[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30688-30710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13675]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-412-818]


Notice of Final Determination of Sales at Less Than Fair Value; 
Stainless Steel Sheet and Strip in Coils From the United Kingdom

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

ACTION: Notice of final determination of sales at less than fair value.

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EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Rast at (202) 482-1324 or 
Nancy Decker at (202) 482-0196, Antidumping and Countervailing Duty 
Enforcement Group III, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230.

Applicable Statute and Regulations

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

Final Determination

    We determine that stainless steel sheet and strip in coils (SSSS) 
from the United Kingdom (U.K.) are being, or is likely to be, sold in 
the United States at less than fair value (LTFV), as provided in 
section 735 of the Tariff Act. The estimated margins of sales at LTFV 
are shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    We published in the Federal Register the preliminary determination 
in this investigation on January 4, 1999. See Notice of Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination; Stainless Steel Sheet and Strip in Coils From the 
United Kingdom, 64 FR 85 (January 4, 1999) (Preliminary Determination). 
Since the publication of the Preliminary Determination, the following 
events have occurred:
    On February 23, 1999, the Department published a correction to the 
preliminary determination, incorporating corrected scope language. See 
Notice of Correction: Preliminary Determinations of Sales at Less than 
Fair Value, Stainless Steel Sheet and Strip from France, Germany, 
Italy, Japan, Mexico, South Korea, and United Kingdom; and Amended 
Preliminary Determination of Sales at Less Than Fair Value, Stainless 
Steel Sheet and Strip from Taiwan, 64 FR 8799 (February 23, 1999).
    The Department verified the responses of the respondent, Avesta 
Sheffield Ltd. and Avesta Sheffield NAD, Inc. (collectively 
``Avesta''), as follows: sections A (General Information), B (Home 
Market Sales), and C (U.S. Sales) of Avesta's responses from January 
18-31, 1999, in Sheffield, Stocksbridge, and Oldbury, U.K., and from 
February 10-12, 1999, in Schaumberg, Illinois; and section D (Cost of 
Production) questionnaire responses from February 15-22, 1999, in 
Sheffield, U.K. See Memorandum For the Files; ``Sales Verification of 
Sections A-C Questionnaire Responses Submitted By Avesta,'' April 1, 
1999 (Home Market Sales Verification Report); Memorandum For the Files; 
``U.S. Sales Verification of Sections A & C Questionnaire Responses 
Submitted By Avesta,'' March 23, 1999 (U.S. Sales Verification Report); 
Memorandum to Richard Weible, Director, Office Eight, Enforcement Group 
Three; ``Verification Report on the Cost of Production and Constructed 
Value Data,'' April 2, 1999 (Cost Verification Report). Public versions 
of these, and all other Departmental memoranda referred to herein, are 
on file in room B-099 of the main Commerce building.
    On January 29, 1999, Allegheny Ludlum Corporation, Armco, Inc., J&L 
Specialty Steel, Inc., Washington Steel Division of Bethlehem Steel 
Corporation, United Steelworkers of America, AFL-CIO/CLC, Butler Armco 
Independent Union, and Zanesville

[[Page 30689]]

Armco Independent Organization, Inc. (petitioners), requested a public 
hearing in this case. On February 4, 1999, Avesta also requested a 
hearing. However, on April 13, 1999, and on April 16, 1999, Avesta and 
petitioners, respectively, withdrew their requests for a hearing; 
therefore, none was held. On April 9, 1999, petitioners and Avesta 
filed case briefs in this matter; we received rebuttal briefs from 
petitioners and Avesta on April 16, 1999.

Scope of the Investigation

    We have made minor corrections to the scope language excluding 
certain stainless steel foil for automotive catalytic converters and 
certain specialty stainless steel products in response to comments by 
interested parties.
    For purposes of this investigation, the products covered are 
certain stainless steel sheet and strip in coils. Stainless steel is an 
alloy steel containing, by weight, 1.2 percent or less of carbon and 
10.5 percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80, 
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05, 
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36, 
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05, 
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36, 
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTS subheadings are provided for convenience and Customs 
purposes, the Department's written description of the merchandise under 
investigation is dispositive.
    Excluded from the scope of this investigation are the following: 
(1) Sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled 
sections, with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a 
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and 
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5 
percent chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional 
U.S. Note'' 1(d).
    In response to comments by interested parties the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this investigation. These excluded products 
are described below:
    Flapper valve steel is defined as stainless steel strip in coils 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves in compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this investigation. This stainless 
steel strip in coils is a specialty foil with a thickness of between 20 
and 110 microns used to produce a metallic substrate with a honeycomb 
structure for use in automotive catalytic converters. The steel 
contains, by weight, carbon of no more than 0.030 percent, silicon of 
no more than 1.0 percent, manganese of no more than 1.0 percent, 
chromium of between 19 and 22 percent, aluminum of no less than 5.0 
percent, phosphorus of no more than 0.045 percent, sulfur of no more 
than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05 
percent, and total rare earth elements of more than 0.06 percent, with 
the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this investigation. This ductile stainless 
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.'' \1\
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of this investigation. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is

[[Page 30690]]

currently available under proprietary trade names such as ``Gilphy 
36.'' \2\
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this investigation. This high-strength, 
ductile stainless steel product is designated under the Unified 
Numbering System (UNS) as S45500-grade steel, and contains, by weight, 
11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon, 
manganese, silicon and molybdenum each comprise, by weight, 0.05 
percent or less, with phosphorus and sulfur each comprising, by weight, 
0.03 percent or less. This steel has copper, niobium, and titanium 
added to achieve aging, and will exhibit yield strengths as high as 
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after 
aging, with elongation percentages of 3 percent or less in 50 mm. It is 
generally provided in thicknesses between 0.635 and 0.787 mm, and in 
widths of 25.4 mm. This product is most commonly used in the 
manufacture of television tubes and is currently available under 
proprietary trade names such as ``Durphynox 17.'' \3\
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    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this investigation. These include stainless 
steel strip in coils used in the production of textile cutting tools 
(e.g., carpet knives).\4\ This steel is similar to AISI grade 420 but 
containing, by weight, 0.5 to 0.7 percent of molybdenum. The steel also 
contains, by weight, carbon of between 1.0 and 1.1 percent, sulfur of 
0.020 percent or less, and includes between 0.20 and 0.30 percent 
copper and between 0.20 and 0.50 percent cobalt. This steel is sold 
under proprietary names such as ``GIN4 Mo.'' The second excluded 
stainless steel strip in coils is similar to AISI 420-J2 and contains, 
by weight, carbon of between 0.62 and 0.70 percent, silicon of between 
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent, 
phosphorus of no more than 0.025 percent and sulfur of no more than 
0.020 percent. This steel has a carbide density on average of 100 
carbide particles per 100 square microns. An example of this product is 
``GIN5'' steel. The third specialty steel has a chemical composition 
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent, 
molybdenum of between 1.15 and 1.35 percent, but lower manganese of 
between 0.20 and 0.80 percent, phosphorus of no more than 0.025 
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no 
more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing, and is supplied 
as, for example, ``GIN6''.\5\
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    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Period of Investigation

    The period of investigation (POI) is April 1, 1997 through March 
31, 1998.

Fair Value Comparisons

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

Transactions Investigated

    For its home market and U.S. sales, Avesta reported the date of 
invoice as the date of sale, given the Department's stated preference 
for using the invoice date as the date of sale. As explained in 
response to Comment 2, below, for this final determination we have 
continued to rely upon Avesta's invoice dates in the home and U.S. 
markets as the date of sale. However, should this investigation result 
in an antidumping duty order, we intend to scrutinize further this 
issue in any subsequent segment of this proceeding involving Avesta.
    We have excluded from our analysis all of Avesta Sheffield Inc.'s 
(ASI) U.S. resales of rejected merchandise. See Comment 6 below.
    Avesta has asserted that hot-rolled merchandise, which is sold only 
in the home market, should be considered a product of Sweden, and, as 
such, it should be excluded from the Department's analysis. Avesta has 
also asserted that a small amount of merchandise reported in the United 
States and/or home market databases is: (1) hot-rolled and cold-rolled 
in Sweden, and then further cold-rolled, annealed, and finally 
processed in the United Kingdom (affecting U.S. and home markets); and 
(2) hot-rolled and cold-rolled in Sweden and then further processed in 
the United Kingdom (affecting the home market). We have excluded from 
our analysis (1) Avesta's hot-rolled sales, and (2) those sales of 
merchandise that are first cold-rolled in Sweden. See Comment 13 below.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act, we considered 
all products produced by the respondent covered by the description in 
the ``Scope of the Investigation'' section, above, and sold in the home 
market during the POI, to be foreign like products for purposes of 
determining appropriate product comparisons to U.S. sales. Where there 
were no sales of identical merchandise in the home market to compare to 
U.S. sales, we compared U.S. sales to the next most similar foreign 
like product on the basis of the characteristics and reporting 
instructions listed in the Department's questionnaire.

Level of Trade

    In our preliminary determination, we found that one level of trade 
(LOT) existed for Avesta in the home market. Furthermore, we found that 
Avesta had two LOTs in the United States, one for EP sales and one for 
CEP sales, and we found that a CEP offset was appropriate in accordance 
with section 773(a)(7)(B) of the Tariff Act. As explained in Comment 4, 
below, and the preliminary determination, we find that (1) one LOT 
existed for Avesta in the home market; (2) two separate LOTs existed 
for Avesta in the United States; and (3) a CEP offset is appropriate.

Export Price and Constructed Export Price

    We calculated EP, in accordance with section 772(a) of the Tariff 
Act, for those sales where the merchandise was sold to the first 
unaffiliated purchaser in the United States prior to importation by the 
exporter outside the United States, and where CEP methodology was not 
otherwise warranted, based on the facts of the record. For further 
discussion on the classification of EP sales, see Comment 1 below.
    We calculated CEP, in accordance with section 772(b) of the Tariff 
Act, for those sales made by ASI, an affiliated U.S. sales company, to 
unaffiliated purchasers in the United States.
    We calculated EP and CEP based on the same methodology employed in 
the preliminary determination, except as noted below in ``Comments'' 
and in the Final Sales Analysis Memorandum from Charles Rast and Nancy 
Decker to The File, dated May 19, 1999 (Final Analysis Memorandum).

[[Page 30691]]

Normal Value

Home Market Viability

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

Affiliated-Party Transactions and Arm's-Length Test

    Sales to affiliated customers in the home market not made at arm's-
length prices (if any) were excluded from our analysis because we 
considered them to be outside the ordinary course of trade. See 19 CFR 
351.102. To test whether these sales were made at arm's-length prices, 
we compared, on a model-specific basis, the prices of sales to 
affiliated and unaffiliated customers net of all movement charges, 
direct selling expenses, and packing. Where, for the tested models of 
subject merchandise, prices to the affiliated party were on average 
99.5 percent or more of the price to unaffiliated parties, we 
determined that sales made to the affiliated party were at arm's 
length. See 19 CFR 351.403(c). In instances where no price ratio could 
be constructed for an affiliated customer because identical merchandise 
was not sold to unaffiliated customers, we were unable to determine 
that these sales were made at arm's-length prices and, therefore, we 
excluded them from our LTFV analysis. See, e.g., Final Determination of 
Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062, 37077 (July 9, 1993); Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber 
from Brazil, 63 FR 59509 (Nov. 8, 1998), citing to Final Determination 
of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062 (July 9, 1993). Where the 
exclusion of such sales eliminated all sales of the most appropriate 
comparison product, we made a comparison to the next most similar 
model.

Cost of Production Analysis

    In accordance with section 773(b)(3) of the Tariff Act, we 
calculated the weighted-average cost of production (COP) based on the 
sum of Avesta's cost of materials, fabrication, general expenses, and 
packing costs. In addition, on a transaction specific basis, we added 
to COP tolling costs for slitting work done by an unaffiliated party. 
We relied on Avesta's submitted COP, except in the following specific 
instances where the submitted costs were not appropriately quantified 
or valued:
    We revised Avesta's financial expense ratio using British Steel 
PLC's consolidated financial statements. See Comment 18 below.
    We adjusted the calculation of Avesta's general and administrative 
expense (G&A) ratio to use unconsolidated cost of goods sold of the 
producing entities. See Final Analysis Memorandum.
    We compared the weighted-average COP for Avesta to home market 
sales prices of the foreign like product, as required under section 
773(b) of the Tariff Act. In determining whether to disregard home 
market sales made at prices less than the COP, we examined whether such 
sales were made (i) in substantial quantities within an extended period 
of time, and (ii) at prices which permitted the recovery of all costs 
within a reasonable period of time. On a product-specific basis, we 
compared COP to home market prices, less any applicable movement 
charges, billing adjustments, and discounts and rebates.
    Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less 
than twenty percent of a respondent's sales of a given product were at 
prices less than the COP, we do not disregard any below-cost sales of 
that product because we determine that the below-cost sales were not 
made in ``substantial quantities.'' Where twenty percent or more of a 
respondent's sales of a given product during the POI are at prices less 
than the COP, we determine such sales to have been made in substantial 
quantities within an extended period of time, in accordance with 
sections 773(b)(2)(C)(i) and 773(b)(2)(B) of the Tariff Act. In 
addition, pursuant to section 773(b)(2)(D) of the Tariff Act, because 
we compared prices to POI-average COPs, we also determine that such 
sales were not made at prices which would permit recovery of all costs 
within a reasonable period of time. Therefore, we disregard the below-
cost sales.
    Our cost test for Avesta revealed that, for certain products, less 
than twenty percent of Avesta's home market sales of those products 
were at prices below Avesta's COP. We retained all sales of those 
products in our analysis. For other products, more than twenty percent 
of Avesta's sales of those products were at prices below COP. In such 
cases, we disregarded the below-cost sales, while retaining the above-
cost sales for our analysis. See Final Analysis Memorandum.

Price-to-Price Comparisons

    For those product comparisons for which there were sales at home 
market prices at or above the COP, we based NV on Avesta's sales to 
unaffiliated home market customers or prices to affiliated customers 
that we determined to be at arm's-length prices. We made adjustments 
for billing adjustments and discounts and rebates. We made deductions, 
where appropriate, for foreign inland freight, warehousing, and inland 
insurance, pursuant to section 773(a)(6)(B) of the Tariff Act. In 
addition, we made adjustments, where appropriate, for physical 
differences in the merchandise in accordance with section 
773(a)(6)(C)(ii) of the Tariff Act. We continued to make circumstance-
of-sale (COS) adjustments in accordance with section 773(a)(6)(C)(iii) 
of the Tariff Act.

Price-to-Constructed Value Comparisons

    In accordance with section 773(a)(4) of the Tariff Act, we based NV 
on constructed value (CV) if we were unable to find a home market match 
of identical or similar merchandise. We calculated CV based on the sum 
of Avesta's costs of materials, fabrication, SG&A expenses, profit, and 
U.S. packing expenses. See section 773(e) of the Tariff Act. In 
accordance with section 773(e)(2)(A) of the Tariff Act, we based SG&A 
expense and profit on the amounts incurred and realized by the 
respondent in connection with the production and sale of the foreign 
like product in the ordinary course of trade for consumption in the 
United Kingdom. We calculated the cost of materials, fabrication, and 
general expenses based upon the methodology described in the ``Cost of 
Production Analysis'' section, above. For selling expenses, we used the 
weighted-average home market selling expenses. Where appropriate, we 
made adjustments to CV in accordance with section 773(a)(8) of

[[Page 30692]]

the Tariff Act. For comparisons to EP, we made COS adjustments by 
deducting home market direct selling expenses and adding U.S. direct 
selling expenses. When we compared CV to CEP, we deducted from CV the 
weighted-average home market direct selling expenses.

