[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15493-15508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7538]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-583-830]


Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Plate in Coils From Taiwan

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

EFFECTIVE DATE: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Gideon Katz or Michael Panfeld, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230; telephone: (202) 482-5255 or (202) 482-0172, respectively.

The Applicable Statute

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

Final Determination

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

Case History

    Since the amended preliminary determination (Notice of Amended 
Preliminary Determination of Sales at Less Than Fair Value: Stainless 
Steel Plate in Coils from Taiwan, (Amended Preliminary Determination) 
(63 FR 66785, December 3, 1998), the following events have occurred: We 
conducted a cost verification of YUSCO's questionnaire response from 
November 30-December 4, 1998, and a sales verification of YUSCO from 
December 14-17, 1998. We also conducted verifications at Ta Chen 
Stainless Pipe, Co. from December 18-21, 1998 and Ta Chen International 
from January 12-15, 1999.
    Petitioners and respondents submitted case briefs on February 8, 
1999. On February 11, 1999, petitioners (the only party requesting a 
public hearing) withdrew their request for the public hearing. 
Petitioners and respondents submitted rebuttal briefs on February 16, 
1999.

Scope of Investigation

    For purposes of this investigation, the product covered is certain 
stainless steel plate in coils. Stainless steel is an alloy steel 
containing, by weight, 1.2 percent or less of carbon and 10.5 percent 
or more of chromium, with or without other elements. The subject plate 
products are flat-rolled products, 254 mm or over in width and 4.75 mm 
or more in thickness, in coils, and annealed or otherwise heat treated 
and pickled or otherwise descaled. The subject plate may also be 
further processed (e.g., cold-rolled, polished, etc.) provided that it 
maintains the specified dimensions of plate following such processing. 
Excluded from the scope of this 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.

Verification

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

Facts Available

    We determine that the use of facts available is appropriate for 
YUSCO in accordance with section 776(a) of the Act, because it failed 
to report all of its home market sales made during the POI.
    Where necessary information is missing from the record, the 
Department may apply facts available under section 776 of the Act. 
Further, where that information is missing because a respondent has 
failed to cooperate to the best of its ability, section 776(b) of the 
Act authorizes the Department to use facts available that are adverse 
to the interests of that respondent, which may include information 
derived from the petition, the final determination, a previous 
administrative review, or other information placed on the record. As 
described below in detail in Comment 1, YUSCO did not act to the best 
of its ability in the reporting of its home market sales. We have 
chosen the highest of the calculated petition margins for Taiwan of 
8.02 percent as total adverse facts available.

Middleman Dumping

1. Dumping Calculation

    As a result of further analysis and comments raised by interested 
parties, we have changed our middleman dumping methodology. As in our 
Amended Preliminary Determination, for the final determination, we have 
determined whether a substantial portion of Ta Chen's U.S. sales were 
below acquisition costs by comparing the total value of stainless steel 
plate sold below acquisition cost to the total value of all stainless 
steel plate sales made by Ta Chen during the POI. We first identified 
sales below acquisition cost by comparing Ta Chen's resale price for 
stainless steel plate sold during

[[Page 15494]]

the POI to its total acquisition cost for this merchandise. We used 
YUSCO's invoice price to Ta Chen as the basis for determining 
acquisition cost. However, unlike our Amended Preliminary 
Determination, we added to this cost an appropriate portion of Ta 
Chen's interest expense and general and administrative expenses (G&A) 
to obtain the total acquisition cost. We based the U.S. resale prices 
on Ta Chen's sales to unaffiliated customers in the United States. From 
that starting price we have continued to deduct further processing 
costs, discounts, movement expenses (freight, insurance, U.S. duties, 
and brokerage and handling fees), and the actual selling expenses 
incurred by Ta Chen (commissions, warehousing charges, bank charges, 
and indirect selling expenses), where applicable, as in our Amended 
Preliminary Determination. We then compared that price, after 
deductions, to the total acquisition cost. Based on this comparison, 
44.53 percent of Ta Chen's resales to the United States were at prices 
below total acquisition cost. Therefore, we determine that Ta Chen made 
a substantial portion of its sales below total acquisition cost. As a 
result of this determination, we have examined whether Ta Chen's U.S. 
prices were substantially below its acquisition costs from YUSCO to 
determine whether Ta Chen engaged in middleman dumping during the POI. 
See Comment 9.
    As we stated in the Amended Preliminary Determination, Congress has 
left to the Department the discretion to devise a methodology which 
would accurately capture middleman dumping. See S. Rep. No. 249, 96th 
Cong., 1st Sess. at 94 (1979) (``Senate Report''). To determine the 
magnitude of the losses incurred by Ta Chen in selling YUSCO's subject 
merchandise to the United States during the POI, we divided the amount 
of losses by the total sales value of all sales.
    In the Amended Preliminary Determination, we calculated the amount 
of losses by comparing a weight-averaged adjusted U.S. price to the 
individual acquisition cost by model. We now believe this to be in 
error. Therefore, for the final determination, we are comparing a 
weighted-average adjusted U.S. price (as described above) to a 
weighted-average total acquisition cost (i.e., invoice price plus an 
appropriate portion of Ta Chen's interest and G&A expenses). A weighted 
average to weighted average comparison is consistent with our 
methodology for calculating a margin in a less-than-fair-value 
investigation. See section 777A(d)(1)(A)(i).
    Therefore, for the final determination, we multiplied the 
difference between the weighted-average adjusted U.S. price and the 
weighted-average total acquisition cost by the respective quantity of 
each U.S. model to determine the ``amount of losses.'' Based upon this 
calculation, we have determined that Ta Chen's losses on U.S. sales of 
subject merchandise during the POI are 2.18 percent, which we deem to 
be substantial. See Comment 11. Therefore, we find that Ta Chen engaged 
in middleman dumping during the POI.

2. Cash Deposit Rate

    Where a producer sells through an unaffiliated trading company and 
has knowledge that the merchandise is intended for the United States, 
we normally focus only on the producer's sales to the trading company 
to determine the margin of dumping. However, as we stated in our 
Amended Preliminary Determination, a producer may sell to an 
unaffiliated reseller, such as a trading company which in turn sells 
the producer's merchandise at prices below the trading company's 
acquisition costs, thereby engaging in middleman dumping. Where we find 
middleman dumping in an investigation, as here, we must calculate a 
cash deposit rate that reflects that middleman dumping, as well as any 
dumping which occurs from the producer to the trading company. 
Therefore, we have assigned a cash deposit rate of 10.20 percent to 
sales produced by YUSCO and sold to the United States through Ta Chen. 
This reflects YUSCO's margin on U.S. sales to Ta Chen as well as the 
middleman dumping by Ta Chen. See 19 CFR 351.106. Any sale of subject 
merchandise by YUSCO other than through Ta Chen will be subject to a 
deposit at the rate determined for YUSCO alone.
Interested Party Comments: YUSCO
    Comment 1: Petitioners contend that a group of YUSCO's ``indirect 
export sales'' (which we call ``scenario two'' sales) are, in reality, 
unreported home market sales. Petitioners note that these sales differ 
from export sales in four respects: (1) These sales are not packed in 
the manner usually required for export; (2) these sales are shipped to 
the customer's warehouse in Taiwan; (3) these sales do not have a 
completed shipping number (unlike direct export sales); and (4) these 
sales are subject to domestic value-added tax (VAT) (unlike direct 
export sales). Moreover, petitioners maintain that YUSCO was unable to 
support its claim of knowledge that the merchandise was exported. 
Petitioners assert that without such proof and in light of the evidence 
gathered at verification, the Department should include these sales in 
YUSCO's home market database. Petitioners further argue that the 
Department should not allow any deductions from the gross unit price 
because these sales were unreported and YUSCO has not made a timely 
claim for adjustments.
    YUSCO argues that the Department should treat YUSCO's scenario two 
sales as third country sales. The determining factor, according to 
YUSCO, is the extent of the producer's knowledge of the final 
destination of these sales at the time of sale. Respondent explains 
that the Department and the courts have, in similar cases, considered 
sales to home market customers as export sales when the producer knew 
at the time of sale that the merchandise would be exported. Respondent 
cites to several cases to illustrate its point, including Certain Hot-
Rolled Carbon Steel Flat Products from Korea, 58 FR 37176 (July 9, 
1993) (finding that a sale to a home market customer was an export sale 
where the customer had knowledge of export, but no specific knowledge 
of the customer's further manufacturing).
    YUSCO claims that the Department verified that YUSCO did indeed 
know at the time of the sale that the scenario two sales were for 
export to third countries. YUSCO argues that the Department verified 
that YUSCO used information provided by customers at the time of order 
to assign order numbers, the prefix of which always begins with ``U'' 
(for export) and a country code, effectively labeling these sales as 
export sales, and that YUSCO's customers for scenario two sales handled 
Taiwan custom clearance, further demonstrating exportation.
    YUSCO claims that contrary to petitioners' assertion, every 
government uniform invoice (``GUI'') for scenario two sales has a 
shipping number followed by an asterisk, and that the asterisk is 
additional evidence that shows specific knowledge that the SSPC was 
destined for export. With regard to petitioners' claim that scenario 
two sales do not require any special export packing, YUSCO claims that 
nothing on the verified record indicates that packing specifications 
for scenario two sales were different from the packing specifications 
for direct export sales.
    YUSCO argues that its collection of VAT from scenario two 
customers, and place of delivery of scenario two sales, are both 
irrelevant to the determination of the ultimate market for these sales, 
because, while it is YUSCO's responsibility to collect VAT from a

[[Page 15495]]

