[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30710-30750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13682]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-428-825]


Final Determination of Sales at Less Than Fair Value; Stainless 
Steel Sheet and Strip in Coils From Germany

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

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

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EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Ranado, Stephanie Arthur, or 
Robert James at (202) 482-3518, (202) 482-6312, or (202) 482-5222, 
respectively, Antidumping and Countervailing Duty Enforcement Group 
III, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230.

Applicable Statute and Regulations

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

Final Determination

    We determine that stainless steel sheet and strip in coil 
(stainless sheet in coil) from Germany are being, or are likely to be, 
sold in the United States at less than fair value (LTFV), as provided 
in section 735 of the Tariff Act. The estimated margins of sales at 
LTFV are

[[Page 30711]]

shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    We published in the Federal Register the preliminary determination 
in this investigation on January 4, 1999. See Notice of Preliminary 
Determination of Sales at Less Than Fair Value: Stainless Steel Sheet 
and Strip in Coils From Germany, 64 FR 92 (Preliminary Determination). 
Since the December 18, 1998 disclosure of the Preliminary Determination 
the following events have occurred:
    On December 28, 1998, KTN timely submitted an allegation of 
significant ministerial errors with respect to the preliminary 
determination. Petitioners (Allegheney Ludlum Corp., Armco, Inc., J&L 
Specialty Steel, Inc., Washington Steel Division of Bethlehem Steel 
Corp., United Steelworkers of America, AFL-CIO/CLC, Butler Armco 
Independent Union, and Zanesville Armco Independent Organization) also 
alleged a single significant ministerial error on December 29, 1998. 
Both interested parties requested that we correct the errors and 
publish a notice of amended preliminary determination in the Federal 
Register. See 19 CFR 351.224(e). After reviewing both parties' 
allegations we determined that the errors, considered collectively, 
were not significant, as defined at 19 CFR 351.224(g) of the 
Department's regulations. See Memorandum For the File; ``Antidumping 
Duty Investigation of Stainless Steel Sheet and Strip in Coils From 
Germany; Analysis of Ministerial Error Allegations,'' January 15, 1999 
(Ministerial Errors Memorandum), on file in room B-099 of the main 
Commerce building. We have addressed the specific errors under ``Facts 
Available'' and Comment 31, below.
    KTN submitted supplemental questionnaire responses on January 6, 
1999 (sections B and C), January 15, 1999 (section E), January 22, 1999 
(section E), and February 17, 1999 (section C).
    The Department verified sections A (General Information), B (Home 
Market Sales) and C (U.S. Sales) of KTN's response January 18 through 
22, 1999 at KTN's headquarters in Bochum, Germany. See Memorandum for 
the File; ``Home Market Sales Verification of Krupp Thyssen Nirosta, 
GmbH (KTN)'', March 1, 1999 (KTN Sales Verification Report). Between 
January 25 and January 29, 1999, we verified KTN's section D (Cost of 
Production) questionnaire response; see Memorandum to Neal Halper, 
Acting Director, Office of Accounting; ``Verification of the Cost of 
Production and Constructed Value Submissions of Krupp Thyssen Nirosta 
GmbH,'' March 15, 1999 (KTN Cost Verification Report). Public versions 
of these, and all other Departmental memoranda referred to herein, are 
on file in room B-099 of the main Commerce building.
    We also conducted verification of KTN's Section C response at the 
offices of its wholly-owned U.S. affiliate, Krupp Hoesch Steel 
Products, Inc. (KHSP) in Atlanta, Georgia from February 8 through 11, 
1999. See Memorandum to the File; ``U.S. Verification of Krupp Thyssen 
Nirosta (KTN),'' March 5, 1999 (KHSP Verification Report). Finally, we 
verified the Section C and Section E (Further Manufacturing) 
information submitted by KTN's affiliated U.S. processor and reseller. 
As the firm's identity and location have been afforded business 
proprietary status by the Department, we refer to this entity herein as 
``U.S. Reseller.'' See Memorandum to the File; ``Verification of the 
Information Submitted by * * * (Reseller),'' March 15, 1999 (Reseller 
Sales Verification Report), and Memorandum to Neal Halper; 
``Verification of the Cost of Further Manufacturing performed by [U.S. 
Reseller],'' March 18, 1999 (Reseller Cost Verification Report).
    On March 23, 1999, the Department requested historical data on 
KTN's monthly shipments of subject stainless sheet in coil into the 
United States to assist in rendering our final determination of 
critical circumstances (see below). KTN submitted the requested 
information on April 2, 1999.
    KTN and petitioners both requested a public hearing in this case 
(on January 22, 1999, and February 3, 1999, respectively). On March 23, 
1999, petitioners and KTN filed their case briefs in this matter; both 
parties filed rebuttal briefs on March 30, 1999. The Department 
conducted a public hearing on April 9, 1999, a transcript of which is 
on file in the Central Records Unit.

Scope of the Investigation

    We have made minor corrections to the scope language excluding 
certain stainless steel foil for automotive catalytic converters and 
certain specialty stainless steel products in response to comments by 
interested parties.
    For purposes of this investigation, the products covered are 
certain stainless steel sheet and strip in coils. Stainless steel is an 
alloy steel containing, by weight, 1.2 percent or less of carbon and 
10.5 percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80, 
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05, 
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36, 
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05, 
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36, 
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTS subheadings are provided for convenience and Customs 
purposes, the Department's written description of the merchandise under 
investigation is dispositive.
    Excluded from the scope of this investigation are the following: 
(1) Sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled 
sections, with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a 
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and 
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5 
percent chromium, and certified at the time of entry to be used in the 
manufacture of razor blades.

[[Page 30712]]

See Chapter 72 of the HTS, ``Additional U.S. Note'' 1(d).
    In response to comments by interested parties the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this investigation. These excluded products 
are described below:
    Flapper valve steel is defined as stainless steel strip in coils 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves in compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this investigation. This stainless 
steel strip in coils is a specialty foil with a thickness of between 20 
and 110 microns used to produce a metallic substrate with a honeycomb 
structure for use in automotive catalytic converters. The steel 
contains, by weight, carbon of no more than 0.030 percent, silicon of 
no more than 1.0 percent, manganese of no more than 1.0 percent, 
chromium of between 19 and 22 percent, aluminum of no less than 5.0 
percent, phosphorus of no more than 0.045 percent, sulfur of no more 
than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05 
percent, and total rare earth elements of more than 0.06 percent, with 
the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this investigation. This ductile stainless 
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.'' 1
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of this investigation. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is 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.

Critical Circumstances

    Section 733(e)(1) of the Tariff Act provides that if a petitioner 
alleges critical circumstances, the Department will determine, on the 
basis of the information available to it at the time, whether there is 
a reasonable basis to believe or suspect that (i) there is a history of 
dumping and material injury by reason of dumped imports in the United 
States or elsewhere of the subject merchandise, or (ii) the person by 
whom, or for whose account, the merchandise was imported knew or should 
have known that the exporter was selling the subject merchandise at

[[Page 30713]]

less than its fair value and that there would be material injury by 
reason of such sales (see 733(e)(1)(A)(i) and (ii), and there have been 
massive imports of the subject merchandise over a relatively short 
period (733(e)(1)(B)).
    In the Preliminary Determination we found that both criteria, i.e., 
knowledge of dumping and material injury and massive imports of subject 
merchandise, had been met by KTN and preliminarily found that critical 
circumstances exist. We have reconsidered our determination of critical 
circumstances as set forth in the Preliminary Determination, however. 
While we still find reasonable grounds to impute knowledge of less-
than-fair-value sales to the importer, we have amended our calculation 
of massive imports from that applied for the Preliminary Determination. 
As explained in detail below, for purposes of this final determination 
we are no longer relying upon the publicly-available data on imports of 
subject merchandise from Germany as a whole supplied by the Census 
Bureau. Rather, we have relied upon the company-specific shipment data 
supplied by respondent KTN. Based on this information we find that 
there were not massive imports and, therefore, that critical 
circumstances do not exist. See our response to Comment 4, below.

Affiliation

    As explained in the Preliminary Determination and immediately 
below, we find that for purposes of this investigation KTN is 
affiliated with Thyssen Stahl and Thyssen AG (Thyssen) and, through 
them, their affiliated sellers and steel service centers in Germany and 
the United States. The Tariff Act defines ``affiliated persons'' at 
section 771(33). Included within that definition are family members, 
any organization and its officers or directors, partners, and employer 
and employee. See section 771(33)(A) through (D). The statute also 
considers as affiliated persons--

    (E) Any person directly or indirectly owning, controlling, or 
holding with power to vote, 5 percent or more of the outstanding 
voting stock or shares of any organization and such organization.
    (F) Two or more persons directly or indirectly controlling, 
controlled by, or under common control with, any person.
    (G) Any person who controls any other person and such person.

Id.
    ``Control'' is defined as one person being ``legally or 
operationally in a position to exercise restraint or direction over the 
other person.'' The Statement of Administrative Action (SAA) which 
accompanied the Uruguay Round Agreements Act (see H. Doc. 316, Vol. 1, 
103d Cong., 2d Sess. (1994)) explained that including control in an 
analysis of affiliated parties ``permit[s] a more sophisticated 
analysis which better reflects the realities of the market place.'' The 
SAA continues, ``[t]he traditional focus on control through stock 
ownership fails to address adequately modern business arrangements, 
which often find one firm `operationally in a position to exercise 
restraint or direction' over another even in the absence of an equity 
relationship.'' Id. at 838.
    Finally, as the Department noted in its ``Explanation to the Final 
Rules'' (i.e., its regulations), ``section 771(33), which refers to a 
person being `in a position to exercise restraint or direction,' 
properly focuses the Department on the ability to exercise `control' 
rather than the actuality of control over specific decisions.'' 
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295, 
27348 (May 19, 1997) (Final Rule)  (emphasis added). Thus, the statute 
does not require that we find the actual exercise of control by one 
person over the other in order to find the parties affiliated; rather, 
the potential to exercise control is sufficient for such a finding.
    In this final determination we continue to find that KTN is 
affiliated with Thyssen Stahl and Thyssen because Thyssen Stahl 
indirectly owns and controls, through Krupp Thyssen Stahl (KTS), forty 
percent of KTN's outstanding stock (the remaining sixty percent are 
controlled by Thyssen's joint-venture partner, Fried. Krupp. AG Krupp-
Hoesch (Fried. Krupp)). Thyssen, which wholly owns Thyssen Stahl, 
likewise indirectly owns and controls forty percent of KTN. See 
Preliminary Determination, 64 FR at 95 and Memorandum to the File; 
``Affiliated Party Sales,'' October 28, 1998 (Affiliation Memorandum).
    In addition, we continue to find that KTN is affiliated with 
Thyssen's home market and U.S. sales affiliates because the nature and 
quality of corporate contact establish this affiliation by virtue of 
Thyssen's common control of its affiliates and of KTS. The record 
demonstrates that Thyssen, as the majority equity holder in, and 
ultimate parent of, its various affiliates, is in a position to 
exercise direction and restraint over the affiliates' production and 
pricing. As we stated in the Preliminary Determination, ``Thyssen's 
substantial equity ownership in KTN and Thyssen's other affiliates, in 
conjunction with the `totality of other evidence of control' requires a 
finding that these companies are under the common control of Thyssen.'' 
Id. For a full discussion of KTN's affiliations see Comment 2, below, 
the Affiliation Memorandum, and Memorandum For the File; ``Antidumping 
Duty Investigation on Stainless Steel Sheet and Strip in Coils from 
Germany--Final Determination Analysis for Krupp Thyssen Nirosta, 
GmbH,'' May, 19, 1999 (Final Analysis Memorandum).

Facts Available

    Section 776(a) of the Tariff Act provides that if an interested 
party withholds information that has been requested by the Department, 
fails to provide such information in a timely manner or in the form or 
manner requested, significantly impedes a proceeding, or provides 
information which cannot be verified, the Department shall use, subject 
to sections 782(d) and (e), the facts otherwise available in reaching 
the applicable determination. See, e.g., Roller Chain, Other Than 
Bicycle Chain, From Japan, 63 FR 63671, 63673 (November 16, 1998). In 
this investigation the Department has determined, for the reasons 
stated in detail below, that KTN or its affiliates failed to provide 
necessary information and, in some instances, that the submitted 
information could not be verified. Therefore, pursuant to section 
776(a) of the Tariff Act, we have determined that the use of the facts 
otherwise available is necessary in these instances.
    However, the statute requires that certain conditions be met before 
the Department may resort properly to the facts available. Where the 
Department determines that a response to a request for information does 
not comply with the request, section 782(d) of the Tariff Act provides 
that the Department will so inform the party submitting the response 
and will, to the extent practicable, provide that party the opportunity 
to remedy or explain the deficiency. If the party fails to remedy the 
deficiency within the applicable time limits, the Department may, 
subject to section 782(e), disregard all or part of the original and 
subsequent responses, as appropriate. Briefly, section 782(e) provides 
that the Department ``shall not decline to consider information that is 
submitted by an interested party and is necessary to the determination 
but does not meet all the applicable requirements established by [the 
Department]'' if the information is timely, can be verified, is not so 
incomplete that it cannot be used, and if the interested party acted to 
the best of its ability in providing the information. Where all of 
these conditions are met, and the Department

[[Page 30714]]

can use the information without undue difficulties, the statute 
requires it to do so.
    Finally, in selecting from among the facts otherwise available, 
section 776(b) of the Tariff Act permits the use of an adverse 
inference if the Department also finds that an interested party failed 
to cooperate by not acting to the best of its ability to comply with 
the request for information. Adverse inferences are appropriate ``to 
ensure that the party does not obtain a more favorable result by 
failing to cooperate than if it had cooperated fully.'' SAA at 870. 
Furthermore, ``an affirmative finding of bad faith on the part of the 
respondent is not required before the Department may make an adverse 
inference.'' Final Rule, 62 FR at 27340. The statute continues by 
noting that in selecting from among the facts available the Department 
may, subject to the corroboration requirements of section 776(c), rely 
upon information drawn from the petition, a final determination in the 
investigation, any previous administrative review conducted under 
section 751 (or section 753 for countervailing duty cases), or any 
other information on the record.
    In accordance with section 776(a) of the Tariff Act, we have 
continued to use partial facts available in instances where KTN failed 
to provide the Department with requested sales information concerning 
certain affiliated resellers in the home market. See Preliminary 
Determination, 64 FR at 95 and 96. Further, pursuant to section 776(b) 
we find that KTN failed to cooperate to the best of its ability because 
it did not supply missing sales data, as demonstrated by its selective 
submission of Thyssen affiliates' data. Therefore, as adverse facts 
available for this final determination, as in the Preliminary 
Determination, we based normal value upon the highest reported gross 
unit price for each product sold to the affiliated parties, in lieu of 
the missing prices on downstream sales from the affiliated resellers to 
unaffiliated customers. We calculated the highest normal value (NV) 
reported by control number (CONNUM) in KTN's home market database and 
applied it to KTN's sales to its affiliates for which KTN did not 
report home market downstream sales. See Memorandum For the File; ``KTN 
Preliminary Analysis Memorandum,'' December 17, 1998 (Preliminary 
Analysis Memorandum).
    With respect to sales in the United States, we have determined that 
in accordance with section 776(b) of the Tariff Act the use of adverse 
facts available is appropriate for five previously unreported U.S. 
sales KTN disclosed to the Department during the verification of KHSP 
(see Comment 10, below). As adverse facts available we assigned the 
highest non-aberrational margin (as explained immediately below) to 
these transactions.
    In addition, as explained in response to Comments 19 and 20, we 
have determined that we must resort to the facts available with respect 
to the sales and further-manufacturing data submitted by U.S. Reseller. 
At verification we discovered numerous and systemic errors, some of 
which cannot be corrected, in the data used by U.S. Reseller to report 
its costs of further manufacturing of subject merchandise. These errors 
included, inter alia, the failure to match properly input coils and 
output finished products, the allocation of processing costs to sales 
which had undergone no further processing whatever, and cases where the 
quantities of output goods exceeded the inputs. The vast majority of 
the subject merchandise sold through U.S. Reseller was first further 
processed by this company; therefore, the deficiencies in its data 
affect a corresponding percentage of U.S. Reseller's submitted sales 
data. Furthermore, the mis-allocations not only affected U.S. 
Reseller's reported sales which had been subject to further processing, 
but through the allocation of processing costs to the non-further-
processed sales tainted this portion of its database as well. In 
addition, U.S. Reseller failed to identify the producer of a 
significant portion of its sales in the United States, and failed to 
report physical criteria vital to our model matching for certain other 
transactions. As the breadth and depth of the discrepancies leave us 
with no confidence in the underlying further-processing data submitted 
by the U.S. Reseller, we have determined that these data cannot serve 
adequately as a basis for calculating KTN's overall weighted-average 
margin. Further, the information required to correct the flaws in U.S. 
Reseller's data is not on the record of this proceeding; therefore, the 
use of total facts available is necessary (see section 782(e)). 
Finally, the record indicates that U.S. Reseller could readily have 
discovered and corrected the majority of these errors prior to 
submitting its data to the Department and, at the latest, prior to 
verification.
    Accordingly, as provided in section 776(b) of the Tariff Act, we 
find that U.S. Reseller has failed to cooperate by not acting to the 
best of its ability in responding to the Department's requests for 
information. Therefore, we have drawn an adverse inference for the 
entirety of the data submitted by U.S. Reseller. As adverse facts 
available we have assigned the highest non-aberrational margin 
calculated for this final determination, to the weighted-average unit 
value for sales reported by U.S. Reseller. To determine the highest 
non-aberrational margin we examined the frequency distribution of the 
margins calculated from KTN's reported data. We found that the margins 
for nearly 10 percent of KTN's transactions fell within a specific 
range of percentages (see the Final Analysis Memorandum for the exact 
figures); we selected the highest of these as reflecting the highest 
non-aberrational margin. We then multiplied the resulting unit margin 
by the total quantity of resales of subject merchandise by U.S. 
Reseller. See the Final Analysis Memorandum. This total quantity 
includes that material affirmatively verified as being of KTN origin, 
as well as a portion of the merchandise of unidentified origin 
allocated to KTN. To apportion the unidentified sales among the 
investigations of stainless sheet in coil from Germany, Italy and 
Mexico (see Comment 20, below) we have adjusted the quantity for each 
of the unidentified sales on a pro rata basis, using the verified 
percentages of U.S. Reseller's merchandise supplied by each of the 
three respondent mills. We then applied the facts-available margin to 
these unidentified sales transactions as explained above.
    Finally, as we explained in our Ministerial Errors Memorandum, we 
inadvertently relied upon a home market sales data base which did not 
include the gross unit prices recalculated as facts available for sales 
to certain affiliated home market resellers. Thus, the decision to rely 
on facts available with respect to KTN's home market downstream sales 
had no effect in the Preliminary Determination. Therefore, we have 
corrected the programming language to include the gross unit prices 
adjusted for the application of facts available in our final 
calculations. See Ministerial Errors Memorandum at 3 and 4.

Fair Value Comparisons

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

[[Page 30715]]

Transactions Investigated

    In the Preliminary Determination we relied upon KTN's invoice date 
as the date of sale in both markets, in keeping with the regulatory 
preference for using the invoice date as the date of sale and because 
there were no facts in this investigation that would warrant selection 
of a different date. See 19 CFR 351.401(i). As explained in response to 
Comment 1, below, for this final determination we have continued to 
rely upon KTN's invoice dates as the date of sale in both the home and 
U.S. markets.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Tariff Act, and 
as explained in the Preliminary Determination, we determine that one 
level of trade (LOT) exists in the home market for KTN's sales. We also 
have determined that KTN's U.S. sales take place at two LOTs, one 
comprising KTN's factory-direct EP sales, and the other KTN's three 
channels of distribution for its CEP sales (i.e., ``back-to-back'' 
sales through KHSP, consignment sales through KHSP, and sales of 
``secondary quality'' merchandise, also through KHSP).
    In addition, we continue to find that KTN's EP sales and its home 
market sales were at the same LOT, while KTN's CEP sales were at a 
different LOT. Because these CEP sales were at a different LOT than 
KTN's home market sales, we examined whether a LOT adjustment may be 
appropriate. However, as KTN sold to a single LOT in the home market, 
we have no basis upon which to determine whether there is a pattern of 
consistent price differences between levels of trade. Further, we do 
not have the information which would allow us to examine pricing 
patterns of KTN's sales of other similar products and there is no other 
record evidence upon which such an analysis could be based. Therefore, 
we have continued to allow a CEP offset, in accordance with section 
773(a)(7)(B) of the Tariff Act. See Preliminary Determination, 64 FR at 
97.

Export Price and Constructed Export Price

    KTN reported as EP transactions certain sales of subject 
merchandise sold to unaffiliated U.S. customers prior to importation 
without the involvement of its affiliated company, KHSP. KTN reported 
as CEP transactions its sales of subject merchandise sold to KHSP for 
its own account. KHSP then resold the subject merchandise after 
importation to unaffiliated customers in the United States.
    Also, because KTN was unable to demonstrate for the record that it 
was not in the position to collect downstream sales information from 
its U.S. affiliates, based on record evidence we requested that KTN 
report its downstream sales made in the United States (see Memorandum 
to Richard Weible, ``Limited Reporting of Home Market and United States 
Sales,'' November 13, 1998) (Limited Reporting Memorandum).
    We calculated EP in accordance with section 772(a) of the Tariff 
Act for those sales where the merchandise was sold to the first 
unaffiliated purchaser in the United States prior to importation and 
where CEP methodology was not otherwise warranted based on the facts of 
record. We based EP on the packed, delivered, tax and duty unpaid price 
to unaffiliated purchasers in the United States. We made deductions for 
billing adjustments and movement expenses in accordance with section 
772(c)(2)(A) of the Tariff Act; these included, where appropriate, 
foreign inland freight, foreign brokerage and handling, international 
freight and foreign inland insurance.
    We calculated CEP, in accordance with subsections 772(b) of the 
Tariff Act, for those sales to the first unaffiliated purchaser that 
took place after importation into the United States. We based CEP on 
the packed, delivered, duty paid or delivered prices to unaffiliated 
purchasers in the United States. We made adjustments for price-billing 
errors, where applicable. We also made deductions for movement expenses 
in accordance with section 772(c)(2)(A) of the Tariff Act; these 
included, where appropriate, foreign inland freight, marine insurance, 
U.S. customs duties, U.S. inland freight, foreign brokerage and 
handling, international freight, foreign inland insurance, and U.S. 
warehousing expenses. In accordance with section 772(d)(1) of the 
Tariff Act, we deducted those selling expenses associated with economic 
activities occurring in the United States, including direct selling 
expenses (credit costs, warranty expenses and other direct selling 
expenses), inventory carrying costs (ICCs), and indirect selling 
expenses (ISEs). We offset credit expenses by the amount of interest 
revenue on sales. For CEP sales, we also made an adjustment for profit 
in accordance with section 772(d)(3) of the Tariff Act.
    Finally, we made the following changes in our calculation of EP and 
CEP in the Preliminary Determination based on information discovered at 
verification or after analysis of comments by the interested parties:
    We recalculated marine insurance, foreign inland insurance, other 
transportation charges, and U.S. duty expenses to reflect corrections 
presented at the start of verification. See KTN Verification Report at 
2 and KHSP Verification Report at 1 and 2. We also adjusted ocean 
transportation for shipments to specific points by an affiliated 
carrier to reflect arm's-length freight rates (see Comment 16, below). 
In addition, we made a number of changes to our calculation of U.S. 
credit expenses and inventory carrying costs to reflect the verified 
interest rates, to ensure use of the proper shipment date for certain 
CEP re-sales, and to correct the time in inventory to capture the time 
the merchandise was at sea (see Comments 12, 13, and 14). We adjusted 
indirect selling expenses (ISEs) for certain U.S. sales made through an 
affiliated reseller located in Germany (see Comment 11). We also 
adjusted ISEs for CEP sales through KHSP to reflect its correction at 
verification (see KHSP Verification Report at 2 and Exhibits 1 and 8). 
Finally, we reclassified specific observations from KTN's CEP and its 
``non-U.S.'' sales listings, as appropriate, to include U.S. sales or 
exclude transshipments. Id.
    With respect to subject merchandise to which value was added in the 
United States by U.S. Reseller prior to sale to unaffiliated customers, 
as explained above, we have applied the facts available in accordance 
with section 776(b) of the Tariff Act.

Affiliated-Party Transactions and Arm's-Length Test

    We excluded from our analysis any sales to affiliated customers in 
the home market not made at arm's-length prices because we considered 
them to be outside the ordinary course of trade. See 19 CFR 351.102. To 
test whether these sales were made at arm's-length prices, we compared 
on a model-specific basis the starting prices of sales to affiliated 
and unaffiliated customers net of all movement charges, direct selling 
expenses, and packing. Where prices to the affiliated party were on 
average 99.5 percent or more of the price to the unaffiliated parties, 
we determined that sales made to the affiliated party were at arm's 
length. See 19 CFR 351.403(c). In instances where no price ratio could 
be calculated for an affiliated customer because identical merchandise 
was not sold to unaffiliated customers, we were unable to determine 
that these sales were made at arm's-length prices and, therefore, 
excluded them from our LTFV analysis. See, e.g., Certain Cold-Rolled

[[Page 30716]]

Carbon Steel Flat Products from Argentina, 58 FR 37062, 37077 (July 9, 
1993). Where the exclusion of such sales eliminated all sales of the 
most appropriate comparison product, we made a comparison to the next 
most similar model.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV 
(i.e., the aggregate volume of home market sales of the foreign like 
product was equal to or greater than five percent of the aggregate 
volume of U.S. sales), we compared the respondent's volume of home 
market sales of the foreign like product to the volume of U.S. sales of 
the subject merchandise, in accordance with section 773(a)(1)(B)(i) of 
the Tariff Act. As KTN's aggregate volume of home market sales of the 
foreign like product was greater than five percent of its aggregate 
volume of U.S. sales of the subject merchandise, we determined that the 
home market was viable. Therefore, we have based NV on home market 
sales in the usual commercial quantities and in the ordinary course of 
trade.
    We made a number of changes to our calculation of NV from the 
Preliminary Determination either based upon our findings at 
verification or in response to comments by the interested parties. At 
verification we found that KTN had understated its home market early 
payment discounts; we adjusted the discounts accordingly (see KTN Sales 
Verification Report at 1. KTN also indicated that it had inadvertently 
understated home market warranty expenses by a factor of 10 (see id.); 
we have recalculated these expenses to correct the error. We also 
corrected KTN's technical service expenses for sales of precision strip 
sales to apply the expense ratio calculated for precision strip 
products. In addition, we recalculated rebates for sales by NSC using 
the corrected percentage supplied at verification (id., see also 
Comment 9, below). NSC also overstated its average days in inventory in 
calculating ICCs; we adjusted this calculation appropriately. 
Furthermore, we corrected the reported sale dates for certain NSC 
transactions. See KTN Sales Verification Report at 1. Finally, we 
amended our model-match language to correct a ministerial error in 
reading KTN's reported finish and gauge codes (see Comment 31).

Cost of Production (COP) Analysis

    Based on a cost allegation filed by the petitioners, the Department 
investigated whether KTN's sales of the foreign like product were made 
at prices which represent less than the cost of production. In 
accordance with section 773(b)(3) of the Tariff Act, we calculated the 
weighted-average COP based on the sum of KTN's cost of materials and 
fabrication for the foreign like product, plus amounts for selling and 
general and administrative (G&A) expenses and packing costs. In 
response to comments of the interested parties, we made the following 
changes to KTN's COP data:
    We adjusted KTN's G&A expense rate by including the costs of 
international projects, year-end adjustments, and personnel costs of 
KTN's affiliated home market processor and reseller, Nirosta Service 
Center (NSC) (see Comment 23). In addition, we based our allocation of 
G&A expenses on KTN's total cost of manufacture (TCOM), rather than on 
processing costs alone, as reported by KTN (see Comment 24).
    In calculating KTN's financial expenses we included exchange rate 
losses of Fried. Krupp, while excluding its exchange rate gains; we 
also included an offset to total interest expenses of Fried. Krupp's 
short-term interest income less the amount attributable to trade 
receivables (see Comment 25).
    Where KTN's reported transfer prices for purchases of nickel from 
an affiliated party were not at arm's length, we increased these prices 
to represent prevailing market prices (see Comment 27).
    Finally, we disallowed KTN's claim to treat NSC's processing costs 
as a direct selling expense, treating these instead as a component of 
KTN's fully-captured variable cost of manufacture (VCOM); accordingly, 
the processing costs reported for sales by NSC have been included in 
KTN's COP, rather than deducted from NV as selling expenses (see 
Comment 6).
    Where possible, we used KTN's reported COP amounts, adjusted as 
discussed above, to compute weighted-average COPs during the POI. We 
compared the product-specific weighted-average COP figures to home 
market sales of the foreign like product, as required under section 
773(b) of the Tariff Act, in order to determine whether these sales had 
been made at prices below COP. We compared the COP to the home market 
prices, less any applicable movement charges and discounts. In 
determining whether to disregard home market sales made at prices less 
than the COP, we examined whether such sales were made (i) in 
substantial quantities over an extended period of time, and (ii) at 
prices which permitted the recovery of all costs within a reasonable 
period of time.
    Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less 
than twenty percent of KTN's sales of a given product were at prices 
less than the COP, we did not disregard any below-cost sales of that 
product because we determined that the below-cost sales were not made 
in ``substantial quantities.'' Where twenty percent or more of its 
sales of a given product during the POI were at prices less than the 
COP, we determined such sales to have been made in substantial 
quantities within an extended period of time, in accordance with 
sections 773(b)(2)(C)(i) and 773(b)(2)(B) of the Tariff Act. Because we 
used POI average costs, pursuant to section 773(b)(2)(D) of the Tariff 
Act, we also determined that such sales were not made at prices which 
would permit recovery of all costs within a reasonable period of time. 
Therefore, we disregarded the below-cost sales. Where all sales of a 
specific product were at prices below the COP, we disregarded all sales 
of that product. When there were no home market sales of identical or 
similar merchandise in the home market available to match to U.S. 
sales, we compared the CEP to CV in accordance with section 773(a)(4) 
of the Tariff Act.
    Our cost test for KTN revealed that less than twenty percent of 
KTN's home market sales of certain products were at prices below KTN's 
COP. Therefore, we retained all such sales in our analysis. For other 
products, more than twenty percent of KTN's sales were at below-cost 
prices. In such cases we disregarded the sales that failed the cost 
test, while retaining the above-cost sales for our analysis. See KTN 
Final Analysis Memorandum.

