[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30820-30843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13679]



[[Page 30820]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-427-814]


Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Sheet and Strip in Coils From France

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

EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Bolling or Douglas Campau, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone: (202) 482-3793.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Round Agreements Act (``URAA''). In addition, 
unless otherwise indicated, all citations to the Department of Commerce 
(``Department'') regulations are to the regulations at 19 CFR part 351, 
adopted at 62 FR 27296 (May 19, 1997).

Final Determination

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

Case History

    Since the preliminary determination, issued on December 17, 1998 
(Notice of Preliminary Determination of Sales at Less Than Fair Value: 
Stainless Steel Sheet and Strip in Coils from France, 64 FR 130 
(January 4, 1999) (``Preliminary Determination''), the following events 
have occurred:
    On January 12, 1999, we issued a supplemental questionnaire to 
Usinor for sections A, B, and C of our initial questionnaire. On 
January 26, 1999, Usinor's submitted its response to the Department's 
supplemental questionnaire. On January 15, and January 21, 1999, we 
issued our cost and sales verification outlines, respectively.
    On January 8, 1999, petitioners submitted comments on the planned 
Usinor sales and cost verifications. During February and March 1999, we 
conducted sales and cost verifications of Usinor and its affiliates' 
responses to the antidumping questionnaires in France and the United 
States. Between March 30, and April 7, 1999, we issued our sales and 
cost verification reports for Usinor and its affiliates (i.e., Ugine, 
Ugine Service, Bernier, Uginox, Hague, and Edgcomb). On April 15, 1999, 
respondent submitted revised sales and cost databases. Petitioners and 
respondent submitted case briefs on April 14, 1999, and rebuttal briefs 
on April 21, 1999. On April 28, 1999, the Department held a public 
hearing.

Scope of 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

[[Page 30821]]

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 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.

Transactions Investigated

    For its home market and U.S. sales, Usinor reported the date of 
invoice as the date of sale. See 19 CFR Sec. 351.401(i). As explained 
in response to Comment 10, below, for the final determination, we have 
continued to rely upon Usinor's invoice dates in the home and U.S. 
markets as the date of sale.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Usinor covered by the description in the Scope of 
Investigation section, above, and sold in France during the POI, to be 
foreign like products for purposes of determining appropriate product 
comparisons to U.S. sales. We relied on nine characteristics to match 
U.S. sales of subject merchandise to comparison sales of the foreign 
like product (listed in order of preference): grade, hot/cold rolled, 
gauge, finish, metallic coating, non-metallic coating, width, tempered/
tensile strength, and edge trim. These characteristics have been 
weighted by the Department where appropriate. The Department's 
questionnaire authorized respondent to make distinctions (sub-codes) 
within some of these characteristics, but not within others. For 
certain product characteristics (i.e., finish and coating) Usinor 
reported additional sub-codes which were specifically permitted by the 
Department's questionnaire. However, Usinor also reported additional 
sub-codes in its hot/cold rolled, and tempered product characteristic 
categories. These are characteristics for which the Department's 
questionnaire did not explicitly permit sub-codes. However, for 
purposes of the preliminary determination, the Department included 
these additional codes. See Analysis Memo from Doug Campau to The File, 
dated December 17, 1998. At verification, we reviewed respondent's 
claims for the additional sub-codes. See Home Market

[[Page 30822]]

Verification Report of Usinor/Ugine at pages 6-9, dated April 6, 1999. 
In light of our findings at verification, we conclude that use of these 
additional codes is appropriate, and have included them in the 
Department's product matching methodology.
    Also, respondent commented on the Department's finish matching 
methodology. As explained in response to Comment 4, below, for this 
final determination we have not changed our finish matching 
methodology.
    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 
discussed above, which were listed in the August 3, 1998 antidumping 
questionnaire and the reporting instructions.

Changes Since the Preliminary Determination

    On February 23, 1999, the Department published the amended 
preliminary determination, incorporating corrected scope language. See 
Notice of 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).
    Based on our analysis of comments received, we have made certain 
corrections to our preliminary determination. We have corrected certain 
programming and clerical errors in our preliminary determination, where 
applicable, and they are discussed in the relevant comment sections 
below.
    Also, the Department corrected the model match and margin programs 
in calculating packing costs for use in the cost test and constructed 
value analysis. In the Preliminary Determination, the Department 
inadvertently used a sale-specific packing cost for use in the 
calculation of interest expenses in both the cost test and constructed 
value analysis. For the final determination, the Department has revised 
this section of the program to calculated a weighted-average packing 
cost per CONNUM for use in these calculations. For a more complete 
analysis, please see the Final Determination Analysis Memo, dated May 
19, 1999.

Fair Value Comparisons

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

Constructed Export Price

    We calculated CEP in accordance with section 772(b) of the Act 
because the first sale to an unaffiliated purchaser took place through 
an affiliated purchaser after the subject merchandise was imported into 
the United States.
    We based CEP on the packed ex-warehouse or delivered prices to 
unaffiliated purchasers in the United States. We identified the 
starting price by accounting for billing adjustments to the invoice 
price. See 19 CFR Sec. 351.401(c). Where appropriate, we made 
deductions from the starting price for billing adjustments, credit, 
warranty expenses, and commissions. We also made deductions for the 
following movement expenses, where appropriate, in accordance with 
section 772(c)(2)(A) of the Act: inland freight from plant to 
distribution warehouse, inland freight from plant/warehouse to port of 
exportation, international freight, marine insurance, U.S. inland 
freight from port to warehouse, U.S. inland freight from warehouse to 
the unaffiliated customer, U.S. inland insurance, U.S. warehouse 
expenses, and U.S. Customs duties. In accordance with section 772(d)(1) 
of the Act, we deducted selling expenses associated with economic 
activities occurring in the United States, including direct selling 
expenses, inventory carrying costs, and other indirect selling 
expenses. We recalculated credit expenses for those sales with missing 
payment dates. For U.S. sales with missing payment dates, the 
Department set the date of payment to the final date of the U.S. sales 
verification. Additionally, for international freight by affiliated 
freight forwarders, we used the average of the reported rates for 
unaffiliated freight forwarders. See Comment 6.
    For products that were further manufactured after importation, we 
adjusted for all costs of further manufacturing in the United States in 
accordance with section 772(d)(2) of the Act. We relied on Usinor's 
submitted further manufacturing costs, except where the Department 
determined that the submitted further manufacturing costs could not be 
relied upon.
    Specifically, we made the following adjustments:
    1. We adjusted Hague's further manufacturing costs by applying the 
percentage difference between the reported values and the subject 
merchandise specific value. We address this issue further in our 
response to comment 30 in the ``Interested Party Comments'' section of 
the notice. See Final Cost Analysis Memorandum at 4.
    2. Because Edgcomb was unable to report further manufacturing costs 
in the manner required by the Department, we had to resort to facts 
otherwise available. Where we did find that Edgcomb's reported costs 
were reported correctly (i.e., SG&A and financial expense 
calculations), we used those costs. We also used certain yield loss and 
processing costs data verified at Edgcomb. However, for all other 
costs, as facts otherwise available, we have utilized the manufacturing 
costs reported by Usinor's other affiliated further manufacturer, 
Hague. Specifically, we developed process string specific costs to 
adjust Edgcomb's reported single weighted-average material and 
conversion costs. We address this issue further in our response to 
comment 25 in the ``Interested Party Comments'' section of the notice. 
Also, See Final Cost Analysis Memorandum at 5.
    3. We also applied Usinor's adjusted financial expense factor to 
the further manufacturing costs reported by Hague.
    We deducted the profit allocated to expenses deducted under section 
772(d)(1) and (2) in accordance with sections 772(d)(3) and 772(f) of 
the Act. In accordance with section 772(f) of the Act, we computed 
profit based on total revenues realized on sales in both the U.S. and 
home markets, less all expenses associated with those sales. We then 
allocated profit to expenses incurred with respect to U.S. economic 
activity (including further manufacturing costs), based on the ratio of 
total U.S. expenses to total expenses for both the U.S. and home 
market.

Normal Value

    After testing home market viability, as discussed below, we 
calculated NV as noted in the ``Price-to-Price Comparisons'' and 
``Price-to-CV Comparisons'' sections of this notice.

1. Home Market Viability

    As discussed in the preliminary determination, we determined that 
the home market was viable. See Preliminary Determination at 134. The 
parties did not contest the viability of the home market. Consequently, 
for the final determination, we have based NV on home market sales 
wherever possible.

[[Page 30823]]

2. Cost of Production Analysis

    In accordance with section 773(b)(3) of the Act, we calculated a 
weighted-average COP based on the sum of Usinor's cost of materials and 
fabrication for the foreign like product, plus amounts for general and 
administrative expenses, interest expenses, and packing costs. We 
relied on the COP data submitted by Usinor in its original and 
supplemental cost questionnaire responses, except in the following 
specific instances:
    1. Usinor valued hot-rolling services proved by affiliated parties 
at the transfer price. In accordance with section 773(f)(2) of the Act, 
we compared the reported transfer price for this hot-rolling service to 
a reported market price provided by the affiliate to unaffiliated 
parties. We found that the transfer price was below the market price. 
Thus, for the final determination, we have increased Usinor's 
affiliated hot rolling cost to reflect the market value paid by non-
affiliates in accordance with section 773(f)(2). We address this issue 
further in our response to comment 19 in the ``Interested Party 
Comments'' section of the notice. Also, See Final Cost Analysis 
Memorandum at 1.
    2. Usinor did not include profit sharing expense and certain other 
expenses reported on the company's income statement in the calculation 
of COP and CV. We included these expenses in the calculation of the 
revised G&A expense rate. We address these items further in our 
response to comments 21 and 22 in the ``Interested Party Comments'' 
section of the notice. Also, See Final Cost Analysis Memorandum at 2.
    3. We increased Usinor's reported net interest expense by the ratio 
of Usinor Holding's (a member of the Usinor Group generating most of 
the Group's financial expenses and revenues) gross and net financial 
expenses. We address these issues further in our response to comments 
23 and 32 in the ``Interested Party Comments'' section of the notice. 
Also, See Final Cost Analysis Memorandum at 3.
    We conducted our sales below cost test in the same manner as that 
described in our Preliminary Determination at 134-135. As with our 
preliminary determination, we found that for certain models of SSSS, 
more than 20 percent of Usinor's home market sales were at prices less 
than the COP within an extended period of time, and were not at prices 
that would provide for recovery of cost. We therefore disregarded the 
below-cost sales and used the remaining above cost sales as the basis 
for determining NV, in accordance with section 773(b)(1) of the Act.

3. Calculation of Constructed Value

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of Usinor's cost of materials, fabrication, general 
and administrative (G&A), U.S. packing costs, direct and indirect 
selling expenses, interest expenses and profit. In accordance with 
section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on 
the amounts incurred and realized by Usinor in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country. For selling expenses, 
we used the actual weighted-average home market direct and indirect 
selling expenses. We relied on the submitted CVs, except as noted above 
in the Cost of Production Analysis section.

Price-to-Price Comparisons

    For those product comparisons for which there were sales at prices 
above the COP, we based NV on prices to home market customers. We made 
adjustments, where appropriate, for physical differences in the 
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. In 
accordance with section 773(a)(6), we deducted home market packing 
costs and added U.S. packing costs.
    We calculated NV based on prices to unaffiliated home market 
customers. Where appropriate, we deducted credit expenses, warranty 
expenses, inland freight, inland insurance, and warehousing expense. We 
also adjusted the starting price for price adjustments such as 
discounts, rebates and freight revenue.
    We recalculated credit expenses for those sales with missing 
payment dates. For home market sales with missing payment dates, the 
Department set the date of payment as the last day of the home market 
sales verification.
    For reasons discussed below in the Level of Trade section, we 
allowed a CEP offset for comparisons made at different levels of trade. 
To calculate the CEP offset, we deducted the home market indirect 
selling expenses from normal value for home market sales that were 
compared to U.S. CEP sales. We limited the home market indirect selling 
expense deduction by the amount of the indirect selling expenses 
deducted in calculating the CEP as required under section 772(d)(1)(D) 
of the Act.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Act, we based NV on CV 
if we were unable to find a home market match of identical or similar 
merchandise. Where appropriate, we made adjustments to CV in accordance 
with section 773(a)(8) of the Act. We deducted from CV the weighted-
average home market direct selling expenses and allowed a CEP offset 
adjustment (see Level of Trade section, below).

Arm's-Length Sales

    Usinor reported that it made sales in the home market to affiliated 
end users. Sales to affiliated customers in the home market not made at 
arm's-length prices are excluded from our analysis under 19 CFR 
Sec. 351.403(c). To test whether these sales were made at arm's length, 
we compared the starting prices of sales to affiliated and unaffiliated 
customers net of all movement charges, direct selling expenses, 
discounts and packing. Where 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 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).

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the EP or CEP transaction. The NV LOT 
is that of the starting-price sales in the comparison market, or when 
NV is based on CV, that of the sales from which we derive selling, 
general and administrative (SG&A) expenses and profit. For EP, the U.S. 
LOT is also the level of the starting-price sale, which is usually from 
exporter to importer. For CEP, it is the level of the constructed sale 
from the exporter to the importer.
    To determine whether NV sales are at a different LOT than EP or 
CEP, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make an LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP

[[Page 30824]]

sales, if the NV level is more remote from the factory than the CEP 
level, but the data available do not provide an appropriate basis for 
determining whether the difference in levels between NV and CEP affects 
price comparability, we adjust NV under section 773(a)(7)(B) of the Act 
(the CEP offset provision). See Notice of Final Determination of Sales 
at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from 
South Africa, 62 FR 61731, 61732 (November 19, 1997).
    In reviewing the selling functions reported by the respondent, we 
examined all types of selling functions and activities reported in 
respondent's questionnaire response on LOT. In analyzing whether 
separate LOTs existed in this investigation, we found that no single 
selling function was sufficient to warrant a separate LOT in the home 
market.
    We determined that Usinor sold merchandise at two LOTs in the home 
market during the POI. One level of trade involved sales made through 
two channels: (1) Sales by Usinor's Ugine division, directly to 
unaffiliated service centers or end users, as well as arm's-length 
sales by Usinor's Ugine division, directly to affiliated service 
center/reseller Ugine Service (Channel 1); and (2) sales made by 
Usinor's Ugine division, with the assistance of Ugine-Service in its 
capacity as sales agent, to unaffiliated service centers or end users 
(Channel 2). The second level of trade involved sales from Ugine to 
Usinor's affiliate Bernier, together with subsequent resales by Bernier 
to unaffiliated end users (Channel 3). From our analysis of the 
marketing process for these sales, we determined that sales through 
Channel 3 were made at a more remote marketing stage than that for 
sales through Channels 1 or 2. See Memorandum from Doug Campau to 
Roland MacDonald, dated December 12, 1998, on file in Import 
Administration's Central Records Unit, Room B-099, U.S. Department of 
Commerce, 14th & Constitution Avenue, N.W., Washington, D.C. We also 
found significant distinctions in selling activities and associated 
expenses between the sales through channel 3 and those through channel 
1 or 2. Based on these differences, we concluded that two LOTs existed 
in the home market.
    In order to determine whether separate LOTs actually existed 
between the U.S. and home market, we reviewed the selling activities 
associated with each channel of distribution. Usinor only reported CEP 
sales in the U.S. market. Because all of Usinor's CEP sales in the U.S. 
market were made through Uginox, there was only one level of trade. For 
these CEP sales, we determined that fewer and different selling 
functions were performed for CEP sales to Uginox than for sales at 
either of the home market LOTs. In addition, we found that the home 
market sales were at a more advanced stage of distribution (to service 
centers or end-users) compared to the CEP sales (to the affiliated 
distributor).
    We examined whether a LOT adjustment was appropriate. The 
Department makes this adjustment when it is demonstrated that a 
difference in LOTs affects price comparability. However, where the 
available data do not provide an appropriate basis upon which to 
determine a LOT adjustment, and where the NV is established at a LOT 
that is at a more advanced stage of distribution than the LOT of the 
CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act 
(the CEP offset provision). We were unable to quantify the LOT 
adjustment in accordance with section 773(a)(7)(A) of the Act, as we 
found that neither of the LOTs in the home market matched the LOT of 
the CEP transactions. Because of this, we did not calculate a LOT 
adjustment. Instead, a CEP offset was applied to the NV-CEP 
comparisons. See Memorandum from Doug Campau to Roland MacDonald, dated 
December 12, 1998, on file in Import Administration's Central Records 
Unit, Room B-099, U.S. Department of Commerce, 14th & Constitution 
Avenue, N.W., Washington, D.C.
    We applied the aforementioned criteria in our preliminary 
determination. See Preliminary Determination at 135. For the final 
determination, we continue to find that respondent has two levels of 
trade in the home market and one level of trade in the U.S.

