[Federal Register Volume 64, Number 87 (Thursday, May 6, 1999)]
[Notices]
[Pages 24329-24370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11286]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-846]


Notice of Final Determination of Sales at Less Than Fair Value: 
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Japan

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

EFFECTIVE DATE: May 6, 1999.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan, John Totaro, LaVonne 
Jackson, or Keir Whitson, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
4243, (202) 482-1374, (202) 482-0961, and (202) 482-1394, 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's 
regulations are to the regulations at 19 C.F.R. part 351 (1998).

Final Determination

    We determine that hot-rolled, flat-rolled, carbon-quality steel 
products (``hot-rolled steel'') from Japan 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 ``Continuation of 
Suspension of Liquidation'' section of this notice.

Case History

    Since the Preliminary Determination (see Notice of Preliminary 
Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Japan, 64 FR 8291 (Feb. 19, 1999)) 
(``Preliminary Determination''), the following events have occurred:
    During February and March 1999, respondents Nippon Steel 
Corporation (``NSC''), NKK Corporation (``NKK'') and Kawasaki Steel 
Corporation (``KSC'') submitted responses to the sales and cost 
supplemental questionnaires issued by the Department. On February 12, 
1999, February 25, 1999, and March 3, 1999, petitioners submitted 
comments regarding the issue of date of sale and the Department's Japan 
sales and cost verifications. On February 19, 1999, NKK filed an 
allegation of clerical error and requested the Department to issue an 
amended preliminary determination. On March 1, 1999, NSC submitted pre-
verification changes and new factual information presumably discovered 
while preparing for the sales verification in Japan. On March 4, 1999, 
KSC submitted corrections presumably discovered while preparing for 
sales verification. Similarly, on March 4, 1999, NKK submitted pre-
verification changes and new factual information

[[Page 24330]]

presumably discovered while preparing for sales verification.
    During February and March 1999, we conducted sales and cost 
verifications of NSC's, NKK's and KSC's responses to the antidumping 
questionnaire. On March 26, 1999, we issued our sales and cost 
verification reports for all three responding companies. Petitioners 
and respondents submitted case briefs on April 12, 1999, and rebuttal 
briefs on April 19, 1999. On April 21, 1999, the Department held a 
public hearing. In addition, on April 12, 1999, General Motors 
Corporation (``GM'') requested a scope exclusion for hot-rolled carbon 
steel that both meets the standards of SAE J2329 Grade 2 and is of a 
gauge thinner than 2 mm with a 2.5 percent maximum tolerance. On April 
22, 1999, the petitioners requested that certain ASTM A570-50 grade 
steel be excluded from the investigation. For a more detailed 
discussion of scope issue, please see Scope Amendments Memorandum, 
dated April 28, 1999.

Scope of Investigation

    For purposes of this investigation, the products covered are 
certain hot-rolled flat-rolled carbon-quality steel products of a 
rectangular shape, of a width of 0.5 inch or greater, neither clad, 
plated, nor coated with metal and whether or not painted, varnished, or 
coated with plastics or other non-metallic substances, in coils 
(whether or not in successively superimposed layers) regardless of 
thickness, and in straight lengths, of a thickness less than 4.75 mm 
and of a width measuring at least 10 times the thickness. Universal 
mill plate (i.e., flat-rolled products rolled on four faces or in a 
closed box pass, of a width exceeding 150 mm but not exceeding 1250 mm 
and of a thickness of not less than 4 mm, not in coils and without 
patterns in relief) of a thickness not less than 4.0 mm is not included 
within the scope of these investigations.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (commonly referred to as interstitial-free (``IF'')) steels, 
high strength low alloy (``HSLA'') steels, and the substrate for motor 
lamination steels. IF steels are recognized as low carbon steels with 
micro-alloying levels of elements such as titanium and/or niobium added 
to stabilize carbon and nitrogen elements. HSLA steels are recognized 
as steels with micro-alloying levels of elements such as chromium, 
copper, niobium, titanium, vanadium, and molybdenum. The substrate for 
motor lamination steels contains micro-alloying levels of elements such 
as silicon and aluminum.
    Steel products to be included in the scope of this investigation, 
regardless of HTSUS definitions, are products in which: (1) iron 
predominates, by weight, over each of the other contained elements; (2) 
the carbon content is 2 percent or less, by weight; and (3) none of the 
elements listed below exceeds the quantity, by weight, respectively 
indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.012 percent of boron, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent of zirconium.

All products that meet the physical and chemical description provided 
above are within the scope of this investigation unless otherwise 
excluded. The following products, by way of example, are outside and/or 
specifically excluded from the scope of this investigation:
     Alloy hot-rolled steel products in which at least one of 
the chemical elements exceeds those listed above (including e.g., ASTM 
specifications A543, A387, A514, A517, and A506).
     SAE/AISI grades of series 2300 and higher.
     Ball bearing steels, as defined in the HTSUS.
     Tool steels, as defined in the HTSUS.
     Silico-manganese (as defined in the HTSUS) or silicon 
electrical steel with a silicon level exceeding 1.50 percent.
     ASTM specifications A710 and A736.
     USS Abrasion-resistant steels (USS AR 400, USS AR 500).
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                C                            Mn                     P                      S                      Si                     Cr                    Cu                    Ni
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.10-0.14%.......................  0.90% Max............  0.025% Max...........  0.005% Max...........  0.30-0.50%...........  0.50-0.70%...........  0.20-0.40%..........  0.20% Max.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches;
    Yield Strength = 50,000 ksi minimum; Tensile Strength = 
70,000-88,000 psi.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               C                          Mn                   P                   S                  Si                  Cr                  Cu                  Ni                  Mo
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.10-0.16%.....................  0.70-0.90%.........  0.025% Max........  0.006% Max........  0.30-0.50%........  0.50-0.70%........  0.25% Max.........  0.20% Max.........  0.21% Max
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
    Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               C                        Mn                 P                 S                Si                Cr                Cu                Ni              V(wt.)              Cb
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
010.10-0.14%...................  11.30-1.80%.....  10.025% Max.....  1.005% Max......  10.30-0.50%.....  10.50-0.70%.....  10.20-0.40%.....  10.20% Max......  010.10 Max......  0.08% Max
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
    Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

[[Page 24331]]



------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               C                       Mn               P                S              Si              Cr              Cu              Ni              Nb              Ca              Al
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.15% Max.....................  1.40% Max......  0.025% Max.....  0.010% Max....  0.50% Max.....  1.00% Max.....  0.50% Max.....  0.20% Max.....  0.005% Min....  Treated.......  0.01-0.07%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield 
Strength = 70,000 psi minimum for thicknesses  0.148 inches 
and 65,000 psi minimum for thicknesses >0.148 inches; Tensile Strength 
= 80,000 psi minimum.
     Hot-rolled dual phase steel, phase-hardened, primarily 
with a ferritic-martensitic microstructure, contains 0.9 percent up to 
and including 1.5 percent silicon by weight, further characterized by 
either (i) tensile strength between 540 N/mm 2 and 640 N/mm 
2 and an elongation percentage 26 percent for 
thicknesses of 2 mm and above, or (ii) a tensile strength between 590 
N/mm 2 and 690 N/mm 2 and an elongation 
percentage 25 percent for thicknesses of 2mm and above.
     Hot-rolled bearing quality steel, SAE grade 1050, in 
coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A, 
with excellent surface quality and chemistry restrictions as follows: 
0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and 
0.20 percent maximum residuals including 0.15 percent maximum chromium.
     Grade ASTM A570-50 hot-rolled steel sheet in coils or cut 
lengths, width of 74 inches (nominal, within ASTM tolerances), 
thickness of 11 gauge (0.119 inch nominal), mill edge and skin passed, 
with a minimum copper content of 0.20%.
    The merchandise subject to these investigations is classified in 
the Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 
7208.90.00.00, 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 
7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 
7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 
7211.19.75.90, 7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain 
hot-rolled flat-rolled carbon-quality steel covered by this 
investigation, including: vacuum degassed, fully stabilized; high 
strength low alloy; and the substrate for motor lamination steel may 
also enter under the following tariff numbers: 7225.11.00.00, 
7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00, 
7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 
7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00, 
7226.91.80.00, and 7226.99.00.00. 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 investigation (``POI'') is July 1, 1997 through June 
30, 1998.

Product Comparisons

    In accordance with section 771(16) of the Act, all products 
produced by the respondents covered by the description in the Scope of 
Investigation section, above, and sold in Japan during the POI are 
considered to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We have relied on eleven 
characteristics to match U.S. sales of subject merchandise to 
comparison market sales of the foreign like product: paint, quality, 
carbon content, strength, thickness, width, coiled or non-coiled, 
temper rolling, pickling, edge trim, and patterns. These 
characteristics have been weighted by the Department where appropriate. 
Where there were no sales of identical merchandise in the home market 
to compare to U.S. sales, we compared U.S. sales to the next most 
similar foreign like product on the basis of the characteristics listed 
in the antidumping questionnaire and reporting instructions.

Changes From the Department's Preliminary Determination

    The Department, upon review of the preliminary margin calculation 
program, found that there were errors associated with the calculation 
of the difference in merchandise adjustment (DIFMER) in NKK's model 
match program. The program that we used, failed to calculate the DIFMER 
adjustment associated with the matching home market CONNUM. Instead, 
the DIFMER calculation selected in the concordance program was chosen 
from the last comparison, resulting in the application of an incorrect 
DIFMER adjustment. For a complete discussion, please see the 
Department's Final Determination Analysis Memo, dated April 28, 1999.
    Second, the Department disallowed KSC's home market technical 
service expenses because these expenses could not be verified. However, 
we continue to adjust for U.S. technical service expenses. See KSC Home 
Market Verification Report, dated March 26, 1999; see also KSC Final 
Analysis Memo, dated April 28, 1999.
    Third, the Department corrected the model match and margin programs 
for all three companies in calculating packing costs for use in the 
cost test and constructed value. In the Preliminary Determination, the 
Department inadvertently used a sale specific packing cost for use in 
the calculation of general and administrative (``G&A'') expenses and 
interest expenses in both the cost test and constructed value analysis. 
For the final determination, the Department has revised this section of 
the program to calculate a weighted-average packing cost per CONNUM for 
use in these calculations. For a more complete analysis, please see the 
Final Determination Analysis Memo, dated April 28, 1999, for all three 
responding companies.

Interested Party Comments

Home Market and U.S. Sales
    Comment 1: Date of Sale.

NKK

    NKK states that the Department should reaffirm its preliminary 
finding that the invoice date/shipment date is the most appropriate 
date of sale for NKK. NKK argues that the material terms of sale were 
not finalized until after shipment for the majority of its U.S. and 
home market sales as supported by documentation provided during 
verification. In addition, NKK argues that the Department's regulations 
and other determinations dictate the use of date of invoice as the date 
of sale.
    NKK argues that its demonstrated sales process clearly indicates 
that the invoice date/shipment date best reflects the date on which the 
final material terms of sale were finalized during the period of 
investigation, and that material terms of sale, i.e. price and 
quantity, often changed after the order confirmation date. NKK argues 
that the

[[Page 24332]]

Department verified that a significant portion of home market and U.S. 
sales had significant changes to price and/or quantity during the POI, 
and therefore the invoice/shipment date is the most appropriate date of 
sale for NKK's sales of subject merchandise.
    Secondly, NKK argues that the Department's regulations indicate a 
preference for the use of date of invoice as the date of sale where 
changes from the original order occur on a frequent basis. NKK states 
that the Department established a presumption that material terms would 
be considered established on the invoice date after adopting 
Sec. 351.401(i) of its regulations. NKK also argues that the 
presumption in favor of invoice date is supported by the language in 
the preamble to the regulations and that an alternative date of sale 
will be used only when there is evidence satisfying the Department that 
the different date better reflects the date on which the exporter or 
producer establishes the material terms of sale. NKK argues that the 
regulations therefore place the burden of proof on the party claiming 
that another date is more appropriate, and that this burden of proof 
has not been satisfied by record evidence. Rather, the record supports 
the finding that the material terms of sale are set on the date of 
shipment/invoice; thus, that date is the most appropriate date of sale.
    Petitioners argue that the Department may use a date of sale other 
than invoice date if it determines that an alternative date more 
accurately reflects the date on which the material terms of sale are 
established. Petitioners argue that the documents and information 
obtained at NKK's verification support the conclusion that the 
essential terms of sale are set on the order confirmation date and 
therefore the order confirmation is the appropriate date of sale for 
this investigation.
    Petitioners contend that NKK manufactures product to order and that 
the principal terms of sale are set at the point the customer places 
the order. Further, they argue that although the Department examined 
numerous transactions at verification, the data show that only a 
minuscule portion of sales had changes to material terms (i.e., price 
terms). Petitioners argue that, for the majority of sales, price terms 
did not change between order confirmation date and invoice/shipment 
date, and that, in instances where changes did occur, they were 
accounted for after the invoice was issued. Petitioners contend that 
changes to price terms which occur after invoicing are not an 
appropriate adjustment for consideration in the Department's date of 
sale analysis. Petitioners further argue that, in the majority of sales 
reviewed at verification, the quantities shipped were within shipping 
tolerances and should therefore not be considered in the date of sale 
analysis. Because sales where the quantity shipped was outside the 
applicable delivery tolerances occurred only in a small number of 
verified transactions, the order confirmation date is the appropriate 
date of sale. Petitioners further argue that, in Certain Corrosion-
Resistant Carbon Steel Flat Products from Japan: Final Results of 
Antidumping Duty Administrative Review (``Certain Corrosion-Resistant 
Carbon Steel From Japan''), 64 FR 12951, 12956-12957 (Mar.16, 1999), 
the Department used the order confirmation date as the date of sale 
under similar factual circumstances. Finally, petitioners argue that 
the Department should use facts available due to the fact that NKK did 
not report a separate database of sales based on order confirmation 
date. According to petitioners, the Department requested NKK to provide 
this information in both its original questionnaire as well as its 
supplemental questionnaire, and NKK refused to provide the requested 
information. Therefore, since the record evidence indicates that order 
confirmation date is the most appropriate date of sale, the Department 
should assign the highest dumping margin, or the highest rate in the 
petition as facts available.
    NKK rebuts petitioners' arguments that order confirmation date is 
the date of sale. NKK argues that petitioners are incorrect in arguing 
that only a few transactions were reviewed at verification for the 
Department's date of sale analysis. NKK argues that the Department 
reviewed a large sample of sales and found that over fifty percent of 
these transactions had changes to material terms. See NKK Sales 
Verification Report, dated March 26, 1999, at 14. NKK argues that, 
contrary to petitioners' assertion, the frequency of changes for both 
price and quantity terms is sufficiently large to justify using invoice 
date as the date of sale. Secondly, NKK argues that petitioners' 
contention that post-shipment price changes are irrelevant to the date 
of sale analysis is incorrect. Citing Diameter Circular Seamless Carbon 
and Alloy Steel Standard Line and Pressure Pipe from German: Final 
Results of Antidumping Duty Administrative Review, 63 FR 13217 (March 
18, 1998), NKK argues that the Department stated that it will use 
shipment date as a proxy date for sales invoice after shipment, not 
that all post-shipment price changes are to be ignored in the date of 
sale analysis. Third, NKK argues that the evidence on the record 
demonstrates that the final price invoiced was not determined until 
after shipment occurred and this differs from the price stated on the 
order confirmation. Fourth, NKK contends that each of the cases cited 
by petitioners in their argument can be distinguished from the facts in 
the present case. NKK argues that, in each of these cases, the 
Department used the order confirmation date because there were no 
changes to the terms of sale after the order date, whereas in the 
instant case, NKK has proven and the Department has verified that 
material terms are not final at order confirmation and that material 
terms changed frequently. These facts, according to NKK, support the 
conclusion that shipment/invoice date is the appropriate date of sale. 
Finally, NKK argues that it is inappropriate to apply adverse facts 
available to NKK. NKK contends that the Department gave NKK the choice 
as to whether to provide a single sales database using invoice date as 
the date of sale or to provide both invoice date and order confirmation 
date databases. NKK contends that it chose to provide a single database 
and has subsequently proven, through record evidence, that invoice date 
is the appropriate date of sale. Thus, there is no basis to use facts 
available.
    Petitioners rebut NKK's argument that invoice date is the date on 
which material terms of sale are set and should be the date of sale. 
Petitioners reiterate their argument that only a small percentage of 
home market and U.S. sales had changes to material terms after the 
order confirmation date. Petitioners continue to argue that changes 
made after shipment are not an appropriate basis for the Department's 
date of sale analysis. Petitioners contend that the Department's 
verification demonstrates that only a few sales had changes to material 
terms, and state that this confirms that order confirmation date is the 
appropriate date of sale. Petitioners further contend that, because NKK 
failed to provide sales databases using order confirmation date as the 
date of sale, the Department should apply adverse facts available. 
According to petitioners, NKK did not report all sales where the order 
was confirmed within the POI, therefore the necessary sales are not on 
the record. Because NKK failed to report these sales, there is 
justification for the Department to reject NKK's response and apply 
facts available.

[[Page 24333]]

NSC

    NSC argues that the Department should follow its preliminary 
determination and continue using the date of shipment as the date of 
sale. NSC argues that the Department verified that the essential terms 
of sale changed between the initial order and shipment date for a 
significant portion of home market and U.S. sales. NSC used the date of 
shipment as a proxy for the date of invoice because the shipment date 
falls within a short time of the invoice date.
    NSC argues that the Department's regulations mandate the use of 
date of invoice as the date of sale, and that there is a rebuttable 
presumption that the appropriate date of sale is the invoice date. NSC 
argues that the presumption can only be overcome by compelling evidence 
on the record. NSC states that the essential terms of sale for its 
sales of subject merchandise are not finally established until, and 
sometimes after, shipment, and that this supports the presumption in 
favor of invoice date. NSC argues that there is a high standard to be 
met to overcome this presumption, and that record evidence on the 
frequency of changes and the potential for change to the essential 
terms after the initial order support the finding that invoice date is 
the appropriate date of sale.
    NSC argues that the Department verified that material terms of sale 
changed after the initial order was placed in a significant portion of 
the sales examined. In addition, respondent argues that the Department 
verified that, in the Japanese hot-rolled steel industry, terms of sale 
are not established until the material is shipped to the purchaser. 
Based on these reasons, NSC argues that the date of shipment/invoice is 
the most appropriate date of sale as supported by the preference stated 
in the Department's regulations and record evidence and we should 
continue using the date of shipment as the date of sale for the final 
determination.
    Petitioners argue that the Department may use a date of sale other 
than invoice date if it determines that an alternative date more 
accurately reflects the date on which the material terms of sale are 
established. Petitioners argue that the documents and information 
obtained at NSC's verification support the conclusion that the 
essential terms of sale are set on the order confirmation date and 
therefore the order confirmation is the appropriate date of sale for 
this investigation. In sum, petitioners argue that there was not a 
significant portion of sales for which material terms of sale changed, 
and that as a result the most appropriate date of sale is the date of 
order confirmation.
    Petitioners argue that NSC only produces merchandise after the 
customer places the order and that the critical step in determining the 
material terms of sale is the issuance of the order confirmation. 
Petitioners further argue that the evidence examined at verification 
supports the conclusion that only modifications that occur between 
order confirmation and shipment are relevant to the date of sale 
analysis, and that modifications which occur after shipment are not 
relevant to the date of sale because the Department does not examine 
any date after the date of shipment as a possible date of sale. 
Petitioners contend that the data examined at verification indicate 
that only a small portion of home market and U.S. sales have changes to 
either price or quantity between order confirmation and shipment. 
Further, they contend that the analysis presented by NSC at 
verification was incorrect. Petitioners argue that their examination of 
the record shows that the sales traces examined indicated changes after 
the date of shipment and are therefore inappropriate to use as a basis 
for examining the most appropriate date of sale. In sum, the 
petitioners argue that NSC's claimed date of sale is not supported by 
record evidence and the Department should use the order confirmation 
date as the date of sale, as it did in Certain Corrosion-Resistant 
Carbon Steel Products from Japan 64 FR at 12956-57.
    Petitioners argue that, should the Department choose to use date of 
invoice as the date of sale, it should employ a transaction-specific 
date of sale analysis, isolate those individual transactions for which 
material terms did not change, and use the order confirmation date as 
the date of sale for such transactions. In cases where terms of sale 
did change, the Department could use the date of shipment/invoice as 
the date of sale.
    Petitioners rebut NSC's argument that date of shipment/invoice is 
the appropriate date of sale. Petitioners argue that the information on 
the record does not support the conclusion that a significant number of 
NSC's home market and U.S. sales had changes to material terms after 
shipment occurred. In fact, petitioners contend that only a small 
minority of reviewed transactions had changes to material terms 
sufficient to justify the determination that shipment/invoice date is 
the appropriate date of sale. In addition, petitioners state that NSC's 
argument that there are compelling facts on the record to warrant the 
use of shipment/invoice date as the date of sale creates a new standard 
unsupported by statutory or case precedent. Further, they claim that 
the argument that there is a potential for change should also be 
disregarded as it is based on a misunderstanding of the Department's 
regulations. Rather, they contend that it would be unreasonable to use 
invoice date as the date of sale merely because there is a hypothetical 
potential for post-order modifications. Petitioners conclude that, 
based on the facts and evidence on the record, the Department should 
use the order confirmation date or the date of the revised order 
confirmation as the date of sale.
    NSC rebuts petitioners' arguments that order confirmation date is 
the most appropriate date of sale by reiterating its initial arguments 
on this topic. In addition, NSC contends that petitioners' analysis of 
the information on the record is wrong both in fact and in law. NSC 
argues that petitioners have misread how NSC reports its price 
adjustments after shipment and how NSC's documents reflect order 
modifications. NSC rebuts each of petitioners' points using proprietary 
information which is incapable of adequate public summary. NSC argues 
that petitioners' claims that order modification is the correct date 
because changes in the orders prior to shipment are reflected in the 
order modification and that changes after shipment cannot be considered 
are wrong. According to NSC, the Department may consider potential for 
changes both pre- and post-shipment in conducting its date of sale 
analysis. In fact, NSC argues, the Department's questionnaire instructs 
them to report the unit price recorded on the invoice for sales shipped 
and invoiced in whole or in part, which is what NSC reported to the 
Department.
    NSC argues that the Department's regulations create a presumption 
in favor of date of invoice as the date of sale, a presumption which 
the petitioners have not overcome through record evidence. NSC argues 
once again that the significance of potential for change has been 
supported by Department precedent. Thus, the Department has concluded 
that simply because the essential terms of sale did not change after 
the initial contract date, this does not demonstrate that essential 
terms of sale were not subject to change after this date. See Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from 
Korea: Final Results of Antidumping Duty Administrative Reviews 
(``Carbon Steel Flat Products from Korea''), 64 FR 12927, 12935 (March 
16, 1999). NSC concludes, that because the terms of NSC's sales of

[[Page 24334]]

subject merchandise remain subject to change throughout the sales 
process, petitioners cannot overcome the presumption in favor of 
invoice date. Finally, NSC argues that the Department verified that 36 
percent of its sales during the POI were in fact modified after the 
order confirmation was issued. The mere fact that hot-rolled steel 
products are made-to-order is not conclusive evidence that the parties 
engage in formal negotiating and contracting procedures that would 
result in terms of sale which are finally and irrevocably established 
at the beginning of the sales process. NSC argues that hot-rolled steel 
is a commodity product that is not sold through a formal negotiation 
and contracting process. Therefore, petitioners' argument that hot-
rolled product is made to order is irrelevant to the date of sale 
analysis. NSC argues that, based upon the evidence placed on the 
record, the most appropriate date of sale is the shipment/invoice date.

KSC

    Respondent argues that the Department's regulation establishes a 
presumption that invoice date should be used as the date of sale. 
Respondent also argues that the Department has consistently applied 
this rule. Specifically, respondent cites Notice of Final Determination 
of Sales at Less Than Fair Value: Stainless Steel Plate in Coils from 
South Africa, 64 FR 15459, 15465 (March, 31, 1999) as evidence that the 
Department reaffirmed its practice of using the invoice date as the 
proper date of sale when material terms of sale can change between 
order and invoice date, even if the changes are not frequent, and the 
reporting company uses invoice date in its internal records.
    Furthermore, KSC asserts that the Department has stated that its 
preference for invoice date is based on two policy rationales. First, 
the date on which the terms of sales are normally established is the 
invoice date. Second, the Department intends that the reporting and 
verification of information be simplified, resulting in predictable 
outcomes as well as the efficient use of resources. Additionally, 
respondent asserts that the Department will use invoice date as the 
date of sale unless the material terms of sale, as evidence by the 
record, are established on a different date.
    Respondent argues that material changes to the terms of sale, 
affecting price or quantity, may and do occur between KSC's order 
confirmation and invoice. As a result, the terms of sale become fixed 
and finalized on the shipment/invoice date. In certain instances within 
the home market, price changes may occur even after invoicing. 
Respondent believes that the frequency of material changes between 
order confirmation and invoice, as seen during verification, proves 
that the invoice date should be used as KSC's date of sale because the 
terms of sale are final only at invoicing (even though the price may 
change afterward in the home market).
    Respondent also argues that invoice date is the date of sale for 
KSC because, in accordance with the Department's regulations which 
provide that the date of sales is to be based upon data maintained by 
the respondent in the ordinary course of business, the books and 
records of KSC, Kawasho Corporation (``Kawasho'') and Kawasho 
International USA, Inc. (``Kawasho International'') are based on 
invoice data. Additionally, using the invoice date as the date of sale 
results in an efficient use of resources by simplifying reporting and 
the verification of information. Finally, respondent states that by 
using the invoice date, the Department allows for predictability in its 
proceedings.
    Petitioners did not comment on KSC's date of sale argument.
    Department's Position: We agree with all three respondents (NSC, 
NKK and KSC) that invoice/shipment date is the correct date of sale for 
all home market and U.S. sales of subject merchandise for each of the 
responding companies.
    Under our current practice, as codified in the Department's Final 
Regulations at Sec. 351.401(i), in identifying the date of sale of the 
subject merchandise, the Department will normally use the date of 
invoice, as recorded in the producer's records kept in the ordinary 
course of business. See Certain Welded Carbon Steel Pipes and Tubes 
from Thailand: Final Results of Administrative Review, 63 FR 55578, 
55587 (1998) (``Pipes and Tubes from Thailand''). However, in some 
instances, it may not be appropriate to rely on the date of invoice as 
the date of sale, because the evidence may indicate that the material 
terms of sale were established on some date other than invoice date. 
See Preamble to the Department's Final Regulations at 19 CFR Part 351 
(``Preamble''), 62 FR 27296 (1997). Thus, despite the general 
presumption that the invoice date constitutes the date of sale, the 
Department may determine that this is not an appropriate date of sale 
where the evidence of the respondent's selling practice points to a 
different date on which the material terms of sale were set.
    In this investigation, in response to the original questionnaire, 
NSC and NKK reported invoice/shipment date as the date of sale in both 
the U.S. and home markets. KSC reported order confirmation date as the 
date of sale based on the belief that that is what the Department 
wanted. However, KSC also provided sales databases using invoice/
shipment date as the date of sale, and continued to argue that this 
would be a more appropriate date of sale. To ascertain whether NSC, NKK 
and KSC accurately reported the date of sale, the Department included 
in its January 4, 1999 supplemental questionnaire a request for 
additional information regarding changes in terms of sale subsequent to 
order date. In its January 25, 1999 response, NSC, NKK and KSC 
indicated that there were numerous instances in which terms such as 
price and quantity changed subsequent to the confirmation of the 
original orders in the U.S. and home markets. NSC, NKK and KSC cited 
specific figures for each type of change. For purposes of our 
Preliminary Determination, we accepted the date of invoice as the date 
of sale subject to verification. See Preliminary Determination, 64 FR 
at 8294.
    At verification, we carefully examined NSC's, NKK's and KSC's 
selling practices. We found that each company records sales in its 
financial records by date of invoice/shipment. For the home market, we 
reviewed several sales observations for which the price and quantity 
changed subsequent to the original order (see Home Market Verification 
Reports, dated March 26, 1999 for the respective companies). For the 
U.S. market, we reviewed several instances in which terms of sale 
changed subsequent to the original order. Based on respondents' 
representations, and as a result of our examination of each company's 
selling records kept in the ordinary course of business, we are 
satisfied that the date of invoice/shipment should be used as the date 
of sale because it best reflects the date on which material terms of 
sale were established for NSC's, NKK's and KSC's U.S. and home market 
sales.
    We disagree with the petitioners' claim that, since the terms do 
not change after the order confirmation date, the order date (or the 
final change order date) is the most appropriate date of sale for 
NSC's, NKK's and KSC's U.S. and home market sales. The fact that terms 
often changed subsequent to the original order, and even after an 
initial order confirmation, suggests that these terms remained subject 
to change (whether or not they did change with respect to individual 
transactions) until as late as the invoice date. For sales that

[[Page 24335]]

we reviewed, we found this to be true for material terms of sale such 
as price and quantity, including quantity changes outside of 
established tolerances. The Department's decision in Certain Corrosion-
Resistant Carbon Steel Flat Products from Japan, 64 FR 12951, 12958 
(Mar. 16, 1999) should, therefore, not be followed in this case. In 
that case, the Department found that the material terms of sale were 
established on the date of the final order confirmation and that there 
were no material changes thereafter. As stated in the Federal Register 
notice, the Department in that case found that there were no changes 
between the final revised order confirmation and the shipment/invoice 
date. In addition, in the Corrosion-Resistant Steel case, there was no 
discussion on the possibility or frequency of changes between the 
original order confirmation, any revised order confirmations, the 
invoice, and changes subsequent to the invoice. The facts of the 
instant case are distinguishable. In the instant case, pursuant to our 
findings at verification, the Department determines that there are 
changes between the original order confirmation date (i.e, the date of 
sale proposed by petitioner), the invoice date (i.e., the date of sale 
proposed by respondents), and in certain instances changes which occur 
after the invoice date for a significant number of individual 
transactions. Each of these facts distinguishes the factual record in 
the current case from the Department's decision in the Corrosion-
Resistant Steel case. Therefore, pursuant to our findings at 
verification, we have determined that invoice date is the appropriate 
date of sale for NSC's, NKK's and KSC's sales, as it most accurately 
represents the date on which the material terms of sale are 
established.
    In addition, the Department has also examined the time lags between 
order date and invoice date to determine whether it was appropriate to 
use order date as the date of sale dates. See Circular Welded Non-Alloy 
Steel Pipe from the Republic of Korea; Final Results of Antidumping 
Duty Administrative Review (``Steel Pipe from Korea''), 63 FR 32833, 
32835 (June 16, 1998). However, it is important to note that, in Steel 
Pipe from Korea, the Department found that ``{t}he material terms of 
sale in the United States are set on the contract date and any 
subsequent changes are usually immaterial in nature or, if material, 
rarely occur.'' Id., 63 FR at 32836. In contrast, NSC, NKK and KSC each 
reported that there were numerous instances of changes in terms of sale 
between the initial order date, and the shipment/invoice date. 
Therefore, invoice date is the most appropriate date of sale, 
notwithstanding some time lag between order confirmation and invoice. 
As noted above, we observed a significant number of such instances at 
verification where changes did occur between order confirmation and 
invoice.
    We also disagree with petitioners' assertion that NSC's, NKK's and 
KSC's reported sales information was inaccurate and incomplete. During 
the course of sales verifications, the Department requested specific 
documentation from each of the responding companies in support of its 
claim that the date of invoice should be used as the date of sale. NSC, 
NKK and KSC complied with the verifiers' request for sales trace 
documentation, and the Department utilized the purchase order, order 
confirmation and invoice information provided by each company as part 
of the basis for its decision on this issue. At verification, the 
Department also clarified which quantity changes were and were not 
within tolerance, and used this information in conducting its date of 
sale analysis.
    Finally, we have not accepted petitioners' suggestion that the 
Department should use a transaction-specific date of sale methodology. 
While this may be appropriate for products involving only a handful of 
sales within the period of investigation or review, such an approach 
would impose a very substantial undue burden on both respondents and 
the Department in terms of reporting and verification. As explained in 
the Preamble to the Department's regulations, the use of a single date 
of sale for each respondent makes more efficient use of the 
Department's resources and enhances the predictability of outcomes. See 
62 FR at 27348.
    Comment 2: Preliminary Determination of Critical Circumstances.

