[Federal Register Volume 64, Number 68 (Friday, April 9, 1999)]
[Notices]
[Pages 17342-17347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8928]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-830]


Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Round Wire from Korea

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

EFFECTIVE DATE: April 9, 1999.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell at 
(202) 482-1442 or (202) 482-3813, respectively, Group 1, Office of AD/
CVD Enforcement 2, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230.

The Applicable Statute and Regulations

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

Final Determination

    We determine that stainless steel round wire from Korea is being 
sold, or is likely to be 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

    The preliminary determination in this investigation was issued on 
November 12, 1998. See Notice of Preliminary Determinations of Sales at 
Less Than Fair Value and Postponement of Final Determinations--
Stainless Steel Round Wire From Canada, India, Japan, Spain, and 
Taiwan; Preliminary Determination of Sales at Not Less Than Fair Value 
and Postponement of Final Determination--Stainless Steel Round Wire 
From Korea, 63 FR 64042 (November 18, 1998) (preliminary 
determination). Since the preliminary determination, the following 
events have occurred:
    In January and February 1999, we conducted on-site verifications of 
the questionnaire responses submitted by respondent Korea Sangsa Co., 
Ltd. (Korea Sangsa) and its affiliate Korea Sangsa America, Inc. 
(KOSA).
    The petitioners 1 and the respondent submitted case 
briefs on February 26, 1999, and rebuttal briefs on March 5, 1999. We 
held a public hearing on March 11, 1999.
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    \1\ The petitioners are ACS Industries, Inc., Al Tech Specialty 
Steel Corp., Branford Wire & Manufacturing Company, Carpenter 
Technology Corp., Handy & Harman Specialty Wire Group, Industrial 
Alloys, Inc., Loos & Company, Inc., Sandvik Steel Company, Sumiden 
Wire Products Corporation, and Techalloy Company, Inc.
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Scope of Investigation

    The scope of this investigation covers stainless steel round wire 
(SSRW). SSRW is any cold-formed (i.e., cold-drawn, cold-rolled) 
stainless steel product of a cylindrical contour, sold in coils or 
spools, and not over 0.703 inch (18 mm) in maximum solid cross-
sectional dimension. SSRW is made of iron-based alloys containing, by 
weight, 1.2 percent or less of carbon and 10.5 percent or more of 
chromium, with or without other elements. Metallic coatings, such as 
nickel and copper coatings, may be applied.
    The merchandise subject to this investigation is classifiable under 
subheadings 7223.00.1015, 7223.00.1030, 7223.00.1045, 7223.00.1060, and 
7223.00.1075 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, the written description of the merchandise under 
investigation is dispositive.

Period of Investigation

    The period of the investigation (POI) is January 1, 1997, through 
December 31, 1997. This period corresponds to the respondent's four 
most recent fiscal quarters prior to the month of the filing of the 
petition (i.e., March 1998).

Fair Value Comparisons

    To determine whether sales of stainless steel round wire from Korea 
to the United States were made at LTFV, we compared the export price 
(EP) or constructed export price (CEP), as appropriate, to the normal 
value (NV). Our calculations followed the methodologies described in 
the preliminary determination, except as noted below and in the sales 
analysis memorandum from Valerie Ellis to Kris Campbell, dated April 2, 
1999, which has been placed in the file.

Export Price and Constructed Export Price

    We used the same methodology to calculate EP and CEP as that 
described in the preliminary determination, except in the following 
specific instances:

    1. We established two separate averaging periods to account for 
the precipitous drop of the Korean won at the end of the POI. See 
comment 1.
    2. We reallocated indirect selling expenses incurred by Korea 
Sangsa's U.S. affiliate entirely to CEP sales. See comment 3.
    3. We disallowed the CEP offset that was granted at the 
preliminary determination. See comment 4.

Normal Value

    We used the same methodology to calculate normal value (NV) as that 
described in the preliminary determination, with the exception that we 
averaged normal value for two separate periods to account for the 
precipitous drop of the Korean won at the end of the POI. See comment 
1.