Use of Facts Available

    In accordance with section 776 of the Act, we have determined that 
the use of facts available is appropriate for certain portions of our 
analysis of Usinor's data. For a discussion of our application of facts 
available, see Comment 25.

Currency Conversion

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

Verification

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

Interested Party Comments

Home Market and U.S. Sales

Comment 1: Use of Home Market Downstream Resales in Determining Normal 
Value

    Respondent argues the Department should not utilize the home market 
downstream resales of Bernier and Ugine Service for comparison purposes 
in the final determination. According to respondent, in deciding 
whether downstream resales need to be reported, the Department should 
consider the nature of the merchandise sold to and by the affiliate, 
the volume of sales to the affiliate, the levels of trade involved, and 
whether sales to affiliates were made at arm's length. See Preamble, 62 
FR at 27356. Respondent argues that these factors militate against 
using Bernier's and Ugine Service's downstream resales. According to 
respondent, Bernier's and Ugine Service's downstream resales of subject 
merchandise together account for approximately five percent of total 
home market sales. Respondent argues that Ugine's home market sales are 
far more representative for margin determination purposes, being at a 
closer level of trade to Ugine's CEP sales to Uginox. Furthermore, 
according to respondent, the Department could have readily included 
Ugine's sales to Ugine Service, rather than downstream resales. 
According to respondent, Ugine's sales to Ugine Service pass the 
Department's arm's-length test, and including these sales rather than 
downstream sales would have captured ninety-nine percent of the total 
home market sales. Respondent argues that given the significant 
coverage provided by the Ugine sales, there is no way the Department's 
margin calculation would be compromised by the absence of Bernier's and 
Ugine Service's resales. Preamble, 62 FR at 27356.
    Respondent points out that the Department has determined and 
verified that all sales of subject merchandise in France were made at 
different levels of trade than sales in the United States. All sales in 
the United States were CEP sales made through Ugine's super-distributor 
Uginox, whereas Ugine's home market sales were made to end users and 
resellers. Thus, according to respondent, all home market sales were 
made at levels of distribution more advanced than that of Ugine's sales 
to Uginox. This difference is all the more

[[Page 30825]]

significant for downstream resales by Bernier and Ugine Service, which, 
according to respondent, involve a significant extra layer of selling 
activities and expenses, and which are far more remote from the factory 
than Ugine's CEP sales to Uginox.
    Respondent argues that because the average U.S. CEP sale was--
according to respondent--more than eleven times the size of the average 
home market downstream resale, no fair comparison can be made between 
Ugine's CEP sales to Uginox and downstream home market sales of Bernier 
and Ugine Service. According to respondent, the law requires that a 
fair comparison be made between CEP and normal value, and that the 
Department--to the extent practicable--establish normal value using 
sales at the same level of trade as the constructed export price. See 
section 773(a) of the Act. Respondent argues that current law gives the 
Department ample authority to favor the level of trade proximity of 
sales by Ugine over the more remote downstream sales by Bernier and 
Ugine Service in making sales comparisons. In order to make a fair 
comparison under current law, respondent believes the Department's 
matching should attempt to find satisfactory product comparisons at the 
nearest level of trade (i.e., involving sales by Ugine), rather than 
seeking identical matches at more remote levels of trade. Respondent 
argues that a comparison of downstream resales of merchandise of 
Bernier and Ugine Service can not be satisfactorily made because they 
are at remote, different levels of trade. Thus, respondent believes the 
Department's comparisons should use Ugine's sales of comparable 
merchandise. Respondent argues that Ugine's sales are the only sales of 
merchandise that may be reasonably compared with Ugine's CEP sales to 
Uginox.
    Respondent argues that significant differences between the level of 
trade of Bernier and Ugine Service sales and the level of trade of 
sales from Ugine to Uginox are not addressed by the statute's level of 
trade or CEP offset provisions. Specifically, respondent believes the 
CEP offset applied in the preliminary determination did not address the 
higher costs for slitting and processing performed by the downstream 
resellers, nor the costs of holding coils in inventory prior to such 
processing. Respondent also believes the CEP offset failed to take into 
account the pricing/profit structure of the downstream resellers--which 
reflects the far lower quantities sold, the customers involved, and the 
risk associated with carrying inventory of finished product.
    To conclude, respondent argues that the Department's consideration 
of downstream home market sales was distortive and did not result in 
fair comparisons. Consequently, respondent believes the Department 
should base normal value on Ugine sales, rather than home market 
downstream sales, for comparison purposes.
    According to petitioners, respondent's request that the Department 
disregard downstream sales of Bernier and Ugine Service has no basis in 
law, is contrary to the facts of the case, and would result in a less 
accurate calculation of normal value. Petitioners argue that Ugine 
provides no argument or evidence to dispute the memoranda prepared 
during the preliminary phase of this proceeding that detailed the 
Department's analysis and rejection of Ugine's request when it was 
initially made.
    Petitioners also argue the Department should dismiss respondent's 
argument that inclusion of the aforementioned downstream sales would 
distort the margin calculation by matching sales at widely varying 
levels of trade. According to petitioners, the statute provides for a 
level of trade adjustment, in appropriate circumstances, and for a CEP 
offset where a level of trade adjustment can not be calculated. 
According to petitioners, the very fact that the adjustment and offset 
exist is testament to the fact that the statute permits matching across 
levels of trade, contrary to respondent's argument.
    Petitioners also argue that the Department captured all of the 
selling expenses the statute directs it to capture in calculating CEP 
offset. Petitioners point out that in calculating CEP offset, the 
Department is required to deduct only the amount of indirect selling 
expenses incurred in the country in which normal value is determined on 
sales of foreign like product, but not more than the amount of such 
expenses for which a deduction is made. Thus, petitioners argue that 
the costs respondent claims the Department should deduct--namely costs 
for slitting and processing subject merchandise in very small 
quantities, costs for holding coils in inventory for such processing, 
and costs relating to the pricing/profit structure of the downstream 
resellers--actually have no bearing on the Department's CEP offset 
calculation because they are not indirect selling expenses.
    Department's Position: We agree with respondent that the downstream 
sales of Ugine Service should be disregarded in the final 
determination. According to 19 CFR Sec. 351.403(c), if an exporter or 
producer sells the foreign like product to affiliated parties, the 
Department may calculate normal value based on such sales if it 
determines that the net prices for such sales are comparable to the 
prices at which the exporter or producer sold the foreign like product 
to persons not affiliated with the seller. It is the Department's 
normal practice to run an arm's-length analysis on home market sales 
made by a producer to an affiliated company to determine whether the 
prices for such sales are comparable to prices charged to unaffiliated 
parties. If the Department determines that prices for sales to the 
affiliated company were sufficiently comparable to prices for sales to 
unaffiliated parties, then the Department need not use downstream sales 
from the affiliated company in its subsequent calculations.
    Prior to making its Preliminary Determination, the Department ran 
an arm's-length analysis on Ugine's home market sales to affiliated 
resellers Ugine Service and Bernier. This analysis led the Department 
to conclude that such sales were not made on an arm's-length basis. 
Consequently, downstream sales from Ugine Service and Bernier to 
unaffiliated customers were used in all calculations for the 
Preliminary Determination. In preparing to run its analysis for the 
final determination, the Department discovered that the data tape used 
to run the arm's-length analysis for the Preliminary Determination 
contained incomplete data on the sales from Ugine to Ugine Service and 
Bernier. This tape had been submitted to the Department on December 1, 
1998. The Department subsequently reran its arm's length analysis using 
a data tape containing complete data on the sales from Ugine to Ugine 
Service and Bernier. This tape had been submitted to the Department on 
November 16, 1999. In rerunning the arm's length analysis with the 
November tape, the Department found that Ugine's sales to Ugine Service 
were in fact made on an arm's length basis. Thus, for all affected 
calculations made for the final determination, the Department used the 
sales from Ugine to Ugine Service. The Department did not use the 
downstream sales from Ugine Service to unaffiliated customers. 
Conversely, the Department has continued to use the downstream sales of 
Bernier because the sales from Ugine to Bernier failed the arm's length 
analysis for the final determination.
    Section 773(a)(1)(B)(i) states that ``to the extent practicable'', 
the comparison will be made at the same level of trade. Thus, where it 
is not practicable--e.g., where there is no sale at the same LOT--
comparing across LOTs is

[[Page 30826]]

reasonable and permissible. Also, as Petitioners note, the very 
existence of the level of trade adjustment and CEP offset is testament 
to the fact that the statute permits matching across levels of trade, 
and that comparisons involving downstream resales by Bernier can be 
fairly and satisfactorily made. As stated in the Preliminary 
Determination, to determine whether NV sales are at a different LOT 
than EP or CEP, we examine stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make an LOT adjustment under section 
773(a)(7)(A) of the Act. For CEP sales, if the NV level is more remote 
from the factory than the CEP level and there is no basis for 
determining whether the difference in levels between NV and CEP affects 
price comparability, we adjust NV under section 773(a)(7)(B) of the Act 
(the CEP offset provision). See Certain Welded Carbon Steel Standard 
Pipes and Tubes from India: Preliminary Results of New Shipper 
Antidumping Duty Administrative Review, 62 FR 23760, 23761 (May 1, 
1997). For the final margin determination, we again made the 
appropriate CEP offset. Consequently, we disagree with Usinor that it 
is inappropriate for comparison purposes because they may be at a 
different level of trade.
    We also agree with petitioners that all appropriate selling 
expenses were captured in the Department's CEP offset calculation. To 
the extent Usinor discusses expenses in the Bernier sales not accounted 
for in the CEP offset, these are accounted for elsewhere in the margin 
program. For example, any additional slitting and processing performed 
by Bernier is accounted for in the difference in merchandise 
adjustment, where appropriate, under section 773(a)(6)(C)(2). The cost 
of holding coils in inventory prior to further processing is included 
in inventory carrying cost calculations. Therefore, for the final 
determination, the Department has continued to use Bernier's downstream 
sales.

Comment 2: Inclusion of Resales by Edgcomb in Determining CEP

    According to respondent's submissions, all of Ugine's U.S. sales of 
subject merchandise were made via Uginox, a wholly-owned and U.S.-based 
subsidiary of Usinor. Uginox, in turn, sells subject merchandise to 
Edgcomb, a downstream processor and reseller. Respondent argues that, 
although Edgcomb is affiliated with Usinor pursuant to section 771(33) 
of the Act, Edgcomb should not be regarded as affiliated with Uginox. 
Respondent states that Uginox and Edgcomb are not under common control 
within the meaning of section 771(33)(F) of the Act, and that neither 
Uginox nor Edgcomb controls the other within the meaning of section 
771(33)(G) of the Act. Furthermore, respondent argues that neither 
Usinor nor Uginox exercises sufficient control over Edgcomb to compel 
Edgcomb to provide timely and accurate responses to the Department's 
requests for information. In light of this, respondent believes the 
Department should reverse its finding that Edgcomb is an affiliated 
person. Respondent also believes the Department should utilize Uginox's 
sales to Edgcomb for comparison purposes instead of Edgcomb's sales to 
its downstream customers.
    Respondent argues that even though Uginox and Edgcomb are each 
affiliated with Usinor, such affiliations do not in turn mean that 
Uginox and Edgcomb are necessarily affiliated with each other under 
section 771(33)(F) of the Act. According to respondent, to be so 
affiliated, Uginox and Edgcomb would have to be under common control. 
Respondent argues that Uginox and Edgcomb are not under common control. 
Respondent points out that Usinor is limited to three of ten seats on 
the Board of Directors of Macsteel, Edgcomb's parent company.
    Respondent further argues that Uginox and Edgcomb are not 
affiliated pursuant to section 771(33)(G) of the Act, which provides 
that any person who controls any other person shall be considered 
affiliated with that person. According to respondent, the statute 
describes control as existing where one person is legally or 
operationally in a position to exercise restraint or direction over 
another person. Respondent argues that no such control exists between 
Uginox and Edgcomb. According to Respondent, Uginox and Edgcomb are not 
part of the same corporate family group, do not have intertwined 
computer systems, have an insignificant supply-purchase relationship, 
and negotiate prices on an arm's-length basis. Moreover, according to 
respondent, Uginox has absolutely no say in Edgcomb's business 
decisions, including sources of supply, customers to whom Edgcomb 
sells, and prices which Edgcomb charges. Consequently, respondent 
believes Edgcomb and Uginox should not be found affiliated under 
section 771(33)(G) of the Act.
    Respondent further argues that exclusion of Edgcomb's resales would 
not distort the margin calculation because Uginox's sales to Edgcomb 
were made at arm's-length prices, and because there is nothing else to 
suggest that Edgcomb's downstream sales were distortive such that they 
must be included in the Department's analysis. Moreover, according to 
respondent, Hague's downstream sales accounted for a much larger 
percentage of Uginox's sales than those of Edgcomb. Respondent also 
asserts that the sales profiles of Hague and Edgcomb closely resemble 
one another, such that the absence of Edgcomb statistics would not 
meaningfully affect the Department's margin calculation--such 
calculation being based on the weighted average price of each product 
sold in the U.S. for the entire POI. To conclude, respondent argues the 
Department should include Uginox's sales to Edgcomb and should exclude 
Edgcomb's resales to its downstream customers in its margin 
calculation.
    Petitioners cite section 772(b) of the Act, which defines CEP as 
the price at which subject merchandise is first sold to a purchaser not 
affiliated with the producer or exporter. Petitioners also point out 
that Usinor has admitted that Edgcomb and Usinor are affiliated. Thus, 
petitioners argue, the first purchasers not affiliated with Usinor 
within this particular sales channel would be Edgcomb's customers.
    According to petitioners, the record establishes and the Department 
has determined that Edgcomb and Uginox are affiliated through the 
common control of Usinor under section 771(33)(F) of the Act. 
Petitioners believe respondent's argument that the Department should 
reverse its determination that Edgcomb and Uginox are affiliated is 
contrary to the Department's regulations and has no support on the 
record.
    According to petitioners, for purposes of affiliation, control is 
defined as the quality of being legally or operationally in a position 
to exercise restraint or control over a person. See section 771(33) of 
the Act. Petitioners do not believe this definition requires a finding 
of actual control, but only the capacity to exercise control. Ferro 
Union Inc. v. United States, Slip Op. 99-27 at 32 (Ct. Int'l Trade Mar. 
23, 1999). According to petitioners, the Department has emphasized that 
the essence of being legally or operationally in a position to exercise 
restraint and direction is having the potential to impact decisions 
concerning production, pricing or cost.