Constructed Value

    In accordance with section 773(e)(1) of the Tariff Act, we 
calculated CV based on the sum of respondent's cost of materials, 
fabrication, SG&A, interest expenses, profit, and U.S. packing costs. 
In accordance with section 773(e)(2)(A) of the Tariff Act, we based 
SG&A and profit on the amounts incurred and realized by KTN in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade for consumption in the foreign country. We 
used the CV data KTN supplied in its section D supplemental 
questionnaire response, except for the adjustments made for COP, 
described above.

Price-to-Price Comparisons

    We calculated NV based on FOB or delivered prices to unaffiliated

[[Page 30717]]

customers or prices to affiliated customers that we determined to be at 
arm's-length prices. We made adjustments for price billing errors, 
where appropriate. We made deductions, where appropriate, for foreign 
inland freight, pursuant to section 773(a)(6)(B) of the Tariff Act. In 
addition, we made adjustments for differences in cost attributable to 
differences in physical characteristics of the merchandise pursuant to 
section 773(a)(6)(C)(ii) of the Tariff Act, as well as for differences 
in circumstances of sale (COS) in accordance with section 
773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. We made COS 
adjustments for imputed credit expenses. Finally, we deducted home 
market packing costs and added U.S. packing costs in accordance with 
section 773(a)(6)(A) and (B) of the Tariff Act.
    To the extent practicable, we based NV on sales at the same level 
of trade as the EP or CEP transactions. Finally, because KTN's sales to 
its home market affiliates represented more than five percent of its 
total home market sales, for certain of its home market affiliates we 
requested that KTN report its affiliates' downstream sales (i.e., sales 
made by the affiliate). See Limited Reporting Memorandum.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Tariff 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 Tariff Act. For comparisons to 
EP, we made COS adjustments by deducting home market direct selling 
expenses and adding U.S. direct selling expenses. Where we compared CV 
to CEP, we deducted from CV the weighted-average home market direct 
selling expenses.

Currency Conversion

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

Analysis of Interested Party Comments

Comment 1: Date of Sale

    In the Preliminary Determination the Department relied upon KTN's 
invoice date as the date of sale in both the home and U.S. markets, in 
keeping with the Department's regulatory preference for using the 
invoice date as the sale date absent evidence ``that a different date 
better reflects the date on which the exporter or producer establishes 
the material terms of sale.'' 19 CFR 351.401(i). Petitioners and KTN 
both presented direct arguments in their respective case briefs 
concerning the proper date of sale for this final determination.
    KTN urges the Department to continue using the invoice date as the 
date of sale. Such a position, KTN submits, would be consistent with 
the Department's clear policy to rely upon the invoice date, a policy 
articulated in several cases including Carbon Steel Pipes and Tubes 
From Thailand, 63 FR 55578, 55587 (October 16, 1998) (Pipes From 
Thailand). KTN insists that it has provided compelling data in support 
of using the invoice date as date of sale. According to KTN, these data 
include precise figures on the frequency of changes to the essential 
terms of sale (including price and quantity) following the order 
confirmation date. KTN insists further that it provided supporting 
documentation of these claims during the Department's home market and 
U.S. verifications, and asserts that the Department reviewed this 
documentation at verification noting no discrepancies. ``In contrast,'' 
KTN concludes, ``[p]etitioners have failed to provide any evidence to 
support their argument that order confirmation date would be a more 
appropriate date to use for the date of sale.'' KTN's Case Brief at 40.
    Petitioners assert that the proper date of sale is the order 
confirmation or, if available, the change order date. Petitioners 
insist that KTN has not established that the invoice date should serve 
as the date of sale in this proceeding, relying instead upon an ``over-
simplification'' of the Department's regulations on this issue. 
Petitioners Case Brief at 3. Citing Pipes From Thailand and Circular 
Welded Non-Alloy Steel Pipe From the Republic of Korea, 63 FR 32833 
(June 16, 1998) (Korean Steel Pipe), petitioners note that the 
Department is afforded great latitude in selecting a sale date other 
than the invoice date if ``the record evidence demonstrates that the 
material terms of sale, i.e., price and quantity, are established on a 
different date.'' Id., quoting Pipes From Thailand. In an industry 
where merchandise is produced to order, petitioners argue, and where 
significant lag times separate the order date and the subsequent 
invoice date, the Department's date-of-sale determination can have a 
critical impact upon the dumping calculations. The vast majority of 
KTN's sales, petitioners note, were produced to order.
    Petitioners dismiss KTN's documentation supporting the use of 
invoice date as either unsubstantiated or indefensible. Id. at 5. For 
example, petitioners dismiss as unsupported by record evidence KTN's 
claims concerning changes in quantity between the original order date 
and the invoice date. As a preliminary matter, petitioners accuse KTN 
of concealing its practices with respect to ``delivery tolerances'' 
(i.e., pre-determined levels by which the weight of a shipment may fall 
above or below the ordered quantity and still satisfy the contractual 
terms of sale) in order to exaggerate the frequency of changes in 
quantity between the original order date and invoice date. According to 
petitioners, KTN first denied its use of delivery tolerances 
altogether, only to acknowledge at the Department's various sales 
verifications that, in fact, it relies upon an ``industry standard'' 
delivery tolerance of plus or minus ten percent of the ordered mass. 
Petitioners' Case Brief at 7. More to the point, petitioners aver, a 
standard ten percent tolerance cannot serve as a meaningful benchmark 
for measuring changes in quantity because common practice in the steel 
industry allows for negotiated tolerances in excess of the standard ten 
percent. Petitioners point to a statement by KTN's sister company 
Mexinox, a respondent in the companion investigation of stainless steel 
sheet and strip in coils from Mexico (investigation number A-201-822) 
that customers may agree to accept quantities above or below those 
called for under the nominal delivery tolerance. Id. at 8, citing 
Mexinox's October 29, 1998 supplemental questionnaire response at 17. 
Petitioners suggest that because KTN uses both standard and special 
negotiated delivery tolerances in its normal course of business, any 
claims concerning quantity changes which fail to account for the latter 
are without merit, as such changes were clearly anticipated in the 
original sales agreement. Petitioners' Case Brief at 10.
    That issue aside, petitioners continue, KTN's purported analysis of 
data from its U.S. sales affiliate KHSP concerning changes in the 
essential terms of sale does not withstand scrutiny. Petitioners accuse 
KTN of building its case by means of data riven with a ``lack of proven 
representativeness, internal inconsistencies, citation to changes in 
items other than essential terms of sale, missing documentation, and a 
complete lack of discussion regarding the role of change orders.'' 
Petitioners' Case Brief at 10. First, petitioners aver, the Department 
did not select the January

[[Page 30718]]

1998 sales used by KTN for its analysis and did not select any other 
month for comparison. Therefore, the Department cannot accept KTN's 
sample as representative of the entire POI. Second, claim petitioners, 
the data include numerous internal discrepancies including conflicting 
or truncated order and invoice numbers that preclude tying the 
proffered order documentation to specific reported transactions. Third, 
petitioners contend, KTN's analysis included changes that, by 
definition, did not affect the essential terms of sale, i.e., price and 
quantity, including changes in payment terms. Further, petitioners 
maintain that other so-called changes included in KTN's analysis do not 
represent changes to an existing order but, rather, entirely new orders 
for completely different products. Petitioners Case Brief at 13. 
Fourth, petitioners suggest that many of KTN's claimed changes lack 
critical documentation, with conflicting order numbers and invoice 
numbers. Petitioners accuse KTN of mixing the orders and invoices 
between and among various sales to build its case that changes, in 
fact, took place. Id. at 14. More fundamentally, suggest petitioners, 
KTN's analysis of KHSP's January 1998 transactions inexplicably 
includes sales which are not included in KTN's CEP sales listing; other 
January 1998 transactions reported in KTN's CEP sales data are 
curiously absent from KTN's date-of-sale analysis. Petitioners accuse 
KTN of submitting an incomplete listing of its U.S. sales, further 
undermining the credibility of KTN's data. Id. at 15.
    Citing a list of KTN's claimed changes in quantities, petitioners 
assert that the data indicate that these variances stemmed not from 
changes between order and invoice, as claimed by KTN but, rather, (i) 
previously-negotiated delivery tolerances in excess of the standard ten 
percent, (ii) partial shipments made whole by a subsequent shipment of 
the balance of the order, or (iii) unreported change orders which 
served to modify and, thus, supercede the original order. Petitioners 
point to the Department's KHSP Sales Verification Report as 
demonstrating that KTN often met customer orders by shipping a portion 
of the order under one invoice number and completing the original order 
with a subsequent shipment issued under a second invoice. Petitioners 
suggest that KTN has represented as changes in quantity what, in fact, 
were merely partial or multiple shipments of the originally-ordered 
quantity, ``a pervasive and industry-wide practice.'' Petitioners' Case 
Brief at 19.
    Petitioners further insist that without any explanation or 
quantification of change orders, KTN's statistics concerning the 
frequency of changes between order and invoice dates are meaningless. 
Id. at 20, citing Certain Hot-Rolled Carbon Steel Flat Products, 
Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-
Resistant Carbon Steel Flat Products, and Certain Cut-to-Length Carbon 
Steel Plate From Belgium, 58 FR 37083, 37090 (July 9, 1993) (Belgian 
Carbon Steel Flat Products). Despite KTN's efforts to gloss the role of 
change orders, petitioners continue, the record clearly indicates that 
KTN relies upon change orders in its normal course of business and that 
KTN failed to consider these in pressing its case that the invoice date 
represents the only date when the essential terms of sale are 
conclusively known. According to petitioners, the Department recently 
addressed the importance of change orders in Certain Corrosion-
Resistant Carbon Steel Flat Products From Japan, 64 FR 12951, 12957 
(March 16, 1999) (Flat Products From Japan). In that case, petitioners 
suggest, the Department relied upon the respondent's order confirmation 
date as the date of sale, noting that any changes in the essential 
terms of sale were memorialized through the subsequent issuance of a 
revised order confirmation.
    Even if one accepts KTN's self-selected and incomplete data for 
January 1998, petitioners aver, for a majority of these transactions 
the essential terms were, in fact, set at the order date; thus, ``the 
order confirmation date, and not the shipment date, best reflects when 
material terms of sale usually are established.'' Id. at 25, quoting 
Flat Products From Japan, 64 FR at 12958. As in Korean Steel Pipe, 
petitioners contend, KTN produces merchandise to order in the vast 
majority of cases; subsequently, there are significant lags between the 
order date and the eventual invoice date. Reliance upon KTN's reported 
invoice date, assert petitioners, would result in the Department's 
``comparing home market sales in any given month to U.S. sales whose 
material terms were set months earlier--an inappropriate comparison for 
purposes of measuring price discrimination in a market with less than 
very inelastic demand.'' Id., quoting Korean Steel Pipe.
    Petitioners point to other perceived problems with KTN's reported 
sales, accusing KTN of including in its home market sales data 
transactions with ``impossibly old'' order dates, some of which 
preceded the POI by many years. Petitioners insist that such 
transactions arose from long-term or ``periodic requirements'' 
contracts. However, as the record does not include any detail 
concerning KTN's contractual obligations, petitioners argue, the 
Department ``should resolve the confusion caused by KTN by concluding 
that order date, not invoice date, should serve as the date of sale * * 
*''. Petitioners blame KTN for sowing this confusion by reporting 
improperly the date of the original order as its order date, rather 
than the final order confirmation issued by KTN. Id. at 32 and 33.
    Further distorting the Department's sales analysis, petitioners 
contend, is KTN's basing order dates on disparate events in the home 
and U.S. markets, relying upon the date of the customer's original 
purchase order for home market transactions, while using the later 
confirmation date for purposes of reporting U.S. order dates. This has 
the effect of further exaggerating the alleged lag between home market 
order date and confirmation date.
    Once aberrant transactions, partial shipments, and changes 
involving non-essential terms of sale are disregarded, petitioners 
argue, KTN's own data indicate that changes occur in far fewer 
transactions than originally claimed by KTN. Given the gaps in the 
record, petitioners insist, the Department cannot accept KTN's 
proffered data as bona fide evidence that the invoice date should serve 
as date of sale. Petitioners' Case Brief at 26. Petitioners list the 
perceived failures in KTN's date-of-sale arguments, contending that the 
lack of credibility inherent in KTN's reporting requires the use of 
total adverse facts available. In the alternative, petitioners suggest, 
KTN's order confirmation date in both the home and U.S. markets should 
serve per se as the date of sale for this final determination. Id. at 
37 through 40.
    In rebuttal, KTN accuses petitioners of relying upon ``fabricated 
theories'' and mischaracterizations of KTN's business practices in 
their effort to undermine the integrity of the data provided by KTN to 
substantiate the use of invoice date as the date of sale. See 
``Rebuttal Brief of Krupp Thyssen Nirosta GmbH, Krupp Hoesch Steel 
Products Inc.'' (KTN Rebuttal Brief), March 30, 1999, at 7. According 
to KTN, petitioners' arguments do not hold up in light of the record 
evidence; even if they did, KTN avers, the record would still support 
the use of invoice date as the date of sale. KTN insists that it has 
provided reliable and compelling evidence that the

[[Page 30719]]

material terms of sale change frequently prior to the issuance of the 
invoice.
    While stating that the burden of proof on this issue rests with 
petitioners, KTN nevertheless maintains that its sales data demonstrate 
that either price or quantity changed in a significant percentage of 
the U.S. sales included in its analysis of January 1998 transactions. 
The Department, KTN notes, reviewed these data at the verification of 
KHSP and noted no discrepancies. In their efforts to attack the 
credibility of the January 1998 analysis, KTN contends, petitioners 
cited examples of discrepancies without providing any context and have 
stretched these ``piecemeal arguments'' to substantiate spurious 
conclusions. KTN Rebuttal Brief at 10. As a preliminary matter, KTN 
insists that throughout this investigation it has not relied upon 
changes in alloy surcharges or quantities falling within the industry 
standard plus-or-minus 10 percent in its arguments for using the 
invoice date, thus rendering petitioners' comments both inaccurate and 
irrelevant. KTN also defends its use of KHSP's January 1998 sales data 
as especially suitable, claiming that it provided the largest sample 
for any month of the POI and because it fell late in the POI, thus 
allowing analysis of transactions where both the invoice and the order 
confirmation fell within the POI.
    Furthermore, KTN continues, many of the perceived inconsistencies 
in KHSP's information stem from the latter's installation of a new 
computer system which became operational on January 1, 1998. Thus, all 
sales prior to January 1 reflect a customer invoice number identical to 
the invoice number issued by KTN's German affiliate Krupp Nirosta 
Export, GmbH (KNE) to KHSP, whereas order confirmation numbers 
reflected certain product codes. KTN's Rebuttal Brief at 15. Once 
KHSP's new SAP software was in place, KTN submits, all invoices bore a 
sequential number unique to KHSP; order confirmations numbers issued 
prior to January 1, but invoiced after January 1, would have the old 
numbering protocol overwritten by the new sequential SAP numbering 
system. KTN argues that ``[t]he numbering mechanisms, while different, 
are internally consistent and permit the tracing of sales 
transactions.'' Id. at 16 and 17.
    KTN also rejects petitioners' charge that it included partial 
shipments against a single order in its reporting of changes in 
quantity. According to KTN, while the weights for individual coils 
posited by petitioners approximate the weight of coils shipped by KHSP 
to customers, the input master coil produced by KTN in Germany is twice 
as heavy. Thus, if available material to fill an order was short by as 
much as 10,000 pounds, KTN suggests, KHSP would negotiate with the 
customer to consider the order filled, rather than forcing KTN to roll 
an entire master coil to make up such a small difference. KTN Rebuttal 
Brief at 18 and 19.
    With respect to KHSP's use of change orders, KTN contends that it 
has provided a copy of each existing change order applicable to any 
sale traced at verification or included in the January 1998 
transactions (see KHSP Verification Exhibit 23). More importantly, 
claims KTN, not every change in the material terms of sale is 
memorialized through issuance of a new order confirmation. In some 
cases, changes in the terms of sale made after the order confirmation 
date are simply reflected in the invoice without the issuance of a 
change order. KTN Rebuttal Brief at 21. According to KTN, the sole case 
cited by petitioners as addressing the importance of change orders, 
Belgian Carbon Steel Flat Products, involved a fact pattern that was 
the polar opposite of KHSP's, where the Department only discovered at 
verification that where the essential terms of sale were altered after 
the initial confirmation, the respondent routinely issued change orders 
firmly establishing the terms of sales. Id. In contrast, argues KTN, at 
its U.S. verification the Department reviewed KHSP's ``compelling 
evidence'' concerning quantity and price changes and noted no 
discrepancies. Id.
    Assuming that each of petitioners' contentions has merit, KTN 
continues, the remaining percentage of sales exhibiting changes in the 
material terms of sale would still be more than sufficient to warrant 
relying on the invoice date as date of sale. In Certain Internal 
Combustion Industrial Forklift Trucks From Japan, 62 FR 5592, 5611 
(February 6, 1997), KTN suggests, the Department found that the invoice 
date best approximated the point at which material terms of sale were 
set in light of evidence of changes in only 4.3 to 7.5 percent of the 
respondent's transactions. KTN argues that even given petitioners' 
adverse assumptions the essential terms of KTN's sales changed with far 
greater frequency in the instant investigation. Furthermore, continues 
KTN, the Department cited the mere potential for changes as militating 
for the use of the invoice date. Therefore, KTN maintains, even if each 
of petitioners' arguments are on point, the Department's precedent 
favors continued reliance on the invoice date.
    With respect to home market date of sale, KTN dismisses the 
allegedly aberrational lag times found in its home market sales 
listing, noting that for a significant majority of KTN's home market 
sales less than six months passed between the customer's order and the 
invoice date. KTN asserts that in a business where a customer places an 
order for shipments to be made at different times during the year, such 
lag times should be expected. KTN's Rebuttal Brief at 25.
    In addition to its factual arguments, KTN contends that case 
precedent similarly supports the use of invoice date. For example, 
continues KTN, in Korean Steel Pipe, a case cited by petitioners, the 
Department noted the markedly different sales processes for U.S. and 
home market sales as supporting the use of the contract date over 
invoice date. KTN suggests that the instant case is easily 
distinguishable from Korean Steel Pipe; unlike the latter case, KTN's 
sales practices in both markets are essentially the same, with most 
transactions in both markets involving made-to-order merchandise. KTN's 
Rebuttal Brief at 27. KTN claims that other case precedent similarly 
supports use of invoice date. In Certain Corrosion-Resistant Carbon 
Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from 
Canada, 64 FR 2173 (January 13, 1999) (Flat Products From Canada), the 
Department opted for invoice date in light of quantity changes for a 
number of sales. The Department reached the same conclusion in Pipes 
From Thailand, KTN notes, owing once again to quantity changes between 
order and invoice dates. These precedents, KTN concludes, support the 
use of KTN's reported invoice date as the date of sale.
    Department's Position: After a thorough review of the record we 
conclude that while petitioners raise a number of cogent arguments for 
using the order confirmation date as the date of sale, the weight of 
the record evidence supports using KTN's reported date of invoice as 
the date of sale for purposes of this final determination. The 
Department's regulations state that the invoice date will serve as the 
date of sale unless record evidence demonstrates ``that a different 
date better reflects the date on which the exporter or producer 
establishes the material terms of sale.'' 19 CFR 351.401(i). ``Our 
current practice, in a nutshell, is to use the date of invoice as the 
date of sale unless there is a compelling reason to do otherwise.'' 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From 
Korea, 63 FR 13170, 13194 (March 18, 1998)

[[Page 30720]]

(Flat Products From Korea II). Furthermore, as the Department has 
noted, ``price and quantity are often subject to continued negotiation 
between the buyer and the seller until a sale is invoiced. * * * [a]s a 
practical matter, customers frequently change their minds and sellers 
are responsive to those changes.'' Final Rule, 62 FR at 27348. The 
Department further recognized that the buyer and seller themselves will 
often disagree as to when, precisely, the terms of sale were set: 
``this theoretical date usually has little, if any, relevance. From 
their perspective, the relevant issue is that the terms be fixed when 
the seller demands payment (i.e., when the sale is invoiced).'' Id. at 
27349.
    Petitioners note correctly that the respondent is a mill which 
largely produces the merchandise under investigation to fill specific 
orders. Therefore, as petitioners see it, once the mill has scheduled 
the casting of stainless slab for rolling to a given stainless coil, 
little room remains for altering the essential terms of sale. 
Furthermore, as detailed below, petitioners point to lacunae in the 
evidence KTN has introduced to support the use of invoice date.
    KTN, in turn, has provided evidence that the material terms of sale 
are subject to change at any time between the order confirmation and 
invoice dates and has indicated that not all such changes would be 
reflected in KTN's order confirmation. This is especially true of home 
market sales, where KTN's computerized production control system allows 
for entry of corrections to orders without generating new order 
confirmations. In addition, KTN has submitted for the record evidence 
of actual changes in the essential terms of sale between its written 
order confirmation and the subsequent invoice date.
    We conclude that the record evidence in the instant proceeding 
supports use of the invoice date. First, it is clear that KTN's records 
and financial statements kept in its normal course of business do not 
recognize a sale until the invoice is issued and payment is demanded. 
See, e.g., the quantity and value sections of the KTN Sales 
Verification Report and KHSP Verification Report. Further, and perhaps 
more to the point, KTN presented numerous examples during the POI where 
either quantity or price or both changed after the order confirmation 
had been issued, but prior to the invoice date. See Home Market 
Verification Report at 32 and Exhibit 6-IV-A, and KHSP Verification 
Report at 17 and Exhibit 23. Thus, as we concluded in Flat Products 
From Korea II, ``there is no record evidence indicating that a date 
other than the invoice date is the date after which the essential terms 
of sale could not be changed.'' Id., 63 FR at 13195 (emphasis added).
    Although petitioners have raised various concerns about KTN's date-
of-sale data (see immediately below), we find, however, that even after 
considering these issues the totality of record evidence still suggests 
that KTN's invoice date is the appropriate date of sale, as it best 
represents the point at which the essential terms of sale ``are firmly 
established and no longer within the control of the parties to alter 
without penalty.'' Large Newspaper Printing Presses and Components 
Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166, 
38182 (July 23, 1996).
    Turning now to the parties' specific comments, we do not subscribe 
to petitioners' views concerning the alleged ``unrepresentativeness'' 
of respondent's data. In our October 9, 1998 section A supplemental 
questionnaire we asked that KTN ``indicate the frequency of price, 
quantity, material specification, delivery terms and alloy surcharge 
changes between confirmation and final invoice.'' \6\ When KTN 
responded it elected to rely upon a sampling of its home market and 
U.S. sales, describing its sampling methodology in detail. See KTN's 
October 23, 1998 section A supplemental response at 14. Sampling was 
necessary, KTN explained, given the burden of tracking each line item 
of each incoming order to its corresponding final invoice. To this end 
KTN selected the first quarter of 1998 for both home market and U.S. 
sales, and presented a further detailed analysis of each specific 
change involving its U.S. sales during the sample month of January 
1998. We reviewed the documentation for both the U.S. and home market 
sales samples at verification and noted no discrepancies. See, e.g., 
KHSP Verification Report at 17.
---------------------------------------------------------------------------

    \6\ Although the Department customarily equates ``essential 
terms of sale'' with price and quantity, it should be noted that 
this questionnaire included within the meaning of ``essential terms 
of sale,'' inter alia, delivery and payment terms.
---------------------------------------------------------------------------

    Having raised no objections to the methodology adopted by KTN to 
address this issue, and having accepted and verified the proffered 
samples, it would be inappropriate for the Department at this point to 
reject these data and make assumptions adverse to KTN's interests 
because the Department failed to request that KTN provide an analysis 
of a different universe of transactions. Furthermore, and more 
importantly, we have no reason in this case to suspect that an analysis 
of a full quarter's sales in the home and U.S. markets, coupled with 
the line-item-by-line-item analysis of one month's sales in the U.S. 
market would not capture accurately KTN's experience throughout the 
POI. There are no factors such as, for example, a period of hyper-
inflation during the POI, or an analysis of an industry subject to 
sharp seasonal fluctuations in sales, which would call into question 
the representativeness of the samples.
    Petitioners assail the reliability of KTN's evidence of claimed 
quantity changes. In response to our direct question concerning the use 
of delivery tolerances KTN responded unequivocally that ``KTN's sales 
orders in the United States and KHSP's sales orders in the United 
States do not include pre-determined weight tolerances.'' KTN's October 
23, 1998 section A supplemental response at 15 (emphasis added). 
However, record evidence indicates that KTN does, in fact, rely upon 
specific delivery tolerances which are subject to negotiation. KTN has 
consistently affirmed, and the Department has verified, that it did not 
include any quantity deviations falling within the standard plus-or-
minus 10 percent range as constituting a change in quantity for 
purposes of its date-of-sale analysis. Nevertheless, the significance 
of that fact is attenuated if the negotiated tolerances for KTN's sales 
exceeded the 10 percent mark.
    That said, however, because the record also does not indicate 
whether any sales analyzed for changes in quantity did involve 
negotiated tolerances in excess of the 10 percent standard, we have no 
evidentiary basis to disregard KTN's verified data or to assume that 
the claimed quantity changes arose, in whole or in part, from 
specially-negotiated quantity tolerances exceeding the standard plus-
or-minus 10 percent threshold.
    Petitioners' argument that at least some of the claimed changes in 
quantity arose from partial shipments against an order, rather than a 
change in quantity, has merit. KTN's rebuttal brief fails to address 
this charge head on. KTN points to a specific order-invoice combination 
drawn from its U.S. sales during the POI and suggests that the customer 
would agree to accept less than one half of the ordered quantity as 
fully satisfying the contractual terms of the original sales agreement. 
However, KTN does not claim that this is what happened with the 
specific transaction. Rather, KTN concludes that ``[t]his is precisely 
the

[[Page 30721]]

type of situation where KTN would agree with the customer to view the 
order as filled.'' KTN's Rebuttal Brief at 19 (emphasis added). KTN has 
presented no evidence of any transaction where a customer actually 
released KTN from its obligation to supply the contractually agreed-
upon quantity of merchandise, as stipulated in the original sales 
agreement. KTN's assertion that a customer would order a large quantity 
of merchandise, presumably in anticipation of its needs, and then 
accept less than half that amount as fully satisfying the original 
sales contract, is unsupported by record evidence. Furthermore, KTN's 
comments with respect to master coils versus slit coils are entirely 
inapposite with respect to the question of partial shipments by KHSP. 
The sales subject to our analysis involve the smaller coils cited by 
petitioners in their case brief, i.e., ``the coils that are sent to 
customers,'' not the much larger master coils produced by KTN in 
Germany. See KTN's Rebuttal Brief at 18. Thus, KTN's assertion that KTN 
in Germany would not roll a new master coil to fill an under-shipment 
of as much as 8,000 or 10,000 pounds sheds no light at all on whether 
or not KHSP would make good the shortfall by means of a second shipment 
of the outstanding quantity. This distinction is critical to KTN's 
rebuttal argument that the evidence supplied at Exhibit 23 did not 
include instances wherein KHSP filled an order by means of two or more 
shipments issued under separate invoices.
    With respect to the role of change orders, however, we find 
petitioners' assertions are not borne out by the record evidence in 
this case. Petitioners' reliance upon Flat Products From Japan as 
supporting the use of order confirmation dates is misplaced. In Flat 
Products From Japan, the petitioners, in supporting the Department's 
use of respondent NSC's order confirmation date, noted that ``the 
record clearly shows that to the extent NSC and its customer made a 
significant revision to any material term of sales, there is an 
established mechanism for accomplishing the revision; specifically, * * 
* NSC issues a new or revised order confirmation.'' The Department 
agreed: ``[v]erification results indicate that the material terms of 
sale were established on the date of the order confirmation. 
Additionally, among the sales examined, we found no material changes to 
the order confirmation terms.'' Flat Products From Japan, 64 FR at 
12958.
    In contrast, in the instant investigation the Department confirmed 
at verification that many changes to the terms of KTN's sales, 
including changes involving price and quantity, are not memorialized 
through the generation of a new order confirmation or change order; KTN 
``will not generate a second order confirmation unless (i) the customer 
requests it, or (ii) the change was ``substantial'.'' KTN Sales 
Verification Report at 32. Given the fluid nature of KTN's ordering 
system, which often allows changes to simply over-write the original 
terms, the record of this investigation does not suggest any discrete 
event, be it the original order confirmation or some other event prior 
to invoice date, where the essential terms of sale are conclusively 
known. Rather, the record indicates that the essential terms of sale 
can and do change subsequent to KTN's issuance of the original order 
confirmation, and that KTN employs no systematic means of capturing and 
documenting changes to its customers' orders. Contrast Belgian Carbon 
Steel Flat Products, 58 FR at 37090 (``[f]or only two of the 20 
selected sales was there no order confirmation, thus calling into 
question Sidmar's claim that order confirmation records are not 
maintained''). As the Department has noted, ``the negotiation of a sale 
can be a complex process in which the details often are not committed 
to writing. In such situations, the Department lacks a firm date on 
which the terms became final.'' Final Rule, 62 FR at 27349. A similar 
situation obtains here where terms of sale are subject to changes which 
are not necessarily documented through issuance of an amended 
confirmation order.
    Finally, even accepting petitioners' assertions and disregarding 
all claimed quantity changes as unsupported by the record evidence, the 
record evidence still supports the use of invoice date as the date of 
sale. KTN has presented evidence--impeached neither by petitioners nor 
by the Department's verifications--that price changes can and did occur 
with some regularity between the order confirmation date and the 
invoice date. Thus, while we agree with petitioners that not each 
instance cited by KTN as representing a change in the essential terms 
of sale is borne out by the record evidence, the Department did verify 
a significant number of instances of changes in price or quantity 
between the order confirmation and the invoice date. As we concluded in 
Flat Products From Korea II ``[t]he Department has no basis to conclude 
that essential terms of sale were set and not subject to change at the 
initial contract date.'' Id., 64 FR at 12956. Thus, the totality of the 
evidence in this case militates against petitioners' suggestion that we 
abandon the presumptive date of sale identified in the Department's 
regulations in favor of using KTN's order acceptance date. Rather, the 
record indicates that the essential terms of sale can and do change 
subsequent to KTN's issuance of its original order confirmation, and 
that KTN employs no systematic means of capturing and documenting these 
changes. For this reason, and because KTN's internal records kept in 
its normal course of business do not recognize a sale until the invoice 
is issued, we have continued to rely upon KTN's reported invoice dates 
in both markets as the dates of sale for this final determination. In 
the event this investigation should result in the publication of an 
antidumping duty order we intend to re-examine this issue thoroughly in 
any subsequent review involving KTN, especially with respect to 
quantity tolerances and change orders.