Cost of Production

    We used the same methodology to calculate cost of production (COP) 
as that described in the preliminary determination, except in the 
following specific instances:

    1. We recalculated the G&A expense ratio to include expenses of 
affiliates involved in the production of subject merchandise, and to 
exclude certain non-operating income. See comment 11.
    2. We reduced the cost of manufacturing by the sale of scrap. 
See comment 12.
    3. We reduced the cost of manufacturing by the rental income. 
See comment 12.
    4. The interest expense ratio was recalculated to create a 
combined ratio including all affiliates. See comment 13.
    5. We recalculated the net cost of goods sold used in the G&A 
and interest expense ratio calculation to include the sales value of 
inter-company sales. See comment 13.

Currency Conversions

    As explained in the preliminary determination, our analysis of 
Federal Reserve data on the U.S. dollar-Korean won exchange rate showed 
that the won declined rapidly at the end of 1997, losing over 40 
percent of its value between the beginning of November and the end of 
December. The decline was, in both speed and magnitude, many times more 
severe than any change in the dollar-won exchange rate during the 
previous eight years. Had the won rebounded quickly enough to recover 
all or almost all of the initial loss, the Department might have 
considered the won's decline at the end of 1997 as nothing more than a 
sudden but only momentary drop, despite the magnitude

[[Page 17343]]

of that drop. As it was, however, there was no significant rebound. 
Therefore, we have not changed our preliminary determination that the 
decline in the won at the end of 1997 was so precipitous and large that 
the dollar-won exchange rate cannot reasonably be viewed as having 
simply fluctuated during this time, i.e., as having experienced only a 
momentary drop in value. As a result, in making this final 
determination, the Department has continued to use daily rates 
exclusively for currency-conversion purposes for home market sales 
matched to U.S. sales occurring between November 1, 1997, and December 
31, 1997. Further, as discussed in Comment 1, below, we have considered 
these two months as a separate averaging period from the first ten 
months of the POI.