Currency Conversion

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

Analysis of Interested Party Comments

Issues Relating to Sales

Comment 1: EP versus CEP sales

    Petitioners argue that the Department should reclassify Avesta's 
reported EP sales as CEP sales based on the evaluation of the 
activities of ASI, Avesta's U.S. affiliate. Petitioners, also assert 
that, in fact, the mere existence of the respondent's affiliate in the 
United States demonstrates that the respondent's sale should be 
classified as CEP sales.
    Petitioners claim that, when sales are made prior to importation, 
it is the Department's practice to evaluate the following: whether the 
merchandise is shipped directly to the unaffiliated buyer without being 
introduced into the physical inventory of the selling agent; whether 
direct shipment to the unaffiliated buyer is the customer channel for 
sales of the subject merchandise between the parties involved; and 
whether the selling agent in the United States acts only as a processor 
of the sales-related documentation and a communication link with the 
unaffiliated U.S. buyer. Referencing the last criterion, petitioners 
argue that the Department has amplified its policy on evaluating the 
level of involvement of U.S. subsidiaries by determining that such 
sales are appropriately classified as CEP sales in the following 
instances: the U.S. subsidiary was the importer of record and took 
title to the merchandise; the U.S. subsidiary financed the relevant 
sales transactions; the U.S. subsidiary arranged and paid for further 
processing; and the U.S. subsidiary assumed the seller's risk.
    Petitioners assert that there is ample precedent for re-classifying 
sales as CEP, where the Department determines that a U.S. affiliate's 
involvement in a sale is significant, but where the merchandise is not 
entered into a U.S. affiliate's inventory. Citing Extruded Rubber 
Thread from Malaysia: Final Results of Antidumping Duty Administrative 
Review, 63 FR 12752 (March 16, 1998) (Extruded Rubber Thread), 
petitioners argue that the Department determined sales to be CEP sales 
in circumstances where the U.S. sales force contacted the U.S. 
customer, negotiated sales terms, arranged for production and shipment, 
and issued final invoices and collected payment. In other instances, 
according to petitioners, the Department has re-classified the 
respondents' U.S. sales as CEP because the U.S. companies performed 
significant selling functions in the United States.
    According to petitioners, ASI satisfies the criteria established in 
Extruded Rubber Thread for reclassifying ASI's EP sales as CEP sales. 
Petitioners argue that, as in that case, ASI is responsible for all 
paperwork, invoicing, and transportation. Furthermore, petitioners 
contend, ASI is responsible for providing quotations to the customer in 
the U.S. and confirming prices with the U.K. mill. They cite the 
Department's U.S. Sales Verification Report, noting that ASI arranges 
shipment logistics for clearance through Customs and shipment to the 
customer, performs customer credit checks, extends credit, collects 
payment, maintains accounts receivables, holds inventory, issues order 
confirmations, inputs orders, sends mill certificates and packing 
lists, and issues the final invoice. Furthermore, according to 
petitioners, the Department's pre-selected sales described in the U.S. 
Sales Verification Report support reclassifying ASI's EP sales as CEP 
sales.
    Petitioners state it is evident from information collected by the 
Department at verification that ASI is not merely a ``paper 
processor'', and that although merchandise is customarily shipped 
directly to customers from the United Kingdom, ASI handles almost every 
significant aspect of making U.S. sales. Because ASI must, in general, 
retain employees to sell the subject merchandise, handle all the 
paperwork, arrange entry and transportation, administer customer 
accounts, and deal with late payments, its activities were not limited 
to that of a ``processor of sales-related documentation'' and 
``communication link'' with the unaffiliated buyers.
    Petitioners assert that the mere existence of ASI demonstrates its 
involvement in the U.S. sales process, and that its large staff 
comprising of an active sales force, billing and accounting staff, 
indicate that its activity must be ``significant''. According to 
petitioners, in the absence of ASI, the respondent would simply conduct 
operations from its home market. A true ``paper processing'' 
subsidiary, they state, would have an inexpensive office and small 
clerical staff with little more than telephone and facsimile equipment 
to communicate with the home office, and that an adjustment (for 
indirect selling expenses) to the starting price, while necessary, 
would be small. On the other hand, according to petitioners, a more 
extensive export market operation, such as ASI's, would result in a 
commensurately larger adjustment. Petitioners argue that, given ASI's 
extensive involvement in the selling process, the Department should 
deduct the indirect selling and operating costs of ASI from the 
starting price for all U.S. sales involving ASI.
    Avesta argues that the Department correctly classified the U.S. 
sales referenced by petitioners as EP sales. Avesta contends that 
petitioners' claim that ASI is responsible for providing quotations to 
the customer in the United States and confirming prices with the U.K. 
mill is deceptive. Avesta points to verified evidence demonstrating 
that the U.K. mill sets the price for EP sales because ASI has much 
less familiarity with the market price for such specialized products. 
Also, Avesta asserts that the Department reviewed sales documentation 
at verification, showing that ASI requested price guidance from the 
mill, and that the mill quoted prices to ASI for each of the EP 
customers during the POI. Avesta claims that the fact that ASI does not 
negotiate the terms of sales distinguishes ASI's role in the sales 
process from that of the affiliated U.S. sales agents in the cases 
cited by petitioners. In all of those instances, according to Avesta, 
the Department's decision to reclassify U.S. sales as CEP transactions 
was based, at least in part, on a finding that the U.S. sales agent was 
involved in the negotiation of the sales.
    Avesta indicates that record evidence shows that ASI's role in the 
sales process for certain sales of merchandise meets the Department's 
requirements for EP sales. According to Avesta, ASI's role for these 
sales is most similar to that of the U.S. affiliate in Stainless Wire 
Rod from Korea, in which the Department determined that the extent of 
the U.S. affiliate's involvement in the sales process was indicative of 
the involvement normally provided by a processor of sales-related 
documentation and a communications link. (See Stainless Wire Rod from 
Korea: Final Determination of Sales at Less Than Fair Value, 63 FR 
40404, 40419 (July 29, 1998) (Stainless Wire Rod from Korea). Avesta 
states that, similarly, the Department has

[[Page 30693]]

previously found that a U.S. affiliate whose functions include 
receiving orders, preparing and executing order confirmation, invoices, 
packing lists, and other sales-related documentation, as well as 
receiving and processing payments from customers, was not so 
substantial to conclude that it was more than a processor of documents 
or communications link.
    Avesta argues that petitioners' assertion that the mere existence 
of a U.S. affiliate constitutes evidence that the respondent's U.S. 
sales should be characterized as CEP sales is without basis in law or 
Departmental practice. Avesta contends that, in Stainless Wire Rod from 
Korea, where sales are made prior to importation through a U.S.-based 
affiliate to an unaffiliated customer in the United States, the 
Department has recently explained that it examines several factors to 
determine whether the sales warrant classification as EP sales. Avesta 
notes that it is not the mere existence of an affiliated U.S. sales 
agent that determines EP versus CEP treatment of U.S. sales, but the 
Department's analysis of the factors enunciated in its EP/CEP test.
    Avesta states that petitioners' arguments seem to ignore the fact 
that Avesta has reported only a small number of U.S. sales as EP sales, 
and that Avesta is not holding the position that all, or even a large 
number of U.S. sales, should be classified as EP sales. Avesta claims 
that, because this small quantity of sales clearly involved sales and 
negotiation by the U.K. mill for certain products, they were correctly 
classified by the Department as EP sales. Avesta asserts that this 
small quantity of EP sales, relative to total U.S. sales, demonstrates 
the inaccuracy of petitioners' characterization of the size and level 
of ASI, and that the activity of ASI's U.S. sales force must be 
significant. Avesta argues that petitioners' characterization of ASI's 
staff as ``large'' is not supported by record evidence and that 
petitioners give no indication of why the Department must assume that 
the activities of ASI's staff are focused on EP sales, which make up 
only a small percentage of total U.S. sales by ASI.
    Department's Position: We disagree with petitioners that Avesta's 
U.S. sales should be treated as CEP sales, and have continued to treat 
Avesta's EP-classified U.S. sales as EP sales in the final 
determination. Specifically, we disagree with petitioners' contention 
that ASI acts as more than a communications link and processor of 
sales-related documentation for sales classified by Avesta as EP during 
the POI.
    The statute defines EP 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 
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 v. United States, 841 F. 
Supp.1248-50 (CIT 1993); AK Steel v. United States, Court No. 97-05-
00865, 1998 WL 846764 at *6 (CIT 1998) (AK Steel). 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 the instant investigation, the sales in question were made prior 
to importation through Avesta's affiliated U.S. sales company, ASI, to 
an unaffiliated customer in the United States. With respect to the 
first prong of the indirect EP test, the record in this case indicates 
that the subject merchandise was shipped directly from the U.K. mill to 
the unaffiliated U.S. customers. Although, as we found at verification, 
a small amount of ASI's mill direct sales may be delayed at the 
customer's request and held by ASI, record evidence during the POI does 
not support petitioners' contention that ASI therefore ``holds 
inventory.'' In fact, our sales verification report specifically states 
that, with respect to ASI's maintaining of inventory, ``none is 
maintained for EP sales.'' See U.K. Sales Verification Report. With 
respect to the second prong, we verified that this pattern of direct 
shipment is a customary commercial channel between the parties 
involved, and there is no indication that the sales between the parties 
involved any departure from this pattern.
    As for the third prong, whether ASI's role in the sales process was 
limited to that of a ``processor of sales-related documentation'' and a 
``communications link,'' we found at verification that EP and CEP-
classified sales differ at the inquiry stage. Specifically, for EP-
classified sales, ASI is not involved in the negotiation of sales but 
merely contacts the U.K. mill, which sets a price for the sales. The 
mill quotes the price from the mill to ASI. ASI then adds amounts for 
duty, brokerage, freight and handling, and a set markup to derive the 
price charged to the customer. We examined documentation between the 
U.K. mill and ASI, including price quotes and other customer-related 
issues. See U.S. Sales Verification Report. As with Avesta's CEP sales, 
ASI arranges for shipment from the port to the customer, arranges for 
Customs clearance, invoices the customer, and collects payment.
    The facts discussed above show that the extent of ASI's involvement 
in the sales process, regarding certain customers whose sales were 
classified as EP, indicates that ASI plays an ancillary role normally 
played by a ``processor of sales-related documentation'' and a 
``communications link.'' While ASI is involved in document-processing 
and other secondary activities related to the sales of subject 
merchandise to the U.S. customer (e.g., clearing Customs, arranging for 
U.S. transportation, issuing invoices, and collecting payment), ASI had 
no substantial involvement in the sales process regarding certain 
customers whose sales were classified as EP, such as sales negotiation. 
For these EP-classified

[[Page 30694]]

sales, the record evidence demonstrates that ASI receives pricing 
information from the U.K. mill to which ASI adds a set mark-up and 
standard amounts to cover movement expenses. Therefore, ASI does not 
negotiate sales terms with U.S. customers for EP-classified sales, but 
rather relays pricing information between the U.K. mill and the U.S. 
customer.
    We disagree with petitioners that the mere existence of ASI 
demonstrates its significant involvement in the U.S. sales process. As 
affirmed by the Court in AK Steel, in determining whether sales should 
be classified as CEP sales, the Department's analysis focuses on the 
three requirements under the test, discussed above, all of which must 
be met in order to classify sales as CEP. If the petitioners' argument 
held true, the basis or need for such a test would not exist. Moreover, 
we note that the majority of Avesta's U.S. sales were reported and 
properly classified as CEP sales. ASI's main role is not for EP sales 
but rather for CEP sales. The U.S. Sales Verification Report indicates 
that ASI maintained a sales office for CEP sales, but that the work 
concerning EP sales, which would include only document processing, was 
done by the in-place staff.
    We disagree with petitioners' argument that ASI satisfies the 
criteria established in Extruded Rubber Thread for reclassifying ASI's 
EP sales as CEP. In that case, the Department's decision to reclassify 
certain U.S. sales as CEP was based, in part, on determining that the 
U.S. sales agent was involved in the negotiation of sales. The fact 
that ASI is not involved in the negotiation of the terms of these sales 
distinguishes ASI's role in the sales process from Extruded Rubber 
Thread. As noted above, while ASI is involved in document-processing 
and other secondary activities related to the sales of subject 
merchandise to the U.S. customer, ASI had no substantial involvement in 
the sales process, such as sales negotiation, regarding certain 
customers whose sales were classified as EP.
    The nature of the U.K. mill's involvement in the sales process for 
EP-classified sales, and ASI's ancillary role in the sales process for 
these sales, lead us to conclude that the EP-classified sales took 
place before the date of importation by the producer of the subject 
merchandise outside of the United States to an unaffiliated purchaser 
in the United States. Therefore, for the final determination, we have 
continued to treat Avesta's EP-classified sales as EP.

Comment 2: Date of Sale

    Petitioners argue that order date is the proper date for 
establishing the date of sale for all sales. They note that, while the 
Department used the invoice date as the date of sale for both home 
market and U.S. sales in the preliminary determination, it indicated 
that it would fully examine the issue at verification and incorporate 
its findings, as appropriate, in its analysis for the final 
determination. Petitioners note that the Department stated that, if 
order confirmation was found to be the appropriate date of sale, it may 
resort to facts available for the final determination, to the extent 
the information has not been reported.
    Petitioners contend that, although Avesta claims invoice date 
should be used to establish the date of sale because the regulations 
state that the Department will ``normally'' use the date of invoice as 
the date of sale, Avesta's reliance on certain sections of the 
regulations and certain cases is selective and misrepresentative. 
According to petitioners, even in cases where the invoice has been used 
to establish the date of sale, invoice date is conditionally or 
provisionally accepted as the date of sale, ``* * * unless the record 
evidence demonstrates that the material terms of sale, i.e., price and 
quantity are established on a different date.'' (See Certain Welded 
Carbon Steel Pipes and Tubes from Thailand: Final Results of 
Administrative Review, 63 FR 55578, 55587-55588 (October 16, 1998) 
(Pipe and Tubes from Thailand).)
    Petitioners indicate that record evidence in this case demonstrates 
that order date is the proper date for all U.S. and home market sales. 
They contend that the Department considers date of sale to be a factual 
issue, decided on a case-by-case basis. According to petitioners, in 
the Circular Welded Non-Alloy Steel Pipe from the Republic of Korea: 
Final Results of Antidumping Administrative Review, 63 FR 32833, 32835 
(June 16, 1998) (Circular Pipe from Korea), the Department ruled that 
the facts of the case indicated a specific sales pattern that justified 
invoice date as the date of sale, even though the circumstances were 
not specifically noted as an exception in the regulations. Despite 
Avesta's attempts to downplay the importance of manufacturing to order, 
petitioners argue that it is clear from the U.S. and home market sales 
verification reports and exhibits that the company does manufacture to 
order, and that the evidence indicates that price and quantity are set 
on the order date. Petitioners also argue that there is significant 
evidence of a long lag time across all U.S. sales (except resales and 
consignment sales), and that in the rare instances where changes in the 
material terms of sales are made, Avesta issues a revised order 
acknowledgment.
    Petitioners argue that the standard tolerance for the steel 
industry (including Avesta) is plus or minus ten percent from the 
quantity specified. (See Certain Cold-Rolled Carbon Steel Flat Products 
from the Netherlands: Final Results of Antidumping Duty Administrative 
Review, 64 FR 11829 (March 10, 1999) (Cold-Rolled Steel from the 
Netherlands). They contend that Avesta did not provide the Department 
at verification any documentation in support of its alternative 
percentage for quantity tolerance. As a result, for the final 
determination, the petitioners urge the Department to accept the 
industry standard definition and determine that changes to order 
quantities of ten percent do not constitute a change in the order. 
Petitioners argue that the Department's review of Avesta's sales-
related documentation presented at verification indicates that, in 
every instance where Avesta supplied sufficient information, the 
material terms of sale were set on the order date (or change order 
date) and did not change prior to shipment and invoice. They contend 
that this evidence refutes Avesta's claim that price and quantity are 
not known until invoice date, which, for U.S. sales, is often many 
months after the order date.
    Petitioners also argue that Avesta demonstrated at verification 
that the prices set to customers in the United States are normally 
determined many months prior to invoicing, on the order or change order 
date, while prices set for home market customers are normally 
determined on the order date several weeks prior to invoicing. As a 
result, petitioners contend that Avesta's argument that price-setting 
in the two markets is defined by invoice date is commercially 
incompatible. Instead, petitioners assert, the degree to which a party 
sells at less than fair value should be determined by comparing the 
pricing activity when U.S. sales terms are confirmed and home market 
sales terms are confirmed. According to petitioners, the Department's 
regulations state that a date other than invoice date may be used where 
a different date better reflects the date upon which the material terms 
of sale were established by the exporter or producer. They note that 
the nature of Avesta's sales process and its documentation satisfy the 
Department's policy outlined in the preamble of the new regulations 
that