Comment 2: Affiliation

    KTN contends that the Department incorrectly concluded that it was 
affiliated with Thyssen and its U.S. and home market affiliates 
pursuant to section 771(33)(F) of the Tariff Act based on the 
conclusion that Thyssen is in the position to exercise direction and 
restraint over both KTN and Thyssen's own affiliates. KTN argues that 
in order for KTS to be affiliated with Thyssen and its subsidiaries 
within the meaning of 771(33), both parties must have either a direct 
relationship with each other (as described in paragraphs 771(33)(A) 
though (E) and (G)), or an indirect relationship ``through which one 
party, though not directly related, is nevertheless in the position to 
control the other (as described in paragraph (F)).'' KTN's Case Brief 
at 7.
    Under the terms of the statute, asserts KTN, Thyssen's subsidiaries 
and the KTS companies cannot be deemed affiliated on the basis of a 
direct relationship for they share no family relationships, board 
members or officers, partnership relations, or hold equity positions in 
one another. See section 771(33)(A) through (E). KTN also argues that 
Thyssen's subsidiaries and the KTS companies are not affiliated under 
771(33)(G), for Thyssen's subsidiaries are not in the direct bilateral 
control relationship envisioned in this section. Citing Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea, 
62 FR 18404 (April 15, 1997) (Flat Products From Korea I), KTN contends 
that POSCO, a respondent in the review, participated with DSM in a

[[Page 30722]]

joint-venture firm, POCOS. DSM, in turn, wholly-owned a subsidiary 
company, Union (also a respondent in the review). KTN notes that in 
Flat Products From Korea I the Department concluded that POSCO and 
Union were not affiliated under section 771(33)(G) because the two 
companies were separate operational entities with no overlapping stock 
ownership and that nothing in the record indicated that either Union or 
POSCO was legally or operationally in a position to control the other 
party. As in Flat Products From Korea I, KTN maintains, Thyssen's 
subsidiaries and the KTS companies have neither overlapping stock 
ownership nor operational or legal control over each other. KTN's Case 
Brief at 9.
    In addition, KTN claims that Thyssen's subsidiaries and the KTS 
companies are not under the common control of Thyssen, and therefore 
are not indirectly affiliated pursuant to section 771(33)(F) of the 
Tariff Act. KTN argues that under section 771(33)(F), a determination 
of control ``calls for a comprehensive and multi-factored analysis of 
the particular facts of each case in the context of the industry at 
issue, including the history of the parties, and the course of their 
dealings with one another.'' KTN's Case Brief at 10. Further, KTN 
points out that in accordance with 19 CFR 351.102, in order to find 
affiliation the Department must first determine that one party is in a 
position to exercise control over the ``production, pricing, or cost of 
the subject merchandise or foreign like product'' of the other party. 
Id., quoting 19 CFR 351.102. KTN contends that the Thyssen 
subsidiaries, and KTS or the KTS companies, are not in a position to 
exercise such control over each other.
    According to KTN, the reality of the KTS shareholders' agreement is 
that Thyssen does not control KTS or the KTS companies. The 
shareholders' agreement, KTN insists, was structured ab initio to place 
the ability to influence KTS's operational decisions solely with Fried. 
Krupp, with the intention of consolidating Fried. Krupp's stainless 
steel operations. KTN asserts that Fried. Krupp's operational control 
over KTS is further reflected by the provision in the shareholders' 
agreement for Fried. Krupp to buy out Thyssen's interests in the firm 
in the event Fried. Krupp's and Thyssen's interests diverge. Therefore, 
KTN claims, KTS's production, pricing, and cost decisions are 
controlled by Fried. Krupp, not Thyssen. KTN's Case Brief at 12.
    Further, KTN contends that petitioners have cited incorrectly 
Mitsubishi Heavy Industries, Ltd. v. United States, 15 F. Supp. 2d 807 
(CIT 1998) (Mitsubishi) as supporting the proposition that ``when two 
companies participate in a joint venture, it is `impossible' that the 
respective subsidiaries of those two companies are not affiliated.'' 
Id., citing petitioners' September 25, 1998 submission on affiliation 
(KTN's emphasis). Even if petitioners' interpretation of this case is 
accurate, KTN argues, Mitsubishi does not reach the facts before the 
Department in this investigation. KTN asserts that in Mitsubishi the 
Court of International Trade (the Court) did not address whether 
subsidiaries of companies that participate in a joint venture were in 
turn affiliated but, rather, held that the two parent companies were 
affiliated under section 771(33)(F) by virtue of their joint-venture 
ownership of a third party. KTN notes that the issue in this proceeding 
is not whether the ultimate parent companies, Fried. Krupp and Thyssen, 
are affiliated, but whether various Thyssen affiliates in Germany and 
the United States are affiliated with the KTS companies. ``Contrary to 
petitioners' assertion,'' contends KTN, ``the Department has clearly 
stated that affiliation between parent companies by virtue of a joint 
venture is not a `vehicle' through which the Department will find 
affiliation between other companies that are controlled by those parent 
companies.'' Id. Any affiliation between Fried. Krupp and Thyssen, 
asserts KTN, would not reach the companies' respective subsidiaries. 
Id. citing Flat Products From Korea I, 62 FR at 18418. Therefore, KTN 
concludes that Thyssen's subsidiaries cannot be considers affiliated 
with the KTS companies controlled by Fried. Krupp merely by virtue of 
the joint venture between Fried. Krupp and Thyssen.
    Petitioners maintain that the Department properly determined that 
KTN is affiliated with Thyssen and Thyssen Stahl AG, one of KTN's two 
joint-venture parents, and with the member companies of the Thyssen 
Corporate Group. In addition, petitioners support the Department's 
decision to use adverse facts available in those instances where the 
respondent failed to cooperate fully in providing the sales data 
requested of these various affiliates by the Department.
    Petitioners note that section 351.102(b) of the Department's 
regulations provides that in finding affiliation based on control, the 
Department will consider (i) corporate or family groupings, (ii) 
franchise or joint venture agreements, (iii) debt financing, and (iv) 
close supplier relationships, among other factors. Petitioners note 
further that under this same regulatory provision control will not be 
found to exist using these factors unless ``the relationship has the 
potential to have an impact on decisions concerning production, 
pricing, or cost of the subject merchandise or foreign like product.'' 
Petitioners' Rebuttal Brief at 6 and 7, citing 19 CFR 351.102(b).
    Applying each of these factors in turn to this case, petitioners 
contend that a general pattern of corporate groupings between Fried. 
Krupp and Thyssen suggest that these persons are affiliates within the 
meaning of section 771(33). Petitioners assert that the ``massive 
cooperation'' between Fried. Krupp and Thyssen is recognized in the 
parent's respective annual reports. For example, petitioners argue, 
Thyssen's September 1997 annual report at note 23 states that ``[i]n 
the year under review, the income/loss from associated affiliates is 
mainly due to the transfer of only a one-digit million DM prorated 
profit from Krupp Thyssen Stainless.'' Thus, petitioners contend that 
Thyssen and its affiliates recognize that the group's consolidated 
stainless steel flat products activities are centered in KTS and its 
manufacturing company, KTN. According to petitioners, the establishment 
of KTS and Thyssen Krupp Stahl (TKS) represents an arrangement whereby 
the two corporate groups have intertwined their steel production and 
marketing activities well in advance of the pending merger between 
Fried. Krupp and Thyssen. Id. at 9.
    Petitioners also argue that KTN's advertising and marketing 
strategies also recognize the interconnections between Fried. Krupp and 
Thyssen. Petitioners maintain that KTN was conceived with the express 
intent of both Fried. Krupp and Thyssen to establish one unified 
speciality steel producer that customers worldwide would perceive as 
being both a Krupp and Thyssen company. Further, petitioners assert 
that Thyssen and Krupp opened their respective channels of distribution 
to KTN's stainless steel products, a fact recognized in the 
marketplace. Petitioners' Rebuttal Brief at 9.
    Second, petitioners allege that KTN, as a joint venture owned by 
the Krupp and Thyssen groups is both a party controlled by two other 
parties pursuant to 771(33)(F) and a joint venture per se as defined at 
19 CFR 351.102(b). Citing Certain Cut-to-Length Carbon Steel Plate from 
Brazil, 63 FR 18486, 18490 (April 15, 1997) (Carbon Steel Plate From 
Brazil), petitioners assert that Thyssen's 40 percent ownership in KTS 
is more than sufficient to place it in a position of control over KTN. 
As in that case, petitioners contend, ``[e]ven a minority

[[Page 30723]]

shareholder interest, examined within the totality of other evidence of 
control, can be a factor that we [the Department] consider in 
determining whether one party is in the position to control another.'' 
Petitioners' Rebuttal Brief at 11, quoting Carbon Steel Plate From 
Brazil. Additionally, petitioners argue that contrary to KTN's 
arguments, evidence of actual control is not required under the statute 
in order to make a finding of control. Rather, control is defined as 
merely the ability to control, i.e., the power to restrain or direct a 
company's activities. Id.
    According to petitioners, KTN's reliance upon Flat Products From 
Korea I is misplaced. Petitioners assert that KTN's argument that the 
Department found that POSCO and Union were not affiliated in the 
absence of direct equity ownership or a finding of control, in essence, 
negates section 771(33)(F), which defines as affiliated persons two or 
more persons directly or indirectly controlling any person. Petitioners 
contend that the issue is not whether two parties who control a third 
party are affiliated to each other, but whether a person jointly 
controlled by two parties is affiliated with the parent companies' 
subsidiaries. Instead, petitioners argue that the pattern of 
affiliations in this case mirrors that found in Stainless Steel Plate 
in Coils From Belgium, 64 FR 15476 (March 31, 1999) (Belgian Stainless 
Plate in Coils) in which the Department determined that because ALZ and 
TrefilARBED were two persons established to be directly or indirectly 
controlled by ARBED, ALZ's sales through TrefilARBED were treated as 
affiliated-party sales. Thus, pursuant to 771(33)(F), petitioners claim 
that where KTS is under common control by Krupp, and Thyssen Stahl and 
Thyssen, KTS is affiliated with both Krupp and Thyssen. Also, pursuant 
to 771(33)(G), petitioners argue that because KTS controls KTN, KTN is 
affiliated to Thyssen through KTS and that because Thyssen controls its 
affiliates, then KTN is affiliated to those affiliates through Thyssen. 
Therefore, petitioners contend that KTS and KTN and the Thyssen 
subsidiaries are two or more persons directly or indirectly controlled 
by Thyssen, and so, are affiliated.
    Further, petitioners argue that as recognized by the Department in 
its December 16, 1998 Affiliation Memorandum, the shareholders' 
agreement between the Krupp and Thyssen groups indicates that Thyssen, 
through Thyssen Stahl, has the indirect ability to control the 
activities of KTN through KTS. Petitioners assert that by means of the 
shareholders' agreement Fried, Krupp, and Thyssen (i) committed their 
respective families of companies to having all stainless activities 
reside in KTS and KTN, (ii) set forth the parties' power to amend or 
supplement the Industrial Concept governing KTS's operations, (iii) 
recognized the sales and distribution functions of the Thyssen 
affiliates, (iv) afforded Thyssen the ability to direct KTS through the 
operation of the Supervisory Board, (v) provided for Thyssen's 
participation in the activities of KTS and KTN through membership in 
the KTS Management Board, (vi) afforded Thyssen an additional avenue of 
direction or restraint of KTS (and thus KTN) through the Shareholder 
Committee, (vii) established a ``super-majority'' requirement for votes 
involving certain business transactions, including appointments to 
KTS's managerial board, giving Thyssen effective veto power over 
critical KTS activities, and (viii) established an arbitration 
committee to mediate any disputes between Fried. Krupp and Thyssen over 
KTS's activities. Petitioners' Rebuttal Brief at pages 17 through 22. 
Therefore, petitioners assert, the shareholders' agreement clearly 
articulates Thyssen's ability to exercise indirect control over KTN via 
KTS.
    Third, petitioners contend that the legal framework established by 
the shareholders' agreement provides both de jure and de facto bases 
for a close supplier relationship between KTN and a certain Thyssen 
affiliate. In fact, according to petitioners, KTN is entirely dependant 
upon this Thyssen entity for the hot-rolling of the stainless steel 
cast in KTN's melt shop. Similarly, petitioners note, this entity 
``does not provide stainless steel hot-rolling services to any entity 
other than KTN.'' Petitioners' Rebuttal Brief at 24, quoting KTN's 
December 17, 1998 section D supplemental response at D-3. Petitioners 
argue that this level of mutual dependency clearly qualifies as a 
``close supplier relationship'' within the meaning of both 19 CFR 
351.102(b) and the SAA at 838 which refers to a ``close supplier 
relationship in which the supplier or buyer becomes reliant upon the 
other.'' Id.
    Therefore, petitioners conclude, these facts leave ``no reasonable 
room for any doubt that KTN is affiliated with Thyssen within the 
meaning of [section 771(33) of the Tariff Act].'' Id. Thus, as Thyssen 
is affiliated with its subsidiaries and has the ability to control 
those subsidiaries, KTN is affiliated with the Thyssen subsidiaries as 
well under the combined provisions of sections 771(33)(F) and (G).
    Department's Position: We disagree with KTN. As we stated at length 
in our Preliminary Determination and the accompanying Affiliation 
Memorandum, we have determined that KTN is affiliated with Thyssen 
Stahl and Thyssen. Section 771(33)(E) provides that the Department 
shall consider companies to be affiliated where one company owns, 
controls, or holds with the power to vote, five percent or more of the 
outstanding shares of voting stock of the other company. Where the 
Department has determined that a company directly or indirectly holds a 
five percent or more equity interest in another company, the Department 
has deemed these companies to be affiliated.
    We examined the record evidence to evaluate the nature of KTN's 
relationship with Thyssen Stahl and Thyssen and have determined that 
KTN is affiliated with Thyssen and Thyssen Stahl. Thyssen Stahl 
indirectly owns and controls, through KTS, forty percent of KTN's 
outstanding stock and Thyssen, which wholly owns Thyssen Stahl, 
likewise indirectly owns and controls a forty percent interest in KTN. 
KTN's section A questionnaire response acknowledges that KTN is a 
wholly-owned subsidiary of KTS. KTS formed KTN in 1997 to handle its 
stainless steel production and sales. The supporting exhibits to this 
submission further confirm Thyssen Stahl's interest in KTS and KTS's 
100-percent interest in KTN. In a submission dated October 20, 1998, 
petitioners placed on the record publicly available data that confirmed 
both the foregoing shareholding interests and that Thyssen Stahl is a 
wholly-owned subsidiary of Thyssen. Consequently, KTN, as the wholly-
owned subsidiary of KTS, is affiliated with the joint venture partner 
Thyssen Stahl and its parent company Thyssen pursuant to section 
771(33)(E) of the Tariff Act. See Stainless Steel Wire Rod From Sweden, 
63 FR 40449, 40453 (July 29, 1998).
    In addition, we have determined that KTN is affiliated with Thyssen 
and its U.S. and home market affiliates. Section 771(33)(F) provides 
that the Department shall consider companies to be affiliated where two 
or more companies are under the common control of a third company. The 
statute defines control as being in a position legally or operationally 
to exercise restraint or direction over the other entity. Actual 
exercise of control is not required by the statute. In this 
investigation, the nature and quality of corporate contact necessitate 
a finding of affiliation by virtue of Thyssen's common control of its 
affiliates and of KTS. See Preliminary Determination, 64 FR at 95 and 
the Affiliation Memorandum. Such a finding is

[[Page 30724]]

consistent with the Department's determinations in Carbon Steel Plate 
From Brazil, 62 FR at 18490 and Stainless Steel Wire Rod From Sweden, 
63 FR at 40452.
    We also agree with petitioners that record evidence demonstrates 
that Thyssen, as the majority equity holder and ultimate parent company 
of its various affiliates, is in a position to exercise direction and 
restraint over these affiliates' production and pricing. Thyssen also 
holds indirectly a substantial equity interest in KTN, plays a 
significant role in KTS's operations and management and, thus, enjoys 
several avenues for exercising direction or restraint over KTN's 
production, pricing and other business activities (see the Affiliation 
Memorandum). In sum, Thyssen's substantial equity ownership in KTN and 
Thyssen's other affiliates, in conjunction with the ``totality of other 
evidence of control'' requires a finding that these companies are under 
the common control of Thyssen. Accordingly, for this final 
determination we continue to find KTN is affiliated with Thyssen, 
Thyssen Stahl, and Thyssen's U.S. and home market affiliates.

Comment 3: Facts Available for Unreported Downstream Sales

    If the Department persists in finding affiliation between the two, 
KTN avers, the use of adverse facts available is, nevertheless, 
inappropriate, as was the Department's method of applying adverse facts 
available for sales involving Thyssen's subsidiaries in the home 
market. The Department, notes KTN, used the highest normal value 
reported by control number in KTN's home market database. KTN claims 
that under section 776(b) prior to relying upon adverse facts 
available, the Department ``must produce substantial evidence that 
respondents refused to cooperate or significantly impeded its review.'' 
KTN's Case Brief at 15, quoting Queen's Flowers de Columbia v. United 
States, 981 F. Supp. 617,629 (CIT 1997). KTN contends that it 
cooperated with the Department to the best of its ability and 
substantially responded to the Department's request for information, 
and that any failure to supply data arose not from an unwillingness to 
cooperate, as suggested in the Preliminary Determination, but from 
KTN's inability to secure the requested data from the Thyssen 
affiliates. KTN cites, inter alia, Usinor Sacilor v. United States, 872 
F. Supp. 1000 (CIT 1994) (Usinor), in which the Court remanded the 
Department's final determination applying adverse facts available to 
certain unreported downstream sales, stating that:

    [i]f Commerce finds that Usinor did not have operational 
control, Commerce is directed to select the weighted average 
calculated margin as BIA. If Commerce finds Usinor maintained 
operational control, Commerce may reapply the highest non-aberrant 
margin as BIA in a manner consistent with the court's decision in 
National Steel Corp. v. United States.

KTN's Case Brief at 17 (original citation omitted).
    KTN argues that, as Usinor suggests, KTN's failure to provide 
information regarding its downstream resellers was not the result of 
deliberate recalcitrance but, rather, KTN's lack of operational control 
over those affiliates and its inability to obtain the information. KTN 
points out that it was able to gain the complete cooperation of three 
Thyssen affiliates located in the United States despite the absence of 
any operational control over these companies. KTN submits that while 
the Department's preliminary determination that KTN was affiliated with 
Thyssen's resellers because of Thyssen's potential control over both 
KTN and its own affiliates may be sufficient as a legal standard, it 
does not support the obverse conclusion that KTN had the ability to 
control the activities of Thyssen's affiliates and could demand their 
proprietary sales data. According to KTN, it had to ``rely on 
persuasion, not control, to access the information requested by the 
Department.'' KTN's Case Brief at 19.
    In addition, KTN objects to the Department's characterization in 
the Preliminary Determination of KTN's cooperation with the Department 
during October and early November 1998. KTN claims that the 
Department's November 17, 1998 request for the reseller sales 
information ``mischaracterizes, and in some cases misstates, the dialog 
between the Department and KTN.'' Id. at 20. KTN asserts that the 
Department acknowledged as much by the significant deletion of the 
reference to the Department's ``three official requests'' for the 
information included in the November 17, 1998 letter's original 
language as this letter was paraphrased in the Preliminary 
Determination. KTN complains that the November 17 letter, which 
included a warning that adverse facts available might be used, preceded 
the Department's November 18 memorandum which set forth the 
Department's reporting requirements for downstream sales by Thyssen 
affiliates. Therefore, KTN argues, while ultimately KTN was unable to 
provide all of the requested downstream sales data, the Preliminary 
Determination fails to consider the overall cooperation shown by KTN 
throughout this proceeding, including its numerous timely responses to 
questionnaires, and participation in two home market and three U.S. 
verifications. Accordingly, KTN submits, should the Department 
determine that Thyssen's affiliates are affiliates of KTN, the 
Department must use non-adverse facts available for the two Thyssen 
resellers, rather than adverse facts available, as in the Preliminary 
Determination. KTN's Case Brief at 21 and 22.
    Assuming that the Department proceeds with its use of facts 
available, KTN recommends that the Department apply facts available for 
sales to the home market resellers by adjusting these prices upward to 
reflect arm's length prices. KTN claims that in determining NV the 
Department's practice is to accept a respondent's home market sales to 
its affiliates, rather than sales by its affiliates, where the 
Department determines that the affiliated-party sales were made at 
arm's-length prices. KTN's Case Brief at 22, citing Antifriction 
Bearings (Other than Tapered Roller Bearings) and Parts Thereof from 
France, et al. (AFBs), 63 FR 33320, 33341 (June 18, 1998). If KTN's 
prices to its two German resellers had passed the arm's length test, 
the Department might have accepted those sales in lieu of sales by the 
affiliates to unaffiliated customers. Id. Therefore, KTN claims that 
rather than calculating an ``arbitrary price,'' the Department could 
apply facts available for the missing sales by simply adjusting KTN's 
prices to its affiliates upward to a level which would satisfy the 
Department's arm's-length test.
    That failing, KTN continues, the Department may not use facts 
available that are excessively punitive or aberrant and ``demonstrably 
less probative of current conditions.'' KTN's Case Brief at 23, quoting 
National Steel Corp. v. United States, 913 F. Supp. 593, 596 (CIT 1996) 
(National Steel). While KTN concedes that the Department has not 
established a bright-line test for identifying and selecting non-
aberrant data, KTN insists the Department articulated two guidelines in 
response to National Steel:

    (1) the data should be sufficiently adverse so as to effectuate 
the statutory purposes of inducing respondents to provide the 
Department with complete and accurate information in a timely 
manner;
    (2) the data should be indicative of the respondent's customary 
selling practices and rationally related to the transactions to 
which the adverse facts available are being applied.

See National Steel at 913 F. Supp. 596.

[[Page 30725]]

    KTN believes that in its Preliminary Determination the Department 
applied aberrant facts available to KTN's sales to the two home market 
resellers by replacing KTN's prices to these two customers with prices 
that are not remotely related to a vast majority of these transactions. 
KTN cites where, in KTN's view, the Department's methodology causes 
aberrant results by, for example, applying prices that are double the 
average price and, in some cases, exceed the average price by 500 
percent. KTN's Case Brief at 25 through 27. Therefore, KTN argues, if 
the Department chooses to apply adverse facts available it must alter 
its approach to exclude the use of aberrant data.
    First, KTN proposes adjusting an arm's-length price factor upward 
by 2.65 percent to account for the potential additional profit earned 
by the two Thyssen resellers. KTN's Case Brief at 28, basing the profit 
calculation on Thyssen's 1997-1998 Annual Report. In the alternative, 
KTN argues, the Department may rely on its own calculation of KTN's 
profit on home market sales of the foreign like product. By using the 
CEP profit rate calculated for the Preliminary Determination, KTN 
claims that the Department can incorporate an additional adverse 
element into its application of adverse facts available. KTN maintains 
that either of these two methods is adverse while remaining indicative 
of profit levels in the German steel industry. If the Department 
determines that neither of these profit calculations is sufficiently 
``punitive,'' the Department could rely upon the profit level 
calculated in the Preliminary Determination for calculating constructed 
profit (based on KTN's sales made in the normal course of trade). KTN's 
Case Brief at 31.
    If the Department insists on finding KTN affiliated with the 
Thyssen affiliates as it did in the Preliminary Determination, KTN 
argues, it must apply facts available for the missing home market 
downstream sales by selecting prices for each CONNUM which exclude 
aberrant prices. KTN believes that this would have the dual effect of 
employing data that is adverse to KTN while at the same time avoid 
using aberrant data. According to KTN, this methodology would employ a 
``well-accepted statistical principle'' that for a normal distribution, 
more than 95 percent of all observations will fall within two standard 
deviations of the mean. KTN's Case Brief at 32. This ``95 percent 
confidence interval,'' KTN suggests, would serve to cap the permissible 
highest price applicable to each CONNUM, thereby foreclosing the 
application of outlier prices.
    Additionally, KTN argues that the Department should not apply 
adverse facts available to sales by KTN's wholly-owned home market 
subsidiary, Nirosta Service Center (NSC), to one of Thyssen's resellers 
(Reseller 2) because those sales pass the arm's-length test. Based on 
the Department's own results from the preliminary determination arm's-
length computer program, KTN maintains that the weighted-average prices 
for sales from NSC to Reseller 2 was 105.276 percent of the weighted-
average prices to unaffiliated customers. KTN asserts that this ratio 
is well above the Department's threshold of 99.5 percent for finding 
sales at arm's length; therefore, the Department should use these 
arm's-length prices rather than facts available. Finally, KTN alleges 
that the Department calculated adverse facts available prices for 
certain sales to the two German resellers that were ordered but not 
invoiced during the POI; assuming the Department uses KTN's reported 
invoice dates as the date of sale, it should therefore remove these 
transactions from its margin analysis.
    Petitioners agree with the Department's application of adverse 
facts available for those home market downstream sales unreported by 
KTN. KTN's suggestion that its participation in this proceeding thus 
far demonstrates that it cooperated to the best of its ability is not, 
petitioners insist, persuasive. Petitioners point to KTN's ability to 
report the its U.S. resellers' downstream sales as evidence that it 
should and could have reported its home market resellers' downstream 
sales as well. Petitioners' Rebuttal Brief at 25.
    KTN's ``second line of defense,'' continue petitioners, is 
similarly unavailing. Accepting KTN's suggestion that it should not be 
subject to facts available because it could not secure requested 
information from an affiliate, petitioners caution, ``is not an axiom 
that should be embraced by the Department.'' Petitioners' Rebuttal 
Brief at 27. Petitioners point to, inter alia, Helmerich & Payne, Inc. 
v. United States, in which, petitioners suggest, the Court sustained 
the Department's application of adverse facts available where requested 
information was controlled by an uncooperative unrelated company. 
Furthermore, petitioners suggest that KTN's argument is misplaced, for 
the question at hand is not KTN's direct control over Thyssen's 
affiliates but Thyssen's role as a parent company over both its own 
affiliates and KTN. According to petitioners, KTN's submission of the 
U.S. resellers' downstream sales is, at the least, evidence of 
Thyssen's control of these affiliates; otherwise, this represents prima 
facie evidence of KTN's control of these parties. Petitioners suggest 
that it is obvious that Thyssen chose to direct compliance only of its 
U.S. affiliates in an attempt to distort the dumping analysis. By 
capturing U.S. transactions further along the distribution chain, but 
withholding this same information regarding home market sales, 
``Thyssen managed to cap normal value while incorporating U.S. 
transactions that, by their very nature, should incorporate price-
markups that increase U.S. price.'' Petitioners' Rebuttal Brief at 28.
    Petitioners also disagree with KTN's suggestion that the Department 
could effectively apply facts available to the unreported downstream 
sales by adjusting the prices of KTN's sales to the affiliated 
resellers upward to prices which would pass the arm's length test. 
Petitioners contend that this approach might have some merit if the 
Department were using non-adverse facts available. Rather, petitioners 
believe that the Department has correctly determined that KTN's failure 
to report home market downstream sales warrants an adverse assumption; 
``KTN's suggestion would be a de facto concession to its incorrect 
premise that the arm's-length test makes unnecessary the collection of 
downstream home-market data.'' Petitioners Rebuttal Brief at 29. 
Petitioners argue that KTN's failure to report the downstream sales by 
two of Thyssen's home market affiliates in response to the Department's 
repeated requests calls for the application of adverse facts available. 
These requests, petitioners note, were based on the statutory and 
regulatory provisions governing the collection of sales data. Id. at 
31.
    After detailing the history and regulatory backing for the 
Department's various decisions both to excuse KTN from reporting 
certain home market sales and to require certain home market and U.S. 
downstream sales data, petitioners then turn to KTN's comments 
concerning the application of adverse facts available. Petitioners 
dismiss KTN's complaint that the preliminary application of adverse 
facts available used data that are excessively punitive and aberrant as 
specious. Rather, insist petitioners, the chosen facts available 
reflect data that are both sufficiently adverse to encourage future 
cooperation from the respondent, and indicative of that respondent's 
customary selling practices.
    First, petitioners maintain that KTN confuses the necessary level 
of adverse inference imputed to missing data.