Interested Party Comments

A. Sales Issues
    Comment 1: Averaging Periods. The petitioners argue that the 
Department should account for the effect of the severe depreciation of 
the Korean won toward the end of the POI by relying on separate 
averaging periods corresponding to the pre-and post-depreciation 
periods. According to the petitioners, the Department's regulations 
provide that average-to-average price comparisons may be performed over 
periods shorter than the POI where the normal values, export prices, or 
constructed export prices for sales in an averaging group differ 
significantly over the POI. The petitioners contend that if the 
Department does not rely on two separate averaging periods in this 
case, the respondent's dumping throughout the majority of the POI will 
be masked by the effect of the devalued Korean currency in the last few 
months of the period. The petitioners request that the averaging 
periods be divided using fiscal quarters (i.e., the first period 
corresponding to the first three quarters of 1997, the second period 
corresponding to the last quarter).
    Korea Sangsa argues that the Department's established currency 
conversion policy fully accounts for the effects of the devaluation of 
the Korean won, and that there is no legal basis or rational need for 
any additional adjustment. According to the respondent, its pricing 
behavior and selling activities in the U.S. and home markets did not 
change throughout the POI, and the company should not be penalized for 
currency movements outside of its control.
    DOC Position: We agree with the petitioners that separate averaging 
periods should be used. Under section 777A(d)(1)(A) of the Act , the 
Department has wide latitude in calculating the average prices used to 
determine whether sales at less than fair value exist. More 
specifically, under 19 CFR 351.414(d)(3), the Department may use 
shorter averaging periods where normal value varies significantly over 
the POI. In the instant case, NV (in dollars) in the last two months of 
the POI differs significantly from NV earlier in the POI due primarily 
to a significant change in the underlying dollar value of the won. This 
significant change is evidenced by the precipitous drop in the won's 
value that began in November 1997 and continued through the end of the 
POI, without a quick, significant rebound. In the span of two months, 
the won's value decreased by more than 40 percent in relation to the 
dollar. Consequently, it is appropriate to use two averaging periods to 
avoid the possibility of a distortion in the dumping calculation. 
Moreover, we disagree with respondent's claim that the use of averaging 
periods is dependent upon a change in a respondent's selling practices. 
We note that in Notice of Final Determination of Sales at Less Than 
Fair Value: Certain Preserved Mushrooms from Indonesia, 63 FR 72268, 
72272 (December 31, 1998), the Department stated that ``in addition to 
changes in selling practices, we believe that we should also consider 
other factors, such as prolonged large changes in exchange rates, in 
determining whether it is appropriate to use more than one averaging 
period.'' Therefore, we have used two averaging periods for the final 
determination, and calculated a weighted average of the resulting 
margins. Because the rapid devaluation of the Korean won began in 
November 1997, we have defined the first period to extend from January 
through October, and the second period from November through December.
    We note that, as explained above in Currency Conversions, we have 
continued to use daily exchange rates for the period November through 
December 1997.
    Comment 2: Correction of Errors at Verification. The petitioners 
allege that the errors identified by Korea Sangsa at the outset of 
verification were so extensive that the Department should not accept 
these corrections without penalty. Korea Sangsa claims that the 
Department found no significant errors at verification and should 
continue to rely on the company's verified data.
    DOC Position: We do not agree that Korea Sangsa's errors were so 
pervasive as to warrant the application of adverse facts available. It 
is standard Department practice to accept corrections of minor errors 
identified by a respondent at the outset of verification. See Notice of 
Final Determination of Sales at Less Than Fair Value: Static Random 
Access Memory Semiconductors from Taiwan, 63 FR 8909, 8929 (February 
23, 1998). The errors identified by Korea Sangsa affected only a few 
variables (e.g., invoice number, credit expenses) with respect to a 
small percentage of sales. See Korea Sangsa sales verification report, 
dated February 19, 1999, at 2. Based on established verification 
procedures, we are satisfied that the revised information presented at 
the outset of verification was correct, and have relied on this 
information for this final determination.
    Comment 3: Allocation of Indirect Selling Expenses to CEP Sales. 
The petitioners argue that the Department should allocate U.S. indirect 
selling expenses incurred by the respondent's U.S. affiliate (KOSA) 
entirely to CEP sales, and not EP sales, since KOSA performs negligible 
activities in connection with EP sales.
    Korea Sangsa asserts that while KOSA plays a limited role with 
respect to EP sales, at least a portion of the indirect selling 
expenses are properly allocable to these sales, and provided separate 
EP and CEP ratios to support its proposed allocation.
    DOC Position: We agree with the petitioners that U.S. indirect 
selling expenses should be allocated only to CEP sales. The record 
indicates that KOSA's role with respect to EP sales is limited to the 
transmittal of purchase orders to its parent company in Korea and the 
occasional receipt of payment, whereas KOSA plays a much more active 
role with respect to CEP sales. The methodology advanced by the 
respondent allocates slightly more expenses to CEP sales than to EP 
sales, but this result reflects merely that the company's reported 
sales had a higher ratio of CEP to EP sales than did the company's 
total sales, and does not capture the fact that, in terms of selling 
activities, KOSA also plays a significantly more active role with 
respect to CEP sales. Since the respondent has not isolated the 
expenses associated with the negligible role played by the affiliate 
with respect to the EP sales, we have allocated the expenses in 
question entirely to CEP sales.
    Comment 4: CEP Offset. The petitioners argue that Korea Sangsa 
should not be granted a CEP offset, given findings at verification 
confirming that there is no difference in selling functions in the home 
and U.S. markets.

[[Page 17344]]