NKK

    NKK argues that the Department's preliminary finding of critical 
circumstances is not supported by the facts on the record. First, NKK 
states, there is no history of dumping with respect to this product; 
thus, the Department must find ``knowledge of dumping'' in order to 
find critical circumstances. In this respect, NKK states, the 
Department normally relies on company-specific margins of over 25 
percent to impute knowledge of dumping. NKK claims that its final 
margin, if adjusted for the alleged clerical error, will not exceed 25 
percent and will therefore not meet the first statutory criterion for 
finding critical circumstances. NKK argues that although the Department 
relied on margins alleged in the petition in its preliminary critical 
circumstances finding, there is no basis for not using company-specific 
margins in the final critical circumstances determination.
    Second, NKK argues that its shipments were not massive during the 
three months immediately preceding and the three months immediately 
following the filing of the petition. NKK argues that the Department's 
longstanding practice is to compare the volume of shipments during the 
three months preceding the filing of the petition with the volume of 
shipments in a comparable period following the filing of the petition. 
The Department deviated from this practice in its preliminary 
determination as to critical circumstances, comparing instead the 
December 1997-April 1998 period to the May 1998-September 1998 time 
period. NKK argues that there is no basis for the use of this time 
period to support a finding of critical circumstances, and that the 
evidence on the record does not support a finding that there were 
massive imports of NKK merchandise during the appropriate comparison 
period. In addition, NKK argues that the Department's conclusions with 
respect to importer knowledge of dumping based on press reports and 
rumors about the possibility of antidumping cases were contradicted by 
price increases during the same time period. Respondent argues that the 
Department's reliance on vague news articles and press reports placed 
on the record prior to the preliminary determination as to critical 
circumstances was misplaced because these sources did not clearly 
indicate that it was likely that the domestic industry would file 
antidumping cases against hot-rolled steel from Japan. NKK concludes 
that, due to the serious economic consequences a finding of critical 
circumstances could involve for itself and its customers, the 
Department should utilize company-specific import data for its final 
critical circumstances determination. If it does so, NKK claims, it 
must make a negative finding, because the ``massive shipments'' 
criterion has not been satisfied.
    Petitioners rebut NKK's argument that the Department's preliminary 
determination of critical circumstances is not supported by the 
information on the record. Petitioners contend that NKK's argument for 
use of company-specific shipment data is contrary to the Department's 
regulations. According to petitioners, the Department must

[[Page 24336]]

examine imports into the United States as opposed to shipments, which 
may or may not correlate to imports during the relevant period. 
Secondly, petitioners argue that, if the Department were to use 
shipment data, this information would still not be an accurate basis 
for analysis as this would be company-specific data, whereas the 
analysis should focus on total imports from Japan. Because NKK has not 
cited any authority for its statement that the Department should make a 
company-specific critical circumstances finding, the Department should 
affirm its preliminary finding by using total imports from Japan as the 
basis for its critical circumstances determination. Finally, 
petitioners argue that NKK and other respondents knew that an 
antidumping investigation was likely, based upon the articles in the 
press placed on the record. Thus, petitioners argue, the Department 
should continue to disregard respondents' argument to the contrary and 
base its decision on record evidence.

NSC

    NSC argues that the statute requires that the Department, if it is 
finding critical circumstances, must first either find a history of 
dumping, or impute knowledge of dumping and of material injury by 
reason of dumped sales. NSC argues that the Department's preliminary 
finding of critical circumstances was based on inflated margins and was 
contrary to law. NSC argues that the Department's final determination 
as to critical circumstances must be supported by evidence on the 
record.
    First, NSC argues that the Department's reliance on allegations 
from the petition and the use of these allegations to make a 
preliminary finding of critical circumstances were unacceptable 
precedent. NSC states that mere allegations in the petition do not 
provide sufficient support for the Department to impute knowledge based 
on the magnitude of dumping margins and injury. NSC argues that the 
statute requires that the Department conduct a factual investigation 
and determine that there is a reasonable basis to believe or suspect 
that products are being dumped before making a finding of critical 
circumstances. In conducting this analysis, respondent argues, the 
Department has never before relied merely on petition allegations to 
form a reasonable belief concerning critical circumstances. Because the 
Department's preliminary determination was based on alleged and 
unsupported information from the petition, it cannot withstand 
scrutiny. Therefore, NSC argues, the Department should not find 
critical circumstances in the final determination.
    Second, NSC argues that the Department's preliminary determination 
of sales at less than fair value was based on adverse inferences with 
no basis in either fact or law. Specifically, NSC argues that the use 
of facts available for NSC's home market freight cost and U.S. 
theoretical weight sales was not supported by record evidence. NSC 
argues that the Department cannot rely on margins based on improper 
adverse inferences in imputing knowledge for purposes of its final 
determination as to critical circumstances.
    In rebuttal, petitioners argue that the Department's Policy 
Bulletin dated October 7, 1998 governs the decision reached by the 
Department. Petitioners note that NSC is incorrect in its assertion 
that the Department has unlawfully taken a substantive action adverse 
to it based solely on the information contained in the petition. They 
note that, under Article 5.3 of the World Trade Organization's 
(``WTO'') Agreement on Antidumping the Department must examine the 
adequacy of the evidence presented in the petition and whether these 
allegations are supported by evidence. Second, petitioners argue that 
the Department should not rely on NSC's statutory construction 
argument, because as NSC interprets the argument, the Department would 
have to issue questionnaires, evaluate responses and calculate company-
specific margins prior to issuing a preliminary critical circumstances 
determination. Petitioners contend that there is no legal basis for 
this argument, because the requirements for a preliminary critical 
circumstances finding are not the same as those for a preliminary 
dumping determination. The fact remains, petitioners state, that the 
primary factor reviewed for a critical circumstances finding is whether 
there has been a massive increase in imports. Petitioners argue that 
the existence of massive imports was known at the time the petition was 
filed. They further argue that, based on this information, the statute 
leaves it to the Department's discretion to decide what procedures it 
will follow in determining whether there is reason to believe or 
suspect that dumping is occurring.

KSC

    KSC asserts that the Department's preliminary critical 
circumstances determination contravened the statute. First, KSC argues 
that the Department does not have the authority to use a time frame 
other than the one based upon the date of filing of the petition to 
determine whether or not there were massive imports. Further, the 
articles relied upon by the Department to support the use of an 
earlier-than-usual time frame do not support a conclusion that KSC had 
reason to believe a case was being filed or likely to be filed. Second, 
KSC claims that it did not have massive imports during the ``proper 
time frame.'' Third, KSC claims that the Department violated its normal 
practice when it relied upon country-specific, rather than company-
specific shipment data. Fourth, KSC argues that the Department's 
preliminary critical circumstances finding should have been negative 
because the ITC preliminarily determined that there was no present 
material injury with respect to this product. KSC's arguments with 
respect to each of these points is discussed in greater detail below.
    KSC first argues that neither the statute nor the regulations grant 
the Department authority to examine a shipment period unrelated to 
either the filing of the petition or the preliminary determination in 
measuring ``massive shipments'' for purposes of the critical 
circumstances determination. According to the Department's regulations, 
the determination of whether or not there has been a massive increase 
in imports is normally made based on the period beginning on the date 
the proceeding begins and ending at least three months later. See 19 
CFR Sec. 351.216(h) and (i). KSC argues that the Department overstepped 
its authority by using a time frame disconnected from the date of 
filing of the petition. KSC further asserts that the use of any 
comparison time other than period immediately following the filing of 
the petition is unlawful because it contravenes the purpose of the 
statutory provision, which (according to the legislative history) is to 
deter the increase of exports ``during the period between initiation of 
an investigation and a preliminary determination'' (H. Rep. No. 96-317 
at 63 (1979). Thus, KSC argues, the proper comparison is between 
shipments during the October-December 1998 period and shipments during 
the July-September 1998 period. KSC also argues that the articles 
relied upon by the Department to impute knowledge of dumping involve 
mere speculation, do not specifically refer to hot-rolled steel, and 
are not grounded in fact. KSC concludes that without a specific 
allegation with respect to a proceeding against hot rolled steel from 
Japan, the Department cannot attribute knowledge of a proceeding to KSC 
in order to provide a basis for use of a

[[Page 24337]]

different time frame for its massive imports analysis.
    Second, KSC argues that, based on company-specific data of record, 
it did not have massive imports during the normal time frame provided 
for in the regulations. Rather, its imports decreased, in both quantity 
and value terms, during the post-petition October--December 1998 
period, as compared to the pre-petition July-September 1998 period. 
Therefore, KSC argues, the Department should reverse its preliminary 
finding of critical circumstances.
    Third, KSC argues that the Department unlawfully used country-
specific data rather than company-specific data in its preliminary 
finding. KSC argues that the Department failed to request company-
specific import data until after the preliminary critical circumstances 
determination, and the Department's failure to obtain this information 
unfairly punished KSC by applying an adverse inference even though they 
were cooperating. KSC argues that the Department must use the company-
specific shipment data submitted by KSC for its final determination.
    Finally, KSC argues that the Department's preliminary critical 
circumstances finding was unlawful because, given the ITC's preliminary 
determination that there was no present material injury, the Department 
could not reasonably impute knowledge of material injury, which is 
necessary for a finding of critical circumstances under post-URAA law 
when there is no history of dumping. KSC argues that a preliminary 
critical circumstances determination cannot be made by the Department 
unless the ITC determines that there was actual material injury. See 
Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate from the Russian Federation, 62 FR 
31967, 31971 (June 11, 1997). KSC states that the Department cannot 
ignore the ITC injury finding. Thus, KSC argues that the Department 
should make a negative critical circumstances finding in the final 
determination.
    Petitioners rebut each of KSC's four arguments regarding the 
Department's preliminary determination of critical circumstances. 
First, with respect to the Department's choice of a time frame for 
measuring shipments, petitioners argue that, despite KSC's reference to 
various legal authorities, the Statement of Administrative Action 
(``SAA''), congressional reports, and Department documents, KSC does 
not explain why the Department's regulation is at issue, or why the 
Department's actions in this case are not consistent with the 
authorities cited. Petitioners assert that the Department's action in 
this case did, in fact, serve to deter an increase in imports during 
the period following initiation.
    Petitioners rebut criticism of the Department's reliance on 
published articles for selecting an early time frame by pointing out 
that, although KSC disputed the significance of certain articles 
considered by the Department in its determination, the articles 
discussed by KSC in its brief were, with one exception, published after 
April 1998. Petitioners thus conclude that it is apparent that the 
Department did not rely on these articles. Petitioners make two points 
in this respect.
    First, petitioners contend, one report included in an exhibit to 
the petition is sufficient by itself to prove requisite knowledge by 
KSC. Petitioners cite the report dated April 1998 by CRU Steel Monitor. 
See Exhibit 3 of Petition for the Imposition of Antidumping Duties: 
Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From 
Japan, (September 30, 1998). Petitioners assert that this report, 
respected within the industry worldwide, discusses concerns actually 
expressed by Japanese producers.
    Second, petitioners argue that, although it is true that the other 
materials included as part of the petition did not refer specifically 
to hot-rolled imports from Japan, it is equally true that certain of 
these reports did refer specifically to the likelihood of antidumping 
cases being filed against hot-rolled steel imports. Petitioners add 
that although these reports mentioned Russia, the fact that, during 
this period, Japan was the second largest hot-rolled import supplier to 
the U.S. market makes it far-fetched to imagine that Japanese 
producers, like KSC, would infer that cases would be brought against 
Russia, the largest importer, but not Japan. Petitioners also contend 
that KSC is aware that U.S. flat-rolled producers have filed a large 
number of trade cases over the past two decades and those cases have 
always been brought against multiple countries.
    Petitioners contend that KSC's argument that the Department's use 
of country-wide (rather than company-specific) import data for purposes 
of its analysis is an unjustified departure from the Department's 
normal practice is a moot point because, as KSC concedes, the company-
specific data submitted to the Department shows a massive increase in 
imports by KSC during the period examined.
    Finally, petitioners provide two reasons why, in their view, KSC's 
assertion that the Department was precluded from finding critical 
circumstances because the ITC did not preliminarily find present 
material injury in it preliminary injury determination is incorrect. 
First, petitioners argue that neither the statute nor its legislative 
history indicates that the Department must find that there is no 
material injury for purposes of such determination simply because the 
ITC did not find present material injury. Second, the ITC may find 
present material injury in its final determination even when it did not 
make such a finding in its preliminary investigation. Petitioners point 
out that the ITC, in its opinion, did not actually say that it did not 
find a reasonable indication of present material injury. Instead, the 
ITC avoided that issue entirely by moving directly to the threat of 
injury. Petitioners assert that this opinion is unusual, and that the 
Department might reasonably wonder whether this is because the ITC was 
carefully refusing to rule out a finding of present material injury in 
a final investigation.

Sumitomo Metal Industries

    Sumitomo argues that the Department should not find critical 
circumstances with respect to it in the final determination. Sumitomo 
argues that the Department chose not to investigate Sumitomo because of 
the administrative burden to the Department, yet nevertheless applied 
its preliminary affirmative critical circumstances finding to imports 
by Sumitomo. Sumitomo argues that, as a cooperative non-selected 
respondent, it is entitled to a negative critical circumstances finding 
in the final determination. See Preliminary Determinations of Critical 
Circumstances: Brake Drums and Brake Rotors from The People's Republic 
of China, 61 FR 55269, 55270 (October 25, 1996). Sumitomo argues that 
it is the Department's practice not to issue final affirmative critical 
circumstances with regard to cooperative non-selected companies. For 
these reasons, Sumitomo argues the Department should find negative 
critical circumstances for non-mandatory cooperative respondents.
    Department's Position: For the reasons discussed below, we continue 
to find critical circumstances for respondent KSC and ``all other'' 
respondents. However, in the final determination, we do not find 
critical circumstances with respect to NSC or NKK.
    Section 735(a)(3) of the Act provides that if critical 
circumstances are alleged, the Department will determine whether: 
(A)(i) there is a history of dumping and

[[Page 24338]]

material injury by reason of dumped imports in the United States or 
elsewhere of the subject merchandise, or (ii) the person by whom, or 
for whose account, the merchandise was imported knew or should have 
known that the exporter was selling the subject merchandise at less 
than its fair value and that there would be material injury by reason 
of such sales, and (B) there have been massive imports of the subject 
merchandise over a relatively short period.
    As discussed in the preliminary critical circumstances finding, we 
are not aware of any antidumping order in any country on hot-rolled 
steel from Japan, for purposes of this final determination. Therefore, 
in this final determination we examined whether there was importer 
knowledge. In determining whether an importer knew or should have known 
that the exporter was selling hot-rolled steel at less than fair value 
and thereby causing material injury, the Department normally considers 
margins of 25 percent or more and a preliminary ITC determination of 
material injury sufficient to impute knowledge of dumping and the 
resultant material injury. The Department's final margins for KSC 
exceeded 25 percent. Therefore, we determine that importers knew or 
should have known that KSC was dumping the subject merchandise. As to 
the knowledge of injury from such dumped imports, in the present case, 
the ITC preliminarily found threat of material injury to the domestic 
industry due to imports of hot-rolled steel from Japan. Therefore, we 
also considered other sources of information, including numerous press 
reports from early to mid-1998 regarding rising imports, falling 
domestic prices resulting from rising imports and domestic buyers 
shifting to foreign suppliers. For a full discussion of the evidence on 
the record see Final Critical Circumstances Memo, dated Apr. 28, 1999. 
Based on this information, we find that importers knew or should have 
known that there would be material injury from the dumped merchandise.
    Because we have found that the first statutory criterion is met 
with regard to KSC, we must consider the second statutory criterion: 
whether imports of the merchandise have been massive over a relatively 
short period. According to 19 CFR Sec. 351.206(h), we consider the 
following to determine whether imports have been massive over a 
relatively short period of time: (1) volume and value of the imports; 
(2) seasonal trends (if applicable); and (3) the share of domestic 
consumption accounted for by the imports.
    When examining volume and value data, the Department typically 
compares the export volume for equal periods immediately preceding and 
following the filing of the petition. Under 19 CFR Sec. 351.206(h), 
unless the imports in the comparison period have increased by at least 
15 percent over the imports during the base period, we normally will 
not consider the imports to have been ``massive.'' In addition, 
pursuant to 19 CFR Sec. 351.206(i), the Department may use an 
alternative period if we find that importers, exporters, or producers 
had reason to believe, at some time prior to the beginning of the 
proceeding, that a proceeding was likely. In the instant case, to 
determine whether or not imports of subject merchandise have been 
massive over a relatively short period for the final determination, we 
examined each selected respondents' export volumes from May-September 
1998, as compared to December 1997-April 1998 and found that imports of 
hot-rolled steel from Japan increased by more than 100 percent. In this 
case, petitioners argue that importers, exporters, or producers of 
Japanese hot-rolled steel had reason to believe that an antidumping 
proceeding was likely. We find that press reports, particularly in 
March and April 1998, are sufficient to establish that by the end of 
April 1998, importers, exporters, or producers knew or should have 
known that a proceeding was likely concerning hot-rolled products from 
Japan. See Critical Circumstances Memo, dated Apr. 28, 1999. 
Accordingly, we examined the increase in import volumes from May--
September 1998 as compared to December 1997--April 1998 and found that 
imports of hot rolled steel from Japan increased by more than 100 
percent. Based on our analysis, we find that there was a massive 
increase in imports with respect to KSC.
    With regard to ``all others'' (i.e., companies that were not 
analyzed in this investigation, e.g., Sumitomo), we have reconsidered 
our Preliminary Determination finding of critical circumstances. For 
the final determination we conducted the following analysis, based on 
the experience of the investigated companies, to determine whether a 
finding of critical circumstances is appropriate with respect to 
uninvestigated exporters. See Notice of Final Determination of Sales at 
Less than Fair Value: Certain Steel Concrete Reinforcing Bars from 
Turkey, 62 FR 9737, 9741 (March 4, 1997) (Rebars from Turkey). In 
Rebars from Turkey, the Department found critical circumstances for the 
``all others'' category because it found critical circumstances for 
three of the four companies investigated. However, we are concerned 
that literally applying that approach may produce anomalous results in 
certain cases. For example, if the ``all others'' rate is below the 
critical circumstances threshold, we do not believe it would be 
appropriate to find critical circumstances for the all others category 
even if we found critical circumstances for a majority of the 
investigated companies. Therefore, we believe it is appropriate to 
address both critical circumstances criteria in reaching a 
determination concerning the ``all others'' category. Thus, we have 
applied that experience to both criteria. First, in determining whether 
knowledge of dumping existed, we looked to the ``all-others'' rate, 
which is based on the weighted-average of the individual rates for the 
investigated companies. In the instant case, the ``all others'' rate 
exceeds 25 percent. Thus, we find importers knew or should have known 
that there was dumping by the all other companies. Similarly, as with 
respondent KSC, we find that importers knew or should have known that 
injury from the dumping by all other companies existed based on the 
ITC's threat finding and the extensive press coverage, from early to 
mid-1998, of widespread lost sales and falling domestic prices as a 
result of dumped imports. Second, we have evaluated whether there are 
``massive imports'' for the ``all others'' companies in terms of both 
the imports of the investigated companies and country-specific import 
data. An evaluation of the company-specific shipment data provided by 
respondents indicates that all three mandatory respondents had massive 
imports and that, on average, imports increased by over 50 percent 
during the comparison period. In addition, where, as in the instant 
case, the U.S. customs data also permit the Department to analyze 
overall imports of the product at issue, we will consider whether those 
data are consistent with a finding of massive imports overall. Again, 
in the instant case, aggregate imports of hot-rolled steel during the 
comparison period increased by more than 100 percent. Thus, we find 
that imports from uninvestigated exporters were massive during the 
relevant period. Therefore, based on these factors, the Department 
determines that there are critical circumstances with regard to all 
other imports of hot-rolled steel from Japan. For a complete discussion 
of the data examined, see the Department's Final Critical Circumstances 
Memo, dated April 28, 1999.

[[Page 24339]]

    Comment 3: NKK's Home Market Levels of Trade.
    In its case brief submitted to the Department, NKK argues that in 
the preliminary determination, the Department incorrectly concluded 
that NKK sells at one level of trade in the home market. NKK asserts 
that, prior to the Department's preliminary determination, NKK had 
provided supporting qualitative evidence to confirm that in the home 
market sales by NKK to unaffiliated trading companies and end-users and 
sales made by affiliated trading companies take place at two distinct 
levels of trade.
    NKK asserts that section 773(a)(1)(B) of the Act requires the 
Department to compare prices, as is practicable, at the same level of 
trade. Furthermore, NKK asserts that the Department's own regulations 
describe that sales are made at different levels of trade when sales 
are made at different marketing stages. See 19 C.F.R. 
Sec. 351.412(c)(2). NKK argues that two levels of trade can be, but are 
not always, based on substantial differences in selling activities. NKK 
further argues that the Department must determine in its analysis if 
levels of trade are meaningful. See Preamble, 62 FR at 27371.
    NKK reminds the Department that in its initial section A 
questionnaire response it presented three distinct channels of trade in 
the home market and argued that the first two channels to end users and 
sales to unaffiliated trading companies, should be consolidated into 
one level of trade. The other level of trade, sales to affiliated 
trading companies, is distinct from sales to unaffiliated end-users and 
trading companies. NKK contends that the Department, in its level of 
trade analysis memorandum for the preliminary determination, ignored 
the selling category in which NKK sells merchandise to unaffiliated 
trading companies. NKK asserts that these sales account for 90 percent 
of total sales to unaffiliated customers during the period of 
investigation. NKK believes that this is a significant error.
    NKK argues that there is a significant difference between the 
selling activities of NKK and the selling activities of its affiliated 
resellers. NKK asserts that while it performs a high degree of selling 
activities in sales to end-users, this type of sale is a small part of 
this level of trade. NKK argues that, in general, its selling 
activities for total sales are smaller than the selling activities of 
its affiliated resellers. See Level of Trade Exhibit, attached to 
Verification Report, dated March 26, 1999. NKK argues that when its 
end-user sales are compared to its affiliated trading companies' end-
user sales, NKK engages in significantly less selling activity related 
to the development of new users, the assessment of user demand, the 
financing of steel purchases by end-users, the provision of inventory 
management and warehousing, and the management of delivery. NKK's 
affiliated trading companies, on the other hand, engages to a high 
degree in the aforementioned selling activities.
    NKK argues that there is a substantial and meaningful difference 
between selling activities performed by NKK and those performed by 
affiliated resellers/trading companies. NKK points out that the 
Department's own regulations establish that a substantially different 
selling function results with additional layers of selling activities. 
See Preamble, 62 FR at 27371. NKK asserts that its affiliated trading 
companies also incur comparatively greater risk as a result of more 
active and diverse selling activities. NKK, on the other hand, chooses 
to limit its own risk by selling 93 percent of its merchandise through 
affiliated trading companies and makes sales directly to end-users only 
in the case of well-established customers. Finally, NKK argues that its 
indirect selling expense ratio was significantly less than that of one 
of its trading companies during the POI. This, according to NKK, is 
consistent with the preamble to the Department's regulations, and 
definitively supports the notion that NKK and its affiliated trading 
companies sell at two distinct levels of trade in the home market. See 
Id.
    Petitioners assert that, having found itself unable to quantify 
pricing differences for the sake of claiming a LOT adjustment, NKK is 
now claiming that the home market is actually two LOTs, and that U.S. 
sales should be only matched to the closer level. Petitioners further 
assert that NKK's argument that the Department's chart, used for 
comparison of selling activities, is inaccurate should be accorded no 
weight, since pursuant to Sec. 351.412(c)(2) of the Department's 
regulations, the ``substantial differences in selling activities are a 
necessary, but not sufficient, condition for determining that there is 
a difference in the stage of marketing.'' Finally, petitioners rebut 
NKK's claims that (1) its affiliate's high degree of performance of 
selling functions yields a higher level of exposure for them and NKK 
can thus diffuse risk and that (2) there is a difference in indirect 
expenses ratios between itself and its trading company by asserting 
that, whether or not it is true, NKK's first claim is unquantifiable, 
and the second claim is problematic because the higher level of 
indirect selling expenses may be typical for a reseller. Therefore, 
petitioners assert that, as in the Preliminary Determination, the 
Department should continue to deny NKK any LOT adjustment.
    Petitioners argue that although NKK claims that it never provided 
inventory warehousing and management for its sales to unaffiliated 
trading companies, and rarely provided such services to end-users, the 
record shows that NKK provided high level delivery management services 
on sales to unaffiliated trading companies and also contradicts NKK's 
claim as to inventory warehousing. Therefore, for the 4 ``mill'' 
functions and 2 of the 5 ``trading company'' functions, (i.e., for 6 
out of the 9 categories of selling functions that NKK performs) NKK's 
selling functions on sales to unaffiliated customers and sales by its 
trading company to end-users are substantially the same. In light of 
these facts, petitioners argue that the Department should continue to 
find one level of trade in the home market.
    Department's Position: We do not agree that NKK's home market sales 
are made at two distinct levels of trade. In accordance with section 
773(a)(1)(B)(i) of the Act, to the extent practicable, we determine NV 
based on sales in the comparison market at the same level of trade 
(``LOT'') as the EP or CEP transaction. The NV LOT is that of the 
starting price sales in the comparison market or, when NV is based on 
CV, that of the sales from which we derive SG&A and profit.
    To determine the LOT of a company's sales (whether in the home 
market or in the U.S. market), we examine stages in the marketing 
process and selling functions along the chain of distribution between 
the producer and the unaffiliated customer. See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from South Africa (``Certain Cut-to-Length Carbon 
Steel Plate from South Africa''), 62 FR 61731 (November 19, 1997).
    NKK sells subject merchandise in the home market through two 
channels of distribution: one channel involves sales by NKK to 
unaffiliated customers (including both end-users and trading 
companies); the second channel involves sales by NKK's affiliate to 
unaffiliated customers. For the preliminary determination, the 
Department found that NKK's sales to these three types of home market 
customers involved essentially the same level of selling functions. 
After a careful analysis of the information on the

[[Page 24340]]

record, we continue to find that there was not a substantial difference 
in the selling functions performed by NKK in making sales to its 
unaffiliated customers and those associated with sales by NKK's 
affiliated company to its unaffiliated customers. Therefore, we 
continue to find that there is one level of trade in the home market.
    As discussed in the Department's preliminary Level of Trade Memo, 
dated February 12, 1999, the Department reviewed the selling functions 
performed with respect for each of the customer categories. As 
indicated by NKK in its January 19, 1999, supplemental section A 
response, NKK collapsed sales directly to unaffiliated companies (end-
users and others) into one level of trade. In conducting its analysis 
the Department reviewed the information placed on the record and did 
not ignore the level of selling activity for sales to unaffiliated 
trading companies, as evidenced by the inclusion of this category in 
the Level of Trade Memo.
    Second, NKK argues that there are substantial differences in the 
selling activities performed by NKK and the selling activities of its 
affiliated resellers. In the instant case, in conducting its level of 
trade analysis, the Department compared the selling functions performed 
for sales in the home market to the first unaffiliated customer. As 
evidenced by the discussion in the Department's Level of Trade Memo 
(referenced above), the information on the record indicates that the 
selling functions and activities performed by NKK on sales to 
unaffiliated customers as compared to the selling functions and 
activities performed by both NKK and its affiliate on sales to 
unaffiliated customers do not vary on a qualitative basis. NKK's 
argument that there are differences between these selling functions is 
not supported by the evidence on the record. Once again, in the 
Department's Level of Trade Memo we discussed the level of service 
provided for each channel of distribution and we found no distinction 
in the levels of service provided. NKK further argues that there are 
substantial differences in the amount of selling functions associated 
with the two groups of sales. However, the Department finds that, while 
the record indicates some differences in the amount of certain 
functions performed, these differences are not so substantial as to 
warrant finding different LOTs on this basis alone. Therefore, because 
the customer types are the same, the types of selling functions are the 
same, and there are not substantial differences in the level of 
functions performed, we continue to find that there is one LOT in the 
home market.
    Comment 4: KSC's CEP Offset.
    Petitioners argue that the Department should not grant KSC a CEP 
offset to the normal value of its home market sales in the final 
determination since KSC has failed to factually establish its 
entitlement to a CEP offset. Furthermore, petitioners argue that KSC's 
statements on the record actually refute its claim for a CEP offset. 
Petitioners claim that KSC has not established sufficiently that its 
home market and CEP sales through its affiliates, Kawasho Corporation 
and Kawasho International, are at different level of trades. For 
instance, petitioners claim that KSC originally stated in its section A 
response that it had two levels of trade in the home market and the 
same two levels of trade in the United States market. Petitioners state 
that KSC only claimed that its home market and U.S. sales to 
unaffiliated trading companies were at a less advanced stage in the 
marketing process than its sales to its affiliates. Petitioners also 
claim that KSC did not respond to Department inquiries that KSC 
``explain why [it] considers the home market level of trade more 
advanced than the U.S. level of trade to warrant a CEP offset if 
necessary.''
    Petitioners also argue that the fact that all sales to both markets 
were manufactured to order and were to the same categories of customers 
indicates that there are no differences in levels of trade between home 
market and the United States. Finally, petitioners claim that KSC's 
descriptions of its selling activities and services have been 
inconsistent and thus unreliable. As a result, petitioners argue that 
KSC has not met the required burden of proof to factually demonstrate 
that its home market sales and CEP sales were made at different levels 
of trade. Thus, the Department should not grant KSC a CEP offset for 
the final determination.
    Respondent contends that the Department's decision to grant KSC a 
CEP offset is in accordance with law and is supported by substantial 
evidence on the record. As legal authority, respondent relies upon 
section 772(a)(7)(B) of the Tariff Act (19 U.S.C. Sec. 1677b(a)(7)(B)) 
and the SAA at 831. Respondent argues that, contrary to petitioners' 
assertions, the facts on the record support KSC's claim for a CEP 
offset. Respondent asserts that petitioners misread KSC's response to 
the Department's section A questionnaire and that petitioners are 
incorrect in stating that KSC asserted that there were two levels of 
trade in the U.S. which correspond exactly to the two levels of trade 
in the home market. According to the respondent, KSC's section A 
response explains that there are at least three marketing stages for 
its CEP sales. In addition, KSC has consistently explained, in its 
section A, Supplemental section A, and section B responses, that its 
CEP sales were at a different level of trade than its home market sales 
through Kawasho. In fact, the respondent states that KSC's home market 
sales through Kawasho are at a more advanced level of trade than its 
CEP sales because these home market sales are at a more advanced stage 
of distribution and farther removed from the factory. Respondent 
asserts that, throughout the immediate investigation, KSC has supplied 
the Department with information, in its Supplemental responses and 
during verification, showing that it has to perform more and different 
selling activities and services for its home market sales than for its 
CEP sales. Furthermore, respondent argues that the difference in the 
number of employees for the different markets confirms that more is 
required to sell in the home market than to the CEP level of trade. 
Respondent concludes by stating that since there is no comparable level 
of trade in the home market, KSC is unable to calculate a trade 
adjustment for its CEP sales and instead requests the Department to 
grant a CEP offset pursuant to section 772(a)(7)(B) of the Tariff Act 
(19 U.S.C. Sec. 1677b(a)(7)(B)) and 19 CFR Sec. 351.412(f).
    Department's Position: We disagree with petitioners that KSC's CEP 
offset should be denied. In accordance with section 773(a)(1)(B)(i) of 
the Act, to the extent practicable, we determine NV based on sales in 
the comparison market at the same level of trade (``LOT'') as the EP or 
CEP transaction. The NV LOT is that of the starting price sales in the 
comparison market or, when NV is based on CV, that of the sales from 
which we derive SG&A and profit. For CEP sales, the Department makes 
its analysis at the level of the constructed export sale from the 
exporter to the affiliated importer.
    Because of the statutory mandate to take level of trade differences 
into consideration, the Department is required to conduct a LOT 
analysis in every case, regardless of whether or not a respondent has 
requested a LOT adjustment or a CEP offset for a given group of sales. 
To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the