[[Page 30726]]

Citing Certain Helical Spring Lock Washers from the People's Republic 
of China, 58 FR 48833, 48839 (September 20, 1993) (Lock Washers), 
petitioners note that where a respondent cooperated generally but 
inadvertently failed to provide a relatively insignificant amount of 
data, the Department often assigns the highest non-aberrational margin 
calculated for a single sale to the missing data. However, petitioners 
insist, in the instant case the failure by KTN was one of cooperation, 
not an inadvertent failure, and that the data requested were critical 
due to the magnitude of missing downstream sales data and the 
importance of comparing U.S. downstream sales to a complete and 
accurate set of home market downstream sales. Petitioners' Rebuttal 
Brief at 43. '
    Second, petitioners allege that KTN's argument fails to consider 
that adverse facts available in the instant case is not a corrective 
measure among sales within KTN's and NSC's home market databases, but a 
surrogate for entirely missing downstream sales. Petitioners concede 
that KTN's elimination of so-called ``outliers'' among the reported 
sales could, potentially, be applicable if the task were simply to 
correct for missing data within a given universe of sales. However, 
petitioners contend, KTN fails to recognize that, once appropriate 
distinctions are made, the general conclusions in National Steel 
support the Department's current approach in this investigation. 
According to petitioners, in National Steel the Court addressed the 
appropriateness of determining ``the highest non-aberrational margin'' 
calculated. This ruling, petitioners insist, did not challenge the 
Department's criteria, nor even its selection of adverse data per se. 
Rather, the decision questioned the Department's failure to provide 
reasoned explanation as to how and why the particular adverse data were 
used. Petitioners' Rebuttal Brief at 44, citing National Steel 913 F. 
Supp. at 596.
    Here, petitioners claim, the Department is not using the highest 
margin calculated to correct for a missing segment of the first-level 
sales by KTN and NSC but, rather, the highest NVs as surrogates, with 
appropriate adverse inferences, for the entirely missing downstream 
sales. Petitioners suggest that it is reasonable to expect that the 
pricing patterns for these missing transactions would be significantly 
higher in contrast to the affiliated-party transfer prices between KTN 
and NSC and the respective affiliated resellers. KTN's failure to 
report the relevant downstream sales has deprived the Department of the 
means of testing precisely how much greater the downstream sales prices 
would be, petitioners continue. Thus, petitioners argue KTN's 
benchmarks for finding ``outliers'' pertain to the wrong universe of 
sales, and the correct set of sales from which potential benchmarks 
could be determined are missing due to KTN's lack of cooperation in the 
first place. Petitioners' Rebuttal Brief at 45.
    One available alternative benchmark the Department could use, 
suggest petitioners, is the measurable percentage difference between 
the transfer prices and downstream prices reported for KTN's downstream 
U.S. sales. While those sales are in the United States, rather than the 
comparison market, argue petitioners, they become the best information 
reasonably available to suggest what the difference should be in the 
home market, in light of KTN's failure to provide repeatedly requested 
downstream sales information. Petitioners claim that, based on KTN's 
own information, KTN exaggerates the magnitude of the markups from 
average to highest home market prices; KTN's actual experience in the 
United States indicates the difference would be significantly less. If 
anything, petitioners continue, the divergence between transfer and 
downstream prices in the home market would be even higher than in the 
United States, given Fried, Krupp's and Thyssen's ascendency as the 
only primary steel manufacturers in Germany and given the history of 
anticompetitive practices in the domestic stainless steel markets by 
Fried, Krupp and Thyssen. Petitioners' Rebuttal Brief at 46.
    Petitioners also dismiss KTN's claim that so-called aberrational 
prices arise from sales of relatively smaller quantities. Petitioners 
note that the nature of downstream sales is such that larger quantities 
sold to an affiliate typically result in smaller discrete sales made 
from that reseller to its downstream customers. As evidence of this 
phenomenon, petitioners point to the transformation of a relatively 
small set of sales to U.S. resellers that evolved into a much larger 
set of resales through U.S. resellers to unaffiliated customers. Id.
    Finally, petitioners take issue with KTN's contention that transfer 
prices from NSC to Reseller 2 are at arm's-length and that the 
Department should therefore not apply adverse facts available to sales 
made through that reseller. Irrespective of whether a particular subset 
of sales may or may not be at arm's-length, petitioners aver, KTN's 
failure to provide requested resale data through affiliated parties 
caused the Department to apply adverse facts available for the missing 
downstream sales. Therefore, petitioners insist that the Department 
acted appropriately in the Preliminary Determination, and that no 
changes are necessary for the final determination.
    Department's Position: We agree with petitioners that our use of 
adverse facts available was appropriate in the instant case. In 
accordance with section 776 of the Tariff Act, we have used partial 
adverse facts available where KTN failed to provide us with certain 
sales information concerning two of KTN's resellers sales in the home 
market. In contrast to KTN's attempts to portray itself as a 
cooperative respondent which was never adequately apprised of the 
Department's requirements, we offer the following narrative history of 
this proceeding:
    On August 3, 1998, the Department issued to KTN its antidumping 
questionnaire, which instructed KTN to report affiliates' resales to 
unaffiliated customers in both the home and U.S. markets. We also 
directed KTN to contact the agency official in charge if sales to 
affiliated parties represented a ``relatively small part'' of its total 
sales, or if KTN was unable to collect the necessary information. Our 
October 9, 1998 section A supplemental questionnaire reiterated this 
instruction (see question 1.c) and further directed KTN to report the 
sales of subject merchandise in the home and U.S. market by the 
specific subsidiaries of Thyssen identified in KTN's section A 
questionnaire response. Finally, on October 27, 1998, Department 
personnel contacted KTN's counsel and once again requested a detailed 
explanation of KTN's reporting of sales to affiliated and unaffiliated 
customers. During that conversation we instructed KTN to report the 
downstream sales of certain affiliates and, if it was unable to do so, 
to provide the Department with a detailed explanation as to why it was 
unable to report such sales (see Memorandum to the File, ``Affiliated 
Party Sales,'' October 28, 1998).
    On October 28, and November 4, 1998, KTN submitted comments and 
additional information regarding its downstream sales. KTN indicated in 
both of these submissions that, in accordance with the Department's 
instructions, it intended to report downstream sales information by 
certain home market affiliates and U.S. affiliated resellers, but for 
assorted other reasons, it did not intend to report its remaining 
affiliates' resales.

[[Page 30727]]

    After a thorough review of the record the Department notified KTN 
that it was still required to report downstream and reseller sales by 
additional home market and U.S. affiliates (see Memorandum to the File, 
``Downstream Sales,'' November 6, 1998). In addition, the Department 
granted in full KTN's request for an extension of time to submit the 
required data.
    KTN's November 16, 1998, section B and C supplemental responses 
failed to include the requested reseller sales information requested by 
the Department. On November 17, 1998, we issued a letter to KTN stating 
the Department would apply adverse facts available to the missing sales 
information if we did not receive it by November 23, 1998. On that 
date, KTN submitted additional affiliated reseller sales information, 
but again failed to provide the Department with a majority of the 
requested downstream and reseller sales information.
    Therefore, as explained in detail in the ``Affiliation'' portion of 
the Preliminary Determination, we also agree with petitioners that it 
is appropriate to make inferences adverse to KTN's interests pursuant 
to section 776(b) of the Tariff Act because KTN did not cooperate by 
responding fully to the Department's repeated requests for specific 
sales information. We have examined whether KTN acted to the best of 
its ability in responding to our requests for information. As the 
chronology presented above and the Preliminary Determination suggest, 
KTN was instructed in the original questionnaire to contact the 
official in charge immediately if it had downstream sales to affiliated 
parties. Therefore, KTN's failure to comply with the Department's 
instructions led it to report one home market database which included 
sales to NSC instead of sales by NSC. Based on the facts presented 
above we determine that KTN had sufficient time to prepare the 
requested information. Both our original August antidumping 
questionnaire and our subsequent supplemental questionnaires explicitly 
directed KTN to report its downstream sales by named affiliates in the 
home market. While we did eventually conclude that KTN was not required 
to report certain resales by certain affiliates, from the time of our 
initial questionnaire, KTN was required to gather all affiliated 
reseller information.
    In addition, KTN posits erroneously the standard that because KTN 
was unable to convince Thyssen's home market resellers to comply with 
the Department's request for information it is somehow exempt from the 
application of facts available. However, based on the fact that we have 
found KTN to be affiliated with Thyssen (as stated above), it is 
unreasonable to assume that Thyssen was unable to compel its own 
resellers to provide the Department with the specific information 
requested. In addition, we note, as do petitioners in their case brief, 
that Thyssen encountered no apparent difficulty in persuading its U.S. 
affiliates to comply with these same requests for reseller information. 
It is reasonable to assume that Thyssen could have prevailed upon its 
home market resellers to comply in like fashion with the Department's 
requests for downstream sales information. Thus, KTN's contention that 
it acted to the best of its ability and, thus, should not be subject to 
adverse facts available is unconvincing.
    Further, we disagree with KTN's proposed alternatives to the 
Department's application of adverse facts available. We find misplaced 
KTN's reliance on National Steel to support its claim that the 
Department's use of adverse facts available in the Preliminary 
Determination produced aberrant results. Rather, we agree with 
petitioners that in citing National Steel KTN confuses the necessary 
level of adverse inference imputed to missing data and fails to 
consider that adverse facts available in the instant case are not 
applied as a corrective measure among sales within KTN's and NSC's 
properly-reported home market databases, but represent an adverse 
surrogate for downstream sales data that are missing in their entirety 
owing solely to KTN's failure to respond.
    In National Steel the Department applied adverse facts available to 
certain sales unreported by the respondent in the case, Hoogovens. The 
Court sustained the criteria used by the Department in selecting among 
the facts available, i.e., that the margin be sufficiently adverse to 
induce future cooperation yet also be indicative of current conditions, 
but reversed the Department's application of these criteria to 
Hoogovens absent a more reasoned explanation. While the instant case 
bears superficial resemblance to National Steel, the fact patterns for 
the two cases are quite different. In National Steel Hoogovens failed 
to report a small number of sales while in the instant case KTN failed 
to report entire databases for two of its home market affiliates, 
thereby sharply limiting the record information from which to select 
among adverse facts available. KTN's failure to report fully the 
requested downstream sales data serves to undercut whatever merit its 
argument might carry precisely because this failure precluded an 
independent analysis which would allow the Department to establish 
current conditions for either of the resellers in question. The missing 
data in this case are of greater significance to our analysis than was 
the case in National Steel for they represent a large volume of KTN's 
home market sales and would allow us to compare home market downstream 
sales with U.S. reseller sales. Therefore, by failing to report such 
sales, the respondent has limited the information available to the 
Department for review in applying adverse facts available. Thus, as 
articulated in National Steel, because KTN should not be rewarded for 
providing inaccurate or incomplete data when it is to its advantage to 
do so, we have selected the only reasonable means available in our 
application of adverse facts available. As in the Preliminary 
Determination, we have selected the highest NVs per control number 
located in either the KTN or NSC databases, and have applied these 
model-specific NVs to the appropriate sales to the two resellers in 
question. While KTN contends that our application of adverse facts 
available produces aberrant results, by failing to report the 
downstream sales requested KTN has precluded the Department's testing 
the missing downstream sales prices and, possibly, selecting a 
different benchmark. As petitioners note, given the market realities of 
advancing through a chain of affiliated resellers, the prices for 
downstream sales from the affiliates to the first unaffiliated customer 
would be higher than the reported transfer prices from KTN or NSC to 
the affiliated parties. Thus, KTN's arguments that our application of 
adverse facts available produced aberrant results are based on 
conjecture, given the absence of the requested and relevant downstream 
sales data. Therefore, for these final results we have continued to 
apply adverse facts available in the same manner as our Preliminary 
Determination.
    In addition, we also disagree with KTN's assertion that the 
transfer prices from NSC to Reseller 2 are at arm's length and that the 
Department should therefore not apply adverse facts available to sales 
made through that reseller. Our Limited Reporting Memorandum indicated 
that we would require the requested downstream sales data for the 
resellers in question since we had determined that they were not at 
arm's length. We based this decision on our analysis of KTN's home 
market database which included KTN's sales to

[[Page 30728]]

NSC. It was not until KTN's November 16, 1998 supplemental response 
that it first reported NSC's downstream sales information and, thus, 
NSC's sales to Reseller 2. However, the question is not whether a 
specific subset of KTN's sales to NSC are or are not at arm's length; 
rather, it is KTN's failure to provide requested data on downstream 
sales through affiliated parties which caused us to apply adverse facts 
available. Therefore, because our original decision was based on 
available record evidence and because we do not conduct our arm's-
length test on subsets of sales to any specific customer, we have 
continued to apply adverse facts available for sales by NSC to Reseller 
2.
    We agree with KTN, however, that as we have determined that the 
invoice date is the appropriate date of sale for this final 
determination (see Comment 1), we incorrectly calculated adverse facts 
available prices for certain sales to two resellers in the home market 
which were ordered during the POI, but invoiced after the POI. Thus, we 
have removed from our calculations all sales with invoice dates falling 
outside the POI.
    For this final determination we have continued to calculate the 
highest NV reported by control number in KTN's and NSC's home market 
database and have applied these to KTN's and NSC's sales to its 
affiliates for which KTN did not report home market downstream sales.

Comment 4: Critical Circumstances

    According to KTN, the Department erred in concluding in the 
Preliminary Determination that critical circumstances exist. KTN claims 
that the Department (i) examined an inappropriate period in finding 
``massive imports,'' (ii) based the pre-and post-petition periods on 
the incorrect months, (iii) relied upon data drawn from an incomplete 
list of HTS item numbers, thus inappropriately excluding certain 
imports of subject stainless sheet in coil, and (iv) did not review 
import trends over a sufficient period of time.
    KTN notes that in making its critical circumstance decision the 
Department compared the volume of imports during the pre-petition 
period of April through June 1998 to the post-petition period of July 
through September 1998. KTN contends that, as in Certain Steel Concrete 
Reinforcing Bars from Turkey 62 FR 9737, 9746 (March 4, 1997) (Re-Bar 
From Turkey), the date on which the petition is filed determines 
whether the month of filing will be included in the pre- or post-
petition period, and that where the petition is filed during the first 
half of a month, the month of filing is treated as part of the post-
petition period. KTN's Case Brief at 42, citing the Department's 
Antidumping Manual, Chapter 10 at 4. KTN argues that since the petition 
was filed on June 10, 1998 (i.e., the first half of the month), June 
should be included in the post-petition period.
    Furthermore, in making a final determination as to whether an 
increase in imports since the filing of the petition is massive, KTN 
argues, the Department must utilize all of the data reasonably 
available. KTN asserts that it is the Department's well-established 
practice to base its analysis on the longest period for which 
information is available, beginning at the date the petition was filed 
and ending with the effective date of the preliminary determination. 
KTN's Case Brief at 43, citing, e.g., Re-Bar From Turkey, 62 FR at 9746 
and Brake Drums and Brake Rotors From the People's Republic of China, 
62 FR 9160, 9165 (February 28, 1997) (Brake Drums II), both of which 
used comparison periods of seven months. Thus, KTN avers, while the 
Department's regulations state only that the period of comparison must 
be at least three months in duration, the Department has frequently 
utilized a comparison period of up to seven months. Therefore, KTN 
maintains that the Department must utilize a seven-month comparison 
period of June through December 1998 (based on the publication of the 
preliminary determination on January 4, 1999). Using this comparison 
period, KTN claims that imports of subject merchandise from Germany 
increased by only 7.85 percent during the post-petition period over a 
similar seven-month pre-petition period of November 1997 through May 
1998. KTN's Case Brief at 44 and Exhibit 6, citing data drawn from the 
Census Bureau's ``Trade Information On-Line Service.''
    In addition, KTN asserts that in determining whether critical 
circumstances exist, the Department must examine trends over a period 
of time to determine whether import volumes are subject to seasonal 
fluctuations which could taint the results. KTN acknowledges that while 
there may not be a direct correlation between the volume of stainless 
steel imports and the season, historical data clearly indicate that the 
level of imports fluctuates greatly from one month to the next. 
Therefore, KTN maintains, the Department's findings are likely to be 
significantly skewed if it considers a brief post-petition period of 
just three months.
    Finally, KTN argues in a footnote to its case brief that the 
Department failed to review the full range of HTS numbers which include 
subject merchandise. KTN takes issue with the Department's 
characterization of this methodological choice as producing 
conservative estimates, because the so-called clean HTS numbers (those 
restricted by definition to subject stainless sheet in coil) do not 
capture all imports of subject merchandise. That the HTS numbers used 
``are under-inclusive,'' KTN notes, ``provides no indication as to the 
direction in which the flaw will skew the critical circumstances 
estimate.'' KTN's Case Brief at 41, n. 43.
    Petitioners argue that in its Preliminary Determination the 
Department justifiably concluded that there was a reasonable basis to 
believe or suspect that (i) the importer knew or should have known that 
the exporter was selling subject merchandise at less than fair value 
and (ii) there had been massive imports over a relatively short period, 
thus satisfying both the second and third criteria of section 733(e)(1) 
of the Tariff Act. Accordingly, petitioners maintain, the Department 
appropriately made an affirmative preliminary determination of critical 
circumstances as to KTN.
    In analyzing whether imports of subject merchandise had been 
massive over a relatively short period of time, petitioners aver, the 
Department correctly calculated that subject imports had increased by 
67.74 percent during the post-petition period scrutinized at the time 
of the Preliminary Determination. Further, and contrary to KTN's 
assertions, petitioners contend that the Department correctly excluded 
certain HTS items which might cover some quantity of in-scope 
merchandise from its calculations of massive imports, and properly 
included the month of June 1998 in the pre-petition period. Petitioners 
argue that the Department made a conservative estimate in calculating 
whether imports were massive by scrutinizing imports falling under HTS 
categories that only include sheet and strip in coil form, and by 
excluding those HTS basket categories which do not indicate whether or 
not the sheet and strip are in coils. In so doing, petitioners claim, 
the Department acted properly to exclude potentially out-of-scope 
merchandise, such as cut-to-length stainless sheet and strip, from its 
analysis. Moreover, petitioners contend that the excluded HTS 
categories account, on average, for less than 20 percent of total 
imports in 1998 of all in-scope merchandise. By including the HTS 
categories in question, argue petitioners, the critical circumstances 
analysis would be skewed, and would lead to imprecise

[[Page 30729]]

results. Petitioners' Rebuttal Brief at 66 and 67.
    Petitioners also insist that the Department properly included the 
month of June in the pre-petition period. Petitioners maintain that 
June should be included in the pre-petition period since entries of 
subject merchandise from Germany during June were almost certainly 
exported from Germany prior to the petition's filing on June 10. 
Therefore, suggest petitioners, since the entries in June were the 
result of KTN's commercial behavior before the petition was filed, June 
should be included as part of the pre-petition period. Petitioners aver 
that 19 CFR 351.206(h)(2)(i) allows for such an adjustment of the base 
and comparison periods where the data are available and the commercial 
realities of the marketplace so dictate. Petitioners' Rebuttal Brief at 
68 and n. 5, citing Uranium From Ukraine and Tajikistan, 58 FR 36640, 
36645 (July 8, 1993).
    Further, petitioners disagree with KTN's assertion that the 
Department must use data through December 1998 in making its final 
critical circumstances determination, arguing that each case must be 
decided according to its own facts, as suggested by the Department's 
regulations at section 351.206(h)(2) and (i). However, petitioners 
maintain, if Census Bureau data again serve as the basis for the final 
determination, consideration of the months through December 1998 as 
well as the inclusion of June 1998 in the post-petition period, still 
indicates that imports of subject merchandise during the relevant 
periods were massive (i.e., an increase of 21.46 percent). Petitioners' 
Rebuttal Brief at 69. Therefore, petitioners conclude, irrespective of 
the periods analyzed, the Department must continue to find that 
critical circumstances exist with respect to KTN.
    Department's Position: We agree in part with KTN and find, pursuant 
to section 735(a)(3) of the Tariff Act, that critical circumstances do 
not exist with respect to KTN. While we do find that the person by 
whom, or for whose account, the merchandise was imported knew or should 
have known that the exporter was selling the subject merchandise at 
less than its fair value and that there would be material injury by 
reason of such sales (see Preliminary Determination 64 FR at 99), we 
have determined that imports for KTN have not been massive. 
Consequently, the second of the two criteria required for a finding of 
critical circumstances has not been met.
    On March 23, 1999, we requested that KTN provide the Department 
with monthly shipment data for 1996 through 1998. In response KTN 
submitted monthly shipment data for October 1995 through December 1998. 
Because it is the Department's practice to use company-specific 
information where available (see, e.g., Re-bar From Turkey, and Certain 
Cased Pencils From the People's Republic of China, 59 FR 55625 
(November 8, 1994)), we have based our final determination on KTN's 
monthly shipment data, rather than the Census Bureau data used for the 
Preliminary Determination.
    We also agree with KTN that we incorrectly included June in the 
pre-petition period. As stated in Re-bar From Turkey, where the 
petition is filed during the first half of a month, the month of filing 
is treated as part of the post-petition period. Since the petition in 
this case was filed on June 10, 1998, we have concluded that June 
should be included in the post-petition period. Further, we agree with 
respondent that it is our normal practice to include in our analysis 
data concerning the respondent's imports of subject merchandise up to 
the date of the preliminary determination, where such data are 
available. See, e.g., Aramid Fiber of Poly-Phenylene Terephthalamide 
From the Netherlands, 59 FR 23684 (May 6, 1994). In the instant 
investigation the most reliable data available concern KTN's shipments 
of subject merchandise, rather than imports into the United States, 
because the former are limited to the respondent KTN and, unlike the 
Census data, are limited to merchandise subject to this investigation.
    However, we disagree with KTN that it would be appropriate to 
broaden our analysis to include data through December 1998. Although 
the ``effective date'' of the Preliminary Determination fell on January 
4, 1999, the date of its publication in the Federal Register, the 
actual date of this determination is December 17, 1998. Because the 
Preliminary Determination fell in the middle of the month of December, 
we believe it would be inappropriate to include data for the full month 
of December in our analysis, as this would mean including data on 
imports after the Preliminary Determination in our analysis of 
``massive imports.'' Accordingly, we have determined that for the 
purpose of our critical circumstances determination it is appropriate 
to compare KTN's shipment data for a six-month pre-petition period of 
December 1997 through May 1998 to a six-month post-petition period of 
June 1998 through November 1998. Based on this comparison we have 
concluded that imports of subject merchandise decreased by 2.5 percent. 
Clearly, then, there was no increase in KTN's imports of subject 
merchandise during the post-petition period.
    With respect to all other exporters who were not subject to this 
investigation, it is the Department's normal practice to conduct its 
analysis based on the experience of the investigated companies. See, 
e.g., Re-bar From Turkey. In Re-bar From Turkey the Department found 
critical circumstances for the ``All Others'' category because it found 
critical circumstances for three of the four companies investigated. 
However, as we recently determined in Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products From Japan, 64 FR 24329 (May 6, 1999) (Hot-
Rolled Steel From Japan), we are concerned that a literal application 
of this approach could produce anomalous results given certain 
circumstances. Therefore, we believe it is appropriate in this case to 
apply the traditional critical circumstances criteria to the ``All 
Others'' category. First, in determining knowledge of dumping, we look 
to the ``All Others'' rate, which is based on the weighted-average 
margins of all investigated companies. In this case such a weighted-
average rate must, of needs, be based on the individual rate of KTN, 
the sole respondent in this investigation. KTN's rate applied to ``All 
Others'' is 25.84 percent. In addition, the Department normally 
considers a preliminary International Trade Commission (Commission) 
determination of material injury sufficient to impute knowledge of 
likelihood of resultant material injury. The Commission preliminarily 
found material injury to the domestic industry due to imports of 
stainless sheet in coil from Germany and, on this basis, the Department 
may impute knowledge of likelihood of injury to all other exporters. 
See Preliminary Determination of the Commission of Certain Stainless 
Steel Sheet and Strip from France, Germany, Italy, Japan, the Republic 
of Korea, Mexico, Taiwan, and the United Kingdom, 63 FR 41864 (August 
5, 1998). However, while we have sufficient evidence to impute 
knowledge of dumping and material injury to the ``All Others'' 
category, we also must also evaluate the second criterion required by 
the statute in making a critical circumstances determination: whether 
there have been ``massive imports'' for the ``All Others'' category. In 
making this determination we examined the company-specific shipment 
data provided by KTN, which, as noted, indicate a decrease of 2.5 
percent during the post-petition period.

[[Page 30730]]

We found, accordingly, that KTN's data provide no evidence of massive 
imports. Based on that finding we likewise determine that imports from 
uninvestigated exporters were also not massive during the relevant 
comparison periods. We also examined U.S. Customs data in an attempt to 
analyze overall imports from Germany of the subject merchandise. 
Contrary to our approach in the Preliminary Determination, we examined 
entries classified under the full range of HTS items which are listed 
in the ``Scope of the Investigation'' section, above. These data 
indicate that imports of subject stainless sheet in coil for Germany as 
a whole increased by 8.9 percent, still well below the 15 percent 
threshold for an affirmative finding of ``massive imports.'' However, 
since the full range of HTS items includes both subject and non-subject 
merchandise, we believe it is inappropriate to base our critical 
circumstances finding on these data which are overly broad. We are 
relying, therefore, upon the scope-specific data supplied by KTN. We 
find, therefore, that imports from all other exporters were not massive 
during the relevant period. Based on these factors the Department 
determines that there are no critical circumstances with regard to 
imports of subject merchandise from all other exporters in Germany.

Adjustments to Normal Value

Comment 5: Proper Application of Facts Available

    Petitioners suggest that the series of customer codes the 
Department used in its preliminary margin program to identify sales 
through Thyssen and Krupp affiliates is not complete. With respect to 
sales through NSC, petitioners identify several customer codes used by 
NSC which, petitioners assert, the Department did not include in its 
preliminary margin program. In addition, petitioners argue, certain of 
KTN's customer codes are reported as Thyssen and Krupp affiliates which 
were not identified by the Department in its preliminary margin 
program.
    KTN counters that petitioners have cited erroneously to the model-
match program whereas the customers are coded correctly in the separate 
arm's-length test program. According to KTN, the program language cited 
by petitioners applies only to the application of adverse facts 
available to unreported downstream sales. KTN concludes that, aside 
from what KTN terms the inadvertent inclusion of affiliated-party sales 
that passed the arm's-length test, the model match program is correct 
and need not be changed.
    Department's Position: We disagree with petitioners. To apply 
adverse facts available with respect to two home market resellers for 
which KTN failed to provide downstream sales data (see Comments 2 and 
3), we included language in our model match program that aggregated all 
customer codes used by KTN or NSC for sales to these two resellers in 
their respective sales databases. Although petitioners argue that our 
list is not exhaustive based on an analysis of customer codes 
identified in the home market sales files as pertaining to ``Thyssen'' 
affiliates (i.e., where CUSRELH equals 3), we determined that no 
additional codes need to be added to the program, as the additional 
codes cited by petitioners identify Thyssen affiliates for whom we did 
not request downstream sales information. Thus, no modification is 
necessary to this programming language for the final determination. See 
Limited Reporting Memorandum for further information.