[[Page 30695]]

``* * * the Department is presented with satisfactory evidence that the 
material terms of sale are finally established on a date other than the 
date of invoice, the Department will use that alternative date as the 
date of sale.'' (See Antidumping Duties: Countervailing Duties, 62 FR 
27296, 27349 (May 19, 1997). Thus, petitioners request that the 
Department consider the order date (or change order date, if 
appropriate) as the date of sale.
    Avesta argues that the Department correctly used invoice date as 
the date of sale in its preliminary determination. It contends that the 
Department has a regulatory preference for using invoice date as the 
date of sale in the absence of evidence that a better date reflects the 
date on which the material terms of sale are established by the 
exporter or producer. (See Stainless Steel Plate in Coils from South 
Africa: Final Determination of Sales at Less Than Fair Value, 64 FR 
15458, 15463 (March 31, 1999) (citing 19 C.F.R. Sec. 351.401(i)). 
Avesta asserts that the Department's regulations establish a rebuttable 
presumption that the invoice date will serve as the date of sale, and 
that the Department's commentary on the regulations states that this 
decision reflects the Department's experience with normal business 
practice. Avesta states that, because petitioners have failed to 
establish record evidence justifying the use of order date, the 
Department should confirm in the final determination that invoice date 
properly establishes Avesta's date of sale.
    Avesta contends that its questionnaire responses and verification 
exhibits demonstrate that the material terms can and often do change 
between order and invoice date for all the U.K. entities other than 
Billing, noting that due to the nature of Billing's business, changes 
between order and invoice date are unlikely. Avesta also argues that 
the Department should reject petitioners' claim that the standard 
quantity tolerance in the steel industry is plus/minus 10 percent, and 
that it has provided several examples on the record in this case of 
quantity changes made after order date beyond a ten percent tolerance 
level.
    Avesta rejects petitioners' argument that order date is the 
appropriate date of sale because Avesta's situation is similar to that 
of the respondent in Circular Pipe from the Korea. Avesta states that 
in Stainless Steel Plate in Coils from Belgium: Final Determination of 
Sales at Less Than Fair Value, 64 FR 15476 (March 31, 1999) (Stainless 
Steel Plate in Coils from Belgium), petitioners similarly argued that 
the appropriate date of sale for the U.S. market was order date given 
that there exists a long lag time between order and invoice date across 
all U.S. sales, and that this lag time is considerably greater, on 
average, for U.S. sales than for home market sales. In that case, 
however, the Department distinguished its determination in Circular 
Pipe from Korea and concluded that the appropriate date of sale was 
invoice date. Avesta notes that, in Stainless Steel Plate in Coils from 
Belgium, the Department disagreed with petitioners' reliance on 
Circular Pipe from Korea to support the argument that the longer lag 
time between the date of purchase order and the date of invoice for the 
U.S. market, as compared to the time lag on the home market, justifies 
the use of order date as the date of sale. First, Avesta notes, in 
Circular Pipe from Korea, the Department verified that the changes to 
terms of sale were infrequent and not material in nature. Second, 
Avesta argues, Circular Pipe from Korea involved an administrative 
review, where the Department makes monthly (rather than annual) 
weighted-average comparisons; therefore, the differences in time lags 
between the markets were significant for comparison purposes. Avesta 
asserts that, unlike the respondent in Circular Pipe from Korea, Avesta 
has submitted numerous examples of changes in terms of sale between 
order date and invoice date.
    Department's Position: We agree with Avesta that invoice date is 
the correct date of sale for all home market and U.S. sales in this 
investigation. Under our current practice, as codified in the 
Department's Final Regulations at section 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 Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Japan: Notice of Final Determination 
of Sales at Less Than Fair Value, 64 FR 24239 (May 6, 1999) (Steel 
Products from Japan). In some instances, however, 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 62 FR 27296 (1997). Therefore, 
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 evidence of the respondent's selling 
practice points to a different date on which the material terms of sale 
were set.
    In the present case, in response to the Department's original 
questionnaire, Avesta reported invoice date as the date of sale in both 
the U.S. and home markets. To determine whether Avesta and ASI 
accurately reported the date of sale, the Department included in its 
October 28, 1998, questionnaire a request for additional information 
regarding changes in the material terms of sale subsequent to order 
date and asked Avesta to report order date for all U.S. and home market 
sales. In its November 23, 1998, response, Avesta indicated that 
invoice date best reflects the date on which the terms of home market 
sales are established. Avesta also indicated that changes can and do 
occur in price and quantity between order date and invoice date for a 
large number of sales, and that the Department's request would be 
extremely burdensome. Avesta noted that it does not have computerized 
records across all five reporting U.K. entities that would allow it to 
obtain order date information. Also, Avesta indicated that invoice date 
is consistent with its internal accounting practices. Avesta reported 
order date for the vast majority of its U.S. sales. For purposes of our 
Preliminary Determination, we accepted the invoice date as the date of 
sale subject to verification.
    At verification, we closely examined Avesta's and ASI's selling 
practices. We found that each U.K. entity and ASI records sales in its 
financial records by date of invoice. For the home market, we reviewed 
several sample sales for which the material terms of sale (price and 
quantity) changed subsequent to the original order across all the U.K. 
entities other than Billing (see Home Market Sales Verification Report 
and Final Analysis Memorandum). Additionally, during our review of 
sample sales, we noted instances where order information changed for 
reasons other than changes to price or quantity. For example, we 
reviewed several sample sales for which the original order was amended 
because of changes to delivery week and/or delivery address. In these 
instances, the Avesta entity updated its computer system to reflect the 
amended order and issued an order re-acknowledgment to the customer 
noting the change. We found that, because the computer systems differ 
across all the entities, the effect of these changes on the original 
order date information maintained in the systems also differs. We 
observed, for example, that the modified information in the computer 
systems for several of the entities reflected the date of the latest 
change,

[[Page 30696]]

regardless of the type of change, or number of changes. Because the 
computer systems and data maintained in these systems regarding order 
date information (including changes made to orders) differ across all 
the entities, we found that Avesta could not consistently distinguish 
between changes made to the material terms of sale from other types of 
changes. See U.S. Sales Verification Report, Home Market Sales 
Verification Report, and Final Analysis Memorandum.
    Consequently, we disagree with petitioners' claim that the order 
date (or change order date) is the most appropriate date of sale for 
Avesta's U.S. and home market sales because the material terms of sale 
would not change after that date. 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 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. (See Steel Products from Japan.)
    With respect to changes in quantity, we disagree with petitioners' 
argument that, because Avesta did not provide evidence at verification 
supporting its alternative percentage quantity tolerance, the 
Department should accept what petitioners claim to be the industry 
standard definition and determine that changes to order quantities of 
up to ten percent do not constitute a change in the order. There is no 
evidence on the record in this case to suggest that the standard 
tolerance for the steel industry (including Avesta) is plus or minus 
ten percent from the quantity specified. We note that the discussion in 
Cold-Rolled Steel from the Netherlands concerning the industry standard 
definition, as cited by petitioners, is referenced only in respondent's 
comments of that determination, not in the Department's positions. 
Also, Cold-Rolled Steel from the Netherlands involved different 
merchandise (cold-rolled carbon steel flat products), and not 
merchandise subject to this investigation. There is no evidence on the 
record in the present case indicating that the percentage quantity 
tolerances for both products are the same. In Pipes and Tubes from 
Thailand, 63 FR at 55578, 55588, the Department indicated that ``while 
we agree with petitioners that changes consistent with the tolerance 
level established in the contract may establish a binding agreement on 
quantity at the contract date, our analysis of the sample contract and 
corresponding invoices reveals that changes frequently were made beyond 
the agreed upon tolerance levels. Where such changes occurred 
frequently after the contract date, we have relied upon a later date.''
    We disagree with petitioners' argument that the Department's 
determination in Circular Pipe from Korea is applicable to this 
investigation because Avesta manufactures to order, and because there 
is a long time lag between the order date and invoice date for Avesta's 
U.S. sales, as compared to the time lag in the home market. The facts 
in the present case are distinguishable from those in Circular Pipe 
from Korea for two reasons. First, in Circular Pipe from Korea, the 
Department verified that changes to terms of sales were infrequent and 
not material in nature. As noted above, at verification we reviewed a 
significant number of instances in both the home market and U.S. where 
the material terms of sale (price and quantity) changed subsequent to 
the original order. Second, unlike this case, Circular Pipe from Korea 
involved an administrative review, where the Department makes monthly, 
rather than annual, weighted-average comparisons, and consequently, the 
differences in time lags between the markets were significant for 
comparison purposes. (See Stainless Steel Plate in Coils from Belgium.)
    Based on Avesta's representation, and as a result of our 
examination at verification of sample sales and each entity's selling 
records kept in the ordinary course of business, we are satisfied that 
the invoice date should be used as the date of sale because it best 
reflects the date on which the material terms of sale were established 
for Avesta's home market and U.S. sales.

Comment 3: Sales for Consumption

    Petitioners argue that the Department should apply facts available 
to the volume of merchandise sold to Avesta Sheffield Distribution, 
Ltd. (AVSD), one of the U.K. sales entities, for consumption that could 
not be linked to AVSD's resales. They note that in its November 2, 
1998, supplemental questionnaire response, Avesta did not include in 
its home market sales database home market sales made to its affiliate 
AVSD given that there was no practical means available to determine 
which of those sales were made to AVSD for consumption and which were 
made to AVSD for resale.
    Petitioners indicate that, while AVSD reported all of its sales of 
subject merchandise from Avesta's U.K. mills (with the exception of 
those sales identified in the home market sales verification report as 
``processed sales--supplier id untraceable''), it did not report the 
coils purchased from the U.K. mills consumed in the production of non-
subject merchandise. They note that Avesta reported, on November 23, 
1998, in a separate database its home market sales made from Avesta 
Sheffield, Ltd. (ASL) and Avesta Sheffield Precision Strip, Ltd. (SPS) 
(U.K. producing mills) to AVSD, and that these sales were not included 
in the preliminary margin analysis. Petitioners also state that the 
Department did not address the issue of AVSD's sales for consumption in 
the home market in the preliminary analysis memorandum or the Federal 
Register notice. They indicate that the preliminary margin analysis did 
not include the total quantity and value of sales by the mills to AVSD 
of the subject merchandise because the volume of sales consumed by AVSD 
to produce non-subject merchandise cannot be linked. Petitioners assert 
that, for the final determination, the Department should apply adverse 
facts available to the volume of sales sold by the mills to AVSD for 
consumption that were not included in AVSD's database. Therefore, the 
Department should apply the highest reported home market price and 
lowest reported U.S. price to the volume of sales sold by the mills to 
AVSD for consumption.
    Avesta argues that the Department should reject petitioners' 
argument and affirm its preliminary decision to exclude from its 
analysis the sales made by Avesta's mills to AVSD for consumption. 
Avesta contends that use of facts available is inappropriate because 
the company, to the best of its ability, fully complied with the 
Department's reporting requirements. Moreover, despite significant 
burden, Avesta emphasizes that it reported two home market databases.
    Avesta asserts that, none of the situations referenced in section 
351.308(a) of Commerce's regulations (19 CFR 351.308(a)) authorizing 
the Department to use facts available are present in this case. Avesta 
notes that it explained in its response that it did not have the 
practical means available to determine which mill sales were made to 
AVSD for consumption and which mill sales were made to AVSD for resale. 
Avesta states that the Department's review of the sales process at 
verification confirmed the accuracy of this claim and the home market 
sales verification report demonstrates that Avesta correctly reported 
that AVSD could not link mill sales to its resales.

[[Page 30697]]

    Department's Position: We agree with Avesta. Based on the verified 
evidence contained in the record of this proceeding, we disagree with 
the petitioners that the use of facts available in this instance is 
warranted. Section 776(a) of the Tariff 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 case, Avesta reported in its November 23, 1998, 
supplemental questionnaire response, two home market sales databases: 
the first database contained sales made by the U.K. entities, while the 
second one contained all home market sales from ASL and SPS to AVSD 
(including sales which AVSD consumed for production of non-subject 
merchandise). We believe that Avesta complied with the Department's 
reporting requirements for this information to the best of its ability. 
First, these databases were reported in a timely manner. Second, at 
verification, Avesta demonstrated, through sample sales traces, as well 
as during its overview of the sales process, that it cannot reasonably 
determine which mill sales were made to AVSD for consumption and which 
mill sales were made to AVSD for resale. As the Department's Home 
Market Sales Verification Report indicates, no information is provided 
to mills on material consumed by AVSD. Although the mills know which 
sales go to AVSD, they do not know which of those sales are further 
processed by AVSD. We found that, while certain information (i.e., the 
cast number) can identify the source of the merchandise, it cannot be 
used to tie back a particular purchase to the mills except by a manual 
review. Our review of AVSD's computer system and mill sales determined 
that the company had no practical means of linking incoming merchandise 
and the processed merchandise sold by AVSD.
    In this case, we verified that Avesta is unable to segregate those 
sales made by the Avesta mills to AVSD for consumption from AVSD's 
resales of subject merchandise. Therefore, we conclude that the company 
reported everything that it could reasonably have been expected to 
report. Rather than ``double-counting'' the downstream sales by using 
the sales to AVSD and the sales by AVSD of the same merchandise, we 
have thus decided to continue to exclude from our analysis the sales 
made by the Avesta mills to AVSD (including sales for consumption) and 
use Avesta's reported downstream sales.
    Comment 4: CEP Offset: Petitioners argue that the Department should 
disallow Avesta a CEP offset for the final determination. They contend 
that record evidence does not support the Department's decision in the 
preliminary determination that Avesta's home market sales are at a more 
advanced stage of distribution than its CEP sales. According to 
petitioners, the Department improperly made deductions from the CEP 
starting price prior to analyzing the LOT for CEP sales. They assert 
that the Department's decision to analyze the LOT based on adjusted CEP 
prices, rather than the CEP starting prices, is inconsistent with the 
Court of International Trade's (CIT) opinion in Borden Inc. et al. v. 
United States, Court No. 96-08-01970, Slip Op. 98-36 (March 26, 1998) 
(Borden), and with the Department's remand in that case. (See Final 
Remand Results for Borden, Inc., et al. v. United States, Consol. Court 
No. 96-08-01970 (August 28, 1998) (Remand Results). Petitioners claim 
that, should the Department rely on the CEP starting price and the 
associated selling functions, it would find: (1) that the CEP starting 
price and home market sales were made at a single LOT, (2) that the 
home market LOT was not more remote than the U.S. LOT, and (3) that a 
CEP offset is not warranted.
    Petitioners maintain that the Department's home market and U.S. 
sales verification reports demonstrate that Avesta engages in the same 
type of selling activities in its dealings with ASI as it does with 
home market and EP sales. They state that record evidence indicates 
that technical services and warranties (which petitioners submit are 
the most significant activities in terms of defining LOT), are handled 
by Avesta and are included in the constructed export price between 
Avesta and ASI, demonstrating that Avesta does not provide warranty and 
after sale services related to its CEP sales. Also, according to 
petitioners, record evidence indicates that freight services are 
provided to ASI's CEP sales, demonstrating that the mill performs the 
same functions at the home market LOT as it does for the CEP LOT.
    Avesta counters that the Borden decision is not final or conclusive 
because the Department is appealing that decision; therefore, the 
decision is not binding. (See Certain Pasta from Italy: Final Results 
and Partial Recission of Antidumping Duty Administrative Review, 64 FR 
6615, 6618 (February 10, 1999) (Pasta from Italy).) Second, the 
Department's preliminary findings that the CEP LOT is the level of the 
constructed sale from the exporter to the importer is consistent with 
the statute and longstanding administrative practice. Third, record 
evidence now verified by the Department shows that Avesta had only one 
CEP LOT in the U.S. market. According to Avesta, this evidence 
demonstrates that the CEP LOT differed considerably from the LOT in the 
home market and was at a less advanced stage of distribution than the 
home market LOT. Avesta argues that petitioners' focus only on the 
provision of technical and warranty services ignores the other reported 
and verified selling functions. Avesta asserts that because the data 
available do not provide an adequate basis for making a LOT adjustment, 
but the home market LOT is at a more advanced stage of distribution 
than the CEP sales, a CEP offset remains appropriate for the final 
determination.
    Department's Position: We agree with Avesta. The CIT has recently 
held that the Department's practice to base the LOT comparisons of CEP 
sales after CEP deductions is an impermissible interpretation of 
section 772(d) of the Tariff Act. See Borden, Slip Op. 98-36 at 58; see 
also Micron Technology Inc. v. United States, Court No. 96-06-01529, 
Slip Op. 99-02 (January 28, 1999). The Department believes, however, 
that its practice is in full compliance with the statue, and that the 
CIT decision does not contain a persuasive statutory analysis. Because 
Borden is not a final decision, the Department has continued to follow 
its normal practice of adjusting CEP under section 772(d) prior to 
starting a LOT analysis, as articulated in the regulations at section 
351.412. Accordingly, consistent with the Preliminary Determination in 
this case, we will continue to analyze the LOT based on adjusted CEP 
prices rather than the CEP starting prices. See Pasta from Italy.
    In the Preliminary Determination, the Department made a CEP offset 
adjustment to NV. Because Avesta's home market sales were found to be 
at a more advanced stage of distribution than its CEP sales, we 
determined that these sales were at a different LOT. As the data 
available did not provide an appropriate basis for making a LOT 
adjustment, but the home market LOT was found to be at a more advanced 
stage than the LOT of the CEP sales, we determined that a CEP offset 
was appropriate in accordance with section 773 (a)(7)(B), as claimed by 
Avesta (see Preliminary Determination).