    Korea Sangsa asserts that the Department should continue to grant 
the CEP offset. The respondent claims that normal value in this case 
includes several selling functions not found in the adjusted CEP, 
including the arrangement of freight and warehousing, as well as direct 
selling expenses such as the arranging of bank transactions for local 
letter of credit sales.
    DOC Position: We agree with the petitioners that a CEP offset is 
not appropriate given the facts of this case. The record indicates that 
the respondent's selling functions in the home market are very limited, 
and do not extend significantly beyond those performed with respect to 
its U.S. affiliate. Although Korea Sangsa arranges for movement of the 
merchandise on behalf of its home market customers, it also arranges 
for movement of the merchandise to its U.S. affiliate. Korea Sangsa 
does arrange banking transactions for local letter of credit sales as 
well as cutting services, but such functions were performed for only a 
small percentage of all home market sales during the POI. Given that 
the selling functions performed with respect to home market customers 
do not differ significantly from those performed with respect to the 
U.S. affiliate, we find that sales to both home market and U.S. 
customers are made at the same level of trade, so that a CEP offset is 
not necessary. This is consistent with similar determinations in recent 
cases. See, e.g., Industrial Nitrocellulose From the United Kingdom; 
Notice of Final Results of Antidumping Duty Administrative Review, 64 
FR 6609, 6614 (Feb. 10, 1999).
    Comment 5: U.S. Credit. The petitioners argue that the Department 
should impute a credit expense for all sales in which reported payment 
date occurred after the reported ship date.
    Korea Sangsa asserts that for a number of sales involving letters 
of credit, it presented the sales documents to its bank upon shipment 
and immediately obtained from the bank the invoice value of the 
transaction. The respondent further claims that the bank levied a 
discount charge for the period between shipment and estimated customer 
payment to the bank, which Korea Sangsa reported as a bank charge. 
Korea Sangsa contends that the Department should not impute an 
additional credit expense for these sales. The respondent also contends 
that it reported imputed credit expenses for all other sales.
    DOC Position: We agree with Korea Sangsa that, for EP sales where 
the respondent receives payment from its bank immediately upon 
shipment, there is no need to impute a credit expense. For such sales, 
as in the preliminary determination, we have made an adjustment for the 
charges levied by the bank, which constitute actual interest expenses 
arising from the lag between the date of shipment and the date of 
customer payment. For all other sales, to the extent that the date of 
payment follows the date of shipment, we have made adjustments for 
imputed credit expenses.
    Comment 6: Clarification of Matching Methodology. The petitioners 
request that the Department clarify its policy with respect to 
situations where there are two equally similar home market products (in 
terms of physical characteristics) that could serve as comparison 
merchandise for a given U.S. product. The petitioners note that the 
Department has in the past either (1) relied on an average of the 
prices of the two products, or (2) selected the home market product 
with the more similar variable cost. The petitioners note that the 
Department followed the latter approach in the preliminary 
determination, and contend that the former approach is more sensible.
    Korea Sangsa argues that the Department should continue to find the 
most similar home market match as in the preliminary determination.
    DOC Position: In situations where, based on the reported product 
characteristics, there are two or more ``equally similar'' home market 
products, we have in the past relied on the home market product with 
the closest variable cost of manufacture to that of the U.S. product. 
See, e.g., Certain Welded Carbon Steel Pipes and Tubes From India; 
Final Results of Antidumping Duty Administrative, 63 FR 32825 (June 16, 
1998). We have followed this methodology for the final determination.
    Comment 7: Packing Form/Model Matching. The petitioners suggest 
that the Department may want to consider the appropriateness of 
including packing form in the model matching criteria for the purpose 
of making price to price comparisons.
    Korea Sangsa claims that, given the lack of any findings at 
verification suggesting that form affects price comparability, the 
Department should not incorporate packing form into the model match 
methodology.
    DOC Position: We agree with Korea Sangsa that packing form should 
not be incorporated into the model match methodology. The petitioners 
have not provided evidence that packing form is a consideration in 
pricing in the wire industry generally, and our analysis of the 
respondent's pricing data suggests no clear correlation between wire 
prices and packing form. Therefore, the Department has determined that 
there is no basis for including these criteria in our model matching.
    Comment 8: Grade Comparisons. Korea Sangsa argues that the 
Department erred in comparing U.S. sales of grade 302 wire to home 
market sales of grade 303 wire, rather than to sales of more similar 
grade 304 wire. According to Korea Sangsa, it is commonly accepted in 
the wire industry that grade 302 and 304 wire are generally 
interchangeable and used in non-free-machining applications, whereas 
the grade 303 wire sold by Korea Sangsa contains significant amounts of 
copper, sulfur, and other chemical elements (which the other two grades 
lack), and is used for free-machining applications. Korea Sangsa 
suggests that the Department can correct this error with a revision to 
the results of the program used to determine similarity of grades, by 
modifying the values assigned to the specific grades in question.
    According to the petitioners, the Department should consider 
general comments on matching methodologies, and not consider requests 
for ad hoc revisions to the results of those methodologies. The 
petitioners argue that the respondent's objection to the Department's 
model matching is based on a limited comparison of two specific grades, 
and does not advance a comprehensive approach to matching of grades.
    DOC Position: We agree with the petitioners. Although Korea Sangsa 
has provided evidence that in certain respects grade 302 wire is more 
similar to grade 304 wire than to grade 303 wire (for instance, that 
grades 302 and 304 contain little or no copper or sulfur, while grade 
303 contains significant amounts of those elements), the respondent has 
not addressed the methodology used in the preliminary determination for 
purposes of determining grade similarity. This methodology relied on 
the standard chemical composition of each grade, and ranked four 
chemical elements (nickel, molybdenum, chromium, and carbon) in a 
hierarchy. Rather than propose a systematic revision to this hierarchy 
with respect to copper, sulfur, and other elements, the respondent has 
identified a specific unfavorable result of the Department's 
methodology, and proposed an ad hoc change to this result. Absent 
comments from interested parties on the relative importance of copper, 
sulfur, and other elements, we have no way of gauging what other grade 
comparisons might be affected by consideration of those elements.