Comment 6: Adjusting for NSC's Processing Costs

    Petitioners point out that in the KTN Sales Verification Report the 
Department indicated that it ``[was] unable to trace any expenses 
related to slitting for FY 1997 because NSC stated that it did not 
produce cost center reports during this period'' and that ``NSC was 
unable to provide any supporting documentation for either the slitting 
cost or total slitting tonnage.'' Petitioners' Case Brief at 77, 
quoting the KTN Sales Verification Report at 56 and 57. Petitioners 
assert that the Department should accordingly deny KTN's claimed direct 
adjustments for NSC's slitting costs.
    KTN responds that the Department should accept as direct selling 
expenses NSC's reported slitting costs for 1998 for slitting master 
coils to customers' orders, and adjust home market prices accordingly. 
According to KTN, the Department was able successfully to verify these 
expenses.
    Department's Position: We disagree with petitioners and KTN. With 
respect to NSC's slitting operations, we have determined that the 
claimed expenses represent direct processing costs which are accurately 
treated as components of KTN's variable cost of manufacture and COP for 
the finished products sold to the first unaffiliated customers. 
Accordingly, for this final determination we have increased COP by 
NSC's 1998 slitting costs as described in our Final Results Analysis 
Memorandum and have denied KTN's claim that these costs are direct 
selling expenses. Because we were unable to verify NSC's fiscal 1997 
slitting costs, we have used the verified figures for fiscal 1998 for 
all relevant slitting costs during the POI.

Comment 7: Early Payment Discounts

    Petitioners argue that many of KTN's home market sales appear not 
to have warranted early payment discounts based on the reported terms 
of sale. According to petitioners, the time between invoicing and 
payment for many transactions seemingly precludes such discounts. 
Petitioners suggest that this fact pattern is contrary to the 
discussion of early payment discounts in the Department's KTN Sales 
Verification Report, wherein the Department observed that ``KTN stated 
that as a policy it does not allow customers to take early payment 
discounts where they fail to meet stated terms, but that on rare 
occasions, early payment discounts will be granted even though a 
customer pays late.'' Petitioners' Case Brief at 78, quoting the KTN 
Sales Verification Report at 33 (petitioners' emphasis). Petitioners 
assert that the Department should disallow all home market early 
payment discounts as adverse facts available or, at a minimum, disallow 
those early payment discounts where reported dates of invoicing and 
payment did not qualify KTN's customer for such a discount.
    KTN responds that the Department successfully verified its 
calculation of early payment discounts and argues that the application 
of facts available is not warranted. KTN argues that in each case in 
which KTN reported early payment discounts in its sales file, the sales 
documentation confirmed that the customer had in fact taken the 
discount. KTN asserts that while the customer may not have qualified 
for the discount for three of the five sales traces which indicated a 
discount was given, the actual terms of payment were verified in each 
case. KTN argues that, as verified by the Department, the date of 
payment was the date that KTN booked the payment into its accounts 
receivable system. Therefore, argues KTN, it is possible that a 
customer sent a payment within the time allowed for qualifying for an 
early payment discount, but that the payment was not booked into KTN's 
accounting system for several days.
    Department's Position: We agree with respondent. During our home 
market verification of KTN we conducted thorough sales traces which 
included ensuring the accuracy of KTN's reported payment and invoice 
dates. We found no discrepancies in any of KTN's reported payment or 
invoice dates.

[[Page 30731]]

Furthermore, while the time lag between the verified invoice and 
payment dates might not have appeared to warrant an early payment 
discount for these transactions, we were satisfied that for those 
transactions reviewed which included early payment discounts, the 
customer in fact claimed these discounts and KTN granted them. See, 
e.g., KTN Sales Verification Report at 59. Therefore, we have continued 
to allow an adjustment to NV for KTN's reported early payment 
discounts.

Comment 8: Advertising Expenses

    In its opening-day correction letter presented at the KTN sales 
verification KTN noted that it had incorrectly double-counted expenses 
attributable to advertising by including them in its ISEs and also 
reporting them as direct expenses. KTN suggested removing advertising 
expenses from its ISEs to correct this error. Petitioners claim, 
however, that information on the record establishes that the remedy 
suggested by KTN is unacceptable. Petitioners point to the discussion 
of advertising activities in the KTN Sales Verification Report, 
specifically the description of these expenses:

    [f]or advertising expenses, KTN explained that 
Informationsstelle Edelstahl Rostfrei (ISER) is the industry 
association which conducts a variety of activities to study and 
promote the uses of stainless steel. KTN presented a list of the 
association's activities in 1997 and 1998, including brochures and 
publications, seminars, fairs * * *

Petitioners' Case Brief at 80, quoting the KTN Sales Verification 
Report at 45.
    Petitioners argue that ISER's activities are directed at KTN's 
current and prospective customers of stainless steel products, not at 
the customer's customers. Accordingly, claim petitioners, any expenses 
incurred by KTN related to its membership in ISER (i.e., the 
association dues) are correctly accounted for as part of ISEs, both for 
the home market and the United States. Petitioners further assert that 
if the Department instead decides to take the approach suggested by KTN 
(i.e., to reduce ISEs by the amount of ISER dues), these expenses 
should also be reported as direct expenses in the United States.
    KTN counters that the Department should continue to treat KTN's 
reported home market advertising expenses as direct selling expenses. 
ISER, KTN asserts, undertook promotional and advertising campaigns 
directed at KTN's customers' customers in the German market. KTN argues 
that, accordingly, home market advertising expenses qualify as direct 
selling expenses.
    Department's Position: We agree with petitioners that KTN's home 
market advertising expenses are properly classified as ISEs. The 
Department has articulated its views with respect to the proper 
treatment of advertising expenses in, e.g., Gray Portland Cement and 
Clinker from Mexico, 64 FR 13148, 13169 (March 17, 1999) and Fresh 
Atlantic Salmon from Chile, 63 FR 31411, 31424 (June 9, 1998). The 
Department normally considers as direct selling expenses those expenses 
that result from, and bear a direct relationship to, the particular 
sales in question. In the case of advertising expenses, to qualify as a 
direct adjustment, these expenses must also be assumed on behalf of a 
customer and must be associated specifically with sales of subject 
merchandise. ISER's activities, however, are aimed at promoting the use 
of stainless steel in general but not subject merchandise specifically. 
The expenses incurred for KTN's membership in ISER are not directly 
related to particular sales by KTN of subject merchandise. As indicated 
in our KTN Sales Verification Report at 45, ISER conducted activities 
to study and promote the use of stainless steel generally (i.e., the 
activities were not limited to stainless steel sheet and strip which is 
the subject of this investigation). Furthermore, there is no record 
evidence supporting KTN's claim that ISER's activities give rise to 
expenses assumed by KTN on behalf of its customers. Therefore, for this 
final determination, we consider KTN's home market advertising expenses 
to be indirect in nature. We have denied KTN's claim that these are 
direct selling expenses, but we have included these expenses in KTN's 
home market ISEs.

Comment 9: Rebates

    As indicated in the KTN Sales Verification Report, NSC's rebates to 
a particular customer were granted at a given percentage even though 
NSC had initially reported a different figure in its response. 
Petitioners urge the Department to apply the corrected rebate 
percentage for 1998 sales (NSC noted that the rebates at issue applied 
only to sales in 1998) and to allow no rebates for the items invoiced 
to this customer during 1997.
    Department's Position: For this final determination we have applied 
the corrected rebate percentage to NSC's eligible 1998 sales, as 
suggested by petitioners.

Adjustments to United States Price

Comment 10: Unreported U.S. Sales

    Petitioners urge the Department to apply partial adverse facts 
available to five previously unreported U.S. sales discovered by the 
Department during the verification of KHSP. Petitioners argue that KHSP 
never included these sales in its list of corrections, nor did it 
provide the total quantity and value of these missing transactions in 
its opening-day corrections letter. The unreported U.S. sales, 
petitioners maintain, do not constitute minor corrections but instead 
new information that should be rejected by the Department and removed 
from the record of this investigation.
    As stated in Lock Washers (58 FR at 48835), aver petitioners, the 
Department's policy concerning unreported sales discovered at 
verification is to accept for the record only that information 
necessary to establish the magnitude of any omissions. In Lock Washers, 
petitioners point out, the Department returned sales documentation 
concerning the unreported sales identified at verification. Petitioners 
also point to the investigation on Belgian Stainless Plate in Coils, in 
which the Department refused to take or even review complete sales data 
(other than the invoice) for a single unreported sale.
    Petitioners assert that it is the Department's established practice 
to apply total facts available to missing sales information if the 
missing data constitute five percent or more of a sales database, or 
partial facts available when the missing or unreported data make up 
less than five percent of a given sales database. Petitioners suggest 
that the Department, in a manner consistent with Lock Washers (in which 
it resorted to partial facts available for the respondent's unreported 
sales data), should apply as partial adverse facts available the 
highest margin from the petition or, at a minimum, the highest margin 
calculated for a single sale based on the correctly reported CEP 
transactions. Petitioners contend that judicial precedent further 
supports the application of facts available with respect to the KHSP 
sales at issue. Petitioners emphasize that in Persicio Pizzamiglio, 
S.A. v. United States, 18 CIT 299 (1994), the Court upheld the 
Department's use of facts available based on unreported home market and 
U.S. sales.
    KTN responds that the Department's acceptance at verification of 
the previously unreported U.S. sales was appropriate. KTN argues that 
petitioners' reliance on Lock Washers is

[[Page 30732]]

misplaced. The facts in that case, KTN argues, are not remotely 
comparable to the facts of this case. Citing a June 7, 1993 letter to 
respondent's counsel in the Lock Washers proceeding, KTN notes that the 
Department rejected the sales documentation at issue because it 
reflected ``entirely new contracts covering a significant portion of 
total U.S. sales quantity and value.'' KTN's Rebuttal Brief at 29. 
However, KTN argues, the new KHSP sales identified at verification were 
neither significant nor entirely new. KTN asserts that KHSP had simply 
misclassified four of the five previously unreported sales as non-
subject merchandise and that only one was entirely new and previously 
unidentified. Furthermore, argues KTN, the sales at issue can hardly be 
considered significant given the number of U.S. transactions. KTN also 
disputes petitioners' claimed parallels between this case and Belgian 
Stainless Plate in Coils, claiming the Department has yet to issue a 
final determination; thus, KTN insists, there is no ``precedential 
authority contained in a verification report in a different 
investigation with different facts.'' KTN's Rebuttal Brief at 
30.7
---------------------------------------------------------------------------

    \7\ The Department's final determination in Belgian Stainless 
Plate in Coils was published in the Federal Register one day after 
the filing of KTN's rebuttal brief.
---------------------------------------------------------------------------

    KTN further claims that petitioners have mischaracterized the 
Department's normal practice with respect to the reporting of new sales 
at verification. The Department's Antidumping Manual, argues KTN, 
clearly establishes that the decision whether or not to accept new 
sales at verification is to be made on a case-by-case basis. KTN cites 
as an example of this case-specific approach Disposable Pocket Lighters 
from the People's Republic of China, 60 FR 22539, 22365 (May 5, 1995) 
(Pocket Lighters from the PRC), where the Department discovered three 
previously unreported invoices at verification. In that determination, 
KTN points out, the Department concluded that the omissions ``were 
inadvertent and the corrected information was verified.'' KTN's 
Rebuttal Brief at 31, quoting Pocket Lighters from the PRC. The 
Department further indicated in its determination that ``the new sales 
represent a small percentage of total sales during the POI and, at 
verification, were not hidden or misrepresented.'' Id. KTN argues that, 
as in Pocket Lighters from the PRC, the Department should accept the 
new sales presented at verification, as they represent a small 
percentage of total sales and were neither hidden nor misrepresented.
    Finally, KTN argues that in the event the Department agrees with 
petitioners that it cannot accept the new sales, it should still use 
the documentation provided by KHSP on the record as facts available. 
KTN suggest this approach would be consistent with Porcelain-on-Steel 
Cooking Ware from the People's Republic of China, 62 FR 32757 (June 17, 
1997) (Porcelain-on-Steel Cookware), in which the Department determined 
that no adverse inference was warranted with respect to three new 
invoices discovered at verification. KTN's Rebuttal Brief at 32.
    Department's Position: We agree in part with petitioners. In 
Certain Cut-to-Length Carbon Steel Plate From South Africa, 61 FR 61731 
(November 19, 1997) (Steel Plate from South Africa), the Department 
applied the highest non-aberrational margin to three of respondent 
Highveld's unreported U.S. sales which were discovered at verification. 
The Department rejected Highveld's arguments that there was no 
significant failure to report the U.S. sales and that the effect of 
these omissions was minor. In fact, in that case the unreported U.S. 
sales represented an even smaller percentage of total sales than do 
KHSP's newly-identified transactions. Similarly, in the earlier Lock 
Washers case the Department took this same approach and applied the 
highest non-aberrational margin calculated for a single sale. It is 
also important to note that, as in this case, the respondent in Lock 
Washers identified the sales at issue at the outset of verification. 
Accordingly, we are not convinced by KTN's suggestions that disclosure 
of such sales at verification somehow warrants their acceptance for 
calculating KTN's weighted-average margin. In addition, by the time the 
Department conducted its U.S. verification, KHSP submitted three U.S. 
sales databases (on September 29, 1998, November 16, 1998, and January 
6, 1999) reflecting various revisions. Thus, KTN had ample opportunity 
to review KHSP's submitted data for completeness.
    With respect to KTN's reliance on Porcelain-on-Steel Cookware, we 
note that the facts in that case are distinguishable from those in this 
investigation. In that case the three unidentified invoices discovered 
at verification were relevant to the calculation of factors of 
production for steel inputs and did not constitute unreported sales 
intended for inclusion in the Department's price-to-price margin 
calculations.
    We do not accept, however, petitioners' characterization of KHSP's 
omissions as ``more egregious'' than those in Lock Washers. Although 
KHSP did not provide the aggregate volume and value of these sales in 
the opening-day correction letter submitted for the record, Exhibit 1 
to the KHSP Verification Report makes clear that KHSP identified these 
missing sales at the outset of verification. See KHSP Verification 
Report, Exhibit 1 at 3 and 10 through 16. Furthermore, KHSP provided a 
complete packet containing copies of each of the relevant invoices 
which the Department included on the record as a verification exhibit. 
Nevertheless, for the reasons stated above, we find that KHSP had three 
opportunities spread over four months to provide the Department with a 
complete listing of its U.S. sales. In response to its failure to do 
so, as adverse facts available, we are applying the highest non-
aberrational margin calculated based on KTN's correctly reported CEP 
transactions to the unreported sales and have included these 
transactions in our calculation of the overall weighted-average margin.

Comment 11: Facts Available for Reseller's Indirect Selling Expenses

    KTN contends that the Department should no longer apply facts 
available for ISEs for each U.S. sale made by one of Thyssen's 
affiliated resellers based in Germany because after the Preliminary 
Determination KTN provided this reseller's ISEs which were verified 
without discrepancy.
    Department's Position: We agree with KTN. At the time of our 
preliminary determination KTN had not submitted information regarding 
the ISEs incurred by the reseller at issue. However, as part of its 
January 6, 1999 supplemental response, KTN reported the ISEs for this 
reseller. During our U.S. sales verification we specifically reviewed 
the ISEs for the reseller in question and noted no discrepancies. 
Therefore, for these final results we have used the verified ISEs as 
reported for this reseller.

Comment 12: U.S. Credit Expenses

    KTN maintains that in its Preliminary Determination the Department 
erroneously rejected KTN's reported credit expense for CEP sales and 
recalculated the expense using the credit period beginning with the 
date that KNE shipped the product from the European port (reported as 
SHIPDAT3U) rather than the date of shipment to the customer from the 
U.S. port (reported separately as SHIPDAT1U). KTN claims that using the 
earlier date of shipment from Germany overstates U.S. credit expenses 
by double-counting the time that

[[Page 30733]]

merchandise is in transit between the European and U.S. ports; KTN 
claims it has included this time in its ICC. KTN argues that upon 
shipment to KHSP from the European port KNE bills KHSP for the 
merchandise; at that time KHSP recognizes the products as inventory on 
its books and records its value in its accounts payable. Similarly, KNE 
books the item as a sale to KHSP and includes the total in its accounts 
receivable due from KHSP. Thus, the time between SHIPDAT3U and 
SHIPDAT1U represents a period of credit being extended by KNE to KHSP, 
not by KHSP to the unaffiliated customer. KTN asserts that it has 
properly recognized this period by including the average time at sea as 
part of its ICCs in Germany. Therefore, under the Department's own 
practice, KTN contends, the correct date of shipment to use in the 
calculation of U.S. credit for CEP sales is the date of shipment to the 
final U.S. customer from the U.S. port. KTN's Case Brief at 56, citing 
Brake Drums and Brake Rotors From the Peoples Republic of China, 61 FR 
53190, 53195 (October 10, 1996) (Brake Drums I).
    Petitioners take issue with KTN's attempt to describe these sales 
as if they were made from KHSP's inventory in the United States. The 
sales in question, petitioners note, are not of merchandise that enters 
KHSP's inventory and is then later sold to the unaffiliated customer, 
but instead are sales that have been ordered by the final U.S. customer 
with the terms of sale set well before entry into the United States. 
Petitioners' Rebuttal Brief at 55. Dismissing KTN's references to 
KHSP's ``accounting inventory'' as a ``clever semantic cover,'' 
petitioners point to KTN's own statements for the record that it does 
not maintain inventory in the United States, but rather, makes direct 
shipments from Germany to the first unaffiliated customer in the United 
States through the CEP agent KHSP. Id. at 56. Petitioners accuse KTN of 
seeking to lower its margin by shifting the ex-factory-to-U.S. port 
expenses from its U.S. credit (a direct expense) to its foreign ICC (an 
indirect expense). Thus, petitioners continue, a Deutsche-mark interest 
rate would apply and the amount would not be deducted from the CEP 
starting price. However, petitioners maintain that the valuation of 
merchandise during this period is in U.S. dollars, as demonstrated by 
the documentation of transactions from KTN through KNE to KHSP. 
Therefore, petitioners submit, U.S. credit expenses should be 
calculated based on the time from KNE's shipment from the European port 
(SHIPDAT3U) using a dollar-denominated interest rate.
    Department's Position: We agree in part with petitioners. In 
response to our section A supplemental questionnaire, KTN reported that 
``[i]t typically is not KHSP's practice to maintain an inventory of the 
subject merchandise for its customers. During the POI, KHSP did 
maintain a small inventory of subject merchandise, but did not sell 
this merchandise.'' KTN's October 23, 1998 supplemental response at 6. 
KTN reiterated this point in a December 1, 1998 submission on critical 
circumstances: ``[a]s stated in prior submissions, KTN does not 
maintain inventory in the United States.'' Therefore, we conclude that 
during the POI KHSP did not have any sales of subject merchandise made 
out of inventory. This being true, all of KTN's sales during the POI 
were made-to-order sales that were drop-shipped from KNE in Germany 
(i.e., direct shipments). Therefore, we disagree with KTN's 
characterization of these transactions as KHSP's ``inventory sales.''
    Further, we disagree with KTN's conclusion that Brake Drums I 
articulated a practice of using the date of shipment from the U.S. port 
to the U.S. customer as the correct date of shipment in calculating the 
credit period for CEP sales. In fact, in Brake Drums I the Department 
stated that:

    [i]n CEP cases where the merchandise received is shipped to the 
U.S. customer from inventory of a U.S. affiliate, the credit period 
begins from the point of shipment from U.S. inventory. However, in 
the case of [respondent] Laizhou/Shenyang merchandise is shipped to 
the U.S. customer directly from the foreign port. Therefore, we have 
relied on a credit period beginning with the date of the bill of 
lading at the foreign port.

Brake Drums I, 61 FR at 53195.
    Therefore, we have recalculated KTN's credit expense based on the 
date of shipment from the German port (SHIPDAT3U) rather than shipment 
from the U.S. port, which is fully consistent with Brake Drums I.
    However, we agree with KTN's assertion that it recognized this time 
period by including the average days at sea as part of its ICCs in 
Germany. Therefore, in order to avoid double-counting the time in 
transit by including this period in both KTN's U.S. credit and its 
foreign ICCs, we have adjusted the latter figure to account for time at 
sea, as reported in KTN's section C supplemental response.

Comment 13: Proper Shipping Date for U.S. Resales

    Assuming, arguendo, that the Department will again recalculate 
credit expenses for either KTN or KHSP sales and continues to use 
SHIPDT3U, KTN insists that the Department must ensure that the shipment 
date field used to calculate the payment days for individual 
transactions contains a date. KTN claims that a subset of the U.S. 
sales reported by KHSP represent transactions where the merchandise was 
directed to a different customer after the product's arrival in the 
United States (e.g., in the case of a canceled sale), or resales of 
merchandise initially rejected by the original U.S. customer after 
delivery. Thus, irrespective of the larger issue of KTN's proper credit 
period, the appropriate date of shipment for these resales is the date 
of shipment within the United States (SHIPDT1U). Therefore, KTN argues 
that should the Department continue to use the date of shipment from 
the European port for KHSP's other U.S. sales, the Department must 
still use SHIPDT1U for this subset of sales.
    Department's Position: As stated in response to Comment 12, we have 
continued to use SHIPDT3U in our calculation of U.S. credit expenses. 
However, we agree with KTN that in those instances where merchandise 
was resold by KHSP after arrival in the United States, the date of 
shipment to use in our calculation of imputed credit expenses should be 
the date KHSP shipped the merchandise to the final U.S. customer 
(SHIPDT1U), and not the date of the original shipment from KNE in 
Germany. Therefore, we have revised our program to account for such 
resales in the United States. See Ministerial Errors Memorandum.

Comment 14: Short-Term Interest Rates

    KTN states that as part of its Preliminary Determination the 
Department applied an interest rate of 9.5 percent, the prime rate plus 
one percent, to calculate U.S. credit expenses because KTN did not 
report Fried. Krupp's short-term interest rate, and because the 
reported U.S. short-term borrowing rate did not represent an arm's-
length rate. However, KTN claims that because, as part of the post-
preliminary home market and U.S. verifications, both KTN and KHSP 
provided information on their respective short-term borrowing rates 
that correct these deficiencies, these verified rates should be used 
for the final determination.
    Petitioners raise a number of issues relevant to both KTN's home 
market and U.S. interest rates. First, petitioners urge the Department 
to reject as untimely information the figures KTN provided at 
verification regarding its home market interest rate. Petitioners 
suggest that the

[[Page 30734]]

Department instead either allow no adjustment whatever for home market 
credit as adverse facts available, or rely upon a second rate reviewed 
at the home market verification as non-adverse facts available.
    Regarding the U.S. interest rate, petitioners assert that, despite 
numerous requests, KTN never supplied the necessary supporting data for 
the interest rates available to Krupp USA Financial Services, Inc. 
(KFSI). Even accepting the specific reported rate, petitioners claim, 
the information KHSP did present at verification regarding KFSI 
demonstrates that the interest rate is not at arm's length. 
Furthermore, petitioners contend that neither the Krupp nor the KHSP 
interest rate can be applied to U.S. sales since neither is based on 
U.S. dollar-denominated lending.
    Petitioners suggest as facts available the use of the interest rate 
KHSP charges its U.S. customers for late payments. Petitioners argue 
that this rate (i) is not skewed by intra-company affiliated 
transactions, (ii) accurately reflects the value on receivables based 
on KHSP's actual commercial practice, (iii) ensures arm's length 
treatment, (iv) is based on dollar-denominated lending and thus is in 
keeping with the Department's policy of matching the denomination of 
the interest rate to that of the transactions to which it applies, and 
(v) ensures parity with the calculated net interest expenses for U.S. 
sales.
    Petitioners also object to KTN's failure to weight-average the 
interest rates by the outstanding loan amounts, and chides KTN for 
failing to even list the amounts of these loans in the relevant exhibit 
to its supplemental response. For the final determination, petitioners 
urge the Department to continue to base KTN's U.S. interest rate on the 
prime rate plus one percent, or 9.5 percent. Petitioners' Case Brief at 
57.
    In rebuttal, KTN disagrees with petitioners assertions concerning 
home market interest rates, arguing that they have overlooked the fact 
that the Department's verification outline explicitly requested that 
KTN provide Fried. Krupp's short-term interest rate. In response to 
this request, claims KTN, it included with its opening-day correction 
letter the short-term interest rate for Fried. Krupp which was 
subsequently verified by the Department. Furthermore, KTN argues, the 
Department has the option of accepting new information at verification 
provided it serves to corroborate, support, or clarify information 
already on the record.
    Further clarifying its position, KTN argues that, contrary to 
petitioners' assertions, KHSP never claimed that its short-term 
borrowings were from Fried. Krupp. Rather, KTN contends, KHSP's short-
term borrowings were made through a Krupp central cash management 
system administered by KFSI. KTN argues that it has never claimed that 
the Fried. Krupp short-term Deutsche-mark-denominated interest rate 
should be applied to its U.S. sales. KTN asserts that the short-term 
interest rate that should be examined is KHSP's borrowing rate from the 
cash management system run by KFSI, which is an entirely separate cash 
management system from that run by Fried. Krupp. KTN's Rebuttal Brief 
at 46.
    Regarding petitioners' concerns about the arm's-length nature of 
KHSP's interest rate, KTN argues that the Department examined this 
information during verification and found no discrepancies. 
Furthermore, contends KTN, petitioners assume that since KHSP is 
borrowing from an affiliated party, the interest rate charged by KFSI 
cannot be at arm's length. However, KTN argues that a given percentage 
of Krupp USA's capital comes from banks at market rates and the 
remainder comes from the central Krupp (not Fried. Krupp) cash 
management system. KTN also cites in support of its argument a passage 
from the KFSI cash management agreement.
    KTN also takes issue with petitioners' questioning the methodology 
of deriving a rate as a simple average of daily rates during the POI. 
KTN contends that whether the rates were based on a simple average or a 
weighted average, the short-term interest rate would be almost 
identical. KTN's Rebuttal Brief at 47.
    Finally, KTN urges the Department to use the Federal Reserve rate 
at the time of the transaction if KHSP's reported short-term interest 
rate is not used, and not the rate assessed by KHSP as late-payment 
interest. KTN suggests that this approach would be consistent with the 
Department's practice, in the absence of borrowings in the proper 
currency, to rely upon publicly-available information to establish a 
short-term interest rate. Id., at 48, citing Flat Products From Canada, 
64 FR at 2176.
    Department's Position: We agree with KTN. Regarding KTN's home 
market interest rate, as stated in the KTN Preliminary Analysis 
Memorandum at 12, KTN failed to provide specific information requested 
in its November 16, 1998 Section B supplemental response regarding the 
average short-term interest rate for Fried. Krupp, one of KTN's parent 
companies. Rather, KTN reported the rate at which it borrowed funds 
from Fried. Krupp. As a result, in the Preliminary Determination we 
used this rate as non-adverse facts available on the basis that the 
average rate of borrowing between KTN and Fried. Krupp would reasonably 
be lower than the average lending rate between Fried. Krupp and an 
unaffiliated lender. However, as part of our January 7, 1999 home 
market verification agenda, we specifically requested this information 
again. During verification KTN presented the Department with 
information pertaining to Fried. Krupp's short-term cost of borrowing 
which was verified without discrepancy. While petitioners note that KTN 
failed to report this information when originally requested, it did 
comply with our later requests. Therefore, for these final results we 
have used the average short-term interest rate between Fried. Krupp and 
its unaffiliated lender.
    In addition, KTN's Section C supplemental response indicated that 
KHSP's U.S. short-term borrowing rate for loans from Krupp's central 
cash management system were not at arm's length when compared with 
publicly-available information placed on the record by KTN. See KTN's 
September 28, 1998 Section C supplemental response. Because, as 
indicated above, KTN did not provide the requested information on the 
specific short-term rates at which Fried. Krupp borrowed, and because 
the submitted rates were not at arm's length, we preliminarily 
recalculated KTN's credit expense using the publicly-available prime 
lending rate of 8.5 percent reported by KTN, increased by one percent 
to approximate a commercially-available lending rate. However, as part 
of its January 6, 1999 submission, KTN provided the short-term 
borrowing rate from the Krupp central cash management system run by 
KFSI. In addition, our U.S. verification agenda again requested that 
KTN provide information pertaining to the short-term borrowing rate of 
Fried. Krupp. See U.S. Verification Agenda, January 23, 1999 at 14. As 
part of KTN's U.S. verification we examined KHSP's annual cost of 
borrowing, comparing the short-term borrowing rates between KHSP's 
affiliated and unaffiliated lenders, and noted no discrepancies. See 
KHSP Verification Report at 21. Based on this comparison, we have 
determined that KHSP's affiliated-party lending rate was at arm's 
length. Therefore, based on information submitted on the record 
subsequent to our Preliminary Determination, for these final results we 
have used KHSP's short-

[[Page 30735]]

term lending rate from Krupp USA Financial Services.