[[Page 30698]]

    We disagree with petitioners' argument that, based on record 
evidence of Avesta's handling of technical services, warranties, and 
freight, Avesta engages in the same type of selling activities in its 
dealings with ASI as it does with home market and EP sales. While we 
agree with petitioners that Avesta performed these services for CEP 
sales and that these activities are important, based on our review at 
verification of all Avesta's selling functions in the United States and 
home market, we found that Avesta also performed other selling 
functions (i.e., other than technical services and warranties) related 
to its home market and EP sales that we believe include important 
selling activities. For example, services such as sales and marketing 
support functions, negotiating prices, and maintaining inventory were 
also provided. (See U.S. Sales Verification Report and Home Market 
Sales Verification Report.)
    Therefore, we believe that record evidence supports our findings in 
the Preliminary Determination that Avesta had only one CEP LOT in the 
U.S. market, and this CEP LOT differed from the LOT in the home market. 
Because the data available do not provide an appropriate basis for 
making a LOT adjustment, but the home market LOT is at a more advanced 
stage of distribution than the CEP sales, a CEP offset remains 
appropriate.

Comment 5: Sales of Proprietary Grade Used To Produce Specialty Steels

    Both petitioners and Avesta comment in their case briefs and 
rebuttal briefs on the Department's inclusion of a proprietary grade of 
steel used in certain industrial blades and surgical and medical 
instruments. Petitioners argue that the Department should include sales 
of this grade in the final margin analysis. They note that Avesta 
stated in its November 2, 1998, questionnaire response that British 
Steel provided one of the U.K. mills reporting under this investigation 
mainly with this grade to produce two specialty steels. While 
petitioners agree with Avesta that one of these steel products has been 
excluded from the investigation, they disagree with Avesta's assertion 
that the second product is also not subject to this investigation. 
Petitioners state that they agreed to exclude from the scope of these 
investigations two proprietary grades of stainless steel sheet and 
strip in coils produced by Hitachi Metals, Ltd. and Hitachi Metals 
America, Ltd., GIN5 and GIN6. (See Letter from Paul C. Rosenthal to the 
Secretary of Commerce, September 29, 1998.) Petitioners contend that 
Avesta never requested an exclusion for its proprietary grade. They 
maintain that, in agreeing to the exclusion for Hitachi, they in no way 
agreed to exclude Avesta's proprietary grade.
    Petitioners disagree with Avesta's assertion that record evidence 
demonstrates that this merchandise meets the specifications for the 
excluded product, as defined by petitioners and the Department. They 
state that this material is not identical to the specifications 
outlined by petitioners or the Department. For example, according to 
petitioners, there are differences in the minimum carbon contents for 
Avesta's product and the product excluded by the Department. 
Petitioners state that, although they have no information regarding the 
correct carbide density (an issue raised by Avesta, see below) of GIN5, 
Hitachi Metals, Ltd. and Hitachi Metals America, Ltd. identified its 
carbide density in several letters to the Department. (See 
Sonnenschein, Nath and Rosenthal Letters to the Department, dated July 
29, 1998, September 8, 1998, September 11, 1998, and September 21, 
1998.) Petitioners urge the Department to confirm the average density 
with Hitachi Metals, Ltd. and Hitachi Metals, Ltd. They state, however, 
that regardless of whether the correct carbide density is an average of 
100 carbide particles per square micron or an average of 100 carbide 
particles per 100 square microns, the Department should continue to 
include the carbide density in its definition and not expand the range 
as suggested by Avesta.
    Avesta argues that, to the extent the proprietary grade referred to 
by petitioners meets the definition of the specialty steels used in 
blades and surgical instruments that are excluded from the scope of the 
investigation, the Department should eliminate sales of this 
proprietary grade from its final antidumping analysis. Avesta contends 
that, in the preliminary determination, the Department identified three 
speciality steels typically used in certain industrial blades and 
surgical instruments which are excluded from the scope of the 
investigation. According to Avesta, the second of these products, an 
example of which is GIN5 steel, is defined both in terms of chemical 
content and in terms of average carbide density. However, due to the 
difficulties in measuring carbide density of a given shipment of 
scalpel steel, Avesta contends that the Department should amend its 
definition of this excluded product to eliminate the reference to 
carbide density. Alternatively, should the Department retain a carbide 
density measure, Avesta recommends that the Department amend the scope 
language to refer to a carbide density that is metallurgically 
feasible.
    Avesta contends that, unlike chemical content, the carbide density 
of scalpel steel may be tested infrequently because it is time-
consuming, posing a burden on foreign producers/exporters, and 
customers do not need to know the carbide density of particular 
shipment. Also, carbide density cannot be measured on an absolute scale 
because different magnifications of the steel will result in different 
measures of carbide density. Therefore, according to Avesta, the 
Department should amend the scope language to omit the reference to 
carbide density. Alternatively, should the Department retain the 
reference, it should at least change the specified density to one which 
producers may plausibly achieve. Avesta asserts that the Department's 
current description of the excluded GIN5-like product as having an 
average of 100 carbide particles per square micron is incorrect, and 
not feasible from a metallurgical standpoint. Avesta argues that, 
should the Department retain a carbide density measure, it should amend 
the scope to refer to particles per 100 square microns.
    Also, Avesta contends that, because the carbide density of a 
particular product varies depending on the magnification level at which 
it is measured, the Department should refer to a magnification level of 
9,000, which is commonly used in the industry. Avesta also urges the 
Department to replace the current language describing the excluded 
product which specifies an average carbon density, without indicating 
how wide or narrow is the acceptable range of carbide density. Avesta 
argues that the Department should replace the current language of the 
scope defining the excluded GIN5-like product as having a carbide 
density on average of 100 carbide particles per square micron with the 
following: ``This steel has a carbide density in the range of 50-100 
carbide particles per 100 square microns when measured at a 
magnification level of  x  9,000.''
    Avesta claims that the reference in the Department's preliminary 
determination to GIN5 as ``an example'' of the excluded product 
confirms that the exclusion is not limited to Hitachi's proprietary 
grade, and that such a limitation would result in discriminatory 
treatment by the Department of similarly situated respondents producing 
products with the same characteristics but with different brand names. 
Avesta also argues that petitioners' contention that

[[Page 30699]]

the proprietary grade referenced does not meet the specified minimum 
carbon content is incorrect. It asserts that Avesta routinely produces 
the grade at higher carbon levels than the specified minimum level, and 
despite petitioners' assertions, Avesta submitted evidence of this 
minimum carbon content, as well as all specifications for the grade as 
a home market sales verification exhibit. Avesta states that the 
specification sheet contained in Home Market Sales Verification Exhibit 
15B and sales trace documentation verified by the Department show that 
the grade meets all the chemical content requirements for the excluded 
product as defined by the Department.
    Department's Position: We agree with petitioners that sales of the 
referenced Avesta proprietary grade should be included in our final 
analysis, and that carbide density should remain in the definition of 
the noted excluded product. First, we note that Avesta's request to 
include magnification levels in the excluded product description is 
irrelevant because petitioners have not recognized this requirement as 
a necessary aspect of its exclusion request. Therefore, magnification 
is not included as a requirement/characteristic of this excluded 
merchandise.
    Second, while we agree with Avesta that GIN 5 is merely an example 
of the excluded product and that the exclusion is not limited to 
Hitachi's proprietary grade, the evidence on the record demonstrates 
that Avesta's proprietary grade material only meets the chemical 
requirements of the excluded product. At verification, Avesta noted 
that, in its opinion, Avesta's proprietary grade fits within the GIN 5 
definition that had been excluded from the scope. The company provided 
a description of its proprietary grade in several supplemental 
responses and in a verification exhibit (see Home Market Sales 
Verification Report at 29). In addition, we reviewed documentation for 
a sale of this merchandise. None of this information on the record 
provides any information regarding carbide density. Therefore, we are 
including Avesta's proprietary grade product in our final analysis. 
Should Avesta adequately demonstrate in the future that its proprietary 
grade complies with all the requirements of the excluded product, then 
Avesta's proprietary grade products would not be covered in the scope 
of this case.
    We agree with Avesta that the measure of carbide density referenced 
in the Preliminary Determination is incorrect. We have revised the 
scope for the carbide density of the second excluded product to read: 
``This steel has a carbide density on average of 100 carbide particles 
per 100 square microns.''

Comment 6: Resales of Rejected Merchandise

    Both petitioners and Avesta comment in their case briefs and 
rebuttal briefs upon the Department's exclusion of U.S. resales of 
rejected merchandise in the preliminary determination. Petitioners 
argue that the Department should include in its final determination all 
U.S. sales, including resales of stainless sheet and strip which had 
been cut to length prior to resale. They disagree with Avesta's claim 
that U.S. resales of rejected products were not representative of 
Avesta's sales during the POI and constituted a negligible quantity of 
its overall U.S. sales. Petitioners note that, while the Department 
included resales of stainless sheet and strip in coils in the United 
States in the preliminary determination, it excluded resales of 
stainless sheet and strip which had been cut to length prior to resale. 
Petitioners argue that, for the final margin analysis, the Department 
should include all resales, regardless of whether the merchandise was 
resold in coil form or cut-to-length form, because all merchandise 
resold in the United States originated from subject merchandise.
    Petitioners disagree with Avesta's claim that its resales in the 
United States are not representative. They contend that the concept of 
sales outside the ordinary course of trade does not pertain to U.S. 
sales. They state that the resales originated from sheet and strip in 
coils from the United Kingdom--the merchandise under investigation. 
Petitioners argue that ASI's resales are subject to this investigation 
regardless of the volume of sales they represent, and furthermore, they 
are on the record and have been verified by the Department.
    Petitioners argue that the Department's normal practice is to 
include all U.S. sales in its margin calculations. They state that, 
prior to the URAA changes to the Tariff Act of 1930, the Department 
considered exclusion requests of insignificant ``outlier'' sales that 
make up less than five percent of the U.S. sales database based on 
whether the respondent established need (i.e., whether the burden of 
collecting this data outweighed the need for the data) for the 
exclusion. Petitioners note that the exclusion of such ``outlier'' 
sales acknowledged the following: that the Department considered a six-
month POI, and it calculated transaction-specific margins for each U.S. 
sale. Petitioners state that the Department's post-URAA current 
practice is to investigates a 12-month POI to capture a full snapshot 
of a respondent's year-long selling practices in each relevant market, 
and that the Department calculates a weighted-average U.S. selling 
price for each product, rather than for each sale. Petitioners state 
that this ``significantly reduces'' the likelihood that a few sales 
will drive margin calculations. Petitioners argue that, given this 
background, the Department should reconsider its policy of excluding 
bona fide sales of subject merchandise in the United States, and reject 
Avesta's assertion that these sales are not representative of its U.S. 
sales.
    Petitioners also pose a corollary argument that, if Avesta had 
resold merchandise in the home market during the POI, and as a result 
received substantially lower prices, the Department should likewise 
exclude such sales because they are not representative of the 12-month 
POI. Petitioners contend that the Department will not exclude those 
resales because they will be weight-averaged with other sales, and 
presumably Avesta will continue to resell merchandise after the POI, so 
the sales are not unrepresentative. According to petitioners, Avesta 
has no incentive to argue for the exclusion of low-priced home market 
resales, or low-priced home market sales made for any reason, because 
such sales tend to lower dumping margins. Petitioners contend that 
Avesta presumably continues to resell merchandise in the United States, 
and that nothing about this is unrepresentative about such sales, other 
than the fact that these are lower-priced U.S. sales.
    Avesta argues that the Department properly excluded U.S. resales of 
rejected merchandise from the preliminary determination. It notes that, 
in the preliminary determination, the Department concluded that ``if 
the Department determines based on verification that Avesta's claims 
about the nature of the resales are correct, they will not be used in 
the final antidumping margin calculations.'' (See Memorandum from Linda 
Ludwig to Joseph A. Spetrini, Limited Reporting of U.S. Sales (October 
26, 1998) (Limited Reporting Memorandum).) Avesta contends that, 
because the Department successfully verified the information provided 
by ASI concerning the U.S. resales, these resales should not be 
included in the final margin calculations. According to Avesta, the 
Department examined the unusual nature of the U.S. resales, including 
the process for handling resales of rejected