[[Page 30827]]

See Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27297 
(May 19, 1997). Petitioners argue that the application of this standard 
to the facts of this case demonstrates control within the meaning of 
the statute. Petitioners point out that for the first half of the POI, 
Usinor owned 49 percent of Edgcomb through its wholly-owned subsidiary 
Sollac; that during the second half of the POI, Usinor indirectly owned 
28.5 percent of Edgcomb; that Usinor holds three of ten seats on the 
board of directors during the POI; and that Edgcomb and Usinor (through 
Uginox) have a customer/supplier relationship. By virtue of these 
facts, petitioners believe Usinor is in a position to exercise 
restraint or direction over Edgcomb. Further, Usinor has the potential 
to impact Edgcomb's decisions concerning production, pricing or cost, 
and thus Usinor has control over Edgcomb during the POI within the 
meaning of section 771(33) of the Act.
    Petitioner argues that the fact that Usinor's ownership interest 
was a minority interest and that Usinor did not have majority 
representation on the board of directors does not prevent the finding 
of control. According to petitioners, minority and majority owners can 
control an entity at the same time, singly or as a group. Ferro Union, 
Slip Op. 99-27 at 32. Petitioners also argue that majority stock 
ownership is not a prerequisite for a finding of control according to 
the Uruguay Round Agreement Acts, Statement of Administrative Action, 
reprinted in H.R. Doc. No. 316, 103d Cong., 2d Sess. At 838 (1994).
    Department's Position: We agree with petitioners that it is 
appropriate to use resales by Edgcomb in the final margin calculations.
    According to section 771(33)(E) of the Act, as amended by the URAA, 
``any person directly or indirectly owning, controlling, or holding 
with power to vote, five percent or more of the outstanding voting 
stock or shares of any organization and such organization'' shall be 
considered affiliated. According to section 771(33)(F) of the Act, as 
amended by the URAA, ``two or more persons directly or indirectly 
controlling, controlled by, or under common control with, any person'' 
shall be considered affiliated. For purposes of section 771(33), ``a 
person shall be considered to control another person if the person is 
legally or operationally in a position to exercise restraint or 
direction over the other person.''
    Respondent acknowledges that Edgcomb and Usinor are affiliated 
pursuant to section 771(33)(E). See Usinor Case Brief at p. 8, dated 
April 14, 1999. We have also determined that Edgcomb and Uginox are 
affiliated within the meaning of section 771(33)(F) of the Act because 
they are both controlled by Usinor. The evidence also establishes that 
Edgcomb was controlled by Usinor during the POI within the meaning of 
section 771(33)(F) of the Act. As noted in its letter of August 31, 
1998, Usinor indirectly owned 49% of Edgcomb, through its wholly-owned 
affiliate Sollac, for the first half of the POI, and 28% during the 
second half of the POI. The legislative history makes clear that the 
statute does not require majority ownership for a finding of control. 
Rather, the statutory definition of control encompasses both legal and 
operational control. Indeed, the very purpose of adding the ``control'' 
provision to the Act was to establish that parties may be affiliated in 
the absence of any ownership interest at all. See Statement of 
Administrative Action (``SAA'') in H. Doc. 103-316 (vol. 1) 103d Cong., 
2d Sess., at. p. 838. A minority ownership interest, examined within 
the context of the totality of the evidence, is a factor that the 
Department considers in determining whether one party is operationally 
in a position to control another. See Certain Cut-To-Length Carbon 
Steel Plate From Brazil, 62 FR 18486, 18490 (April 15, 1997); and 19 
CFR 351.102(b). In this case, during the POI, Edgcomb was also a 
service center, processor, and reseller of subject merchandise produced 
by Usinor. Furthermore, as confirmed during verification and 
acknowledged in respondent's case brief, Usinor held at least three of 
ten seats on Edgcomb's board of directors for the duration of the POI. 
Finally, at verification we learned that Usinor dictated that Edgcomb 
use a certain accounting procedure which Edgcomb acknowledged it would 
not otherwise have used. These facts, juxtaposed with the substantial 
ownership interest, lead us to conclude that Usinor is ``in a position 
to exercise restraint or direction over'' Edgcomb.
    Additionally, as noted in its letter of August 31, 1998, Usinor 
wholly owns its U.S. affiliate Uginox. Because Usinor is the sole owner 
of Uginox, it is ``in a position to exercise restraint or direction 
over'' Uginox within the meaning of section 771(33) of the Act. Usinor 
thus controls both Edgcomb and Uginox, fulfilling the common control 
element required for finding affiliation between Edgcomb and Uginox 
under section 771(33)(F) of the Act.
    Because we find that Edgcomb and Uginox are affiliated under 
section 771(33)(F), and have used the downstream resales of Edgcomb in 
our calculations for the final determination instead of the sales from 
Uginox to Edgcomb, it is not necessary to address the petitioners' 
comment that under section 772(b) we must use the downstream resales of 
Edgcomb because of Edgcomb's affiliation with Usinor, regardless of 
Edgcomb's affiliation with Uginox.

Comment 3: Home Market Indirect Selling Expenses and CEP Offset

    Respondent argues that the Department incorrectly excluded indirect 
selling expenses associated with Ugine's Building Products Group (``The 
Group'') in determining the CEP offset in the preliminary 
determination. Respondent states that the Department made this 
determination based on its conclusion such costs were ``not clearly 
attributable to scope merchandise.'' 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 
France, 64 FR 130 (January 4, 1999) (``Stainless Steel Sheet and Strip 
from France''). Respondent notes that this exclusion resulted in an 
understatement of its indirect selling expenses in the home market. 
Further, respondent contends that contrary to the Department's 
preliminary determination, the subject merchandise was in fact sold by 
the Building Products Group and the Group's mission is to promote the 
use of stainless steel products (including the subject merchandise) in 
France. Thus, the Group's costs are properly included in Ugine's 
indirect selling expenses and in the CEP offset. Furthermore, 
respondent notes that in its questionnaire response, Ugine allocated 
the expenses of the building products cost center in a reasonable 
manner which was pursuant to the Department's questionnaire and prior 
practice by allocating its home market indirect selling expenses 
related to sales of all products over company-wide sales. See Notice of 
Final Determination of Sales at Less Than Fair Value: Collated Roofing 
Nails from Korea, 62 FR 51420, 51426 (October 1, 1997). Specifically, 
respondent noted that these expenses support all sales of stainless 
steel products in France, not just certain products. Therefore, 
respondent stated that the Department should include the expenses of 
Ugine's Building Products Group in its calculation of home market 
indirect selling expenses and the CEP offset in the final 
determination.
    Petitioners acknowledge respondent's argument that Ugine Sales 
Verification Exhibit UG-20 (Feb. 26, 1999) contains

[[Page 30828]]

proof that Ugine Building Products sold subject merchandise, and that, 
consequently, total indirect selling expenses should not have been 
reduced by indirect selling expenses related to Ugine's Building 
Products Division. However, according to petitioners, the Ugine Sales 
Verification Report provides no clear evidence or finding to support 
Usinor's claim. Petitioners also point out that Usinor itself has 
stated that the Building Products Group's mission is to promote the use 
of stainless steel ``products''. According to petitioners, this 
statement demonstrates that the activities to which the Building 
Products Group's activities relate are not the promotion of subject 
merchandise, but rather the promotion of products made from subject 
merchandise. According to petitioners, such activities are not clearly 
attributable to the subject merchandise. Thus, petitioners argue, the 
Department properly excluded these indirect selling expenses from the 
numerator of its preliminary calculation.
    Department's Position: We agree with respondent. The Department has 
examined the respondents' home market indirect selling expenses, 
specifically Ugine Building Products (UBI) indirect selling expenses, 
and found that these expenses have been properly reported. The 
Department included the indirect selling expenses associated with UBI 
in its calculation of Ugine's indirect selling expense ratio. We have 
verified that Ugine has properly included UBI's expenses in its 
numerator of indirect selling expenses. The Department has verified 
that UBI was formed to develop new stainless steel products for the 
French and European building construction industry and UBI's main 
mission is improve Ugine's stainless steel sales to the building 
construction industry, including sales of subject merchandise. 
Additionally, we verified that UBI is in charge of promoting and 
selling stainless steel products such as the subject merchandise to the 
different markets as ``an attempt at trying to convince end-users 
(contractors and architects) to try it, switching from their 
traditional zinc-coated products or other non-steel products'' to 
Ugine's stainless steel products. See Home Market Verification Report 
of Usinor/Ugine, at page 38, April 6, 1999. Furthermore, the Department 
has determined that the respondent has properly included an allocated 
portion of UBI's selling expenses in Ugine's indirect selling expense 
calculation. Therefore, we have determined that the respondent has 
properly reported its home market indirect selling expenses.

Comment 4: Model Match Methodology/Group Products According to Finish 
Overruns

    Respondent argues that the Department's product matching 
methodology with respect to weighting of the finish characteristics is 
not supported by factual evidence. Respondent noted that the Department 
never disclosed its rationale for weighting the individual 
characteristics. Respondent contended that the Department disregards 
the level of processing required to achieve the designated finish. For 
example, the Department's methodology for matching finishes matches a 
bright-annealed finish (i.e., requires no finishing beyond the rolling 
mill), first to a product with a polish finish, then to a product that 
requires more finishing. Thus, rather than matching to other products 
without a finish step beyond rolling, the Department matches a product 
with no finish steps to products with one or two finish steps. Hence, 
respondent argued that the Department's weighting of finishes fails to 
account for the differences in finishes with respect to cost, value and 
difficulty in finishing. Therefore, respondent argues that the 
Department should first match products with identical finishes, and if 
no identical finish match is available, then the Department should 
match to all other finishes requiring the same number of finish steps, 
which would be reasonable and proper as well as supported by the 
record.
    Petitioners argued that the Department should reject Usinor's 
proposed finish groupings because it fails to adequately distinguish 
between the physical characteristics created by the finishing processes 
as required by the statute, and consequently fails to retain important 
cost distinctions among different products. According to petitioners, 
section 771(16) of the Act requires that products be matched according 
to identical and similar physical characteristics. For the subject 
merchandise, petitioners argued that finish is an identifiable and 
quantifiable difference in merchandise. Petitioners asserted that the 
subcategories suggested by respondent, which, according to petitioners, 
are based on a simple count of the number of finishes, do not recognize 
the differences in the physical characteristics and costs of the 
subject merchandise that are created by the finishing process. 
According to petitioners, to treat products with different finishes as 
identical would be to ignore the strict hierarchy of section 771(16) of 
the Act, as well as the different costs of production of each product.
    Department's Position: We disagree with respondent. In July 1998, 
the Department solicited comments addressing potential model match 
criteria. The comments respondent submitted on July 27 and 28, 1999 
made no suggestion that the Department consider number of finish 
processes involved in production of subject merchandise in establishing 
its matching criteria. In fact, the suggested matching criteria for 
finish that respondent submitted on July 27, 1998 contained only six 
possible types of finish (including ``[n]one'').
    In this case, level of processing is not determinative of what 
constitutes a best match for model match purposes. Thus, whether a 
product goes through three, two, one or no finishing processes is not 
reflected in the model match program. This is because section 771(16) 
requires that products be matched according to physical characteristics 
rather than according to production processes, as suggested by 
respondent. We agree with petitioners that the subcategories suggested 
by respondent (based on number of finish steps) do not adequately 
distinguish products based on the differences in physical 
characteristics of subject merchandise produced via the different types 
of finishing processes.
    Finally, it is not possible--utilizing the information gathered at 
verification or otherwise submitted to the record by Ugine--to 
consistently determine how many finish processes a particular product 
has gone through. Exhibit 8 of respondent's case brief indicates that a 
majority of the finish types assigned model match codes by the 
Department involve more than one finish process. However, as 
illustrated in exhibits UG-3(f) and UG-5, the information verified and 
on record is not detailed enough to allow the Department to conclude 
that a particular quantity of subject merchandise was produced via a 
particular number of finish processes. Therefore, even if we wished to 
follow Ugine's suggestion, Ugine has not provided sufficient 
information to enable us to utilize the number of finish process steps 
in our model matching procedures.

Comment 5: Foreign Inland Freight

    Petitioners stated that respondent failed to report inland freight 
expenses between the Gueugnon plant and the Macon containerization 
facility and did not provide an explanation why these expenses were not 
reported. Thus, petitioners argued that the Department is required to 
base this expense on facts

[[Page 30829]]

available in accordance with section 776(a) of the Act because 
respondent made no effort to provide the actual freight information in 
its pre-verification submission although its records permitted it to 
report other foreign inland freight for other sales. Also, because 
respondent did not provide any evidence that it acted to the best of 
its ability to provide the missing information. Further, petitioners 
contended that because respondent did not demonstrate that it acted to 
the best of its ability, the Department should apply adverse facts 
available. See section 776(b) of the Act. Petitioners argued that 
adverse facts available are warranted because neither the information 
itself or sufficient justification for its omission was provided, and 
not applying adverse facts available would allow respondent to 
selectively provide information and improperly influence the outcome of 
the margin calculation, which would be contrary to the purpose of the 
facts available provisions. See Olympic Adhesives, 899 F.2d at 1571. 
Furthermore, petitioners stated that to apply the average 
transportation cost for all reported sales, as suggested by respondent, 
would not be appropriate, because it would potentially permit the 
respondent to manipulate the database. Therefore, the correct facts 
available rate to apply for these sales, is the highest reported 
transportation rate paid by Ugine on any such sale. See Circular Welded 
Non-Ally Steel Pipe and Tube from Mexico: Final Results of Antidumping 
Duty Administrative Review, 63 FR 33041, 33046-47 (June 17, 1998).
    Respondent argues that petitioners' contention that it failed to 
report inland freight expenses between the Gueugnon plant and the Macon 
containerization facility is erroneous. According to respondent, it 
disclosed in its September 28, 1998 section C response that the company 
was unable to collect the foreign inland freight expense data for 
certain shipments destined for Hague, and that for such shipments, an 
average per-unit expense was reported. Respondent further explains that 
prior to verification, Ugine discovered the average expense had been 
inadvertently omitted for these sales, and subsequently presented the 
average freight expense as a minor correction. Respondent also notes 
that during the Hague verification, it provided the Department with 
actual freight expenses from the Gueugnon plant to the Macon 
containerization facility for the sales transactions selected for 
review, and that such actual freight expenses were approximately equal 
to the reported average freight expense. Respondent claims it resorted 
to utilization of average transportation cost only for those sales 
where transaction-specific data were unavailable.
    Respondent further asserts that petitioners' citation to Circular 
Welded Non-Alloy Steel Pipe and Tube from Mexico: Final Results of 
Antidumping Duty Administrative Review does not support petitioners' 
claim that the Department should apply the highest reported 
transportation rate paid by Ugine to all sales for which no expense was 
reported. Id. According to respondent, the Department applied facts 
available in the aforementioned case only after having placed the 
respondent on notice--in prior reviews--that verifiable freight expense 
information was required and should not be destroyed, and where the 
respondent continued to destroy its freight records. Respondent asserts 
that in the present case, Ugine presented verifiable expense 
information, and average freight expense information only where 
transaction-specific data were unavailable. According to respondent, 
Ugine has cooperated fully and to the best of its ability with all of 
the Department's requests. Thus, respondent believes the Department 
should deny petitioners' request for use of facts available for foreign 
inland freight expenses on Hague transactions.
    Department's Position: We disagree with petitioners. In this 
instance, although we verified that respondent was unable to report the 
freight expense at issue for all transactions, respondent has been 
fully cooperative and has acted to the best of its ability to provide 
the Department with all available information as the Department has 
requested. Moreover, respondent has provided a reasonable estimate of 
the freight amount for those transactions where respondent could not 
identify the exact amount. Thus, we do not believe the facts warrant 
the application of an adverse assumption as facts available in this 
instance. We note that the Department allows respondents to correct for 
minor changes in preparation of verification. The verification outline 
of January 21, 1999 provided for ``presentation by Usinor of minor 
changes, if any, to the response resulting from verification 
preparation. Identification of the specific observation(s) involved, 
and corresponding database(s), must also be provided.'' See 
Verification Outline at page 3, dated January 21, 1999. Respondent 
provided minor corrections for its freight on U.S. sales/foreign inland 
freight on Hague sales at the start of Ugine's home market sales 
verification. See Home Market Verification Report of Usinor/Ugine at 
page 3, April 6, 1999. Furthermore, during Ugine's home market sales 
verification, we compared several of the reported average freight 
figures with an the actual freight expense from the Gueugnon plant to 
the Macon containerization facility, and found that the average figures 
were reasonable. See Home Market Verification Report of Usinor/Ugine, 
at pages 42-45, April 6, 1999; and Exhibits UG-28, UG-35, UG-36, UG-37 
and UG-39.
    Moreover, we disagree with petitioners in their citation of 
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Final 
Results of Antidumping Duty Administrative Review in support of their 
facts available claim for this issue. 63 FR 33041, 33046-47 (June 17, 
1998). In that case, the Department stated that it was justified in 
applying the use of partial adverse facts available because the 
respondent did not cooperate to the best of its ability. In this 
instance, Usinor has cooperated to the best of its ability in supplying 
the Department with all of the relevant information, including, when 
necessary, careful estimates of missing information, for the inland 
freight expenses between the Gueugnon plant and the Macon 
containerization facility. In sum, for the final determination, we used 
respondent's information for the inland freight expenses between the 
Gueugnon plant and the Macon containerization facility.