Taiwan company, in the end there is actually no VAT paid because the 
customer obtains a refund from the government. YUSCO cites Antifriction 
Bearings (Other than Tapered Roller Bearings) an Parts Thereof from 
France, et al, 60 FR 10900 (February 28, 1995), a case in which the 
Department determined that with regard to indirect export sales, the 
collection of VAT by the respondent is ``not a determinant of the 
ultimate destination of the merchandise.''
Department's Position 
    Application of Facts Available. Section 776(a) of the Act provides 
that, if an interested party withholds information that has been 
requested by the Department, fails to provide such information in a 
timely manner or in the form or manner requested, significantly impedes 
a proceeding under the antidumping statute, or provides information 
which cannot be verified, the Department shall use, subject to sections 
782(d) and (e) of the Act, facts otherwise available in reaching the 
applicable determination. Thus, pursuant to 776(a), the Department is 
required to apply, subject to section 782(d), facts otherwise 
available. Pursuant to section 782(e), the Department shall not decline 
to consider such information if all of the following requirements are 
met: (1) The information is submitted by the established deadline; (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; and (5) the information can 
be used without undue difficulties.
    We find, based on the evidence set out below, that by not reporting 
a large portion of the home market database (so-called scenario two 
sales), YUSCO withheld information that had been requested by the 
Department (i.e., all home market sales of the foreign like product) 
and did not act to the best of its ability in providing this 
information. Because the Department discovered the existence of these 
sales only at verification, this information was not provided in a 
timely manner (i.e., in response to Section B of the Department's 
questionnaire). Furthermore, YUSCO's withholding of crucial information 
which the Department needed to calculate an accurate normal value 
significantly impeded the Department's investigation. Moreover, the 
Department cannot consider the information presented at verification 
because : (1) The information was not submitted by the established 
deadline; (2) the information discovered at verification is so 
incomplete that it cannot serve as a reliable basis for reaching the 
applicable determination; and (3) the information cannot be used 
without undue difficulties. As a result, we must rely on the facts 
otherwise available. Where the Department determines that an interested 
party has failed to cooperate by not acting to the best of its ability 
to comply with a request for information, section 776(b) of the Act 
provides that the Department may use an adverse inference in selecting 
from the facts available. See, e.g., Roller Chain, Other Than Bicycle, 
From Japan; Final Results and Partial Recission of Antidumping Duty 
Administrative Review, 63 FR 63671 (Nov. 16, 1998); Certain Welded 
Carbon Steel Pipes and Tubes From Thailand: Final Results of 
Antidumping Duty Administrative Review, 62 FR 53808, 53819-20 (Oct. 16, 
1997). We have determined, as described below, that YUSCO failed to 
cooperate within the meaning of Section 776(b) and have applied as 
facts available the highest petition margin, 8.02%. See e.g., Notice of 
Final Determination of Sales at Less than Fair Value: Certain Preserved 
Mushrooms from Chile, 63 FR 56613, 56620 (October 22, 1998); Notice of 
Final Determination of Sales at Less Than Fair Value: Stainless Steel 
Wire Rod from Spain, 63 FR 40391, 40396 (July 29, 1998) (applying 
adverse facts available when certain requested information is withheld 
by an interested party in its questionnaire response, but discovered at 
verification). See Facts Available Memorandum from Rick Johnson to 
Edward Yang, March 19, 1999 for full discussion.
Total Facts Available
    Section 773(a)(1)(B) of the Act requires that, in determining 
normal value, the Department use all sales of the foreign like product 
sold for consumption in the exporting country, provided the sales are 
in the usual commercial quantities, made in the ordinary course of 
trade and, to the extent practical, at the same level of trade as the 
export price or constructed export price sale. Our questionnaire 
requires that where the home market is viable, respondents report all 
sales of the foreign like product sold in the home market. See 
Questionnaire at B-1.
    The Department's antidumping questionnaire issued to YUSCO, at B-1, 
notes that Section B of the questionnaire ``provides instructions for 
reporting your sales of the foreign like product in your home market or 
a third-country market.'' Foreign like product, in turn, is defined in 
the glossary to the antidumping questionnaire as referring ``to 
merchandise that is sold in the foreign market and that is identical or 
similar to the subject merchandise. When used in the questionnaire, 
foreign like product means all merchandise that is sold in the foreign 
market and that fits within the description of merchandise provided in 
Appendix III to the questionnaire. (Section 771(16) of the Act).'' 
Therefore, it is clear from the instructions in the questionnaire that 
respondent is required to report all sales of subject merchandise in 
the foreign market. Furthermore, in explaining how to report customer 
codes for home market sales, the questionnaire states that, ``{i}f 
known, identify customers that export some or all of their purchases of 
the foreign like product. Explain how you determined which sales were 
for consumption in the foreign market.'' See Questionnaire at page B-8. 
This instruction clearly places an obligation upon a respondent and 
contemplates, in accordance with the section 773(a)(1)(B) of the 
statute, that sales for consumption in the home market be reported as 
home market sales. Moreover, the questionnaire specifically asked 
respondent to identify customers that export and explain how it 
determined what sales were for home market consumption.
    The record establishes that YUSCO failed to report a substantial 
portion of sales consumed by home market customers. Moreover, YUSCO 
failed to identify these customers and explain how it determined what 
sales to report. As a result, the Department was unaware of the 
existence of these so-called scenario two sales until verification. See 
Verification Report at 6. At verification, we found that YUSCO 
erroneously considered a substantial portion of its sales as third 
country export sales, even though they were sales to unaffiliated home 
market customers. See Verification Report at 6-7.
    Further, we learned for the first time at verification that in 
determining that these scenario two sales were for export, YUSCO relied 
solely upon its internal classifications. Under YUSCO's system, sales 
with order numbers starting with ``D'' are home market sales and order 
numbers starting with ``U'' are destined for export. However, 
verification revealed that at least some portion of sales classified 
under ``U'' were consumed in the home market. YUSCO merely relied upon 
customers' statements that a product would be exported, without taking 
into account whether the customer would consume the SSPC by using it to 
produce non-

[[Page 15496]]

subject merchandise prior to export. YUSCO's internal classifications 
were therefore insufficient and unreliable in this regard.
    We found at verification that one group of these scenario two 
sales, classified by YUSCO as ``UZ sales,'' accounted for a substantial 
portion of all scenario two sales. We found that all the customers 
which made up this subgroup of UZ sales were pipe manufacturers located 
in the home market. See Verification Report at 7 and Exhibit 7. 
Therefore, it is clear that YUSCO knew or had reason to know that the 
sales of SSPC to these pipe customers would be used in Taiwan to 
manufacture non-subject merchandise (i.e., consumed in Taiwan). See 
Verification Report at 7. The other scenario two sales (also 
substantial in number), which were coded by YUSCO with a ``U'' at the 
beginning of the order numbers, were also sales made to companies in 
Taiwan. See Verification Report at 6-7. YUSCO provided no information 
about these customers, except for one customer, which YUSCO stated 
generally further manufactures SSPC into sheet, i.e., non-subject 
merchandise, before export. See September 4, 1998 YUSCO supplemental 
questionnaire response. Therefore, from what information was provided, 
YUSCO knew that at least some ``U'' sales of SSPC were consumed in the 
home market by Taiwan manufacturers of downstream products. Although we 
took as exhibits sales listings of UZ sales and other ``U'' sales, and 
while they provided information as to gross unit prices and quantity, 
YUSCO did not provide us with sufficient product or customer 
information to allow us to determine if the merchandise sold was 
exported or further manufactured into non-subject merchandise in 
Taiwan. See Verification Exhibits 7 and 8.
    YUSCO argues that the so-called scenario two sales were ``indirect 
export sales'' ultimately destined for export to third countries by 
YUSCO's Taiwanese customers. Because, according to YUSCO, at the time 
of sale YUSCO had knowledge that these sales were ultimately for export 
to third countries, YUSCO claims that it was correct in not reporting 
these sales as home market sales, even though sales were made to home 
market customers and shipped within the home market. As noted above, 
the Department's questionnaire requires that all sales of the foreign 
like product in the home market be reported (except as specifically 
provided for in the questionnaire which do not obtain here) and places 
an obligation on the respondent to identify customers that export and 
explain how it determined sales were for consumption in the home 
market.
    As noted above, under section 773(a)(1)(B), normal value is based 
on sales of the like product for consumption in the home market. Thus, 
sales should be excluded from the home market database only if a 
respondent knew or had reason to know that merchandise was not sold for 
home consumption. See INA Walzlager Schaeffler Kg v. United States, 957 
F. Supp. 251 (CIT 1997). Therefore, only if YUSCO could demonstrate 
that it knew or had reason to know that merchandise subject to 
investigation was not sold for consumption in the home market under 
section 773(a)(1)(B) might it have been appropriate for YUSCO to omit 
these so-called scenario two sales as home market sales. In this case, 
substantial evidence establishes that this was not the case. It is 
without question that merchandise sold in the home market, even if 
ultimately destined for export, is consumed in the home market in 
producing non-subject merchandise prior to exportation. See, e.g., 
Certain Hot-Rolled Carbon Steel Flat Products From Korea, 58 FR 37176 
(July 9, 1993)(Comment 9); Dynamic Random Access Memory Semiconductors 
of One Megabit and Above From the Republic of Korea, 58 FR 15467 (March 
23, 1993). Therefore, YUSCO should have reported as home market sales 
at least the portion of the scenario two sales (UZ sales) that were 
consumed in the home market, regardless of whether the non-subject 
merchandise made by these customers from YUSCO's merchandise was later 
exported, because YUSCO knew or had reason to know that its pipe 
customers would consume the SSPC in Taiwan to manufacture pipe.
    With regard to the remaining high percentage of the non-reported 
``U'' sales, it was incumbent upon YUSCO to demonstrate that it knew or 
had reason to know that such sales to Taiwan customers were not 
destined for home consumption. Because the Department first learned of 
these sales during verification, it was compelled to review very 
limited information. See Verification Report at 6. There was no 
information concerning the customers involved in these ``U'' sales from 
which we could determine if such customers were merely Taiwanese 
resellers of SSPC for export or producers which had used YUSCO's 
merchandise to manufacture non-subject merchandise in Taiwan. YUSCO had 
no sales contracts or commercial invoices for ``U'' sales to 
demonstrate its claim. The only evidence to which YUSCO could point to 
establish that these sales were destined for export was YUSCO's 
internal classifications, which categorized the sales as export sales. 
See Verification Report at 7. Although YUSCO's invoices did have an 
asterisk in the shipping number which we were told signified ``indirect 
export'', as stated, all sales were made to Taiwan customers, and 
YUSCO's classifications did not sufficiently describe the types of 
customers. See Verification Report at 7. Thus, from such 
classifications, one cannot distinguish whether the customer is a 
manufacturer (e.g. pipe producer) or a mere reseller. Moreover, no 
evidence at verification revealed that YUSCO packed such sales for 
export. See Verification Report at 7. Again, these same internal forms 
also characterized the other portion of the scenario two sales, ``UZ'' 
sales (which, as stated, were in and of themselves a substantial 
percentage of home market sales), as destined for export, while 
verification revealed that UZ sales were for consumption in the home 
market in producing non-subject merchandise (pipe) prior to export. See 
Verification Report at 7.
    Because YUSCO's classification was inadequate, by relying on it 
YUSCO failed to comply to the best of its ability with the Department's 
instructions. Moreover, what information it did possess regarding its 
Taiwan customers indicates that its merchandise was consumed in the 
home market. Therefore, YUSCO should have reported such sales to the 
Department in its questionnaire response. Because of its failure to 
report a substantial portion of its home market sales to the 
Department, which the Department did not learn until verification, it 
was too late for the Department to verify and use these sales in 
determining normal value. The information available to the Department 
at verification only included gross prices and quantity; the 
merchandise sold was not sufficiently described to permit model-
matching to U.S. sales (although the Department took a computer 
diskette containing information about physical characteristics of the 
scenario two sales at verification, the information was incomplete, not 
verified, and in any event could not be utilized without undue 
difficulty by the Department because it would have to be input 
manually). Therefore, we determine that the information is so 
incomplete that it cannot serve as a reliable basis for reaching our 
determination of normal value.
    We note that petitioners' argument regarding VAT is not valid since 
although YUSCO collects VAT from Taiwan companies involved in indirect