Comment 15: U.S. Indirect Selling Expenses

    To derive its U.S. ISE ratio, KHSP first isolated those expenses it 
could attribute specifically to its Wayne, New Jersey sales division 
which handled only sales of subject merchandise. KHSP then allocated a 
portion of the remaining ``unidentifiable'' selling expenses (i.e., 
those attributable to KHSP's selling activities generally) to sales of 
subject merchandise on the basis of sales value. Finally, KHSP divided 
the sum of the Wayne office expenses and the allocated general selling 
expenses by the total value of sales through the Wayne office. 
Petitioners argue, however, that the use of an ISE ratio applicable to 
the operations of KHSP as a whole (i.e., total KHSP ISEs divided by 
total KHSP sales value) is preferable. Petitioners' Case Brief at 45.
    Furthermore, petitioners argue that the Department should deny 
KHSP's proposal to reduce the total ISEs by amounts for foreign 
exchange gains and losses and interest expenses, as they are applicable 
specifically to KHSP's CEP sales operations. With respect to interest 
expenses, petitioners argue, KHSP has failed to provide any evidence 
demonstrating that the amount of ISEs should be reduced by interest 
expenses. Petitioners cite Cold-Rolled and Corrosion-Resistant Carbon 
Steel Flat Products From Korea, 64 FR 12927 (March 16, 1999) (Flat 
Products from Korea III), wherein the Department stated that:

    The Department disagrees with respondents' assertions that the 
Department's policy is to exclude interest expenses of U.S. sales 
affiliates from U.S. indirect selling expenses because imputed 
credit and inventory carrying cost expenses are already deducted 
from the starting price. . . . [I]nterest expenses incurred by sales 
affiliates may relate to activity other than the financing of 
inventory or accounts receivable, and still be associated with sales 
of subject merchandise.

Petitioners' Case Brief at 46, quoting Flat Products From Korea III, 64 
FR at 12931.
    Regarding its allocation of U.S. ISEs, KTN argues that the 
petitioners' suggested methodology for allocating these expenses is at 
odds with section 772(d) of the Tariff Act, which authorizes the 
Department to deduct from the CEP starting price only those expenses 
incurred in selling subject merchandise. Petitioners' methodology, 
asserts KTN, would serve to overstate ISEs because it would include 
those expenses incurred by KHSP's Atlanta office which deals primarily 
with non-subject merchandise. In contrast, argues KTN, its methodology 
results in a more accurate calculation and is in accordance with 
section 772(d) of the Tariff Act in that it isolates expenses related 
to the sale of subject merchandise. KTN's Rebuttal Brief at 33. KTN 
clarifies that only where it was unable to identify which sales office 
incurred a given expense did it allocate the expense on the basis of 
overall sales value. KTN argues that the Department should accept its 
reported ISE ratio for U.S. sales in light of the Department's 
successful verification of these expenses.
    With respect to the second argument raised by petitioners, KTN 
responds that it appropriately deducted foreign exchange gains and 
losses and interest expenses from its total ISEs. As noted, because 
section 772(d) of the Tariff Act authorizes the Department to deduct 
from the CEP starting price only those ISEs incurred in the sale of 
subject merchandise, and because the record indicates that KHSP clearly 
incurred no foreign exchange gains or losses on the sale or purchase of 
subject merchandise during the POI, a downward adjustment to exclude 
these amounts is justified. KTN's Rebuttal Brief at 35.
    Similarly, argues KTN, an adjustment for net interest expenses is 
warranted. KTN disputes petitioners' suggestion that these expenses 
should be included in both its financial expenses and its ISEs. In 
fact, KTN claims, in Flat Products from Korea III the Department stated 
that it would exclude ``some portion or all of a U.S. sales affiliate's 
interest expenses in its calculation of indirect selling expenses. * * 
* To the extent that a U.S. affiliate's interest expenses are 
associated with non-subject merchandise, the Department does not deduct 
them from the CEP starting price.'' Accordingly, the Department 
``excluded interest expenses associated with non-subject merchandise'' 
and then ``reduced the remaining amount for interest expense for an 
amount attributable to financing of accounts receivable and inventory, 
leaving nothing left to include in the calculation of indirect selling 
expenses.'' KTN's Rebuttal Brief at 36, quoting Flat Products From 
Korea III, 64 FR at 12931. KTN argues that the Department, in a manner 
consistent with Flat Products from Korea III and section 772(d) of the 
Tariff Act, should allow a downward adjustment to KHSP's reported ISEs 
for interest expenses, as ``there is no portion of KHSP's interest 
expense remaining to include in the calculation of indirect selling 
expenses after (1) excluding interest expenses associated with non-
subject merchandise, and (2) reducing the remaining interest expense to 
account for amounts already reported as imputed expenses.'' Id.
    Department's Position: We agree in part with petitioners. With 
regard to the manner in which KHSP allocated its U.S. selling expenses, 
as noted above, KHSP was able to identify certain ISEs associated with 
its Wayne, New Jersey sales office. Those expenses which could not be 
attributed specifically to the Atlanta or Wayne offices were allocated 
to Wayne on the basis of sales value. KHSP then summed the total 
expenses attributable to the Wayne operations and those expenses 
allocated to sales from Wayne and divided by the Wayne sales value to 
derive its ISE ratio. See KHSP Verification Report at 23 through 26 and 
Exhibit 8. While petitioners argue for a company-wide approach, we find 
no evidence that KHSP's allocation methodology is distortive or 
inaccurate. With respect to the first step in KHSP's allocation of its 
ISEs (i.e., the isolation of the Wayne office's expenses), we verified 
fully that the Wayne office dealt in subject merchandise exclusively as 
well as the manner in which KHSP determined which expenses to include. 
Regarding the second step in the allocation process (i.e., the 
allocation of ``unidentifiable'' expenses on the basis of Wayne 
office's sales value), we have no reason to believe this approach 
results in distortions or somehow understates U.S. ISEs.
    In a recent administrative review involving Japanese tapered roller 
bearings the Department employed an approach to recalculate respondent 
NTN's ISEs similar to the second step in KHSP's allocation. We first 
summed NTN's total U.S. ISEs, multiplied this amount by the ratio of 
covered merchandise to total sales and, finally, divided the resulting 
figure by sales of covered merchandise to derive an ISE ratio. See, 
e.g., 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, 63 FR 
63860, 63867 (November 17, 1998). For this final determination we have 
concluded that the manner in which KHSP allocated its U.S. ISEs is 
neither distortive nor inaccurate and, in fact, reflects accurately 
KHSP's experience with respect to sales of subject merchandise during 
the POI. We have, accordingly, accepted KHSP's methodology.

[[Page 30736]]

    However, we agree with petitioners concerning KHSP's claimed 
downward adjustments to U.S. ISEs for exchange rate gains and losses 
and interest expenses. In Belgian Stainless Plate in Coils the 
Department, over the respondent's objections, included interest 
expenses in the calculation of ISEs because the record did not 
demonstrate that these expenses arose from the financing of inventory 
or accounts receivable and were not associated solely with non-subject 
merchandise. To the extent that interest expenses are shown to relate 
to the financing of accounts receivable and inventory, we normally will 
not include them in the calculation of ISEs. In Belgian Stainless Plate 
in Coils, however, we concluded that

    * * * the Department has included U.S. affiliate interest 
expenses in the calculation of U.S. ISEs independent of our 
calculation of imputed credit expenses, even if the interest 
expenses in question constituted part of the basis for determining 
the interest rate used to calculate the imputed credit expenses. * * 
* [W]e note that the record evidence is not clear these interest 
expenses reflected short-term debt. More importantly, the short-term 
or long-term nature of the debt is irrelevant in this context, given 
that either type may relate to subject merchandise and involve 
activities other than financing of inventory or receivables.

Id., 64 FR at 15488.
    As in Belgian Stainless Plate in Coils, we are unable to determine 
from the record whether or not KHSP's claimed interest offset to ISEs 
relates to the financing of inventory or accounts receivable. The only 
information on the record relating to KHSP's interest expenses is a 
worksheet prepared for verification identifying the amount of interest 
expenses recorded under certain account codes. See KHSP Verification 
Report at Exhibit 8. This itemization does not allow us to determine 
the nature of the loans for which these interest expenses were 
incurred, nor has KHSP provided any narrative explanation regarding 
such expenses. Accordingly, for this final determination we have denied 
KTN's claimed offset to ISEs for interest expenses. KTN has likewise 
provided no convincing evidence to support its claimed downward 
adjustment to U.S. ISEs to account for exchange rate gains and losses. 
The most we are able to determine from the record is the aggregate 
amount of POI exchange rate gains and losses reflected in a worksheet 
which accompanies Exhibit 8 of the KHSP Verification Report. Absent 
information regarding the circumstances under which these gains and 
losses were incurred, we have no basis for excluding them from KHSP's 
ISEs; accordingly, we have denied KHSP's offset to its selling expenses 
for exchange rate gains and losses.

Comment 16: Charges by Affiliated Freight Carrier

    Petitioners argue that, as articulated in a Departmental memorandum 
in Large Newspaper Printing Presses from Japan, the Department requires 
evidence from a respondent that charges for goods or services provided 
by affiliated parties were made at arm's length. However, petitioners 
claim, KTN has provided no such evidence with respect to charges it 
incurred for international freight services provided by an affiliated 
carrier. In fact, maintain petitioners, an analysis which it conducted 
using KTN's sales data demonstrates that the international freight 
charges for a substantial portion of those transactions involving KTN's 
affiliated carrier were not at arm's length. As non-adverse facts 
available, petitioners argue that the Department should replace those 
reported international freight expenses charged by an affiliated 
carrier deemed not to reflect arm's-length prices with port-specific, 
weighted-average, arm's-length ocean freight charges derived from 
unaffiliated CEP freight transactions.
    KTN responds that freight charges for those U.S. sales shipped by 
an affiliated carrier, when evaluated in total, were at arm's-length 
prices and, as such, do not warrant an adjustment. Using the same 
arm's-length methodology employed by petitioners in their October 15, 
1998 deficiency comments, KTN claims to have performed an analysis of 
the revised data submitted with its January 6, 1999 supplemental 
response. The results of its analysis, argues KTN, clearly demonstrate 
that the transactions between KNE and the affiliated carrier were at 
arm's length for two of the three U.S. ports to which the carrier 
shipped merchandise. KTN's Rebuttal Brief at 37 and 38.
    If the Department determines that an adjustment is necessary, avers 
KTN, it should disregard petitioners' argument for an adjustment factor 
which is based on prices to different final destinations. Instead, 
argues KTN, the Department should conduct an analysis of the correct 
arm's-length adjustment which uses as its final point of comparison the 
relative prices for all transactions at issue rather than the prices by 
port of destination.
    Finally, KTN argues, if the Department determines that a port-
specific adjustment is appropriate, it should only apply an adjustment 
factor to those transactions shipped to the specific port for which 
ocean freight charges were deemed not to be at arm's length.
    Department's Position: We agree with petitioners that, for those 
transactions shipped by KTN's affiliated carrier, the claimed expenses 
were not at arm's length. After reviewing the data from KTN's January 
6, 1999 submission, we have determined that for two of the three ports 
to which the affiliated carrier shipped merchandise, the affiliated 
carriers' prices were not at arm's length when compared to non-
affiliated carriers' prices to the same port. The results of our 
analysis are more fully described in the Final Analysis Memorandum. We 
have not adopted KTN's suggestion to base our arm's-length analysis on 
the relative prices for all transactions. This approach would compare 
prices charged by unaffiliated and affiliated carriers shipping to 
different destinations for which ocean freight charges would presumably 
vary widely. For this final determination we have applied a port-
specific adjustment factor as described in our Final Analysis 
Memorandum to those sales transactions shipped by KTN's affiliated 
carrier for which ocean freight charges were deemed not to be at arm's 
length.

Comment 17: Warranty Expenses

    In the home market KTN reported expenses associated with warranty 
claims on both a transaction-specific and an allocated basis. However, 
KTN reported only allocated warranty expenses for its U.S. CEP sales. 
Petitioners argue that KTN was uncooperative by refusing to provide 
transaction-specific U.S. warranty expenses incurred by KHSP for CEP 
sales. Given that KTN was able to report transaction-specific warranty 
claims in the home market, petitioners see no reason why KTN would have 
been unable to do the same with respect to U.S. CEP sales. Petitioners 
offer as evidence of KTN's ability to report these expenses on a 
transaction-specific basis KTN's statement in its September 29, 1998 
questionnaire response that ``respondents maintain a log of credit and 
debit memos that includes warranty claims for the subject 
merchandise.'' Petitioners' Case Brief at 51, quoting KTN's September 
29, 1998 section C response at C-49.
    Petitioners suggest that KTN's attempt in its supplemental 
questionnaire response to justify an allocation in preference to 
transaction-specific reporting is not adequate. In fact, petitioners 
contend, the fact patterns regarding U.S. warranty claims bear a 
similarity to those of the home market for which KTN reported sale-
specific

[[Page 30737]]

warranty expenses. Petitioners further argue that while the Department 
found only minor discrepancies in its verification of KTN's home market 
transaction-specific warranty expenses, such was not the case for its 
allocated warranty expenses. KTN officials admitted, petitioners claim, 
that the warranty expense total was calculated incorrectly due to the 
erroneous inclusion of a billing adjustment category among warranty 
claims when compiling the response. Petitioners' Case Brief at 52. In 
light of these alleged discrepancies, petitioners urge the Department 
to apply the highest single absolute value for reported CEP warranty 
expenses to all CEP sales of prime merchandise and to use zero for home 
market warranty expenses. Id. at 53.
    As an additional matter, petitioners maintain that the respondent's 
reliance throughout the course of this investigation on AFBs, 62 FR 
2081 (January 15, 1997) is misplaced. Petitioners claim that AFBs did 
not, as KTN suggests, advance the proposition that average allocated 
warranty expenses are preferable to transaction-specific expenses. 
Rather, contend petitioners, the Department stated in AFBs that it 
would accept allocated warranty expenses provided it was not feasible 
for the respondent to report the expense on a more specific basis.
    Petitioners' argument, KTN asserts, is a misinterpretation of both 
the law and the facts in this case. KTN argues that while the 
Department's regulations express a preference for transaction-specific 
reporting as a whole, the Department has for many years explicitly 
recognized that warranty expenses may be reported on an allocated 
basis. KTN argues that the reason for this practice is twofold. First, 
KTN asserts, warranty obligations arise from the universe of all 
transactions for which the warranty is offered whereas warranty 
expenses arise only on the few transactions for which the warranty is 
invoked. KTN argues that it is wrong to attribute the cost of a general 
obligation only to those transactions for which a specific expense was 
incurred. KTN's Rebuttal Brief at 40. Second, claims KTN, the 
Department has noted in AFBs that ``it is not possible to tie [POI] 
warranty expenses to [POI] sales, since the warranty expenses can be 
incurred on pre-[POI] sales. Likewise, [the respondent] may not incur 
warranty expenses on [POI] sales until a future time period.'' Id., 
quoting AFBs 62 FR at 2098 (KTN's redactions).
    KTN argues that, like the respondent in AFBs, KTN and KHSP have 
reported warranty expenses in the most feasible manner given each 
company's circumstances and that its chosen methodology is neither 
distortive nor inaccurate. KTN asserts that it attempted to assign home 
market warranty expenses to specific product groups, but discovered 
that, due to limitations arising from claims where information 
regarding product type was not recorded or not available, it was not 
possible to do so. In those instances, KTN notes, its computer system 
assigned these unattributable expenses to a single product group. As a 
result, KTN argues, the attempted product group allocations did not 
properly reflect claims within the group. KTN points out that as soon 
as it discovered this shortcoming, it prepared a revised worksheet that 
allocated warranty expenses across all subject merchandise, 
differentiating them only by market. KTN further asserts that, contrary 
to petitioners' contention, the Department did in fact verify and 
accept KTN's allocated warranty expenses during the home market 
verification. Id. at 41.
    With respect to the manner in which KHSP reported warranty 
expenses, KTN notes that KHSP tabulated the warranty expenses 
associated with specific transactions and reported those expenses on an 
allocated basis. KTN asserts that the Department was able to verify 
that KHSP accurately captured all expenses associated with warranty 
claims. Moreover, argues KTN, its methodology does not lead to 
inaccuracies or distortions because in both the home market and the 
United States warranty expenses incurred on stainless steel merchandise 
were allocated across sales of stainless steel merchandise on the basis 
of value. Id. at 42.
    Furthermore, KTN argues, even if the Department should reject KTN's 
argument for allocating warranty expenses, the use of adverse facts 
available is not appropriate. KTN disagrees with petitioners' 
characterizations that KTN was ``uncooperative'' and ``steadfastly 
refused to report invoice-specific warranty expenses'' for U.S. sales. 
In fact, KTN claims, it fully complied with the Department's requests 
for information regarding warranty expenses and has provided the 
Department with verified information which would allow it to apply 
warranty expenses to U.S. sales on a transaction-specific basis, 
thereby rendering the application of adverse facts available especially 
unnecessary.
    Department's Position: As the Department verified, KTN and KHSP are 
generally able to tie warranty claims to specific sales even though 
they initially reported warranty expenses on an allocated basis. With 
respect to its home market sales, for its January 6, 1999 supplemental 
response KTN searched its database through September 1998, or six 
months after the close of the POI, for warranty claims associated with 
subject merchandise and, where possible, linked these to POI sales in 
order to report these expenses on a transaction-specific basis. 
Regarding U.S. warranty expenses incurred by KHSP, we noted during our 
verification that its debit and credit memos bore references to the 
original invoices which would have allowed it to track such claims on a 
sale-specific basis, even though KHSP had reported these expenses using 
an allocation in its original submissions. As indicated in the KHSP 
Verification Report, we verified KHSP's allocated warranty expenses and 
examined the manner in which the company tracked warranty claims.
    However, notwithstanding KTN's and KHSP's ability to track these 
expenses on a transaction-specific basis, we have long recognized that 
the nature of warranty expenses (i.e., that claims made for specific 
sales are often made long after the close of a given period of 
investigation or review) often renders necessary the use of an 
allocation. While KHSP maintains a log containing, inter alia, credit 
memos relating to claims, there is no guarantee that a review of this 
log six months after the completion of the POI will accurately capture 
all warranty expenses relating to POI sales, as the potential remains 
for claims against POI sales to be presented at yet a later date. This 
same potential for inaccuracy also affects home market sales because 
there are likely to have been claims made on subject POI transactions 
which were processed after the date through which KTN searched its 
database (i.e., September 1998). As we noted in AFBs, it is not always 
possible to tie POI warranty expenses to POI sales, since the warranty 
expenses can be incurred during the POI on sales before the POI; 
likewise, a respondent may not incur warranty expenses on POI sales 
until well after it is required to submit those sales to the 
Department.
    Therefore, we agree with KTN and have used the verified information 
on its allocated warranty expenses for home market and U.S. sales. With 
respect to home market sales, however, because the Department found 
minor discrepancies between the reported and verified allocated 
warranty expenses, in accordance with section 776(a)(D) of the Tariff 
Act, we have based the warranty adjustment on the facts available. We 
calculated the lowest reported ratio of warranty expenses using the

[[Page 30738]]

transaction-specific warranty expense and applied this ratio to all 
home market sales. This calculation is further detailed in our Final 
Analysis Memorandum; see also KTN Sales Verification Report at pages 47 
and 48.

Comment 18: Other Corrections at Verification

    Petitioners highlight three items from the U.S. and home market 
verification reports which were specified in the opening-day correction 
letters. First, in light of KHSP's admission at verification that there 
were certain sales for which it did not apply the expense ratio 
calculated for certain brokerage and handling charges, petitioners 
request that the Department correct the reported CEP sales listing to 
ensure that all transactions reflect this charge. In addition, 
petitioners urge the Department to revise KHSP's reported U.S. duty 
expenses for resales to reflect the corrected ratio KHSP calculated 
prior to verification. Finally, petitioners request that the Department 
apply to EP sales marine insurance charges which KTN initially did not 
report.
    KTN does not dispute petitioners' comments with respect to these 
issues and points out that it brought these items to the attention of 
the Department during the first day of the home market and U.S. 
verifications.
    Department's Position: For this final determination we have made 
revisions to our computer programs to correct for these errors.

U.S. Reseller Issues

Comment 19: Facts Available for U.S. Reseller

    Petitioners present a number of grounds for disregarding the 
questionnaire response of KTN's affiliated processor and reseller in 
toto and basing the margin for this body of U.S. sales transactions on 
adverse facts available. Petitioners accuse U.S. Reseller of (i) 
failing to provide requested sales documentation at verification, (ii) 
misclassifying a significant portion of its sales as being of unknown 
origin by refusing to trace the original suppliers, (iii) failing to 
report physical characteristics of its merchandise essential to the 
Department's sales matching, (iv) classifying sales of prime material 
as secondary, or non-prime, (v) neglecting to report early payment 
discounts granted on its sales, and (vi) mis-reporting further-
manufacturing costs. Petitioners' Case Brief at 82.
    In addition to the alleged shortcomings in U.S. Reseller's sales 
response, petitioners point to a number of problems with U.S. 
Reseller's further-manufacturing COP response, as well. For example, 
petitioners note that U.S. Reseller allocated further-processing costs 
to products which did not undergo further processing. In certain cases 
reviewed at the cost verification, continue petitioners, the output 
weight of the finished goods exceeded the input weight of the original 
master coil, which is, petitioners note, a physical impossibility. 
Furthermore, petitioners assert, U.S. Reseller reported incorrectly 
quantity extras (surcharges for further processing performed on small 
orders), and failed to account for the costs of finishing operations 
performed on the underside of sheet products and ``re-spinning'' single 
coils into several smaller coils. These failings, petitioners aver, are 
``systemic in nature and thus universally applicable'' as they arise 
from the underlying computer program used to identify the 
characteristics of specific products and to assign costs based on these 
identified characteristics. Id. at 99. Petitioners maintain that the 
Department cannot be left the task of reconstructing an accurate 
response; therefore, the only appropriate solution is the application 
of total adverse facts available to the U.S. Reseller portion of KTN's 
response. In the alternative, petitioners urge the Department to apply 
partial adverse facts available for all missing or miscalculated cost 
data and sales adjustments.
    KTN takes issue with petitioners' attempt to portray isolated 
errors discovered at verification as impeaching the entirety of U.S. 
Reseller's sales data. For example, the inability to produce the 
requested surprise sales documentation, KTN avers, stemmed from U.S. 
Reseller's inability to retrieve the relevant sales documentation from 
its archives and represented the only instance in which U.S. Reseller 
was unable to provide documents requested by the Department. KTN 
suggests that given U.S. Reseller's ``questionable'' involvement in 
this investigation through the Department's finding of affiliation, 
U.S. Reseller cannot be held to the same standard as a respondent in an 
ongoing administrative review process.
    KTN also dismisses the significance of any noted reporting errors, 
and attributes these to the computer program developed by U.S. Reseller 
solely to comply with the Department's detailed reporting requirements. 
As a steel service center, KTN maintains, U.S. Reseller has no need to 
track each input stainless steel coil to the finished products as re-
sold to the ultimate end user. As a result, avers KTN, U.S. Reseller 
never developed the computer programming necessary to tie each 
transaction to its input stainless steel. KTN explains that U.S. 
Reseller attempted to accomplish this first by merging data maintained 
separately by U.S. Reseller's different warehouses to develop a list of 
each item sold. U.S. Reseller then had to merge this item list with its 
invoice history file which, KTN continues, would provide links to the 
original customer orders. Aside from errors arising from bad data, 
e.g., data entry errors when originally posting the items, KTN 
suggests, this merger of data was successful in ``the overwhelming 
majority of transactions * * *''. KTN claims that for those invoices 
sourced from multiple input coils, U.S. Reseller developed a computer 
algorithm to match input coil and output sheet and strip on the basis 
of product characteristics and weights consumed versus weights shipped 
to customers. KTN dismisses the subset of erroneous results as ``very 
small and fully identified,'' with potential mismatches of input and 
output material occurring in no more than 4.25 percent of the reported 
transactions. Id. at 70 and 72 (original emphases). Even this subset is 
overstated, KTN claims, by the inadvertent inclusion of sales of non-
subject merchandise. KTN further claims that it identified each of the 
``problematic'' transactions for the cost verification team, 
discounting assertions in the U.S. Reseller Cost Verification Report 
that time constraints precluded any examination of this list.
    KTN ``freely concedes'' that its linking program did not execute 
perfectly. However, KTN insists, any resulting errors were (i) 
identified to the Department, (ii) fully explained, and (iii) only 
affected slightly more than four percent of U.S. Reseller's reported 
sales. Therefore, KTN concludes, ``[t]he accuracy of the remaining 
95.95 percent of transactions is simply not at issue.'' KTN Case Brief 
at 74.
    As for early payment discounts, KTN suggests that the number of 
transactions affected by this error was minuscule. Exhibit 11 of the 
U.S. Reseller Sales Verification Report, KTN notes, included the 
overall value of early payment discounts and their significance 
expressed as percentages of both total sales value and subject 
merchandise sales value. Even were the Department to assume that all 
early payment discounts applied to sales of subject merchandise, 
submits KTN, these discounts are insignificant.
    KTN also disputes the significance of the Department's conclusion 
in the U.S. Reseller Cost Verification Report that U.S. Reseller failed 
to allocate finishing costs for products sold with a ``pre-

[[Page 30739]]

buffed'' bottom finish. U.S. Reseller ``conceded at verification that 
this was a programming error that was simply overlooked,'' KTN asserts. 
Contrary to the U.S. Reseller Cost Verification Report, KTN maintains, 
it fully identified each transaction affected by this error; in any 
event, avers KTN, the quantity of such transactions is trivial, 
involving just 26 items. KTN Case Brief at 75.
    With respect to re-spinning costs, KTN contends that these are 
common to virtually all products sold by U.S. Reseller; as such, argues 
KTN, re-spinning costs are not separately identifiable in U.S. 
Reseller's normal records. KTN claims that as a result U.S. Reseller 
appropriately included re-spinning costs in its calculation of fully-
absorbed factory overhead.
    As for the allocation of costs for processing performed by outside 
vendors, KTN urges the Department to place this matter in perspective 
by considering that processors of both aluminum and stainless steel 
accounted for a minority of the total processing charges incurred by 
U.S. Reseller from outside vendors. U.S. Reseller had no means to 
identify directly the portion of the processing expenses properly 
allocable to stainless versus other products, KTN avers; U.S. Reseller 
acted reasonably, therefore, in allocating these expenses using the 
proportion of stainless to non-stainless processing based on its own 
historical experience. For the Department to assume otherwise, KTN 
objects, is rank speculation. KTN Case Brief at 78. KTN also disputes 
the significance of any discrepancies between processing costs as 
recorded in U.S. Reseller's management reports and the actual amounts 
observed in spot checks conducted by the Department at verification, 
and challenges the fairness of the methods employed in uncovering these 
discrepancies. Prior to January 1998, KTN asserts, computer records 
allowing vendor-specific calculations of outside processing costs were 
not available. U.S. Reseller, therefore, relied upon its management 
reports, ``the only consistent source of information on processor-
specific outside processing costs covering the entire POI.'' KTN Case 
Brief at 79. Furthermore, KTN insists, U.S. Reseller fully explained 
these discrepancies as arising from credit notes or unpaid invoices 
issued after U.S. Reseller's books for a given month had been closed. 
Claiming that there is no evidence that the discrepancies introduce 
bias in any particular direction, KTN suggests that the Department has 
no grounds for concluding that the charges of outside processors has 
been either over- or under-stated.
    KTN further argues that there is no mystery about the difference 
between the verified quantity of processed goods used in calculating 
yield losses and the higher figure included in KTN's section E further-
manufacturing response: for its first response U.S. Reseller had 
assumed erroneously that all of its merchandise had been subject to 
further processing. KTN insists that U.S. Reseller identified and 
corrected this error in its January 6, 1999 supplemental section E 
response. The Department was able to trace the corrected actual amount 
without discrepancy during the U.S. Reseller cost verification. KTN's 
Case Brief at 80.
    Department's Position: We agree with petitioners that, pursuant to 
section 776(a) of the Tariff Act, total facts available are warranted 
with regard to sales through KTN's affiliated further manufacturer. In 
the instant case the use of total facts available for the U.S. Reseller 
portion of KTN's section C response is warranted because the 
methodology and computer programming used by U.S. Reseller to identify 
its products' physical characteristics and to match each of these 
products with its associated costs were found at verification to be 
accomplishing neither end consistently or accurately. Moreover, both 
the frequency of the errors and the absence on the record of 
information necessary to correct certain of these errors serve to 
undermine the overall credibility of the further-manufacturing response 
as a whole, thus compelling the Department to rely upon total facts 
available for U.S. Reseller's database. Reliance upon total facts 
available is required for all further manufactured sales because the 
submitted data do not permit calculation of the adjustments required 
under section 772(d)(2) of the Tariff Act for ``the cost of any further 
manufacture or assembly (including additional material and labor) * * 
*''.
    We also find, as explained below, that the use of an adverse 
inference is appropriate in this case because the record established 
that U.S. Reseller did not cooperate with the Department by acting to 
the best of its ability in responding to our requests for information. 
The manifest and manifold errors in U.S. Reseller's response evidence a 
failure to conduct even rudimentary checks for the accuracy of the 
reported further-processing data. Indeed, a reasonable check by company 
officials could have shown that (i) products that underwent no further 
processing were being assigned further-processing costs, (ii) further-
processed products were not being assigned their appropriate processing 
costs, (iii) coils passing through certain processes were not being 
allocated any cost for the process, and (iv) the output width of slit 
coils generated by a given master coil exceeded the original width of 
that input coil.
    The Department may correct reported costs or adjust incorrect data 
in response to its findings at verification. See, e.g., Extruded Rubber 
Thread From Malaysia, 64 FR 12967, 12976 (March 16, 1999). In this 
case, however, correction of the specific flawed data is not a viable 
option because of the high percentage of errors found through our 
testing (nearly 40 percent of the items tested were found to be in 
error). In addition, some of these errors cannot be corrected using 
information on the record. More importantly, the fundamental nature of 
these errors raises concerns as to the validity not only of the data 
subjected to direct testing, but of the remainder of the response as 
well.
    The Department's August 3, 1998 antidumping questionnaire put 
interested parties on notice that all information submitted in this 
investigation would be subject to verification, as required by section 
782(i) of the Tariff Act, and, further, that pursuant to section 776 
the Department may proceed on the basis of the facts otherwise 
available if all or any portion of the submitted information cannot be 
verified. In addition, in letters dated February 17 and 23, 1999, the 
Department provided U.S. Reseller with the sales and cost verification 
agendas it intended to follow, both of which repeated the warning that 
any failure to verify information could result in the application of 
facts available. The cost verification agenda identified nine 
transactions that the Department intended to test. U.S. Reseller had a 
full week to gather supporting documentation for these nine 
transactions and to test for itself the accuracy of the further 
manufacturing data. Clearly, U.S. Reseller did not avail itself of 
these opportunities, since our testing at verification revealed that 
costs for three of the nine selected transactions contained fundamental 
and significant errors. See U.S. Reseller Cost Verification Report at 
14 through 17. When the Department then selected nine additional 
transactions for review, four of these were also found to reflect 
significant errors. These included allocating processing costs to non-
processed material (id. at 15), mis-allocating quantity surcharges 
(id.), and, more troubling, reporting finished weights which exceeded 
the weight of the input material (``[t]his is impossible