Comment 6: Affiliated Freight Forwarders

    Petitioners state that respondent was unable to demonstrate that 
rates from its affiliated freight forwarder were arm's-length rates. 
Petitioners argue that the fact that the affiliated freight forwarder 
made profit does not necessarily prove the rates it charged to 
respondent and its affiliates were arm's-length rates. Petitioner 
believes that respondent should have been able to present information 
to establish that the affiliate charged arm's-length prices. Because, 
in petitioners' opinion, respondent did not establish the arm's-length 
nature of the affiliated freight forwarder's rates, petitioners believe 
these transactions should be disregarded pursuant to section 773(f)(2) 
of the Act, and that the Department should base rates for affiliated 
freight forwarders on the highest reported rate for an unaffiliated 
freight forwarder.
    Respondent argues that petitioners' claim that Usinor is unable to 
demonstrate that it deals with its affiliated freight forwarder on an 
arm's-

[[Page 30830]]

length basis--and that the Department should therefore base affiliated 
freight forwarder rates on the highest reported rate for an 
unaffiliated freight forwarder--is incorrect. According to respondent, 
the Department verified the fact that the affiliated freight forwarder 
made a reasonable profit on the services it provided to Ugine. 
According to respondent, no further evidence of the arm's-length 
character of these services is needed.
    Respondent also claims that the vast majority of charges by the 
affiliated freight forwarder are what respondent refers to as ``pass-
throughs of charges'' from unaffiliated service providers. Respondent 
further indicates that any charges to be found on invoices of the 
affiliated freight forwarder that are not what respondent refers to as 
``pass-throughs of charges'' from unaffiliated entities will represent 
minuscule percentages of the total amounts for each invoice.
    Department's Position: We agree with petitioners in part. It is 
clear from the record evidence that Usinor was unable to demonstrate 
that its affiliated freight forwarder rates were at arm's length 
prices. At verification, respondent stated that ``it can not show how 
the affiliated freight forwarder's rates are generated and charged 
versus the rates of other, non-affiliated freight forwarders.'' See 
Home Market Verification Report of Usinor/Ugine, at page 31, April 6, 
1999. Consequently, we are unable to conclude that these affiliated 
party transactions were carried out at arm's length prices.
    Further, we disagree with respondent's argument that a profit made 
on the services of the affiliated freight forwarder provided to Ugine 
proves that these services were at arm's length. The arm's length test 
compares prices charged by or paid to affiliated parties with prices 
which would otherwise be obtained in transactions with unaffiliated 
parties. See Circular Welded Non-Alloy Steel Pipe from Korea, 63 FR 
32833, 32838 (June 16, 1998). The level of profit on these sales is not 
a relevant consideration.
    Nevertheless, because Usinor was unable to provide the requested 
information, it would inappropriate to use the rate proposed by 
petitioners, because use of such a rate would require an adverse 
assumption under section 776(b) of the Act. Because we find that Usinor 
has acted to the best of its ability with respect to this adjustment, 
as non-adverse facts available, we have used the average of Usinor's 
reported freight-forwarder rates.

Comment 7: Product Matching

    Petitioners noted that Edgcomb sometimes shipped higher quality, 
higher cost products than that which was ordered by a particular 
customer. Petitioners argued that where GRADEU (grade) and INGRADU 
(invoiced grade) differ, the Department should match sales according to 
INGRADU. According to petitioners, the statute requires the Department 
to match products according to the similarity of the actual physical 
characteristics of the products. Therefore, according to petitioners, 
the actual grade sold and shipped--the IN GRADU--must be the basis for 
product matching with home market sales in order to determine the 
actual level of dumping on such sales.
    Additionally, petitioners argued the Department should ensure that 
Usinor has reported constructed value information based on INGRADU and 
not on GRADEU. According to petitioners, because the products shipped 
actually have a higher cost of production than the product invoiced, 
the constructed value reported must reflect the higher actual cost of 
production. If constructed value is not available on an INGRADU basis 
for any U.S. sale being compared to constructed value, petitioners 
believe the margin for that sale should be based on facts available.
    Respondent asserted that Ugine accurately reported the physical 
characteristics of the material actually produced and shipped in fields 
GRADEH or GRADEU as required by the Department's questionnaire. 
Respondent stated that where the information contained in fields 
INGRADH or INGRADU differs from the information in fields GRADEH or 
GRADEU, it is because the grade invoiced differed from the grade 
actually produced and shipped to the customer. Respondent further 
stated that, per the Department's instructions, the grade reported in 
INGRADH or INGRADU is the grade appearing on the invoice to the 
customer, even though it does not always reflect the actual physical 
characteristics of the product in those circumstances. Hence, according 
to respondent, the information in fields GRADEH and GRADEU should be 
used for product comparisons, as such information reflects the actual 
physical characteristics of the material produced and sold.
    Department's Position: We disagree with petitioners' contention 
that product matching must be based on the data reported in field 
INGRADU. Petitioners appear to misunderstand the reported 
characteristics: although they correctly argue that matching should be 
based on the characteristics of the merchandise actually shipped, they 
mistakenly state that the fields INGRADU and INGRADH are the fields 
which contain those characteristics. In fact, in response to the 
Department's initial and supplemental questionnaires, respondent 
reported the grades of subject merchandise invoiced to customers in 
fields INGRADU and INGRADH. Respondent reported the grades of subject 
merchandise actually produced and shipped to customers in fields GRADEU 
and GRADEH. As Edgcomb explained at verification, for a number of 
sales, the grades reported in fields GRADEU and INGRADU differ. See 
United States Verification Report of Edgcomb, at page 5, April 7, 1999. 
According to Edgcomb, when necessary, they would ship higher quality 
and higher cost product than what was ordered, while invoicing a 
customer for the lower quality and lower cost grade ordered. See United 
States Verification Report of Edgcomb, at page 5, April 7, 1999. 
Edgcomb representatives explained that this was sometimes necessary 
because of shortages in inventory. See United States Verification 
Report of Edgcomb, at page 5, April 7, 1999. Edgcomb would also do this 
at times to reduce inventory of certain products. Thus, in some cases, 
the fields INGRADU and INGRADH do not reflect the actual merchandise 
delivered to the customer. The Department is required to base its 
calculations on products actually sold for consumption in the U.S. and 
home markets. In cases where the grades reported in fields GRADEU and 
INGRADU differ, the Department will base its product comparison on the 
product actually produced and shipped. Thus, the Department used the 
data reported in fields GRADEU (or GRADEH, as appropriate) for 
comparison purposes.

Comment 8: Credit Expenses/Bernier Sales

    Petitioners claimed that Bernier was not able to report its actual 
dates of payment for its home market sales, but instead provided an 
average delay between invoice and payment. Additionally, petitioners 
noted that Bernier recalculated the average payment period using only 
roughly 70 percent of its reported sales value. Thus, petitioners 
argued the average payment period proposed by respondent should be 
rejected because the recalculation is not based on the total sales 
value. Further, petitioners contended that the omitted 30 percent of 
sales could substantially reduce the average payment period, and the 
sales chosen

[[Page 30831]]

for recalculating the average payment period do not appear to be 
sampled randomly. Therefore, petitioners argued that Bernier's credit 
expense for home market sales should be rejected because Bernier has 
not provided either actual payment dates or accurate average date of 
payment for all sales.
    According to respondent, at the outset of verification, Bernier 
made a minor correction to revise the reported delay between invoice 
date and date of payment in order to correct an error in its computer 
program used to compute the data. Respondent explains that in providing 
the corrected data, Bernier examined its largest sales--representing 
over 80 percent of the total quantity and 70 percent of total value of 
sales of subject merchandise--provided the Department with figures for 
actual payment delay on such sales, and then calculated average payment 
delay on its remaining sales based on the actual data. Thus, respondent 
believes petitioners' demand that Bernier should be denied an 
adjustment for credit expense should be rejected.
    Department's Position: We disagree with petitioners. Respondent's 
methodology for reporting its credit expenses is acceptable. At the 
beginning of verification, Bernier presented the Department with a 
minor correction on its date of receipt of payment which revised the 
reported delay between invoice date and the receipt of payment dates 
which had previously been misreported due to a computer programming 
error. To correct this error, respondent manually researched its 
largest sales, which represented over 80 percent of the total quantity 
of their sales of subject merchandise (roughly 70 percent of the total 
sales value). See Home Market Verification Report of Bernier, at page 
2, April 6, 1999 and Exhibit BE-1. Once Bernier had completed its 
research, it provided the Department with revised figures with the 
actual payment delay on the aforementioned pool of sales. See Sales 
Transactions, Verification Exhibits BE-14 through BE-16. Further, 
Bernier only used an average payment date for the remaining pool of 
sales that did not have an actual payment date, and based that average 
date on the actual payment date data for the largest sales. Moreover, 
the Department's questionnaire clearly states, ``if actual payment 
dates are not readily accessible in your accounting system, you may 
base the calculation on the average age of accounts receivable.'' See 
Department's Questionnaire at page B-28, August 3, 1998. Thus, it is 
reasonable for respondent to calculate an average payment date for 
those sales that did not have an actual payment date. Therefore, 
respondent has been fully cooperative and has acted to the best of its 
ability to provide the Department with all available information and 
facts available is warranted in this regard. In sum, for the final 
determination, the will use respondent's information for credit 
expense.

Comment 9: Credit Expenses/Ugine Service Sales

    Petitioners stated that Ugine Service was not able to report its 
actual dates of payment for its home market sales, but instead provided 
an average delay between invoice and payment. Additionally, petitioners 
noted that Ugine Service recalculated the average payment period using 
a small portion of its sales database. Thus, petitioners argued the 
average payment period proposed by respondent should be rejected 
because the recalculation is not based on the total sales value. 
Further, petitioners contended that the larger omitted portion of sales 
could substantially change the average payment period, and Ugine 
Service did not provide information on how it chose the sales for its 
sample. Since the Department cannot determine whether the sales chosen 
are representative of all other sales and cover a representative period 
in the POI, petitioners state the validity of the sample cannot be 
determined and thus is not reliable. Therefore, petitioners argued that 
Ugine Service's credit expense for home market sales should be rejected 
because Ugine Service has not provided either actual payment dates or 
demonstrated that it has provided an accurate average date of payment 
for all sales.
    According to respondent, Ugine Service was able to manually 
identify and report actual date of payment for a significant percentage 
of its reported home market sales. Where possible, Ugine Service 
computed the average days payment was outstanding based on customer-
specific information. For the rest, respondent claims Ugine Service 
applied an overall average based on the customer-specific information. 
According to respondent, such data was reported to the best of Ugine 
Service's ability. Thus, respondent believes the Department should deny 
petitioners' request to reject Ugine Service's credit expense 
adjustment.
    Department's Position: We disagree with petitioners. Respondent's 
methodology for reporting its credit expenses is acceptable. At the 
beginning of verification, Ugine Service presented the Department with 
a minor correction on its receipt of payment date. Respondent stated 
that they had to revised the date of receipt of payment due to double-
counting the period from the actual invoice date to the due date. Due 
to this error, respondent stated that it manually researched its files 
and reported the actual date of receipt of payment on a transaction-
specific basis for a portion of its sales file. See Home Market 
Verification Report of Ugine Service at page 2, April 5, 1999 and 
Exhibit UGS-1, Attachment 2. For the remaining sales, Ugine Service 
used an average based on customer specific data, to calculate a number 
of days outstanding for the credit calculation. That calculated average 
is very close to the average number of days based on transaction-
specific information. See Home Market Verification Report of Ugine 
Service, April 5, 1999 and Exhibit UGS-1, Attachment 3. Thus, Ugine 
Service's calculated average days was a reasonable surrogate because 
Ugine Service could not provide the actual payment dates for these 
sales. Further, the Department's questionnaire clearly states, ``if 
actual payment dates are not readily accessible in your accounting 
system, you may base the calculation on the average age of accounts 
receivable.'' See Department's Questionnaire at page B-28, August 3, 
1998. Thus, it is reasonable for respondent to calculate an average 
payment date for those sales that did not have an actual payment date. 
Therefore, respondent has been fully cooperative and has acted to the 
best of its ability in providing the Department with all available 
information and facts available is not warranted in this instance. In 
sum, for the final determination, we used respondent's information for 
credit expense.

Comment 10: Date of Sale in the Home Market

    According to petitioners, the verification report for Ugine 
demonstrates that order confirmation date is the appropriate date of 
sale for home market sales. Specifically, petitioners stress that an 
order acknowledgment document is generated by Ugine's order entry 
system for each order and each change of order. Petitioners argued that 
the Department should conclude that order date--as defined by the order 
confirmation--is the appropriate date of sale because it is the date of 
sale on which the terms of sale are set and recorded.
    According to respondent, the date of invoice properly reflects date 
of sale in this case. Respondent claims that Ugine and Uginox maintain 
their sales records based on invoice date in the normal course of 
business. Thus, respondent asserted that the companies reported

[[Page 30832]]

their sales by invoice date on the basis of the Department's 
regulations, the Questionnaire instructions, and the applicable facts. 
According to respondent, the Department verified that order date would 
not be the appropriate date of sale in this case, as price and quantity 
are subject to continued negotiation until a sale is invoiced. Thus, 
respondent argued that the Department should reject petitioners' 
contention that the home market date of sale should be based on order 
date.
    Department's Position: We agree with respondent that invoice date 
is the correct date of sale for Usinor's home market sales. 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 Certain Welded Carbon Steel Pipes and Tubes from 
Thailand: Final Results of Administrative Review, 63 FR 55578, 55587 
(October 16, 1998) (``Pipes and Tubes from Thailand''). However, in 
some instances, it may not be appropriate to rely on the date of 
invoice as the date of sale, where the evidence indicates that the 
material terms of sale were established on some date other than invoice 
date. See Preamble to the Department's Final Regulations, 62 FR 27296, 
27348-27350 (May 19, 1997). Thus, despite the general presumption that 
the invoice date constitutes the date of sale, the Department may 
determine that this is not an appropriate date of sale where the 
evidence of the respondent's selling practice points to a different 
date on which the material terms of sale were set.
    In this investigation, in response to the original questionnaire, 
Usinor reported invoice date as the date of sale in both the U.S. and 
home markets. On November 2, 1998, Usinor submitted a letter requesting 
that the Department not require the submission of order confirmation 
date data because the companies' record keeping systems were not 
equipped to report order acknowledgments, in some cases because order 
acknowledgments were not generated, and in some cases because they were 
routinely purged from the involved databases. Furthermore, Usinor 
reported that the essential terms of the companies' orders change 
between the date of order acknowledgment and the invoice date for most, 
but not all, of its U.S. and home market sales. For purposes of our 
preliminary determination, we accepted the date of invoice as the date 
of sale subject to verification. See Preliminary Determination at 133-
134.
    At verification, we carefully examined Usinor and its affiliates 
selling practices, namely, the manner in which each company records the 
sales in its financial records by date of invoice. For the home market, 
we reviewed several sales observations for which the price and quantity 
changed subsequent to the original order confirmation. See Home Market 
Verification Report of Usinor/Ugine at pages 12, and 39-47, dated April 
6, 1999. Additionally, at verification we examined respondent's study 
of order modifications in 1995 and found that the terms of sale for a 
large portion of sales in that year were modified multiple times 
between the initial order date and the invoice date, and that the vast 
majority of orders were modified at least once. See Home Market 
Verification Report of Usinor/Ugine at pages 12, and 39-47, dated April 
6, 1999. Further, we discovered at verification that when an order is 
changed only the most recent set of information can be retrieved from 
the database system. Thus, if an order is changed, Usinor would only be 
able to recover information from the most recent version of the changed 
order, and is thus not able to recover historical information about 
that order. In addition, at verification we discovered that Usinor 
purges its record keeping database system (i.e., CDSTAT) every six 
months in order to keep computer memory space at a maximum, and only 
the original order date and other original order data are retained in 
another (i.e., FACSTAT) database. See Home Market Verification Report 
of Usinor/Ugine at page 11, April 6, 1999. Thus, based on respondent's 
representations, and as a result of our examination of Usinor and its 
affiliates records kept in the ordinary course of business, we are 
satisfied that the date of invoice should be used as the date of sale 
because it best reflects the date on which material terms of sale were 
established for Usinor and its affiliates' home market and U.S. sales.