[[Page 15497]]

exports, its customers are reimbursed by the Taiwan government upon 
exporting the merchandise.
    We also note that the circumstances of this case are different from 
those articulated in Certain Cut-To-Length Carbon Steel Flat Products 
from Korea, 58 FR 37176, 183 (July 9, 1993), which YUSCO cites for 
support in deeming the scenario two sales as export sales. The crucial 
distinction is that, in that proceeding, the respondent had timely 
reported the sales at issue to the Department. Thus, the Department was 
able to collect information, later verified, which established that the 
sales at issue were home market sales because the respondent did not 
know or have reason to know at the time of sale that its merchandise 
was destined for export. The present case, to the contrary, involves a 
large number of unreported sales which the Department was unaware of 
until verification, and so was unable to verify the nature of the sales 
to determine whether to use the sales in calculating normal value. 
Moreover, what the Department did uncover at verification indicated 
that YUSCO was aware that, at a minimum, a substantial portion of 
scenario two sales (``UZ'' sales) were for consumption in producing 
non-subject merchandise by YUSCO's Taiwan customers.
Adverse Facts Available
    Section 776(b) of the Act authorizes the Department to use as 
adverse facts available information derived from the petition. Section 
776(c) provides that, when the Department relies on secondary 
information, such as the petition, as facts available, it must, to the 
extent practicable, corroborate that information from independent 
sources that are reasonably at its disposal. The SAA clarifies that 
``corroborate'' means that the Department will satisfy itself that the 
secondary information to be used has probative value (see SAA at 870). 
The SAA also states that independent sources used to corroborate may 
include, for example, published price lists, official import statistics 
and customs data, and information obtained from interested parties 
during the particular investigation (see SAA at 870).
    At the outset of this investigation, the Department examined the 
accuracy and adequacy of the price to price information in the 
petition. While we rejected the petition margins based on cost, we 
determined that the price to price comparisons constituted sufficient 
evidence of dumping to justify initiation. See Antidumping 
Investigation Initiation Checklist; Stainless Steel Plate in Coils from 
Belgium, Canada, Italy, South Africa, South Korea and Taiwan, pages 14-
16 (estimated margins for Taiwan ranged from .29% to 8.02%); see also 
petitioners' submission dated April 17, 1998 (amendment to petition 
regarding price information).
    In order to determine the probative value of the petition margins 
for use as adverse facts available for the purposes of this 
determination, we have examined evidence supporting the petition 
calculations. In accordance with section 776(c) of the Act, to the 
extent practicable, we examined the key elements of the U.S. price and 
normal value calculations on which the petition margin was based and 
compared the sources used in the petition to YUSCO's reported sales 
databases. Based on this analysis, we have successfully corroborated 
the information in the petition. See Facts Available Memorandum.
    Therefore, we have chosen the highest of the calculated petition 
margins for Taiwan of 8.02 percent as total adverse facts available.
    Comment 2: YUSCO argues that even if the Department makes an 
affirmative finding on middleman dumping by Ta Chen, the Department 
should assign and calculate an independent dumping margin for YUSCO 
based on the one reported U.S. sale made through a company in Taiwan 
other than Ta Chen. Ta Chen makes the same assertion. YUSCO claims that 
the Department verified that the sale in question was, in fact, a U.S. 
sale and that this sale was not made through Ta Chen. According to 
YUSCO, its order acceptance sheet for this sale shows its limited 
knowledge of the Taiwan company's further processing, as well as its 
knowledge that the merchandise would ultimately be sold to a U.S. 
customer. YUSCO argues that its lack of specific knowledge about its 
customer's further processing does not meet the Department's standard 
for ``consumption'' of SSPC in the home market.
    YUSCO cites several instances in which it claims that the 
Department has considered a sale to a local customer as a U.S. sale 
where the respondent ``is aware at the time of sale that the 
merchandise is ultimately destined for the United States'': Fresh 
Atlantic Salmon from Chile, 63 FR 31411 (June 9, 1998); Dynamic Random 
Access Memory Semiconductors of One Megabit or Above from the Republic 
of Korea, 63 FR 50867 (September 23, 1998); Yue Pak, Ltd. v. United 
States, Slip. Op. 96-65 at 9 (CIT), aff'd. 1997 U.S. App. LEXIS 5425 
(Fed. Cir. 1997); Peer Bearing Co. v. United States, 800 F. Supp. 959, 
964 (CIT 1992).
    YUSCO also cites the final determination in the LTFV investigations 
of Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled 
Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel 
Flat Products, and Certain Cut-to-Length Carbon Steel Plate from Korea 
(58 FR 37176 (July 9, 1993)) to support its argument that the 
Department considers a sale to a local customer as an export sale where 
the respondent has specific knowledge that the merchandise would be 
exported, but had no specific knowledge regarding the customer's 
further manufacturing. YUSCO distinguishes these circumstances from 
those addressed in the preliminary determination in the LTFV 
investigation of Stainless Steel Sheet and Strip in Coils from Korea, 
(64 FR 137 (January 4, 1999)), in which sales to a further 
manufacturer/exporter in Korea were deemed home market sales because 
the respondent had specific knowledge that the subject merchandise 
would be further manufactured into non-subject merchandise prior to 
exportation. YUSCO concludes that since Ta Chen was not involved in 
this U.S. sale, the Department should assign and calculate an 
independent dumping margin rate for YUSCO based on this sale.
    Petitioners argue that sales to home market customers that are 
further manufactured prior to export are reportable home market sales. 
In this case, continue petitioners, the sale in question should be 
considered a home market sale since YUSCO knew at the time of sale that 
the merchandise would be further manufactured in Taiwan into non-
subject merchandise and then sold to the United States. Petitioners 
cite the preliminary determination in Stainless Steel Sheet and Strip 
in Coils from Korea (64 FR 137) in which the Department included as 
home market sales those sales of subject merchandise to Korean 
companies that respondent knew would further manufacture the subject 
merchandise into non-subject merchandise for export. Petitioners also 
point to two of YUSCO's submissions in which YUSCO stated that it knew 
at the time of sale that the SSPC would be consumed prior to 
exportation. See YUSCO's September 22, 1998 letter to the Department 
and YUSCO's September 4, 1998 supplemental questionnaire response.
    Petitioners also claim that the sale in question should be 
classified as a home market sale because YUSCO considered it a domestic 
sale in its normal course of business, it did not require special 
export packing, it was shipped to a customer in Taiwan prior to export, 
it

[[Page 15498]]

did not have a complete shipping number in the Government Uniform 
Invoice (``GUI''), and the sale was subject to a value-added tax (VAT). 
Petitioners also refer to a Department memorandum to the file dated 
November 25, 1998 which states that evidence established that YUSCO 
knew that the SSPC would be further manufactured into non-subject 
merchandise.
    Petitioners conclude that, even if the Department continues to 
classify this sale as a U.S. sale, it should disregard this sale for 
the final determination since it is an ``outlier'' sale, and thus not 
representative of YUSCO's normal selling behavior. Petitioners cite 
several cases in which the Department ruled similarly; including Ipsco, 
Inc. v. United States, 714 F. Supp. 1211, 1216 (CIT 1989); Silicon 
Metal from Brazil: Notice of Final Results of Antidumping Duty 
Administrative Review, 64 FR 6305 (February 9, 1999); and Tapered 
Roller Bearings, and Parts Thereof, Finished and Unfinished, from 
Japan; Final Results of Antidumping Duty Administrative Review, 57 FR 
4960 (February 11, 1992).
    Department's Position: The accurate determination of which sales 
should be classified as home market sales and used to calculate normal 
value, and which sales should be classified as U.S. sales and used to 
calculate export price, is central to accurately determining 
antidumping margins. In determining whether a sale made prior to 
importation to a customer outside the United States should be 
considered a U.S. sale, section 772(a) requires that respondent know 
that subject merchandise, purchased by an unaffiliated reseller, is 
destined for exportation to the United States. Because the statute does 
not address how the Department is to determine if a respondent knew 
whether home market sales of subject merchandise were destined for the 
U.S. market, the Department has discretion in making this 
determination. It has been the Department's practice to examine the 
evidence on a case-by-case basis to determine whether the respondent 
knew or had reason to know that its sales of subject merchandise to an 
unaffiliated company in the home market were destined for export to the 
United States. See, Ina Walzlager v. United States, 957 F. Supp. 251 
(CIT 1997)(standard for determining knowledge under section 773(a) is 
imputed knowledge, not actual knowledge); Yue Pak v. United States, 
Slip Op. 96-65 at 9 (CIT) (upholding the Department's interpretation of 
``for exportation to the United States'' to mean that the reseller or 
manufacturer from whom the merchandise was purchased knew or should 
have known at the time of sale that the merchandise was being exported 
to the United States).
    Based on the record evidence, it is clear that YUSCO knew or had 
reason to know that its sale of subject merchandise to a certain 
customer was not for export to the United States because it would be 
further manufactured in Taiwan into non-subject merchandise. The non-
subject merchandise was then to be exported to the United States. See 
September 4, 1998 Supplemental Questionnaire Response, September 22, 
1998 letter to the Department, and October 19, 1998 letter to the 
Department in which YUSCO states that it had general knowledge and an 
understanding that the SSPC would be used to manufacture non-subject 
merchandise prior to export to the United States. Therefore the sale in 
question is in fact a home market sale. See Memorandum to Edward Yang: 
Stainless Steel Plate In Coils from Taiwan; YUSCO Sales, November 25, 
1998. Nevertheless, as we have applied total adverse facts available to 
YUSCO (see Comment 1), the classification of this sale as either U.S. 
or home market is irrelevant to the calculation of YUSCO's margin.
    Comment 3: YUSCO states that the Department should calculate 
YUSCO's dumping margins incorporating its corrections to minor errors 
that it submitted at the commencement of both cost and sales 
verification. Petitioners state that the Department should include an 
unreported discount for one YUSCO U.S. sale, as noted in the 
verification report.
    Department's Position: We agree with both YUSCO and petitioners. 
However, we have not made these corrections for the final 
determination, since we have applied total adverse facts available to 
YUSCO, as described in Comment 1.
    Comment 4: Petitioners claim that during YUSCO's cost verification 
YUSCO failed to quantify differences between the reported and booked 
costs of manufacture. Although YUSCO offered ``three contributing 
factors,'' state petitioners, YUSCO was unable to quantify the amounts 
related to each of the claimed reconciling items. Petitioners claim 
that the Department must thus adjust the reported total manufacturing 
costs (``TOTCOMs'') to reflect the unreconciled difference.
    YUSCO contends that the Department should reject petitioners' 
argument to increase YUSCO's TOTCOM since all elements of YUSCO's 
production costs were verified to have been included in YUSCO's 
calculation of TOTCOM by control number (``CONNUM''). YUSCO argues that 
the difference between the reported TOTCOM and the booked TOTCOM is a 
result of the exclusion of beginning work-in-process prices from the 
reported TOTCOM, and from the allocation of processing costs by 
processing time for the purpose of this investigation, and these 
adjustments have been quantified in the verified record. Furthermore, 
YUSCO claims that during verification it was not asked to quantify the 
difference between the reported and booked TOTCOMs by item, so it is 
not fair to say that the company was unable to quantify the difference 
by item.
    Department's Position: We agree with petitioners that the 
unreconciled difference found between the costs in the accounting 
records and the reported costs should be included in the revised 
reported costs. As articulated in Certain Cut-to-Length Carbon Steel 
Plate From Mexico: Final Results of Antidumping Duty Administrative 
Review, 64 FR 77, 78 (January 4, 1999) (Comment 1), the Department must 
assess the reasonableness of a respondent's cost allocation methodology 
according to section 773(f)(1)(A) of the Act. Before this can be done, 
however, the Department must ensure that the aggregate amount of costs 
incurred to produce the subject merchandise was properly reflected in 
the reported costs. In order to accomplish this, a reconciliation of 
the respondent's submitted COP and CV data to the company's audited 
financial statements, when such statements are available, is performed. 
YUSCO did not complete this reconciliation because it did not identify 
and quantify all differences shown on the reconciliation. As stated in 
Certain Cut-to-Length Carbon Steel Plate From Mexico, ``[i]n situations 
where the respondent's total reported costs differ from the amounts 
reported in its financial statements, the overall cost reconciliation 
assists the Department in identifying and quantifying those differences 
in order to determine whether it was reasonable for the respondent to 
exclude certain costs for purposes of reporting COP and CV.'' As to 
YUSCO's argument that it was never asked to identify and quantify the 
unreconciled differences in its cost reconciliation, the Department 
requested YUSCO to quantify differences between its accounting records 
and reported costs in step III.D. of the cost verification agenda. 
While we agree with petitioners that the unreconciled difference found 
between the costs in the accounting records and the reported costs 
should be included in