[[Page 24341]]

difference affects price comparability, as manifested in a pattern of 
consistent price differences between the sales on which NV is based and 
comparison market sales at the LOT of the export transaction, we make a 
LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP 
sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the differences in 
the LOTs between the NV and the CEP sales affects price comparability, 
we adjust NV under section 773(A)(7)(B) of the Act (the CEP offset 
provision). See Certain Cut-to-Length Carbon Steel Plate from South 
Africa, 62 FR at 61731.
    In the Preliminary Determination, the Department made a CEP offset 
adjustment to the normal value of KSC's sales that were compared to CEP 
sales in the United States, because the Department preliminarily found 
that all of KSC's home market sales were made at levels of trade 
different from and more advanced than the level of trade of KSC's CEP 
sales in the United States, and there is no basis for determining 
whether the differences in the LOTs between the NV and the CEP sales 
affects price comparability. See Level of Trade Memo, dated February 
12, 1999. In particular, the Department found that KSC performed fewer 
and different selling functions in connection with CEP sales to Kawasho 
International and Kawasho Corporation than in connection with home 
market sales to its unaffiliated customers. For example, the Department 
found that KSC provided a high level of warehousing, processing, 
freight arrangement, and payment collection services in the home 
market, but did not provide the same level of services on its CEP sales 
to the United States. Further, the Department found that it was not 
possible to quantify a LOT adjustment based on the available data. The 
fact that KSC originally identified a different LOT pattern is not 
determinative. As explained above, the Department conducts its own LOT 
analysis, rather than merely accepting the assertions of the parties. 
Similarly, just as sales to a different customer category is 
insufficient, by itself, to establish a different level of trade, all 
sales to the same customer category are not necessarily sales made at 
the same level of trade. See Preamble to the Department's regulations, 
62 FR at 27371. Finally, the Department is satisfied that it has 
sufficient reliable information to reach a decision as to the levels of 
trade at which KSC and its affiliates sell subject merchandise. 
Furthermore, the Department verified the data used in making this 
analysis. See Verification Report, dated March 26, 1999. Thus, after 
further examination of the record, the Department will continue to make 
a CEP offset because the facts on the record indicate that KSC's CEP 
level of trade is different from and less advanced than KSC's home 
market levels of trade and that the data of record do not permit it to, 
instead, make a LOT adjustment based on the effect of the LOT 
difference on price comparability.
    Comment 5: Overruns.
    NKK asserts that the Department should consider its sales of 
overruns in its calculation of home market price because such sales 
meet the Department's criteria for sales in the ordinary course of 
trade. NKK argues that (1) its invoice coding system identifies sales 
as overruns; (2) its overruns are sold for the same uses as ordinary 
production, and unlike non-prime merchandise, the specific product 
characteristics are maintained and used to determine whether overruns 
meet a customer's needs, and there is no physical difference between 
overruns and ordinary production; and (3) the number of customers 
purchasing overruns and the volume of overruns purchased are similar to 
ordinary sales according to the Department's overrun methodology.
    Petitioners, in rebuttal, argue that the Department properly 
excluded the overruns in its preliminary determination margin 
calculation. Furthermore, petitioners argue that application of the 
Department's own standards for determining whether overrun sales are in 
the ordinary course of trade supports the Department's decision to 
exclude overruns from its margin calculation. See, e.g., Circular 
Welded Non-Alloy Steel Pipe from the Republic of Korea; Preliminary 
Results of Antidumping Duty Administrative Review, 62 FR 64559, 64561 
(December 8, 1997) referencing, Laclede Steel Co. v. United States, 18 
CIT 965, (1995); Carbon Steel Flat Products from Korea, 64 FR at 12941-
42. Petitioners argue that, by the Department's standards, NKK's 
overrun sales are outside the ordinary course of trade based on the 
ratio of overrun sales to home market sales, the number of overrun 
customers in relation to the total number of customers, the average 
price of overrun sales compared to commercial production sales, the 
relative profitability of overrun sales, and the quantity of overrun 
sales compared to the total quantity of commercial sales. Petitioners 
claim that no one factor among these standards is dispositive, and, 
finally, that the Department has excluded and should continue to 
exclude overruns in its margin calculation.
    Department's Position: We agree with petitioners that overruns 
should continue to be excluded from the Department's final analysis. 
After an examination of the record, the Department has determined that 
NKK's overrun sales are sold at a lower price, sold in smaller 
quantities overall and sold to fewer customers than product that is not 
overruns. Second, based on the results of verification, where the 
Department examined overrun sales, we determined that these sales are 
made only after they cannot be applied to other sales and after a 
significant time lag follows production as compared to other sales in 
the normal course of business. The Department concedes that NKK's 
overruns are sold as prime merchandise; however, this sole factor does 
not enable these sales to be considered in the ordinary course of 
trade. Third, the Department found that there were sufficient matches 
to non-overrun prime merchandise sold in the ordinary course of trade, 
which is the Department's preference in determining matches between 
U.S. sales and home market sales. Based on these factors, the 
Department continues to exclude overrun sales from its analysis.
    Comment 6: Department's Arm's Length Test.
    NKK argues that the Department should use a different arm's length 
test than the ``99.5 percent'' test that it normally uses and used in 
the preliminary determination. The Department's current policy is to 
treat home market sales prices to an affiliated customer as having been 
made at ``arm's length'' (and therefore useable in the normal value 
calculation) if prices to that affiliated purchaser are, on average, at 
least 99.5 percent of the prices charged to unaffiliated purchasers. 
See Preamble, 62 FR at 27355. NKK states that the Department has not 
codified its ``99.5 percent'' arm's length test methodology, and 
therefore suggests what it believes to be a more accurate arm's length 
test. NKK claims that both generally and on the fact of this case, the 
Department's current test produces distorted results. NKK argues that 
there is no factual basis on which to conclude that sales to one of its 
affiliated trading companies were not made at arm's length prices.
    NKK describes two variations of the test used in past dumping 
investigations and argues that both variations are methodologically 
flawed. Specifically, NKK argues that the current arm's length test 
methodology is flawed because the application of a single fixed

[[Page 24342]]

ratio ( ``99.5 percent'') to CONNUM-specific or weighted-average 
related/unrelated customer price ratios distorts commercial reality by 
not taking into account actual pricing practices. NKK references 
several types of situations in which it argues the current test 
produces anomalous results.
    NKK also proposes a new approach involving several changes to its 
current test. First, NKK asserts that the Department should abandon its 
methodology of creating an ``overall customer percent-ratio 
aggregation'' and, instead, base its arm's length test on CONNUM-
specific sales data. In short, NKK argues that the arm's length test 
should be applied on a CONNUM-specific basis, rather than a customer-
specific basis. Second, NKK argues that, instead of using an 
``inflexible and mechanical'' 99.5% of the mean for a benchmark to 
determine arm's length sales, the Department should instead adopt a 
test based on standard deviations. Such a test, according to NKK, would 
address the variability and magnitude of pricing data. Specifically, 
when the mean price for the CONNUM sold to the related customer is 
within one standard deviation of the mean price to the unrelated 
customer, the Department should consider that sales of that CONNUM to 
that customer are at arm's length.
    NKK argues that its proposed test would not be difficult to apply, 
and includes proposed SAS programming. Finally, NKK asserts that if the 
Department adopts an arm's length analysis methodology that applies a 
standard-deviation test on a CONNUM-specific basis, the record will 
show that NKK's sales to affiliated trading companies were, in fact, at 
arm's length.
    Petitioners, in rebuttal, argue that there is no reason for the 
Department to abandon its current arm's length test. Specifically, 
petitioners argue that the Department has considerable discretion in 
determining when to exclude related party sales in the calculation of 
normal value. See, e.g., Usinor Sacilor v. United States, 872 F. Supp. 
1000, 1004 (CIT 1994). Furthermore, petitioners argue that the courts 
will uphold the Department's arm's length test unless respondents can 
prove that the test is unreasonable and distorts price comparability. 
See SSAB Svenskt Stal AB v. Bethlehem Steel Corporation, 976 F. Supp. 
1027, 1030-1031 (CIT 1997); Micron Technology Inc. v. United Tests, 893 
F. Supp. 21, 38 (CIT 1995). Petitioners argue that the burden of 
persuasion, with respect to the theory that the Department's arm's 
length test distorts price comparability, falls on the respondent. See 
NEC Home Electronics Ltd. v. United States, 54 F. 3d 736, 744 (Fed. 
Cir. 1995).
    Petitioners specifically reject NKK's proposed arm's length test. 
Petitioners argue that NKK's proposed alternative test is based 
entirely on the idea of using standard deviations to account for 
pricing variability. Petitioners, citing statistical authorities, 
assert that the application of a mean/standard deviation analysis only 
works when there is a symmetrical, bell-shaped frequency distribution, 
and claim that NKK's data sets do not fit this model. Petitioners 
reject the accuracy of the sample scenarios that NKK advances in its 
case brief. For example, petitioners argue that one of NKK's case brief 
scenarios misrepresents the facts of a standard deviation-based 
analysis to the extent that NKK does not establish the standard 
deviation for unrelated prices. Petitioners assert that NKK's proposed 
arm's length test is over-inclusive, and statistically inaccurate; 
therefore, they argue, it should be dismissed by the Department.
    Department's Position: The Department has not adopted NKK's 
proposed arm's length test for purposes of this investigation. As NKK 
has acknowledged, determining whether home market sales made to 
affiliated parties are made at arm's length is a complex process which 
the Department considered in some detail during the most recent round 
of regulatory revisions. At that time, the Department decided that it 
would not codify the current test, but would continue to apply it 
unless and until it developed a new method, in which case the new 
methodology would be described and announced in a policy bulletin. See 
Preamble, 62 FR at 27355. The Department's ``99.5 percent'' arm's 
length test methodology is well established and the CIT has repeatedly 
sustained the methodology. See Micron Technology Inc. v. U.S., 893 F 
Supp. 21 (CIT 1995) and Torrington Co. v. United States, 960 F. Supp. 
339 (CIT 1997).
    An agency's interpretation of the statute it administers must be 
accorded substantial weight. Thus, the Department's well-established 
practice can be sustained as long as it is ``sufficiently reasonable.'' 
See American Lamb Co. v. United States, 785 F.2d 994, 1001 (Fed. Cir. 
1986). In Usinor Sacilor v. United States, 872 F. Supp. at 1004, the 
Court of International Trade stated that it would uphold the 
Department's ``99.5 percent'' test unless it was shown to be 
unreasonable. While NKK has proposed an alternative methodology based 
on a statistical approach, it has not demonstrated that the current 
methodology is unreasonable. The CIT has already rejected the idea that 
the ``99.5 percent'' test is unreasonable because it does not take into 
account price variance. See Usinor Sacilor v. United States, 872 F. 
Supp. at 1004.
    With respect to NKK's concern of applying the arm's-length test on 
a customer basis, we note that the question underlying the arm's-length 
test is whether affiliation between the seller and the customer has (in 
general) affected pricing. Because affiliation is the result of 
relationships between firms, the focus of the arm's-length test is the 
customer, not a particular product. For this reason, the Department 
makes one up-or-down call on pricing to an affiliated customer: either 
there is arm's-length pricing or there is not. However, under NKK's 
proposed connum-by-connum approach, affiliation could be found to 
matter for some connums, but not for others, even though the customer 
in both cases is the same. To support it's proposal, in exhibit B to 
it's submission dated April 12, 1999, NKK claims that the sales to an 
affiliated customer, NKK Trading of certain CONNUMs were considered not 
to be at arm's length prices although the prices for over 50% of those 
sales exceeded the mean price to the unaffiliated customers for these 
connums. However, the relatively small share of total sales to NKK 
Trading for which these connums account is perfectly consistent with 
the Department's finding that NKK's affiliation with NKK Trading has in 
general affected price.
    Additionally, NKK presents several theoretical situations under the 
Department's current approach, where NKK claims that sales could be 
excluded for reasons unrelated to affiliation. In particular, NKK 
argues that a statistical approach would reduce the likelihood of 
testing error when pricing to affiliated and unaffiliated customers is 
the same (i.e., the error of finding that affiliation has affected 
prices when, in fact, it has not). However, NKK does not address the 
concern that, by lowering the threshold for accepting affiliated party 
sales under their statistical approach from the Department's current 
standard, NKK's test would increase the likelihood of testing error 
when pricing to affiliated and unaffiliated customers is not the same 
(i.e., the error of finding that affiliation has not affected price 
when, in fact, it has). Given this concern with NKK's proposed 
approach, the Department continues to believe that the ``99.5 percent'' 
test imposes a reasonable requirement on affiliated-party prices:

[[Page 24343]]

on average, they essentially must be as high as prices to unaffiliated 
parties.
    Comment 7: NSC's Affiliated Freight Costs.
    NSC argues that the Department should allow all of NSC's home 
market inland freight expenses for the final determination because the 
Department verified that NSC procures inland freight services at arm's 
length prices, and that NSC had properly reported these expenses.
    NSC argues that, under the antidumping law, the Department shall 
reduce the normal value price by the costs incurred to bring the 
subject merchandise from the original place of shipment to the place of 
delivery to the purchaser in order to achieve an undistorted fair value 
comparison. See section 772(c)(2)(A); SAA at 4040. NSC argues that the 
Department has allowed respondents to deduct the full expense of inland 
freight services provided by affiliates unless the Department cannot 
establish that the services were not purchased in an arm's length 
transaction. See Notice of Final Determinations of Sales at Less than 
Fair Value: Certain Hot-Rolled, Cold-Rolled, and Corrosion Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
from France, 58 FR 37125, 37132 (1993); Certain Cold Rolled Carbon 
Steel Flat Products from Korea: Final Results of Antidumping Duty 
Administrative Review, 63 FR 781, 788 (January 7, 1998); Steel Pipe 
from Korea, 63 FR at 32,839; see also Gray Portland Cement and Clinker 
from Mexico: Final Results, 63 FR 12764, 12780 (1998).
    NSC states that it ``confirmed'' prior to verification that these 
services from affiliates were purchased at arm's length prices by 
providing freight charts and explaining that it paid the same rates to 
affiliates and unaffiliates. NSC argues that the Department verified 
that NSC paid arm's length prices to affiliated and non-affiliated 
freight suppliers, and that NSC reported its inland freight charges 
accurately. See Verification Report at 14-15, dated March 26, 1999. NSC 
concludes that, therefore, the Department must make a deduction for 
NSC's home market inland freight expenses when calculating normal value 
for the final determination.
    Department's Position: We agree with NSC. The Department has 
allowed a deduction for home market freight expenses because NSC 
reported its freight expenses in accordance with Departmental 
methodology and the expenses were verifiable. While NSC's responses to 
the Department's questionnaires did not demonstrate that NSC had 
procured inland freight services from affiliates at arm's length 
prices, at verification, we examined contracts and payment 
documentation which demonstrated that NSC's reported inland freight 
charges were accurate and non-distortive. See Verification Report at 
15, dated March 26, 1999. Therefore, in the final determination, we 
have utilized NSC's reported home market freight expenses in the 
calculation of normal value.
    Comment 8: NKK's Home Market Freight Costs.
    Petitioners assert that, according to NKK, the company does not 
track actual delivery charges on an individual shipment basis; thus, it 
calculated its reported movement costs in the home market based on the 
way in which a particular product was most likely transported. 
Petitioners note that NKK, late in the process, disclosed that the 
reported delivery terms, for 19 percent of its transactions, were 
incorrect. In addition, NKK also revealed that a computer programming 
error resulted in the wrong method of transportation being reported for 
a full 13 percent of its home market sales. Petitioners argue that, in 
light of the numerous errors in NKK's reporting of movement expenses, 
NKK has failed to demonstrate that (1) its method for allocating its 
home market movement expenses does not cause inaccuracies or distortion 
and (2) it is entitled to an adjustment for movement expenses in the 
home market. Therefore, petitioners assert that, at minimum, the 
Department should deny NKK's reported adjustments for movement expenses 
for certain specific sales.
    NKK asserts that it reported, in its original and supplemental 
questionnaire responses, that it does not retain transaction specific 
movement expenses. Instead, using its monthly summaries, NKK determined 
an average per-ton movement expense for each category of 
transportation, as well as by each method of transportation.
    In addition, NKK argues, that pursuant to the Department's 
practice, a week before verification NKK submitted new revised 
databases. The Department accepted and verified the accuracy of the 
method for allocating these rates to specific transactions, and tested 
the reported movement expenses in 45 sample sales transactions. No 
discrepancies were found. Furthermore, NKK asserts that, contrary to 
what petitioners alleged in both in their pre-verification comments and 
briefs, the Department verified that the sales terms code did match the 
claim of a movement expense. Therefore, NKK's asserts that its 
methodology was reliable and accurate. NKK has successfully 
demonstrated its entitlement to an adjustment for movement expenses in 
the home market, and evidence on the record proves that petitioners' 
claims have no basis.
    Department's Position: We agree with NKK and have allowed a 
deduction for freight expenses for home market sales of subject 
merchandise because the reported expenses are in accordance with 
Departmental methodology, are consistent with the company's accounting 
practices, and were substantiated at verification. See Verification 
Report, dated March 26, 1999. NKK has reported home market freight in 
accordance with its accounting system and provided the data on a 
product, transportation-type and destination-specific basis. Based on 
its findings at verification, the Department determined that 
respondent's reported freight costs for home market sales of hot-rolled 
steel are not distortive, and provide a reasonable estimate of actual 
transaction-specific freight expenses. Therefore, we are granting NKK a 
home market freight adjustment for sales of subject merchandise.
    Comment 9: NSC's U.S. Sales.
    Petitioners contend that certain of NSC's U.S. sales, those made 
through an affiliated U.S. reseller and reported as export price 
(``EP'') sales, are constructed export price (``CEP'') sales and that 
adverse facts available should be applied to these sales. Petitioners 
state that NSC was not forthright with its explanation of the U.S. 
reseller's functions in the sales process, as the Department found that 
the reseller performed many more functions than were originally 
outlined in the questionnaire responses. More specifically, petitioners 
believe that the findings at verification demonstrate the involvement 
of the reseller in the negotiation of the substantive terms of sales, 
such as prices. Furthermore, petitioners assert that NSC's claim that 
the reseller was merely a processor of information and a communication 
link is untenable. In addition, petitioners argue that because NSC 
failed to report ``significant facts'' regarding the reseller's role in 
the sales process the Department should use facts available. 
Petitioners contend that NSC withheld information from the Department, 
failed to provide information in a timely manner and impeded the 
proceeding. Lastly, petitioners have requested that the Department use 
the highest calculated margin for NSC's U.S. sales as facts available.
    NSC argues that verification confirmed the facts underlying the 
Department's preliminary decision that

[[Page 24344]]

NSC's U.S. sales were properly characterized as EP sales. NSC states 
that the sales meet criteria for EP sales established in Mitsubishi 
Heavy Indus., Inc. v. United States, 15 F.Supp. 2d 807, 812 (CIT 1998) 
(citing PQ Corp. v. United States, 652 F.Supp. 724, 731 (CIT 1987), and 
affirmed in AK Steel Corp. v. United States, No. 97-05-00865, 1998 WL 
846764, at *6 (CIT 1998).
    NSC argues that if a transaction meets these criteria, the 
Department will treat the sales as EP because the routine selling 
functions of the manufacturer have been relocated geographically from 
the selling country to the United States. See Koenig & Bauer-Albert AG 
v. United States, 15 F. Supp. 2d 834, 352 (CIT 1998). NSC adds that, in 
such circumstances, the EP sales are in effect made directly to the 
unrelated buyer because the U.S. affiliate has no independent function. 
The remainder of NSC's argument cannot be recreated in a public 
summary.
    Petitioners rebut NSC's contention that the Department should not 
use adverse inferences with regard to NSC's sales made through its 
affiliated U.S. reseller. The petitioners cite to the Department's 
Verification Report which shows that the U.S. reseller negotiated terms 
of sale with customers. Petitioners further argue that NSC's arguments 
ignore the U.S. reseller's role as verified by the Department. 
Additionally, petitioners state that due to the reseller's role in the 
``negotiations and base price proposals'' the sales should be deemed 
CEP. Furthermore, petitioners contend that because NSC did not describe 
the full range of the reseller's role and the Department consequently 
does not have all of the information necessary with which to calculate 
a margin for CEP sales, the Department should find adverse inferences 
and use the highest calculated margin for these sales.
    Petitioners argue that the Department finds that CEP treatment is 
justified where a U.S. affiliate plays a significant role in soliciting 
business and maintaining customer contacts, or participates in the 
negotiation of sales price to the extent that it is more than a 
processor of sales-related documentation or a communications link. See 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea: Final Results of Antidumping Duty Administrative Reviews, 
63 FR 13170, 13172 (March 18, 1998). Petitioners argue that, contrary 
to NSC's assertions, the facts in this case justify classifying certain 
of NSC's sales as CEP.
    Petitioners also note that where the U.S. affiliate acts as the 
first and only point of contact for the U.S. unaffiliated customer, or 
that it played the primary role in generating the sale by bringing the 
customer to the foreign producer, the Department has found that the 
affiliate's role in the sales process is significant. See Stainless 
Steel Plate in Coils from the Republic of Korea, 64 FR 15444, 15453 
(March, 31, 1999); see also Notice of Final Determination of Sales at 
Less Than Fair Value: Extruded Rubber Thread from Malaysia: Final 
Results of Antidumping Duty Administrative Review, 64 FR 12967, 12971 
(March 16, 1999); Carbon Steel Flat Products from Korea, 64 FR at 
12927. Petitioner also argues that the Department has found that where 
the U.S. affiliate participates in negotiations, its role is elevated 
beyond a processor of documentation or a communications link. 
Petitioner argues this is true even where the U.S. affiliate negotiates 
along with the foreign producer (Small Diameter Circular Seamless 
Carbon and Alloy Steel Standard Line and Pressure Pipe from Germany: 
Preliminary Results of Antidumping Duty Administrative Review, 62 FR 
47446, 47448 (September 15, 1997), reserved the right to approve all 
orders, id. or limited the affiliate's ability to negotiate prices 
within certain ranges, Cut-to-Length Carbon Steel Plate from Belgium: 
Preliminary Results of Antidumping Duty Administrative Review, 62 FR 
48213, 48214-15 (1997); Certain Cut-to-Length Carbon Steel Plate from 
Germany: Final Results of Antidumping Duty Administrative Review, 62 FR 
18390, 18391-92 (1997)). Petitioners argue that where the U.S. 
affiliate's role is not incidental or ancillary, CEP treatment is 
appropriate. See Industrial Nitrocellulose from the United Kingdom: 
Final Results of Antidumping Duty Administrative Review, 64 FR 6609, 
6611 (February 10, 1999). Petitioners cite the U.S. verification report 
in support of their argument that CEP is appropriate for certain of 
NSC's U.S. sales, and argue that application of facts available is 
justified as well, based NSC's failure to provide complete information 
on these circumstances.
    In its rebuttal, NSC argues that the Department should continue to 
treat NSC's sales through its affiliated U.S. reseller as EP sales. NSC 
contends that the affiliated U.S. reseller acted as a communication 
link between the affiliated Japanese reseller and the U.S. customer. 
NSC states that the U.S. reseller acted ``only as a processor of sales-
related documentation and a communication link with the unrelated U.S. 
buyer.'' See Mitsubishi Heavy Indus., Ltd. v. United States, 15 F. 
Supp. 2d 807, 812 (CIT 1998). Furthermore, NSC argues that the U.S. 
reseller was in constant communication with the Japanese reseller and 
that messages during the sales negotiations document that the U.S. 
reseller had no authority to make decisions without the consent of the 
Japanese reseller. NSC contends that the U.S. reseller acted as a 
communication link, which is a role that U.S. affiliates may play in EP 
sales. See AK Steel Corporation v. United States, 34 F. Supp. 2d 756 
(CIT 1998); see also NSC U.S. Verification Memorandum, dated March 26, 
1999, at Exhibit 4. In sum, NSC argues that at no point did the 
affiliated U.S. reseller make any decisions with regard to the terms of 
sale without first consulting the Japanese reseller. Finally, NSC 
contends that if the U.S. reseller had authority to negotiate terms of 
sale the documented correspondence between the U.S. and Japanese 
resellers would not have occurred. Thus, the U.S. reseller was simply a 
conduit for communication.
    Department's Position: We disagree with petitioners that NSC's U.S. 
sales should be treated as CEP sales. The statute defines export price 
as the price at which the subject merchandise is first sold (or offered 
for sale) to an unaffiliated purchaser before the date of import by the 
exporter outside the United States. In contrast, CEP is the price at 
which the subject merchandise is first sold (or offered for sale), 
before or after the date of import, in the United States by or for the 
account of the exporter or by a seller affiliated with the exporter to 
an unaffiliated purchaser. Thus, sales made prior to import can be 
either EP or CEP, with the former being sold by the exporter or 
producer outside the United States and the latter being sold by someone 
in the United States who is selling for the account of the exporter or 
is affiliated with the exporter. In cases in which both the exporter 
and a U.S. affiliate or a party in the United States acting on the 
exporter's behalf are involved in the sales transaction, a case-by-case 
determination must be made, based on the facts associated with the 
transactions at issue, to determine whether such sales are properly 
characterized as EP or CEP sales. Normally, when a party in the United 
States is involved in the sale to the first unaffiliated customer, the 
sales are properly treated as CEP sales. However, the Department has a 
long history of recognizing so-called ``indirect EP sales,'' which are 
sales made by an exporter, with the party in the United States 
performing only certain ancillary