[[Page 30700]]

merchandise and documentation for three U.S. resales. In each of the 
resales reviewed, notes Avesta, the Department verified that the 
customer rejected the merchandise for a variety of reasons, including 
mechanical properties, scratches, material problems, acid marks, dirt, 
pits, etc. Also, Avesta states that for two of these resales, the 
Department verified that the rejected merchandise had been cut to 
length prior to resale. Accordingly, the Department properly excluded 
from the preliminary analysis those U.S. resales of rejected 
merchandise that were cut-to-length by ASI's customers before being 
returned, as these were not sales of merchandise under investigation. 
However, Avesta contends, because of the unusual circumstances 
surrounding ASI's resales, the Department should disregard all U.S. 
resales in the final determination.
    Avesta also argues that the Department should exercise its 
discretion to exclude resales of rejected merchandise because these 
resales represent a very small percentage of ASI's U.S. sales during 
the POI. Avesta notes that, in the Limited Reporting Memorandum 
regarding limiting reporting of U.S. sales, the Department acknowledged 
that it may exclude certain U.S. sales in its less than fair value 
calculations where those sales have an insignificant effect on the 
margin, or where they are not representative of the respondent's 
selling practices in the United States. Avesta states that the 
Department also recognized that it normally considers exclusion 
requests pertaining to less than five percent of total U.S. sales, and 
that ASI's resales of rejected merchandise during the POI meet this 
criteria.
    Avesta asserts that the resales are not representative of ASI's 
sales during the POI. Because ASI orders only prime quality stainless 
sheet and strip in coils from the United Kingdom, Avesta argues that 
all merchandise exported from the U.K. mills to ASI is believed to be 
prime when it comes off the production line. It is only when the U.S. 
customer receives and uncoils the merchandise, that occasionally, 
defects in the material may be discovered for the first time. Avesta 
states that, as recognized by the Department, the nature of these 
resales is different from typical sales of secondary merchandise, where 
the producer considers the merchandise to be defective and initially 
sells it as ``seconds.'' According to Avesta, these resales are not 
part of ASI's business plan, and that they differ from normal U.S. 
sales in that resales possess different physical characteristics from 
prime merchandise (i.e., defects) and the rejected merchandise is 
resold to a different class of customers than ASI's normal, prime 
merchandise (i.e., secondary dealers). Thus, because the small volume 
of ASI's imports of secondary merchandise is unintentional and the 
resales of this merchandise are unlike the U.S. sales of prime 
merchandise, these resales cannot be considered representative of ASI's 
normal U.S. sales activity. Additionally, Avesta argues that 
petitioners' position that the Department should include in its 
analysis resales of cut-to-length merchandise is unsupportable, given 
that petitioners excluded cut-to-length stainless steel sheet and strip 
from the scope of imported merchandise covered in their petition.
    Department's Position: We agree with Avesta. On October 26, 1998, 
the Department issued a decision memorandum indicating that if it 
determines, based on verification, that Avesta's claims about the 
nature of its U.S. resales of rejected merchandise are correct, these 
sales will not be used in the final antidumping margin calculations. In 
this memorandum, the Department stated that it may, on occasion, 
exclude certain U.S. sales in LTFV comparisons, if the sales have an 
insignificant effect on the margin. See Bowe Passat Reinigungs v. 
United States, 926 F. Supp. 1138 (CIT 1996), citing Ipsco Inc. v. 
United States, 687 F. Supp. 633 (CIT 1988). (For a detailed analysis of 
this issue, see Limited Reporting Memorandum.) Based on our findings at 
verification, we believe that Avesta's claims regarding the volume and 
nature of these sales is supported by record evidence. At the U.S. 
verification, we found that these resales indeed represent a small 
share of total U.S. sales. As we noted in the U.S. Sales Verification 
Report at 10, these sales constitute a small part of ASI's business. 
Moreover, although the merchandise purchased from the U.K. mills is 
assumed to be prime, occasionally, defects can occur, which may not be 
discovered until the customer uses the merchandise.
    During our review of three sample resales of this rejected 
merchandise, Avesta provided documentation demonstrating, in each case, 
that the resold merchandise had been returned by the original customer 
due to a number of reasons, including mechanical properties, scratches, 
material problems, acid marks, dirt, pits, etc. See U.S. Sales 
Verification Report. The resold merchandise was subsequently purchased 
by secondary dealers in the United States. For two of these resales, 
the rejected merchandise was cut to length prior to resale. Based on 
our findings at verification, Avesta's previous claims concerning the 
nature of its U.S. resales of rejected merchandise appear to be 
accurate.
    Excluding these sales will have an insignificant effect on the 
margin. The sales process for these sales is highly complex, involving 
an initial sale, the customer's rejection of the merchandise, the 
subsequent resale, as well as the linking of the resale to the initial 
sale. These sales also involve difficult model match and programming 
issues. Rather than fully undertake this time-consuming and burdensome 
analysis, for a small number of sales which will have an insignificant 
effect on the margin, we are excluding all of these resales from our 
analysis in the final determination.

Comment 7: Sales Submitted by SPS and Billing

    Petitioners argue that the Department should apply partial facts 
available to sales made by SPS and Billing. They indicate that Avesta 
presented at verification, as minor corrections, certain quantities of 
stainless sheet and strip in coils sold by Billing and by SPS, which 
should have been included in the home market database, but were omitted 
until verification.
    Petitioners contend that it has been the Department's consistent 
practice, in cases where sales data are offered for the first time at 
verification, to accept for the record only enough documentation to 
establish the actual magnitude of the omission. (See, e.g., Certain 
Helical Spring Lock Washers from the People's Republic of China: Final 
Determination of Sales at Less Than Fair Value, 58 FR 48833, 48835 
(September 20, 1993) (Lockwashers).) Petitioners note that, in the case 
of Lockwashers, the Department returned the sales trace documentation 
pertaining to the unreported sales that the respondent submitted during 
verification. Petitioners reference the Department's verification 
outline in arguing that verification is not the appropriate time to 
submit new information; rather, the sole purpose of verification is to 
check the accuracy of questionnaire responses. They also question what 
facts made Avesta ``recognize'' the under-reported data during 
verification preparation, and argue that the company deliberately 
withheld it until verification. Petitioners state that, as facts 
available, the Department should apply the highest home market price 
and lowest U.S. price to the percentage of sales unreported prior to 
verification.

[[Page 30701]]

    Avesta argues that the Department should include the reported data 
for sales by SPS and Billing in the final margin analysis, and that 
petitioners' suggestion that the Department apply facts available to 
these sales is unreasonable. Avesta notes that the sales in question 
are home market sales only and not U.S. sales, which are fully 
reported. Avesta contends that all six of the Department's conditions 
used to define clerical errors are met in this case. Avesta notes that 
these criteria are: (1) The error in question must be demonstrated to 
be a clerical error, not a methodological error, an error in judgment, 
or a substantive error; (2) the Department must be satisfied that the 
corrective documentation provided in support of the clerical error 
allegation is reliable; (3) the respondent must have availed itself of 
the earliest reasonable opportunity to correct the error; (4) the 
clerical error allegation, and any corrective documentation, must be 
submitted to the Department no later than the due date for the 
respondent's administrative case brief; (5) the clerical error must not 
entail a substantial revision of the response; and (6) the respondent's 
corrective documentation must not contradict any information previously 
determined to be accurate at verification. (See Cold-Rolled Steel from 
the Netherlands, 64 FR at 11829.) Avesta argues that the omissions 
resulted from clerical errors, as explained in U.K. Sales Verification 
Exhibit 1. According to Avesta, the omission of SPS sales resulted from 
dimensional differences between the suggested definition of excluded 
flat wire product (the industry standard) and the flat wire definition 
adopted by the Department in the Preliminary Determination. Avesta 
notes that, at the time it submitted its home market sales file, it 
reasonably assumed that merchandise meeting the standards for flat 
wire, as defined by the industry and as endorsed by the petitioners, 
was excluded from the scope of the investigation. As a result, the 
computer program used to compile SPS'' sales file was programmed to 
identify sales of merchandise with a width greater than 12.7 mm (rather 
than 9.5 mm).
    With respect to the omission of Billing sales, Avesta argues that 
the source of the merchandise sold was not recorded in the company's 
computer system, and therefore, these sales were not identified as 
sales of U.K. merchandise. Moreover, Avesta contends that, in the 
Department's review at verification of documentation concerning the 
omitted sales, and as part of its completeness tests, the Department 
was satisfied that the corrective documentation is reliable. Avesta 
states that petitioners' contention that the omitted sales were 
deliberately withheld until verification is false. According to Avesta, 
as soon as it discovered the omissions, it compiled as much data on the 
sales as possible, given the time constraints, and reported the missing 
transactions to the Department at the beginning of the U.K. 
verification. Avesta also contends that its identification of the 
clerical errors and submission of corrective documentation was timely 
as all of this information was submitted to the Department at the 
beginning of verification, two months prior to the due date for case 
briefs. Avesta argues that inclusion of the previously omitted sales 
does not entail a substantial revision of the response, and they 
represent small percentages of total home market sales during the POI. 
Furthermore, assuming the Department accepts the minor correction for 
field EDGEH for Billing's sales as presented at verification, all sales 
made by Billing during the POI will likely drop out of the Department's 
analysis for matching purposes. Lastly, Avesta asserts that the 
corrective documentation concerning the SPS and Billing sales does not 
contradict information previously determined to be accurate since it 
was reviewed and verified by the Department.
    Department's Position: We agree with Avesta. To ensure accurate 
determinations, the Department's practice allows respondents to submit 
information at the beginning of verification to correct errors found 
during the course of preparing for verification. See Preamble to the 
Proposed Rules, 61 FR 7308, 7323 (February 27, 1996). In this case, at 
the outset of the verification, Avesta promptly informed the Department 
verifiers that it mistakenly omitted a small quantity of sales made by 
SPS and Billing. The company explained that it did not report these 
sales because of its initial confusion about the scope language with 
respect to SPS' sales, and because of Billing's delay to provide its 
sales information for a small number of sales to be included in the 
home market database. Given that these corrections were insignificant 
when compared to Avesta's total home market sales (see Final Analysis 
Memorandum) and that we found Avesta's explanation for these omissions 
reasonable, we have accepted and verified these sales in accordance 
with our practice of allowing respondents to correct minor errors while 
preparing for verification. Accordingly, we have included SPS' and 
Billing's sales in our final determination.

Comment 8: U.S. Warehousing

    Petitioners argue that the Department should apply facts available 
to ASI's reported warehousing expense in the final determination. They 
state that the Department found at verification a discrepancy in the 
way that ASI recorded storage charges, as well as related charges for 
movement in and out of storage in its normal course of business. 
Petitioners contend that, in some instances, all three charges were 
recorded in the warehouse account, and in other instances, only storage 
costs were recorded in warehousing expenses. They note that, for one 
sale, the Department found that ASI reported only trucking charges as 
freight expenses, and handling in/out charges were not reported. 
Petitioners argue that, as facts available, the Department should apply 
the highest reported warehousing expense in the U.S. database to all 
U.S. sales.
    Avesta argues that petitioners' proposed application of facts 
available to Avesta's warehousing expenses should be rejected and that 
the inadvertent omission of handling in/out charges from some U.S. 
sales is simply a clerical error. Avesta contends that, because these 
omitted charges are so small on a per pound basis, the effect of any 
adjustment is immaterial. Avesta indicates that the Department found 
discrepancies in the reported warehousing expense for only five of the 
20 sales traces reviewed at verification. It contends that the 
Department should reject petitioners' suggestion to apply the highest 
reported warehousing expense to all U.S. sales. Instead, should the 
Department decide not to accept ASI's warehousing expenses as reported, 
it should only apply the highest reported value to those sales 
transactions for which warehousing expenses were actually incurred.
    Department's Position: We disagree with petitioners that we should 
apply facts available to warehousing expenses and determine to accept 
warehousing expenses as reported. Avesta chose to employ a methodology 
corresponding to what it believed was its normal recording of these 
expenses. Six of the 20 sales examined at the U.S. verification 
involved marine freight invoices featuring handling in and out of 
storage, freight, and warehousing, while other sales either did not 
involve marine freight invoices or involved marine freight invoices for 
freight alone. For sales with marine freight invoices for handling, 
freight, and storage, Avesta

[[Page 30702]]

decided to report freight as inland freight, and it presumed that 
handling and storage expenses would be encompassed in the warehousing 
account. Based on the stated methodology, of these six sales examined, 
two involved incorrect recording of handling, and one involved 
incorrect recording of warehousing, in the company's normal course of 
business. While freight was correctly reported to the Department for 
each sale, the company ``incorrectly'' recorded, in its normal course 
of business, freight for four of the sales. In fact, for two of the 
sales, freight was recorded in the warehousing account: one in the POI 
and one before the POI. This results in freight being considered in 
effect twice for one of the sales--once as freight and another time as 
part of average warehousing reported. Therefore, while some sales may 
have been under-reported, other sales were, in essence, over-reported.
    Avesta reported an average per unit warehousing amount for sales 
warehoused during the POI. We found at verification that this 
calculation involved all storage expenses during the POI, including 
non-merchandise related records storage. While three of the six sales 
examined had handling and storage recorded in the warehousing account 
before the POI, it is reasonable to presume that in their place the 
warehousing account included handling and storage expenses for sales 
that occurred after the POI. Because, on average, the effect of any 
mis-recordings should be minimal, we determine to accept Avesta's 
warehousing expenses as reported.

Comment 9: Inland Freight Expenses

    According to petitioners, the Department should apply facts 
available to Billing's reported inland freight expenses, plant/
warehouse to customer. They note that company officials explained to 
the Department at verification that it would take a large manual effort 
to tie all invoices to the actual freight invoices, which was the 
reason why Avesta chose one month at random and calculated an average 
freight amount by customer using all invoices in that month. 
Petitioners contend that this methodology is not reasonable because one 
month is not a representative period of time. In addition, petitioners 
assert that this methodology fails to reflect freight charges incurred 
by Billing during the POI. According to petitioners, mere burden is not 
an excuse for failing to respond fully and accurately to the 
Department's questionnaire. As partial facts available, petitioners 
urge the Department to apply the lowest reported freight charge to 
Billing's home market sales.
    Avesta argues that the methodology used by Billing to report inland 
freight from plant/warehouse to the customer is reasonable and 
representative of freight charges incurred by the company during the 
POI, and that it should be accepted by the Department. Avesta notes 
that the Department recently confirmed that although it prefers actual 
freight costs, a reasonable allocation methodology that most closely 
reflects actual costs is acceptable. See Final Results of Antidumping 
Duty Administrative Review: Oil Country Tubular Goods From Mexico, 64 
FR 13962, 13969 (March 23, 1999) (OCTG from Mexico). Avesta contends 
that Billing was unable to report its actual freight charges because it 
does not have a freight system that is able to allocate these expenses 
directly to customer orders. (Avesta cites its September 29, 1998, and 
November 23, 1998, Section B Questionnaire Responses and the Home 
Market Verification Report.) Because of the limitations of this system, 
Billing's methodology used to calculate an average freight amount by 
customer, based on shipments during a representative month, was 
reasonable. Avesta also argues that the Department verified evidence 
presented by Billing that demonstrated that the overall freight charge 
for all customers during the POI was in line with the average of 
freight charges for the year.
    Department's Position: We agree with Avesta. While the Department 
prefers to have actual freight costs, a reasonable allocation that most 
closely reflects actual costs is acceptable. See OCTG from Mexico, 64 
FR at 13969. The Department verified that Billing was unable to report 
its actual freight charges absent a manual search because its 
accounting system does not directly link transport charges to customer 
orders. See Home Market Sales Verification Report. While Billing did 
choose a month ``at random,'' we found that its methodology nonetheless 
avoided unrepresentative months. Billing also analyzed the amounts 
calculated for that month for unusually high values to ensure 
reasonableness. The Department verified information regarding freight 
rates, payments for freight, and that the overall freight charge for 
all customers during the POI was in line with the average freight 
charges for the total year. Based on our findings at verification, we 
therefore conclude that Avesta's methodology is reasonable, and have 
accepted it for the final determination.

Comment 10: Ocean Freight, Inland Freight, and Brokerage Charges

    Petitioners argue that the Department should apply facts available 
to Avesta's reported ocean freight, inland freight, and brokerage 
charges. They contend that Avesta improperly calculated these expenses 
using gross tons, rather than net tons, which was the unit of measure 
of the reported sales quantity. Petitioners state that, at 
verification, Avesta provided sample calculations of the expenses in a 
verification exhibit. Petitioners recommend that the Department apply 
the highest reported expenses for ocean freight, inland freight, and 
brokerage and handling charges.
    Avesta argues that the Department should reject petitioners' 
proposed application of facts available to ocean freight, inland 
freight, and brokerage charges. Avesta disagrees with petitioners that 
it reported these charges on gross tons, rather than net tons, for all 
Avesta entities. Avesta claims that, contrary to petitioners' claims, 
only the Sheffield Business Unit calculated its charges using this 
methodology. Avesta contends that petitioners fail to provide support 
for their assertion that Sheffield's charges for inland freight, ocean 
freight, and brokerage and handling should have been divided by net 
tons. Avesta asserts that the Department's questionnaire does not 
specify a preference for calculations based on either gross or net 
tons, and that Sheffield's calculations based on gross tons was 
reasonable, given that the shipping company applies its per-unit charge 
to gross weight when determining ocean freight charges to Sheffield. 
Avesta argues that, should the Department determine Sheffield's 
methodology is improper, a reasonable alternative to petitioners' 
suggestion is to apply a multiplier to the values reported for these 
variables for all Sheffield sales to the United States, in order to 
approximate a per-unit expense calculated on a net weight basis. Avesta 
notes that the difference in calculating these expenses using gross 
weight versus net-weight has a minimal impact.
    Department's Position: We agree, in part, with both petitioners and 
Avesta. Petitioners are correct in noting that, for certain sales 
reviewed at verification, we found that Avesta calculated the values 
reported for ocean freight, inland freight, and brokerage and handling 
expenses in gross tons, rather than net tons. Also, we acknowledge that 
Avesta provided an exhibit demonstrating this methodology at 
verification. Our review of this exhibit, however, resulted in a 
finding that this methodology applies

[[Page 30703]]

only to sales by the Sheffield Business Unit. We did not find evidence 
of this methodology used by the other U.K. entities in calculating 
ocean freight, inland freight, and brokerage and handling charges. 
While we agree with Avesta that the Department's questionnaire does not 
specifically state a preference for the calculations to be based on 
gross or net weight, sales and expenses should be reported on a similar 
basis to ensure fair comparisons in the Department's LTFV analysis. For 
the final determination, we have applied a multiplier to the expenses 
in question for all Sheffield Business Unit sales to the United States, 
in order to arrive at an approximation of the expenses on a net weight 
basis. See Final Analysis Memorandum.