[[Page 15499]]

the revised reported costs, based on our decision to apply total 
adverse facts available, this issue is moot.
    Comment 5: Petitioners argue that the Department should include 
exchange gains and losses associated with notes payable instruments in 
YUSCO's net interest expense. According to petitioners, the Department 
discovered at the cost verification that YUSCO had excluded these 
exchange gains and losses from its financial expense rate, and that 
since net exchange losses related to notes payable is a cost incurred 
by the company as a whole for financing purposes, it should be included 
in the net interest expense calculation. Petitioners also assert that 
this result is consistent with the Department's cost questionnaire.
    Respondents did not comment on this issue.
    Department's Position: The Department agrees with petitioners that 
the current portion of the net exchange loss related to notes payable 
should be included in the financial expense rate calculation. As 
explained in Notice of Final Determination of Sales at Less Than Fair 
Value: Fresh Atlantic Salmon from Chile, 63 FR 31430 (June 9, 1998) 
(Comment 24), the Department includes in the cost of production the 
amortized portion of foreign exchange losses resulting from loans. For 
this final determination, we would have amortized the net exchange 
losses generated from debt over the current maturities of the debt and 
included the amortized portion in YUSCO's financial expenses. However, 
based on our decision to apply total adverse facts available, this 
issue is moot.
Interested Party Comments Re: Ta Chen
    Comment 6: Ta Chen contends that the transactions involving the 
subject merchandise do not fall within the ambit of any middleman 
dumping provision because: (1) The transactions involve a direct sale 
between a Taiwanese manufacturer and an unaffiliated U.S. buyer and (2) 
the Department cannot determine that middleman dumping is occurring 
because there is no middleman.
    Ta Chen explains that Ta Chen is merely a processor of paperwork 
and a communications link and is acting as an agent of TCI, Ta Chen's 
U.S. affiliate. Ta Chen claims that TCI initiates all purchase requests 
from YUSCO and uses Ta Chen as a facilitator due to language barriers 
and time zone differences. Ta Chen further claims that there is a 
straight pass-through of the purchase price from YUSCO to TCI such that 
TCI incurs both the risk and the profit or loss on the sale.
    Ta Chen states that the Department must recognize and follow 
commercial law in its administration of the antidumping laws. See NSK 
v. United States, 115 F. 3d 965 (Fed.Cir. 1997). Ta Chen claims that, 
under commercial law, a four-pronged test exists for determining 
whether an intermediary is acting as an agent or as a buyer. The test 
analyzes: (1) Whether the intermediary could or did provide 
instructions to the seller; (2) whether the intermediary was free to 
sell the items at any price it desired; (3) whether the intermediary 
could or did select its own customers; and (4) whether the intermediary 
could or did order the merchandise and have it delivered for its own 
inventory. Ta Chen claims that the Department generally follows this 
analysis in determining whether sales through a U.S. subsidiary should 
be treated as EP or CEP transactions. See Stainless Steel Wire Rod from 
Spain, 63 FR 40391, 40395. Ta Chen maintains that if the intermediary 
cannot perform these tasks and if there is a simultaneous passage of 
title and risk of loss from the seller to the intermediary to the 
buyer, then the intermediary is acting as an agent. Ta Chen states that 
an analysis of the record will show that the answers to these questions 
are negative and thus, Ta Chen is acting as an agent. Moreover, Ta Chen 
claims that based on the terms of sale from YUSCO to Ta Chen and from 
Ta Chen to TCI, there is a simultaneous transfer of title from YUSCO to 
TCI. In addition, Ta Chen claims that the terms of payment from TCI to 
Ta Chen are such that TCI assumes all risk of loss, and that 
furthermore, petitioners point to these same facts in their case brief. 
Thus, Ta Chen concludes that Ta Chen is acting as an agent of TCI.
    Ta Chen states that the Tariff Act of 1930 allows only for dumping 
margin calculations with regard to producers and exporters. Ta Chen 
states that it is the Department's practice to treat manufacturers who 
have knowledge that the merchandise was exported to the United States 
as exporters, citing AFBs from France, 57 FR 28360 (Comment 18)(1992). 
According to Ta Chen, the record shows that the manufacturer, YUSCO, 
had such knowledge and therefore, would be treated as the exporter 
under the Department's normal practice. However, Ta Chen notes that the 
above practice has one exception, namely, middleman dumping.
    Ta Chen argues that middleman dumping is a narrowly defined 
exception and does not apply in this case. Ta Chen points to the 
legislative history of the Trade Agreements Act of 1979 as evidence 
that middleman dumping is limited to the issues involved in Voss 
International v. United States, (Voss) C.D. 4801 (May 7, 1979), citing 
S. Rep. 249, 96th Cong., 1st Sess. 93-94 (``Senate Report'')(July 17, 
1979). Ta Chen argues that the authority to perform a middleman dumping 
analysis, borne out of the legislative history, does not operate as a 
broader grant of authority beyond the issues presented in Voss and the 
issues in Voss are not present in the instant case, citing PQ Corp. v. 
United States, 652 F. Supp. 724, 734, 11 CIT 53 (1987), because YUSCO 
did not make a sale to Ta Chen. Therefore, Ta Chen concludes, the 
Department does not have the authority to investigate Ta Chen nor does 
it have the authority to use TCI's U.S. resale prices in the 
calculation of a dumping margin.
    Notwithstanding this conclusion, Ta Chen argues that if the 
Department wishes to take on a broader view of its ability to 
investigate middleman dumping, in the instant case there is no sale to 
a middleman outside the United States who then makes the first sale to 
the United States. Ta Chen again cites to the Senate Report at 93-94:

    Regulations should be issued, consistent with present practice, 
under which sales from the foreign producer to middlemen and any 
sales between middleman before sale to the first unrelated U.S. 
purchaser are examined to avoid below cost sales by the middlemen. 
(Emphasis added in Ta Chen brief)

Ta Chen asserts that this sentiment is repeated in the Statement of 
Administrative Action of the Trade Agreements Act of 1979, H. Doc. No. 
153 (Pt.II), 96th Cong., 1st Sess. At 412, in the Department's 
determination in Fuel Ethanol from Brazil; Final Determination of Sales 
at Less Than Fair Value, (Fuel Ethanol) 51 FR 5572, 5577 (Feb. 14, 
1986), and in the Department's own Antidumping Manual. Ta Chen claims 
that YUSCO sells directly to TCI, an unaffiliated U.S. customer, and 
therefore, there is no middleman.
    Ta Chen argues that the Department has not considered a U.S. 
distributor which buys from a foreign manufacturer to be an 
``exporter'' on the basis that the U.S. distributor is foreign-owned. 
Ta Chen states that to conclude otherwise would be contradictory 
because the U.S. distributor is clearly an ``importer.'' Ta Chen points 
to the Department's statements in its middleman dumping initiation 
memorandum in the investigation of Stainless Steel Sheet and Strip in 
Coils from Taiwan, as suggesting that TCI could be subject to a 
middleman dumping investigation by virtue of the collapsing doctrine. 
Ta

[[Page 15500]]

Chen argues that if the Department applied the collapsing doctrine in 
this manner, it would render moot all EP/CEP analyses of sales between 
a foreign parent and its U.S. subsidiary. Because this is clearly not 
the case, Ta Chen argues that the collapsing analysis does not apply to 
a U.S. importer and its foreign-owned parent. Rather, Ta Chen states 
that the collapsing doctrine applies to situations where two producers, 
with their own production facilities, are considered to be one entity 
for purposes of issuing a duty margin. Finally, Ta Chen argues that to 
discriminate against U.S. corporations that are foreign-owned would be 
bad policy and contrary to free trade policies.
    Petitioners argue that the Department should take into account Ta 
Chen's dumping of YUSCO's SSPC since the Department has the authority 
to consider and include in its dumping calculations price 
discrimination by a middleman who can be located anywhere in the world. 
Petitioner claims that the Department should follow standard procedures 
as employed in Mitsui & Co. v. United States, Court No. 90-12-00633 at 
9-10 and in Fuel Ethanol, and compare the foreign manufacturer's net 
U.S. price to its normal value, compare the middleman's net U.S. price 
to its normal value, and then sum the dumping margins.
    Petitioners cite the legislative history of section 772 of the 
Tariff Act of 1930, H.R. Rep. No. 317, 96th Cong., 1st Sess. 75 (1979); 
and the Senate Report to illustrate that Congress gave the Department 
the authority to investigate resales by middlemen. Petitioners further 
cite the Statement of Administrative Action of the Trade Agreements Act 
of 1979, H. Doc. No. 153 (Pt. II), 96th Cong., 1st Sess. 412 (1979) 
reprinted in 1979 U.S.C.C.A.N. at 682. They argue that this Statement 
reiterated that resales by middlemen are to be examined as possible 
below-cost sales, regardless of the location of the middleman.
    Furthermore, petitioners claim that Ta Chen is incorrect in 
asserting that the Department should not consider Ta Chen's resales of 
YUSCO's SSPC to Ta Chen's unaffiliated U.S. customers. Petitioners 
point to the Trade Agreements Act of 1979, accompanying legislative 
history, and Voss, and claim that the legislative history at H.R. Rep. 
No. 317, supra at 75 and the Senate Report at 94 explicitly state that 
sales involving middlemen are to be examined to avoid below cost sales 
by middlemen. When middlemen sell above their costs, the courts and the 
legislative history state, according to petitioners, that the 
producer's price to the first unrelated middleman may be used as a 
purchase price, as found in Sharp Corp. v. United States, 63 F.3d 1097, 
1093-94 (Fed. Cir. 1995); Smith Corona Group v. United States, 713 F.2d 
1568, 1572 (Fed. Cir. 1983); PQ Corp. v. United States, 652 F. Supp. 
724, 735 (CIT 1987), and H.R. Rep. No. 317, supra at 75; and the Senate 
Report at 94. In these cases, according to petitioners, sales to 
middlemen were not to be examined when any sales involving them 
appeared to be below cost. Petitioners claim the Department's decision 
in Fuel Ethanol was consistent with these authorities and precedents.
    Petitioners hold that for these reasons, Ta Chen is in this case a 
middleman, not YUSCO's first unaffiliated U.S. customer as Ta Chen 
claims, and that the Department should reject Ta Chen's contentions 
that the middleman dumping provision is inapplicable here.
    Alternatively, if the Department concludes that middleman dumping 
refers solely to middlemen outside of the United States, petitioners 
argue that the Department should still find that Ta Chen acted as a 
middleman for YUSCO and ascribe middleman dumping accordingly. 
Petitioners believe that, contrary to Ta Chen's claim that YUSCO sold 
its SSPC directly to TCI, the record shows that YUSCO's sales were to 
Ta Chen, which then resold the SSPC to TCI. See Petitioner's Rebuttal 
Brief at 15-17 (proprietary version). Petitioners claim that the 
verified record shows that Ta Chen was intimately involved in the 
purchase and intra-company resale to TCI of YUSCO's product, and that 
the verification report did not conclude that TCI buys plate from 
YUSCO, but merely states that Ta Chen officials claimed such during 
verification.
    Petitioners claim that the three-pronged test which Ta Chen 
discusses and bases on AK Steel Corp. v. United States, Slip Op. 98-159 
at 15 (Nov. 23, 1998), is not applicable here. They argue that this 
test is used merely to classify sales as CEP or EP, and that in either 
instance, the Department uses sales to unaffiliated U.S. customers. In 
this case, according to petitioners, the Department can determine 
whether a middleman has dumped only by examining each middleman resale 
leading to the ultimate sale to the unaffiliated U.S. customer. 
Petitioners further argue that even if this test were to be used, it 
would result in the Department's finding that Ta Chen was substantially 
involved in the purchase and resale of SSPC because its role in the 
sales process was similar to that of a selling agent in Industrial 
Nitrocellulose from the United Kingdom, who was deemed to be 
substantially involved in the sales process because its duties included 
sales solicitation and price negotiation.
    Department's Position: We disagree with Ta Chen that it is not the 
middleman for resales of YUSCO's merchandise into the U.S. market. 
Evidence plainly establishes that for the purposes of conducting a 
middleman dumping investigation, there were sales of subject 
merchandise between YUSCO and Ta Chen which, in turn, Ta Chen resold 
into the United States through its U.S. affiliate, TCI. We find the 
activity engaged in by Ta Chen as that of a classic middleman and 
therefore subject to our scrutiny.
    Where a producer sells its merchandise to an unaffiliated 
middleman, it has been the Department's long-standing practice normally 
to select as the U.S. price the price between the foreign producer and 
the unaffiliated middleman, provided that the foreign producer knew or 
had reason to know that its merchandise was destined for export to the 
United States. See Antifriction Bearings From France, 57 FR 28360 
(1992) (Comment 18). However, if the middleman is reselling below cost, 
the sale between the producer and the middleman may not be an 
appropriate basis for establishing the total margin of any dumping that 
may have occurred. The legislative history to the 1979 Act makes clear 
that Congress recognized that middlemen may also be engaged in dumping 
and acknowledged that the Department had authority to investigate 
``sales from a foreign producer to middlemen and any sales between 
middlemen before sale to the first unrelated U.S. purchaser * * * to 
avoid below cost sales by the middlemen.'' See H.R. Rep. No. 317, 96th 
Cong., 1st Sess. 75 (1979); and the Senate Report. Therefore, there is 
no question that the Department has the authority to depart from its 
normal practice, where circumstances warrant, and investigate whether 
dumping is being masked or understated by middlemen. See Fuel Ethanol 
(the legislative history of the 1979 Act sustained the Treasury 
Department's practice of using the price between the manufacturer and 
unrelated trading company for exports to the U.S. when the manufacturer 
knew the destination at the time of sale to the exporter, but was not 
intended to bar us from looking at all facets of the transaction). 
Where the Department determines that a substantial portion of the 
middleman's resales in the United States was made at below the 
middleman's total acquisition costs and the middleman incurred 
substantial losses on those resales, middleman dumping has occurred and