[[Page 24345]]

functions that support the sales process. To determine whether sales 
are properly classified as EP in such cases the Department examines 
three criteria: whether (1) the merchandise is not inventoried by the 
importer, (2) the sale is made through a customary commercial channel 
for sales of this merchandise, and (3) the affiliated importer acts 
only as a processor of sales-related documents and as a communications 
link with the exporter. See, e.g., Du Pont, 841 F. Supp. at 1248-50; AK 
Steel, 1998 WL 846764 at *6. Only when all three criteria are met does 
the Department treat the sales as EP sales. As the Court explained in 
AK Steel, this test is simply a means to determine whether a sale at 
issue is in essence between the exporter and the unaffiliated buyer, in 
which case the EP rules apply, or whether the role of the affiliate has 
sufficient substance that the CEP rules apply. Id.
    In this case, NSC's small U.S. office merely assisted NSC and its 
affiliated Japanese trading company in making the sales in question. 
With respect to the first prong of the indirect EP test, the 
merchandise at issue was shipped directly from the manufacturer to the 
unaffiliated U.S. customer without being introduced into the physical 
inventory of NSC's U.S. affiliate. With respect to the second prong, 
this pattern of direct shipment is a customary commercial channel for 
sales of such merchandise in the industry, and there is no indication 
that the sales between the parties involved represented any departure 
from the customary commercial patterns. As for the third prong, 
information obtained by the Department at verification confirmed NSC's 
claims that its U.S. affiliate's role was that of a processor of sales-
related documents and as a communications link with the exporter.
    The gravamen of petitioner's claim that these sales should be 
classified as CEP sales appears to be the fact that the affiliate is 
involved in the negotiation process. However, the sales-related 
documents we examined at verification indicated that the affiliate's 
role in the sales negotiation process is properly characterized as 
ancillary to the role of NSC and an affiliated trading company in 
Japan. See U.S. Sales Verification Report, dated March 26, 1999. The 
primary function of the U.S. affiliate in negotiation was conveying 
offers and counter-offers between the customer on the one hand, and NSC 
and the Japanese trading company on the other--in other words, serving 
as a ``communications link'' between the parties involved in making the 
decisions with respect to these sales. Contrary to petitioners' 
assertions, the U.S. affiliate cannot be said to have participated in 
any real sense in the negotiation of the sales at issue.
    Verification also confirmed the accuracy of information NSC 
provided on the record with respect to its performance of other support 
functions related to these U.S. sales, including conveying an initial 
offer to bid, issuing certain sales documentation, and assisting in 
arranging the transport of the merchandise from Japan to the customer. 
The affiliate also pays U.S. import duties and certain transportation 
expenses (wharfage, brokerage, barge/demurrage, stevedoring, and 
trucking expenses) on these sales, receives payment from the customer 
and receives a commission on the sale. See NSC U.S. Verification Report 
at 2-4, dated March 26, 1999. These are all functions that have 
previously been found to be compatible with a finding that the sales 
involved are EP sales. In addition, the Court of International Trade 
has held that the fact that a U.S. subsidiary receives a commission for 
providing such services is not incompatible with a finding that the 
sales are EP sales. See Outokumpu Copper Rolled Products AB v. United 
States (``Outokumpu''), 829 F. Supp. 1371, 1378-80 (CIT 1993). Thus, 
the facts of record, taken as a whole and considered in context, 
demonstrate that these sales are essentially sales between NSC's 
affiliated Japanese trading company and the unaffiliated U.S. customer, 
with certain routine sales support functions carried out by the U.S. 
affiliate. Therefore, we find that the facts on the record demonstrate 
that the sales at issue meet the well-established criteria for indirect 
EP sales.
    In addition, we note that these sales constitute such a minute 
portion of NSC's U.S. sales that, even if the Department had accepted 
petitioners' argument both that they should be considered CEP sales and 
that the Department should apply an adverse margin to these sales, the 
impact on NSC's margin, if any, would have been negligible.
    Comment 10: NSC's U.S. Sales Prices.
    Petitioners contend that the Department should use the gross unit 
U.S. price in dollars which appears on the invoice, and not a converted 
net price in yen as the basis for its U.S. price calculations. NSC 
reported the gross unit price for its U.S. sales in dollars, and this 
value appears on the invoice, even though NSC's customers ultimately 
pay for the merchandise in yen based on a nine day forward exchange 
rate. NSC reported the price paid in yen minus a trading company 
discount as NETPRTCU. Petitioners claim that the Department converted 
the net yen value to dollars on the date of shipment, and state that 
this approach is improper. Petitioners rely upon Ferrosilicon from 
Brazil: Amended Final Results of Antidumping Duty Administrative Review 
(``Ferrosilicon from Brazil''), 62 FR 54085, 54086 (1997), where the 
Department amended its final results in order to use the U.S. dollar-
denominated gross unit price, and on Notice of Final Determination of 
Sales at Less Than Fair Value: Stainless Steel Wire Rod from Japan, 63 
FR 40434, 40446-7 (1998), where the Department also used a gross unit 
price in dollars.
    Department's Position: The Department disagrees that we should use 
the gross unit U.S. price in dollars which appears on the invoice and 
not the converted price in yen. The yen value on the invoice is the 
value which is invoiced and paid by NSC's customers. For every U.S. 
sale, and other export sales, NSC records the dollar value, the yen 
value, and the exchange rate used to convert the dollar to yen, and 
then tracks the yen invoice value through to their accounts receivable. 
Petitioners' argument is that the Department should avoid unnecessary 
conversion where possible. The Department verified that the yen value 
on the invoice is converted using the yen to dollar exchange rate on 
the ninth day after shipment. This conversion is pursuant to the terms 
of sale agreed upon by the parties at the time of the order 
confirmation. Therefore, for purposes of NSC's normal accounting 
records, the yen value posted in the normal course of business is the 
converted dollar value effective on the date of shipment, using the 
methodology discussed above. In reporting U.S. sales to the Department, 
NSC directly reported the yen value from the invoice as recorded in the 
normal course of business. As a result, the Department used the yen 
value from the invoice as the starting point in its calculation of U.S. 
price.
    Petitioners' reliance on the two administrative cases cited is 
misplaced. The Ferrosilicon from Brazil case, unlike this case, 
involved a forward exchange rate agreement. Thus, section 773A(a) of 
the Act required that foreign currencies be converted into U.S. dollars 
based on the exchange rate specified in the forward exchange rate 
agreement. Instead, the Department, due to the erroneous impression 
that it did not have dollar-denominated prices on record, ``mistakenly 
converted the U.S. sales prices reported in Brazilian currency to U.S. 
dollars on the date of sale.'' 62 FR at 54086. Because the

[[Page 24346]]

Brazilian currency gross unit amount which appeared on the commercial 
invoice corresponded to the dollar-denominated price as of the date of 
conversion pursuant to the forward exchange agreement, converting that 
Brazilian currency value to U.S. dollars was an exchange rate error. 
Because the dollar value reported to the Department already 
corresponded to the dollar equivalent of the amount to be paid in 
Brazilian currency on the proper day for making that currency exchange, 
the Department used the submitted dollar value.
    The Japanese wire rod case involved a situation similar to 
Ferrosilicon from Brazil. In that case, the Department stated that the 
invoice listed a gross unit price only in dollars, the conversion 
factor associated with the forward exchange agreement, the amount 
corresponding to a commission (or ``discount'') paid to the Japanese 
trading company to which Nippon (i.e., NSC in the instant case) sold, 
and a net price in yen that results after that ``discount'' was 
deducted. 63 FR at 40447. As instructed in the questionnaire, Nippon 
had reported the gross unit price on the invoice (which was in 
dollars), and the Department had used this price as the starting price 
in its preliminary calculations. Id. Petitioners urged that, because 
payment was made in yen, rather than in dollars, the Department should 
disregard Nippon's data and use facts available. Id. In the final 
determination, the Department continued to use the reported dollar 
gross price because Nippon, as requested, had provided the price on the 
invoice. Id. In addition, the Department had verified that Nippon 
received the yen-denominated amount corresponding to that dollar 
amount, converted at the forward exchange rate reflected on the 
invoice, minus the trading company's ``discount.'' Id. In other words, 
once the discount was taken into consideration (as it would necessarily 
be regardless of which currency was used), the dollar amount exactly 
corresponded to the net yen amount petitioners complained had not been 
used in the first place.
    Based on the facts of the instant case, the Department has used the 
yen value reported on the invoice as the starting point for the 
calculation of U.S. price.
    Comment 11: NSC's Arm's Length Analysis.
    Petitioners argue that the Department should apply the arm's length 
test to resales made by NSC's affiliated customer to other NSC 
affiliates. On January 4, 1999, the Department requested that NSC add a 
field to its sales database indicating the relation of the end-user to 
NSC for sales made through one of NSC's affiliated resellers. Citing 
lack of time, NSC responded by providing the Department with a list of 
the affiliated reseller's customers who were also affiliated with NSC, 
instead of updating the database. Therefore, petitioners request that 
the Department apply the arm's length test to the subsequent sales by 
NSC's affiliated reseller, where applicable.
    Department's Position: The Department disagrees with petitioners. 
The Department's regulations state that, if an exporter or producer 
sold the foreign like product to an affiliated party, it may calculate 
normal value based on such sales if it determines that the price is 
comparable to the price at which the exporter or producer sold the 
foreign like product to a person who is not affiliated with the seller. 
See 19 C.F.R. Sec. 351.403(c). It is the Department's normal practice 
to run the arm's length test on home market sales made by the producer 
to an affiliated company to determine whether the prices for such sales 
are comparable to prices charged to unrelated parties. In the instant 
case, the Department conducted its normal arm's length analysis and 
found that NSC's sales to the affiliated reseller at issue failed the 
arm's length test. Therefore, our preference is to use the downstream 
sales if available. Based upon the information placed on the record, we 
find no basis for departing from the Department's normal practice in 
this regard.
    As the Department has stated in the Preamble to its regulations, 
``[t]he purpose of an arm's length test is to eliminate prices that are 
distorted.'' See 62 FR at 27356. Once a non-distorted price has been 
identified in a given series of transactions for use as normal value, 
``the Department does not believe it is necessary or appropriate to 
require the reporting of downstream sales in all instances.'' See Id. 
The approach proposed by petitioners, which would require routine 
reporting of all downstream data for home market sales to affiliates, 
so that the arm's length test could be conducted at multiple levels, 
would be both burdensome and unnecessary. Thus, for the final 
determination, when a sale by NSC to an affiliated party passed the 
arm's length test, we did not conduct further tests to determine 
whether the sales by that affiliate were also made at arm's length.
    Comment 12: NSC's Home Market Downstream Sales.
    NSC argues that the Department should continue to find that NSC 
need not report any further downstream sales. As it did in the 
Preliminary Determination, NSC contends that the process of acquiring 
the necessary information for the still unreported downstream sales 
would be overly burdensome due to the manual effort involved, and the 
affiliated reseller's limited retention of paper documents. 
Furthermore, NSC has continued to work to report the downstream sales. 
At verification, NSC demonstrated that the task of reporting the 
outstanding downstream sales would be overly burdensome, and, in some 
cases, impossible. In addition, NSC cites to the Department's 
regulations at 19 C.F.R. Sec. 351.403(d), which state that in some 
cases the Department will not require the reporting of all downstream 
sales if the outstanding sales ``account for less than five percent of 
the total value (or quantity) of the exporter's or producer's sales of 
the foreign like product * * *'' As NSC's unreported downstream sales 
meet this Departmental requirement, NSC requests that the Department 
not change its Preliminary Determination regarding this issue. 
Petitioners did not comment on NSC's argument in their rebuttal briefs.
    Department's Position: We agree with NSC that certain downstream 
sales should continue to be disregarded in the final determination. 
Pursuant to Sec. 351.403 of the Department's regulations, the 
Department does not normally require the reporting of downstream sales 
if total sales of the foreign like product by a firm to all affiliated 
customers account for five percent or less of the firm's total sales of 
the foreign like product. In general, the Department does not believe 
it necessary or appropriate to require the reporting of downstream 
sales in all instances. Questions concerning the reporting of 
downstream sales are complicated, and the resolution of such questions 
depends on a number of considerations, including the nature of the 
merchandise sold to and by the affiliate, the volume of sales to the 
affiliate, the levels of trade involved, and whether sales to 
affiliates were made at arm's length. In addition, the Department 
normally will not require the respondent to report the affiliate's 
downstream sales unless the sales to the affiliate fail the arm's 
length test. The Department believes that imposing the burden of 
reporting small numbers of downstream sales often is not warranted, and 
that the accuracy of determinations generally is not compromised by the 
absence of such sales.
    In the instant case, NSC requested that it be excused from 
reporting a small percentage of home market downstream

[[Page 24347]]

sales due to overwhelming burdens in obtaining the information and the 
fact that these downstream sales will not constitute appropriate 
matches for their U.S. sales of subject merchandise. Furthermore, the 
Department examined these sales at verification and confirmed that 
these sales will not constitute appropriate matches for U.S. sales. See 
NSC Home Market Verification Report, dated March 26, 1999. After 
examining the data placed on the record, the Department has determined 
that there are sufficient matches of sales in the home market and that 
the downstream sales in question account for less than three percent of 
each firm's total home market sales of subject merchandise. For 
purposes of this final determination, the Department is disregarding 
this small percentage of downstream sales.
    Comment 13: Request for Written Opinion/ Ex Parte Communications.
    NSC argues that, pursuant to section 782(g) of the Tariff Act (19 
U.S.C. Sec. 1677m(g)), and in accordance with the SAA at 814, the 
Department must inform all parties of the essential facts under 
consideration before making a final determination, and give all parties 
sufficient time to defend their interests. See Bethlehem Steel Corp. v. 
United States, 27 F. Supp. 2d 201, 207-08 (CIT 1998); Michael Y. Chung, 
U.S. Antidumping Laws: A Look at the New Legislation, 20 N.C.J. Int'l 
L. & Com. Reg. 495, 525 (1995). NSC states that the Court of 
International Trade has held that the Department cannot rely on 
information on which the parties have not been given an opportunity to 
comment. See Wieland-Werke AG v. United States, 4 F. Supp. 2d 1207 (CIT 
1998). NSC argues that this requirement is necessary to provide due 
process and a fair judgement. NSC charges that the Department has not 
provided NSC with all information relevant to this investigation, and 
thus appears to be about to make a final determination which does not 
afford NSC the right to defend itself or respond to that information. 
In particular, NSC notes that the Department has not placed on the 
record the factual or legal bases for its decision not to verify NSC's 
theoretical-actual weight conversion factor. NSC states that the 
Department has not responded to its letters on this issue and has not 
placed on the record an ex-parte memorandum with respect to the meeting 
between NSC's representatives and Deputy Assistant Secretary Spetrini 
at which this issue was discussed.
    NSC argues that the Department's failure to explain its basis for 
not verifying the conversion factor violates section 782(g) of the 
Tariff Act (19 U.S.C. Sec. 1677m(g)) and Article 6.9 of the Antidumping 
Agreement (referring to informing parties of the essential facts under 
consideration, so that they may defend their interests), as well as 
Sec. 351.307(c) of the Department's regulations and Article 6.7 of the 
Antidumping Agreement (which relate to reporting on the results of 
verification). NSC argues that the Department has refused to provide 
this information, that this refusal was illegal, and that it has 
prejudiced NSC's ability to defend its interests and affected its due 
process rights. In this respect, NSC relies upon the SAA at 814, and 
Clifford v. United States, 136 F.3d 144, 149 (D.C. Cir. 1998). NSC 
states that the Department's actions raise the specter of government 
officials secretly prejudging this matter, and not allowing NSC to 
respond or defend its interests. See NEC Corp. v. United States, 151 
F.3d 1361, 1374 (Fed. Cir. 1998). NSC concludes that, for these 
reasons, the Department's decision on theoretical weight cannot stand.
    NSC also cites the statutory requirement that the agency document 
ex-parte communications on the official record. See section 777(a)(3) 
of the Tariff Act (19 U.S.C. Sec. 1677f(a)(3)); see also Gilmore Steel 
Corp. v. United States, 585 F. Supp. 670, 679 (CIT 1984). The 
Department is required to include notice of these communications in the 
official record of the case for judicial review. NSC states that, in 
addition, in order to allow interested parties to comment on 
information submitted by other parties during such meetings, see 19 
C.F.R. Sec. 351.301(c)(1), information communicated during ex-parte 
meetings must be placed on the record.
    NSC states that the Department has ``chosen secrecy over 
transparency'' by not placing on the official record memoranda 
memorializing any ex-parte meetings between petitioner or other 
interested parties and members of the Administration concerning issues 
presented during this proceeding, and cites press reports alleging the 
occurrence of several meetings relating to this case. NSC adds that the 
Department also did not respond to NSC's letters requesting that ex-
parte memoranda be placed on the record. NSC argues that the Department 
is thus in violation of section 777(a)(3) of the Tariff Act (19 U.S.C. 
Sec. 1677f(a)(3)) and 19 C.F.R. Sec. 351.104. NSC claims that, coupled 
with the violations of Article 6.9 and 19 U.S.C. Sec. 1677m(g) 
described above, the Department's actions in this respect threaten the 
fairness and integrity of the entire proceeding. Petitioners did not 
comment on NSC's request in their rebuttal briefs.
    Department's Position: We disagree with NSC's assertion that the 
Department has not provided NSC with all information relied upon in the 
investigation, in particular information relating to the Department's 
decision regarding NSC's sales made on a theoretical weight basis. At 
the time that the Department made the decision not to verify the 
theoretical-to-actual weight conversion factor, the Department 
explained to NSC's counsel the basis for the Department's actions. In 
addition, the Department issued a letter dated April 12, 1999, 
explaining the reason for rejecting the submitted conversion factors. 
The factual and legal bases for the Department's decision regarding 
these sales are also discussed in Comment 29, ``Use of Facts Available 
for NSC's Theoretical Weight Sales.''
    The Department, pursuant to section 777f(a)(3) of the Act has 
placed all ex parte communications on the official record of the case 
and they are available to interested parties in room B-099 of the main 
Department of Commerce building. The only ex parte communications 
relating to NSC's sales made on a theoretical weight basis were 
communications with representatives of NSC. Therefore, NSC was not 
prejudiced by any delay in recording those communications for the 
record. In addition, as reflected in the memos summarizing ex parte 
communications, all ex parte communications with petitioners' counsel 
involved no new information and all information discussed was on the 
record.
    The Department disagrees with NSC that it was not informed of the 
essential facts and did not have sufficient time to defend its 
interests. NSC, like other parties in this proceeding, has availed 
itself of the myriad opportunities to participate actively in the 
antidumping investigation by submitting information and argument and by 
commenting on information and argument placed upon the record. NSC has 
done so in meetings with the Department, in written briefs, and during 
the hearing conducted in this proceeding. In particular, NSC devoted 
over 40 pages of its case brief to arguing the actual/theoretical 
weight issue and argued the issue again at the hearing. Thus, NSC, like 
all other parties, has been given ample time to analyze and comment 
upon the essential facts under consideration, and to preserve its 
rights to appeal the decisions of the Department.

[[Page 24348]]

Cost of Production

NSC

    Comment 14: NSC's Costs for Particular CONNUMs.
    Petitioners argue that the Department should use adverse facts 
available for any U.S. sales that are matched to control numbers 
(``CONNUMs'') for which NSC failed to report product-specific cost. 
Petitioners state that the Department requested NSC to provide product-
specific cost for all CONNUMs, including those that, in NSC's view, 
were not likely to be matched to U.S. sales. By refusing to provide the 
information, the petitioners assert, NSC has significantly impeded the 
investigation by failing to cooperate to the best of its ability. 
Petitioners maintain that the statute mandates use of facts available 
in several circumstances, including when a respondent withholds 
requested information or ``fails to provide such information by the 
deadlines for submission of the information.'' Section 776(a)(2)(A) and 
776(b) of the Act authorize the Department to use an adverse inference 
where the respondent has ``not acted to the best of its ability to 
comply with a request for information.'' As further support for their 
position, petitioners cite Certain Welded Carbon Steel Pipes and Tubes 
from Thailand: Final Results of Antidumping Duty Administrative Review, 
62 FR 53808, 53819-20 (October 16, 1997), in which the Department 
determined that an adverse inference was warranted because the company 
being reviewed failed to act to the best of its ability and did not 
comply with the Department's request.
    In addition, petitioners contend that adverse facts available 
should be applied to 19 CONNUMs for which the Department found certain 
problems at verification. For these CONNUMs, costs were reported on a 
product-specific basis and on a CAPS code basis, but were then weight-
averaged across a ``mix of products.'' According to petitioners, the 
evidence shows the respondent did not act to the best of its ability in 
reporting these costs, and an adverse inference should be used in 
applying facts available to ensure that the respondent will not be 
rewarded for its failure to supply the necessary information. Thus, for 
the final determination, whenever a U.S. sale is matched to a home 
market CONNUM for which product-specific costs were not reported, the 
Department should apply the highest calculated margin as facts 
available.
    NSC argues that petitioners' suggestion that the Department should 
use adverse facts available for the products for which costs were 
reported on a broad product group average (i.e., CAPS code specific 
basis) is unwarranted. NSC contends that it has cooperated as far as 
possible given the accelerated timeframe and fully explained its 
inability to report all costs on a product-specific basis. Moreover, 
NSC asserts that under section 782(e) of the Tariff Act (19 U.S.C. 
Sec. 1677m(e)), the Department is required to consider respondents' 
information, even if it is not submitted by the deadlines or in the 
form requested. NSC claims, however, that the information submitted was 
timely, complete and verified, and thus the Department has no basis for 
the use of facts available or adverse facts available.
    Further, NSC asserts that if facts available is warranted, an 
adverse inference should not be applied because the information on the 
record does not establish that NSC failed to act to the best of its 
ability throughout the investigation. In support of its position NSC 
cities 62 FR 27340, where the Department explained that it will 
consider whether ``practical difficulties'' contributed to a 
respondent's inability to supply requested information. Accordingly, 
the Department has no grounds to apply facts available with adverse 
inferences.
    In addition, NSC argues that if the Department decides an adverse 
inference is proper, applying the highest calculated margin is aberrant 
and not consistent with the law or the Department's past practice. 
According to NSC, the Department's well-established policy limits it to 
the highest non-aberrant margin. See Notice of Final Determination of 
Sales at Less Than Fair Value: Stainless Steel Wire Rod From Italy, 63 
FR 40422, 40428 (1998). Further, NSC contends that a margin is not 
always the most appropriate means of substituting missing information. 
Thus, NSC asserts, should the Department choose to apply an adverse 
inference in selecting facts available, it should consider using 
information on the record related to the missing data, as opposed to 
using a punitively high margin.
    Department's Position: We agree with petitioners that adverse facts 
available should be applied to any U.S. sales which are matched to 
CONNUMs for which the product-specific costs have not been provided. As 
noted in the comments from the petitioners, 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 section 782 (d) and (e), facts otherwise available in reaching the 
applicable determination. In this investigation, on more than one 
occasion, the Department requested that NSC provide product-specific 
cost data for all U.S. and home market sales of subject merchandise. 
However, NSC failed to provide this information for certain CONNUMs. As 
noted in the cost verification report, the Department found nineteen 
CONNUMs where the mix of products within the CONNUM included both 
product-specific costs and costs reported on a broader product group 
cost, which means that the reported costs for these CONNUMs are not 
product-specific. Since NSC failed to provide the necessary information 
in the form and manner requested, and in some instances the submitted 
information was found to be inaccurate, we conclude that pursuant to 
section 776(a) of the Act, use of facts otherwise available is 
appropriate.
    Moreover, section 776(b) of the Act, provides that an adverse 
inference may be used when an interested party has failed to cooperate 
by not acting to the best of its ability to comply with requests for 
information. As discussed above, even though we asked twice, NSC failed 
to comply with our requests for product-specific information. The 
information necessary to compute CONNUM specific costs for the products 
in question was available in NSC's books and records (as evidenced by 
the existence of similar data used to report product-specific costs for 
the products sold to the United States). NSC, however, simply elected 
not to report CONNUM-specific costs for these products because they 
believed these products would not be used as matches in the antidumping 
margin. Thus, for the final determination, we applied the highest 
calculated margin to any U.S. sales which is matched to home market 
CONNUMs for which the product-specific cost data was not reported.
    Comment 15: NSC's Corrections to U.S. CONNUM Database Presented at 
Verification.
    At verification, NSC submitted, as a minor correction, data showing 
that certain CONNUMs had been reported incorrectly due to an improper 
conversion from millimeters to inches. This resulted in the creation of 
a small number of new U.S. CONNUMs. According to petitioners, the 
Department should use adverse facts available for these CONNUMs in

[[Page 24349]]

calculating the margin for the final determination, because NSC failed 
to supply cost information for the new CONNUMs.
    NSC rebuts petitioners argument and states that the costs for the 
new CONNUMs are reported in Verification exhibit B.1 and 15, and also 
included in the revised cost file NSC submitted at the Department's 
request on April 14, 1999. NSC asserts that it did not fail to report 
product costs for the minor corrections submitted at verification. NSC 
contends that full costs for all U.S. CONNUMs, including all of the new 
CONNUMs related to the minor corrections were included in the cost 
verification exhibits and in a cost file subsequently requested by the 
Department.
    Department's Position: We disagree with petitioners. At 
verification, NSC provided a worksheet which showed the product-
specific cost for the new CONNUMs created due to the minor correction. 
In addition, on April 14, 1999, the Department requested and received a 
revised COP and CV tape which reflects the minor corrections presented 
at verification.
    Comment 16: NSC's Electricity Purchases.
    The petitioners argue that the Department should not use transfer 
prices to value transactions between NSC and its affiliated suppliers 
of electricity. Instead, petitioners assert that, in dealing with 
transactions between affiliated suppliers under section 773(f)(2) and 
(3) of the Act, it is the Department's practice to value major inputs, 
like electricity, at the higher of the transfer price, market price or 
actual cost of production. Further, petitioners contend that there is 
nothing on the record to warrant changing the Department's an 
established practice. According to petitioners, NSC's claim that the 
price differential between the affiliated and unaffiliated suppliers is 
due to the different levels of distribution is baseless. Petitioners 
assert that the record shows there is no ``wholesale market'' for 
electricity in Japan.
    In addition, petitioners dispute NSC's claims that the financial 
performances of the affiliated and unaffiliated suppliers are relevant 
as to whether the market price exceeds transfer price. Further, 
petitioners contend that financial analyses are not a function of 
prices charged to an affiliated company. Therefore, NSC is overlooking 
the purpose of the arm's length test-- to guarantee a price that 
reflects the market value. Thus, for the final determination, the 
petitioners contend that the Department should adjust the transfer 
price to reflect the higher market price.
    NSC contends that the Department should not adjust the price it 
paid to its affiliated electric power cooperatives (``co-ops''). 
According to NSC, a simple comparison between the rates paid to their 
affiliated suppliers and those paid to their unaffiliated suppliers 
(i.e., regional electric companies) is meaningless. NSC argues that the 
electricity supplied by the affiliated and unaffiliated suppliers 
involves different segments of the electricity market. Specifically, 
the co-ops are wholesalers, whereas the regional companies are 
retailers. In addition, respondent asserts that it demonstrated at 
verification, through financial analysis, that the co-ops are not 
selling electricity at unreasonably low rates for wholesalers of 
electric power as compared to the unaffiliated regional electric 
companies. NSC further points out that if co-ops were to adjust their 
prices to equal the retail market price, the result would be an 
unrealistically high rate of return on assets. Thus, NSC claims it 
would be inappropriate for the Department to make any adjustment to its 
reported electricity costs.
    Department's Position: While we disagree with petitioners that 
NSC's electricity purchases from its affiliated suppliers represent a 
major input in this case, we agree that the reported cost of 
electricity purchased from its affiliates should be adjusted to a 
market price (i.e., arm's length price) in accordance with section 
773(f)(2) of the Act.
    We disagree with NSC's argument that section 773(f)(2) of the Act 
requires the Department to take into account whether NSC's affiliated 
and unaffiliated suppliers of electricity are at different levels of 
distribution, and if they are, to refuse to compare the prices charged 
by each the two groups of suppliers. Even if these suppliers do operate 
at different levels of distribution, the customer (i.e., NSC) in all 
instances, is at the same level. Section 773(f)(2) of the Act focuses 
on whether the arms-length comparison reflects comparable merchandise 
and whether the transaction occurred in the market under consideration. 
It does not focus on the nature or circumstances of the supplier. In 
this instance, both NSC's affiliated and unaffiliated electricity 
suppliers provided the identical input to NSC. Purchases of electricity 
from its affiliated and unaffiliated suppliers occurred in Japan, the 
market under consideration.
    We also disagree with NSC that a comparative return on asset 
analysis is indicative of whether transactions between affiliates 
occurred at market prices. The structure and efficiency of an entity is 
unique to that entity's operations. We agree that those characteristics 
do impact the profitability of an entity; however, we disagree that it 
is indicative of whether the selling practices in a particular market 
are necessarily at arm's-length prices. Accordingly, for the final 
determination, we adjusted NSC's electricity purchases from affiliates 
to reflect the prices charged by its unaffiliated suppliers.
    Comment 17: NSC's Exchange Gains and Losses.
    The petitioners argue that NSC failed to provide requested 
information as to the types of transactions that gave rise to reported 
foreign exchange gains and losses. The petitioners claim that NSC is 
able to segregate its foreign exchange gains and losses and contend 
that NSC's chart of accounts provides evidence that the means to do so 
were readily available. The petitioners note that this information was 
necessary because the Department treats exchange gains and losses 
differently depending on their source.
    The petitioners state that, since NSC failed to comply with the 
Department's request to the best of its ability, the Department should 
draw an adverse inference and conclude that the entire amount of the 
transaction exchange gain is related to accounts receivable and thus 
should be disallowed. In addition, the petitioners argue that the 
Department should draw the adverse inference that the entire amount of 
exchange losses is related to accounts payable and should therefore be 
included in the cost of manufacturing.
    NSC contends that in reporting foreign exchange gains and losses, 
it acted to the best of its ability and petitioners claim that an 
adverse inference should be applied is without merit. Although NSC 
notes that its chart of accounts divides exchange gains and losses into 
certain categories, in practice those accounts are not used. NSC 
asserts that it does not maintain transaction-specific data on foreign 
exchange gains and losses. Accordingly, NSC argues that reclassifying 
the information to meet the Department's request would be overwhelming. 
Thus, NSC asserts that it acted to the best of its ability and there is 
nothing on the record to suggest that it could have reported the 
requested information. Further, NSC argues that the Department should 
continue to exclude the portion of the exchange losses unrelated to the 
cost of production of hot-rolled steel.
    Department's Position: While we disagree with the petitioners that 
we found evidence indicating that NSC had the means to segregate its 
foreign exchange gains and losses, we agree that

[[Page 24350]]

the foreign exchange gains should be excluded and certain foreign 
exchange losses included in the calculation of the G&A expense ratio. 
It is the Department's normal practice to distinguish between foreign 
exchange gains and losses from sales transactions and exchange gains 
and losses from other types of transactions. See, e.g., Final 
Determination of Sales at Less Than Fair Value: Steel Wire Rod From 
Trinidad & Tobago, 63 FR 9177, 9181 (February 24, 1998). The Department 
normally does not include exchange gains and losses generated from 
accounts receivable. Since NSC failed to provide any documentation 
showing that the foreign exchange gains should be included as an offset 
to the G&A expenses, we do not consider it appropriate to allow the 
gains as an offset to reported costs. In addition, with the exception 
of the exchange losses associated with or incurred by to divisions 
unrelated to steelmaking, NSC failed to provide any substantiation that 
the foreign exchange losses should be excluded. We therefore adjusted 
NSC's G&A expense ratio to exclude the foreign exchange gains and 
include certain foreign exchange losses.
    Comment 18: NSC's G&A Expenses.
    The petitioners argue that the Department should recalculate NSC's 
G&A expense ratio to include all appropriate expenses, including 
certain expenses the nature of which constitutes business proprietary 
information. The petitioners contend that the expenses at issue, which 
are discussed in more detail in the proprietary version of their case 
brief, relate to the company as a whole, and that NSC should not be 
permitted to exclude the portions of those expenses that relate to non-
steel divisions.
    In addition, the petitioners argue that there is no reason to 
believe that the poor performance of the Japanese economy affected any 
NSC division differently than any other division and that NSC failed to 
support this claim. The petitioners therefore believe that economic 
conditions are irrelevant to the issue at hand and provide no basis for 
excluding certain expenses from the G&A calculation.
    NSC argues that its calculation of general and administrative 
expenses properly allocates company-wide costs to the production of 
hot-rolled steel. Specifically, NSC states that non-operating and 
special profits and losses are properly allocated to the production of 
hot-rolled steel using steel division cost of sales in the denominator, 
and that all exclusions from the calculation relate to gains and losses 
of non-steel divisions. NSC asserts that its non-operating and special 
profits and losses differ from general and administrative expenses as 
they arise from specific events and are not related to the operations 
of the company as a whole. NSC contends that the Department has 
excluded such special gains and losses from the cost calculation in the 
past and cites Stainless Steel Wire Rod from Italy, 63 FR at 40430 in 
support of its argument.
    NSC argues that certain expenses at issue that were excluded from 
the G&A calculation are accurately classified as special losses and 
that the exclusion of these expenses should be retained. NSC contends 
that these expenses are related to ongoing restructuring and are 
determined by economic conditions at each separate division of the 
company. Accordingly, NSC argues that such expenses are not related to 
the company as a whole, but instead are specifically tied to each 
division, and there is no reason to allocate a portion of the 
proprietary expense associated with or pertaining to a separate 
division to the G&A expenses of the steel division. Further, NSC 
asserts that it demonstrated at verification that its allocation 
methodology actually excluded fewer costs than were incurred by non-
steel divisions.
    Department's Position: We agree with petitioners that the total 
amount of the proprietary expenses should be included in the G&A 
expense calculation. We find no reason to conclude that NSC's normal 
accounting treatment of not including this proprietary item as a cost 
of manufacturing, in accordance with its home country Generally 
Accepted Accounting Principles (``GAAP''), is unreasonable or 
distortive. In fact, there is virtually no difference in the amount of 
these proprietary expenses allocated to subject merchandise whether 
they are treated as G&A or as a cost of manufacturing. We consider 
these expenses to relate to the general operations of the company as a 
whole and as such consider it appropriate to allocate them on a 
company-wide basis as a percentage of unconsolidated cost sales.
    Comment 19: NSC's Blast Furnace Costs.
    The petitioners argue that, for the final determination, the 
Department should eliminate an offset for a reversal of a reserve for 
the repair of blast furnaces. According to petitioners, the 
Department's practice is to disallow the reversal of a charge taken in 
a prior year because it would distort the current year's costs. 
Petitioners note that, for instance, in Certain Cut-to-Length Carbon 
Steel Plate from Germany: Final Results of Antidumping Duty 
Administrative Review, 61 FR 13834, 13837 (March 26, 1996), the 
Department disallowed a reduction in current year production costs by 
the reversal of prior year operating expense accruals and write downs 
of equipment and inventory. Petitioners further claim that, although a 
reversal of a prior period charge is in accordance with Generally 
Accepted Accounting Principles (``GAAP''), the adjustment is considered 
improper for the antidumping analysis because it bears no relation to 
the cost of production during the current year.
    Department's Position: We agree with the petitioners that an offset 
to G&A expenses for a reversal of a reserve for repairs of the blast 
furnace should be disallowed. It has been the Department's practice to 
disallow reductions to current year production costs by the reversal of 
prior year operating expense accruals. The subsequent year's reversal 
of these estimated costs does not represent revenue or reduced 
operating costs in the year of the reversal. Rather, they represent a 
correction of an estimate which was made in a prior year. While 
reversals of accruals are in accordance with GAAP, the Department 
relies on GAAP provided that it does not result in distorted per unit 
costs. In this investigation, we find it inappropriate to reduce the 
actual production costs incurred in the current year by excess reserves 
recognized in prior years.
    Comment 20: NSC's Reconciliation Adjustment.
    NSC argues that the Department incorrectly excluded NSC's 
reconciliation adjustment from its reported COP and CV data in the 
preliminary determination. NSC argues that its reconciliation 
adjustment corrects for differences between total reported costs and 
total actual costs incurred, and that failure to include the adjustment 
would result in a reported cost of manufacture that does not reconcile 
with NSC's accounting records. NSC thus concludes that the Department 
should include the reported reconciliation adjustment in its final 
determination.
    Petitioners argue that the Department properly excluded the 
reconciliation adjustment in its Preliminary Determination because the 
quantities used to derive the adjustment were not on the same basis. 
Petitioner contends that while the overall differences may be very 
small for product groups, the particular quantity differences for 
specific products within groups are significant. The petitioners 
therefore refute NSC's claim that the difference is insignificant and 
contend that inclusion

[[Page 24351]]

of the reconciliation adjustment would distort product costs at the 
individual CONNUM level. In addition, the petitioner states that the 
reconciliation pertains only to quantity differences and is not related 
to per unit cost. The petitioner thus concludes that since the 
reconciliation adjustment does not represent an element of cost, no 
corresponding adjustment to the cost of manufacturing should be made.
    Department's Position: We agree with the respondent that the 
reconciliation adjustment should be included in the COP and CV data 
files for the final determination. At verification, we determined that 
the reconciliation adjustment is based on differences between costs in 
NSC's normal books and records and product-specific cost reported to 
the Department. NSC maintains costs in the normal course of business at 
a more aggregate level than required by the Department; therefore, NSC 
used a reporting methodology which differed in some respects from its 
normal cost accounting system. As a result of deriving the reported 
costs, there were small differences between the reported product-
specific cost and NSC's cost of manufacturing subject merchandise. 
Since the reconciliation adjustment reconciles the reported cost to the 
cost of manufacturing as recorded in its financial accounting system, 
for the final determination we have included the adjustment.