Comment 11: Reimbursement of Antidumping Duties Paid

    According to petitioners, the Uginox verification report indicates 
that Ugine charges Uginox prices net of all export and import-related 
expenses. Petitioners concluded that this amounts to a discount or 
rebate to Uginox from Ugine of all the export and import related 
expenses, plus an amount for profit, on each U.S. sale. In light of 
this practice, petitioners argued that Ugine will now discount the 
price to Uginox on U.S. sales by the amount of any antidumping duties 
collected, contrary to the requirements of 19 C.F.R. 
Sec. 351.402(f)(1)(i). Petitioners contended that the Department should 
apply section 353.402(f) of its regulations, find that there is an 
agreement between Ugine and Uginox that will result in the 
reimbursement of antidumping duties by Ugine to Uginox, and then add 
the amount of the duties to be reimbursed into the duty deposit rate 
for Usinor.
    Petitioners asserted that the Department previously applied the 
reimbursement regulation in a case where duties had yet to be assessed, 
and that the Department specifically concluded that an agreement to 
reimburse was sufficient to trigger the regulation. Petitioners further 
stated that there is no legal or logical reason to wait until the end 
of the first administrative review to apply the reimbursement 
regulation, thereby frustrating the remedial effect of the antidumping 
laws for that additional time. In support of this, petitioners quote 
cases indicating that the regulation is designed to preserve the 
statute's remedial purpose by discouraging foreign exporters from 
assuming the cost of duties, and that the remedial effect must be 
preserved as soon as an agreement to reimburse duties is apparent.
    According to respondent, the Department's reimbursement regulations 
do not apply at this stage of the proceeding. Respondent asserted that 
petitioners fail to cite any cases where reimbursement was found or 
considered in an investigation. Respondent further stated that 
petitioners only cite administrative reviews--covering periods for 
which duties had already been imposed--in support of their argument. 
Respondent argued that there must be a finding of sales at less than 
fair value before a dumping margin can be imposed, and there must in 
turn be an established dumping margin prior to any finding that 
reimbursement is taking place. Respondent contended that in this case 
the Department has not determined that the subject merchandise is being 
sold at less than fair value, so there is no basis for an actual 
assessment of duties. Thus, according to respondent, the Department can 
not find that reimbursement is taking place.
    Respondent claimed that there is no agreement by Ugine to reimburse 
Uginox for antidumping duties. Respondent further claimed that 
petitioners have failed to satisfactorily allege the required elements 
of duty reimbursement. According to respondent, the Department's 
regulations require that a petitioner

[[Page 30833]]

show evidence that an exporter either directly pays antidumping duties 
for its affiliated importer or has reimbursed the importer for duties 
already paid. Respondent claimed that no such payments or 
reimbursements have been or can be made. Respondent also argued that 
petitioners' claim is legally infirm because the Department's policy 
and practice related to the treatment of possible discounts or 
reimbursements of the type discussed above require more and different 
evidence than has been presented in this case.
    Finally, respondent argued the Department should reject 
petitioners' argument for a rebuttable presumption of reimbursement 
against Uginox. According to respondent, the Department's regulations 
state that a rebuttable presumption of reimbursement may be imposed if, 
at the time duties are being paid, the importer has not filed a pre-
liquidation certificate with Customs. Respondent argued that such a 
presumption is impossible in this case because duties have not been 
assessed and are not being paid. Thus, respondent stated that the 
Department should reject petitioners' reimbursement claim.
    Department's Position: We disagree with petitioners. First, our 
reimbursement regulations are not applicable at this stage of the 
proceeding. For the Department to apply the duty reimbursement 
provision, there must be a duty to reimburse. During the POI, there was 
no liability for antidumping duties to be assessed.
    Second, petitioners have improperly cited certain cases in support 
of their argument, e.g., Certain Cold-Rolled Carbon Steel Flat Products 
from the Netherlands: Final Results of Antidumping Administrative 
Review, 61 FR 48465, 48470 (September 13, 1996); Porcelain-on-Steel 
Cookware from Mexico: Preliminary Results of Antidumping Administrative 
Review, 64 FR 1592, 1593 (January 11, 1999) (``Porcelain Cookware''). 
Both of these cases involve administrative reviews. In all 
administrative reviews--unlike in investigations--actual duties are to 
be assessed on the transactions under review. Therefore, these cases 
are not applicable.
    In light of the stage of the proceeding, we conclude that there is 
no basis to apply the reimbursement regulation in this case.

Comment 12: CEP Sales and Home Market Level of Trade

    Petitioners point out that the Department compared CEP sales to 
home market sales based on a constructed level of trade for those CEP 
sales after the adjustments under section 772(d) of the Act were made. 
According to petitioners, the Court of International Trade has ruled 
that the Department's interpretation that the adjustments under section 
772(d) of the Act must be made prior to level of trade matching 
contravenes the purpose of the statute. Borden, Inc. v. United States, 
4 F. Supp. 2d 1221 (Ct. Int'l Trade 1998). Thus, for the final 
determination of this investigation, petitioners argued that the 
Department is required to determine level of trade prior to the 
application of adjustments under section 772(d) of the Act.
    Respondent argued the Department should adhere to its current 
practice of beginning its level of trade analysis after adjusting for 
U.S. selling expenses and profit. According to respondent, petitioners' 
reliance on Borden Inc. v. United States is misguided, as the 
Department has indicated its disagreement with Borden, and because the 
case is under appeal. 4 F. Supp. 2d 1221 (Ct. Int'l Trade 1998). 
Respondent also asserted that petitioners' claim is fundamentally 
identical to an argument expressly considered and rejected in Certain 
Stainless Steel Wire Rod From France: Final Results of Antidumping Duty 
Administrative Review, 63 FR 30185 (June 3, 1998).
    Department's Position: We disagree with petitioners. The Department 
is continuing its practice, articulated in section 351.412(c) of the 
new regulations (see 62 FR 27296, 27414), of making the level of trade 
comparisons for CEP sales on the basis of the CEP after adjustments 
provided for in section 772(d) of the statute.
    As we stated in Certain Stainless Steel Wire Rods from France: 
Final Results of Antidumping Duty Administrative Review, starting price 
is not the basis for comparison for CEP sales. 62 FR 7206 (February 18, 
1997) (``SSWR II''). The statutory comparison is based on the CEP, 
which is defined as starting price net of the CEP deductions (i.e., 
those deductions provided for in section 772(d) of the Act which are 
only applicable to CEP sales). See section 772(b) of the Act. The Act 
requires the Department to make comparisons between NV and EP or CEP to 
the extent practicable, at the same level of trade. See section 
773(a)(1)(B) of the Act. If the starting price is used to determine the 
level of trade for CEP sales, the Department's ability to make 
meaningful comparisons at the same level of trade (or appropriate 
adjustments for differences in levels of trade) would be severely 
undermined in cases involving CEP sales. Similarly, using the 
unadjusted price to determine the level of trade of both EP and CEP 
sales would result in a finding of different levels of trade for an EP 
and a CEP sale when, after adjustment, the selling prices reflect the 
same selling functions. Moreover, using the adjusted CEP for 
establishing the level of trade is consistent with the purposes of the 
CEP adjustment: to determine what the sales price would have been had 
the transaction between the producer and its U.S. affiliate qualified 
as an export price sale. Accordingly, we have followed our practice, 
which specifies that the level of trade analyzed for CEP sales is the 
level of trade of the price after the deduction of U.S. selling 
expenses and profit associated with economic activity in the United 
States pursuant to section 772(d) of the Act. Therefore, for the final 
determination, the Department has continued to apply the level-of-trade 
analysis from its preliminary determination.
    The U.S. Court of International Trade (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 Act. See Borden Inc., et al. v. United States, Court No. 
96-08-01970, Slip Op. 98-36 (March 26, 1998), at 58 (Borden); see also 
Micron Technology Inc. v. United States, Court No. 96-06-01529, Slip 
Op. 99-02 (Jan. 28, 1999). The Department believes, however, that its 
practice is in full compliance with the statute, 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.

Comment 13: Hague's Credit Expense

    Respondent argued that the Department incorrectly recalculated 
Hague's credit expenses when it recalculated the credit expenses 
associated with unpaid invoices. Respondent contended that because 
Hague's sales do not have specific payment dates, Hague's credit 
expenses are based on average days outstanding and are not transaction 
specific. Thus, blank payment dates for Hague sales do not indicate 
unpaid invoices. Respondent noted that the Department's computer 
program mistakenly mistook Hague sales with blank payment dates as 
unpaid invoices and recalculated the credit expenses for these sales. 
Therefore, respondent argued that for the final determination, this 
recalculation of credit expense for

[[Page 30834]]

Hague sales with blank payment dates should be removed.
    Petitioners did not comment on this issue.
    Department's Position: We agree with respondent and have corrected 
our computer programming (i.e., margin calculation program) with 
respect to Hague's U.S. credit expenses for sales with blank or missing 
payment dates for the final determination. In the final margin program, 
the Department added specific computer language to correct this 
problem. For a complete listing of the changes the Department has made 
to its final margin program, please see the Department's analysis 
memorandum and final margin computer program.

Comment 14: CEP Profit Calculation

    Respondent argued that the Department incorrectly double-counted 
U.S. and home market freight revenue when it calculated CEP profit in 
the preliminary determination. Respondent states that on the home 
market side, the Department added freight revenue (FRTREVH) to the home 
market revenue (REVENVH), but the Department had already included 
FRTREVH in the CEP profit calculation as an offset to movement 
expenses. Thus, the Department should correct the double counting of 
FRTREVH.
    Additionally, respondent argued that on the U.S. side, the 
Department added freight revenue (FRTREVU) to the U.S. revenue 
(REVENU), but the Department had already included FRTREVU in the CEP 
profit calculation as an offset to movement expenses. Thus, the 
Department should correct the double counting of FRTREVU.
    Petitioners did not comment on this issue.
    Department's Position: We agree with respondent and have corrected 
our computer programming (i.e., model match and margin calculation 
programs) to prevent double-counting home market and United States 
freight revenue for the final determination. For a complete listing of 
the changes the Department has made to its final margin program, please 
see the Department's analysis memorandum and final margin computer 
program.

Comment 15: CEP Profit Calculation/Currency Conversion of U.S. Packing 
Expense

    Respondent argued that the Department did not correctly convert the 
currency for U.S. packing cost in its CEP profit calculation. 
Respondent noted that the Department converted the packing expense 
variable PACKU to U.S. dollars and saved this result in the variable 
PACKINGU. However, respondent contended that the Department included 
the dollar-denominated variable PACKINGU in the calculation of the 
French franc-denominated variable string (COGS), therefore mixing the 
currencies. Thus, respondent stated that the Department should correct 
this currency conversion for the final determination.
    Petitioners did not comment on this issue.
    Department's Position: We agree with respondent and have corrected 
our computer programming (i.e., margin calculation program) with 
respect to the packing costs in the CEP profit calculation. In the 
final margin program, the Department has corrected the currency 
conversion problem in the CEP profit calculation. For a complete 
listing of the changes the Department has made to its final margin 
program, please see the Department's analysis memorandum and final 
margin computer program.

Comment 16: U.S. Intercompany Sales between Uginox and Edgcomb

    Petitioners stated that the Department incorrectly included sales 
from Uginox to Edgcomb in its preliminary determination. Petitioners 
noted that in the preliminary determination the Department fully 
intended to include all downstream sales from Bernier, Ugine Service, 
Hague and Edgcomb in its dumping calculation but not intercompany 
sales. Thus, petitioners stated that by including the sales between 
Uginox and Edgcomb and the downstream sales of Edgcomb, the Department 
has double-counted these sales and calculated an improper CEP for 
Edgcomb sales. Petitioners stated that the Department should correct 
this error for the final determination and only use Edgcomb's 
downstream sales.
    Respondent stated that it agrees with petitioners that the 
Department should not double-count Edgcomb's resales as well as sales 
from Uginox to Edgcomb. However, respondent argues that the Department 
should eliminate Edgcomb's resales for the reasons stated above comment 
2.
    Department's Position: We agree with petitioners. As stated in 
comment 2 above, the Department has concluded that Edgcomb should be 
considered affiliated with both Usinor and Uginox for the purposes of 
this final determination. See Comment 2. Therefore, for purposes of 
calculating a final antidumping duty margin for Usinor, the Department 
included Edgcomb's downstream sales in its margin calculation, and 
eliminated sales from Uginox to Edgcomb.

Comment 17: Failure to Deduct U.S. Freight Expenses From Port to 
Warehouse

    Petitioners argued that the Department inadvertently failed to 
include U.S. port to warehouse expenses (i.e., the variable INLFPWU) in 
its calculation of total U.S. movement expenses. Petitioners stated 
that the Department should correct this inadvertent error for the final 
determination.
    Respondent did not comment on this issue.
    Department's Position: We agree with petitioners. In the 
preliminary determination, the Department inadvertently failed to 
include U.S. port to warehouse expenses ( INLFPWU) in its calculation 
of total U.S. movement expenses. In the final determination, we have 
included INLFPWU in our calculation of U.S. movement expenses. Please 
see the Department's analysis memorandum and final margin computer 
program for this change.

Comment 18: Missing Payment Dates

    Petitioners stated that in the preliminary determination, the 
Department recalculated credit expenses for sales with missing payment 
dates. However, in the Department's revised credit expense calculation, 
petitioners contend that the revised net price calculation failed to 
deduct early payment discounts and other discounts in the home market 
credit expense calculation, and early payment discounts in the U.S. 
credit expense calculation. Further, petitioners noted that the 
respondent included other discounts and early payment discounts in its 
calculations of both the U.S. and home market credit expenses. 
Therefore, petitioners argue that without considering these additional 
deductions, the credit expense calculation is not consistent with the 
respondent's reported data for credit expenses.
    Respondent stated that petitioners objection to the Department's 
calculation of credit expense for sales with missing payment dates has 
been overtaken by events. Specifically, credit expense on the revised 
files has been recalculated to account for actual payment dates, where 
available, or average days outstanding. Therefore, respondent argued 
that there is no basis for alteration of the Department's program with 
regards to credit expenses.
    Department's Position: We agree with respondent in part. On April 
8, 1999, the Department provided respondent an opportunity to revise 
its sales and cost files with minor corrections found at the

[[Page 30835]]

recent sales and cost verifications in France and the United States. 
See Memorandum to the File, dated April 8, 1999. On April 15, 1999, 
respondent provided the Department with revised sales and cost tapes. 
The Department has confirmed that Respondent's U.S. credit expenses do 
not need to be recalculated because the respondent has already 
recalculated all of its U.S. credit expenses to account for actual 
payment dates, where available, or average days outstanding. However, 
in the preliminary determination, we did not deduct early payment 
discounts and other discounts in the home market credit expense 
calculation. Additionally, respondent's revised home market sales tape 
continues to have missing payment dates for certain sales which have 
not been paid. Therefore, for the final determination, we have 
recalculated respondent's home market credit expense for sales with 
missing payment dates by designating the last day of the home market 
verification as payment date, and have deducted early payment discounts 
and other discounts in our recalculation of home market credit expense, 
where appropriate. For a complete listing of the changes the Department 
has made to its final margin program, please see the Department's 
analysis memorandum and final margin computer program.