[[Page 15501]]

the margin calculation is adjusted accordingly, i.e., we look to the 
middleman's first sale to an unaffiliated customer. See Amended 
Preliminary Determination; Fuel Ethanol; and Comments 9 and 13.
    Ta Chen acknowledges that the Department has the authority to 
conduct middleman dumping investigations but offers various arguments 
against applying middleman dumping to Ta Chen. Ta Chen mainly argues 
that if there was not a sale between YUSCO and Ta Chen, but Ta Chen 
merely acted as a selling agent for its wholly-owned U.S. affiliate, 
TCI, there can be no middleman and thus no middleman dumping.
    Here, the verified evidence establishes that YUSCO made sales to Ta 
Chen, not directly to TCI. Contrary to Ta Chen's assertions otherwise, 
Ta Chen did take legal title to the merchandise. Even though YUSCO 
shipped the merchandise fob to TCI at a port in Taiwan, a purchaser 
need not take physical possession of merchandise to have legal title. 
Here, Ta Chen negotiated the sale with YUSCO, signed a sales contract 
with YUSCO, was invoiced by YUSCO, paid YUSCO for the merchandise in 
Taiwan dollars, paid bank charges on payments to YUSCO, entered these 
sales into Ta Chen's books, signed the export declaration, invoiced 
TCI, and undertook various other activities involved in exporting and 
transporting the merchandise. See Ta Chen's Verification report at 3, 
and YUSCO's Verification Report at 3 and Exhibit 11 (both reports dated 
January 28, 1999); see also Petitioners' Rebuttal Brief (proprietary 
version) at 15-17 (dated Feb. 16, 1999). Thus, the evidence is 
sufficient to establish that Ta Chen was acting as a middleman within 
the meaning of the antidumping law.
    Further, trading companies such as Ta Chen have typically been the 
focus of the Department's investigation into middleman dumping 
allegations because most often trading companies engage in the 
``successive resales from the foreign producer to the first unrelated 
U.S. buyer,'' thus prompting our scrutiny. See, e.g., Electrolytic 
Manganese Dioxide From Japan, 58 FR 28551 (May 14, 1993); Fuel Ethanol; 
PC Strand From Japan: Final Results of Redetermination Pursuant to 
Court Remand, Court. No. 90-12-00633 (August 5, 1994); see also 
Consolidated International Automotive, Inc. v. United States, 809 F. 
Supp. 125, 130 (CIT 1992).
    We also disagree that we should examine Ta Chen's role in the 
transaction chain by applying the criteria we normally use to determine 
if U.S. sales are EP or CEP sales. The EP/CEP analysis is used to 
determine if the selling activities of parties in the United States are 
more than ancillary to the transaction, in which case CEP methodology 
is warranted to take into account the selling expenses incurred in the 
United States when calculating the dumping margin. In contrast, the 
middleman dumping analysis is used to determine whether a transaction 
with a middleman is masking or understating any dumping. Regardless of 
whether Ta Chen calls itself an agent, it is a middleman and an 
appropriate subject of a middleman dumping inquiry. YUSCO invoiced Ta 
Chen for the merchandise and it was subsequently resold to an 
unaffiliated purchaser at less than the acquisition cost. This is 
precisely the type of situation cited by Congress when it addressed the 
middleman dumping concern. See H.R. Rep. No. 317 at 75. (Voss also 
involved the sale of subject merchandise by a producer to an 
unaffiliated trading company in the exporting country, which was then 
exported to the middleman's wholly-owned U.S. affiliate for resale to 
an unrelated U.S. customer). Therefore, Ta Chen's assertion that the 
Department's authority is limited to the issues presented by Voss is 
misplaced, because the issues in the instant case mirror those in Voss. 
YUSCO sold its merchandise to Ta Chen which, as the middleman, in turn 
sold it to the first unaffiliated U.S. customer through TCI.
    Finally, given that we find that Ta Chen is a middleman, the 
question Ta Chen raises regarding the geographical location of the 
middleman is moot, since Ta Chen is located in the exporting country 
and hence clearly within the ambit of a middleman dumping 
investigation. See e.g., Antidumping Manual, Chapter 7 at 5 (if the 
Department receives a documented allegation that the trading company 
located in the exporting country or a third country is reselling to the 
United States at prices which do not permit the recovery of its total 
acquisition costs, we will initiate a middleman dumping investigation).
    Comment 7: Ta Chen states that this middleman dumping investigation 
was unlawfully initiated. Ta Chen states that the Department's 
standards for initiating such an investigation requires timely and 
convincing evidence of middleman dumping, citing e.g., Certain Forged 
Steel Crankshafts From Japan, 52 FR 36984, 36985, Consolidated Int'l 
Automotive v. U.S., F. Supp. 125, 129-30 (CIT 1992), and Mitsui & Co., 
Ltd. v. U.S., 18 CIT 185 (1994). Further, Ta Chen states that the 
petitioners have an obligation to submit such evidence that is 
reasonably available to them, citing Electrolytic Manganese Dioxide 
From Japan, 58 FR 28551 and Certain Stainless Steel Cooking Ware From 
Korea, 51 FR 24563-64. Ta Chen argues that there was no convincing 
evidence of actual middleman dumping nor did petitioners submit 
evidence reasonably available to them on the subject and thus, the 
Department's standards have not been met.
    Ta Chen contends that the record does not establish that the 
alleged lost sale was due to a sale of Taiwanese-origin product. Ta 
Chen asserts that in petitioner's September 21, 1998 submission, 
petitioners acknowledged that the alleged lost sale possibly due to a 
sale of both (or, as respondents believe petitioners' statement 
implies, either) Taiwanese and Korean product. Ta Chen also argues that 
the product alleged to have been sold to Company X was T04L \3/16\ to 
\1/2\ inch plate. However, respondent argues that petitioners misstated 
this specification in its middleman dumping allegation as 0.1875 to 
0.3125 inch product. See, e.g., paragraph 5 of Exhibit 1 of 
petitioner's August 25, 1998 submission and petitioner's August 11, 
1998 submission at 10. Regardless, Ta Chen argues that its sole 
Taiwanese supplier, YUSCO, does not produce or sell a product above \1/
4\ inch plate. Thus, Ta Chen argues that the alleged sale could not 
have been a sale of Taiwanese product. Thus, Ta Chen concludes, the 
convincing evidence standard has not been met.
    Ta Chen also states that the Department initiated this middleman 
investigation based on a claim by petitioners that Ta Chen actually 
sold subject merchandise to Company X in October 1997. Ta Chen argues 
that both petitioners and the Department had available to them the 
knowledge that there was no such sale. Ta Chen states that this same 
``lost sale'' was previously alleged in petitioner's March 31, 1998 
antidumping petition to both the Department and the International Trade 
Commission (ITC). Ta Chen stated that the petition also included a 
contact name and phone number at Company X. Ta Chen claims that it made 
no sales whatsoever to Company X in October 1997 or at any other time. 
Moreover, Ta Chen suggests that a review of its sales listing will show 
that in October 1997, its lowest sales price was well above both the 
alleged price to company X and petitioner's alleged acquisition costs. 
Finally, Ta Chen states that the ITC contacted Company X regarding the 
alleged ``lost sale'' and that Company X denied the sale took place. Ta 
Chen

[[Page 15502]]