[[Page 30740]]

and for this reason we could not verify the amount of processing for 
this observation.'' Id.).
    The first step identified in the Department's verification agendas 
calls for the respondent, at the outset of verification, to present any 
errors or corrections found during its preparation for the 
verification. As we stated above, none of the errors discussed here 
were presented by U.S. Reseller at the outset of verification; yet many 
of them were manifestly apparent and U.S. Reseller was obligated to 
notify the Department prior to the start of verification of these 
problems.
    We disagree with KTN's assertion that the numerous errors 
identified by the Department affect only a small number of products out 
of the possible universe of transactions and that the effect of the 
errors is minuscule. As mentioned above, U.S. Reseller created a 
computer program to respond to the Department's questionnaire which 
sought to match an input coil to each output coil sold and to assign a 
cost for each processing step through which the finished coil 
supposedly passed. When we tested this computer program at verification 
to assess its accuracy and reliability, we found that seven of eighteen 
tested transactions contained errors in either the allocation of 
processing costs or in the matching of input coils to output coils. In 
two of these cases U.S. Reseller had assigned processing costs to 
products which had, in fact, undergone no processing. We note that this 
discrepancy arose from the input coils and output coils identified by 
U.S. Reseller's own computer program. In another transaction the 
combined widths of the finished products were greater than the original 
width of the input coil as identified by the system, an obvious 
physical impossibility that should have been identified by U.S. 
Reseller as an error. The nature of these errors raises serious doubts 
as to the accuracy of the overall program used to match input master 
coils to output slit coils as sold. It also serves to undercut KTN's 
assertions that KTN acted to the best of its ability in compiling this 
portion of its section C response. Further, several of these errors 
served to understate the costs of further processing by shifting 
portions of these costs to non-further-processed merchandise. Since 
these errors affect the entire population of products sold (i.e., both 
processed and unprocessed products), it is not possible for the 
Department to isolate the problems and adjust for the errors 
accordingly.
    The program also failed to assign properly certain finishing costs. 
Certain coils with a pre-buff finish applied to the underside by the 
reseller had no finishing costs reported for the additional processing. 
Finally, other transactions contained errors in the application of 
surcharges for processing small quantity orders. In the samples tested 
U.S. Reseller had reported quantity extra charges in excess of what 
should have been reported. This error led to an understating of the 
variance between the costs as allocated for purposes of the response 
and the costs as maintained in the U.S. Reseller's financial accounting 
system. Once again, both errors reduced the costs allocated to further 
processed products, thus creating further doubts as to the accuracy of 
the underlying reporting methodology.
    We also find unpersuasive KTN's suggestion that because U.S. 
Reseller had to develop the computer program as a result of the 
Department's highly detailed questionnaire it should therefore be held 
blameless for any errors arising from its implementation of its chosen 
computer logic. We must stress that every respondent in every 
antidumping investigation is faced with the question of how best to 
sort and retrieve the sales and cost data as maintained in its normal 
course of business to respond to our questionnaire. This necessarily 
entails the winnowing of its larger universe of sales to capture only 
that merchandise subject to our investigation, and the further creation 
of unique data fields to reflect the specific model-match criteria and 
the applicable expense adjustments set forth in the questionnaire. 
Finally, the resulting database must be refined to present the 
transaction-specific information on sales and adjustments in the 
precise formats required by the Department. That U.S. Reseller, like 
virtually all respondents in antidumping proceedings, chose to rely 
upon a computer program as the easiest means to accomplish this end is 
entirely unremarkable and in no way mitigates the failings found in 
this case. We note further that KTN and a number of its home market and 
U.S. affiliates largely succeeded in supplying data relating to sales, 
expenses, and COP in responding to the same antidumping questionnaire 
with equally detailed reporting requirements. The surfeit of errors in 
U.S. Reseller's data was not the result of any unduly burdensome 
reporting requirements imposed by the Department; rather, these 
shortcomings resulted in their entirety from U.S. Reseller's reliance 
on faulty computer programming and data which U.S. Reseller apparently 
failed to review prior to verification.
    In addition, we disagree with KTN's assertion that it was able to 
quantify the extent of the cost errors on the final day of 
verification. First, we note that U.S. Reseller made no attempt to 
explain or quantify two of the errors discovered by the Department, the 
allocation of processing costs to unprocessed material and the 
misreporting of the small-quantity surcharge. More to the point, due to 
the volume of information that must be verified in a limited amount of 
time, the Department does not look at every transaction, but rather 
samples and tests the information provided by respondents. See, e.g., 
Bomont Industries v. United States, 733 F. Supp. 1507, 1508 (CIT 1990) 
([v]erification is like an audit, the purpose of which is to test 
information provided by a party for accuracy and completeness) and 
Monsanto Company v. United States, 698 F. Supp. 275, 281 (CIT 1988) 
(``[v]erification is a spot check and is not intended to be an 
exhaustive examination of a respondent's business''). It has been the 
Department's long standing practice that if no errors are identified in 
the sampled transactions, the untested data are deemed reliable. 
Conversely, if errors are identified in the sample transactions, the 
untested data are presumed to be similarly tainted absent satisfactory 
explanation and quantification on the part of the respondent. See, 
e.g., Tatung Company v. United States, 18 CIT 1137 (December 14, 1994). 
This is especially so if, as here, the errors prove to be systemic in 
nature. The fact remains unchallenged that for two days of a scheduled 
three-day verification we tested a number of further-manufactured 
transactions to assess the reliability of U.S. Reseller's methodology 
for reporting costs and discovered numerous errors. U.S. Reseller 
claimed on the last day of verification that it had reviewed its 
further-manufacturing data and isolated the magnitude of these errors. 
KTN's assertion in its case brief that U.S. Reseller succeeded in 
identifying all of the errors is an unsubstantiated ipse dixit which 
could not be verified in the time remaining. The only way to test this 
eleventh-hour claim would have been to re-verify the entire further-
manufacturing database to ensure that all erroneous transactions had, 
in fact, been captured. Moreover, as indicated in the verification 
outlines presented to KTN and U.S. Reseller, the proper time for U.S. 
Reseller to check the accuracy of its reported data was before these 
data were submitted, or, at the latest, prior to the start of the 
verification. We presented KTN and its U.S. Reseller

[[Page 30741]]

with the cost verification agenda one week in advance precisely to 
allow them to prepare properly for verification. Had U.S. Reseller 
reviewed the accuracy of the computer program used to report its 
further manufacturing costs prior to verification, it could have 
identified the errors and presented them to the Department on the first 
day of verification. We consider it inappropriate for respondents to 
expect the Department to retest the entire further manufacturing 
database on the last day of verification after the Department uncovers 
numerous errors as a result of its routine testing. Furthermore, the 
requirements of section 782(d) that the Department provide a respondent 
the opportunity to remedy such errors is inapplicable. Rather, as we 
stated in Certain Cut-to-Length Carbon Steel Plate from Sweden,

    [w]e believe [respondent] SSAB has misconstrued the notice 
provisions of section 782(d) of the [Tariff] Act. Specifically, we 
find SSAB's arguments that the Department was required to notify it 
and provide an opportunity to remedy its verification failure are 
unsupported. The provisions of section 782(d) apply to instances 
where ``a response to a request for information'' does not comply 
with the request. Thus, after reviewing a questionnaire response, 
the Department will provide a respondent with notices of 
deficiencies in that response. However, after the Department's 
verifiers find that a response cannot be verified, the statute does 
not require, nor even suggest, that the Department provide the 
respondent with an opportunity to submit another response.

Certain Cut-to-Length Carbon Steel Plate from Sweden, 62 FR 18396, 
18401 (April 15, 1997).
    Finally, we reject KTN's arguments with respect to the propriety of 
drawing an adverse inference with respect to a respondent ``whose 
involvement in the proceeding was questionable in the first place.'' 
KTN goes to great pains to assert that it never had control over the 
data submitted by U.S. Reseller; therefore, any lack of cooperation 
evinced by U.S. Reseller cannot be imputed to KTN. See, e.g., KTN's 
Rebuttal Brief at 73 and Public Hearing transcript at 46 and 47. KTN 
presents the issue as one in which KTN was at the mercy of recalcitrant 
parties, only some of whom could be persuaded to participate in the 
investigation: ``U.S. Reseller's sales and cost data found its way into 
the record of this investigation only after its release was negotiated 
and it was confidentially transmitted to KTN's counsel.'' Id. However, 
KTN's protestations that its officials in Bochum, Germany did not have 
the opportunity to review U.S. Reseller's submitted data for accuracy 
beg the point. The Department has never suggested that KTN was in a 
position to compel a reluctant U.S. Reseller to provide its sales and 
cost data to KTN; rather, the thrust of our affiliation determination 
has consistently been that Thyssen, not KTN, was in a position to 
direct its German and U.S. affiliates to provide complete and timely 
responses to the Department. We suggest here that where it was in KTN's 
interests to do so, Thyssen did precisely that, by instructing selected 
affiliates to cooperate with the Department's investigation. For 
reasons beyond the Department's ken, U.S. Reseller chose to submit 
responses under the guise of a cooperative respondent while withholding 
crucial information to make its responses usable for purposes of 
establishing statutory U.S. price.
    We note that throughout this investigation KTN has been represented 
by legal counsel who certified each of KTN's (and U.S. Reseller's) 
submissions of fact in this case, claiming the counsel had read the 
submission and had ``no reason to believe [it] contains any material 
misrepresentation or omission of fact.'' See 19 CFR 351.303(g). 
Similarly, on January 13, 1999, U.S. Reseller certified that the 
responsible company official had read its submission and that the 
information therein was, to the best of the official's knowledge, 
complete and accurate. See, e.g., KTN's January 15, 1999 section E 
supplemental response. Finally, throughout the preparation for the U.S. 
Reseller verifications and the verifications themselves, counsel were 
present at all times in the conference room. U.S. Reseller was also 
assisted by economic consultants retained by KTN specifically for 
purposes of preparing responses in this antidumping investigation. The 
fact remains that despite its disagreement with the Department's 
decision on affiliation, Thyssen succeeded in persuading U.S. Reseller 
to submit a response; from that moment forward, it was incumbent upon 
U.S. Reseller to submit complete and accurate responses to our 
questionnaires. It was the further responsibility of KTN's legal 
representatives, acting throughout this proceeding on KTN's behalf, to 
ensure that the data it helped prepare were reliable. Finally, the 
record does not reflect that once KTN was directed to submit U.S. 
Reseller's sales and cost information it was having trouble securing 
U.S. Reseller's cooperation (aside from KTN's stated objections for the 
Department's legal reasoning). Had this been the case of KTN painfully 
and laboriously extracting each datum from a recalcitrant unaffiliated 
party, one would expect the record to reflect this in, for example, 
written pleas of an inability to submit the requested data, or appeals 
for modifications to reporting requirements in response to limited 
available data. Instead, there is silence on this point. KTN proceeded 
throughout the investigation as though U.S. Reseller's full cooperation 
was a given, once the Department had notified KTN that the further-
processed sales would be required for our analysis.
    Therefore, the Department concludes that KTN had the resources to 
secure the necessary level of cooperation from U.S. Reseller. In 
addition, the Department finds that, for the reasons discussed above, 
U.S. Reseller failed to cooperate by acting to the best of its ability 
in compiling its further-manufacturing response. Moreover, because the 
U.S. Reseller's information is essential to the dumping determination, 
the use of adverse facts available is appropriate irrespective of KTN's 
involvement in providing the information. See, e.g., Hot-Rolled Steel 
From Japan, 64 FR at 24367. Therefore, consistent with section 776(b) 
of the Tariff Act, we have drawn an adverse inference in selecting 
among the facts available for use in lieu of U.S. Reseller's 
unverifiable data. As adverse facts available we have assigned the 
highest non-aberrational margin calculated on KTN's properly reported 
U.S. sales.

Comment 20: U.S. Sales of Unidentified Origin

    Petitioners accuse KTN of belatedly submitting such vast revisions 
to U.S. Reseller's sales listings as to constitute an entirely new 
response. Petitioners note that on January 6, 1999, KTN reported for 
the first time a significant body of U.S. Reseller's sales 
transactions. These sales data were not only submitted late, 
petitioners aver, but also in many cases were missing essential 
information identifying the manufacturer and the products' physical 
characteristics.
    With respect to unidentified suppliers, petitioners deem 
unpersuasive KTN's evolving explanations for these discrepancies. The 
stainless industry requires strict quality control, petitioners insist, 
including warranty provisions and the routine transmission of quality 
certifications from the producing mill. Out of necessity, U.S. Reseller 
would be able to track merchandise back to its suppliers. Petitioners 
also dismiss as irrelevant KTN's claims that its computer system did 
not permit a full linking of U.S. Reseller's sales transactions to the 
supplying mills. Even if true, petitioners argue, KTN's assertions do 
not obviate its

[[Page 30742]]

responsibility to take the steps necessary to supply the Department 
with complete data including, if necessary, the manual search of paper 
records. Petitioners aver that had KTN raised this issue, i.e., its 
difficulty in reporting accurately all sales, when it received the 
questionnaire in August 1998, ``the Department and petitioners could 
have addressed how best to proceed in a deliberate fashion with KTN.'' 
Petitioners' Case Brief at 86. Petitioners accuse KTN of deliberately 
withholding this information until after the Preliminary Determination 
so it could present the Department with a fait accompli on the eve of 
the Department's verification.
    Petitioners further argue that the Department's verification 
debunked KTN's claims with respect to U.S. Reseller's ability to report 
the supplying mill; of a random sampling of seven invoices involving 
unidentified suppliers, in three cases U.S. Reseller was able readily 
to identify the manufacturer. Petitioners note that three months 
elapsed between U.S. Reseller's initial sales listing of November 16, 
1998 and its final database submitted on February 17, 1999; U.S. 
Reseller's failure to use this time to identify its supplying mills 
demonstrates that it failed to cooperate to the best of its ability. 
The Department's response, petitioners argue, should be recourse to 
adverse facts available.
    Furthermore, petitioners maintain, much of U.S. Reseller's sales 
data includes significant discrepancies such as missing gauge or finish 
information that render the data useless for the Department's analysis. 
As with the missing supplier information, petitioners argue, even if 
U.S. Reseller's computer records did not readily permit collation and 
reporting of this information, a review of U.S. Reseller's sales 
records would have yielded the required product characteristics. 
Petitioners point to the Department's finding at verification that the 
omissions arose from errors such as the inclusion of non-subject 
merchandise (e.g., stainless steel angles) in U.S. Reseller's sales 
listings, data entry errors, or missing values generated by the 
computer program used to merge the various source files used in 
compiling U.S. Reseller's response. U.S. Reseller had ample time, 
petitioners suggest, to conduct a manual review of sales documents to 
remove non-subject merchandise from its response and to supply the 
missing characteristics for the remaining sales of subject merchandise.
    Continuing in their rebuttal brief, petitioners dismiss KTN's 
request for the Department to make extensive corrections to its 
reported data and insist upon the use of adverse facts available. 
Petitioners' Rebuttal Brief at 57. In fact, petitioners suggest, some 
of the proposed corrections are beyond the Department's capacity. For 
example, sales of stainless steel angles which U.S. Reseller 
inadvertently included in its sales listing are not readily discernible 
from the submitted computer sales file. These corrections, petitioners 
maintain, should not be the Department's burden; rather, the Department 
should rely upon adverse facts available for the U.S. Reseller portion 
of KTN's response.
    KTN argues in rebuttal that there is no longer any question that 
the U.S. Reseller could not trace the origin of these sales. KTN's 
Rebuttal Brief at 68. According to KTN, the Department's cost and sales 
verification reports both noted that once U.S. Reseller transfers 
inventory between its locations, its computerized inventory system 
issues a new stock number, thereby erasing the original link with the 
supplying mill. KTN quotes approvingly the Department's conclusion that 
``* * * the Company is unable to identify [the products'] original 
source through the system.'' Id., quoting the Reseller Cost 
Verification Report at 5.
    Rejecting as absurd petitioners' argument that U.S. Reseller could 
have tracked the source manually, KTN claims that, while physically 
possible such a trace would require an inordinate amount of effort and 
would cause extended disruption to U.S. Reseller's business operations. 
The Department, maintains KTN, ``cannot impose such unreasonable 
burdens on respondents * * *''. Id. at 69.
    KTN characterizes petitioners' comments as betraying a fundamental 
misunderstanding of the nature of the additional sales reported on 
January 6, 1999, and why KTN chose to include them. KTN reiterates its 
view that the only transactions which properly should be included in 
the Department's final determination are those which can be established 
affirmatively as having originated at KTN. Consistent with this view, 
KTN argues, its initial U.S. Reseller response included only those 
items sold which could be linked directly through the inventory 
database to a master coil produced by KTN; any transactions which 
lacked this direct link were omitted. KTN justifies this approach by 
suggesting that more likely than not, the unidentified material came 
from a supplier other than KTN, given the relative proportion of 
stainless flat products positively identified as having been supplied 
by KTN.
    KTN insists that the purpose of its later decision to report 
transaction-specific data on the unidentified merchandise was to assist 
with the Department's verification and not to concede that these sales 
should properly be subject to our margin calculations. As to the proper 
treatment of these transactions for the final determination, KTN urges 
the Department to disregard them entirely. In the alternative, KTN 
suggests allocating the unidentified transactions across the three 
concurrent investigations involving stainless sheet in coil (i.e., from 
Germany, Mexico and Italy) based on the verified share of the 
identified sales supplied by each of the respondents in these 
investigations (respectively, KTN, Mexinox, and Acciai Speciali Terni, 
S.p.A.). For this investigation this could be accomplished by 
multiplying the weight of each unidentified transaction by the 
percentage of U.S. Reseller's merchandise purchased from KTN, as 
reflected in the sales sourced from identified suppliers.
    Department's Position: We agree, in part, with petitioners and with 
KTN. In its January 6, 1999 supplemental response KTN reported a large 
quantity of sales by U.S. Reseller which lacked any information 
identifying the supplying manufacturer. As noted, KTN claimed that it 
had no immediate computer link to trace the origin of coils which had 
been transferred between U.S. Reseller's different warehouses. Thus, it 
had included this unidentified mass of sales in each of the sales 
databases filed on the records of the investigations of stainless sheet 
in coils from Germany, Mexico, and Italy.
    As explained in response to Comment 19, we have determined that the 
errors affecting U.S. Reseller's reported sales and cost data, 
including its failure to identify properly the supplier of a major 
portion of its sales, render this portion of KTN's section C response 
unreliable in its entirety for purposes of our margin calculations. 
However, this conclusion does not dispose of the issue of the proper 
treatment of the unidentified transactions. For a significant portion 
of U.S. Reseller's U.S. transactions during the POI the manufacturer is 
simply unknown. The absence of the supplying mill for this body of 
sales affects not only this investigation, but also those involving 
stainless steel sheet in coils from Mexico and Italy. Furthermore, the 
absence of this elementary and critical information forecloses any 
attempt by the Department to apportion these sales accurately between 
merchandise which is subject to one of the three ongoing investigations 
and that which is properly considered non-subject

[[Page 30743]]

merchandise because it was obtained from either a domestic or other 
foreign mill. Thus, this gap in the record is one of overarching 
importance, impinging upon our ability to calculate accurately the 
margins in three separate antidumping duty investigations.
    We cannot accede to KTN's suggestion that we exclude the 
unidentified transactions entirely from our calculations. While we are 
not able to state with precision which of these transactions represent 
subject stainless sheet in coils from Germany, KTN has conceded that 
some are properly subject to this investigation (as, indeed, some are 
subject to the concurrent investigations involving Mexico and Italy). 
The Tariff Act and the implementing regulation do envision a number of 
scenarios where the Department may disregard transactions in its 
analysis (sample transactions or sales of obsolete merchandise, for 
example, or when sampling transactions pursuant to section 777A of the 
Tariff Act). However, these exceptions all involve an independent 
analysis by the Department of the facts surrounding the proposed 
exclusions and its reasoned explanation on the basis of the record that 
the transactions at issue are either unnecessary or inappropriate for 
inclusion in our calculations. There are no provisions allowing the 
Department simply to ignore a significant portion of U.S. sales based 
on a reseller's putative inability to identify the affiliated 
respondent manufacturer.
    As for this claimed inability, KTN attempts to present as the 
Department's own conclusions what were, in fact, its reporting of KTN's 
claims at verification. Thus, the Reseller Sales Verification Report 
noted that ``Reseller explained that if material from its warehouse is 
sold to another location * * * the [receiving] warehouse subsequently 
will enter the merchandise into its own inventory by recording itself 
as the supplier.'' U.S. Reseller Sales Verification Report at 6. 
However, the report also states on the previous page that ``Reseller 
clarified that the original supplier's identification is traceable, but 
is not vital to its own needs.'' Id. at 5. Further, we found at 
verification that, notwithstanding U.S. Reseller's assertions, in many 
cases it was possible through a rudimentary search of U.S. Reseller's 
existing computerized records to identify the supplier. As petitioners 
note, of seven ``unidentified supplier'' transactions sampled at 
verification, we were able to trace immediately the outside supplier 
for three of these using nothing more than a personal computer in U.S. 
Reseller's offices. See U.S. Reseller Sales Verification Report at 10.
    As noted above, we have determined that the use of adverse facts 
available is appropriate for the sales and further-manufacturing data 
submitted by U.S. Reseller. As for the unidentified body of sales, the 
Department also finds that the available computer records would allow 
U.S. Reseller to trace with facility the supplier for nearly half of 
the sample transactions selected at verification. Had U.S. Reseller 
made full use of its readily-available computer data, the effort 
required to identify the manufacturer for the remaining transactions 
would have been substantially less, thus largely attenuating the 
``enormous amount of work'' involved in ``manual tracing'' * * * 
through several layers of internal paper transactions, inventory 
records, and sales records.'' KTN's Rebuttal Brief at 68. Accordingly, 
we find that U.S. Reseller failed to cooperate by acting to the best of 
its ability in compiling information essential to our analysis, such as 
the identity of the supplying mill, and will make an adverse inference 
in apportioning the unidentified transactions.
    In selecting facts available we find that there is no record 
support for KTN's proposal that we allocate the unknown universe of 
U.S. Reseller's transactions based on the observable percentages in the 
known universe; this approach would still result in the Department's 
disregarding over half of the unidentified U.S. transactions without 
any justification in the record. First, since by KTN's own admission 
some portion of the unidentified sales were supplied by KTN, the 
resulting percentage of merchandise identified as being of German 
origin is understated. In addition, we have no means of conducting an 
independent evaluation of this large body of sales to determine whether 
the patterns found for the identified universe of transactions would 
hold true for merchandise which, obviously, moved in different channels 
of distribution (e.g., through its transfer between or among U.S. 
Reseller's locations). Thus, for purposes of this final determination 
we have adopted a variant of KTN's proposal. As an adverse inference we 
are treating all of the unidentified merchandise as having originated 
with one of the three respondent firms in the concurrent 
investigations. To apportion the unidentified sales among the three 
investigations we have adjusted the quantity for each of the 
unidentified sales on a pro rata basis, using the verified percentages 
of U.S. Reseller's merchandise supplied by each respondent mill. We 
have then applied a facts-available margin to these transactions, as 
explained above in response to Comment 19.

Comment 21: Merchandise Imported in Cut-to-Length Form

    KTN notes that at the verification of the U.S. Reseller it 
identified certain transactions involving non-subject merchandise which 
had inadvertently been included in U.S. Reseller's sales files. These 
sales involved merchandise originally imported from Germany in cut-to-
length form and, thus, not subject to the instant investigation. In 
addition, U.S. Reseller reported a number of transactions involving 
stainless steel angles, shaped products likewise not subject to this 
investigation. KTN suggests that the Department use its reported data, 
coupled with a list of non-subject transactions provided at the U.S. 
Reseller verification, to delete these sales from its reported data 
base.
    Petitioners dismiss as without merit KTN's request that the 
Department correct U.S. Reseller's sales data, noting that not all of 
the non-subject sales can be identified using the reported data. The 
burden of compiling an accurate sales listing, petitioners aver, should 
not rest with the Department.
    Department's Position: While KTN claims that it identified the 
quantity of cut-to-length merchandise at the outset of the U.S. 
Reseller verification, we compared these figures to the sales data 
submitted on January 6, 1999. We found the total quantity of stainless 
sheet which was acquired by U.S. Reseller in cut-to-length form as 
reflected in U.S. Reseller's sales listing greatly exceeded the 
quantities for cut-to-length products presented in Exhibit 6. Because 
we cannot reconcile the various figures we have no evidentiary basis 
for making the quantity adjustment claimed by KTN. See Final Analysis 
Memorandum. As a result we have applied the adverse facts available 
margin to the entire quantity of stainless sheet products included in 
U.S. Reseller's submitted data.

Comment 22: Other U.S. Reseller Issues

    Petitioners and KTN each presented a number of other arguments 
pertaining to the sales by U.S. Reseller, many addressing points raised 
in the U.S. Reseller Sales Verification Report. As mentioned in passing 
under Comment 20, above, petitioners and KTN commented on additional 
problems discovered at the U.S. reseller verification, including (i) 
U.S. Reseller's inability to provide documents for the ``surprise'' 
sales trace requested at verification, (ii) the discovery by the

[[Page 30744]]

Department of unreported early payment discounts on U.S. sales, and 
(iii) the alleged mis-classification of prime merchandise as non-prime.
    Petitioners also faulted KTN on the manner in which U.S. Reseller 
calculated its ISEs for further-manufactured merchandise, including its 
omission of its net financial expenses from the ISE calculation. In 
addition, petitioners suggested that the Department recalculate U.S. 
Reseller's SG&A to correct ``serious discrepancies'' discovered by 
Thyssen, Inc.'s independent auditors. Furthermore, petitioners accused 
U.S. Reseller of mis-allocating its stainless steel scrap yield ratio 
by using a numerator and a denominator derived from different universes 
of transactions. KTN objected in turn to each of petitioners' comments 
on these issues. For its part, KTN protested the timing of the release 
of the U.S. Reseller verification reports and the subsequent schedule 
for filing case and rebuttal briefs; petitioners dismissed KTN's 
objections as baseless.
    Department's Position: Because we have determined to use adverse 
facts available for U.S. Reseller's sales data, these additional 
comments are moot and are not addressed further here.