Cost of Production/ Constructed Value

Comment 19: Affiliated Party Transactions (Usinor)

    Petitioners argue that the Department should adjust Usinor's 
reported hot rolling costs to reflect a market value in accordance with 
the major input rule. According to the petitioners, the Department 
determines the value of a major input purchased from an affiliated 
party based on the highest of the price paid to the affiliated party, 
the market price, or the cost of producing the major input (see Final 
Results of Antidumping Duty Administrative Review: 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); Final Results of Antidumping Duty 
Administrative Reviews and Revocation in Part of an Antidumping 
Finding; Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, from Japan and Tapered Roller Bearings, Four Inches or less 
in Outside Diameter, and Components Thereof, from Japan, 61 FR 57629, 
57644 (Nov. 7, 1996)). In this instance, the petitioners claim the 
record shows that the market price is higher than either the reported 
transfer price or the affiliates cost of production (``COP'').
    Usinor disagrees with the petitioners' assertion that an adjustment 
is necessary. According to Usinor, Ugine properly valued affiliated 
party inputs at the transfer price which exceeded actual cost. As for 
the comparison to a market price, Usinor claims that the Department 
cannot make a proper comparison between the reported market price and 
the reported transfer price because of the differing market conditions. 
Thus, Usinor states that no adjustment to hot rolling costs is 
necessary for the final determination.
    Department's Position: We agree with petitioners that the hot 
rolling services Usinor obtained from an affiliate should be adjusted 
to a market price. Section 773(f)(2) allows the Department to test 
whether transactions between affiliated parties involving any element 
of value are at prices that ``fairly reflect * * * the market under 
consideration.'' Section 773(f)(3) allows the Department to test 
whether transactions between affiliated parties involving a major input 
is above the affiliated supplier's cost of production. In other words, 
if an understatement in the value of an input would have a significant 
impact on the reported cost of the subject merchandise, the law allows 
the Department to insure that the transfer price or market price is 
above the affiliated supplier's cost. The determination as to whether 
an input is considered major is made on a case-by-case basis. See Final 
Rule 62 FR at 27362.
    In determining whether an input is considered major, among other 
factors, the Department looks at both the percentage of the input 
obtained from affiliated suppliers (verses unaffiliated suppliers) and 
the percentage the individual element represents of the subject 
merchandise's COM (i.e., whether the value of inputs obtained from an 
affiliated supplier comprises a substantial portion of the total cost 
of production for subject merchandise). In the instant case, we looked 
at these percentages for hot rolling services provided by an affiliate. 
The cost of these services represent a relatively small percentage of 
the subject merchandise's COM, which reduces the risk of misstatement 
of the subject merchandise's costs to such a degree that we have 
determined that section 773(f)(3) of the Act does not apply to these 
inputs. However, we found that the weighted-average transfer price of 
hot rolling services reported by Usinor was below market price and 
therefore, in accordance with section 773(f)(2) of the Act, we have 
increased the subject merchandise's COM accordingly.
    As for Usinor's concern that the reported market price is not 
comparable to the reported transfer price, we disagree. For the market 
price, Ugine reported the arm's length sales price the affiliate 
charged to non affiliates for performing analogous hot rolling 
services. Thus, we note that the reported market price does represent 
the amount usually reflected in sales of the major input in the home 
market under consideration as required by section 773(f)(3) of the Act.

Comment 20: Depreciation Expense (Usinor)

    To calculate COP and CV, petitioners claim that the Department 
should rely on the depreciation expense recorded in Ugine's cost 
accounting system rather than the depreciation expense reported on the 
financial statements. According to petitioners, section 773(f)(1)(A) of 
the Tariff Act of 1930, as amended, provides that the Department 
normally relies on data from a respondent's books and records in which 
its costs are normally kept if those records are prepared in accordance 
with the home country's generally accepted accounting principles 
(``GAAP''), and where they reasonably reflect the cost of producing the 
merchandise. In this instance, the petitioners claim that the cost 
accounting system is in fact the company's normal books and records. 
Thus, in order for the Department to reject Ugine's cost accounting 
system for the valuation of the depreciation expense, the petitioners 
argue that the Department must find that Ugine's cost accounting system 
is not in accordance with French GAAP, or that costs recorded in the 
cost accounting system are not reasonably reflective of the production 
costs. Moreover, petitioners claim that there is no record evidence to 
suggest that Ugine's cost accounting system does not reasonably reflect 
the costs associated with the production of stainless steel sheet and 
strip in coils. Petitioners assert that the burden is on Usinor to 
demonstrate on the record that the costs recorded in their normal books 
and records are not reasonable (see Final Determination of Sales at 
Less Than Fair Value: Canned Pineapple Fruit from Thailand, 60 FR 
29553, 29559 (June 5, 1995); Final Determination of Sales at Less Than 
Fair Value: Certain Welded Stainless Steel Pipe from the Republic of 
Korea, 57 FR 53693, 53705 (November 12, 1992) and Final Determination 
of Sales at Less Than Fair Value: Furfuryl Alcohol from South Africa, 
60 FR 22550, 22556 (May 8, 1995)). Without

[[Page 30836]]

such demonstration on the record by Usinor, the petitioners assert that 
the Department should, in the final determination, base depreciation on 
the figures recorded in Ugine's cost accounting records.
    Usinor contends that it properly relied on the depreciation expense 
reported in the company's audited financial statements prepared in the 
accordance with French GAAP to calculate depreciation expense. 
According to Usinor, Ugine's cost accounting system does not reflect 
depreciation in accordance with GAAP and therefore such depreciation 
cannot properly be used in this investigation. Usinor states that the 
Department has traditionally preferred to use the figures found on the 
financial statements (see Final Results of Antidumping Administrative 
Review: Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, Germany, Italy, Romania, Singapore, Sweden, 
and the United Kingdom, 62 FR 54043, 54080 (1997)). Moreover, Usinor 
claims that the Department has traditionally relied on the depreciation 
expense reported on the financial statements rather than the 
depreciation expense reported in the respondent's cost accounting 
system (see Usinas Siderurgicas de Minas Gerias S.A. v. United States, 
No. 93-09-00557-AD, 1998 WL 442297, at *9 (CIT 1998); FAG U.K. LTD v. 
United States, 945 F.Supp. 260, 271 (CIT 1996); Cinsa S.A. de C.V. v. 
United States, 966 F.Supp 1230, 1234 (CIT 1997); Final Results of 
Administrative Review: Silicon Metal From Brazil, 64 FR 6305, 6321 
(February 9, 1999); and the Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Round Wire From Canada, 64 FR 17324, 17335 
(April 15, 1999)). Therefore, Usinor requests that the Department 
reject petitioners' attempt to overturn the Department's longstanding 
practice in this area and use the depreciation as recorded in Usinor's 
financial accounting system.
    Department's Position: We agree with Usinor that in this case the 
depreciation expense reported on Usinor's audited financial statements 
should be used in the calculation of COP and CV. Specifically, Ugine 
S.A. became a division of Usinor at the end of 1995. As a result of the 
merger, Usinor revised Ugine's depreciation expense. This revision to 
Ugine's depreciation expense was made in accordance with French GAAP. 
Although Usinor revised Ugine's depreciation expense for financial 
statement purposes, Ugine never revised its internal financial 
accounting and cost accounting depreciation ledgers to reflect the 
change. Thus, Ugine's cost accounting system and financial accounting 
system generate different depreciation results than the amount Usinor 
officially recognizes for the division. For submission purposes, Usinor 
adjusted the depreciation expense reported in Ugine's cost accounting 
system to the amount Usinor reported for the Ugine division in Usinor's 
financial statements. Contrary to petitioners' claim, we found that the 
depreciation expense recorded in the cost accounting system conforms to 
French GAAP only after the company has made adjustments to reflect the 
amount reported on Usinor's audited financial statements. We note that 
the independent auditors base their opinion on the final amounts 
reported on the financial statements and not on the amounts that may be 
recorded in the internal cost accounting system. Moreover, Ugine 
demonstrated that its depreciation expense contained in its cost 
accounting system eventually reconciled to Ugine's divisional financial 
statement and that the depreciation expense reported on this divisional 
statement reconciled to the depreciation expense reported on Usinor's 
financial statements. Since the amount of depreciation expense detailed 
in Ugine's cost accounting system reconciles to Usinor's audited 
financial statements, we believe that Ugine's reported depreciation 
expense does not distort its COP and CV figures. Finally, we note that 
Usinor's ``change'' to Ugine's depreciation expense was made prior to 
the POI.
    Additionally, our use of amounts reported on a company's financial 
statement has been upheld by the Court of International Trade (see, FAG 
U.K. LTD v. United States, 945 F.Supp. 260, 271 (CIT 1996) (upholding 
the Departments reliance on a firm's expense as recorded on the firm's 
financial statements); Hercules, Inc. v. United States, 673 F. Supp. 
454 (CIT 1987) (upholding the Department's reliance on COP information 
from the respondent's normal financial statements maintained in 
conformity with GAAP); See also: Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Round Wire From Canada, 64 FR 17324, 
17335 (April 9, 1999)) (The Department relied on respondent's expense 
as recorded on the firm's financial statements). More importantly, the 
Court of International Trade has consistently sustained our practice of 
relying on the depreciation expense reported in the company's audited 
financial statements (see Cinsa S.A. de C.V. v. United States, 966 
F.Supp 1230, 1234 (CIT 1997) (upholding the Department's reliance on 
depreciation expense reported on the financial statements); Laclede 
Steel Co. v. United States, 965 Slip OP 94-160, *24 (CIT 1994) 
(upholding the Departments reliance on depreciation expense reported on 
the financial statements); Final Results of Administrative Review: 
Silicon Metal From Brazil, 64 FR 6305, 6321 (1999). For the final 
determination, we relied on the depreciation expense reported by 
Usinor.

Comment 21: Including Employee Payments in the Cost of Production 
(Usinor)

    For the final determination, petitioners assert that the Department 
should recalculate Ugine's COP and CV to include certain employee 
profit-sharing payments. According to petitioners, the Department has 
addressed this issue before, and in each case has determined that 
``profit-sharing'' payments are appropriately considered an employee 
remuneration cost to the company and should be included in the 
calculation of COP and CV. As examples of such instances, the 
petitioners cite the Final Results of Antidumping Duty Administrative 
Review: Porcelain-on-Steel Cooking Ware From Mexico, 60 FR 2378 
(January 9, 1995); the Final Determination of Sales at Less Than Fair 
Value: Oil Country Tubular Goods from Austria, 60 FR 33551, 33557 (June 
28, 1995); and the Final Results of Antidumping Administrative Review: 
Porcelain-on-Steel Cooking Ware from Mexico, 58 FR 43327, 43331 (August 
16, 1993), in which Department included similar profit-sharing costs in 
the calculation of COP.
    Respondent had no comment on this issue.
    Department's Position: We agree with the petitioners that Usinor's 
profit sharing expense should be included in the calculation of COP and 
CV. Under French law, an employer is required to distribute a portion 
of its profit to employees. This distribution of profits is reflected 
on the company's income statement as an expense. With respect to the 
employees involved in the production and administration of the subject 
merchandise, the distribution represents a form of compensation. 
Moreover, our established practice is to include this type of 
compensation in the calculation of COP and CV, because this profit 
sharing represents an expense recognized within the POI and should be 
reflected in the product cost, in accordance with full absorption 
costing principle (see Final Results and Partial

[[Page 30837]]

Rescission of Antidumping Duty Administrative Review: Certain Pasta 
From Turkey, 63 FR 68429 (December 11, 1998); Notice of Final Results 
of Antidumping Duty Administrative Review: Certain Cut-to-Length Carbon 
Steel Plate From Germany, 61 FR 13834, 13838 (March 28, 1996); and 
Final Results of Antidumping Duty Administrative Review: Porcelain-on-
Steel Cooking Ware from Mexico; 60 FR 2378 (January 9, 1995). For the 
final determination, therefore, we included Usinor's profit-sharing 
expense in the calculation of COP and CV to reflect the fully absorbed 
cost of producing the stainless steel sheet and strip.

Comment 22: Including ``Exceptional'' Expenses and Other Expenses in 
the General and Administrative Expense Calculation (Usinor)

    Petitioners state that the Department should include certain 
omitted expenses in the calculation of Ugine's general and 
administrative expense ratio. According to the petitioner, these 
expenses represent normal general and administrative expenses for the 
operations. Thus, they should be included in the general and 
administrative expense calculation for the final determination.
    Usinor asserts that it properly excluded the expenses in question 
because they do not relate to the production of the subject 
merchandise. According to Usinor, Ugine's exclusion of certain non-
operating and extraordinary expenses was entirely justifiable. 
Moreover, Usinor claims that the Department verified these omitted 
expenses and only had a concern with donations and football club 
expenses. Thus, Usinor believes that the items excluded, as verified by 
the Department, are not production costs. Therefore, consistent with 
past Department's practice (see Final Results of Administrative Review: 
Tapered Roller Bearings, Finished and Unfinished, and Parts Thereof, 
From Japan, 56 FR 41508, 41516 (1991); and Final Results of 
Administrative Review: Television Receivers, Monochrome and Color, From 
Japan, 56 FR 5392 (1991)), Usinor claims that they properly should not 
be included in Ugine's G&A expenses.
    Department's Position: We agree with both petitioners and 
respondent in part. We agree with petitioners that some of the omitted 
expenses in question should be included in the calculation of the G&A 
expense rate. For instance, we agree that contributions (i.e., donation 
and the football expenses) should be included in the calculation of G&A 
expense because these expenses are a part of Usinor's overall 
administrative expenses attributable to all production, including 
production of subject merchandise. As for the exceptional expenses, we 
agree with the respondents that these items are related to investing 
activities and should not be included in the calculation of COP and CV 
(see, Final Determination of Sales at Less Than Fair Value: Certain 
Steel Concrete Reinforcing Bars From Turkey, 62 FR 9737, 9748 (March 4, 
1997); and Final Results of Administrative Review: Tapered Roller 
Bearings, Finished and Unfinished, and Parts Thereof, From Japan, 56 FR 
41508, 41516 (1991) (Department included extraordinary expenses).

Comment 23: Disregarding Usinor's Claim for an Offset of Short-Term 
Interest Income in Its Financial Expense Calculation (Usinor)

    Petitioners argue that the Department should deny Usinor's claim 
for an offset of short-term interest income in its financial expense 
calculation because the respondent could not distinguish short-term 
interest income from total interest income. Moreover, the petitioner 
asserts that Usinor could not support its claim that interest income 
was generated from short-term sources. Petitioners state that the 
Department will not allow an offset in such circumstances and cite the 
Final Determination of Sales at Less Than Fair Value: Certain Cut-to-
Length Carbon Steel Plate from the People's Republic of China, 62 FR 
61964, 61970 (November 20, 1997) in which the Department stated that it 
``* * * will offset interest expense by short-term interest income only 
where it is clear from the financial statements that the interest 
income was indeed short-term in nature.'' In that case, the Department 
did not offset the interest income in the financial expense 
calculation. Therefore, the petitioners argue that since Usinor was not 
able to clearly distinguish short-term interest income from total 
interest income in the financial statements, the Department should 
disallow and reverse the offset taken by Usinor in its financial 
expense calculation.
    Usinor claims that the Department should accept Ugine's offset of 
short-term interest income in calculating its financial expenses--just 
as the Department has done in other cases involving Usinor (see Final 
Determination of Sales at Less Than Fair Value: Certain Stainless Steel 
Wire Rods From France, 58 FR 68865, 68872 (December 29, 1993)). 
According to the respondent, Ugine calculated the offset in the same 
manner as previously approved by the Department. Thus, Usinor contends 
that petitioners' request to disallow Ugine's short-term interest 
income offset is without merit.
    Department's Position: We agree with petitioners. Usinor's 
consolidated financial statements only reported a net interest expense 
figure. Therefore, in order to calculate a financial expense figure 
Usinor imputed its gross interest expense, long-term interest income, 
and the short-term interest expense offset based on an adjustment 
methodology used by the Department in a previous antidumping 
investigation involving Usinor (see Final Determination of Sales at 
Less Than Fair Value: Certain Stainless Steel Wire Rods From France, 58 
FR 68865, 68872 (December 29, 1993)). In that case, the Department made 
an adjustment to financial expense because Usinor incorrectly deducted 
both short-term and long-term interest income, rather than limiting the 
deduction to short-term income as required by the Department's 
practice, when calculating its reported financial expense rate. As a 
result, the Department limited the interest income offset claim to an 
estimated short-term amount. By contrast, in this proceeding, we have 
excluded Usinor's short-term interest offset because neither of 
respondent's audited financial statements reported any breakdown of 
long- vs. short-term investments or investment income, nor was the 
respondent able to provide support for its claimed short-term interest 
income. Therefore, based on the Department's past practice, we have 
disallowed Usinor's short-term interest income offset in the financial 
expense calculation (see, e.g., Final Results of Antidumping Duty 
Administrative Review and Determination Not to Revoke in Part: Silicon 
Metal From Brazil, 64 FR 1974 (February 9, 1999) (Department disallowed 
the short-term offset.).