argues that because the results of the ITC's phone call were known to 
petitioners before it used this ``lost sale'' in its request to 
initiate a middleman dumping investigation, counsel for petitioners 
submitted a false representation to the Department.
    Moreover, Ta Chen claims that petitioners did not satisfy their 
requirement to utilize sources readily available to them. Ta Chen 
states that the petitioners made only a single attempt to contact 
Company X themselves but were unsuccessful in attempting to reach a 
certain contact at Company X. Ta Chen asserts that it had subsequent 
contact with this individual and was aware of that individual's ready 
availability to speak with petitioners. However, respondent argues that 
petitioners never attempted to call back this individual. Thus, Ta Chen 
argues, petitioners did not make use of the sources readily available 
to them.
    Petitioners argue that they met the Departmental requirement of 
``timely and convincing evidence that the trading company is in fact 
dumping.'' See Petitioners' Rebuttal Brief at page 27. Moreover, 
petitioners assert that evidence may be only that which is reasonably 
available to Commerce. On these accounts, petitioners defend their 
submissions as consistent with the standard required by the Department. 
Petitioners also assert that their evidence was advanced in good faith 
as the best information reasonably available to petitioners that 
pointed toward middleman dumping by Ta Chen, and furthermore, that Ta 
Chen has not shown this information to be false. Petitioners conclude 
that the reasonableness of the evidence provided is borne out by the 
fact that the Department indeed found middleman dumping in its Amended 
Preliminary Determination.
    Department's Position: We disagree with Ta Chen that our initiation 
of a middleman dumping investigation was illegal and should be 
rescinded. As stated, Congress plainly intended for the Department to 
have the authority to both investigate middlemen and to avoid below 
cost sales by middlemen. See Senate Report at 412, (``successive 
resales from the foreign producer to the first unrelated U.S. buyer are 
examined to avoid sales by middlemen below their costs''). Through its 
administrative practice, the Department has developed a reasonable 
standard for analyzing allegations of middleman dumping.
    As we stated in our memorandum initiating this middleman dumping 
investigation, the standards for initiating a middleman dumping 
allegation are similar to those of initiating a traditional antidumping 
investigation, in that we must have evidence to suspect that middleman 
dumping is occurring. See Memorandum for Joseph Spetrini: Stainless 
Steel Plate in Coils From Taiwan: Whether To Initiate a Middleman 
Dumping Investigation (Middleman Initiation Memo)(Aug. 25, 1998)(non-
proprietary version on file in Rm. B-099 at the Department of 
Commerce). In analyzing whether to initiate we will evaluate 
information, either direct or circumstantial, and will require that 
petitioners provide supporting data on prices and costs which are 
reasonably available to them and that this information is convincing. 
See Consolidated International Automotive, Inc. v. United States, 809 
F. Supp. 125, 130 (CIT 1992)(upholding the Department's refusal to 
initiate a middleman dumping investigation where petitioner only 
offered a theory, but no sufficient data); Preliminary Determination of 
Sales at Less Than Fair Value; Stainless Steel Cooking Ware From the 
Republic of Korea, 51 FR 24563 (July 7, 1986)(refusing to initiate 
because no documents submitted contained pricing or cost data); 
Electrolytic Manganese Dioxide (EMD) From Japan; Final Results of 
Antidumping Administrative Review; 58 FR 28551 (May 14, 1993)(the 
Department will not initiate on mere conjecture but requires convincing 
evidence presented by petitioners). Here, petitioners provided both 
timely price and cost information, reasonably available to them, which 
was supported by affidavits and which the Department reviewed and found 
credible and convincing. See Middleman Initiation Memo.
    First, we disagree with Ta Chen's claim that the sale (which we 
viewed as an offer, see below) described in petitioner's affidavit to 
Company X was not of Taiwanese origin, and that the Department should 
have recognized this as the case because the ``weekly report'' (sales 
call report) attached to the affidavit described a product which was 
not in the range of thickness produced by YUSCO, Ta Chen's supplier. We 
looked at the grade, thickness, width and surface finish of the U.S. 
sale referred to in the affidavit, compared its characteristics to 
those of the three YUSCO reported control numbers (CONNUMS) which 
petitioner had relied upon in their analysis and found two of YUSCO's 
sales that were comparable. See Middleman Initiation Memo at 5. 
Further, contrary to Ta Chen's assertions otherwise, the product 
dimensions for the price quoted in the affidavit covered a product with 
a thickness between .1875 and either .3125 or .50. Ta Chen admits that 
YUSCO produced subject merchandise up to .25 inches in thickness. See 
Ta Chen Case Brief at 31 (Feb. 9, 1999). Therefore, regardless of the 
upper end of this product's thickness range, YUSCO produced product 
within the ranges described in both the affidavit and the accompanying 
weekly report. The affidavit clearly indicated that this alleged sale 
took place within the POI, and thus the information submitted by 
petitioners was also relevant to this investigation. As a result, the 
Department had reasonable evidence from which to conclude that this was 
merchandise produced by YUSCO.
    Second, with regard to whether the sale alleged in the affidavit 
occurred, Ta Chen argues that this sale was never made and, as a 
result, the Department could have learned this had it contacted the 
affiant directly. However, we initiated our middleman dumping 
investigation on the basis that this was a price quote, but not 
necessarily a sale. See Middleman Initiation Memo at 4. The affidavit 
submitted by petitioners stated that the affiant believed there was a 
sale by Ta Chen of subject merchandise on a date within the POI; it did 
not say unequivocally that there was a completed sale. As in an 
antidumping investigation, the Department has the authority to initiate 
a middleman dumping investigation based upon an offer for sale. See 
section 731(1) (``a class or kind of foreign merchandise is being or is 
likely to be sold''); section 771(14) (``sold, or in the absence of 
sales, offered for sale''). Ta Chen has not argued that the transaction 
at issue was not an offer, but argues only that it was not a completed 
sale.
    Moreover, at the time of the investigation, there was no reason for 
the Department to go beyond the affidavit and supporting weekly report 
as submitted by petitioners to confirm whether there was an offer for 
sale. As a matter of practice, when initiating an antidumping 
investigation the Department regularly relies upon U.S. price quotes 
(whether sales or offers) submitted in affidavits, provided the 
affidavit supplies sufficient and credible information. Here, the 
affidavit was submitted with a supporting call report by a U.S. 
customer in the business of selling the domestic like product who was 
generally familiar in the marketplace with Ta Chen and its 100 percent-
owned U.S. affiliate, TCI, and with their U.S. pricing.
    Further, Ta Chen did not raise its concerns to the Department 
regarding the alleged lost sale listed in the petition

[[Page 15503]]

for ITC purposes until after our initiation. See Letter from Ta Chen 
dated September 14, 1998 (Ta Chen claims that it did not receive the 
information it needed until after our initiation because it had not 
applied for an APO earlier, but we note that its wholly-owned 
affiliate, TCI, as the importer of record, is an interested party and 
it is incumbent upon an interested party to timely avail itself of 
access to proprietary information). However, there was no reason for 
the Department to have reviewed that information when it initiated the 
middleman dumping claim. The Department viewed this as an offer for 
sale and therefore evidence of a lost sale would not have been 
material. Additionally, as stated, there was no indication before the 
Department that the affidavit was untrustworthy or lacked merit. 
Finally, with regard to any information that petitioners may have 
possessed through the ITC proceeding that the price quote at issue was 
a lost sale prior to submitting it to the Department, we are not 
permitted access to proprietary ITC information, and therefore we have 
no means to arrive at the true state of the facts in this regard. 
However, as discussed, even if there was not a sale, it does not 
necessarily follow from Ta Chen's allegations that there was not an 
offer for sale and Ta Chen has not argued otherwise. As a result, we 
believe the middleman dumping investigation was properly initiated.
    Comment 8: Ta Chen states that the bank charges reported under 
CREDIT1U and CREDIT2U fields are associated with the movement of funds 
between affiliated parties. Ta Chen argues that the Department does not 
deduct these in a below cost of production analysis because these 
charges are incurred as a result of internal business decisions. As 
such, the Department should not consider these in its below acquisition 
cost analysis.
    Petitioners did not comment on this issue.
    Department's Position: In the Department's Memorandum to Edward 
Yang, Office Director: Analysis for the Amended Preliminary 
Determination of Stainless Steel Plate from Taiwan: Middleman Dumping 
Investigation, November 25, 1998, at 1, we agreed with petitioners' 
allegation that a ministerial error had been made by failing to account 
for bank fees incurred in Taiwan and the United States. As we stated in 
the Amended Preliminary Determination, ``actual selling expenses should 
be deducted in the middleman dumping analysis.'' See Mitsui & Co., Ltd. 
v. United States, Slip-Op. 97-49 (April 1997)(Mitsui 1997).
    While Ta Chen argues that these bank charges are for movement of 
funds within Ta Chen, we note that these charges are incurred with 
respect to sales of subject merchandise. As Ta Chen stated on page 20 
of its November 23, 1998 supplemental response, the bank charge 
incurred and paid in the United States has been calculated based on the 
Ta Chen invoice by actual weight, and is a fixed amount which does not 
vary with transaction value. For the bank charge incurred and paid in 
Taiwan, Ta Chen stated that this bank charge varies with the value of 
the transaction and thus is allocated over value.
    The fact that these bank charges are costs that Ta Chen argues are 
``associated with internal movement of funds between affiliated 
parties'' does nothing to negate the fact that these are actual costs 
incurred with respect to the sale of subject merchandise. These bank 
charges were actually incurred and would not have been incurred but for 
the fact that Ta Chen made U.S. sales of subject merchandise. 
Therefore, they are properly considered as direct selling expenses, and 
must be deducted from U.S. price in conducting our middleman dumping 
analysis.
    Comment 9: Ta Chen argues that the Department should not consider 
Taiwanese-based selling expenses incurred prior to importation in its 
final determination since Ta Chen is a pipe manufacturer and is not in 
the coil business. Ta Chen bases its argument on the Department's 
precedent in Fuel Ethanol. If, however, the Department chooses to use 
Taiwanese general and administrative expenses, Ta Chen argues that the 
Department could add the additional expenses presented at the start of 
verification and could also increase this sum by the ratio of total 
administration expenses to total selling departmental expenses. Ta Chen 
points out that it is not unreasonable to believe that only two clerks 
in Taiwan are involved in SSPC since there were only a small number of 
invoices and the clerks acted merely as paper processors.
    Petitioners argue that the Department should base Ta Chen's general 
and administrative expenses (G&A) for constructed value on Ta Chen's 
audited financial statement since this is required by the Department's 
questionnaire. Petitioners claim that the G&A that Ta Chen calculated 
is significantly understated because it only includes expenses 
associated with two clerks involved in SSPC sales and does not include 
expenses associated with Ta Chen's accounting, general management and 
legal departments. Petitioners cite Mitsui 1997 as precedent for using 
constructed value in calculating normal value (and therefore, applying 
G &A) in a middleman dumping case. They continue by claiming that Ta 
Chen incorrectly relied on a statement in Fuel Ethanol, and that in 
Fuel Ethanol the Department did actually include the foreign G&A in the 
constructed value used in calculating the middleman dumping margin.
    Department's Position: As we stated in our Amended Preliminary 
Determination, Congress has left to the Department the discretion to 
devise a methodology which would accurately capture middleman dumping. 
See Senate Report. In our Amended Preliminary Determination, to 
determine if Ta Chen's U.S. sales prices were substantially below its 
acquisition prices from YUSCO, we divided the amount of the losses by 
the total sales value for all sales. In our Amended Preliminary 
Determination, we calculated the amount of losses by taking the sum of 
the invoice price from YUSCO to Ta Chen, minus the adjusted U.S. sales 
price of each below cost sale. However, at that time we did not add any 
additional costs incurred by Ta Chen in purchasing YUSCO's merchandise. 
We now believe this was an error. Because Ta Chen incurred G&A expenses 
(including interest expenses) on its purchases of YUSCO merchandise, 
such costs must be added to the acquisition price (which is analogous 
to an input cost) from YUSCO in order to calculate Ta Chen's total 
acquisition costs regarding purchases of YUSCO's product. Only in this 
way can we determine the magnitude of losses Ta Chen absorbed in 
selling such merchandise in the United States and thus calculate the 
full extent of middleman dumping. This comports with how the Department 
determines whether sales are made below cost. See section 773(b)(3). 
Our antidumping manual also indicates that middleman dumping occurs 
where the middleman is not recovering its acquisition and selling 
costs. See Antidumping Manual Chapter 7. Therefore, to the extent that 
this methodology conflicts with our earlier approaches in Fuel Ethanol 
and Mitsui 1997, our determination supersedes both.
    In Fuel Ethanol, after determining that the middleman was selling 
below acquisition cost by comparing its acquisition cost from unrelated 
suppliers to U.S. resale prices to the first unaffiliated customers, 
minus all costs and expenses incurred in selling the merchandise by the 
middleman and its U.S. affiliate to the United States, we found all 
home market sales by the middleman's parent to be below cost