Comment 11: Verification Changes

    Petitioners state that many changes (affecting movement expenses, 
payment date, physical characteristics) were presented to the 
Department's verifiers at the U.S. verification, home market 
verification, and the cost verification, and that all of these changes 
(with the exception of those resulting from new factual information) 
should be implemented for the final margin analysis. Avesta did not 
comment on this issue.
    Department's Position: We agree with petitioners that numerous 
changes were presented to the Department at the sales and cost 
verifications. For the final determination, we have made changes, where 
appropriate, to Avesta's submitted cost and sales data as discussed in 
our Final Analysis Memorandum.

Comment 12: Freight Revenue

    Petitioners argue that the Department should deduct freight revenue 
from the calculation of movement expenses in the home market. They 
contend that the Department's preliminary margin program incorrectly 
failed to deduct freight charged to the customer in the home market 
(FREICUSH) from total movement expenses. According to petitioners, 
Avesta stated in its supplemental questionnaire response that FREICUSH 
is not included in the gross price for those AVSD (one of the U.K. 
sales entities) sales for which FREICUSH is shown as a separate charge; 
otherwise, FREICUSH is either embedded in the gross unit price or not 
charged.
    Petitioners also contend that the Department incorrectly deducted 
freight charged to customers in the U.S. market (FREICUSU) from gross 
price in calculating revenue in the United States (REVENU), which in 
turn is used to calculate CEP profit. Petitioners note that, as in 
accordance with Avesta's questionnaire response, FREICUSU is included 
in the gross price. Petitioners argue that FREICUSU is revenue and 
should not be deducted from gross unit price in the calculation of 
revenue in the Department's final margin analysis.
    Avesta agrees that the Department should subtract freight charged 
to the customer from the calculation of movement expenses in the home 
market but only for sales by AVSD. Avesta notes that AVSD is the only 
one of the five U.K. entities that reported values in the field 
FREICUSH without also including the FREICUSH value in gross unit price. 
Specifically, for Avesta observes that, those sales for which AVSD 
reported a positive value in field FREICUSH, the freight charged to 
customer is not included in gross unit price. For those sales for which 
AVSD reported a zero, Avesta notes that, the freight charged to 
customer is included in gross unit price.
    Department's Position: We agree with respondent that we should 
subtract FREICUSH from the calculation of movement expenses only for 
sales by AVSD. Comparison of sales documentation obtained at the home 
market verification and the home market database reveals that, in 
reporting AVSD's sales to the Department, freight charged to the 
customer was not added to price of the merchandise, and the gross unit 
price in the home market database contains only the price of the 
merchandise. For other U.K. selling entities examined, we found that 
the gross unit price in the home market database was reported as the 
sum of the price charged to the customer for the merchandise, plus the 
price charged to the customer for freight. In order to remove all 
movement-related charges from the foreign prices, we subtracted 
movement expenses reported from gross unit price. Reported movement 
expenses reflect the total cost charged to Avesta for movement of the 
merchandise. The net movement cost incurred by Avesta would be reported 
movement expenses less freight revenue received from the customer. When 
freight charged to the customer is included in reported gross unit 
price, subtracting only reported movement expenses from gross unit 
price results in the deduction of net movement costs incurred by the 
respondent, leaving the price of the merchandise alone. When freight 
charged to the customer is not included in reported gross unit price, 
however, and reported movement expenses are subtracted from gross unit 
price, failure to also subtract freight charged to the customer from 
movement expenses (the same effect as adding it to gross unit price) 
results in the deduction from gross unit price of more than the net 
movement costs incurred by the respondent. Therefore, as a result of 
our verification findings and our clearer understanding of FREICUSH and 
reported gross unit price for each of the U.K. reporting entities, we 
have changed the methodology from our Preliminary Determination to 
subtract FREICUSH from movement expenses for sales made by AVSD.
    We agree with petitioners that FREICUSU should not be deducted from 
gross unit price in calculating REVENU. We found at verification that 
reported gross unit price in the United States includes freight charged 
to customer. Therefore, as discussed above, deducting FREICUSU from 
REVENU results in more than the net movement costs incurred by the 
respondent being deducted from gross unit price in the calculation of 
CEP profit. Therefore, we have changed the methodology from our 
Preliminary Determination to remove FREICUSU from the calculation of 
REVENU.
    As noted above, reported gross unit price in the United States 
includes freight charged to the customer. Therefore, when freight 
charged to the customer is included in reported gross unit price, 
subtracting only reported movement expenses from gross unit price 
results in the deduction of net movement costs incurred by the 
respondent, leaving the price of the merchandise alone. In the 
Preliminary Determination, we deducted both reported movement expenses 
and reported FREICUSU from gross unit price in calculating net U.S. 
price. In this final determination, we are removing FREICUSU from the 
calculation of net U.S. price. This methodology ensures that the 
treatment of freight charged to customers on U.S. sales and home market 
sales is consistent.

Comment 13: Hot-Rolled, Annealed and Pickled Merchandise

    Avesta argues that, in the Preliminary Determination, the 
Department correctly determined that Avesta's sales of hot-rolled 
annealed and pickled SSSS should be excluded from its analysis, as this 
merchandise is produced in Sweden and not in the United Kingdom. Avesta 
explains that it hot-rolls this merchandise in Sweden and not in the 
United Kingdom.
    Avesta maintains that annealing and pickling do not substantially 
transform the product, in that neither process changes the chemical 
composition of

[[Page 30704]]

the merchandise. Avesta states that it cited in its questionnaire 
response several rulings by the U.S. Customs Service, which hold that 
the annealing and pickling in the United Kingdom is not a substantial 
transformation which confers country of origin. Avesta declares that 
the Customs decisions address issues of concern to the Department in 
rendering scope decisions, and as such, they must be given substantial 
weight in the Department's analysis. Avesta also holds that Stainless 
Steel Plate from Sweden is a comparable case also involving Avesta 
Sheffield. Avesta argues that, in that case, the Department rejected 
arguments that annealing and pickling in addition to hot-rolling is 
necessary to bring hot band within the definition of stainless steel 
plate. Avesta cites to Memorandum from Richard Weible to Joseph 
Spetrini re: Affirmative Scope Ruling--Stainless Steel Plate from 
Sweden (A-401-040), December 22, 1997 (Stainless Steel Plate from 
Sweden Scope Memorandum).
    Petitioners did not comment on this issue.
    Department's Position: We agree with Avesta that its hot-rolled 
sales during the POI should be excluded from our analysis as this 
merchandise is produced in Sweden and not in the United Kingdom. In the 
Stainless Steel Plate from Sweden Scope Memorandum (the public version 
of which is attached to the Preliminary Determination Analysis 
Memorandum for this case, dated December 17, 1998), we determined that 
hot bands rolled in Sweden from British slab are within the scope of 
that antidumping finding. In that case we explained that, in 
determining whether substantial transformation has occurred, the 
Department looks to whether a ``new and different article'' results 
from the production process. In addition to whether the production 
process results in a ``new and different article,'' the Department has 
considered value-added and process-cost in other cases involving 
substantial transformation. See Stainless Steel Plate from Sweden Scope 
Memorandum.
    The instant case also involves British slabs that are hot-rolled in 
Sweden on the same equipment as that analyzed in the Stainless Steel 
Plate from Sweden Scope Memorandum. As we found in the Stainless Steel 
Plate from Sweden Scope Memorandum, based upon physical changes that 
the conversion of slab into hot band produces on the product, we 
conclude that the rolling of slabs into hot bands results in the 
production of a ``new and different article'' and constitutes a 
substantial transformation within the meaning of the antidumping law. 
See Certain Carbon Steel Butt-Weld Pipe Fittings from India: Notice of 
Final Determination of Sales at Less Than Fair Value, 60 FR 10545, 
10546 (February 27, 1995). The processing of slabs into hot bands 
dramatically changes the physical characteristics of the product, 
drastically reducing the thickness, extending its length, changing the 
microstructure and significantly increasing its strength 
characteristics. Therefore, we find that U.K. slabs hot rolled in 
Sweden do not fall within the scope of this investigation. Accordingly, 
we are continuing to exclude hot-rolled sales in our final analysis.

Comment 14: Class or Kind

    Avesta argues that, in the Preliminary Determination, the 
Department erred in determining that hot-rolled, annealed and pickled 
sheet and strip (HRAP SSSS) and cold-rolled sheet and strip (CR SSSS) 
are the same subject merchandise or class or kind. Avesta contends that 
the Department has both the authority and the obligation to modify the 
petition's description of class or kind when it finds that the petition 
has described more than one class or kind. Avesta asserts that the 
Department is not bound by the like product determination of the 
International Trade Commission (ITC), and that the Department and the 
ITC have separate statutory authority to make class or kind and like 
product determinations and may make distinct determinations.
    Avesta comments that the Department considers class or kind of 
merchandise to establish the scope of a proceeding. Questions of class 
or kind most commonly arise, according to Avesta, when the Department 
is to determine whether particular foreign merchandise falls within the 
scope of an antidumping investigation.
    Avesta asserts that, in determining whether products constitute one 
or more classes or kinds of merchandise, the Department normally 
considers several factors, with no single factor being dispositive. 
According to Avesta, these factors are: (1) Physical characteristics of 
the merchandise; (2) end uses; (3) interchangeability of products; (4) 
channels of distribution in which the merchandise moves; (5) the 
production process; and (6) price. (Avesta refers to High Information 
Content Flat Panel Displays and Display Glass Therefor From Japan, 56 
FR 32376, 32381 (July 16, 1991), in which the Department applied 
basically the same criteria for class or kind product analysis, and to 
Diversified Products Corporation v. United States, 572 F. Supp. 883, 
889 (CIT 1983) (Diversified Products), in which the following criteria 
were used: physical characteristics, end use, expectations of 
customers, channels of trade, and cost.) Avesta contends that analysis 
of these factors demonstrates that there is more than one category of 
merchandise under investigation. Avesta analyzed each of the factors as 
described below.
    Regarding physical characteristics, Avesta argues that irrespective 
of thickness, CR SSSS are distinguished from HRAP SSSS by increased 
uniformity of surface and smoothness and by closer dimensional 
tolerances. Avesta asserts that the relative smoothness of the surface 
layer of the material cross-section differs between HRAP and CR by a 
factor of 10. Avesta further claims that the enhanced surface 
characteristics typically available in a cold-rolled product allow for 
dramatic differences in material performance pertaining to issues such 
as bacteria retention and ability to perform downstream metal finishing 
operations to achieve sanitary or aesthetic properties associated with 
cold-rolled stainless steels. In addition, Avesta states that CR SSSS 
have a tighter thickness tolerance than HRAP SSSS. Avesta holds that 
the differences in physical characteristics between HRAP and CR SSSS 
are reflected in their classification under different headings in the 
HTSUS and in the codes assigned by the AISI.
    Regarding end uses, Avesta contends that the end uses of HRAP and 
CR SSSS differ substantially. Avesta notes that HRAP SSSS are used in 
applications that do not require the surface finish of CR SSSS or are 
used as feed stock for CR SSSS. Avesta maintains that HRAP SSSS are 
consumed by manufacturers of welded pipe, and by manufacturers of 
specialized equipment requiring corrosion-resistant steel (such as 
pulp/paper, chemical/petrochemical, etc. equipment). Avesta notes that 
purchases of hot-rolled material require the corrosion/heat resistance 
or strength characteristics of stainless steel, and do not require the 
surface characteristics, finish and dimensional tolerance of CR SSSS, 
while for purchasers of CR SSSS, surface characteristics, finish, and/
or dimensional tolerance are important.
    Regarding interchangeability, Avesta argues that HRAP and CR SSSS 
are not interchangeable. Avesta claims that CR SSSS are generally sold 
for applications requiring specific surface conditions or dimensional 
tolerances, and therefore, HRAP SSSS are generally not substitutable 
for CR SSSS.

[[Page 30705]]