NKK

    Comment 21: NKK's Overall Cost Methodology.
    Petitioners argue that NKK's reporting methodology should be 
rejected because it is fundamentally flawed and results in costs that 
are significantly understated. Petitioners assert that NKK's 
methodology distorts costs because it relies on a base group that is 
not reflective of the actual production levels of subject merchandise 
at the individual manufacturing facilities and, therefore, does not 
properly reflect plant efficiencies; it relies on a single variance for 
all product groups, rather than more detailed variances; and, it relies 
on the cost extras from only one facility. (See Comments below for a 
detailed discussion of each of these three allegations.) Petitioners 
argue that the effect of these flaws is not quantifiable and the 
necessary information to correct these deficiencies is not on the 
record.
    Moreover, petitioners argue that NKK withheld information requested 
by the Department that would have enabled the Department to correct 
these deficiencies and, therefore, has not acted to the best of its 
ability. First, petitioners assert that NKK did not provide variances 
by budget group when requested to do so by the Department. Second, 
petitioners argue that NKK did not provide cost extras for the second 
facility, even though there are significant differences in cost between 
plants. Third, petitioners argue that the selected base product is not, 
as claimed by NKK, representative of the overall production of the 
subject merchandise.
    Therefore, petitioners assert that the Department must resort to 
total adverse facts available. If, however, the Department does not 
resort to total adverse facts available, then it argues that the 
Department should draw an adverse inference in selecting an alternative 
remedy to address the significant distortions.
    NKK asserts that the Department verified that in the aggregate it 
reported all its costs and the issue is not whether NKK provided 
weighted average costs but the reasonableness of NKK's particular 
weighting methodology. NKK argues that petitioners' concerns regarding 
the reported variance are unwarranted because NKK developed the most 
specific variance it could for the hot-rolled steel operations. NKK 
argues that its use of Fukuyama's cost extras was reasonable because it 
developed the most reasonable product specific costs it could and had 
no choice but to work with the information which it maintains in the 
normal course of business. NKK also argues that the Department tested 
the reasonableness of NKK's reported values for cost extras during 
verification and noted no problems. NKK contends that there is no basis 
for using adverse facts available as petitioners request because it has 
been fully cooperative in all phases of this investigation. NKK 
contends that an alternative methodology can be based on verified 
information on the record and should not be based on adverse facts 
available.
    Department Position: We disagree with petitioners that we should 
reject NKK's reported costs and use, instead, adverse facts available. 
While we agree that NKK's methodology improperly weights costs, because 
the selected base product does not adequately represent the range of 
subject merchandise produced at each plant, we find that this problem 
is correctable. (See Comment below.) We disagree with petitioners that 
NKK's reported variance or its cost extra methodology distort the 
reported costs. (See Comments below.) We note that the variance used by 
NKK was for the specific base product group and took into account the 
specific cost centers those products passed through during production. 
We also note that the absence on the record of cost extras specific to 
the second facility does not impugn NKK's methodology, since NKK 
adjusted the cost extras associated with the other facility by the 
difference between the weighted average base product groups of both 
facilities and the pinpoint product.
    Moreover, we do not agree with petitioners that NKK did not act to 
the best of their ability in reporting costs. First, record evidence 
allows the Department to reasonably adjust for the improper weighting 
of costs (i.e., to account for the cost differences between plants). 
Second, as noted above, NKK did not use one plant-wide variance, but 
calculated a variance for the specific base product group and took into 
account the specific cost centers those products passed through during 
production. Third, although NKK did not provide the requested 
information concerning each individual base group's variance, the 
Department was able to verify NKK's assertion as to the level of 
difficulty in preparing such variances. We also note that the selected 
base product group accounted for a significant portion of the U.S. and 
home market products, and that the information is not necessary in 
order to correct the flaws identified in NKK's response. Finally, the 
Department did not request that NKK provide cost extras for the second 
facility, nor did it determine that the presence of such data would 
have significantly altered the results, since the first facility's cost 
extras were adjusted by the difference in the pinpoint product and the 
weighted average base costs of both facilities. Therefore, we have 
relied on NKK's reported costs except for certain adjustments to 
account for the improper weight averaging of the cost of the two 
manufacturing facilities to account for plant efficiency.
    Comment 22: NKK's Weighted-Average Costs.
    Petitioners argue that NKK's response methodology for weighting the 
cost of the two manufacturing facilities which produced the subject 
merchandise significantly understates the cost of manufacturing 
(``COM''). Petitioners maintain that the Department's questionnaire 
states that the respondent must report COP and CV based on the weighted 
average cost incurred at all facilities and that NKK's methodology does 
not properly account for the actual production levels at the two 
facilities.
    Petitioners also note that the Department's questionnaire 
specifically stated that, if NKK did not believe it could respond to 
the Department's request in the form requested, it was to notify the 
Department in writing before

[[Page 24352]]

it submitted the response. Accordingly, petitioners contend that at no 
time did NKK submit a letter asking permission to use a single selected 
product as the starting point instead of providing all of its product 
groups. Moreover, petitioners argue that NKK has acknowledged that it 
could have reported a certain number of additional product groups and 
account for the majority of U.S. sales during the POI but did not do 
so. Petitioners argue that NKK's failure to report accurate costs for 
these additional product groups means that the cost of corresponding 
home market sales that are matched to U.S. sales are inaccurate.
    According to petitioners, the production of the ``pinpoint'' 
product (used by NKK to differentiate the cost of the base product 
group's cost to product specific cost) is not representative of the 
production of all of the base product groups at each production 
facility.
    In support of their position, petitioners note that in Carbon Steel 
Flat Products from Korea, 64 FR at 12945, the Department rejected 
respondent's cost submission upon finding that the reported costs were 
understated. Petitioners argue that the Department concluded that the 
respondent could have reported information on a CONNUM-specific basis, 
but failed to do so. The Department rejected the submitted cost in that 
case and applied adverse facts available. Petitioners assert that NKK 
had the ability to report costs in a manner that reflected the actual 
product mix of the two works but that it disregarded the Department's 
instructions and used a distortive weighting methodology. Thus, 
petitioners contend that NKK's response should be rejected.
    Petitioners contend that NKK's proposed adjustment does not result 
in reported costs that reflect the actual cost of certain product 
groups other than NKK's selected product group. Instead, petitioners 
argue that NKK's adjustment simply applies the base cost of the 
selected product group to the production quantities of the other 
product groups. Thus, petitioners contend that applying the correct 
production mix to the wrong cost does not remedy flaws in NKK's 
reporting.
    NKK argues that its allocation methodology is reasonable. NKK 
asserts that its initial response showed that the relative weighting of 
costs between the Fukuyama and Keihin works was based on a subset of 
the total production quantity. In addition NKK argues that it clarified 
the reasons for choosing the particular product as the starting point 
for development of the actual costs in a supplemental response. NKK 
argues that the particular product chosen as the starting point 
corresponds most closely with the ``pinpoint'' product used in 
calculating the cost extras and that it represents the overwhelming 
majority of the U.S. sales. Further, NKK asserts that it was not 
practical to develop a different weighting for each of the subject 
merchandise product groups. NKK claims that due to time constraints it 
would have been impossible to extract each of the variances that 
related to the production flow of each of the different product groups 
and, therefore, once it had gone through the exercise for the selected 
group it was necessary and accurate enough to use this group for the 
weighting.
    According to NKK, the correction to the weighting between the 
Fukuyama and Keihin works the Department contemplates in the cost 
verification report would be less accurate and less reasonable than 
NKK's methodology. NKK asserts that its methodology does not understate 
costs, and that this is clear because the total cost reconciled within 
a small difference. Thus, NKK argues that increasing the reported costs 
would constitute a serious distortion.
    NKK contends that while its methodology is less precise for a 
portion of the subject merchandise, its method is more appropriate for 
the particular product group which represents the majority of the home 
market data that match to U.S. sales. Further, NKK claims that the 
remaining portion of the database is small and its methodology actually 
overstates the cost for some product categories. In addition, NKK 
argues that there were certain product groups which were only produced 
at Fukuyama and that the methodology NKK used actually overstates cost 
for these product groups. Thus, NKK states that using the overall 
aggregate weighting methodology mentioned in the Department's Cost 
Verification Report would result in an even greater distortion of 
costs.
    NKK argues that, if the Department rejects NKK's methodology, the 
Department should adjust the weighting factors of the four key product 
groups. Using information on the record to allocate the production of 
these groups, NKK argues, the Department should increase the cost for 
two of the product groups and reduce the cost for the other two product 
groups. According to NKK, a single adjustment is too crude and 
adjustments for all product groups would be unduly burdensome and 
impractical.
    NKK argues that petitioners mischaracterize the Department's 
decision in Carbon Steel Flat Products from Korea. NKK points out that 
the Department in fact rejected petitioners' call for total adverse 
facts available in that case and simply adjusted the reported costs 
with respect to the methodological issue as to weighting. NKK contends 
that the situation in this case is identical. In this case, NKK argues, 
the Department can accept its approach as reasonable, adjust the costs 
for product groups other than the selected product group on a product 
by product basis, or adjust the reported costs for the overall relative 
weighting.
    Department's Position: While we agree with petitioners that NKK's 
submission methodology inappropriately weighted production at each of 
its two facilities, by using a single product group's production mix to 
weight all product groups, we disagree that the entire response should 
be rejected. While we do not have on the record CONNUM-specific 
production quantities for each facility, we do have information to 
allow the Department to re-weight NKK's production costs on a product-
group specific basis to more properly reflect the actual production 
quantities at the facilities. A product group weighted average, between 
the two plants, is a reasonable approximation of our preferred method, 
as opposed to using a mix for a single product group for all subject 
merchandise.
    NKK's reporting methodology first computed an average base cost for 
what it identified as a representative product for use as the starting 
point for the reported costs. The average base cost was computed using 
its budgeted cost system which is maintained in the normal course of 
business. NKK increased or decreased the average base cost depending on 
the relationship of each specific product to the base product using its 
standard management costing system. The selected product groups 
budgeted costs for the three periods covering the POI for each plant 
(six in total) were used to compute the POI weighted average cost of 
manufacturing for the base product. The six different budgeted costs 
were weight averaged based on actual production quantities of the 
selected product group at each plant during each budgeted cost 
calculation period during the POI. As a result, all CONNUMs for 
submission purposes reflect the production mix between the two plants 
for this selected product rather than the production mix of each of the 
subject merchandise product groups. We disagree with NKK that this 
methodology is the most reasonable given the information on the record 
because we found significant

[[Page 24353]]

differences in the product mix between the plants.
    We disagree with petitioners that NKK's proposed adjustment applies 
a corrected production mix to the wrong cost. The weighting issue 
between the two plants does not impair the base cost plus extra 
methodology used to report product-specific costs. The relative cost 
differences between the pinpoint product and each of the other products 
NKK reported are not impacted by this issue.
    Also, the Carbon Steel Flat Products from Korea case cited by 
petitioners does not support the use of adverse facts available in this 
case. In that case, the Department found that the respondent did not 
act to the best of its ability because the respondent repeatedly did 
not supply the requested information and during verification we found 
that the information existed.
    Comment 23: NKK's Reported Cost Variances.
    Petitioners contend that NKK's use of a single variance for all 
product groups is distortive and must be rejected. Petitioners assert 
that consistent with the Department's long standing practice of 
requiring variances at the most specific level, the Department directed 
NKK to report variances for each product group. Petitioners argue that 
the overall steel division variance is not a reliable substitute for 
the product group-specific variances requested by the Department, 
noting the difference in variances for each of the manufacturing 
facilities. Petitioners estimated the variances for a product group 
other than the NKK-selected product group and assert that neither the 
overall steel division variance nor the selected product group variance 
can substitute for the individual product group variances.
    Petitioners argue that in Antifriction Bearing (Other than Tapered 
Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Romania, Singapore, Sweden and the United Kingdom: Final Results of 
Antidumping Duty Administrative Reviews, (``Antifriction Bearings'') 60 
FR 10900, 10928 (1995), the Department rejected respondent's use of 
plant-wide variances instead of more specific variances because it 
resulted in unreasonable cost shifting between products. Petitioners 
contend that, in this case, NKK's proposal to use the variance for the 
entire steel division, which incorporates more than one plant, is 
distortive. Petitioners contend that NKK's use of either the selected 
product group or the steel division variance leads to unreasonable cost 
shifting. Petitioners allege that NKK had the ability to report product 
group-specific variances but refused to do so.
    NKK argues that the Department reviewed the variance calculation in 
detail at verification and noted no particular problems in the cost 
verification report with respect to the variance calculation or 
methodology. NKK contends that the Department reconciled the reported 
costs to the overall cost in the accounting records and that if there 
were any serious distortions one would have expected to find 
discrepancies in the reconciliation exercise.
    NKK asserts that it could not have reported product-group-specific 
variances as petitioners contend. NKK claims that the variances it 
tracks in the ordinary course of business have no detail that would 
allow it to calculate separate variances, for example, for high carbon 
hot-rolled steel and for regular carbon hot-rolled steel. NKK contends 
that there is no need to do so and that it does not do so in the 
ordinary course of trade.
    NKK asserts that it developed the most specific variance that it 
could for the hot rolled steel operations. NKK contends that it 
extracted those variances associated with the production stages leading 
up to finished hot-rolled steel. NKK claims that its comparison of this 
variance to the overall steel division variance simply shows that the 
disparity in variances among different steel products is relatively 
small and that this should be no surprise since the largest portion of 
the variance for both hot-rolled and downstream products usually occurs 
at the upstream production stages. NKK asserts that petitioners' 
argument about variances for different subject product groups ignores 
the facts on the record. NKK notes that petitioners' argument concludes 
that there are substantial differences between NKK's selected product 
group and the petitioners' example product group, when in fact the only 
difference is pickling. NKK claims that it is not plausible that the 
variances at the pickling stage alone could double the size of the 
overall variance.
    Department's Position: We disagree with petitioners that NKK's 
application of variances is distortive and have continued to rely on 
NKK's submitted variances for the final determination. The Department's 
practice calls for respondents to report the most specific level of 
variances kept in their normal books and records. NKK, however, does 
not normally accumulate and allocate variances at the product group 
level. For the response, NKK determined variances by cost center for 
the production stages (e.g., hot strip mill) at each of the 
manufacturing facilities through which the vast majority of the subject 
merchandise passes. NKK allocated the other variances it normally 
records across all products. In this case, NKK's variance methodology 
appears to reasonably reflect the variances applicable to the subject 
merchandise. Unlike the variances in Antifriction Bearings, NKK's 
reported variances are on a more specific level than the division-wide 
basis questioned in Antifriction Bearings. In addition, in Antifriction 
Bearings, the Department noted that the company did in fact maintain 
variances at a more detailed level than division-wide. Accordingly, we 
do not consider it appropriate to adjust NKK's reported variance 
amounts.
    Comment 24: NKK's Reported Cost Extras.
    Petitioners argue that NKK's use of Fukuyama's cost extras to 
develop the reported costs was not reasonable because they do not 
represent costs at the other facility.
    NKK argues that it developed the most reasonable product specific 
costs that it could and had no choice but to work with information in 
its normal accounting system and those materials which it has in the 
ordinary course of business. NKK contends that the Department spent a 
great deal of time at the verification exploring the cost extras and 
testing the reasonableness of the only cost extras that NKK has in the 
ordinary course of business.
    For a full discussion of this issue see the Department's April 28, 
1999 Memorandum to Neal Halper, Acting Director, Office of Accounting, 
Cost of production (``COP'') and constructed value (``CV'') Calculation 
Memorandum for Final Determination, (``Final NKK Cost Calculation 
Memorandum'').
    Department's Position: We agree with NKK that the use of Fukuyama 
cost extras by NKK is appropriate. NKK used the information it kept in 
the ordinary course of business to calculate product specific costs 
required by the Department. We did not request that NKK provide cost 
extras for the second facility, nor did we determine that the presence 
of such data would have significantly altered the results, since the 
first facility's cost extras accounted for the relative difference in 
costs due to technical specification differences between the pinpoint 
product and all other products. This relative difference was applied to 
a base cost that already incorporated cost differences between the two 
facilities. We also note that the cost extras were adjusted to reflect 
the costs at both facilities. For a full

[[Page 24354]]

discussion of this issue, see the Department's April 28, 1999 Final NKK 
Cost Calculation Memorandum. We have not made any adjustments to NKK's 
cost extras.
    Comment 25: NKK's G&A Expenses.
    NKK argues that the Department should not calculate G&A expenses on 
a company-wide basis, but should use NKK's steel division G&A. NKK 
argues that the Department's questionnaire does not require a company-
wide G&A rate. NKK asserts that it normally assigns G&A expense to the 
relevant division that incurred the expense. NKK contends that expenses 
incurred in other divisions, which have nothing to do with the steel 
production, should not be attributed to the steel division and that 
head office expenses which relate to the overall operations are 
normally allocated to each division. NKK argues that the questionnaire 
allows for some flexibility in responses, depending on how a company 
incurs and records G&A expenses, and does not mandate a fixed approach 
to G&A expense reporting.
    NKK contends that using its division-specific G&A expense kept in 
the normal course of business is consistent with the Department's prior 
practice. Citing the Final Determination of Sales at Less Than Fair 
Value: Furfuryl Alcohol From South Africa (``Furfuryl Alcohol From 
South Africa''), 60 FR 22550, 22556 (May 8, 1995), NKK alleges that the 
Department focused on respondent's approach in the normal course of 
business. In that case, NKK asserts, the Department noted that the 
respondent was able to demonstrate that some G&A expenses were directly 
related to non-subject merchandise and that the Department excluded 
these unrelated G&A expenses from the G&A ratio. NKK contends that its 
G&A methodology is based on the same premise that only relevant 
expenses should be included in the G&A.
    NKK also cites the Notice of Final Determination of Sales at Less 
Than Fair Value: Fresh Atlantic Salmon from Chile, 63 FR 31411, 31433 
(June 9, 1998) (``Fresh Atlantic Salmon from Chile''), to support the 
argument that the Department followed the respondent's normal business 
practices. In that case, the respondent argued that the Department 
should use the reported G&A expense, which included expenses associated 
with an affiliated company. NKK notes that the Department rejected this 
approach and used only those expenses related to the responding salmon 
company, as recorded in the respondent's normal books and records. NKK 
argues that its approach is consistent with this decision, and states 
that the fact that business units are organized as divisions rather 
than ``legally separate'' affiliated companies should not matter. NKK 
contends that it makes no sense to ignore existing distinctions in G&A 
expenses between steel production and other business activities and 
that the narrowest category recorded in the respondent's accounting 
records should be used.
    Petitioners argue that it is the Department's long-standing 
practice to calculate G&A expenses using a company's audited, 
unconsolidated financial statements. As support for their position, 
petitioners cited the Notice of Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Round Wire from Canada (``Stainless 
Steel Round Wire from Canada''), 64 FR 17324, 17333 (April 9, 1999) and 
several other cases in which the Department followed this long-standing 
practice.
    Petitioners contend that the Fresh Atlantic Salmon from Chile case 
cited by NKK is not consistent with NKK's argument that G&A expenses of 
other divisions should be excluded from respondents' G&A. Petitioners 
argue that the Department's determination in that case was to exclude 
expenses incurred by an affiliate and use the respondent's audited, 
unconsolidated financial statements.
    Department's Position: We disagree with NKK that G&A expenses 
should be based on NKK's Steel Division G&A rather than on company-wide 
G&A. G&A expenses by their nature are indirect expenses incurred by the 
company as a whole. If they directly related to one process or product, 
they would more appropriately be considered manufacturing costs. NKK 
provided no specific reasons as to why its normal method of allocation 
of G&A to different divisions is more reasonable than the Department's 
normal method. It is the Department's consistent practice to calculate 
G&A expenses based on the producing company as a whole and not on a 
divisional or product-specific basis. See Stainless Steel Round Wire 
from Canada; Notice of Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449, 40459 (July 
29, 1998) and Fresh Atlantic Salmon from Chile, 63 FR at 31433. This 
approach recognizes the general nature of these expenses and the fact 
that they relate to the company as a whole and is consistent with GAAP 
treatment of such period costs. The Department's methodology also 
avoids any distortions that may result if, for business reasons, 
greater amounts of company-wide general expenses are allocated 
disproportionally between divisions. We consistently apply this 
methodology, unless the respondent provides case-specific facts that 
clearly support a departure from our normal practice of allocating 
company-wide G&A expenses over company-wide cost of sales. This 
approach is both reasonable and predictable. To allow a respondent to 
choose between the Department's normal method and an alternative method 
simply because one method results in a lower rate, would be a results 
oriented approach.
    The Department's calculation of G&A expenses in the Furfuryl 
Alcohol from South Africa case was specific to the facts of that case. 
As noted above, we believe that the facts of this case warrant 
continuing to follow the Department's long-standing practice of 
calculating G&A expenses on a company-wide basis.
    In the Fresh Atlantic Salmon from Chile case cited by NKK, we 
followed our normal practice of calculating the G&A expense rate based 
on the respondent's unconsolidated operations. The determination in 
that case was to exclude an affiliated company's G&A not to exclude G&A 
expenses of a different division as being unrelated to producing the 
subject merchandise. Moreover, we disagree with NKK's assertion that 
there is no distinction between a division and a stand alone affiliated 
company. Divisions may exist in name only or may have some autonomy, 
but they are controlled by the greater company. Affiliated companies 
are separate legal entities and as such require complete administration 
structures. In this case, NKK's divisions are not separate entities but 
merely separate business units within a single corporation. Thus, we 
have calculated G&A expenses based on NKK's unconsolidated company-wide 
G&A for the final determination.
    Comment 26: NKK's Blast Furnace Costs.
    NKK argues that the Department improperly included the loss from a 
blast furnace accident in G&A. NKK asserts that, consistent with prior 
Department practice, the Department should exclude the blast furnace 
losses as an extraordinary expense. NKK contends that this accident 
meets the standard for extraordinary treatment affirmed by the Court of 
International Trade in Floral Trade Council of Davis, California v. 
United States, (``Floral Trade Council'') 16 CIT 1014, 1016-17 (CIT 
1992), because an accident such as this is ``unusual in nature and 
infrequent in occurrence.''
    NKK argues that the blast furnace accident was ``unusual in 
nature'' because record evidence demonstrates that NKK has never had a 
blast furnace

[[Page 24355]]

accident in its history. NKK claims that, in past cases where the 
Department has excluded extraordinary expenses from the cost of 
production, an unforeseen and abnormal event occurred which was beyond 
management's control. NKK cited the following cases for the 
Department's practice with regard to the frequency with which the event 
occurred: Notice of Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Wire Rod from Taiwan, 63 FR 40462 (July 29, 
1998), Notice of Final Determination of Sales at Less Than Fair Value: 
Large Newspaper Printing Presses and Components Thereof, Whether 
Assembled or Unassembled, From Japan, 61 FR 38139, 38153 (July 23, 
1996) and Final Determination of Sales at Less Than Fair Value: Fresh 
Cut Roses from Ecuador, 60 FR 7019, 7038 (February 6, 1995). NKK argues 
that the blast furnace accident was unforeseen and beyond its control; 
otherwise it would have performed the necessary repairs to prevent the 
accident from occurring.
    NKK argues that the blast furnace accident was also ``infrequent in 
occurrence.'' NKK contends that the Court explained in Floral Trade 
Council that ``an event is ``infrequent in occurrence'' if it is not 
reasonably expected to recur in the foreseeable future.'' NKK asserts 
that these are the facts in this case because NKK has never before had 
a blast furnace accident.
    NKK also claimed that it properly treated the blast furnace 
accident as a non-operating expense in its audited financial 
statements. NKK argues that the Department's standard practice is to 
use costs as they are reported in the respondent's financial 
statements. NKK argues that it reported the losses resulting from the 
blast furnace accident as non-operating expenses in the financial 
statements that were completed and audited before the initiation of 
this antidumping investigation. NKK contends that its treatment of the 
blast furnace accident as a non-operating expense was in accordance 
with standard Japanese GAAP.
    Petitioners argue that the Department correctly included certain 
losses related to the blast furnace accident in NKK's G&A. Petitioners 
assert that these losses do not qualify as extraordinary expenses. 
Petitioners contend that a breakdown in the blast furnace is not 
unusual in nature because it is not highly abnormal, unrelated nor 
incidentally related, to the manufacture of steel. Petitioners argue 
that only in rare situations will an event occur that meets both the 
``infrequent in occurrence'' and ``unusual in nature'' criteria. 
Petitioners cited Notice of Final Determination of Sales at Less Than 
Fair Value: Certain Preserved Mushrooms from India, 63 FR 72246 
(December 31, 1998) and Notice of Final Determination of Final 
Determination of Sales at Less Than Fair Value: Static Random Access 
Memory Semiconductors from Taiwan, (``SRAMS from Taiwan''), 63 FR 8909 
(February 23, 1998) to demonstrate the type of events the Department 
determined were not unusual in nature. Petitioners contend that while 
blast furnace accidents may be infrequent, they are by no means 
``unusual'' in occurrences in the steel industry. Therefore, 
petitioners argue that the Department should include the losses related 
to the blast furnace accident in NKK's G&A expenses.
    Department's Position: We disagree with NKK that the loss from the 
blast furnace accident should be treated as an extraordinary expense. 
As noted in Floral Trade Council, an extraordinary event is both 
``unusual in nature and infrequent in occurrence.'' NKK argues that the 
blast furnace accident was unusual in nature and infrequent in 
occurrence because this was the first blast furnace accident in NKK 
history. We disagree with NKK's assertion that this accident is unusual 
in nature. Like other steel producers, NKK performs regular maintenance 
and repairs of its blast furnaces in hopes of preventing accidents and 
loss of operation. While NKK may not have experienced a blast furnace 
accident in the past, industrial accidents are neither unusual nor 
unforeseen for steel producers. Furthermore, as NKK itself notes, it 
classified the loss due to the blast furnace accident in its audited 
financial statements as a non-operating expense and not an 
extraordinary loss. As in the Department's determination in the SRAMS 
from Taiwan, we have included the loss incurred as a result of the 
blast furnace accident in the G&A expenses for the final determination.