[[Page 15504]]

and then calculated foreign market value based upon constructed value. 
However, it is the middleman's acquisition cost for purchases of 
subject merchandise and resales of that merchandise into the United 
States that are under scrutiny. Thus, the proper comparison is between 
the acquisition costs and the price of those resales. Comparing the 
middleman's home market sales of the foreign like product from all 
producers to U.S. resales is inappropriate. In Mitsui 1997, although we 
indicated that to complete our analysis we would require additional 
information about the middleman and its suppliers regarding sales, 
expenses and cost information to calculate foreign market value, we did 
not indicate that we would follow our approach in Fuel Ethanol in 
calculating the magnitude of losses to determine middleman dumping. We 
found that, based upon comparing the supplier's invoice price to the 
U.S. resale prices, the trading company had not made a substantial 
portion of resales at below acquisition cost.
    Because we have Ta Chen's verified financial statements, we have Ta 
Chen's total expenses for all sales and its total cost of all goods. 
Relying upon this data, we arrived at a percentage of G&A expenses 
(including interest) for Ta Chen's purchases of YUSCO's merchandise 
which we have used in our calculation to determine middleman dumping, 
i.e., the magnitude of losses sustained by Ta Chen in selling YUSCO's 
product into the United States. We do not agree with Ta Chen that it 
merely undertook minimal activities on behalf of TCI and, therefore, 
reject its call to add on G&A expenses only incurred for two clerks 
(See Comment 6).
    Finally, as discussed in a previous portion of this notice 
(``Middleman Dumping'') we note that we are also changing the 
methodology used to identify whether there was a substantial portion of 
resales by Ta Chen sold below its acquisition costs to mirror the 
methodology used to determine the magnitude of losses. In the Amended 
Preliminary Determination, we compared the U.S. resale price (after 
deductions as described) to the supplier's invoice price. However, as 
discussed above, we now believe that the acquisition price alone does 
not reflect all the costs associated with Ta Chen selling the foreign 
producer's merchandise to the United States. Because Ta Chen also 
incurred G&A and interest expenses, we will add such expenses to the 
acquisition price to arrive at the total acquisition cost (acquisition 
price plus associated G&A and interest costs) incurred by Ta Chen in 
selling this merchandise. We will continue to compare the total value 
of all sales below acquisition cost to the total value of all Ta Chen's 
resales to determine if there were a substantial portion of resales 
below acquisition cost. Our change in methodology results in a finding 
that 44.53 percent of resales were sold below acquisition cost, which 
we find is a substantial portion of Ta Chen's resales.
    Comment 10: Ta Chen requests that the Department use YUSCO's 
selling prices rather than Ta Chen's reported acquisition costs in the 
final determination. Ta Chen makes this request based on a comparison 
of these costs and prices noted in the verification report, which 
revealed certain differences between YUSCO's selling price and Ta 
Chen's reported acquisition cost.
    Petitioners argue that the Department should disregard Ta Chen's 
request for the Department to use YUSCO's reported selling prices to 
TCI rather than TCI's reporting of such prices since at verification 
the Department found no discrepancies with regard to Ta Chen's 
constructed value methodology.
    Department's Position: We agree with petitioners and are continuing 
to use Ta Chen's reported acquisition prices. At verification, we found 
a significant number of discrepancies in attempting to verify Ta Chen's 
acquisition prices. However, because overall Ta Chen's reporting 
represents a conservative approach, we will continue to use Ta Chen's 
reported acquisition costs for this final determination.
    Comment 11: Ta Chen argues that although the Department 
preliminarily determined that Ta Chen sold subject merchandise in 
substantial quantities and substantially below its cost of acquisition, 
the Department never articulated the rationale or the standard it used 
in determining what is substantial. Ta Chen contends that given a de 
minimis level of two percent, and given that ``recognized authorities'' 
and ITC Commissioners have observed that margins are not considered 
substantial until they exceed the 10 to 20 percent levels, a 
determination by the Department that three percent represents a 
substantial loss must be explained. Ta Chen also argues that since 
trading companies ``typically'' operate at low margins, and because TCI 
held the merchandise in inventory in the United States for a 
substantial amount of time, a three percent loss is reasonable given a 
(purported) 12 to 23 percent drop in the prices of subject merchandise 
during the POI.
    Petitioners argue that the Department should not set a fixed 
numerical guideline to determine the existence of substantial losses 
since each case has its own circumstances. Additionally, Ta Chen has 
not demonstrated a meaningful correlation between the two percent de 
minimis standard for dumping margins and the middleman dumping 
criterion of substantial losses. Petitioners continue by claiming that 
contrary to Ta Chen's claim, Ta Chen should not be allowed to sell at 
below cost merely because it was following a downward market, and that 
Ta Chen's selling prices actually contributed to this downward market.
    Department's Position: We agree with petitioners. There can be no 
single threshold which constitutes substantial losses with regard to 
middleman dumping because each case involves a unique set of 
circumstances. In this case, we find that 2.18 percent, as well as the 
three percent calculated in the Amended Preliminary Determination, 
constitutes substantial losses. As an initial matter, it is undisputed 
by both parties that such losses are above de minimis. See 19 CFR 
351.106. Secondly, we note that Ta Chen's assertion that trading 
companies ``typically'' operate at low margins indicates that losses 
which may, on an absolute basis, be at seemingly lower levels may still 
be considered ``substantial''. Thirdly, it is our understanding that 
SSPC is traded as a commodity. Therefore, it is price sensitive and 
sales are thus often made or lost based on relatively small differences 
in price. Hence, such a percentage likely is significant in this 
industry.
    Comment 12: Ta Chen requests that the Department clarify its 
instructions to the U.S. Customs Service to indicate the full name of 
Ta Chen Stainless Pipe, Ltd. because the Amended Preliminary 
Determination stated that ``this investigation covers two respondents, 
Yieh United Steel Corporation and Ta Chen Stainless Steel Pipe, Ltd.'' 
However, the Department has established a deposit rate for Yieh United/
Ta Chen.
    Petitioners argue that the language should remain the same because 
the reference to ``Ta Chen'' is inclusive of both Ta Chen Stainless 
Pipe, Ltd. and TCI. Petitioners assert that this is appropriate given 
that these two companies are affiliated and that section 772 of the 
Tariff Act directs the Department to ``examine sales from the foreign 
producer to middlemen (trading companies) and any sales between 
middlemen before sale to the first unrelated U.S. purchaser to avoid 
below cost sales by the middlemen.''

[[Page 15505]]

    Department's Position: We disagree with petitioners. Although in 
antidumping investigations we do assign channel-specific deposit rates 
on occasion, these are producer-exporter specific rates. While we 
believe that a rate including both YUSCO and Ta Chen is appropriate, as 
discussed in other sections of this notice, we do not believe it is 
appropriate to include TCI, because TCI is an importer and if it 
imports from another producer or reseller, it should, as any other 
importer, be subject to the cash deposit rate for that producer/
reseller or the all others rate. Moreover, the importer-specific rates 
we calculate in an annual review are for purposes of assessing duties. 
Since we do not order the final assessment of duties in an 
investigation, this calculation does not apply. Therefore, for the 
final determination, we will continue to assign a deposit rate to ``Ta 
Chen'' with the understanding that this refers to only Ta Chen 
Stainless Pipe Co., Ltd. We also note that any sales by Ta Chen of 
subject merchandise produced by any party other than YUSCO will be 
subject to the all others rate.
    Comment 13: Petitioners argue that the Department should 
recalculate Ta Chen's U.S. credit and U.S. inventory carrying expenses. 
Petitioners contend that Ta Chen failed to account for compensating 
balances required on its loans in Ta Chen's calculation of its short-
term interest rate. In addition, petitioners request that the 
Department increase Ta Chen's credit expenses to account for the 
interest expenses and bank charges discovered at verification. 
Petitioners cite Mitsui 1997 as a precedent for calculating normal 
value based on constructed value in a middleman dumping case.
    Petitioners argue that the Department should calculate inventory 
carrying costs for the time the merchandise is in transit from Ta 
Chen's warehouse in Taiwan to the time of entry into TCI's inventory. 
Petitioners assert that this cost must be deducted from U.S. price as 
U.S. inventory carrying costs. This claim is based on Ta Chen's 
statements that title of the merchandise passes instantaneously from 
YUSCO to Ta Chen to TCI. Thus, the merchandise is in the inventory of 
TCI during shipment.
    Ta Chen requests that, for reasons indicated in Mitsui 1997, the 
Department continue not to deduct imputed costs. Ta Chen claims that 
the concern related to middleman dumping is only whether the middleman 
is selling below cost, and thus any attempt to include constructed 
value or other imputed costs would be unlawful. Thus, since the 
interest expenses and inventory carrying costs (which are not even 
incurred in the United States, but rather on the ocean) that 
petitioners mention are only used in calculating imputed costs, Ta Chen 
argues that petitioners' argument is irrelevant.
    Department's Position: As in our Amended Preliminary Determination, 
we have not included imputed credit expenses and inventory carrying 
costs in calculating U.S. resale prices because, as we stated, these 
expenses represent opportunity costs, not actual costs to the company. 
See also Mitsui 1997. In addition, as set out in our Amended 
Preliminary Determination, we will deduct from Ta Chen's U.S. resale 
the actual expenses incurred in selling the product in the United 
States. See Comment 9. We will not include imputed costs and expenses 
because we continue to believe that middleman dumping involves sales 
below the middleman's actual total acquisition costs and expenses and 
therefore to include imputed costs and expenses would be inappropriate. 
Similarly, because the focus of middleman dumping is solely on whether 
the merchandise was sold to the first unaffiliated party in the United 
States at prices below the middleman's total acquisition costs and 
expenses, instead of using constructed value, in calculating a 
middleman dumping margin, we have used a middleman acquisition price 
which, as stated, is analogous to the input cost, and the middleman's 
actual G&A and interest expenses. Taken together, these items encompass 
all costs associated with purchasing the merchandise.
    As discussed in other sections of this notice, we will add to Ta 
Chen's acquisition price a portion of its total G&A expenses, including 
interest (allocable to sales of subject merchandise), because these are 
actual costs incurred by Ta Chen in purchasing YUSCO's merchandise. See 
Comments 9 and 20. This is also consistent with constructing costs in 
lieu of prices under section 773(b)(3), where only actual G&A including 
interest is used (and will not, therefore, include profit, see Comments 
9 and 20).
    Comment 14: Petitioners argue that the Department should 
recalculate Ta Chen's reported warehousing expenses to include building 
depreciation expenses and total interest for land and buildings 
associated with TCI's Los Angeles warehouse and then deduct these as 
direct selling expenses. With regard to the interest for land and 
building, petitioners' claim that this expense was calculated only for 
the square footage specifically attributable to coil, but that the Los 
Angeles warehouse expense was allocated over all merchandise.
    Ta Chen states that the correct building depreciation expense for 
coil shipments from the Los Angeles warehouse can be calculated by 
multiplying the warehouse building mortgage interest rate by 
petitioners' estimate of 1997 warehouse building depreciation and then 
dividing by total pounds shipped.
    Ta Chen points to the verification exhibits to show that, contrary 
to petitioners' claims, the Los Angeles warehouse interest expense was 
calculated correctly because both the mortgage interest and warehouse 
expense were allocated over only coil shipments.
    Department's Position: Regarding the inclusion of building 
depreciation expenses, we agree with both Ta Chen and petitioners and 
have recalculated TCI's warehousing expenses accordingly. We also agree 
with Ta Chen with regard to the calculation of mortgage interest since, 
as seen in the verification exhibits, both the interest expense and 
warehouse expense were allocated over shipments of SSPC.
    Comment 15: Petitioner claims that, in the final determination, we 
should deduct expenses related to an unreported Chicago warehouse 
discovered at verification.
    Ta Chen argues that petitioners erroneously allocate the unreported 
Chicago warehouse's charge to the amount stored at the reported 
warehouse, and the fact that this one Chicago warehouse was not 
reported actually results in over-reported Ta Chen warehouse expenses.
    Department's Position: We agree with Ta Chen. Petitioners' 
recalculation of per unit Chicago warehouse expenses does not account 
for the quantity stored at the unreported warehouse. Based on an 
exhibit taken at verification, we conclude that, in fact, Ta Chen's 
reported warehousing expenses for its warehouse activities in Chicago 
were conservative. We thus have not adjusted Ta Chen's warehousing 
expenses.
    Comment 16: Petitioners argue that Ta Chen failed to account for 
all of its overhead expenses in calculating indirect selling expenses. 
Petitioners cite such expenses as utilities, property taxes, and 
security expenses as items which are general in nature. Petitioners 
request that the Department recalculate Ta Chen's indirect selling 
expenses as total selling expenses, including interest expenses, as a 
percentage of sales.
    Ta Chen acknowledges that perhaps it should have allocated, to 
SSPC, expenses for charitable contributions,