    Regarding channels of distribution, Avesta notes that these 
channels overlap for HRAP and CR SSSS overlap. Avesta further notes 
that, while end users have distinct requirements for these products, 
distributors often handle sales of both products and the same purchaser 
may purchase both HRAP and CR products. Nevertheless, Avesta asserts, 
producers and purchasers perceive the two products as distinct. Avesta 
maintains that it is common for steel products regarded as separate 
products to be handled by the same distributors, and to be purchased by 
the same end users for different applications. Avesta contends that the 
Department should not focus disproportionately on the channel of 
distribution portion of the analysis because sharing of a significant 
portion of the channels of distribution is not dispositive if the 
balance of the evidence supports a Department finding of two separate 
classes or kinds of merchandise (Avesta cites to Certain Brake Drums 
and Certain Brake Rotors From the People's Republic of China, 61 FR 
14740 (April 3, 1996)).
    Regarding production process, Avesta argues that the process 
involved in converting HRAP to CR SSSS is significant. Avesta notes 
that the U.S. Customs Service has found that such a conversion 
constitutes a substantial transformation of the merchandise. Also 
Avesta cites Rules for Determining the Country of Origin of a Good for 
Purposes of Annex 311 of the North American Free Trade Agreement; Rules 
of Origin Applicable to Imported Merchandise, 60 FR 35878, 35880 (July 
12, 1995). Avesta declares that CR SSSS must undergo substantial 
additional processing using production equipment that is not used to 
produce HRAP SSSS. Avesta asserts that the process of producing CR SSSS 
involves significant reductions to the hot-rolled material at an 
ambient temperature on a reversing or tandem rolling mill and often 
subsequent annealing and descaling of the material, and temper rolling 
for coil shape and surface enhancement if deemed necessary. Avesta 
maintains that cold-rolling is performed in a separate mill than hot-
rolling and requires separate equipment, which is reflected in Avesta's 
production process in which slab is hot-rolled at the Steckel mill in 
Sweden, followed by cold-rolling in separate facilities using separate 
equipment.
    Regarding price, Avesta notes that the price difference between 
HRAP and CR SSSS is significant. Avesta argues that CR SSSS command a 
significant premium over HRAP SSSS, and it has attached to its brief a 
price comparison, by grade, of its home market sales during the POI. 
Avesta contends that the additional cost of transforming hot-rolled 
into cold-rolled material is substantial and results in the difference 
in their respective selling prices.
    Petitioners argue that the Department correctly recognized that 
HRAP and CR SSSS comprise a single class or kind of merchandise. 
Petitioners assert that, by focusing on minor physical differences, 
Avesta's analysis of this issue ignores the major physical attributes 
and similarities of HRAP and CR SSSS. Petitioners hold that Avesta's 
analysis ignores all of the relevant determinations on this issue, 
which have uniformly found that stainless steel sheet and strip, as 
well as stainless steel plate, each comprise a single class or kind of 
merchandise, regardless of whether they are hot or cold-rolled. 
Petitioners specifically refer to the Department and ITC decisions, 
which confirm that HRAP stainless steel plate and CR stainless steel 
plate as comprising a single class or kind of merchandise (i.e., Notice 
of Final Determination of Sales at Less than Fair Value: Stainless 
Steel Plate in Coils from the Republic of Korea, 64 FR 15444 (March 31, 
1999) and Certain Stainless Steel Plate from Belgium, Canada, Italy, 
Korea, South Africa, and Taiwan, Inv. Nos. 701-TA-376-379 and 731-TA-
788-793 (Prelim.) USITC Pub. No. 3107 (May 1998)). Petitioners go on to 
assert that, contrary to Avesta's argument, the Department and the ITC 
have preliminarily determined that HRAP and CR SSSS constitute a single 
class or kind, and single like product. Petitioners also argue that 
these cases affirm the Department's findings in the 1980's that HRAP 
SSSS and CR SSSS comprise a single class or kind of merchandise. 
Petitioners cite to Final Determinations of Sales at Less Than Fair 
Value: Certain Stainless Steel Sheet and Strip Products from Federal 
Republic of Germany; 48 FR 20459, 20460-61 (May 6, 1983)).
    Petitioners maintain that a review of Avesta's argument 
demonstrates Avesta relies on two minor physical differences, surface 
smoothness and dimensional tolerances, for three of six criteria 
examined. Petitioners further assert that Avesta's analysis focuses on 
niche products and minor exceptions. Petitioners analyzed each of the 
factors also analyzed by Avesta, as summarized below.
    Regarding physical characteristics, petitioners note that, while 
Avesta asserts that surface smoothness and closer dimensional 
tolerances distinguish CR SSSS from HRAP SSSS, the ITC, in its 
preliminary determination, found that such physical differences were 
minimal. Petitioners further argue that Avesta ignores the most salient 
physical features of SSSS--chemical composition, thickness, and 
annealed and pickled condition. Petitioners note that the most 
important physical characteristic identified by the Department in this 
case is grade. Petitioners assert that every grade of SSSS can be 
either HRAP or CR, and that there is a substantial overlap in their 
gauges. Petitioners further note that gauge is a critical physical 
characteristic and that it separates stainless steel plate in coils 
from SSSS. Petitioners comment that physical characteristics selected 
by the Department in its matching hierarchy also overlap between HRAP 
and CR, such as coating, width, edge, and annealed and pickled 
condition. The petitioners also note that the ITC confirmed the 
importance of the overlap in physical characteristics, gauge, and 
width. While Avesta argues that HTS headings and AISI product codes 
segregate HRAP and CR products, petitioners maintain that the 
Department's scope specifically notes HTS headings are not dispositive 
and that using Avesta's logic would lead to 60 classes or kinds as 
there are 60 HTS subheadings included in the scope.
    Regarding end uses, petitioners argue that, while it is true that 
the vast majority of HRAP steel is used to produce CR SSSS, this 
supports a finding of a single class or kind. Petitioners assert that 
Avesta's only argument for differing end-uses is that manufacturers of 
welded pipe and specialized equipment relied on HRAP SSSS; however, 
petitioners note, the ITC found that such end-uses accounted for less 
than four percent of all SSSS sales. Petitioners assert that the ITC 
concluded that there is a limited market for HRAP SSSS and the vast 
majority of HRAP SSSS is produced and captively consumed for CR SSSS 
production, which supports a single like product (or class or kind) 
determination. Petitioners contend that Avesta failed to note that the 
limited number of end uses for HRAP also use CR in the same 
applications. According to petitioners Avesta's argument is misleading 
because it does not focus on end uses. Petitioners note that Avesta 
focuses on intermediate uses for HRAP but on end uses for HR. Finally, 
petitioners note that the end uses for the vast majority of SSSS are 
identical because the vast majority of SSSS is CR.
    Regarding interchangeability, petitioners assert that while Avesta 
relies on surface conditions and dimensional tolerance, which are 
physical characteristics, that argument

[[Page 30706]]

ignores the 94 percent of the market where HRAP is dedicated to 
producing CR SSSS. Petitioners argue that Avesta highlights the limited 
applications where HRAP is less substitutable for CR, while ignoring 
that CR is always substitutable for HRAP.
    Regarding channels of distributions, petitioners note that Avesta 
acknowledges that distributors often handle sales of both products and 
that the same purchaser will purchase both HRAP and CR products. While 
petitioners agree with Avesta that weakness in one criteria is not 
dispositive, petitioners note that Avesta's weakness in several 
criteria here is dispositive.
    Regarding production process, petitioners argue that while Avesta 
cited U.S. Customs Service rulings and NAFTA Rules of Origin, these 
rulings are not applicable nor controlling in the Department's class or 
kind inquiries. Petitioners contend that the Department considers the 
six factors noted with an eye to enforcement of the antidumping and 
countervailing duty law. Petitioners further assert that Avesta fails 
to acknowledge the Department's previous class or kind rulings for 
stainless steel flat products have uniformly concluded HRAP and CR SSSS 
are a single class or kind. Petitioners argue that it is important to 
realize that a significant portion of the production process for HRAP 
and CR are identical, such as melting, refining, casting, hot-rolling, 
annealing, and pickling. Petitioners maintain that CR SSSS is simply a 
further processed HRAP product and even then both are followed by 
similar processes, such as annealing, pickling, recoiling, etc. 
Petitioners also note that while Avesta states CR is performed in 
separate mills, this is a consequence of Avesta's operation and not a 
requirement as some producers make HRAP and CR in the same facility and 
as companies that produce HRAP also produce CR SSSS.
    Regarding price, petitioners argue that while Avesta submitted a 
comparison of HR and CR prices, this comparison can be misleading and 
should not be relied on. Petitioners contend that Avesta's pricing 
analysis is by grade only, ignoring other critical physical 
characteristics, especially gauge. Also, petitioners note that, Avesta 
compared prices net of discounts, rebates, billing, and freight. 
Petitioners contend that, since Avesta claimed and the Department 
agreed in the Preliminary Determination that some of the HR merchandise 
is of Swedish origin, inclusion of non-subject merchandise in pricing 
comparisons is improper, and much of the pricing differences in 
Avesta's analysis may be caused by freight costs related to shipping 
merchandise between the United Kingdom and Sweden. Petitioners note 
that the ITC examined the issue of cost in its like product 
determinations, and concluded that, on average, cold-rolling represents 
38 percent of the cost of finished, cold-rolled SSSS. Petitioners go on 
to state that the ITC acknowledged that the cost of cold-rolling can 
vary, depending on the finished product, and noted that a wide range of 
products with differing specifications are produced. Petitioners 
further assert that the ITC acknowledged that prices within CR types 
can vary significantly, yet Avesta has not argued for different classes 
for different CR products. Finally, petitioners note that while CR 
clearly adds value which is sometimes significant, the majority of 
value is added to products through the HRAP stage.
    Department's Position: We agree with petitioners. In making class 
or kind determinations, we analyze the following criteria enunciated in 
the Diversified Products and Kyowa Gas cases: (1) The general physical 
characteristics; (2) the end use; (3) the expectations of ultimate 
customers; (4) the channels of trade; and (5) the manner in which the 
product is advertised or displayed. Of the criteria mentioned by 
Avesta, production process, interchangeability of products, and price 
are not part of this analysis. Indeed, while price is a criterion 
considered by the ITC in making a like product determination, it is not 
a factor evaluated by the Department in making its class or kind 
decisions.
    When examining the general physical characteristics of products, 
the Department does not rely on mere physical differences. There must 
be a clear dividing line between different product types in order for 
the Department to find different classes or kinds. See Sulfur Dyes, 
Including Sulfur Vat Dyes from the United Kingdom: Final Determination 
of Sales at Less Than Fair Value, 58 FR 7537 (February 8, 1993). Avesta 
is correct that the cold-rolling will provide SSSS with a product that 
has closer dimensional tolerances and increased uniformity of surface. 
In addition, these products have different HTSUS and AISI codes. 
However, the respondent's focus on the relevance of dimensional 
tolerances and surface uniformity is misplaced. The most important 
characteristics of SSSS revolve around the grade of the product, the 
dimensional characteristics that it possesses, and its resistance to 
corrosion. These characteristics will dictate the relevant applications 
of the material. Regarding HRAP and CR SSSS, both products: (1) Are 
produced in the same stainless steel grades (i.e., specific chemistries 
such AISI 304 or 316); (2) meet the dimensional characteristics 
outlined in the scope of this investigation, in many instances 
overlapping in thicknesses and widths; and (3) provide the same 
resistance to corrosion if produced to the same grade. The recognition 
of surface uniformity, close dimensional tolerance, and different 
classification headings in the HTSUS and AISI alone do not substantiate 
differences in physical characteristics that merit a separate class or 
kind. If the Department were to adopt Avesta's logic, there would be 
multiple classes or kinds of CR SSSS as different products have 
different levels of surface uniformity, dimensional tolerance, and 
result in different classification headings in the HTSUS. In addition, 
numerous other stainless steel orders include cold-finished and hot-
finished products within the same class or kind (e.g.,  stainless steel 
bar) despite the cold-finished product possessing many of the 
characteristics Avesta noted for CR SSSS. We did not recognize these 
products as a separate class or kind precisely for the reasons noted.
    Regarding end use, Avesta focuses on the differences between HRAP 
and CR SSSS on specific applications such as HRAP SSSS being used for 
welded pipe applications. It also states that CR SSSS uses will be 
dictated by a demand for improved surface characteristics, finish, and/
or dimensional tolerances. Again, Avesta fails to recognize that the 
relevant uses of SSSS are driven by the need for steel possessing 
specific dimensional characteristics and providing specific levels of 
resistance to corrosion. Since both HRAP and CR SSSS are produced in 
the same grades and overlap in dimensional characteristics, there is 
overlap in specific uses. Again, if the Department were to determine 
class or kind distinctions based on products possessing different 
surface characteristics, finish, or dimensional tolerances, it would be 
in the untenable position of recognizing hundreds of different grades 
of CR SSSS as different classes or kinds of merchandise because of the 
myriad of products produced, each intended for a unique, specific use.
    Regarding expectations of customers, both HRAP and CR SSSS will 
satisfy the same basic requirements/needs of customers. Both products 
are primarily being sought because they possess the same specific 
chemical analysis that promote their resistance to the effects of 
environmental corrosion, and because

[[Page 30707]]

they can possess overlapping dimensional characteristics.
    Regarding channels of trade, both parties acknowledge that HRAP and 
CR SSSS are marketed through the same channels of distribution.
    Regarding manner in which advertised, neither party addressed this 
issue in the context of the Diversified Products criteria, and there is 
insufficient information presented on the record that differentiates 
the manner in which HRAP and CR SSSS are advertised.
    For the reasons stated above, we are continuing to treat HRAP SSSS 
and CR SSSS as one class or kind.

Comment 15: Flat Wire

    Avesta argues that the Department should amend the definition of 
excluded flat wire to reflect the industry standard. Avesta notes that, 
in the Notice of Initiation (see Stainless Steel Sheet and Strip in 
Coils from France, Germany, Italy, Japan, Mexico, South Korea, Taiwan, 
and the United Kingdom, 63 FR 37521, 37522 (July 13, 1998)), the 
Department invited comments on product coverage in these 
investigations. Avesta notes that in responding to this invitation on 
July 20, 1998, it commented that while ``flat wire'' was excluded from 
the scope, no definition was provided. Avesta states that it proposed 
that the Department adopt the industry standard for flat wire, as 
defined in the AISI Steel Products Manual, which notes a cold-rolled 
product, with a prepared edge, rectangular in shape, \1/2\ inch or less 
in width, under \1/4\ inch in thickness. Avesta asserts that on July 
29, 1998, petitioners stated that, with respect to an appropriate 
definition of the excluded flat wire, they agree with the comments on 
page 6 of Avesta's July 20 letter.
    Avesta complains that despite petitioners' apparent endorsement of 
the AISI definition of flat wire, the Department rejected that 
definition in its Preliminary Determination. Avesta argues that, 
without any apparent discussion or explanation of its decision to adopt 
a different definition of flat wire than the one used by the industry, 
the Department amended the language excluding flat wire. Avesta 
maintains that no evidence appears to exist on the record of these 
investigations that supports or justifies this departure from the 
standard industry definition of flat wire. Avesta alleges that, because 
the Department's alternative flat wire definition is at odds with the 
product the stainless steel industry normally considers flat wire, it 
creates the potential for confusion on the part of foreign producers/
exporters as to what is properly excluded. To minimize this problem, 
Avesta urges the Department to modify its flat wire exclusionary 
language to conform with the industry standard, as set forth in the 
AISI Steel Products Manual.
    Petitioners argue that the Department should not amend the 
definition of flat wire from the Preliminary Determination. Petitioners 
emphasize that their July 29, 1998, letter, referenced by Avesta, noted 
that they agreed with the comments on page 6 of Avesta's July 20 
letter, noting in particular, the importance of including in the 
definition a requirement that the material have a ``prepared edge''. 
Petitioners, upon further discussion with the U.S. industry, have 
determined that the Department's scope language for flat wire outlined 
in the preliminary determination is accurate and should be retained for 
the final determination. Petitioners cite The Making, Shaping, and 
Treating of Steel, 10th Edition (page 1012) as containing a definition 
of flat wire. Petitioners note that this publication states that ``flat 
wire normally is best produced in sizes up to 9.53 mm (3/8 inch)''. 
Petitioners urge the Department not to amend the scope language used in 
the Preliminary Determination, namely, flat wire is cold-rolled 
sections with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm.
    Department's Position: We agree with petitioners. The development 
of the flat wire exclusion language is reflective of the petitioners' 
intent with respect to the scope language and a recognized industry 
publication listing the dimensional characteristics of this product and 
other stainless steel products. In the original petition, petitioners 
make no mention of the dimensional or physical characteristics of their 
flat wire exclusion. The Department carefully reviewed various 
publications, including The Making, Shaping and Treating of Steel and 
Design Guidelines for the Selection and Use of Stainless Steel. The 
latter publication notes in a table on page 19 that the width 
classification of stainless steel wire, including flat wire, is ``under 
3/8'' (9.53 mm).'' We established a maximum width for flat wire that is 
reflective of these publications' dimensional width limitation. 
Petitioners have not requested that the Department amend the width 
limitations of the flat wire exclusion. In fact, they have acknowledged 
the suitability of this dimensional definition of flat wire, and that 
this maximum width level of the flat wire exclusion is an accurate 
reflection of the product for which they are not seeking relief. 
Therefore, based on these publications, and since petitioners are 
seeking relief for products in the scope as written in the Preliminary 
Determination, we are not revising the scope language for flat wire.