KSC

    Comment 27: KSC's Affiliated Input Costs.
    Petitioners argue that the Department should adjust KSC's reported 
materials costs for iron ore and coal purchased from affiliated parties 
at below-market prices. Petitioners note that KSC purchased iron ore 
and coal from affiliated and non-affiliated parties during the period 
of investigation (``POI'') and that, on average, the price paid to 
affiliated parties for these inputs was lower than the price paid to 
non-affiliated parties. Petitioners argue that section 773(f) (2) and 
(3) of the Act require such purchases to be valued at the higher of 
market prices, transfer price or the affiliated supplier's cost of 
production. Petitioners note that documentation provided by KSC 
demonstrates that its affiliated supplier's transfer price was lower 
than the market price paid to unaffiliated trading companies for the 
same materials. Petitioners also note that none of the schedules 
submitted by KSC makes references to any price differentiation by grade 
or time of purchase. Petitioners assert that it is the respondent's 
burden to show whether any adjustments to the transfer price or market 
price are necessary before a comparison may be made and cites to 
Department precedent in Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plate from Canada: 
Final Results of Antidumping Duty Administrative Reviews and 
Determination To Revoke in Part, 64 FR 2173, 2181-82 (January 13, 1999) 
(``Steel from Canada''). Since KSC has failed to meet this burden, 
petitioners argue, the Department must increase the affiliated 
supplier's transfer price to reflect the market value of iron ore and 
coal.
    KSC argues that the Department should reject petitioners' request 
to adjust KSC's purchase price of iron ore and coal inputs through an 
affiliated party. KSC claims that the Department's verification report 
and the petitioners' analysis do not reflect the fact that there are 
price differences between various grades and types of iron ore and 
coal, and that its purchases were made at different times over the 
course of the POI. If these grade and timing differences are 
considered, KSC argues, then the price paid to the affiliated suppliers 
is virtually the same as that paid to the non-affiliated suppliers. KSC 
claims that since it does not purchase all types of iron ore and coal 
in consistent proportions from both affiliated and non-affiliated 
parties, the overall POI-average price does not provide for a valid 
comparison. KSC asserts that a cost verification exhibit offers a 
breakdown of input prices by commodity code, which demonstrates that 
prices paid to affiliated suppliers and unaffiliated suppliers are 
virtually the same when compared by grade. KSC notes that in many 
instances the price charged by the affiliated supplier is higher than 
the price charged by an unaffiliated supplier, while in other cases it 
is lower. KSC also claims that the Department's sample comparisons of 
identical grades on nearly the same date show nearly identical prices 
being

[[Page 24356]]

charged by affiliated and unaffiliated suppliers. KSC argues that this 
comparison confirms that the overall average prices of all grades over 
the entire year was not a valid indicator of arm's length pricing 
between KSC and its affiliated supplier.
    Department Position: We agree with petitioners. KSC submitted a 
schedule which demonstrates that, on average, its POI purchases of iron 
ore and coal from affiliated parties were made at lower prices than its 
purchases from non-affiliated parties. KSC did not submit sufficient 
information to support its contention that timing differences and grade 
differences have an impact on the comparison of iron ore and coal 
prices and, therefore, we were not able to perform a more detailed 
analysis. At verification we reviewed a list of iron ore and coal 
prices by commodity code and noted, as KSC acknowledges, that the 
prices from affiliated suppliers were often lower than prices charged 
by unaffiliated suppliers. Since there is sufficient evidence on the 
record that purchases from affiliated parties were made at below-market 
prices, we believe that a comparison of the POI average prices is 
appropriate and does not distort our analysis. Therefore, in accordance 
with section 773(f)(2) of the Act, we have adjusted the cost of 
materials to reflect the market values of iron ore and coal, based on 
the prices charged by unaffiliated suppliers.
    Comment 28: KSC's G&A Expenses.
    In reporting G&A expenses, KSC argues that it properly excluded its 
expenses for special retirement expenses and losses on the sale of 
fixed assets used for production of non-subject merchandise. KSC notes 
that the special retirement expenses are one-time severance payments to 
transferred employees. KSC states that these expenses are incurred in 
more than one year to the extent that downsizing of operations is not 
completed in a single year, but the expense is a one-time event for the 
particular employees transferred during a particular year. KSC claims 
that since these expenses are not related to the current production of 
the company and are considered an extraordinary expense under Japanese 
GAAP, they should be excluded from G&A expenses. With regard to the 
losses on sale of fixed assets, KSC cites to Fresh Atlantic Salmon From 
Chile, 63 FR at 31436, in which the Department noted that losses on the 
sale of fixed assets are not included in G&A expenses when the assets 
in question are tied to the production of non-subject merchandise. KSC 
also cites the following cases as examples of Department practice on 
this issue: Brass Sheet and Strip from Canada; Final Results of 
Antidumping Duty Administrative Review, 61 FR 46618, 46619-20 
(September 4, 1996); Certain Hot-Rolled Lead and Bismuth Carbon Steel 
Flat Products From the United Kingdom; Final Results of Antidumping 
Duty Administrative Review, 60 FR 44009, 44012 (August 24, 1995) 
(``Lead and Bismuth''), Final Determination of Sales at Less Than Fair 
Value: Furfuryl Alcohol From South Africa, 60 FR 22550, 22556 (1995) 
(``Furfuryl Alcohol''), Final Determination of Sales at Less Than Fair 
Value: Certain Carbon and Alloy Steel Wire Rod from Canada, 59 FR 
18791, 18795 (April 20, 1994) (``Steel Wire Rod''). KSC asserts that 
these cases provide examples of instances where the Department has 
recognized that expenses relating exclusively to the production of non-
subject merchandise should not be included in the G&A expenses of 
subject merchandise. In the instant case, KSC claims that the 
Department should exclude the losses referred to above because they 
relate to assets which were used solely for the production of non-
subject merchandise.
    Petitioners argue that the Department normally calculates G&A 
expenses based on the respondent's unconsolidated operations, which 
include the operations of each of the respondent's divisions. See, 
e.g., Notice of Final Determination of Sales at Less Than Fair Value--
Stainless Steel Round Wire from Canada, 64 FR 17324, 17333 (April 9, 
1999). Petitioners also assert that KSC has not established on the 
record that the losses on the sale of fixed assets relate solely or 
exclusively to the production of non-subject merchandise. With regard 
to the expenses on special retirement payments, petitioners argue that 
expenses relating to the termination, transfer or early retirement of 
employees in a downsizing event are neither unusual nor infrequent for 
the steel industry, and therefore cannot be classified as extraordinary 
expenses. Petitioners add that the fact that KSC incurred special 
retirement expenses in 1996, 1997 and 1998 is further evidence that 
these expenses are not extraordinary under U.S. GAAP, and therefore 
should be included in the calculation of KSC's G&A expense rate.
    Department's Position: We agree with petitioners and, as in the 
preliminary determination, we have included the special retirement and 
losses on sales of fixed assets in our calculation of KSC's G&A expense 
rate. The expenses for special retirement are severance costs that are 
recorded as part of KSC's ongoing downsizing operations. The 
Department's normal practice is to include severance costs in a 
company's G&A expenses. See, e.g., Notice of Preliminary Determination 
of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality 
Steel Products from Brazil, 64 FR 8299, 8305-8306 (February 19, 1999) 
and Notice of Final Results and Partial Rescission of Antidumping Duty 
Administrative Review: Certain Pasta From Turkey, 63 FR 68429, 68434 
(December 11, 1998). We noted at verification that these downsizing 
activities have resulted in recurring expenses for KSC. The fact that 
the process may extend over multiple years does not preclude the use of 
current period expenses. KSC has recognized in its audited financial 
statements the expense related to the current fiscal year, and it is 
this period cost which we have included in KSC's G&A expenses. Also, 
even though the classification of these amounts as extraordinary 
expenses under Japanese GAAP. The Department does allow for the 
exclusion of extraordinary expenses under certain circumstances, but 
these severance amounts do not fall into this category. The Department 
normally will exclude costs considered extraordinary, provided that 
they are both unusual in nature and infrequent in occurrence. These 
expenses for special retirement cannot be considered infrequent in 
occurrence since they have been a recurring cost for KSC and, 
therefore, should be included in G&A expenses along with other period 
costs. See Silicomanganese From Brazil: Preliminary Results of 
Antidumping Administrative Review, 62 FR 1320, 1322 (January 9, 1997).
    With regard to the losses on sale of fixed assets, we verified that 
the assets in question relate to the production of non-subject 
merchandise. However, it is our practice to calculate G&A expenses 
using the operations of the company as a whole. See, e.g., Brass Sheet 
and Strip at 46619, Circular Welded Non-Alloy Steel Pipe and Tube From 
Mexico: Final Results of Antidumping Duty Administrative Review, 63 FR 
33041, 33050 (June 17, 1998). As we stated in the original 
questionnaire issued to KSC, ``G&A expenses are those period expenses 
which relate indirectly to the general production operations of the 
company rather than directly to the production process for the subject 
merchandise* * *'' Therefore, any income or expense incurred through 
KSC's disposition of fixed assets should be included in the G&A expense 
rate, regardless of whether they are used purely for the production of 
subject merchandise or non-subject

[[Page 24357]]

merchandise. This policy was established in Final Determination of 
Sales at Less Than Fair Value: New Minivans from Japan, 57 FR 21937, 
21943 (May 26, 1992) (``Minivans''). In that case, the Department 
stated, ``we generally consider disposal of fixed assets to be a normal 
part of a company's operations and have included, therefore, any gains 
or losses generated by these transactions in the cost of production 
calculation.'' (emphasis added) This is consistent with our treatment 
of miscellaneous expenses in U.S. Steel Group et al v. United States, 
998 F. Supp. 1151, 1153-54 (CIT 1998). We note also that KSC incurred 
losses on sale of fixed assets related to the production of subject 
merchandise and these losses were included in G&A expenses and 
allocated over the cost of all products that KSC produced.
    In the Fresh Atlantic Salmon from Chile case cited by KSC, the 
issue was whether or not to treat temporary shutdown costs as period 
costs, or G&A expenses, that would normally be allocated over the cost 
of all products. The Department determined that the facilities in 
question were only idle for a brief period of time and therefore the 
costs associated with the temporary shutdown should not be treated as 
G&A expenses. Rather, the costs of operating the facility were charged 
directly to the cost of manufacturing for the non-subject products 
produced in the facility. The Department did not, as KSC implies, 
specifically exclude the shutdown costs from the G&A expense 
calculation because the facility did not produce subject merchandise. 
KSC's reliance on to Brass Sheet and Strip and Steel Wire Rod is 
similarly misplaced. The issue in these cases was whether to include in 
a respondent's G&A expenses certain costs that were incurred by a 
parent company or a subsidiary. The cites are not on point since the 
instant case involves equipment that was owned by KSC itself and, as 
noted above, the Department calculates G&A expenses based on the 
operations of the respondent, as a whole. Expense incurred by a parent 
company, or any other affiliated company, are only included in the G&A 
expense calculation to the extent of the support provided by the parent 
or affiliated company. KSC's reliance to Lead and Bismuth is also 
misplaced, since the respondent in that case closed an entire facility 
that only produced non-subject merchandise and then excluded these 
closure costs from the G&A expense rate calculation. In the instant 
case, KSC simply disposed of assets and, as noted above in Minivans, 
the Department's policy is to include in G&A all gains or losses 
generated by such disposals. The respondent in Furfuryl Alcohol 
calculated separate G&A expense rates by division and a company-wide 
G&A expense rate for G&A expenses that related to the operations of the 
company as a whole. Here, KSC submitted a single G&A expense rate for 
the entire company and only included its losses on sale of fixed assets 
related to subject merchandise. It would not be appropriate or 
reasonable to allocate these losses over the cost of producing all 
products, while specifically excluding losses on sale of fixed assets 
used for non-subject production. Since the sale of fixed assets is a 
general activity of the company, and not specifically related to 
production, we have allocated all losses on the sale of fixed assets 
over the cost of producing all products.
Facts Available
    Comment 29: Use of Facts Available for NSC's Theoretical Weight 
U.S. Sales.
    NSC characterizes as an inadvertent mistake the fact that, in its 
response to the initial questionnaire, NSC stated that a theoretical 
weight to actual weight conversion factor could not be supplied because 
coils sold on a theoretical basis are never weighed. Respondent states 
that it believed this statement to be true at the time of filing. NSC 
argues that it corrected this error within the Department's time limits 
for submitting new information. In the alternative, NSC argues that the 
conversion data it presented constitutes a minor correction. Thus, the 
Department should have accepted the information under the minor 
corrections rule. NSC states that the Department never rejected the 
filings containing the corrections as untimely, and therefore abused 
its discretion by refusing to verify this information and by applying 
adverse facts available to the affected sales. NSC also argues that to 
reject the information now would severely prejudice NSC's rights, that 
this information meets the criteria set forth in section 782(e) of the 
Tariff Act and, thus, that the Department must consider this 
information in calculating a margin for NSC. Finally, NSC argues that 
the Department incorrectly applied an adverse inference in the 
preliminary determination regarding the theoretical-actual conversion 
factor, because it did not first find that NSC had not acted to the 
best of its ability to provide this information to the Department. To 
the contrary, NSC argues its responses to the Department's requests for 
information establish a pattern of cooperation and accuracy.
    NSC further states that it was placed under extreme time pressures 
in attempting to comply with the Department's accelerated schedule in 
this investigation, and that this contributed to NSC's failure to 
identify the mistake regarding the weight conversion factor.
    NSC states that it realized in preparing for verification that all 
hot-rolled coils are weighed during the production process, and that 
these actual weight data are recorded at the production facilities. NSC 
adds that the production databases do not overlap with the sales 
databases at NSC's headquarters. NSC stated it obtained the actual 
weight information, calculated a conversion factor and submitted this 
information to the Department on February 22, 1999, prior to both the 
cost and sales verifications. NSC also states that it filed additional 
information on this subject on March 1, 1999.
    NSC disagrees with the Department's statement in the Preliminary 
Determination (February 19, 1999) that NSC had ``refused'' to provide a 
conversion factor. NSC argues that this statement baselessly implies 
that NSC intentionally withheld information, whereas, it claims, the 
record shows that NSC cooperated fully but committed an inadvertent 
error in its initial questionnaire response.
    NSC states that the Department took no action to remove the 
conversion factor from the record, and included in the verification 
agenda an instruction that NSC explain how its production and sales 
systems capture actual weight. NSC alleges that at verification, 
``Department representatives repeatedly assured NSC that the 
theoretical weight conversion factor would be verified. Those 
assurances notwithstanding, NSC claims, the Department abruptly 
informed it approximately two hours before the end of verification that 
``Washington'' had directed that the conversion factor not be verified. 
The Department also refused to allow NSC's representatives to even 
explain the background of its initial mistake. The reasons for those 
decisions have never been disclosed on the record and the verification 
report was silent on theoretical weight.'' NSC Brief at 16. NSC 
concludes that the Department's failure to verify this issue was 
unwarranted and unexplained.
    NSC further argues that (1) its correction was submitted more than 
seven days prior to verification, (2) the conversion factor is not a 
substantial revision to NSC's response, but is similar to the type of 
corrections

[[Page 24358]]

allowed by the Department on the first day of or during verification 
and (3) the Department had adequate time to analyze the conversion 
factor prior to verification.
    NSC cites Sec. 351.301(b)(1) of the Department's regulations, which 
states that in an investigation, the time limit for submitting factual 
information is no later than seven days before the commencement of 
verification. NSC argues that it is the Department's practice to allow 
respondents to amend questionnaire responses to correct limited errors 
within this period, and to verify the accuracy of this information at 
verification, and use the corrected data. See, e.g., Porcelain-on-Steel 
Cooking Ware from the People's Republic of China; Final Results of 
Administrative Review, 62 FR 32757, 32,759 (June 17, 1997); Notice of 
Final Determination of Sales at Less than Fair Value: Certain Partial-
Extension Steel Drawer Slides from the People's Republic of China, 60 
FR 54472 (October 24, 1995); Notice of Determination of Sales at Not 
Less than Fair Value: Stainless Steel Bar from Italy, 59 FR 66921, 
66926 (December 28, 1994). See also Final Determination of Sales at 
less than Fair Value: Certain Corrosion-Resistant Carbon Steel Flat 
Products from Australia, 58 FR 37079, 37081 (July 9, 1993). NSC 
acknowledges that the Department has rejected timely submissions which 
are substantial revisions of previously submitted data or attempts to 
respond to a questionnaire for the first time. See, e.g., Koenig & 
Bauer-Albert AG v. United States, 15 F. Supp. 2d 834, 847 n.6 (CIT 
1998); Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Steel From the People's Republic of China, 62 FR 61964, 
61987 (November 20, 1997). NSC argues, however, that because submitting 
its conversion factor is not comparable to submitting a substantial 
quantity of new information, and because it answered the questionnaire 
(albeit incorrectly as to this point) within the questionnaire 
deadline, it properly corrected its response by submitting the 
correction within the terms of the seven-day rule.
    NSC argues that the Department accepts minor corrections even when 
the correcting submissions are untimely filed. See Bowe-Passat v. 
United States, 17 CIT 335, 337-8 (1993). NSC asserts that it is the 
Department's practice to allow respondents to make minor revisions to 
or to supplement questionnaire responses after the preliminary 
determination, both prior to and during verification. See, e.g., Final 
Determination of Sales at Less than Fair Value: Antifriction Bearings 
(Other than Tapered Roller Bearings) and Parts Thereof from the Federal 
Republic of Germany, 54 FR 18992, 19034 (May 3, 1989); Notice of Final 
Determination of Sales at Less than Fair Value: Certain Pasta from 
Italy, 61 FR 30326, 30352 (June 15, 1996); Notice of Final 
Determination of Sales at Less than Fair Value: Certain Cut-to Length 
Carbon Steel Plate from the Russian Federation, 62 FR 61787, 61789 
(November 19, 1997); Notice of Final Determination of Sales at Less 
than Fair Value: Certain Freshwater Crawfish Tail Meat from The 
People's Republic of China, 62 FR 41347, 41356 (August 1, 1997); Usinor 
Sacilor v. United States, 872 F. Supp. 1000, 1008 (CIT 1994). NSC 
argues that the Department has allowed this type of revision where the 
correction is limited and the corrected information is submitted early 
enough to allow adequate time for the Department to analyze the 
revision. NSC argues that its correction, which affects only a limited 
number of its U.S. sales, qualifies as a minor correction.
    NSC states that the timing of its correcting submissions allowed 
the Department and petitioner adequate time to review its changes. See 
Brother Indus. Ltd. v. United States, 771 F. Supp. 374, 383-84 (CIT 
1991); Final Determination of Sales at Less than Fair Value; Steel Wire 
Rope from Korea, 58 FR 11029, 11031 (February 23, 1993); Antidumping: 
Circular Welded Carbon Steel Pipes and Tubes from Thailand; Final 
Determination of Sales at Less than Fair Value, 51 FR 3384, 3386 
(January 27, 1986).
    NSC states, furthermore, that its conversion factor is so simple 
that there was no analysis that the Department or petitioners could 
have performed on it, and therefore the petitioner suffered no 
disadvantage or prejudice from NSC's submission of the conversion 
factor prior to verification. NSC adds that it would not have been 
difficult for the Department to incorporate the factor into the margin 
calculation. NSC also argues that use of its conversion factor, rather 
than use of facts available, contributes to the accuracy of the record 
on which the margin is calculated--a goal of the antidumping statute. 
See Rhone-Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. 
Cir. 1990).
    NSC argues that, if the Department believed that the submissions 
containing its conversion factor were untimely, the Department was 
required under Sec. 351.301(c) and 351.302.(d) of its regulations to 
reject and return the submissions to NSC with written notice stating 
the reason for the return. See Koenig & Bauer-Albert AG v. United 
States, 15 F. Supp. 2d at 847 n.6 (CIT 1998); Kerr-McGee Chem. Corp. v. 
United States, 955 F. Supp. 1466, 1469-70 (CIT 1997); Usinor Sacilor v. 
United States, 872 F. Supp. 1000, 1007 (CIT 1994); Gray Portland Cement 
and Clinker from Mexico; Final Results of Antidumping Duty 
Administrative Review, 64 FR 13148, 13153 (March 17, 1999); Final 
Determination of Sales at Less than Fair Value: Certain Cut-to-Length 
Steel Plate from the People's Republic of China, 62 FR 61964, 61985 
(November 20, 1997). Because these submissions were on the record at 
the time of verification, NSC states that the Department could not 
refuse to verify the conversion factor. NSC also states that the 
Department would prejudice the rights of parties by removing 
information from the record without following the procedures 
established in the regulations, since the record serves as the basis 
for the parties' arguments before the Department or in a subsequent 
appeal. See Kerr-McGee Chem. Corp. v. United States, 955 F. Supp. 1466, 
1472 (CIT 1997).
    NSC also notes that the Department has broad discretion in choosing 
to accept untimely filed information onto the record, and thus the 
parties must rely on the Department's notice of rejection to determine 
the status of each submission. See Bowe-Passat v. United States, 17 CIT 
at 338 (1993). Thus, NSC argues that to reject the information now 
would deprive it of the opportunity to respond to the Department's 
rationale for rejecting the submission, and to demonstrate that the 
conversion factor could have been easily derived, which will prejudice 
NSC by leading to the continued use of facts available.
    NSC argues that if, notwithstanding the above arguments, the 
Department wishes to resort to use of the facts available as to this 
issue, pursuant to section 776(a)(2)(B) of the Act (19 U.S.C. 
Sec. 1677e(a)(2)(B)), because NSC did not submit its conversion factor 
within the questionnaire deadlines, the Department must also consider 
the provisions of 782(e) of the Tariff Act (19 U.S.C. Sec. 1677m(e)). 
See 19 U.S.C. Sec. 1677(e)(a)(2)(B); Borden, Inc. v. United States 
(``Borden''), 4 F. Supp. 2d 1221, 1244-45 (CIT 1998). NSC argues that 
the conversion factor submission meets the criteria set forth in 
Sec. 1677m(e) (i.e., it is complete, capable of being verified, capable 
of being used without undue difficulty, provided by NSC acting to the 
best of its ability, and submitted within the deadline established for 
its submission) and thus is appropriate for use in the final 
determination.
    NSC argues that its submission was timely because ``in the context 
of Sec. 1677m(e)(1), the `deadline' cannot be

[[Page 24359]]

interpreted as the due date for the initial or supplemental 
questionnaires because such an interpretation would nullify the express 
reference to Sec. 1677m(e) in Sec. 1677e(a)(2)(B).'' NSC Brief at 31. 
NSC argues that untimely information can still be considered for a 
final determination, provided that it meets the requirements set out in 
Sec. 1677m(e). NSC states that the reference to a ``deadline'' in 
Sec. 1677m(e) should be interpreted as compliance with the seven-day 
rule or the minor error rule, and thus NSC's conversion factor should 
be used in the final determination.
    The Department, according to NSC, may rely on information it does 
not examine at verification. See Floral Trade Council v. United States, 
822 F. Supp. 766, 722 (CIT 1993); Micron Tech., Inc. v. United States, 
117 F.3d 1386, 1396 (Fed. Cir. 1997); Certain Cut-to-Length Carbon 
Steel Plate from Germany: Final Results of Antidumping Duty 
Administrative Review, 61 FR 13834, 13840 (1996). Moreover, NSC argues, 
there is no reason to doubt the accuracy of its conversion factors 
given the accuracy of other NSC information demonstrated at 
verification.
    NSC argues that, in the Preliminary Determination, the Department 
did not make the requisite finding under section 776(b) of the Tariff 
Act (19 U.S.C. Sec. 1677e(b)) and 19 C.F.R. Sec. 351.308.(a) that NSC 
had failed to cooperate to the best of its ability; instead, it found 
only that NSC had not provided the conversion factor requested. 
Therefore, NSC argues, the Department was not justified in using an 
adverse inference in selecting facts available to apply to the affected 
sales. See Ferro Union, Inc. v. United States, Ct. No. 97-11-01973, 
Slip Op. 99-27, 1999 CIT LEXIS 24, at *54 (March 23, 1999); D&L Supply 
Co. v. United States, Ct. No. 92-06-00424, Slip Op. 98-81, 1998 CIT 
LEXIS 79, at *4 (June 22, 1998). See also Certain Cold-Rolled and 
Corrosion-Resistant Carbon Steel Flat Products from Korea: Final 
Results of Antidumping Duty Administrative Reviews, 64 FR 12927, 12947 
(Mar. 16, 1999). NSC states that this two-part process the Department 
must undertake before using an adverse inference differs from the 
Department's former BIA standard under prior law. See Antidumping 
Duties; Countervailing Duties: Proposed Rule, 61 FR 7308, 7327 (1996).
    NSC argues that the Department may only apply an adverse inference 
if the Department determines that a party's failure to provide 
information is ``deliberate.'' See Preamble to Proposed Rule, 61 FR at 
7328; Borden Inc. v. United States, 4 F. Supp. 2d at 25 (CIT 1998); 
Ferro Union Inc. v. United States, 1999 CIT LEXIS 24, at *7. NSC states 
that the Department refused to verify the circumstances surrounding 
NSC's failure to provide the actual weight data, although NSC sought to 
have it do so. NSC contends that the Department cannot prevent 
inclusion on the record of information relating to whether its initial 
failure to provide these data was deliberate, and then conclude that it 
was unwilling to provide the data. See Usinor Sacilor v. United States, 
872 F. Supp. 1000, 1007 (CIT 1994).
    NSC also states that the record as a whole evidences its 
extraordinary level of cooperation. NSC states that the Department 
cannot hold NSC to the ``standard of perfection'' that it appears to 
have applied in the preliminary determination (see NTN Bearings Corp. 
v. United States, 74 F.3d 1204, 1208 (Fed. Cir. 1995)), and that the 
selection of adverse facts available was improper given the minor 
adjustment in data involved (see Usinor Sacilor v. United States, 872 
F. Supp. 1000,1007 (CIT 1994)). NSC argues that the Department should 
not treat a respondent that simply errs the same way it treats a 
respondent that refuses to reply to part or all of a questionnaire.
    NSC argues that the rate assigned to it in the Preliminary 
Determination was punitive, and that antidumping law prohibits imposing 
punitive duties, calling instead for remedial measures. See NTN 
Bearings Corp. v. United States, 74 F.3d 1204, 1208 (Fed. Cir. 1995). 
For this reason, NSC contends, in choosing the ``facts available,'' the 
Department must, at a minimum, select margins that are ``nonaberrant,'' 
and not abnormal. See National Steel Corp. v. United States (``National 
Steel I''), 870 F. Supp. 1130, 1134-37 (CIT 1994). NSC argues that it 
is a Department policy upheld by the court that a margin used as facts 
available must correspond to a substantial commercial quantity of a 
respondent's sales that fall within the mainstream of that respondent's 
sales. See National Steel Corp v. United States (``National Steel 
III''), 929 F. Supp. 1577, 1579-80 (CIT 1996). NSC argues that the 
margin the Department used in the Preliminary Determination for the 
sales affected by this issue was the highest possible, and that 
therefore it is ``aberrant.'' Finally, NSC argues that the extent of 
increase in the total margin as a result of this issue constitutes an 
impermissible penalty.
    Petitioners argue that NSC's case brief and letters submitted after 
the Preliminary Determination regarding the theoretical-actual weight 
conversion factor amount to admissions that NSC did not act to the best 
of its ability in responding to the Department's questionnaires and did 
not provide information in a timely manner. Petitioners point out that 
NSC stated that in preparing its responses, it failed to check the 
records at the manufacturing facilities, despite two Department 
requests for information maintained there. Petitioners argue that NSC's 
failure to cooperate to the best of its ability warrants using adverse 
inferences.
    Petitioners stated that NSC's arguments that its post-Preliminary 
Determination submissions regarding the conversions factor were timely 
under the seven-day rule ignore 19 CFR Sec. 351.301(c)(2), which 
authorizes the Department to set time limits for questionnaire 
responses, and 19 CFR Sec. 351.302(d), which authorizes the Department 
to return untimely filed questionnaire responses. Petitioners note that 
the Department cited Sec. 351.302(d) in its supplemental questionnaire 
issued on January 4, 1999. Petitioners contend that, under 19 CFR 
Sec. 351.301(c)(2), the seven-day rule does not apply in these 
circumstances.
    Petitioners state that, because NSC indicated that it would not and 
could not provide this data, and because the Department did not request 
it again, the time for submitting new information other than specific 
corrections had passed. For these reasons, petitioners argue that the 
Department was authorized to use facts available. See Cut-to-Length 
Steel from the People's Republic of China, 62 FR 61964, 61987 (November 
20, 1997) (``Steel from China'').
    Petitioners state that the cases cited by NSC at pages 17 and 18 of 
its case brief are off point, because the respondents in those cases 
sought to correct minor errors prior to verification. Petitioners argue 
that, in the instant case, NSC is seeking to present new information 
which contradicts earlier statements that the information did not 
exist. Petitioners argue that Steel from China, also cited in NSC's 
brief, is on point, in that the Department rejected information a 
respondent had previously failed to provide in a questionnaire 
response.
    Petitioners also argues that even under the seven-day rule, the 
conversion submission was untimely filed. Petitioners then argue that 
NSC's three post-Preliminary Determination submissions reveal that NSC 
did not make a reasonable inquiry to obtain the weight conversion 
information in response to the Department's questionnaires. For this 
reason, petitioners argue that NSC's case brief argument regarding the 
Department's