[[Page 15506]]

postage & delivery, security, taxes & licenses, property taxes, and 
utilities. Ta Chen also claims, however, that for the other indirect 
expenses mentioned by petitioner there is no evidence that they are 
related to sales of SSPC, as the verification findings show, and that 
petitioners should have raised this argument before verification.
    Department's Position: We agree with petitioners. In Exhibit 11 of 
its November 23,1998 supplemental, Ta Chen reported both an overall 
ratio of U.S. selling expenses for sales of all products and a ratio it 
represented as appropriate to sales of stainless steel coils. In its 
data submission, Ta Chen reported the latter. However, Ta Chen stated 
that ``* * * it does not matter which figures are used, as far as the 
final dumping margin.'' See, November 23, 1998 submission at 24.
    While the Department reviewed a portion of TCI's reported indirect 
selling expenses attributable to coil at verification, the nature of 
any verification includes the employment of spot-checking techniques, 
which are necessary given the extreme time constraints for a 
verification. Therefore, while the Department will generally find an 
item to be successfully ``verified'' based on successful spot-checks of 
data, such a conclusion becomes open to rebuttal if compelling evidence 
is presented after verification which calls into question any 
calculation. In this respect, in its rebuttal brief, TCI now admits 
that certain expenses had been erroneously excluded from its selling 
expense allocation for stainless steel coil. Thus, by Ta Chen's own 
admission, its calculation of indirect selling expenses for coils is 
flawed. Therefore, for this final determination, we have used TCI's 
overall operating costs as a percentage of sales as previously reported 
in Exhibit 11 of Ta Chen's November 23, 1998 supplemental response. 
This is in accordance with our normal practice. See Yieh United Steel 
Corporation (YUSCO) and Ta Chen Stainless Pipe Co., Ltd. Analysis 
Memorandum for the Final Determination of the Less-Than-Fair-Value 
Investigation of Stainless Steel Plate in Coil from Taiwan (``Ta Chen 
Final Analysis Memo''), March 19, 1999 at 3.
    Comment 17: Petitioners argue that the Department should 
recalculate one CONNUM's acquisition cost in Ta Chen's constructed 
value worksheet to exclude the warranty claim since the payment of the 
warranty claim could not be verified and YUSCO stated that it did not 
accept any such warranty claim.
    Ta Chen claims that this is irrelevant since the Department did not 
use constructed value in its middleman dumping margin analysis.
    Department's Position: We agree with petitioner and have 
recalculated Ta Chen's acquisition price, accordingly. This so-called 
warranty claim is actually an offset to Ta Chen's acquisition price and 
is analogous to a billing adjustment on an input. Because we were 
unable to verify this offset claim, we are calculating a weighted-
average acquisition price that excludes this offset.
    Comment 18: Petitioners assert that although none were reported, Ta 
Chen's interest expenses for the constructed value calculation should 
be calculated by dividing the company's total net interest expense 
divided by its cost of sales, as required by the Department's 
questionnaire.
    Ta Chen argues that an adjustment should not be made for Ta Chen's 
interest expenses based on the fact that Ta Chen guarantees TCI's 
loans. Ta Chen states that, as the record shows, Ta Chen never paid any 
of TCI's interest expense on TCI's loans.
    Department's Position: We agree with petitioners. As described 
above (see Comment 6), Ta Chen plays an integral role in the purchase 
and resale of SSPC and therefore its interest expenses must be taken 
into account as part of total G&A expenses. See Comments 8, 13. As 
petitioners suggest and as the questionnaire prescribes, we have 
calculated Ta Chen's interest expenses by dividing the company's total 
net interest expense divided by its cost of sales. See Ta Chen Final 
Analysis Memo, at 2-3.
    Comment 19: Petitioners state that the Department should correct Ta 
Chen's errors found at verification. Petitioners also contend that Ta 
Chen's latest submitted data is missing field INDIRS2U representing 
U.S. warehousing expenses. Petitioners request that the Department 
utilize all appropriate expenses in its final determination.
    Ta Chen states that U.S. warehousing expenses were reported in 
field DIRSEL2U and that field INDIRS2U was erroneously included in its 
initial dataset.
    Department's Position: We agree with petitioners and have corrected 
Ta Chen's errors found at verification. These errors include 
recalculation of U.S. repacking expenses, U.S. commissions, 
international freight, credit expenses and U.S. indirect selling 
expenses. However, we have not deducted the INDIRS2U field because the 
record does not support a conclusion that this field represents U.S. 
warehousing expenses or any other expense that has not already been 
accounted for in this final determination. In fact, the Department 
included the field INDIRS2U in its Amended Preliminary Determination 
calculations, since this field was included in the database which the 
Department used in its preliminary calculations. However, such 
inclusion was in error, because this information constituted 
unsolicited (as well as unexplained) new data (submitted October 14, 
1998, in response to the Department's October 9, 1998 letter requesting 
unrelated information). Indeed, we note that Ta Chen excluded this 
field in its supplemental sales submission to the Department of 
November 23, 1998. However, due to time constraints, we were unable to 
use the November 23, 1998 database (i.e., an updated database which 
excluded the field INDIRS2U) for the Amended Preliminary Determination. 
See Ta Chen Final Analysis Memo, at 3.
    Comment 20: Petitioners argue that the Department should correct 
the ``ministerial errors'' found in the preliminary determination. One 
such alleged error is that the Department did not use the correct 
exchange rate in its analysis of whether Ta Chen engaged in middleman 
dumping. Petitioners contend that in that part of its analysis, the 
Department should have chosen, as the exchange rate, the date of 
YUSCO's sale to Ta Chen rather than on the date of TCI's resale in the 
United States. Petitioners support their argument by stating that the 
focus in middleman dumping is on whether Ta Chen covered its cost of 
acquisition with respect to the price paid by Ta Chen to YUSCO. 
Furthermore, they point to the Amended Preliminary Determination in 
which, the Department selected, as the exchange rate, the date of 
YUSCO's sale to Ta Chen in calculating the dumping margin attributable 
to YUSCO. Petitioners request that the Department consistently employ 
the date of sale for the transactions between YUSCO and Ta Chen in 
evaluating the extent of Ta Chen's middleman dumping.
    Petitioners also argue that the Department did not correctly 
calculate the overall dumping margin for YUSCO/Ta Chen since the margin 
calculation on the sales between Ta Chen and its unaffiliated U.S. 
customers inadvertently omitted U.S. credit expenses, U.S. inventory 
carrying costs, CEP profit, inventory carrying costs incurred in Taiwan 
for U.S. sales, and indirect selling expenses incurred in Taiwan for 
U.S. sales. Additionally, claim petitioners, with regard to Ta

[[Page 15507]]

Chen's constructed value, the Department failed to include indirect 
selling expenses, G&A, interest expenses, and constructed value profit.
    Ta Chen argues that the Department should use the exchange rate on 
the date TCI receives payment from its unaffiliated U.S. customer in 
converting Taiwanese acquisition costs and expenses into U.S. dollars. 
Ta Chen argues that use of this exchange rate would indicate the true 
profitability of the transaction because the SSPC was actually 
purchased from YUSCO in Taiwanese currency. To obtain the actual profit 
or loss from the perspective of a Taiwanese trading company, one would 
have to convert the U.S. dollars received and convert that to Taiwanese 
dollars based on the existing exchange rate to determine if the resale 
price was more than the acquisition price.
    Department's Position: With respect to the appropriate exchange 
rate, we disagree with both petitioners and Ta Chen and have continued 
to apply the same currency conversion as that applied in our Amended 
Preliminary Determination. In that determination, we selected the 
exchange rate for converting the acquisition cost as the rate in effect 
on the date of Ta Chen's resales (through its 100 percent-owned 
affiliate, TCI) to its first unaffiliated U.S. customers. Using the 
same exchange rate for both transactions is in keeping with the statute 
and our normal practice of making an apples-to-apples comparison 
between prices and costs. See section 773A and Mitsui 1997. When 
calculating a constructed normal value, the Department uses the 
exchange rate based upon the date of the U.S. sale. See section 773A. 
In the case of middleman dumping, we are attempting to compare costs 
with prices--the acquisition costs, including actual G&A and interest 
expenses (see Comment 9)--with the resale price to the first 
unaffiliated U.S. customer (minus actual movement and selling expenses 
associated with selling the product in the United States). Therefore, 
because we are comparing costs with prices it is appropriate to follow 
our standard practice.
    Moreover, it is only on the date of sale to the first unaffiliated 
U.S. customer that the middleman, in this case Ta Chen, will know 
whether or not it will recover its total acquisition costs on resale. 
It cannot know this on the date it acquires the merchandise. Therefore, 
because the basis of middleman dumping is to determine if the middleman 
is selling below its acquisition costs, the date of sale to the first 
unaffiliated U.S. customer is the appropriate date upon which to 
convert Ta Chen's acquisition costs into U.S. dollars.
    Although Ta Chen acknowledges that to ensure an apples-to-apples 
comparison the Department must convert one side of the equation so that 
both are in the same currency, Ta Chen's suggestion to use the exchange 
rate on the date payment is received for the U.S. sale from the first 
unaffiliated customer is without merit. The suggestion ignores the 
statute, the regulations and our standard practice. In constructing a 
normal value in lieu of actual prices, the Department does not use the 
date of payment, but rather, as discussed, the date of the actual U.S. 
sale to the first unaffiliated customer. See section 773A; 19 CFR 351. 
415(a)(``in an antidumping proceeding, the Secretary will convert 
foreign currencies into United States dollars using the rate of 
exchange on the date of sale of subject merchandise'').
    We also disagree with respect to petitioners suggestion to deduct 
imputed selling expenses and CEP profit. Petitioners' argument that we 
must make these deductions in order to correctly calculate an overall 
dumping margin is misplaced because, although our calculations contain 
parallels to a ``normal'' dumping calculation, here, we are not trying 
to calculate a constructed normal value or an overall dumping margin. 
Rather, we are determining the magnitude of losses incurred by Ta Chen 
in selling the merchandise below its total acquisition cost. Likewise, 
we will not add to the total acquisition cost the profits gained by Ta 
Chen, as that would be contrary to the rationale for determining 
middleman dumping, which is solely to determine the extent of the 
losses the middleman is absorbing in selling merchandise from an 
unaffiliated supplier into the United States (see Comment 9). Finally, 
with respect to indirect selling expenses incurred in Taiwan, we note 
that Ta Chen reported that it had none. Therefore, as we describe in 
Comments 9 and 18, we are including G&A and interest expenses in 
calculating Ta Chen's total acquisition costs.
    Comment 21: Ta Chen infers that petitioners are arguing that the 
Department should add YUSCO's and TCI's dumping margins together and 
base TCI's dumping margin on constructed value, including profit, for 
the final determination. Ta Chen argues that such a methodology leads 
to the double counting of margins since it adds the difference between 
normal value and the price paid by Ta Chen and the difference between 
normal value and the price paid to the first unaffiliated U.S. 
customer.
    Department's Position: We disagree with Ta Chen and find that 
adding YUSCO's margin to Ta Chen's margin accurately calculates the 
extent of middleman dumping. Contrary to Ta Chen's claims, by adding 
the margins, we are adding the difference between normal value and the 
price paid by Ta Chen to the difference between Ta Chen's total 
acquisition cost and the price paid to the first unaffiliated U.S. 
customer. Doing so accounts for all transaction and all expenses, 
resulting in an accurate middleman dumping margin.

Continuation of Suspension of Liquidation

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

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                        margin
                                                              percentage
------------------------------------------------------------------------
YUSCO......................................................         8.02
YUSCO/Ta Chen..............................................        10.20
All Others.................................................         7.39
------------------------------------------------------------------------

ITC Notification

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

[[Page 15508]]

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

    Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7538 Filed 3-30-99; 8:45 am]
BILLING CODE 3510-DS-P