Issues Relating to Cost of Production

Comment 16: Major Inputs

    Petitioners argue that the Department should apply adverse facts 
available to Avesta's COP given Avesta's failure to properly respond to 
the Department's cost questionnaires concerning major inputs. 
Petitioners assert that respondents did not provide market price data 
for inputs obtained from affiliated parties.
    According to petitioners, the Department must apply the major input 
rule in calculating the cost of Avesta's major inputs, in accordance 
with section 773(f)(3) of the Tariff Act, which provides that, where 
transactions between affiliated parties involve a major input, the 
Department may value the major input based on the COP if the cost is 
greater than the amount that would be determined under section 
773(f)(2) (i.e., the higher of transfer price or market price). 
Petitioners contend that the Department is required to review purchases 
from affiliated parties of major inputs in order to determine that they 
reasonably reflect a fair market value.
    Petitioners assert that Avesta failed to properly respond to the 
Department's questions concerning its major inputs. According to 
petitioners, Avesta indicated that, as a consolidated entity, it need 
not comply with the Department's questionnaire. Instead, petitioners 
note, Avesta stated that all its production facilities involved in 
producing subject merchandise are either part of the same legal entity, 
part of legal entities that will be collapsed and assigned one dumping 
margin, or units in the same operating division within the Avesta 
Sheffield Group. According to petitioners, Avesta further stated that, 
because all of its production facilities are affiliated within the 
Avesta Sheffield Group (``the Group'') and their accounts are 
ultimately consolidated with the Group, Avesta reported the actual 
costs for all facilities involved in the production of the merchandise 
under investigation.
    Petitioners argue that Avesta's contention that the production 
facilities affiliated with the Group are ``one from an operational 
standpoint'' is irrelevant because several of the affiliated entities 
are not engaged in the production of the subject merchandise, but 
rather,

[[Page 30708]]

produce the inputs used to make subject merchandise. Petitioners also 
state that these production facilities are separate legal entities. 
Petitioners assert that, in Pasta from Italy, the Department determined 
that the operational reality of the close association between two 
entities does not outweigh the legal form of the entities.
    Petitioners contend that, given the numerous deficiencies and 
Avesta's ``non-responsiveness'' to the Department's questionnaires and 
requests, the use of adverse facts available for COP and CV is 
warranted for the Department's final analysis. They argue that the use 
of adverse facts available is appropriate because of Avesta's repeated 
failure to report the necessary market value for the major inputs (a 
critical element needed to gauge whether home market sales were made in 
the ordinary course of trade) and its failure to report the COP and CV 
data in the requested format by the Department (i.e., costs separated 
for the major inputs). Petitioners recommend the application of the 
highest COP and CV reported for each control number as the appropriate 
basis for facts available. Alternatively, according to petitioners, 
should the Department determine that Avesta's COP and CV response is 
acceptable for the final margin analysis, at a minimum the Department 
should apply the higher of the transfer price or cost of production for 
each grade of the major inputs involved.
    Avesta argues that petitioners' argument is factually and legally 
unsound, and therefore, it should be rejected. Avesta contends that, 
with respect to market values for the two major inputs, the Department 
made no inquiries to which it failed to respond. Avesta indicates that 
its supplemental questionnaire states that it did not purchase either 
of the major inputs from unaffiliated suppliers, and that the accuracy 
of this response was reviewed and confirmed by the Department at 
verification. Avesta asserts that, because it purchased neither input 
from unaffiliated suppliers, it had no information as to their market 
values to provide the Department, and that market values can only be 
considered when such values are available. Avesta claims that it fully 
complied with the Department's reporting requirements by providing only 
the COP and transfer prices for each of the major inputs. For these 
reasons, asserts Avesta, no adverse inferences reasonably can or should 
be drawn by the Department in its final determination.
    Avesta argues that record evidence reflects that Avesta consulted 
with the Department on the proper format for submitting the COP/CV 
information, and the result of those discussions was the company's 
submission of a chart comparing the costs and transfer prices of the 
two major inputs as a substitute for the initially requested COP/CV 
format. Avesta notes that the Department requested no further 
information, and that the accuracy of the reported information was 
reviewed and confirmed at verification. Avesta contends that no adverse 
inferences reasonably can or should be drawn by the Department as to 
the data provided because Avesta responded to the best of its ability 
to the request for data in a particular format. Also, Avesta argues 
that petitioners' recommendation that the Department perform its major 
input analysis on a grade-specific basis should be rejected. Avesta 
contends that it reasonably applied one methodology for all grades, and 
petitioners have not provided any evidence that this methodology 
materially distorts the reported COPs/CVs.
    Department's Position: We disagree with petitioners that we should 
apply adverse facts available to Avesta's COP information. We find that 
Avesta has provided all necessary information regarding major inputs. 
Moreover, given that market price information was not available for the 
inputs in question, in valuing the major inputs, we have relied on the 
higher of transfer price or the affiliate's cost of production, in 
accordance with sections 773(f)(2) and (3) of the Tariff Act.
    Sections 773(f)(2) and (3) of the Tariff Act specify the treatment 
of transactions between affiliated parties for purposes of reporting 
cost data (used in determining both COP and CV) to the Department. 
Section 773(f)(2) states that the Department may disregard such 
transactions if the amount representing that element (the transfer 
price) does not fairly reflect the amount usually reflected (typically 
the market price) in the market under consideration. Under these 
circumstances, the Department may rely on the market price to value 
inputs purchased from affiliated parties. Section 773(f)(3) states that 
if transactions between affiliated parties involve a major input and 
the cost of the major input is greater than the amount that would be 
determined under section 773(f)(2) (i.e., the higher of the transfer or 
market price), the Department may value the major input on the basis of 
the information available regarding its COP. Additionally, section 
773(f)(3) applies if the Department ``has reasonable grounds to believe 
or suspect that an amount represented as the value of such input is 
less than the COP of such input.'' The Department generally finds that 
such ``reasonable grounds'' exist where it has initiated a COP 
investigation of the subject merchandise (see, e.g., Stainless Steel 
Plate in Coils From South Africa: Notice of Final Determination of 
Sales at Less Than Fair Value, 64 FR 15459, 15474 (March 31, 1999); 
Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line 
and Pressure Pipe From Germany: Final Results of Antidumping Duty 
Administrative Review, 63 FR 13217, 13218 (March 18, 1998), and 
Silicomanganese from Brazil; Final Results of Antidumping Duty 
Administrative Review, 62 FR 37869, 37871 (July 15, 1997). In 
addition,19 CFR 351.407(b) further instructs the Department to 
determine the value of a major input based on the higher of: (1) The 
price paid to the affiliated party (i.e., transfer price), (2) the 
market price, or (3) the cost of the affiliated party to produce such 
input.
    We find that Avesta provided to the Department all the necessary 
and requested information regarding major inputs. On December 18, 1998, 
we requested in a supplemental questionnaire that Avesta provide, among 
other items, COP and CV databases with separate fields for each of the 
major inputs. On January 4, 1999, Avesta responded that it would not be 
able to provide these databases by the deadline requested. We consented 
to this delay under the condition that Avesta answer related questions 
in the supplemental questionnaire, and include a chart comparing 
transfer price and cost, by grade, for each of the major inputs. In 
addition, we asked that Avesta provide an alternative proposal on how 
to apply any major input adjustments, which may be necessary to the 
submitted cost database, prior to the cost verification (see Memorandum 
from Charles Rast and Nancy Decker to The File, January 7, 1999). 
Avesta provided the requested chart and appropriately answered the 
related questions. Although the company did not provide the alternative 
proposal, we found, as a result of verification, that no major input 
adjustments are necessary, and therefore, the alternative proposal is 
not needed. See Cost Verification Report at 15-16 and Final Analysis 
Memorandum.
    As noted in the Cost Verification Report at 15, Avesta did not 
purchase major inputs from unaffiliated companies during the POI. 
Therefore, in applying 19 CFR 351.407(b)(2), we find that there is no 
market price available. Accordingly, we have relied upon the higher of 
the affiliated party's cost of production of the major input or the 
transfer price of that major input. The Department made a similar 
decision in

[[Page 30709]]

the Final Results of Antidumping Duty Administrative Reviews: 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, Germany, Italy, Japan, Singapore, and the United 
Kingdom 62 FR 2081, 2115 (January 15, 1997).
    Given that Avesta complied with our request for information by 
providing necessary COP and transfer prices of major inputs, and based 
on our verification findings confirming the accuracy of this 
information, we have relied upon the higher of cost of production or 
transfer price for the final determination, in accordance with section 
773(f) of the Tariff Act and section 351.407(b) of the Department's 
regulations. See Final Analysis Memorandum.

Comment 17: Estimated Versus Actual COPs

    Petitioners maintain that Avesta reported estimated COP for several 
control numbers in the home market. They argue that the Department 
should apply the highest reported cost to those control numbers that 
were reported as estimated costs. Petitioners assert that because 
Avesta did not provide actual costs for all control numbers, as 
requested in the Department's questionnaire, adverse facts available 
should be applied. They state that Avesta should not be rewarded for 
providing an inaccurate cost response. Petitioners indicate that as 
facts available, the Department should add to the COM the revised 
interest expense and highest reported G&A expenses.
    Avesta disagrees, contending that it did report actual costs for 
all control numbers in its questionnaire responses. According to 
Avesta, each control number represented a product as defined by the 
physical characteristics identified by the Department in its 
questionnaire. Avesta maintains that, in preparing for its costs 
responses, it relied upon its normal accounting system. In this system, 
Avesta claims, which was verified by the Department, the company does 
not track costs for products at the same level of detail associated 
with each and every one of the physical characteristics identified by 
the Department. (See Cost Verification Report at 22.) Avesta indicated 
that, in calculating actual costs for the purposes of the responses, it 
calculated actual costs for the products identified from the actual 
cost information contained in its accounting system. Avesta notes that 
these costs were not estimates, but were rather actual costs contained 
in its accounting system calculated to comply with the Department's 
reporting requirements. Thus, Avesta urges the Department to reject 
petitioners' argument and rely upon its reported costs for the final 
determination.
    Department's Position: We agree with Avesta. At verification, we 
examined Avesta's books and records kept in the ordinary course of 
business. We confirmed that Avesta does not have standard costs for all 
products at the same level of detail associated with each physical 
characteristic identified by the Department. In cases where a control 
number did not have a standard cost because there were no products with 
identical physical characteristics, Avesta used the standard cost of 
the product with the closest possible match containing the most similar 
physical characteristics. (See Cost Verification Report, at 22-23.) 
This standard was then adjusted for variances and an actual cost of the 
control number for the POI was calculated. Based on our verification 
findings in this case, we find that Avesta's methodology for 
calculating actual costs of a control number that did not have a 
standard cost in the normal accounting system is reasonable. For the 
final determination we have thus relied upon Avesta's costs as 
reported.

Comment 18: Interest Expense

    Both petitioners and Avesta comment in their case briefs and 
rebuttal briefs on whether it may be appropriate to use British Steel 
PLC's consolidated profit and loss statement for the calculation of 
interest expense, given that Avesta is a consolidated subsidiary of 
British Steel PLC. Petitioners argue that the Department should 
recalculate interest expense based on British Steel's consolidated 
profit and loss statement, rather than using Avesta Sheffield AB's (AS 
AB--ASL's parent company) consolidated profit and lost statement, 
because Avesta is a consolidated subsidiary of British Steel PLC. They 
state that it is the Department's normal methodology to calculate 
interest expense at the highest consolidated level. (See Stainless 
Steel Round Wire From Canada: Final Determination of Sales at Less Than 
Fair Value, 64 FR 17324, 17334 (April 9, 1999) (Stainless Steel Round 
Wire).)
    Petitioners also argue that the Department should not adjust 
British Steel's interest expense for ``other interest receivables,'' as 
Avesta did not provide any supporting documentation demonstrating its 
position that these receivables were short-term in nature. Petitioners 
note that Avesta's treatment of these receivables is based on its 
assumption as to their short-term nature. Because AS AB is 51 percent 
owned by British Steel PLC, petitioners discount Avesta's position that 
AS AB did not have access to the confidential accounting records of 
British Steel PLC, and that the only information it had was that which 
was contained in published annual accounts. They state that there is no 
requirement in the law that a respondent must be able to verify public 
information issued by its parent company. Petitioners note that 
presumably British Steel's auditors have certified the accuracy of its 
financial statements.
    Avesta contends that, because British Steel's interest rate is not 
relevant to Avesta, and because Avesta does not have access to the 
proprietary information necessary to verify the figures reported in 
British Steel's profit and loss statement, the Department should use AS 
AB's consolidated income statement as the basis for calculating the 
interest expense ratio in the final determination. Avesta states that 
the Department traced the cost of sales, interest expense, and interest 
income ratio used in this interest expense ratio to AS AB's 
consolidated income statement. Avesta notes that it recalculated net 
interest expense, however, based on British Steel PLC's consolidated 
profit and loss statement pursuant to the Department's supplemental 
questionnaire. Avesta observes that this recalculation showed a net 
interest expense of zero for the POI. Avesta reiterates that it has no 
access to the confidential records of British Steel PLC; therefore, it 
based its recalculation on the information contained in British Steel 
PLC's published annual accounts.
    Avesta asserts that the use of British Steel PLC's data is 
incorrect because AS AB has its own borrowings and does not receive 
financing from British Steel. A second reason this approach is 
incorrect, according to Avesta, is because it has no means to confirm 
the accuracy or source of the data British Steel chose to make public. 
Avesta concludes that the Department's decision that Avesta should base 
its interest expense ratio on British Steel's data puts the company at 
a significant disadvantage.
    Department's Position: We agree with petitioners that interest 
expense should be calculated using British Steel PLC's consolidated 
profit and loss statement. Both before and after the URAA amendments, 
the Department has consistently used the financing expenses incurred by 
a parent company on behalf of a consolidated group of companies to 
determine a particular company's net interest expense. For example, in 
Final Determination of Sales at Less Than Fair Value: Certain

[[Page 30710]]

Carbon Steel Butt-Weld Pipe Fittings From Thailand, 60 FR 10552 
(February 27, 1995), the Department followed its long-standing practice 
and calculated the interest expense component of COP based upon the 
interest expense of the parent entity of a consolidated group of 
companies, rather than the individual company responsible for the 
production of the product at issue. In so ruling, the Department 
reasoned that capital was fungible and that the parent company's 
capital was used to fund all of the operations of the consolidated 
company and could not be segregated. See also Aramid Fiber Formed of 
Poly Para-Phenylene Terephthalamide from the Netherlands: Final Results 
of Antidumping Administrative Review, 62 FR 38059, 38060 (July 16, 
1997). The CIT affirmed various aspects of this long-standing practice. 
See E.I. Dupont de Nemours v. United States, Court No. 96-11-02509, 
Slip Op. 98-7 at 6-8 (CIT January 28, 1998) (affirming the Department's 
use of the parent's consolidated statements, where evidence cited did 
not overcome the presumption of corporate control); Gulf States Tube 
Div. v. United States, Court No. 95-09-01125, Slip Op. 97-124 at 34-43 
(CIT August 29, 1997) (the Department's calculation of interest expense 
derived from borrowing costs incurred by a consolidated group was 
reasonable where the parent company's majority ownership was prima 
facie evidence of control over the subsidiary); New Minivans from 
Japan, 57 FR 21946 (May 26, 1992) (Comment 18); Brass Sheet and Strip 
from Canada; Final Results of Antidumping Duty Administrative Review, 
55 FR 3141, 31418, (August 2, 1990) (Comment 22). In calculating 
interest expense, therefore, we have used British Steel PLC's 
consolidated profit and loss statement.
    It is the Department's practice to allow a respondent to offset 
(i.e., reduce) financial expenses with short-term interest income 
earned from the general operations of the company. See e.g., Timken v. 
United States, 852 F. Supp. 1040, 1048 (CIT 1994); see also Static 
Random Access Memory Semiconductors From Taiwan: Final Determination of 
Sales at Less Than Fair Value, 63 FR 8909, 8933 (February 23, 1998). In 
calculating a company's cost of financing, we recognize that, in order 
to maintain its operations and business activities, a company must 
maintain a working capital reserve to meet its daily cash requirements 
(e.g., payroll, suppliers, etc.) The Department further recognizes that 
companies normally maintain this working capital reserve in interest-
bearing accounts. The Department, therefore, allows a company to offset 
its financial expense with the short-term interest income earned on 
these working capital accounts. Since British Steel PLC's financial 
statements do not identify the nature of interest income on its profit 
and loss statement, we have compared, as facts available, British Steel 
PLC's liquid assets to its total assets and have assumed that the ratio 
of liquid assets to total assets represents the ratio of short-term 
interest income to total interest income because liquid assets by their 
very nature are short-term assets. Therefore, we have used this 
percentage of total interest income to offset interest expense. See 
Final Analysis Memorandum.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Tariff Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
entries of subject merchandise from the United Kingdom that are 
entered, or withdrawn from warehouse, for consumption on or after 
January 4, 1999 (the date of publication of the Preliminary 
Determination in the Federal Register). The Customs Service shall 
continue to require a cash deposit or the posting of a bond equal to 
the estimated amount by which the normal value exceeds the U.S. price 
as shown below. These suspension of liquidation instructions will 
remain in effect until further notice. The weighted-average dumping 
margins are as follows:

------------------------------------------------------------------------
                                                             Weighted-
                  Exporter/manufacturer                   average margin
                                                             (percent)
------------------------------------------------------------------------
Avesta Sheffield........................................           14.84
All Others..............................................           14.84
------------------------------------------------------------------------

International Trade Commission Notification

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

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13675 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P