[[Page 24360]]

failure to verify the information it submitted after the preliminary 
determination is out of place and without merit. Finally, petitioners 
argue that NSC incorrectly characterized its submission of the 
conversion information as a minor correction. Petitioners state that 
NSC's submission attempted to supply new information it had previously 
characterized as unattainable and nonexistent. This type of 
information, petitioners argue, is not eligible for untimely admission. 
Petitioners argue that the Department acted correctly and should 
continue to use adverse inferences in the final results.
    Petitioners argue that all NSC information relating to the weight 
conversion factor was submitted after the questionnaire deadlines and 
was therefore untimely filed. Petitioners argue that under section 
776(a)(2) of the Tariff Act (19 U.S.C. Sec. 1677e(a)(2)), the 
Department was justified in rejecting this information and applying 
facts available. Petitioners add that the statute mandates the use of 
facts available in these circumstances, and that to refrain from using 
facts available would run contrary to the intent of the law, which is 
to encourage compliance with the Department's questionnaires. See SAA 
at 868.
    Petitioners also argue that NSC's claim that the Department 
improperly rejected its weight conversion factor is without merit. 
Petitioners state that, contrary to NSC's position, the seven-day rule 
does not apply to the correlation submissions, since it does not serve 
to extend the established deadlines for responses to the Department's 
questionnaires. See 19 C.F.R. Sec. 351.301(b) and (c). The information 
NSC attempted to submit, petitioners argue, was the subject of a 
specific request in a Department questionnaire and was not provided by 
the deadline set in that questionnaire.
    Petitioners also rebut NSC's argument that its weight conversion 
information was properly submitted as a minor correction. Petitioners 
state that NSC's submission does not meet the standard for minor 
corrections established in Titanium Sponge from the Russian Federation, 
61 FR 58525, 58531 (November 15, 1996). According to petitioners, the 
information NSC submitted was not a correction to anything, but was 
instead information supplied for the first time after being repeatedly 
withheld.
    Petitioners state that NSC improperly relied on section 782(e) of 
the Act (19 U.S.C. Sec. 1677m(e)) (the Department ``shall not decline 
to consider information that is submitted by an interested party'') 
because NSC did not submit its weight conversion information within the 
deadlines established in the Department's questionnaires, and failed to 
act to the best of its ability to comply with the Department's 
requirements for supplying this information. See Borden, 4 F. Supp. 2d 
at 1245. Petitioners note that NSC stated in its original questionnaire 
response that, despite the Department's request, the factor was 
unnecessary, and stated in its supplemental questionnaire response that 
it could not calculate a factor, when in fact the required information 
was within its records. Petitioners also point to NSC's statement that 
the conversion factor was ``hardly the most pressing issue for NSC's 
staff'' when preparing its response. See NSC Brief at 13. Petitioners 
conclude that the requirements of section 782(e) are not met because, 
if NSC had acted to the best of its ability, the information would have 
been timely filed and NSC would not have presented inaccurate 
explanations for its failure to provide this information.
    Petitioners reject as irrelevant NSC's claims that its weight 
conversion information should be accepted because its failure to 
provide the data when they were originally requested was inadvertent. 
Petitioners state that the statute does not require the Department to 
determine whether a reporting failure is in good faith, and that the 
Department cannot excuse inaccurate responses on the grounds of 
``honest mistake.'' Petitioners argue that this would undermine the 
Department's ability to gather information. Petitioners state that the 
Department's rejection of NSC's responses regarding the conversion 
factor as untimely was warranted under the statute and the Department's 
practice.
    Petitioners argue that the Department properly applied adverse 
facts available because NSC failed to provide information under its 
possession and control to the Department in a timely manner. These 
circumstances, petitioners contend, show that NSC did not act to the 
best of its ability in preparing this aspect of its questionnaire 
response. See Borden, 4 F. Supp. 2d at 1246; Ferro Union 1999 CIT LEXIS 
24, at * 55. Petitioner notes that, contrary to NSC's inference in its 
case brief, affirmative evidence of bad faith is not required before 
the Department can make an adverse inference. See Preamble, 62 FR at 
27340.
    Further, petitioners reject NSC's argument that the Department 
should be precluded from making an adverse inference because much of 
NSC's other information was timely submitted and verified. Petitioners 
state that use of partial facts available is appropriate in these 
circumstances. Petitioners state that NSC has pointed to no 
justification for its claim that the adverse facts available margin 
applied to NSC's U.S. theoretical weight sales was aberrant, and that 
this may constitute the best information available. See National Steel 
I, 870 F. Supp. at 1136; accord National Steel Corporation v. United 
States (``National Steel II''), 913 F. Supp. at 596-597; see also 
Stainless Steel Sheet and Strip in Coils from Mexico, 64 FR 124, 128 
(January 4, 1999). The facts available margin, petitioners claim, was 
based on NSC mainstream sales made under customary selling practices.
    Finally, petitioners state that NSC was incorrect when it argued 
that its only act of non-cooperation was to make a mistake in its 
answer. Petitioners argue that NSC repeatedly withheld information 
within its control, and issued statements as to why this information 
was not provided which were shown to be untrue.
    Department's Position: We agree with petitioners that the 
Department should continue to apply adverse facts available with 
respect to NSC's U.S. sales which are based on theoretical weight. 
Section 776(a)(2) of the Act provides that if an interested party: (A) 
withholds information that has been requested by the Department; (B) 
fails to provide such information in a timely manner or in the form or 
manner requested; (C) significantly impedes a proceeding under the 
antidumping statute; or (D) provides such information but the 
information cannot be verified, as provided in section 782(i), the 
Department shall, subject to subsection 782(d), use facts otherwise 
available in reaching the applicable determination. Section 776(b) of 
the Act further provides that adverse inferences may be used where an 
interested party has failed to cooperate by not acting to the best of 
its ability to comply with the Department's requests for information. 
See also, SAA at 870.
    NSC reported most of its U.S. and home market sales on an actual 
weight basis, with the exception of a small percentage of U.S. and home 
market sales. The Department requested conversion factors for these 
transactions in its original and supplemental questionnaires. Section 
351.301(b)(1) of the Department's regulations provides generally that, 
in an investigation, factual information can be submitted up to seven 
days prior to verification. However, section 351.301(c)(2) states that 
``[n]otwithstanding paragraph (b)'',

[[Page 24361]]

when requesting information pursuant to a questionnaire, the Department 
will specify the deadlines by which time the information is to be 
provided by the parties. Thus, NSC is incorrect in asserting that the 
requested conversion data is timely because it was submitted within the 
general deadline in section 351.301(b)(1). Any information submitted 
after the deadline specified in the questionnaire is untimely, 
regardless of whether the general deadline in section 351.301(b)(1) has 
passed.
    In the instant case, NSC failed to submit the requested information 
by December 21, 1998 (the deadline for the original section B and C 
questionnaire responses), nor did it provide this information by 
January 25, 1999 (the deadline for submission of information requested 
in the section B and C supplemental questionnaire). Despite repeated 
requests for this information, NSC did not provide the requested data 
until March 1, 1999 (nearly 3 months after the initial questionnaire 
deadline).
    NSC also argues that the conversion data falls within the 
Department's practice of accepting ``minor corrections'' to 
questionnaire responses after the response deadline has passed, 
provided the Department has the information in time to verify it. 
However, a minor correction is normally a correction to information 
that was timely submitted. In this case, NSC did not timely submit the 
conversion data that it subsequently sought to correct. NSC's only 
response was that the data did not exist. While NSC characterizes that 
statement as a correctable minor error, we disagree. The evidence 
indicates that the requested information was routinely maintained by 
NSC in the normal course of business, but that obtaining it was simply 
not a priority. Regardless of who specifically knew about this 
information, the sales department or the production department, the 
data existed and could have easily been obtained. The fact that NSC was 
able to provide this information shortly after the preliminary 
determination also supports the conclusion that it could have done so 
within the time requested. Moreover, it is impossible for the 
Department to determine whether NSC's claims of inadvertent error are 
valid or merely self-serving. Thus, they are insufficient to rebut the 
evidence establishing that the requested information was readily 
available.
    Furthermore, timely, accurate conversion information is necessary 
to the margin calculation and can have a significant impact. In 
recognition of steel industry practices, the Department routinely 
requests respondents in proceedings involving steel to provide either 
the actual and theoretical weights of the transactions in both markets, 
or in the alternative, to provide conversion factors to ensure apples 
to apples comparisons on the same weight basis. See Preliminary 
Determination of Sales at Less Than Fair Value: Circular Welded Non-
Alloy Steel Pipe from Brazil, 57 FR 17883, 17884 (April 28, 1992). The 
need for timely filed, verifiable actual weights or conversion factors 
is particularly acute with flat rolled steel products in coils, 
including those at issue. Assuming that the coils meet the 
specifications of the ordered product, the actual width and the actual 
thickness of the coils will vary within the allowed tolerances, but the 
lengths of the coils are not specified in the available sales-related 
documentation. Therefore, the total actual weight of the coils sold in 
transactions denominated in theoretical weight can vary by a 
significant, but unknown amount, as the actual dimensions of the coils 
cannot be determined. Accordingly, the resulting unit values that would 
be used in the Department's price-to-price comparisons could also vary 
by a significant, but unknown amount. The Court of International Trade 
has addressed the issue, upholding the Department's decision to apply 
best information available when a theoretical-to-actual conversion 
factor could not be verified. See Persico Pizzamiglio, S.A. v. United 
States, 18 CIT 299, 305 (CIT 1994).
    Because NSC's conversion data was untimely and did not constitute a 
minor correction, the Department informed NSC at verification that it 
would not accept the theoretical to actual weight conversion factors 
and returned the data on April 12, 1999. Section 351.302(d) of the 
Department's regulations provides that the Department will not retain 
in the record information that is untimely or unsolicited. 19 C.F.R. 
Sec. 351.302(d)(2). The fact that the Department did not reject this 
information prior to verification did not prejudice NSC. Many decisions 
are made between the preliminary and final determinations, including, 
in some instances, the rejection of submissions. While the Department 
must explain the basis for those decisions in its final determination, 
it is under no obligation to do so before then. As evidenced by NSC's 
case brief and the hearing transcript, the company was well aware of 
the issue and has had ample opportunity to defend its interests. See 
also Department's response to Comment 13, ``Ex Parte Communications'', 
above.
    Section 776 of the Act states that, if a party fails to provide 
information by the established deadline, the Department shall, subject 
to section 782(d), use the facts otherwise available. See also 19 
C.F.R. 351.301(c)(2)(ii) (``failure to submit requested information in 
the requested manner by the date specified may result in use of facts 
available under section 776 of the Act and section 351.308.''). Section 
782(d) of the Act provides that, subject to 782(e), the Department may 
disregard a deficient response. NSC argues that the Department should 
have used the conversion factor data because it meets the criteria of 
section 782(e), i.e., it is complete, capable of being verified, 
capable of being used without undue difficulty, provided by NSC acting 
to the best of its ability, and submitted within the deadline 
established for its submission. We find this argument unpersuasive. The 
provision of the statute relied upon by NSC sets forth the 
circumstances under which the Department will consider information 
provided by a respondent, even though it may be deficient in some 
respects. For example, if the freight information in a timely 
questionnaire response is missing or cannot be used, the Department 
will not reject the entire response; it will consider the remaining 
information, provided that it is verified. There is simply no support 
for NSC's argument that this provision is essentially an exception to 
rejecting information that is submitted after the established deadline. 
To the contrary, the first criterion in this provision is that ``the 
information is submitted by the deadline established for its 
submission.'' As noted above, NSC's conversion data was not submitted 
by the deadline established in the questionnaire. Therefore, it does 
not meet the criteria of section 782(e) and the use of facts available 
for theoretical weight sales is warranted.
    Because NSC failed to timely provide requested information, in 
accordance with section 776 of the Act, the Department has made its 
determination with respect to the theoretical weight sales on the basis 
of the facts available. Further, the Department finds that NSC, by not 
submitting a theoretical weight conversion factor it could have 
provided when originally requested until well after the time for 
response had passed, failed to cooperate by not acting to the best of 
its ability. NSC's claims that it could provide a conversion factor in 
March of 1999, but was unable to derive such a factor when the 
questionnaire responses were due, does not withstand scrutiny. Although 
NSC argues that it lacked the data necessary to calculate a conversion 
factor, as required by section

[[Page 24362]]

782(c)(1) of the Act, it should have proposed to the Department the 
sort of conversion factor it ultimately did calculate, explaining why a 
more accurate one might not be practicable. Instead, NSC merely 
dismissed the Department's repeated requests. As noted above, the data 
requested was routinely maintained by NSC in the normal course of 
business. It was readily available and would not have been burdensome 
to produce in a timely manner. Moreover, NSC had other information to 
use in providing a conversion factor. Nevertheless, NSC did not provide 
the information until well after the established deadline. As noted 
above, NSC's claims of inadvertent error are insufficient to overcome 
these basic facts. The fact that NSC ultimately did provide such a 
factor is proof that it could have done so much earlier. Thus, because 
NSC failed to timely provide the requested conversion data, it has 
``failed to cooperate by not acting to the best of its ability to 
comply with an information request.'' Therefore, in accordance with 
section 776(b) of the Act, the Department is authorized, to use an 
adverse inference in choosing the facts otherwise available.
    We have considered, but rejected, the suggestion made by NSC that 
the Department use a theoretical-to-actual conversion factor from 
another source as facts available. Because of the potential differences 
in theoretical-to-actual variances among producers and for different 
flat rolled products, particularly those sold in coils, we cannot 
determine that an alternative theoretical-to-actual conversion factor 
would be appropriate in this situation. Therefore, we have used a facts 
available margin for these sales.
    In selecting a facts available margin, we sought a margin that is 
sufficiently adverse so as to effectuate the statutory purposes of the 
adverse facts available rule, which is to induce respondents to provide 
the Department with complete and accurate information in a timely 
manner. We also sought a margin that is indicative of NSC's customary 
selling practices and is rationally related to the transactions to 
which the adverse facts available are being applied. To that end, we 
selected margins from individual sales of CONNUMs that involved 
substantial commercial quantities and fell within the mainstream of 
NSC's transactions. Thus, as adverse facts available, we have 
calculated an average of the highest calculated sale-specific margins 
for each of the CONNUMs involved in the theoretical weight sales; that 
is, we used margins from sales of the same CONNUMs with actual weight 
sales for which we had all necessary information to calculate a margin. 
Finally, we found nothing on the record to indicate that the 
transactions that we selected were not conducted in a normal manner.
    Comment 30: Use of Facts Available for NKK's Theoretical Weight 
Sales.
    NKK argues that the Department should reverse its decision to 
reject the submitted prices for all of its home market sales sold on a 
theoretical weight basis and to apply adverse facts available to these 
sales. NKK claims that (1) its failure to provide conversion factors 
for these sales prior to the preliminary determination was based on a 
legitimate misunderstanding of what the Department desired, (2) upon 
learning what the Department desired, NKK promptly submitted the 
requested conversion factors and (3) the Department fully verified the 
calculation of the conversion factors.
    NKK first explains that its failure to provide the conversion 
factor requested by the Department was based on a legitimate 
misunderstanding of what the Department required. NKK asserts that, in 
its original questionnaire, the Department asked NKK to specify, for 
each and every transaction, whether the quantity sold was based on 
actual weight or some other basis, and if more than one weight was 
reported, to provide the conversion factor to arrive at a uniform 
quantity measure. NKK responded by stating that providing such 
conversion factor was either impracticable or impossible, because it 
did not weigh the coils sold on a theoretical basis, and therefore did 
not have the actual weights for these sales. NKK states that when, in 
its supplemental questionnaire, the Department requested that NKK 
provide the conversion factor that it ``used'' to arrive at a uniform 
quantity measure, NKK assumed that the Department had misunderstood 
NKK's initial response, so it repeated its rationale for not providing 
a conversion factor. After NKK complained that it was wrongly penalized 
in the Preliminary Determination, the Department pointed to KSC's 
ability to respond to the same question. NKK states that KSC had 
provided not a conversion factor, but a more accurate estimate of the 
actual weight, and states that if the Department had clarified earlier 
that this was what it wanted, it could have complied earlier.
    Finally, NKK asserts that after it had a clearer understanding of 
what the Department required, it was able to prepare a conversion 
factor (on a basis involving proprietary information) which could be 
used to calculate a more accurate estimate of the weight for the 
theoretical weight sales. NKK provided this factor one week before 
verification and argues that, pursuant to Sec. 351.301(b)(1) of the 
Department's regulations, this was within the established time limits. 
In addition, NKK argues that the Department was able to verify fully 
all submitted information. Therefore, NKK argues, the Department cannot 
rely on section 776 of the Act to apply facts available, since none of 
the criteria in that provision apply in this case.
    Petitioners, on the other hand, argue that, in the Final 
Determination, the Department should reject the theoretical-to-actual 
weight conversion factor provided by NKK in its February 22, 1999 
filing, and should apply adverse facts available to NKK's theoretical 
weight transactions. Petitioners assert that the Department asked NKK 
to provide a theoretical-to-actual weight conversion factor in the 
Department's initial and supplemental section B questionnaires. Thus, 
petitioners argue, the Department made two clear requests for a 
theoretical-to-actual weight conversion factor, which it needed in 
order to calculate CONNUM-specific DIFMERs and costs. According to 
petitioners, NKK twice refused to provide the conversion and, by 
choosing to provide the conversion factor only after the Department had 
applied adverse facts available to NKK's theoretical weight 
transactions, demonstrated a clear intent to not comply with the 
Department's request. This refusal to comply, in the opinion of 
petitioners, warrants the application of adverse facts available 
pursuant to section 776 of the Tariff Act (19 U.S.C. Sec. 1677e).
    Petitioners argue that the Department should not allow NKK to 
selectively choose what information the company will provide the 
Department. They characterize NKK's refusal to provide a theoretical-
to-actual weight conversion until adverse facts available had been 
applied in the preliminary determination as ``cherry picking'' and 
assert that in antidumping investigations the Department, not the 
respondent, should decide what information is required to ensure the 
integrity of the process. See Ansaldo Componenti, S.p.A. v. United 
States, 628 F. Supp. 198, 205 (CIT 1986); see also Olympic Adhesives, 
Inc. v. United States, 899 F. 2d 1565, 1572 (Fed. Cir. 1990).
    In its rebuttal brief, NKK reiterates that it did not ``refuse'' to 
comply; instead it misunderstood the Department's request for a 
theoretical weight conversion factor. NKK stresses

[[Page 24363]]

that it maintained that it could not calculate the actual differences 
between the theoretical and actual weight of its coils because, unlike 
the merchandise of another respondent, NKK's theoretical weight sales 
were not, in fact, weighed. See Olympic Adhesives, 899 F. 2d at 1573 
(Fed. Cir. 1990) (it is not a refusal to provide requested information 
when a respondent answers that such information is not available). NKK 
rebuts petitioners' assertion that NKK did not comply with the 
Department's request for a theoretical weight conversion factor and, 
furthermore, rebuts petitioners claim that NKK did not cooperate to the 
best of its ability.
    NKK argues that once it understood the Department's request, it 
provided the appropriate theoretical weight conversion factor. NKK 
argues that because actual weight was not available for its theoretical 
weight sales and because it communicated this fact to the Department, 
it did not provide the requested data as it believed that this data was 
not available. See Olympic Adhesives, 899 F. 2d at 1573. NKK further 
argues that the conversion factor does not calculate the actual weight. 
NKK admits that it filed its conversion factor after the original and 
supplemental questionnaire deadlines but asserts that, ultimately, the 
conversion factor was filed with the Department seven days prior to 
verification. NKK asserts that the Department's own regulations 
establish this as the latest date on which factual information is due. 
See 19 C.F.R. Sec. 351.301(b)(1).
    NKK in its rebuttal brief, argues that the Department routinely 
accepts untimely information when circumstances of a particular case 
warrant the need to accept untimely filings. See Bowe-Passat v. United 
States, 17 CIT at 337-38. NKK further argues that if certain conditions 
are met, the Department cannot legally decline to consider certain 
information, even if the information does not meet all of the 
Department's requirements. NKK argues that its case meets the necessary 
legal criteria and, thus, its theoretical weight conversion factor 
should be considered by the Department. See section 782(e) of the Act. 
Specifically, NKK argues in its rebuttal brief that ``first, the 
conversion factor was submitted before the latest deadline for 
submission of factual information; second, the conversion factor can be 
and was verified; third, NKK fully explained how the conversion factor 
was arrived upon and is therefore a reliable basis on which to reach an 
applicable determination; fourth, NKK provided the factor as soon as it 
understood the Department's specific request; and fifth, the 
application of NKK's conversion factor is easily accomplished in the 
Department's programming.'' In summary, NKK argues that there is no 
reasonable basis on which the Department can reject its theoretical 
weight conversion factor.
    Petitioners rebut NKK's argument that NKK acted to the best of its 
ability. Petitioners argue that NKK failed to respond to the 
Department's specific requests for an actual to theoretical weight 
conversion factor. Petitioners argue that the Department should 
therefore draw an adverse inference in selecting adverse facts 
available for NKK's theoretical weight transactions. See section 776(b) 
of the Act (19 U.S.C. Sec. 1677e(b)). Petitioners assert that the 
Department, in its final determination, should continue to apply 
adverse facts available to NKK's theoretical weight sales because NKK 
should not be allowed to benefit through its failure to comply with the 
Department's requests. See SAA at 868, 896 (1994).
    Department's Position: We agree with petitioners that the 
Department should continue to apply adverse facts available for NKK's 
home market theoretical weight sales. Section 776(a)(2) of the Act 
provides that, if an interested party: (A) withholds information that 
has been requested by the Department; (B) fails to provide such 
information in a timely manner or in the form or manner requested; (C) 
significantly impedes a proceeding under the antidumping statute; or 
(D) provides such information but the information cannot be verified, 
as provided in section 782(i), the Department shall, subject to 
subsection 782(d), use facts otherwise available in reaching the 
applicable determination. Further, section 776(b) of the Act provides 
that adverse inferences may be used where an interested party has 
failed to cooperate by not acting to the best of its ability to comply 
with the Department's requests for information. See also SAA at 870.
    NKK reported all its U.S. and home market sales on an actual weight 
basis, with the exception of less than one percent of home market 
sales. Although the Department requested conversion factors for these 
transactions, NKK refused to provide conversion factors for these sales 
within the deadline established in the questionnaire. Rather, it 
submitted these factors on February 22, 1999, almost 2 months after the 
deadline for the original questionnaire response and one month after 
the deadline for the supplemental questionnaire response. Because the 
Department requested these conversion factors in questionnaires with 
earlier deadlines, and these data were not submitted in accordance with 
those deadlines, the conversion factors submitted on February 22, 1999, 
constituted untimely submitted information within the meaning of 19 
C.F.R. Sec. 351.301(c)(2)(ii). Because these data were required to be 
provided in NKK's questionnaire responses, the more general provision 
upon which NKK relies in stating that the factors were timely provided 
(i.e., 19 C.F.R. Sec. 351.301(b)(1)) does not apply. Because NKK's 
conversion factor data were not timely submitted, the Department 
rejected these factors in a letter dated April 12, 1999. The 
Department, therefore, has not considered these data or retained them 
in the official record of the proceeding. See 19 C.F.R. 
Sec. 351.302(d)(1). The Department does not agree with NKK's assertion 
that these data were verified. Rather, at verification the Department 
specifically informed NKK and its counsel that the Department would not 
accept the conversion factor and would specifically instruct NKK to 
submit this information on the record if the Department determined that 
it was timely. However, any arguments as to the accuracy of these data 
are moot because the data in question are no longer part of the record 
before the Department.
    Because NKK failed to timely provide requested information, in 
accordance with section 776 of the Act, the Department has made its 
determination with respect to the theoretical weight sales on the basis 
of the facts available. Further, the Department finds that NKK, by not 
submitting a theoretical weight conversion factor it could have 
provided when originally requested until well after the time for 
response had passed, failed to cooperate by not acting to the best of 
its ability. NKK's claims that it could calculate a conversion factor 
in February of 1999, but was unable to derive such a factor when the 
questionnaire responses were due, does not withstand scrutiny. Although 
NKK argues that it did not understand what the Department wanted when 
it originally requested a ``conversion factor'', although this was not 
stated at the time, and that it lacked the data necessary to calculate 
one, as required by section 782(c)(1) of the Act, it should have 
proposed to the Department the sort of conversion factor it ultimately 
did calculate, explaining why a more accurate one might not be 
practicable. Instead, NKK merely dismissed the Department's repeated 
requests. The fact that NKK ultimately did provide such a factor is the 
proof that they could have

[[Page 24364]]

done so much earlier. Thus, because NKK failed to timely provide the 
requested conversion data, it has ``failed to cooperate by not acting 
to the best of its ability to comply with an information request.'' 
Therefore, in accordance with section 776(b) of the Act, the Department 
is authorized, to use an adverse inference in choosing the facts 
otherwise available.
    The only NKK sales affected by this failure to provide data were 
home market sales. Therefore, as adverse facts available we assigned 
the highest calculated adjusted price (NV) for any CONNUM to the 
relevant transactions.
    Comment 31: Use of Facts Available for KSC's U.S. Sales Through 
CSI.
    KSC asserts that the Department erred both by including in its 
margin calculation sales made through its U.S. affiliate California 
Steel Industries (``CSI'') and in using adverse facts available in 
connection with those sales. Sumitomo Metal Industries, Ltd. (``SMI''), 
a non-selected respondent whose margin will be affected by KSC's 
margin, also urges that the Department should not use adverse facts 
available for KSC's sales to CSI, arguing that the fact that CSI is a 
petitioner shows that KSC cannot ``control'' CSI, and is not, 
therefore, responsible for CSI's refusal to provide data requested by 
the Department.
    With respect to the first point, KSC argues that the Department 
should have based the margins for its CSI sales on sales made to 
unaffiliated companies, in accordance with Sec. 772(e) of the Act (the 
``Special Rule for Merchandise With Value Added After Importation''). 
With respect to the second point, KSC argues that, if The Department 
does calculate a margin based on the CSI sales, it should not treat 
CSI's refusal to provide the requested data as a lack of cooperation on 
the part of KSC. Therefore, KSC argues, The Department should not apply 
adverse facts available to the KSC's CSI sales.

Decision Not To Apply the ``Special Rule''

    Respondent contends that the Department's application of adverse 
facts available in its Preliminary Determination was unlawful because 
the subject merchandise from KSC which is further processed by CSI 
qualifies for the simplified reporting provision or ``special rule for 
merchandise with value added after importation'' contained in the 
statute at 19 U.S.C. Sec. 1677a(e)(1). The purpose of this provision, 
according to the SAA, is to give the Department a ``simpler and more 
effective method for determining export price'' in situations where the 
value added after importation to the United States is likely to exceed 
substantially the value of the subject merchandise.'' See SAA at 825. 
As explained in the SAA, this level is reached when ``value added in 
the United States is estimated to be substantially more than half the 
price of the merchandise as sold in the United States.'' See Id.
    Respondent states that 19 C.F.R. Sec. 351.402(c)(2) provides that 
the Department will ``normally determine that the value added in the 
United States by the affiliated person is likely to exceed 
substantially the value of the subject merchandise if the [Department] 
estimates the value added to be at least 65 percent of the price 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States.'' Respondent states that the use of terms such as 
``normally'' and ``estimates'' indicates that the 65 percent test is 
not a bright line rule. Respondent cites Tapered Roller Bearings and 
Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Component 
Thereof, From Japan,

63 FR 37344 (1998), as evidence that the Department has applied the 
special rule without requiring the value added to be more than 65 
percent. CSI added substantial value to the subject merchandise it 
obtained from KSC, contends the respondent, because the value added by 
CSI represents more than half of the price charged to the first 
unaffiliated customer buying galvanized steel and is ``on the cusp'' of 
being over half the price charged for cold-rolled steel and pipe. 
Respondent concludes that the significant value added by CSI, combined 
with the provision's purpose of simplifying the Department's 
determination, should permit the application of the special rule. 
Therefore, KSC urges, the Department should use the weighted average 
margin of other sales of identical subject merchandise sold by KSC for 
the volume of hot-rolled steel sold to CSI in making its determination.

Use of Adverse Facts Available for the CSI Sales

    Respondent's overall conclusion that the Department's application 
of adverse facts available as to the CSI sales is unsupported by law or 
fact is based on five broad arguments.
    First, respondent states that the Department cannot draw an adverse 
inference unless it has found that a party did not act to the best of 
its ability in responding to the Department's information requests. 
Respondent argues that, in determining whether a party acted to the 
best of its ability, the Department considers, among other things, the 
accuracy and completeness of the information submitted, and whether the 
party has hindered the calculation of accurate dumping margins. As a 
result of the Uruguay Round Agreements Act (``URAA''), respondent 
asserts, the Department cannot apply an adverse inference without first 
making factual findings on the record to support any conclusion that a 
party failed to act to the best of its ability. See Preamble, 62 FR at 
27340. Furthermore, the Court of International Trade decisions in 
Borden, Inc. v. United States, 4 F. Supp. 2d 1221 (1998) (``Borden'') 
and Ferro Union, Inc. v. United States (``Ferro Union''), Ct. No. 97-
11-01973, Slip Op. 99-27 (March 23, 1999), 1999 CIT LEXIS 24, at *54 , 
hold that the Department must base any finding that a respondent failed 
to cooperate on record evidence, not on the mere absence of information 
on the record. Therefore, respondent concludes that the Department must 
either correct its preliminary decision to apply an adverse inference 
to these sales or provide a factual basis for its conclusion that KSC 
did not act to the best of its ability.
    KSC's second argument is that the administrative record for this 
case establishes beyond question that KSC acted to the best of its 
ability. See Preamble, 62 FR at 27341 (the Department will make 
determinations regarding a respondent's acting to the best of its 
ability on a fact-and case-specific basis); see also, NEC Home 
Electronics, Ltd. v. United States, 54 F. 3d 736, 742 (Fed. Cir. 1995); 
Atlantic Sugar, Ltd. v. United States, 744 F. 2d 1556, 1559 (Fed. Cir. 
1984) (The Department's determinations must be based on a complete and 
objective evaluation of the actual evidence on record). Respondent 
contends that all the evidence in the instant case demonstrates that 
KSC acted to the best of its ability, with no implication that KSC was 
uncooperative or that KSC impeded the investigation. Specifically, KSC 
claims that the record shows that it: (1) made repeated written and 
oral requests urging CSI to cooperate in providing the data The 
Department had requested, (2) offered to provide CSI with assistance in 
furnishing this data to The Department, (3) offered CSI the option of 
reporting proprietary information it did not want to reveal to KSC 
directly to the Department, and (4) submitted a voluminous amount of 
information during the course of the investigation and answered all