[[Page 17345]]

Therefore, we have continued to rely on the methodology for 
determination of grade similarity that was used in the preliminary 
determination.
    Comment 9: Overdraft Rates. Korea Sangsa asserts that the 
Department should include the company's overdraft rate in the 
calculation of short-term lending rates during the POI. According to 
Korea Sangsa, in the preliminary determination the Department deviated 
from its practice of basing the interest rate for the calculation of 
imputed credit on all short-term borrowing, including overdraft loans. 
The respondent cites to two determinations in which the Department 
relied on overdraft rates: Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination 
With Final Antidumping Duty Determination: Stainless Steel Plate in 
Coils From Italy, 63 FR 47246 (Sept. 4, 1998), and Extruded Rubber 
Thread From Malaysia: Final Results of Countervailing Duty 
Administrative Review, 62 FR 48985 (Sept. 18, 1997).
    The petitioners do not specifically address the issue of overdraft 
rates, stating that the Department has discretion to determine the 
appropriate basis for calculating the respondent's home market 
borrowing rate. However, the petitioners note that the rate reported by 
Korea Sangsa appears to be overstated. The petitioners point out that 
the interest rate reported by the respondent is above the range of 
rates listed in the company's audited financial statements.
    DOC Position: We disagree with Korea Sangsa that the reported 
overdraft rates should be included in the calculation of imputed 
credit. For purposes of calculating imputed credit expenses, it is the 
Department's policy to use a short-term interest rate tied to the 
currency in which the sales are denominated. We will base this interest 
rate on the respondent's weighted-average short-term borrowing 
experience in the currency of the transaction. See Policy Statement 98-
2. In this case, the overdraft rate in question is several times higher 
than the respondent's regular short-term borrowing rate, and does not 
appear to bear any relation to normal commercial borrowing by the 
respondent (the total POI amount of overdraft borrowing, when compared 
to the total amount of regular short-term borrowing, indicates that 
overdraft borrowing is exceptionally rare).
    The countervailing duty cases cited by the respondent are 
inapposite, in that they did not involve the calculation of imputed 
credit. (For example, in Stainless Steel Plate in Coils from Italy, we 
used overdraft rates to calculate benchmarks on long-term (rather than 
short-term) loans, in connection with the valuation of subsidies in 
Italy.) The respondent has not identified any precedent establishing 
that the Department's practice is to include overdraft rates 
(especially aberrationally high overdraft rates) in the calculation of 
short-term interest rates for purposes of calculating imputed credit. 
Given this, we have continued to exclude these rates from the 
calculation of the home market short-term interest rate. Regarding the 
petitioners' claim that the reported interest rate is inconsistent with 
the range of rates in the notes to the financial statements, we found 
at verification that the reported rate was consistent with the 
respondent's books and records.
B. Cost Issues
    Comment 10: Inflation/Cost Averaging. The petitioners argue that 
there was significant inflation in Korea during the POI, as evidenced 
by the increase in Korea Sangsa's cost in won for one grade of wire 
rod, the principal input used in the production of round wire. The 
petitioners contend that, given such inflation, the Department should 
index Korea Sangsa's monthly costs and perform monthly cost and price 
comparisons.
    Korea Sangsa claims that Korea did not suffer significant inflation 
during the POI. The respondent contends that neither the Korean 
consumer price index nor the producer price index for the period 
indicate a rate of inflation even approaching the level at which the 
Department will normally consider making an adjustment. The respondent 
also asserts that the petitioners' allegations regarding Korea Sangsa's 
wire rod purchases are misleading, and that in fact, the price of at 
least one grade of wire rod actually decreased for some months of the 
POI. Finally, while the respondent concedes that there may have been 
some inflationary pressure on the company in the final month of the 
POI, the respondent asserts that such pressure could not have been 
reflected in the costs of production of merchandise sold during the 
POI.
    DOC Position: We disagree with the petitioners that monthly costs 
should be indexed for inflation and that we should perform monthly cost 
and price comparisons. Based on our assessment of information on the 
record, we find that the inflation rate in Korea during the POI was not 
significant enough to warrant any adjustment to our calculation 
methodology. The Department uses a different calculation methodology 
for economies experiencing high inflation. This is because money can 
lose purchasing power at such a rate that comparison of transactions 
that have occurred at different times, even within the same POI, are 
misleading. The annualized inflation rate during the POI did not reach 
such levels in this case. Therefore, we have continued to rely on the 
methodology for price and cost comparisons that was used in the 
preliminary determination.
    Comment 11: Calculation of G&A Expenses. The petitioners claim that 
the Department should revise its calculation of G&A expenses to reflect 
findings at verification, namely to include: (1) exchange losses 
experienced by collapsed affiliate Korea Welding Electrode Co., Ltd. 
(Koweld) in connection with accounts payable, (2) amounts for actual 
payments of severance indemnities, and (3) amounts for ``special'' and 
extraordinary depreciation.
    Korea Sangsa contends that, to the extent that the Department finds 
it necessary to include Koweld's exchange losses in the G&A ratio, the 
Department should also adjust the G&A ratio to reflect Koweld's 
offsetting exchange gains. With respect to severance payments and 
depreciation, the respondent claims that all such costs were correctly 
reported and verified, and therefore, no revisions are necessary for 
the final determination.
    DOC Position: We agree with petitioner that the foreign exchange 
losses realized in connection with loans and accounts payable should be 
included in the COP and CV calculations. It is the Department's 
practice to distinguish between exchange gains and losses generated by 
sales transactions and those generated by loans payable and the 
purchases of production inputs. See Notice of Final Results and Partial 
Recission of Antidumping Duty Administrative Review: Certain Welded 
Carbon Steel Pipe and Tube from Turkey, 63 FR 35190, 35198 (June 29, 
1998). The Department typically excludes from the COP and CV 
calculation those foreign exchange gains and losses generated by sales 
transactions because we do not consider them to relate to the 
manufacturing activities of the company. See Notice of Final 
Determination of Sales at Less Than Fair Value: Steel Wire Rod from 
Trinidad and Tobago, 63 FR 9177, 99182 (February 24, 1998). We also 
agree with respondents that the offsetting foreign exchange gains 
realized in connection with accounts payable and loans should be 
included in the COP and CV calculations. Thus, we