Comment 24: Accepting New Information Presented by Usinor on the Costs 
of Products Sold but Not Produced (Usinor)

    Petitioners claim that the Department should not accept Usinor's 
minor correction provided on the first day of verification that relates 
to products sold but not produced during the POI. According to 
petitioners, this change is not a minor correction because the 
correction is the submission of new costs for thirteen control numbers. 
More important, the revision is based on new factual information that 
was not submitted a week before verification took place. As a result, 
neither the Department nor the petitioner had time

[[Page 30838]]

to review the submitted information before verification.
    Petitioners further argue that while they recognize the need to 
allow respondents an opportunity to correct minor errors at the 
beginning of the verification, they do not believe that verification is 
an appropriate venue for the submission of new factual information. 
According to petitioners, the Department generally only collects and 
uses information obtained at verification when minor discrepancies are 
found or when the Department believes that a respondent's methodology 
may not have been reasonable but can be simply changed (see Final 
Results of Antidumping Duty Administrative Reviews: Heavy Forged Hand 
Tools, Finished or Unfinished, With or Without Handles, From the 
People's Republic of China, 63 FR 16758, 16761 (April 6, 1998)). 
Verification, claim the petitioners, is used by the Department to 
clarify and support information already on the record. Thus, the 
Department will correct errors found at verification as long as those 
errors are minor and do not exhibit a pattern of systemic misstatement 
of fact (see Final Determination of Sales at Less Than Fair Value: 
Ferrosilicon From Brazil, 59 FR 732, 736 (Jan. 6, 1994)). Therefore, 
the petitioners assert that the submission of these new costs cannot be 
considered minor by any measure and should not be used in the margin 
calculation.
    Usinor disagrees with petitioners position that the presentation of 
revised cost data for these thirteen control numbers is inappropriate. 
According to Usinor, the revised cost data does constitute a minor 
correction because the reported costs of these control numbers were 
incorrectly submitted due to a computer error. Moreover, Usinor asserts 
this type of correction is typically accepted by the Department at the 
commencement of verification. Usinor further states that this minor 
correction was thoroughly verified by the Department. The Department, 
therefore, should reject petitioners' attempt to create an issue where 
none exists.
    Department's Position: We agree with Usinor that the revised cost 
of the thirteen control numbers in question is a minor correction 
appropriately provided at the beginning of verification. Contrary to 
the petitioners' argument, this revision is not based on the submission 
of new information because the change relates to the correction of 
existing information for these control numbers. Specifically, Usinor 
presented the Department with revised cost data for 13 control numbers 
(i.e., models) on the first day of verification. In its original 
submission, Usinor thought that these thirteen models had been produced 
outside the POI. To calculate the POI cost of these models in its 
response, Usinor relied on surrogate values (i.e., the costs of the 
most similar control number produced during the POI). During the 
preparation for verification, however, Usinor realized that these 
models had actually been produced during the POI. As a result, the 
company did have the actual cost of the model available to make more 
accurate calculations. During verification, we obtained and reviewed 
with company officials a list of the actual cost of manufacture for 
these control numbers (see cost verification exhibit 1). We noted costs 
had changed but did not find the difference to be significant. As for 
the collection of the corrected information, we believe the revised 
calculation of the cost of these models was properly submitted prior to 
the beginning of verification since the error was found as a result of 
verification preparation (i.e., reconciliation of costs, as requested 
in the agenda). Therefore, we have accepted the revised costs for the 
final determination.

Comment 25: Application of Facts Available to Edgcomb's Further 
Manufacturing Data (Edgcomb)

    Petitioners contend that the dumping margin for U.S. sales further 
manufactured by Edgcomb should be based on adverse facts available. 
According to petitioners, it is appropriate for the Department to use 
adverse facts available pursuant to section 776(b) of the Act in this 
case because Usinor has failed to cooperate by not acting to the best 
of its ability to comply with a request for information within the 
meaning of section 776(b) of the Act. The verification report 
establishes this non cooperation in several different areas. According 
to petitioners, in similar cases, the Department has applied the 
highest margin in the petition, the notice of initiation, or the 
highest non-aberrant calculated margin in the database (see Final 
Determination of Sales at Less Than Fair Value: Static Random Access 
Memory Semiconductors From Taiwan, 63 FR 8909, 8910 (Feb. 23, 1998)).
    Petitioners first argue that Edgcomb did not provide the most 
product-specific costs available. According to petitioners, Edgcomb has 
a standard cost system that calculates model-specific costs, but 
Edgcomb elected not to use it for submission purposes. Petitioners 
argue that Edgcomb calculated and reported a single weighted-average 
per-unit further manufacturing cost based on an inappropriate 
allocation methodology that was found to be inaccurate and distortive 
by the Department. Specifically, petitioners first point out that 
Edgcomb's reported costs did not account for the processing steps 
through which the merchandise actually passed. In addition, the 
reported costs were an average of all stainless steel products rather 
than just subject merchandise. Thus, Edgcomb included costs for non 
subject merchandise like bars and angles. Then, the petitioners note 
that the respondent allocated costs using sales quantities (which do 
not accurately represent production quantity, due to product-specific 
changes in inventory) and sales values (which do not account for 
differences in product mix). As a result of failing to provide 
information based on their cost accounting system and of creating an 
entirely new costing system, the petitioners argue that the information 
on the record concerning Edgcomb's further manufacturing costs is so 
incomplete that it cannot serve as the basis for the final 
determination, and the data cannot be corrected and used without undue 
difficulty.
    Petitioners further allege that Edgcomb deviated from its normal 
accounting system in reporting its costs without obtaining 
authorization from the Department for the methodologies used. Thus, the 
company failed to provide information requested by the Department in 
the form and manner requested. According to petitioners, the 
Department's instructions required Usinor to contact the Department 
before offering an alternative methodology, which respondent failed to 
do. As a result, petitioners maintain that Edgcomb's unilateral 
decision to use an average rather than product-specific costs were 
improper. The burden, according to the petitioners, is on the 
respondent to create a complete and accurate record (see Final Results 
of Administrative Review: Circular Welded Carbon Steel Pipes and Tubes 
From Thailand, 62 FR 53808, 53814 (October 16, 1997)). Moreover, 
respondents cannot be allowed the unilateral discretion to decide which 
information to provide the Department (see Olympic Adhesives, Inc. v. 
United States, 899 F.2d 1565, 1571 (CIT. 1990) and Mitsubishi Heavy 
Indus., Ltd. v. United States, 833 F. Supp. 919, 924 (CIT 1993) (It is 
Commerce, not the respondent, that determines what information is to be 
provided for an investigation)). Lastly, petitioners contend that

[[Page 30839]]

Edgcomb failed to provide verifiable information that significantly 
impeded the investigation. As a result, Edgcomb has not demonstrated 
that it has acted to the best of its ability to provide requested 
information to the Department.
    Usinor asserts that no basis exists to apply adverse facts 
available to Edgcomb's further manufacturing costs. Usinor claims that 
Edgcomb clearly disclosed in its section E questionnaire response that 
it was not relying on its cost accounting system to calculate its 
further manufacturing costs. Moreover, Usinor asserts that the 
Department never requested revised data from Edgcomb, nor did it even 
request a further explanation of Edgcomb's methodology. Thus, Usinor 
asserts that Edgcomb should not be penalized for the Department's 
failure to give Usinor adequate notice of any perceived deficiencies in 
Edgcomb's methodology. Respondent also claims that it would be 
particularly unfair and inappropriate to penalize Usinor for any 
perceived shortcomings in Edgcomb's cost data. According to Usinor, it 
fully cooperated with the Department's investigation and provided the 
Department with further cost of manufacturing data to the best of its 
ability. Usinor maintains that it does not control Edgcomb, and 
although Usinor believes that Edgcomb cooperated fully, it was unable 
to compel Edgcomb to proceed in a particular manner or with specified 
resources to provide the information pertinent to the investigation.
    Moreover, Usinor argues that the further manufacturing data is 
acceptable and reasonable and should be used in the Department's final 
determination. Usinor argues that the methodology Edgcomb used was the 
only feasible method available and that this method accurately 
represents the cost of further processing. Usinor then asserts that 
Edgcomb's cost accounting system did not calculate accurate costs 
during the entire POI because the system was brand new. According to 
Usinor, Edgcomb installed the system during the POI but was slow to 
correct the cost inaccuracies the system calculated because further 
processing cost represents an insignificant portion of the Company's 
total cost. Since the cost system generated inaccurate results during 
the POI, Usinor claims that Edgcomb's cost accounting system could not 
be used. As an alternative, Usinor claims that Edgcomb appropriately 
used its financial accounting system to calculate the submitted single 
weighted-average per-unit cost.
    If the cost accounting system had been completely implemented and 
usable, Usinor then argues that Edgcomb would still not be able to use 
the system to calculate its further manufacturing costs. According to 
Usinor, the company would have to overcome the problem of linking the 
sales orders back to the original plant that processed the subject 
merchandise. Usinor claims that this would involve extensive computer 
programming as well as an unreasonable amount of manual work on 
Edgcomb's behalf. In such instances, Usinor claims that the Department 
does not normally request such extensive undertakings and cites Usinor 
Sacilor v. United States, 872 FS 1000, 1007 (CIT 1994) to support its 
position that such an undertaking is not necessary.
    Usinor then contends that calculating a single weighted-average 
further manufacturing costs for Edgcomb is not distortive. According to 
Usinor, the single weighted-average cost is appropriate because 
Edgcomb's slitting and cutting fabrication costs represent 
approximately the same amount. Usinor maintains that the Department 
often accepts single weighted-average per-unit costs. To support its 
position, Usinor cites several cases in which the Department accepted 
respondent's non-product specific weighted-average production costs 
when product-specific costs were not available (see Final Results of 
Antidumping Review: Certain Porcelain-on-Steel Cookware from Mexico, 62 
FR 42496, 42506 (August 7, 1997) (``Cookware from Mexico''); Final 
Results of Antidumping Review: Certain Welded Carbon Steel Pipe From 
Turkey, 61 FR 69067, 69072 (December 31, 1996) (``Steel Pipe from 
Turkey''); Final Results of Antidumping Review: Certain Cold-Rolled 
Carbon Steel Flat Products From Germany, 60 FR 65264, 65266 (December 
19, 1995) (``Steel Sheet Flat Products from Germany''). In the same 
context, Usinor disagrees with the Department's finding discussed in 
the further manufacturing cost verification report that indicates that 
the required processing route of a model does have an impact on the 
model's specific costs. According to Usinor, the verifiers incorrectly 
compared the fabricating costs associated with the cutting and slitting 
processes and not the average gross unit prices of the models involved. 
If the verifiers had compared the gross unit price, Usinor maintains 
that the total difference in costs would be found to be de minimis. In 
addition, Usinor asserts that the Department based its findings on a 
limited sample that is unrepresentative of the total population.
    As for using sales quantity and value as an allocation bases, 
Usinor maintains that the approach is not distortive. According to 
Usinor, sales quantity is appropriate as an allocation base because it 
approximates Edgcomb's actual production quantity. In such instances, 
Usinor claims that the Department normally accepts the sales quantities 
in lieu of production quantity. To support this claim, Usinor cites 
several cases in which the Department accepted sales quantities in lieu 
of production quantities (see Final Results of Antidumping Duties: 
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 
69071 (December 31, 1996); Final Determination of Sales at Less Than 
Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17330 
(April 9, 1999)). As to the use of sales value as an allocation base, 
respondent notes that this allocation base was used principally because 
the data for other allocation bases were not available.
    Usinor then disagrees with the petitioners' contention that 
Edgcomb's reported costs were based on incomplete data. Usinor 
maintains that the only instance of Edgcomb basing its calculations on 
limited data is its process material yield loss calculations. According 
to Usinor, Edgcomb had to calculate this cost based on the last three 
months of the POI because of the deficiencies in its cost accounting 
system. Specifically, Edgcomb's cost accounting system did not retain 
all the production data for the POI. Moreover, Usinor claims that the 
sample used to generate the yield loss is representative because it is 
based on Edgcomb's experience and there is no reason to believe the 
yield losses change over time.
    Department's Position: We agree with petitioners that the further 
manufacturing costs cannot be used for the final determination, and 
therefore the Department must resort to facts otherwise available. 
While we agree with petitioners that the further manufacturing costs 
contain errors that are not correctable, we disagree that the 
application of adverse facts available is warranted in this case. 
Section 777(b) allows the Department to use an inference that is 
adverse to the respondent, if it finds that the ``interested party has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information.'' However, we were able to verify that, 
because Edgcomb was in the process of switching accounting systems 
during the POI, it experienced extraordinary difficulties in reporting 
to the Department. While we agree with

[[Page 30840]]

petitioners that Usinor or Edgcomb should have notified the 
Department--prior to the submission of the further manufacturing 
response--that it did not intend to use its normal cost accounting 
system for reporting purposes, the Department did not direct Edgcomb to 
resubmit its further manufacturing costs. Therefore they have not 
failed to cooperate and an adverse inference is not warranted.
    However, based on our findings at verification, we conclude that 
the cost methodology reported by Usinor for Edgcomb's costs is 
unusable. We disagree with Usinor's argument that the reporting of one 
single weighted-average per-unit further manufacturing cost does not 
distort the analysis. Edgcomb's single weighted-average per-unit cost 
not only obscured all cost differences associated with some of the 
physical characteristics identified in this investigation as being 
significant, but also included all cost differences associated with the 
physical characteristics of non-subject merchandise. At verification, 
we found that Edgcomb included the fabricating costs of both subject 
and non-subject merchandise in its submitted weighted-average cost.
    We also disagree with Usinor that the use of sales values and 
quantities is appropriate. While the Department has allowed the use of 
sales quantities when it is established that they are reflective of 
production quantities, the use of sales values is seldom appropriate. 
Sales values are not typically appropriate for purposes of allocating 
cost because they do not necessarily reflect the actual factors that 
drive certain costs. The court of appeals has found the use of sales 
value as an allocation base leads to a circular methodology, in the 
context to antidumping calculations (see IPSCO, Inc. v. United States, 
965 F. 2d 1056 (Fed. Cir. 1992) (Court determined price-based 
allocations of costs methodologies circular, and ``contradict the 
express requirements of the statute which set forth the cost of 
production as an independent standard for fair value.'').
    Additionally, we disagree with Usinor's interpretation of several 
cases which Usinor relies upon to support its claim that the Department 
has normally accepted respondent's non-product specific weighted-
average production costs when product-specific costs were not 
available. For example, in Cookware from Mexico, 62 FR at 42506, the 
Department actually determined that the respondent's reported costs 
``were allocated to a sufficient level of product specific detail in 
accordance with the Department's questionnaire instructions.'' In Steel 
Pipe From Turkey, 61 FR at 69072, the Department determined that, even 
though respondent's reported cost did provide some level of product 
specificity, it did not reflect the same level as the costs maintained 
in its normal course of business. Therefore, the Department made 
necessary adjustments through application of partial facts available to 
reflect more product-specific data available on the record. In Steel 
Flat Products from Germany, 60 FR at 65266, the Department determined 
that the reported costs did have a certain level of product specificity 
and did reflect the costs as reported in the company's normal cost 
accounting system.
    Finally, Usinor has also argued that the samples the Department 
obtained of the cost accounting system are not representative of the 
total population. We disagree. We note that the court has upheld our 
use of testing the respondent's data through the use of samples. In 
Tatung Co. v. United States, Slip Op. 94-195 (CIT 1994), the court 
opinion stated ``verification is like an audit, the purpose of which is 
to test information provided by a party for accuracy and completeness, 
so that Commerce can justifiably rely on that information.'' Moreover, 
we note that Usinor itself selected the two samples upon which the 
Department's conclusions are based prior to verification. See Memo to 
the File from Garri Gzirian, dated March 19, 1999.
    Therefore, we have not relied on Edgcomb's reported cost of 
manufacturing data. Where we did find that Edgcomb's costs were 
reported correctly, we have used those costs. However, in other 
instances, as facts otherwise available we have utilized the 
manufacturing costs of Usinor's other further manufacturer, Hague. We 
adjusted Hague's reported costs using certain yield loss and processing 
costs data verified at Edgcomb. We have relied on Edgcomb's SG&A and 
financial expense calculations.