[[Page 24365]]

questions posed by the Department at verification, including those 
relating to the CSI issue. Thus, KSC concludes that the absence of data 
on the CSI sales should be attributed to the non-cooperation of CSI, 
but not of KSC.
    KSC's third point is that its extensive cooperation prohibits use 
of the most adverse facts available, even if the Department should find 
that it did not meet the ``best of its ability'' standard, because KSC 
``substantially cooperated'' in this investigation. See Roller Chain, 
Other Than Bicycle from Japan: Final Results and Partial Recission of 
Antidumping Duty Administrative Review, 63 FR 63,674 (1998); Certain 
Cut-to-Length Carbon Steel Plate from Sweden, 62 FR 46,947, 46,948 
(1997); Final Results of Review of Antidumping Duty Administrative 
Review of Certain Pasta from Italy, 61 FR 30326, 30329 (1996) (the 
Department's normal practice is to refrain from applying the most 
adverse inference possible in calculating a margin when a party has 
been cooperative).
    Respondent also refers to the previous distinction between 
cooperative and uncooperative parties under the Department's pre-URAA 
two-tiered Best Information Available (``BIA'') methodology. Under this 
methodology, the most adverse BIA was reserved only for parties that 
refused to provide requested information, not those parties that were 
cooperative and made every effort to obtain and provide information 
requested by the Department. Respondent contends that, even under the 
pre-URAA law, the Department would have been prohibited from applying 
an adverse inference against KSC in the instant case. Respondent states 
that the Department's failure to follow its own practice as to KSC in 
this case ``constitutes abusive agency action'' and that it is 
incomprehensible and unjustifiable for the Department to ignore KSC's 
immense efforts to comply with the Department's requests for 
information.
    KSC's fourth argument is that the Department's application of an 
adverse inference based on the ``erroneous presumption'' that, because 
they are affiliated KSC has sufficient ``control'' over CSI to compel 
that company to provide the requested data disregards the contrary 
evidence on record. Thereby, KSC argues, The Department violates both 
the antidumping statute and the Constitution. Respondent asserts that 
the Department's decision to apply adverse facts available was based on 
the erroneous assumption that KSC has operational or legal control over 
CSI and, as a result, could have obtained the requested information 
from CSI. Respondent does not dispute that KSC and CSI are affiliated 
parties, as defined by the statute, and agrees that normally it is 
reasonable to presume that closely affiliated parties have access to 
each other's documents and employees. What is illegal, KSC contends, is 
that the Department has refused to take into consideration the record 
evidence rebutting such a presumption in this case. KSC also claims 
that the Department's application of the affiliation definition in this 
manner raises federal due process concerns.
    Respondent points out that 19 U.S.C. Sec. 1677(33) provides that 
one party is deemed to ``control'' another party when the first party 
is ``legally or operationally in a position to exercise restraint or 
direction over the other person.'' Respondent argues that, although it 
is reasonable to presume that if parties are related under the statute 
they are in the best position to obtain information from each other, 
the judicial precedents supporting this proposition do not also support 
the Department's application of a non-rebuttable presumption that this 
is the case. Thus, KSC argues, the Department may not ignore evidence 
on the record that demonstrates that the parties do not have access to 
each other's documents or employees. See Koyo Seiko Co. v. United 
States, 92 F. 3d 1162 (Fed. Cir. 1996); Helmerich & Payne, Inc. v. 
United States (``Helmerich''), 24 F. Supp. 2d 304 (CIT 1998); Usinor 
Sacilor v. United States (``Usinor''), 907 F. Supp. 426, 428-29 (CIT 
1995); Koyo Seiko Co. v. United States, 905 F. Supp. 1112 (CIT 1995); 
Holmes Prods. Corp v. United States, 795 F. Supp. 1205, 1206-07 (CIT 
1992).
    Respondent argues that, in Helmerich, although the Court upheld the 
Department's decision to apply the facts available in that pre-URAA 
case in which the respondent twice failed to complete the 
questionnaire, it made a point of noting that it would have reached a 
different decision under the post-URAA law. In Usinor, respondent 
asserts, the Court had held that the Department should not have applied 
severely adverse BIA when missing data were beyond the control of the 
respondent; on remand, the Department agreed that the respondent could 
not realistically have collected the required data from its related 
subsidiaries. Respondent notes that, in the Preamble to its ``facts 
available'' regulation (19 C.F.R. Sec. 351.308), the Department 
acknowledged that it agreed with the substance of an argument that 
where a respondent has made a good-faith effort to obtain information 
from an affiliate, failure of the affiliate to provide the information 
should not give rise to an adverse inference. See 62 FR at 2341. Thus, 
the Department stated that it would continue to determine the 
application of adverse inferences on a fact- and case-specific basis.
    KSC asserts that the federal courts have been vigilant in rejecting 
claims that related corporate entities necessarily have access to each 
other's data. KSC argues that, in this respect, the federal courts have 
looked to other factors such as whether the requested documents were 
available during the regular course of business and whether the two 
parties operated as a single business unit. See Cooper Industries, Inc. 
v. British Aerospace, Inc., 102 F.R.D. 918, 919-20 (S.D.N.Y. 1984); 
Camden Iron & Metal, Inc., v. Marubeni Am. Corp., 138 F.R.D 438, 442 
(D.N.J. 1991); see also Glaxo, Inc. v. Boehringer Ingelhaim Corp., 40 
U.S.P.Q. 2d (BNA) 1848, 1850, 1851 n.4 (D.Conn. 1996) (the mere fact 
that documents are in the possession of a joint venturer does not 
automatically establish ``control'' over them). Respondent claims that 
the evidence on record demonstrates that KSC did not have the ability 
to obtain the requested information from CSI and that the Department 
learned during verification that, because of the structure and past 
practice of the joint venture, it was impossible for KSC to impose its 
will upon CSI. The fact that CSI is a petitioner (as well as a 
respondent) in this case is, according to KSC, the best evidence that 
KSC does not have operational control over CSI.
    Respondent argues that any action by a federal agency that is taken 
in total disregard of the administrative record raises due process 
concerns. See NEC Corp. v. United States, 151 F. 3d 1361, 1370 (Fed. 
Cir. 1998) cert. denied, 119 S. Ct. 1029 (1999) (if application of an 
excessive dumping margin as a result of an adverse inference deprives 
importers of significant property interests, a cognizable due process 
claim under the Fifth Amendment of the Constitution will exist); see 
also Techsnabexport, Ltd. v. United States, 795 F. Supp. 428, 435-36 
(CIT 1992) and cases cited therein.
    Respondent asserts that the Supreme Court has established a three-
part test to determine what procedures are required to comport with due 
process. This test balances the competing rights and interests at 
issue. See Mathews v. Eldridge, 424 U.S. 319, 334 (1976). If a statute 
is found to involve an ``irrebuttable presumption,'' the focus of this 
balance shifts to whether ``the presumption is not necessarily or 
universally true in fact,'' and whether ``the government has available 
a

[[Page 24366]]

`reasonable alternative means of making the crucial determination.''' 
See Rogers v. United States, 575 F. Supp. 4, 9-10 (D. Mont. 1982); 
Vlandis v. Kline, 412 U.S. 441, 452 (1973) Universal Restoration, Inc. 
v. United States, 798 F. 2d 1400, 1406 (Fed. Cir. 1986). Respondent 
contends that the Department's application of adverse facts available 
against KSC in the instant case based on the refusal of an ``adverse 
affiliate'' to provide information requested by the Department amounts 
to a denial of due process rights by improperly raising an irrebuttable 
presumption. Respondent argues that the facts on the record show that 
it is not ``universally true'' that a respondent can control the 
actions of its affiliate, particularly when the affiliate is a 
petitioner in the case. See Steven M. v. Gilhool, 700 F. Supp. 261, 
264-65 (E.D.P. 1988) (irrebuttable presumption can only survive if it 
is universally true). In this case, respondent argues, the Department 
has a reasonable alternative to an irrebuttable presumption available. 
The facts on record enable it to determine whether KSC actually does 
``control'' CSI, rather than presuming such control exists.
    KSC's fifth and final point is that the Department's decision to 
use the most adverse facts available contradicts important policy 
considerations underlying the antidumping law. One purpose of the 
adverse inference provision is to ensure that parties do not obtain a 
more favorable result by not cooperating in an agency proceeding. In 
this case, however, if the Department applies the adverse inference, 
CSI, the uncooperative petitioner, will benefit from refusing to 
provide information as a result of increased antidumping duties 
assessed on competing imports, whereas KSC, which has been a 
cooperative respondent, will be penalized by a significantly increased 
margin. Respondent contends that it is arguable that KSC would have 
been in a better position if it had refused to cooperate altogether, 
given that the highest margin alleged in the petition was lower than 
the margin calculated by the Department for KSC in its preliminary 
determination.
    Finally, respondent claims that CSI, by controlling what 
information the Department has available for calculating a margin, has 
``usurped the investigatory role'' assigned to the Department by 
defining the scope of the record. See Allied-Signal Co. Aerospace v. 
United States, 996 F.2d 1185, 1191 (Fed. Cir. 1993). Respondent 
concludes that the Department cannot allow any party, including a 
petitioner, to benefit from an attempt to control the results of the 
administrative process through its own unresponsiveness.
    In their rebuttal, petitioners allege that the Department's 
application of adverse facts available for KSC's sales through its 
affiliate CSI is warranted by the facts and the law, and should not be 
modified in the Department's final determination. Petitioners' rebuttal 
argument is based on two points. First, they argue, the Department's 
decision to apply adverse facts available is appropriate under Sec. 776 
of the Act. Petitioners argue that KSC failed to act to the best of its 
ability by not responding to Section E of the Department's 
questionnaire regarding CSI's further manufactured sales. KSC's claim 
that, based on the record, the Department can find only CSI to be 
uncooperative, and its claim that the Department's decision to apply 
adverse facts available is unlawful because it is based on the 
presumption that KSC has operational or legal control over CSI, lack 
merit. According to the petitioners, the factual basis underlying the 
Department's decision to apply adverse facts available is supported in 
the record and provides adequate justification for the decision. 
Petitioners state that the Department has determined that it will 
consider an affiliated party's non-compliance with the Department's 
requests ``as an omission imputable to the respondent'' which merits 
the application of adverse facts available. See Silicomanganese From 
Brazil, 62 FR 37869, 37873 (1997) (``Silicomanganese From Brazil '') 
and Roller Chain, Other Than Bicycle, From Japan, 61 FR 64328, 64329 
(1996). Due to KSC's significant ownership interest, CSI is 
undisputedly affiliated with KSC. As a result, petitioners argue, KSC 
had the burden of obtaining the requested information and providing it 
to the Department without regard to any alleged lack of cooperation 
from CSI. Therefore, the omission of CSI's further manufactured sales 
information is imputed to KSC and subjects KSC to the application of 
adverse facts available.
    Petitioners cite Silicomanganese From Brazil and Koyo Seiko Co., 
Ltd. v. United States, 92 F. 3d 1166 (Fed. Cir. 1996) as evidence that 
the respondent, in order to be excused from submitting requested 
information in the possession of the affiliate, bears the burden of 
demonstrating that it does not have control over and cannot compel an 
affiliated party to submit such information. Petitioners also cite 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From 
the People's Republic of China, 63 FR 63842, 63857 (1998) and 
Silicomanganese From Brazil as evidence that the Department will apply 
adverse facts available when a respondent fails to meet its burden of 
demonstrating that it cannot obtain requested information in the 
possession of another party. According to petitioners, KSC failed to 
meet its burden to establish in that it acted in the best of its 
ability to obtain the requested information from CSI and that it could 
not have exerted control over CSI to obtain the information. 
Petitioners conclude that, despite CSI's Shareholders' Agreement, which 
shows that KSC had the right and the powers to exert such control, KSC 
did not attempt to exercise any of these rights and powers.
    Petitioners support this conclusion by arguing that KSC failed to 
have its representatives on CSI's Board of Directors call a board 
meeting to address the lack of cooperation received by KSC from CSI, 
that the lack of cooperation was not discussed during a regular 
quarterly CSI board meeting, that during verification KSC officials 
acknowledged that this issue was not discussed among the joint venture 
partners, and more significantly, nothing on the record shows that KSC 
made any efforts to enforce its right under the Shareholders' 
Agreement. Petitioners argue that KSC should have exerted control over 
CSI and states that the fact that CSI is a petitioner in the immediate 
investigation does not establish that KSC lacked control over CSI. 
Petitioners also argue that KSC has not substantiated on the record its 
claims that CSI's officers refused to cooperate in responding to the 
Department's requests. The three letters from CSI's CEO placed on the 
record by KSC, according to petitioners, do not constitute refusals by 
CSI to provide the requested information. Petitioners cite letters 
dated October 29, 1998, November 6, 1998 and December 14, 1998 as 
evidence for this conclusion. Petitioners point out that KSC's counsel 
claimed for the first time during verification that, in response to 
CSI's concern regarding the disclosure of highly sensitive information 
as evidenced in these letters, KSC's counsel offered to compile a 
response maintaining the confidentiality of the CSI's information, but 
that the offer was rejected by CSI. Petitioners argue that there is no 
evidence of such an offer by KSC counsel in the letters provided for 
the record or in KSC's responses to the Department's supplemental 
questionnaires. Because KSC failed to substantiate and establish that 
it acted to the best of its ability in regard to CSI's further 
manufactured sales, petitioner

[[Page 24367]]

conclude that the Department's decision to apply adverse facts 
available is justified and the Department should continue to use 
adverse facts available in its final determination.
    Petitioners' second point is that the Department's choice of facts 
available represents a valid exercise of its discretion and is 
consistent with the statutory purpose of applying adverse fact 
available. Petitioners disagree that KSC's cooperation in other aspects 
of the investigation prohibits the use of adverse facts available and 
that this remedy contravenes the purpose underlying the use of adverse 
inferences. Petitioners cite Sec. 776(b) of the Act which discusses the 
information the Department may rely on in selecting adverse facts 
available and the discretion afforded to the Department in the 
application of adverse facts available. Petitioners contend that the 
Department's analysis in employing adverse facts available for KSC's 
sales through CSI in the its Preliminary Determination was in complete 
accordance with the Department's practice. See Stainless Steel Wire Rod 
From Italy, 63 FR 40422, 40428 (1998). Petitioners also cite National 
Steel I, 870 F. Supp. at 1136 and Certain Welded Carbon Steel Pipes and 
Tubes from Thailand, 62 FR 53808, 53820-53821 (1997) as evidence that, 
even assuming that KSC was substantially cooperative, the Department 
had broad discretion to select a level of adverse facts available that 
appropriately addressed KSC's failure to respond to the Department's 
Section E questionnaire for its sales through CSI. In response to KSC's 
claims that the remedy violates the purpose of the underlying use of 
adverse inferences, petitioner argue that this remedy of applying 
adverse facts available will serve to induce respondents to use all 
reasonably available means to exercise control over their affiliates in 
order to ensure that complete and accurate reporting of data is made to 
the Department for the calculation of accurate dumping margins. In 
conclusion, petitioner state that the Department, in its final 
determination, should adhere to its decision to apply adverse facts 
available.

Substantial Value Added

    Petitioners contend that KSC's argument that it should not have 
been required to report further manufacturing information because CSI 
added substantial value to KSC's subject merchandise is devoid of 
merit. See Sec. 772(e) of the Act (19 U.S.C. Sec. 1677a(e)); SAA at 
825; and 19 C.F.R. Sec. 351.402(c)(2). Petitioners contend that, based 
on average purchase prices and reselling prices set forth by KSC in its 
November 10, 1998 letter to the Department, CSI's sales of further 
manufactured merchandise, which include cold-rolled steel, corrosion-
resistant steel and pipe, do not meet the 65 percent threshold outlined 
in the Department's regulations. Petitioners argue that KSC's claim 
that the 65 percent test should not be seen as a ``bright-line rule'' 
must be rejected because the Department has stated that the 65 percent 
rule is, in fact, a ``bright-line test.'' See Preamble, 62 FR at 27352. 
Even if KSC could satisfy the Department's test, petitioners argue that 
the special rule would not excuse KSC's failure to report CSI's further 
manufacturing information requested by the Department because the 
special rule is intended to relieve administrative burden, not excuse 
the reporting of required data. Petitioners contend that, in this case, 
the Department's calculations would not have been burdensome given that 
CSI's further manufacturing consisted predominantly of one or two 
additional processes. Petitioners conclude that, even if the 65 percent 
threshold had been met, it is likely that the Department would have 
used the actual further manufacturing data rather than one of the 
alternatives permitted by the statute. Accordingly, state petitioners, 
there is no justification for KSC's failure to respond to the 
Department's Section E questionnaire and as a result, the Department's 
application of adverse facts available remains appropriate.
    Department's Position: We disagree with KSC with respect to the use 
of the ``special rule'' and with KSC and Sumitomo with respect to the 
Department's decision to use adverse facts available for the CSI sales.

Decision Not To Apply the ``Special Rule''

    As KSC has implicitly acknowledged, the extent to which CSI adds 
value to KSC merchandise through further processing does not meet the 
Department's normal 65 percent standard even for the further 
manufactured products with the highest level of value added. 
Furthermore, for products further manufactured into cold-rolled steel 
and pipe, the value added is less than half of the price charged to 
CSI's unaffiliated customer and a small amount of KSC's subject 
merchandise is resold by CSI ``as is,'' with no value added at all.
    Although the 65 percent benchmark is not an inflexible rule, it 
does provide useful guidance as to when it is no longer appropriate to 
consider certain sales in determining a producer's margin. The degree 
of value added by CSI simply does not reach this threshold, especially 
in view of the fact that the CSI sales represent a very significant 
portion of KSC's total U.S. sales. It would not be appropriate to 
abandon the Department's normal practice in this case for a much vaguer 
standard whereby the Department would obtain proxy values for sales 
through any affiliate whose value added could be considered 
``substantial.'' Thus, the Department properly has not applied the 
``special rule'' of section 772(e) of the Act to the CSI sales.

Use of Adverse Facts Available for the CSI Sales

    It is undisputed that KSC's sales of subject merchandise through 
its affiliate CSI are constructed export price (``CEP'') sales. 
Therefore, the statute requires that the U.S. price of these sales for 
margin calculation purposes be calculated by using CSI's price to the 
first unaffiliated U.S. customer and adjusted, pursuant to section 
772(c) and (d) of the Act, to account for certain expenses incurred by 
CSI and KSC. These adjustments include, but are not limited to, the 
costs associated with further manufacturing performed by CSI prior to 
its sale to the unaffiliated customer. In essence, for purposes of the 
CEP calculation, the statute treats the exporter and the U.S. affiliate 
collectively, rather than independently, regardless of whether the 
exporter controls the affiliate. Accordingly, KSC's argument that it 
does not ``control'' CSI is misplaced and irrelevant.
    Because the statute requires that the Department base its margin 
calculations for the CSI sales on record information concerning the CSI 
sales themselves, the Department required that KSC and CSI, 
collectively, provide the necessary price and cost data for KSC's U.S. 
sales through CSI. It is also undisputed that KSC and CSI failed to 
provide this necessary information. Because the information possessed 
by a U.S. affiliate such as CSI is essential to the dumping 
determination, the antidumping law is thwarted if the affiliate refuses 
to provide the necessary information.
    Section 776(a) of the Act requires that the Department use facts 
otherwise available when necessary information is not on the record, or 
an interested party withholds requested information, fails to provide 
such information in a timely manner, significantly impedes a 
proceeding, or provides information that cannot be verified. As the 
necessary information with respect to these sales is not on the record, 
the Department

[[Page 24368]]

must use the facts otherwise available in calculating the margins for 
the CSI sales.
    Section 776(b) of the Act authorizes the Department to use an 
adverse inference in determining the facts otherwise available whenever 
an interested party has failed to cooperate with the Department by not 
acting to the best of its ability to comply with requests for 
information. KSC and CSI have neither provided the data on CSI's sales, 
as requested by the Department, nor demonstrated to the Department's 
satisfaction that this is not possible. Therefore, the Department finds 
that KSC and CSI have failed to cooperate by not acting to the best of 
their ability to comply with the Department's requests for information 
with respect to the CSI sales. Therefore, we have used an adverse 
inference in selecting the facts available with respect to the CSI 
sales.
    Allowing a producer and its U.S. affiliate to decline to provide 
U.S. cost and sales data on a large portion of their U.S. sales would 
create considerable opportunities for such parties to mask future sales 
at less than fair value through the U.S. affiliate. The fact that the 
affiliate is a petitioner does not allay such concerns. Thus, this fact 
does not constitute an exception to the principle that the Department 
may make an adverse inference with respect to sales for which data is 
not provided unless the foreign exporter and its U.S. affiliate have 
acted to the best of their ability to provide such data.
    While it is clear that KSC and CSI collectively have not acted to 
the best of their ability, we also disagree with KSC's claim that it 
alone acted to the best of its ability. At verification, the Department 
investigated this claim. See KSC Verification Report at 20-23. After 
careful consideration of all of the evidence on record, the Department 
finds that KSC did not act to the best of its ability with respect to 
the requested CSI data.
    CSI is a joint venture between KSC and a large Brazilian mining 
operation, Companhia Valle do Rio Doce (``CVRD''). Through their 
respective U.S. affiliates, KSC and CVRD each own 50 percent of CSI. 
KSC's claim that it acted to the best of its ability with respect to 
this issue rests on its assertion that it was powerless to compel CSI 
to provide the Department with this data, given that CSI, as a 
petitioner in this case, refused to cooperate. Some of the most 
important evidence contradicting KSC on this issue, including 
information pertaining to the board and the Shareholders' Agreement, 
constitutes business proprietary information, and are discussed only in 
our proprietary Analysis Memorandum, which is hereby incorporated by 
reference. Generally, however, the record shows that, although KSC 
could have been much more active in obtaining the cooperation of CSI in 
this investigation, it limited its efforts to merely requesting the 
required data and otherwise took a ``hands-off'' approach with respect 
to CSI's alleged decision not to provide this data. For example, KSC 
officials stated that KSC did not instruct its members of the CSI board 
to address the issue, did not invoke the Shareholder's Agreement, and 
did not discuss this issue with its joint venture partner. This does 
not reach the ``best efforts'' threshold embodied in Sec. 776(b). 
Furthermore, the fact that KSC has provided a great deal of information 
and has substantially cooperated with respect to other issues does not 
relieve it of the requirement to act to the best of its ability to 
provide the requested CSI information. With respect to the CSI sales, 
KSC has provided only minimal volume and value information and has not 
acted to the best of its ability to obtain further information. Thus, 
as to the missing CSI data, it cannot be said that KSC was fully 
cooperative and made every effort to obtain and provide the information 
requested by the Department. Therefore, even though full cooperation by 
KSC alone would not constrain the Department from using adverse facts 
available specifically with respect to the CSI sales, we do not agree 
with KSC's argument that it has ``substantially cooperated'' during 
this investigation.
    As indicated above, the Department has based its decision to use 
adverse facts available on its finding that KSC and CSI collectively 
did not act to the best of their ability with respect to the CSI data, 
not, as KSC claims, on any ``presumption'' that solely because the two 
companies are ``affiliated'' within the meaning of the statute, KSC 
necessarily has sufficient control to compel CSI to provide this data. 
As KSC has noted, the Department makes such decisions on a case-
specific basis, using the totality of the record evidence. See 
Preamble, 62 FR at 27341. That is what the Department has done in this 
case. The Department provided KSC with extensive opportunities, prior 
to and at verification, to explain and document its efforts to obtain 
the necessary data, and has considered all of this data in making its 
determination. While the Department has considered that the record 
supports KSC's claim that it did make some effort to obtain the data 
and that CSI's management rebuffed these efforts, the record also shows 
that KSC essentially acquiesced in CSI's decision not to provide this 
data. Given KSC's relationship with this 50/50 joint venture, as 
detailed in the Home Market Sales Verification Report, dated March 26, 
1999, this did not constitute making its best efforts to obtain the 
data. Because the Department did not rely upon any ``irrebuttable 
presumption'' of control arising out of the statutory definition of 
affiliation in reaching this determination, KSC's arguments based on 
this theory, including its due process argument, have no merit with 
respect to this case.
    Finally, KSC's claim that use of an adverse inference in this case 
will contradict the Department's policy of not rewarding uncooperative 
parties is likewise incorrect. As KSC notes, one purpose of an adverse 
inference is to ensure that parties do not obtain a more favorable 
result by not cooperating. However, KSC misconstrues this to mean that 
the Department can or should somehow take into account the effect of a 
dumping margin on other business interests of an interested party. We 
disagree. In applying an adverse inference, the Department can only 
reasonably ensure that the dumping margin determined for the subject 
merchandise is not less than the actual margin we would have found had 
the parties cooperated. We cannot reasonably predict or weigh the 
multitude of effects this might or might not have on the parties 
involved. In this case, we can only ensure that KSC and CSI do not 
obtain a more favorable dumping margin on subject merchandise. As an 
affiliated importer and/or seller of KSC's subject merchandise, CSI 
will be affected by any margin assigned to KSC's exports of this 
merchandise. Neither KSC nor CSI will be rewarded with more favorable 
dumping margins. Any benefit accruing to CSI from its non-cooperation 
will flow not from its role as an affiliate-respondent, but from its 
role as a U.S. producer of non-subject merchandise. Furthermore, KSC, 
as a 50 percent shareholder in CSI, will share in any such benefit. In 
addition, we note that it is not the use of the adverse inference which 
allows KSC's U.S. affiliate to restrict the scope of data on the 
record--it is CSI's decision to withhold that data and KSC's decision 
to acquiesce in this posture. Neither KSC nor CSI should be relieved of 
the obligation to report data on sales through CSI in this or future 
proceedings. Thus, while KSC's business relationships may involve 
certain internal conflicts of interest, the use of an adverse inference 
in determining the dumping margins on CSI sales does not contradict the 
Department's policies.

[[Page 24369]]

    For the final determination, the Department has used as adverse 
facts available the second highest calculated margin for an individual 
CONNUM. Although no party commented on the rate chosen as facts 
available in the preliminary determination, we have reexamined our 
choice for this final determination. In the preliminary determination, 
we used as the facts available margin the highest margin by CONNUM. 
However, upon reexamining that decision, we find that the margin chosen 
was not sufficiently within the mainstream of KSC's sales in that the 
rate was derived from sales of a product that accounted for a very 
small portion of KSC's total sales as well as the highest rate by 
CONNUM. In selecting the facts available margin for the final 
determination, we sought a margin that is sufficiently adverse so as to 
effectuate the statutory purposes of the adverse facts available rule 
to induce respondents to provide the Department with complete and 
accurate information in a timely manner. We also sought a margin that 
is indicative of KSC's customary selling practices and is rationally 
related to the transactions to which the adverse facts available are 
being applied. To that end, we selected a margin for a CONNUM that 
involved substantial commercial quantities and thus fell within the 
mainstream of KSC's transactions based on quantity. Finally, we found 
nothing on the record to indicate that the sales that we selected were 
not transacted in a normal manner.

Changes to the Department's SAS Computer Programming

    Comment 32: NKK's Clerical Error Allegation.
    NKK requests that the Department correct a ministerial error in the 
Department's preliminary calculation of NKK's dumping margin. NKK 
states that, in accordance with the Department's instructions, it 
reported all values in its U.S. and home market databases in the 
currency in which these values were incurred. NKK therefore reported 
all selling expenses in Japanese yen. NKK states that the Department, 
in its margin calculation program, intended to convert reported home 
market and U.S. price and expense amounts to U.S. dollars before 
determining NKK's sales-specific and weighted-average dumping margin. 
However, NKK concludes, the Department failed to convert U.S. direct 
and indirect expenses from Japanese yen to U.S. dollars when 
calculating the actual dumping margin.
    Specifically, NKK asserts that the Department, in calculating 
foreign unit price in U.S. dollars (FUPDOL), did not apply the 
appropriate exchange rate. NKK states that when the Department 
calculates FUPDOL in an exporter price calculation, U.S. direct and 
indirect expenses are not deducted from U.S. price in the calculation 
of net U.S. price (NETPRIU). Thus, U.S. direct and indirect expenses, 
through a commission offset adjustment, are added to normal value when 
calculating FUPDOL. However, in calculating NKK's preliminary dumping 
margin, the Department did not convert U.S. direct and indirect 
expenses prior to the FUPDOL calculation and, as a result, yen expenses 
were mistakenly added to a dollar unit value in calculating FUPDOL. NKK 
provided suggested computer programming language for use in correcting 
this error. Petitioners have not commented on this issue in their 
rebuttal brief.
    Department's Position: The Department agrees that this was an 
error, and has corrected the yen to dollar exchange rate conversion 
error in its final determination. Pursuant to Sec. 351.224 of the 
Department's regulations, the effective date of this correction will be 
30 days after the filing of the alleged clerical error.
    Comment 33: Changes to NKK's Preliminary Margin Calculation.
    Petitioners assert that the Department should correct three 
ministerial errors in the arm's length and model match programs used in 
calculating NKK's dumping margin. First, petitioners state that the 
Department should add the variable OVERRUNH to the KEEP statement for 
home market sales at line 786 of the model match program. Second, 
petitioners argue that The Department should revise line 98 (pertaining 
to the arm's length test) in the manner indicated in its case brief. 
Finally, petitioners argue that the Department should revise line 863 
of the model match program in the manner indicated in its case brief. 
Petitioners provided suggested computer programming language to 
implement these corrections. NKK did not rebut petitioners' allegation 
in their rebuttal brief.
    Department's Position: The Department agrees with petitioners and 
has made the appropriate changes to the arm's length program, model 
match program and margin calculation program.
    Comment 34: Changes to NSC's Preliminary Margin Calculation 
Program.
    NSC argues that the Department erred by including the sales to 
which it had assigned a facts available margin in its calculations of 
the margins for NSC's ``mainstream'' sales. NSC contends that these 
sales should have been excluded from the calculation once the facts 
available margins were assigned. Petitioners argue that the Department 
should reject NSC's argument and follow its established practice of 
determining the overall weighted average percent margin across all 
CONNUMS by using the value (U.S. price by CONNUM quantity by CONNUM), 
not just the quantity. Petitioners argue that unless this value is used 
in the calculation, the impact of facts available will be diminished.
    Secondly, NSC argues that because the Department matches prime 
products to prime products, and because there were no U.S. sales of 
non-prime merchandise, sales of non-prime merchandise were effectively 
eliminated from the preliminary results margin calculation program. 
However, NSC states, the Department erred by combining home market 
sales of prime and non-prime merchandise in the same CONNUM to 
calculate the percentage of sales above and below the cost of 
production. NSC argues that this creates a distorting error in the 
determination of whether sales of a particular CONNUM were made below 
cost. Thus, NSC argues, the preliminary margin determination is 
contrary to the Department's policy of conducting separate cost tests 
on prime and non-prime products. See Notice of Final Determination of 
Sales at Less than Fair Value: Stainless Steel Plate in Coils 
(``SSPC'') from the Republic of Korea, 64 FR 15444, 15455 (March 31, 
1999); Notice of Final Results of Antidumping Duty Administrative 
Review: Certain Cold-Rolled Carbon Steel Flat Products from the 
Netherlands, 61 FR 48465, 48466 (September 13, 1996). Petitioners have 
not commented on this argument.
    Department's Position: The Department agrees that prime and non-
prime merchandise should not be combined to determine whether sales 
fell above or below cost. As noted by NSC, it is the Department's 
longstanding policy to conduct separate cost tests for prime and non-
prime materials. Therefore, for the final determination, the Department 
has excluded non-prime merchandise from its analysis.
    However, the Department agrees with petitioners reasoning as to why 
some sales should be used in the calculation of the overall margin and 
continues to use the same analysis it did in the preliminary 
determination.

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

[[Page 24370]]

suspend liquidation of all entries of subject merchandise from Japan 
that were entered, or withdrawn from warehouse, for consumption on or 
after November 21, 1998 (90 days prior to the date of publication of 
the Preliminary Determination in the Federal Register) for KSC and 
those companies which fall under the ``all-others'' rate. In addition, 
we will continue to suspend liquidation of all entries of subject 
merchandise from Japan that were entered, or withdrawn from warehouse, 
for consumption on or after February 19, 1999 (the date of publication 
of the Department's preliminary determination) for NSC and NKK. We 
shall refund cash deposits and release bonds for NSC and NKK for the 
period between November 21, 1998 and February 19, 1999 (i.e., the 
critical circumstances period). 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:

------------------------------------------------------------------------
                                                               Margins
                          Company                             (percent)
------------------------------------------------------------------------
Nippon Steel Corporation...................................        19.65
NKK Corporation............................................        17.86
Kawasaki Steel Corporation.................................        67.14
All Others.................................................        29.30
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (``ITC'') of our determination. Because 
our final determination is affirmative, the ITC will, within 45 days, 
determine whether these imports are materially injuring, or threatening 
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, or withdrawn from warehouse, for 
consumption on or after the effective date of the suspension of 
liquidation.
    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Act.

    Dated: April 28, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-11286 Filed 5-5-99; 8:45 am]
BILLING CODE 3510-DS-P