[[Page 17346]]

have included both exchange gains and losses in our calculation of COP 
and CV.
    We disagree with the petitioners that the actual payments for 
severance indemnities should be included in the calculation of G&A 
expenses. Annually, the respondent accrues in its accounting books and 
records amounts for severance indemnities. The actual severance 
payments to employees are not recorded as expenses to Korea Sangsa. 
Rather, the annual accrual is recorded as an expense in the books and 
records of the company. We agree with Korea Sangsa that it correctly 
reported the provision for severance payments in its reported costs. 
Accordingly, we made no adjustment for actual severance payments in 
Korea Sangsa's G&A expense calculation.
    We disagree with the petitioners that respondents have not included 
``special and extraordinary'' depreciation expenses in the reported 
costs. We note from our verification that Korea Sangsa included regular 
and special depreciation in its calculation of the cost of 
manufacturing. In addition, depreciation expense related to assets used 
in the general operations of the company were included in the reported 
G&A expenses. See cost verification exhibit 9. Thus, we made no 
adjustment to Korea Sangsa's reported costs.
    Comment 12: Offset to Costs for Rental Income and Scrap Revenues. 
Korea Sangsa asserts that the Department should allow an offset to 
reported costs for income from the rental of machinery to affiliated 
parties, as well as from revenues from the sale of scrap.
    The petitioners contend that Korea Sangsa has not shown that the 
machinery in question was related to production activities, and 
therefore no offset should be granted in connection with the rental of 
that machinery. The petitioners also assert that to the extent that the 
Department allows an offset for revenue from the sale of scrap, it 
should also reduce the respondent's cost of sales by any revenue from 
the sale of scrap in order to ensure that the interest and G&A expense 
ratios are calculated on the same basis as the cost of manufacture 
figure to which they are applied.
    DOC Position: We agree with Korea Sangsa that in this instance the 
rental income that represents amounts paid by collapsed affiliate Myung 
Jin. Co. (MJC) to Korea Sangsa should be allowed as an offset to the 
cost of manufacture. It has been determined for this proceeding that 
MJC and Korea Sangsa should be collapsed into a single entity for cost 
and sales reporting purposes. Thus, if the income from the rental of 
the equipment is not used to offset the cost incurred by Korea Sangsa, 
costs would be double counted, first as maintenance and depreciation 
costs to Korea Sangsa, and second as a rental expense included in 
factory overhead for MJC's Daesong Factory. Therefore, for the final 
determination, we have reduced the cost of manufacture for the rental 
income.
    With respect to the issue of scrap, we also agree with Korea 
Sangsa. It is Department practice to allow an offset to cost of 
manufacturing by revenue generated from sales of scrap. See, e.g., 
Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Wire Rod from Taiwan, 63 FR 40461, 40472 (July 29, 
1998). In keeping with this practice, we will allow this offset for the 
final determination. Further, we agree with the petitioners that the 
interest and G&A ratios should be calculated on the same basis as the 
cost of manufacturing figure to which they are applied. Therefore, 
since we have reduced cost of manufacturing by the revenue generated 
from the sales of scrap and rental income, we have also reduced the 
denominator used in the G&A and interest expense calculation.
    Comment 13: Elimination of Inter-Company Sales. Korea Sangsa 
asserts that it has correctly eliminated inter-company sales from the 
cost-of-goods sold (COGS) denominator used to calculate the G&A and 
interest ratios. The respondent contends that it is appropriate to 