Comment 26: Combined Financial Statements of Edgcomb and EEHC, and 
Leasing Arrangement Between the Entities (Edgcomb)

    Petitioners assert that Usinor understated Edgcomb's further 
manufacturing costs by not including the true cost of leasing its plant 
and equipment (``P&E'') from an affiliate. According to petitioners, 
Usinor relied on the amounts reported in Edgcomb and EEHC's combined 
financial statements. The combined financial statements collapsed the 
results of Edgcomb and EEHC (which is a partnership that leases P&E to 
Edgcomb) into a single reporting entity. However, by relying on amounts 
reported in the combined financial statements, petitioners assert that 
Edgcomb only included the depreciation expense associated with this 
leased P&E rather than the actual lease payments incurred. Petitioners 
argue that this combination is improper because Edgcomb and EEHC are 
distinct entities with separate revenues and costs. Thus, petitioners 
contend that Usinor inappropriately understated Edgcomb's further 
manufacturing costs.
    Usinor disagrees with the petitioners' contention. According to 
Usinor, Edgcomb manages EEHC's financial records in the normal course 
of business and normally combines the financial results of the two 
entities. Moreover, Usinor maintains that EEHC is simply a paper 
company that was created solely for the purpose of implementing the 
sale/leaseback financing arrangement. As such, Usinor maintains that 
there is no actual substance to the separateness of these business 
entities. In addition, Usinor claims that it is the Department's normal 
practice to collapse such affiliated entities into a single reporting 
entity. To support its claim, Usinor cites Koenig & Bauer Albert AG v. 
United States, LEXIS 23, at *12 (CIT 1999) and Asociacion Colombiana de 
Exportadores de Flores v. United States, 6 FS 2d 865, 892-896 (CIT 
1998) (Demonstrates the Department's practice of collapsing affiliated 
parties and treating them as a single entity.). Usinor further notes 
that Edgcomb's recording of EEHC's actual depreciation expenses instead 
of the actual rental expense in the combined financial statements is in 
accordance with U.S. GAAP. Therefore, according to respondent, the 
Department should continue its practice of adhering to a respondent's 
accounting practices in accordance with GAAP so long as the practices 
do not significantly distort the firm's financial position and actual 
costs. To support this point, respondent cites Laclede Steel Co. v. 
United States, 965 LEXIS 186, at *28 (CIT 1994) and Final Determination 
of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Italy, 
63 FR 40422, 40429 (July 29, 1998).
    Department's Position: We agree with petitioners that Edgcomb 
understated its reported costs by only reporting the depreciation 
expense on its leased assets rather than the transfer price. However, 
we find this issue is moot because we are not relying on Edgcomb's 
reported fabrication costs for the final determination.

[[Page 30841]]

Comment 27: Value of Scrap Sales Used To Offset Further Manufacturing 
Material Costs (Edgcomb)

    Usinor admits that Edgcomb may have slightly understated its 
material costs by overstating its scrap revenue used as an offset to 
these costs. However, Usinor claims that revising the value would only 
increase further manufacturing costs by a de minimis amount.
    Petitioners refer to the overstatement of the value of scrap sales 
offset as another reason for not accepting Edgcomb's reported further 
manufacturing costs. However, if the Department does not resort to 
facts available, petitioners claim that the Department should make an 
adjustment to correct for this understatement of costs.
    Department's Position: We agree with petitioners that Edgcomb 
understated its reported material costs by overstating its scrap 
revenue offset. However, this issue is moot because we are not relying 
on Edgcomb's fabrication costs for the final determination.

Comment 28: Including the Consolidation Depreciation Adjustment to 
Further Manufacturing Costs (Edgcomb)

    Usinor argues that the Department should not include the 
depreciation adjustment reported in Edgcomb's 1997 financial statements 
in the company's further manufacturing cost. According to Usinor, this 
depreciation is the result of making a year-end adjustment for 
financial statement purposes. Specifically, Usinor notes that this 
adjustment was made in accordance with U.S. GAAP because the new parent 
(i.e., Samsteel) of Edgcomb changed the useful lives used by Edgcomb 
previous parent (i.e., Usinor). Moreover, Usinor claims that this 
adjustment was later eliminated through consolidating entries when 
Samsteel prepared its 1997 consolidated financial statements. In 1998, 
Usinor notes that this adjustment wasn't even recorded at Edgcomb's 
level. If the depreciation adjustment is added to Edgcomb's further 
manufacturing costs, Usinor notes that the resulting change would have 
a de minimis impact on the margin calculations.
    To capture accurately the expenses incurred, petitioners contend 
that the Department should include the adjustment in Edgcomb's further 
manufacturing costs.
    Department's Position: We agree with petitioners that this expense 
should be included in Edgcomb's further manufacturing fabrication 
costs. However, this issue is moot because we are not relying on 
Edgcomb's fabrication costs for the final determination.

Comment 29: Applying Facts Available to Hague's Further Manufacturing 
Costs (Hague)

    Petitioners argue that the Department cannot accept the further 
manufacturing costs reported by Hague, and should base the margin 
calculations on adverse facts available. Petitioners point out that 
Hague reported its unit cost of material based on overall figures that 
include the total cost and quantity of subject and non-subject 
merchandise. Petitioners claim that information presented on the 
verification exhibits show that Hague's accounting system is capable of 
providing a more detailed cost of material. Based on this conclusion, 
petitioners assert that Hague failed to provide the most product-
specific costs allowed by its cost of production records, which creates 
grounds for application of the adverse facts available under section 
776 of the Act.
    Usinor argues that petitioners' claims of inaccuracy and demands to 
apply adverse facts available to Hague's further manufacturing cost 
should be rejected. Usinor refutes petitioners' conclusion on the 
capabilities of Hague's accounting system by claiming that it was not 
feasible to provide more product-specific calculations based on the 
information generated by the system. According to Usinor, in those 
cases, where the system keeps track of major grade categories, it does 
not allow to separate subject from non-subject material within each 
grade. In other cases, where it does allow identification of the source 
and process (which is essential for identifying subject merchandise), 
it does not contain information by grade. Respondent contends that 
Hague's further manufacturing data is based on a reasonable 
methodology, consistent with the available records that Hague maintains 
in its normal course of business.
    Department's Position: We disagree with the petitioners' contention 
that the methodologies used by Hague to calculate its reported cost of 
further manufacturing warrant the application of adverse facts 
available. To calculate model specific costs, Hague relied on the most 
specific and reasonable allocation methods available within its normal 
record keeping system. Specifically, Hague relied on the costs reported 
in its financial accounting system to calculate its reported further 
manufacturing costs because the company does not have a detailed cost 
accounting system that generates model-specific costs. Using the 
amounts reported in its financial accounting system and available 
production reports, Hague was able to calculate a unique further 
manufacturing cost for each major fabrication process. Where the 
respondent has provided model specific costs that reasonably reflect 
the cost of production, our practice is to accept the respondent's 
reported costs (see Final Results of Antidumping Duty Administrative 
Review: Certain Welded Carbon Steel Pipe and Tube From Turkey, 61 FR 
69067 (December 31, 1996). In accordance with section 782(e) of the 
Act, even where information does not meet all of the established 
requirements, we will use it where it is timely, reliable, and can be 
used without undue difficulty.
    Moreover, our verification revealed nothing to contradict Hague's 
claim that it does not maintain more product-specific data in its 
normal course of business. We also verified that Hague was not able to 
calculate more model specific fabrication costs than those provided. 
While the accounting records identified by petitioner could in theory 
be used to calculate more specific costs for each specific order, Hague 
does not retain all the necessary production records in its normal 
course of business to make such calculations. As a result, Hague's 
methodology does provide a reasonable level of product specificity that 
is consistent with the company's records maintained in the normal 
course of business. Moreover, we found that the deficiencies we had 
identified in our further manufacturing cost verification report (e.g., 
understatement of material costs, additional process strings, etc.) can 
be adjusted without undue difficulties using data available on the 
record. Therefore, we find that the application of adverse facts 
available is not warranted in this instance.

Comment 30: Adjusting the Reported Further Manufacturing Material Costs 
(Hague)

    Usinor maintains that the Department does not need to adjust 
Hague's reported material costs. Usinor argues that the methodology 
used by the Department in its further manufacturing cost verification 
report to show that costs may be understated is inaccurate. 
Specifically, Usinor points out that the numerator in the verifiers' 
calculations includes non-subject as well as subject material 
purchases. In addition, the Department's calculated cost is based on 
1997 calendar year figures. In contrast, the denominator includes only 
subject merchandise sales and is POI based. To make the Department's 
calculation more accurate and to show that the reported

[[Page 30842]]

material cost is not distortive, Usinor provided a revised calculation 
of Hague's material costs in its case brief. Since the resulting figure 
is only slightly higher than the reported costs, Usinor believes that 
Hague's approach was fair and reasonable and should be accepted by the 
Department.
    Petitioners argue that the Department should adjust Hague's cost of 
material to exclude non-subject materials in accordance with the 
methodology suggested in the cost verification report.
    Department's Position: We have reviewed the information on the 
record and agree with Usinor that the material cost calculated in 
Hague's cost verification report was overstated. In addition, we 
reviewed the methodology suggested by Hague in its case brief and have 
found it to be reasonable and more product-specific. Therefore, for the 
final determination, we have adjusted Hague's further manufacturing 
costs using the method outlined in Usinor's case brief.

Comment 31: Claim Reimbursement Offset Further Manufacturing Costs 
(Hague)

    Usinor argues that the Department should not reverse the adjustment 
made to Hague's raw material costs to exclude a warranty expense. 
According to Usinor, Hague appropriately reduced its reported costs for 
an expense that relates to the resolution of a 1996 warranty claim on a 
1995 sale.
    Petitioners contend that the Department should reverse the 
adjustment to include this warranty cost because it was expensed during 
the POI.
    Department's Position: We agree with Usinor that Hague should not 
include this expense in the calculation of its further manufacturing 
costs. We note that the adjustment in question (``Claim Reimbursement--
95'') actually represents a finished goods inventory adjustment. 
Specifically, information on the record show that a customer rejected a 
shipped product because of a defect caused by the fabrication process. 
Regardless of the timing of the events and transactions underlying this 
adjustment, the adjustment essentially represents a revaluation of 
finished goods inventory which should not be considered a part of 
Hague's further manufacturing costs. Therefore, consistent with our 
normal practice, we have allowed Hague to exclude this cost from its 
costs calculations (see Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17334 
(April 9, 1999)).

Comment 32: Adjusting Further Manufacturing Financial Expense Ratio 
(Hague)

    Usinor argues that the Department should not adjust Hague's 
reported further manufacturing financial expense. According to Usinor, 
Hague appropriately deducted imputed amounts from the consolidated 
financial expense figure to avoid double counting. Usinor maintains 
that imputed credit and inventory carrying costs are already deducted 
from the sales price in the margin calculations. Therefore, these 
expenses should not be included in the calculation of the further 
manufacturing costs which is also a deduction to the sales price. 
Respondent asserts that it is the Department's standard practice to 
avoid such double-counting. To support this assertion, respondent cites 
Final Results of Antidumping Duty Administrative Reviews: Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea, 
64 FR 12927, 12931 (March 16, 1999) (``Carbon Steel Flat Products From 
Korea''); Final Determination of Sales at Less Than Fair Value: New 
Minivans From Japan, 57 FR 21937, 21956 (May 26, 1992) (``New Minivans 
From Japan''); and Final Results of Antidumping Duty Administrative 
Review: Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From the Federal Republic of Germany, 56 FR 31692, 31721 
( July 11, 1991) (i.e., ``AFB from Germany'').
    Petitioners, however, argue that in fact Carbon Steel Flat Products 
from Korea undercuts the respondent claim, and demonstrates that, to 
the contrary, the Department's standard practice is not to accept such 
adjustments.
    Department's Position: We disagree with Usinor. It is not 
appropriate for Hague to reduce the consolidated financial expense with 
imputed amounts. In fact, we have always maintained that regular 
interest expenses represent a legitimate production cost of a U.S. 
further manufacturing affiliate and therefore should not be reduced by 
imputed interest (see Final Determination of Sales at Less Than Fair 
Value: Large Newspaper Printing Presses and Components Thereof, Whether 
Assembled or Unassembled, From Japan, 61 FR 38139, 38165 (July 23, 
1996). In that case, the Department disagreed with the respondent that 
we double counted costs in the further manufacturing interest expense 
by deducting both interest and imputed credit in our CEP calculation. 
As for Usinor's citations to support their position, we note that the 
Department's position is taken out of context. Specifically, our 
position in Carbon Steel Flat Products From Korea (which references 
Minivans and AFBs From Germany) addresses the possibility of double-
counting of imputed interest in the context of U.S. indirect selling 
expenses. However, we note that indirect selling expenses are not a 
component of further manufacturing cost. Furthermore, even in the 
context of U.S. indirect selling expenses, the Department stated its 
position that ``because activities of U.S. sales affiliates differ 
considerably across cases, the Department must determine the 
appropriate universe of CEP deductions on a case-by-case basis.'' 
Therefore, we have disallowed the adjustment in question, and applied 
the financial expense ratio calculated at the consolidated level.

Comment 33: Further Manufacture Financial Expense Ratio Calculation 
(Edgcomb)

    Usinor states that the Department should accept Edgcomb reported 
further manufacturing financial expense that was calculated using 
Samsteel, Inc.'s consolidated financial statements. Usinor maintains 
that Edgcomb's ultimate parent, the Macsteel Group of South Africa, 
does not prepare a consolidated financial statement. Thus, Edgcomb 
calculated its financial expense ratio using the consolidated amounts 
from the highest level financial statement obtainable (i.e., that of 
Samsteel). Usinor also notes that the financial expense ratio for 
Samsteel is not significantly different from Usinor's consolidated 
financial expense ratio.
    According to petitioners, Edgcomb is not cooperating in this 
investigation by refusing to provide the consolidated financial figures 
of Edgcomb's ultimate parent, Macsteel Group of South Africa. 
Petitioners refer to the overstatement of the value of scrap sales 
offset as another reason for not accepting Edgcomb's reported further 
manufacturing costs. If the Department does not resort to adverse facts 
available for Edgcomb, petitioners claim that the Department should 
still adjust respondents financial expense.
    Department's Position: We agree with Usinor that Edgcomb 
appropriately relied on the financial statements of the highest 
consolidation level available to calculate the company's further 
manufacturing financial expense ratio. During verification, we 
confirmed that no higher level of consolidation existed (see, Edgcomb's 
cost verification exhibit 13). Moreover, relying on Samsteel's 
consolidated statements as being the

[[Page 30843]]

highest level available is consistent with our prior practice (see 
Final Determination of Sales at Less Than Fair Value: Stainless Steel 
Round Wire From Canada, 64 FR 17324-17336 (April 9, 1999) (Department 
relied on the amounts reported on the consolidated financial statements 
of the highest level available to calculate the financial expense 
ratio). Likewise, we found that it would be inappropriate to use the 
Usinor Group's consolidated financial expense ratio as a surrogate. We 
note that the Usinor Group only held a minority interest in Edgcomb. As 
a result, Edgcomb's financial results were not consolidated into the 
Group's financial results. Since Edgcomb's financial expense is not a 
component of the reported further manufacturing costs which are being 
based on facts available, as discussed above, we have relied on the 
company's submitted financial expense ratio for the final 
determination.

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 France 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. The suspension 
of liquidation instructions will remain in effect until further notice. 
The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                        margin
                                                              (percent)
------------------------------------------------------------------------
Usinor.....................................................        10.64
All Others.................................................        10.64
------------------------------------------------------------------------

ITC Notification

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

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13679 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P