reduce that denominator by the cost of those sales (i.e., the price 
paid by the respondent to an unaffiliated supplier for merchandise that 
the respondent resold to an affiliate), rather than by the sales value 
of those transactions (i.e., the price paid by the affiliate to the 
respondent for that merchandise).
    The petitioners claim that COGS denominator should be reduced by 
the cost of the inter-company sales to the respondent's affiliate, 
which is based on the sales value realized by Korea Sangsa.
    DOC Position: We agree with the petitioner that the COGS 
denominator should be reduced by the transfer price between affiliates. 
If the Department reduced the denominator by only the amount paid by 
the respondent to an unaffiliated supplier for the purchase of the 
merchandise in question, it would leave in that denominator an element 
of profit or loss realized by the respondent upon resale of the 
merchandise to its affiliate, thus not fully eliminating the effect of 
the inter-company sales. Therefore, we have used the sales value of the 
inter-company sales to calculate net COGS used in the G&A and interest 
ratio calculations.
    Comment 14: Allocation of Packing Labor Costs. The petitioners 
contend that the Department determined that packing for the U.S. and 
home markets was identical, but that at verification the Department 
found that packing labor had been allocated disproportionately to U.S. 
products. According to the petitioners, this discrepancy calls into 
question the general reliability of the reported packing costs, 
warranting the application of facts available.
    Korea Sangsa asserts that it has correctly allocated packing labor 
costs to home market and U.S. products, and that no adjustment to this 
allocation is necessary for the final determination.
    DOC Position: We disagree with the petitioners that the application 
of facts available is appropriate. At verification, we confirmed that 
the pool of packing costs allocated to round wire sold in the U.S. and 
home markets included all appropriate costs. We also observed that 
labor involved in packing merchandise for both the U.S. and home 
markets did not appear to vary, and noted that the respondent appeared 
to have slightly over-allocated packing labor cost to U.S. products. 
Upon review, we have determined that the allocation of packing labor 
costs appears reasonable. Accordingly, no adjustment was necessary.

Suspension of Liquidation

    In accordance with section 735(c)(1)(C) of the Act, we are 
directing the Customs Service to suspend liquidation of all entries of 
stainless steel round wire from Korea, that are entered, or withdrawn 
from warehouse, for consumption on or after the date of publication of 
the final determination in the Federal Register. The Customs Service 
shall require a cash deposit or the posting of a bond equal to the 
weighted-average amount by which the normal value exceeds the EP or 
CEP, as indicated in the chart below. These instructions suspending 
liquidation will remain in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                        margin
                                                              percentage
------------------------------------------------------------------------
Korea Sangsa...............................................         3.07
All Others.................................................         3.07
------------------------------------------------------------------------

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

[[Page 17347]]

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 
the Customs Service to assess antidumping duties on all imports of the 
subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the effective date of the suspension of 
liquidation.
    This determination is published pursuant to sections 735(d) and 
777(i)(1) of the Act.

    Dated: April 2, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-8928 Filed 4-8-99; 8:45 am]
BILLING CODE 3510-DS-P