KTN's Cost of Production

Comment 23: General and Administrative Expenses

    Petitioners assert that the Department should include expenses 
relating to KTN's international projects, year-end adjustments, and 
personnel costs in KTN's revised G&A. Petitioners also argue that 
revenue from rebate claims, provisions and internal freight do not 
warrant treatment as offsets to KTN's G&A expenses, suggesting that the 
Department does not adjust a respondent's COP for offsets unrelated to 
its production activities.
    In petitioners' view the costs associated with KTN's international 
projects, comprising joint ventures such as Shanghai Krupp (SKS) in the 
People's Republic of China, ``directly affect[ ] the allocation of the 
entire Nirosta world-wide manufacturing scheme.'' Petitioners' Case 
Brief at 64. In addition, petitioners contend that KTS's experiences in 
building and launching new facilities, such as the joint-venture plant 
in Shanghai, will benefit the entire Nirosta group. Thus, petitioners 
argue, international projects expenses should be included in KTN's G&A 
calculation.
    Furthermore, petitioners argue that KTN's year-end adjustments 
pertain to pension and legal liabilities; as such, petitioners 
maintain, these adjustments are properly considered part of KTN's 
general operations and should be included in KTN's total COP. Finally, 
petitioners argue that adjustments KTN makes in its normal course of 
business relating to NSC's executive compensation should be included in 
KTN's G&A total because (i) there is no evidence these expenses pertain 
solely to NSC's operations and (ii) KTN has not reported these expenses 
separately under NSC's G&A expenses.
    In addition, petitioners argue, expenses arising from the 
acquisition by KTN's parent KTS of Mexinox, the Mexican re-roller of 
stainless steel hot bands purchased from KTN, should be included in 
KTN's G&A expenses because Mexinox is an integral part of KTN's 
operations. Therefore, petitioners aver, the ``extremely interwoven 
nature'' of the Nirosta group shows that the Mexinox acquisition costs 
are in fact related to the core business of KTN and should be included 
in KTN's total COP. Petitioners' Case Brief at 63 and 64.
    However, petitioners claim that revenues from rebate claims, 
provisions and internal freight do not warrant treatment as offsets to 
KTN's G&A expenses, suggesting that the Department does not adjust a 
respondent's COP for non-production-related offsets. Petitioners Case 
Brief at 63, citing U.S. Steel Group v. United States, 998 F. Supp. 
1151 (CIT 1998), and Certain Pasta From Italy, 63 FR 42368, 42371 
(August 7, 1998).
    KTN counters that costs associated with the international projects 
center are unrelated to the production of subject stainless sheet in 
coils in Germany, as they are associated with the foreign operations of 
KTS. Likewise, accruals for severance payments do not represent G&A 
expenses incurred during the POI. KTN maintains that the downsizing for 
which the expenses were accrued never took place; thus, no severance 
payments were actually made. KTN expresses no objection, however, to 
including the personnel costs associated with NSC's operations in its 
G&A calculation.
    KTN also rejects petitioners' assertion that the costs incurred in 
the Mexinox acquisition should be included in KTN's G&A. According to 
KTN, these costs incurred by KTN's parent company, KTS, bear no 
relationship to costs ``pertaining to production and sales of the 
foreign like product by the exporter in question''--the statutory test 
for including SG&A expenses for purposes of COP. KTN insists that 
because these expenses were incurred by KTS, rather than the respondent 
KTN, and because they are not associated with production and sale of 
the foreign like product by KTN, they are properly excluded. KTN 
dismisses as unfounded petitioners' assertion that Mexinox represents 
an integral part of KTN's operations, noting that the black band 
supplied by KTN to Mexinox represents a raw material cost to Mexinox 
which has been captured fully in Mexinox's verified COP.
    With respect to rebates, claims, provisions, and internal freight, 
KTN suggests that petitioners' objections are based upon the incorrect 
assumption that the adjustments involve revenue received by KTN, an 
assumption fueled by the Department's Preliminary Cost Calculation 
Memorandum and KTN's Case Brief, which repeated this erroneous 
characterization. KTN's Rebuttal Brief at 50. In fact, KTN insists, 
these items are not revenues but adjustments to revenue, i.e., 
expenses, which have been reported properly within KTN's sales listing. 
Treating these items as adjustments to KTN's G&A, argues KTN, would 
result in double-counting. Petitioners' reliance on U.S. Steel is 
misplaced, KTN concludes, because that case addressed the proper 
classification of expenses within a cost response as either G&A or a 
cost of manufacture (COM), not whether the disputed items should be 
included in both the cost and the sales files.
    Department's Position: We agree with petitioners that the costs 
associated with international projects as well as those arising from 
year-end adjustments should be included in KTN's G&A expenses. The 
costs of international projects are properly included in G&A because 
they relate primarily to general expenses of the group as a whole. 
These projects had not developed into stand-alone commercial entities. 
Thus, as petitioners note, their costs affect directly the allocation 
of the entire Nirosta world-wide manufacturing scheme.
    As for the year-end adjustments, throughout the investigation KTN 
provided conflicting information as to the true nature of these 
adjustments. At verification we determined that the majority of these 
were for severance accruals. See KTN Cost Verification Report at 19 and 
20. We consider severance costs to be expenses that relate to the 
general operation of a company as a whole. In setting up a severance 
accrual, KTN was reasonably certain that it would need to make 
severance payments for its workers currently employed by the company at 
some point in the near future. KNT recognized these severance costs 
during the current year and they directly relate to the company's 
current employees. Accordingly, we consider it appropriate to include 
these year-end adjustments in

[[Page 30745]]

the respondent's G&A calculation. Finally, as both petitioners and KTN 
agree, we have included NSC's personnel costs in the G&A expense ratio 
calculation.
    Regarding the Mexinox acquisition costs, we agree with KTN that 
these expenses should not be included in KTN's G&A expenses. While we 
agree with petitioners' characterization of Mexinox as an integral part 
of Fried. Krupp's operations, we do not consider it appropriate to 
include inter-company finance charges in our calculation of G&A 
expenses. Financing expenses related to Fried. Krupp's purchase of 
Mexinox will be captured in Fried. Krupp's consolidated financial 
statements.
    We also agree with KTN regarding the treatment of rebate claims, 
provisions and internal freight. As noted in Exhibit 23 of the KTN Cost 
Verification Report, the expenses included in this account are 
predominantly for commissions and freight which the Department treats 
as selling expenses. Appropriately, KTN has reported these expenses in 
its sales listing. Therefore, we have excluded them from the G&A 
expense calculation.

Comment 24: Allocation of G&A Expenses

    KTN takes issue with the Department's suggestion in the KTN Cost 
Verification Report that G&A expenses should be allocated based on 
total cost of manufacture (TCOM). Rather, KTN insists, its methodology, 
which allocates aggregate G&A expenses to products based on processing 
costs alone, achieves a more accurate result, as it is not skewed by 
wide variations in material costs. Material costs vary sharply, KTN 
explains, not only as a result of the differing alloy content of 
different grades of stainless steel, but also because of fluctuations 
in alloy prices. Therefore, according to KTN, while G&A activities do 
not vary according to grades of steel, material costs do vary depending 
upon the nickel content of the specific steel grade. As a result, KTN 
avers, inclusion of material costs will result in products which 
require the same G&A activities having sharply divergent per-ton 
allocated G&A expenses. KTN's Case Brief at 50. While it is reasonable, 
KTN suggests, to assign a higher G&A cost to a product which requires 
more processing activities, as the processing requires active 
management, it is inherently unreasonable to assign higher G&A costs to 
a product whose sole distinction is a higher cost for its constituent 
materials. Therefore, KTN believes that the Department should accept 
KTN's reported activity-based G&A expenses and not recalculate G&A 
based on its TCOM.
    Petitioners oppose KTN's request for the allocation of its G&A 
expense ratio based on processing costs alone, calling KTN's suggested 
approach ``a results-oriented attempt to distort fully absorbed 
costs.'' Petitioners' Rebuttal Brief at 52. Such an approach, contend 
petitioners, results in a grade-neutral ratio which assigns the same 
absolute G&A expense to both low-cost and high-cost products. 
Petitioners insist that, contrary to KTN's methodology, the proper 
allocation of G&A over COM always includes the cost of materials. The 
rationale for a value-based allocation, petitioners argue, is that 
higher-value products absorb the same proportional amount, but a 
greater absolute amount, than lower-value products. Id. at 53. 
Petitioners argue that this approach for the allocation of SG&A 
expenses has been used consistently by the Department in such cases as 
Pure Magnesium from the People's Republic of China, 63 FR 3085 (January 
21, 1998). Petitioners draw further support from Belgian Stainless 
Plate in Coils where the Department rejected the respondent's 
``improvements'' in attempting to use a quantity-based methodology in 
allocating its selling expenses. As a result, petitioners note, the 
Department allocated the respondent's SG&A expenses solely on the basis 
of value.
    Department's Position: We agree with petitioners that G&A expenses 
should be allocated as a percentage of the total cost of manufacturing 
the merchandise, as opposed to KTN's assertion that they be allocated 
as a percentage of processing costs. As set forth in Large Newspaper 
Printing Presses and Components Thereof, Whether Assembled or 
Unassembled, From Japan, 61 FR 38139, 38149 (July 23, 1996) and Certain 
Carbon and Alloy Steel Wire Rod From Canada, 59 FR 18791, 18795 (April 
20, 1994), our normal methodology for allocating G&A expenses is to 
apply these types of costs as a percentage of total manufacturing cost. 
This approach recognizes that the category termed ``G&A expense'' 
comprises a wide range of costs, some of which bear such an indirect 
relationship to the immediate production process that any allocation 
based on a single factor, i.e., processing costs, would be purely 
speculative. The Department's normal method for allocating G&A costs 
based on total manufacturing cost takes into account all production 
factors (i.e., materials, labor, and overhead) rather than a single 
factor chosen arbitrarily. By allocating G&A consistently over total 
manufacturing costs the Department attempts to minimize discriminatory 
cost allocations. In addition, G&A expenses represent period costs, not 
product costs, and as such they should be spread proportionately over 
all merchandise produced in the period. By computing G&A based on a 
percentage of total manufacturing costs, each product absorbs the same 
proportional amount of G&A expenses relative to its total cost, even if 
the absolute amount might vary. This approach avoids distortions to the 
price or cost analysis caused by apportioning a higher percentage of 
processing costs to lower-cost products.
    We also disagree with KTN's assertion that activity-based costing 
and standard accounting practices support the allocation of period 
costs based on processing costs. As the name suggests, activity-based 
costing provides that a cost element should be allocated based on the 
activity which gave rise to that cost element. G&A expenses, however, 
do not arise from individual processing costs or activities. We also 
disagree with KTN's unsupported argument that the more processing a 
product undergoes, the greater the amount of general and administrative 
activities properly associated with the product. By definition, G&A 
expenses relate to the general operations of the company as a whole 
and, as noted, to a period of time, not to specific products or 
processes. Absent evidence that our normal G&A allocation method 
unreasonably states G&A costs, we allocate such costs based on the 
total manufacturing cost. Therefore we have calculated KTN's G&A 
expenses as a percentage of the total manufacturing cost, including 
material costs.

Comment 25: Exchange Rate Gains and Losses

    Petitioners maintain that because KTN was unable to reconcile its 
reported schedule of exchange gains and losses to the financial 
statements of Fried. Krupp, the Department should adopt the methodology 
suggested in the KTN Cost Verification Report by including foreign 
exchange rate losses, but excluding foreign exchange rate gains, in 
calculating consolidated financial expenses.
    KTN disagrees, asserting that the Department should rely upon the 
exchange rate gains and losses realized by KTN proper, rather than the 
overall exchange rate experience of Fried. Krupp as a whole. To the 
extent the Department does rely upon the exchange rate gains and losses 
indicated in Fried. Krupp's financial statements, KTN argues, any 
losses should be offset

[[Page 30746]]

by the gains. KTN further avers that the Department found sufficient 
evidence at verification to distinguish between the short-term and 
long-term interest reflected in Fried. Krupp's consolidated 1997 
financial statements; interest income from long-term investments is 
shown separately from other interest and similar income drawn from 
short-term resources.
    Department's Position: As a general matter we disagree with KTN 
that for computing interest expenses the Department should use KTN's 
company-specific foreign exchange and interest income figures rather 
than the consolidated figures reflected in Fried. Krupp's financial 
statements. The Department has a longstanding practice of calculating 
the respondent's net interest expense rate based on the financing 
expenses incurred on behalf of the consolidated entity. This practice 
recognizes the fungible nature of invested capital resources (i.e., 
debt and equity) within a consolidated group of companies. The Court 
sustained this approach in Camargo Correa Meais, S.A. v. United States, 
17 C.I.T. 897, 902 (August 13, 1993), where the Court quoted 
approvingly Certain Small Business Telephone Systems and Subassemblies 
Thereof From Korea, 54 FR 53141, 53149 (December 27, 1989):

    The Department recognizes the fungible nature of a corporation's 
invested capital resources including both debt and equity, and does 
not allocate corporate finances to individual divisions of a 
corporation * * * Instead, [Commerce] allocates the interest expense 
related to the debt portion of the capitalization of the 
corporation, as appropriate, to the total operations of the 
consolidated corporation.

    Accordingly, we will continue to use the consolidated financial 
statements of Fried. Krupp in the calculation of KTN's financial 
expense ratio.
    As for the foreign exchange gains and losses, the Department 
requested in two questionnaires and again at verification that KTN 
provide information to support the inclusion of Fried. Krupp's foreign 
exchange gains and exclusion of its foreign exchange losses from the 
interest expense computation. However, KTN, which has the sole ability 
and responsibility to support the requested adjustments, failed to 
provide any supporting information. Thus, we agree with petitioners 
that since KTN failed to provide evidence to support the inclusion of 
gains and the exclusion of losses from the financial expense ratio 
calculation, we have included Fried. Krupp's foreign exchange rate 
losses while excluding its foreign exchange rate gains from the 
financial expense ratio calculation.
    We agree with KTN, however, that based on our findings at 
verification, the interest income used as an offset to financial 
expenses is appropriately classified as short-term. Fried. Krupp's 1997 
consolidated financial statements distinguish between interest earned 
from long-term and short-term financial assets. Accordingly, we 
included the interest income earned from short-term assets, less the 
amounts relating to trade receivables, as an offset to financial 
expenses.

Comment 26: Deep-Drawing by Affiliated Processor

    Petitioners accuse KTN of failing to report that an affiliated 
party, Thyssen Umformtechnik, performed deep drawing operations on 
stainless flat products produced by KTN. The Department, petitioners 
contend, must apply adverse facts available in accounting for this 
critical element in KTN's COP.
    KTN suggests that petitioners have misunderstood the role of these 
deep drawing operations. KTN maintains that rather than representing a 
cost associated with producing the foreign like product, deep drawing 
actually involves the consumption of the foreign like product in the 
manufacture of non-subject products ranging from vacuum bottles to 
automotive parts.
    Department's Position: We agree with KTN with respect to the 
alleged role of deep drawing operations in the production of the 
foreign like product. The deep drawing at issue, as KTN claims, 
involves the consumption of the merchandise in the production of non-
subject products and is not, as petitioners contend, a ``critical 
element'' of KTN's reported COP. As such, we made no adjustment for the 
deep drawing processes performed by Thyssen Umformtechnik.

Comment 27: Failure To Report Affiliated Supplier

    Petitioners note that KTN purchased small quantities of titanium 
8 from a company owned by Acciai Speciali Terni S.p.A. 
(AST), a sister company of KTN. According to petitioners, KTN failed to 
disclose prior to the Department's cost verification that the titanium 
was in fact purchased from an affiliated party. KTN's failure to 
disclose its affiliation with the supplier warrants use of adverse 
facts available, petitioners insist, because while titanium may 
represent a small portion of KTN's total raw material purchases, it 
comprises a major portion of the material costs for those grades of 
stainless steel which are alloyed with titanium.
---------------------------------------------------------------------------

    \8\ The specific input and the supplier's identity were afforded 
treatment as business proprietary information, and were so treated 
in petitioners' case brief. However, KTN identifies the input 
publicly in its rebuttal brief.
---------------------------------------------------------------------------

    KTN rejects as pure conjecture petitioners' arguments concerning 
purchases of titanium from its affiliate. Petitioners, KTN avers, have 
provided no information or analysis which could lead the Department to 
suspect the nature of the transactions between the affiliate and KTN. 
Furthermore, argues KTN, titanium purchases from the affiliate involved 
only small quantities of this input.
    Department's Position: We disagree with petitioners. KTN disclosed 
at the outset of verification that it purchased small quantities of 
titanium from an affiliated company's subsidiary. We discussed the 
affiliation and these purchases with KTN officials, and noted that 
KTN's product brochures list titanium as a trace element (i.e., less 
than one percent) in certain grades of stainless steel. Given the 
relative insignificance of this input, we deferred further testing of 
the purchases and instead focused our testing on KTN's purchases of 
more significant inputs. Thus, contrary to petitioners' assertions, KTN 
identified the nature of these purchases; at verification the 
Department exercised its discretion in electing to concentrate on 
inputs which have a greater affect on KTN's reported COP.

Comment 28: Major Inputs From Affiliated Suppliers

    Petitioners insist that KTN did not provide its affiliates' 
acquisition costs for certain raw materials used in the production of 
subject stainless steel sheet and strip. Petitioners argue that, as 
major inputs, the raw materials purchased from affiliates should be 
valued at the higher of transfer prices, market value, or the 
affiliates' COP, in accordance with section 773(f)(2) and (3) of the 
Tariff Act. However, in the instant case, petitioners aver, the 
transfer prices paid by KTN to its affiliated suppliers for inputs such 
as nickel and chromium were, on average, below market value. 
Petitioners' Case Brief at 68, citing Exhibit 23 of the KTN Cost 
Verification Report. Petitioners disagree with the Department's 
opinion, voiced in this report, that KTN's transfer prices were greater 
than both market value and the affiliates' COP (i.e., the affiliates' 
acquisition costs). Furthermore, evidence of the affiliates' overall 
profitability does not address whether or not the transfer prices at 
issue were above the cost of acquisition for these raw materials.

[[Page 30747]]

    Petitioners suggest increasing the value of KTN's nickel, chromium, 
and scrap inputs by the difference between KTN's highest unit costs for 
purchases from unaffiliated suppliers and the average transfer price, 
using the data in KTN Cost Verification Exhibit 23. If the Department 
persists in conducting the major inputs test in spite of KTN's refusal 
to provide its affiliated suppliers' acquisition costs, petitioners 
continue, the Department as a ``corrective measure'' should increase 
the value of these inputs by the difference between the average 
transfer price and the average market price.
    KTN asserts that the Department verified that the transfer prices 
for raw materials supplied by affiliated parties were greater than both 
market prices and the affiliates' cost of production; accordingly, KTN 
argues, the Department should use the transfer prices in calculating 
COP and CV.
    Department's Position: We disagree with petitioners. Section 
773(f)(2) allows the Department to test whether transactions between 
affiliated parties involving any element of value required to be 
considered in calculating COP (i.e., major or minor inputs) are at 
prices that ``fairly reflect * * * the market under consideration.'' 
Section 773(f)(3) allows the Department to further test whether 
transactions between affiliated parties involving a major input are at 
prices above the affiliated supplier's cost of production. In other 
words, if an understatement of the value of a major input would have a 
significant impact on the reported cost of the subject merchandise, the 
statute allows the Department to insure that the transfer price or 
market price is above the affiliated supplier's COP.
    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 the percentage of the input obtained from 
affiliated suppliers (versus un-affiliated suppliers) and the 
percentage the individual element represents of the product'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. Id. In the instant case we examined both the 
percentage of the input obtained from affiliated versus unaffiliated 
suppliers and the percentage of the product's COM represented by the 
specific elements of value, here, nickel, chromium, and alloyed scrap. 
The limited amounts of the inputs obtained from affiliated suppliers, 
combined with the relatively small percentage the individual elements 
represent of the product's COM, mitigates the effect purchases of these 
inputs from affiliates would have on KTN's total COP. Accordingly, we 
determine that in this investigation section 773(f)(3) of the Tariff 
Act does not apply to the nickel, chromium, and alloyed scrap purchased 
from affiliated parties. However, we did find that the prices paid to 
affiliated parties for nickel were below market price; therefore, as 
provided by section 773(f)(2) of the Tariff Act, we have increased the 
COM accordingly.

Comment 29: Hot Rolling Costs

    Petitioners charge KTN with supplying data on the costs of hot-
rolling services provided by an affiliate that are both incomplete and 
inaccurate. As a result, petitioners maintain, the Department lacks the 
necessary data to conduct the major input test described at section 
773(f)(3) of the Tariff Act. Because KTN failed to provide its 
affiliate's total actual manufacturing costs, as well as the supporting 
documentation to calculate the affiliate's SG&A and net financial 
expenses, argue petitioners, the Department must rely upon adverse 
facts available to establish the TCOM for all of KTN's products.
    According to petitioners, KTN selectively applied variances (to 
adjust standard costs to actual costs) to only limited portions of its 
cost build-up. In doing so, petitioners contend, KTN failed to account 
fully for the affiliate's actual per-unit costs of the hot-rolling 
services. Petitioners claim that as a result, KTN's reported costs do 
not cover the actual COM of the affiliated hot-roller.
    Petitioners contend KTN has further skewed its reporting of hot-
rolling costs by failing to include amounts for the affiliate's 
variable operating costs and SG&A expenses. Petitioners insist that to 
capture fully the affiliate's COP, the reported costs must include the 
SG&A of the affiliate, as well as the interest expenses of its parent 
firm, Thyssen Stahl AG. Further, petitioners argue that KTN failed to 
submit for the record data on the affiliate's expenses, such as its 
financial statements, that would allow a calculation of these additions 
to COM. Absent the profit and loss statement of the affiliate or, at 
the least, its parent, petitioners contend, there is no way to 
establish either the SG&A or financial expense portions of fully-
captured COP for this hot rolling.
    In light of KTN's failure to report the actual TCOM and the 
additional data necessary to determine adjustments for SG&A and net 
financial expenses, petitioners aver, the Department must resort to the 
facts available to establish KTN's COP. Petitioners suggest as an 
adverse inference that the Department should apply the single highest 
TCOM to all of KTN's products. That failing, conclude petitioners, the 
Department should adjust the reported COM to reflect actual, not 
standard, costs, and to include surrogates for the missing SG&A and 
financial expense data for the affiliated hot roller.
    KTN takes issue with a number of petitioners' assertions. First, 
KTN argues, petitioners have not even established that the hot-rolling 
services at issue constitute a major input for the purposes of section 
773(f)(3). Hot-rolling services, submits KTN, account for a small 
fraction of KTN's costs and are not a major input. That petitioners 
fail to address a necessary predicate to their entire line of argument, 
KTN maintains, is grounds for rejecting that argument entirely. While 
acknowledging that the Department has no bright-line figure for 
establishing what constitutes a major input, KTN nevertheless suggests 
that hot rolling adds relatively little value to the foreign like 
product; stainless steel derives most of its value from metallurgy 
(i.e., at the liquid steel stage) and through cold rolling, annealing, 
and other finishing processes. Hot rolling, KTN concludes, is not a 
major input.
    Second, KTN maintains, petitioners' allegations betray a 
misunderstanding of KTN's reporting methodology; the Department, on the 
other hand, tested this methodology at verification and found it to be 
sound. KTN's Rebuttal Brief at 57. KTN claims that petitioners 
virtually ignored the agreement between KTN and its affiliate setting 
forth the terms for its purchase of these services, whereas the 
Department examined this document, tested its formulae, and concluded 
that the transfer price covered the affiliate's cost of providing hot 
rolling. Petitioners' assertion that certain of the affiliate's costs 
were omitted from the transfer price, KTN avers, is drawn from the 
incorrect document, which merely addresses end-of-year adjustments to 
these costs. Rather, KTN maintains, the hot-rolling services agreement 
provides an itemization of costs to be included in the transfer price 
that is so liberal that ``KTN is of the view that it is paying too much 
for the hot rolling services.'' KTN's Rebuttal Brief at 61.
    KTN concludes that petitioners' objections to its reported hot-
rolling costs are misinformed. KTN insists that it has provided all 
documentation requested by the Department, and these hot-rolling 
services were discussed at length at verification. Petitioners'

[[Page 30748]]

arguments, therefore, should be dismissed.
    Department's Position: We agree with KTN that the transfer prices 
paid to its affiliated hot roller were at arm's length and, therefore, 
no adjustment is necessary. As mentioned above, when determining 
whether an input or process is considered major, the Department 
considers, inter alia, the percentage of the input or process obtained 
from affiliated suppliers and the percentage the individual element 
represents of the product's COM. In this case because hot-rolling 
comprises a relatively small percentage of the foreign like product's 
COM the impact of any misstatement of these costs upon total COP is 
reduced. As a result, we have determined that the hot-rolling services 
supplied by the affiliate do not constitute a major input as defined by 
section 773(f)(3) of the Tariff Act. However, as the hot rolling 
represents an input supplied by an affiliate, the Department still 
tests whether or not the transfer prices were at arm's length. In the 
instant case no market prices for hot-rolling services were available. 
Therefore, at verification the Department confirmed that the transfer 
prices, after the year-end adjustments enumerated in the purchase 
contract, were above the affiliated supplier's cost of production. 
Further, the Department confirmed at verification that the contract 
between KTN and its affiliated hot roller establishes prices which 
cover all fixed and variable manufacturing costs and SG&A as well as a 
provision for profit to the affiliate. Finally, we verified that the 
actual prices paid by KTN to the affiliate reflected the terms of the 
contract.

Ministerial Errors and Miscellaneous Comments

Comment 30: Separate Weighting of Nickel Alloys for Model Matching

    KTN argues that the Department should use separate product codes 
for its 304L low-nickel and 304L high-nickel alloys because there are 
significant differences in the physical characteristics between the two 
which have a direct bearing on their respective costs of manufacture. 
KTN points to the widely divergent nickel content of the low-and high-
nickel variants of its 304L stainless steel.
    Petitioners contend that the model-matching grade criteria should 
not undergo selective modification to redefine product bands in the 
results-oriented exercise suggested by KTN, citing Ferrosilicon from 
Venezuela, 57 FR 61879, 61880 (December 29, 1992) (preliminary 
determination), and 58 FR 27522 (May 10, 1993) (final determination).
    Department's Position: We agree with petitioners. In order to 
understand the Department's position, it is first helpful to clarify 
our methodology for assigning weight factors. We assigned individual 
weighting factors to those reported grades recognized by the AISI 
nomenclature. We also assigned unique factors to any reported 
proprietary grades or foreign grade specifications if the chemical 
content was sufficient to distinguish them from any existing AISI grade 
already assigned a ranking factor in our matching hierarchy (e.g., DIN 
specification 1.4462). Where a proprietary or foreign grade 
specification was similar in chemical composition to an AISI grade, we 
assigned it the same weight as the comparable AISI grade, rather than 
assigning a unique weighting factor to that particular grade. We also 
did not assign unique weights to certain ``sub-grades'' (e.g., 304DDQ) 
because the percentage ranges of chromium, carbon, nickel, and 
molybdenum do not differ from the broader AISI grade.
    After deciding which grades to assign unique weighting factors, we 
established a linear weighting system designed to search for matches 
within the general classes of stainless steel (e.g., the chromium-
nickel series, the straight chromium (hardenable) series, and the 
straight chromium (non-hardenable) series). In addition to ensuring 
matches within the general classes or families of stainless steel, our 
weighting system is designed to match grades in the same family based 
on chemical composition. For example, within the chromium-nickel 
series, where an identical match is not possible, our preference is to 
pair grades containing molybdenum (e.g., grades 316 and 317) with each 
other before searching for a grade with no molybdenum (e.g., grades 302 
and 304).
    KTN argues that the Department should use separate product codes 
for 304L low-nickel and 304L high-nickel alloys, stating that

    * * * DIN grade 4306 can be equated to AISI grade 304L. However, 
KTN sells different versions of DIN grade 4306--4306.00 and 4306.90. 
DIN grade 4306.00 has a nickel content of 10.0 through 10.2% while 
DIN grade 4306.90 has a nickel content of 8.05-9.12%. These 
differences in nickel content result in a large difference in costs 
and thus in price as well. Therefore, for sales of 4306.00, KTN has 
reported the information in GRADE2H as ``304L H'' with an H 
indicating high nickel content. For sales of 4306.90, KTN has 
reported the information in GRADE2H as ``304L L,'' with an L 
indicating low-nickel content.

KTN's September 29, 1998 section B questionnaire response at 9.
    AISI grade 304L, to which we have assigned a unique weighting 
factor for purposes of our model match, contains between 8 and 10.5 
percent nickel by weight. The nickel ranges specified by KTN for 
4306.90 (304L L), 8.05 to 9.12 percent, and 4306.00 (304L H), 10 to 
10.2 percent, fall entirely within the broader range specified for AISI 
grade 304L. Therefore, while the nickel content of the low- and high-
nickel variants differs somewhat, both fall within the limits 
recognized as acceptable for grade 304L stainless steel. Accordingly, 
for this final determination we have not altered our model match 
program to distinguish between different variants of the same grade 
304L stainless steel.

Comment 31: Errors in Model-Match Program

    KTN claims that the programming language included in the 
Department's model-match program to consider gauge and finish did not 
execute properly due to a formatting discrepancy between the number of 
digits used in the Department's program and the number included in 
KTN's reported sales databases. As a result, KTN notes, two of the nine 
physical criteria intended for use in the model-match program were not 
considered, thus skewing the matching and the attendant adjustments for 
differences in merchandise (difmer).
    Department's Position: We examined our model-match program and 
agree with KTN that the program inadvertently failed to consider the 
gauge and finish variables when matching home market and U.S. products. 
KTN reported gauge and finish in a different format than it did the 
other physical characteristics considered in the model-match program, 
inserting a leading zero for all values less than ten. As a result, for 
many models the program read the gauge and finish variables as equal to 
zero, and generated missing values for those records. Furthermore, in 
cases where sales of coil in the United States were matched to sales of 
similar merchandise in the home market (rather than sales of the 
identical coil) the model-match program did not calculate difmer 
adjustments as it should but, rather, set the value for these 
adjustments to zero. Therefore, for this final determination we have 
amended our program to account for the leading zeros inserted in KTN's 
reported gauge and finish. See also the Department's Ministerial Errors 
Memorandum.

[[Page 30749]]

Comment 32: Disclosure Under Administrative Protective Order

    Petitioners argue that KTN has improperly double-bracketed the 
identities of its affiliated Thyssen distributors in the United States 
and Germany, refusing to release this information under administrative 
protective order (APO), even though this information has been in the 
public domain. According to petitioners, documentation they submitted 
on November 12, 1998 and January 11, 1999, clearly shows that the 
stainless steel distribution role of the various disputed Thyssen 
distributors ``is not only generally known, but in fact advertised, 
placed on the Internet, briefed in public company announcements, 
analyzed in the trade press, touted in public annual reports, outlined 
in Dun and Bradstreet company profiles, reported to the SEC, and 
highlighted in product brochures.'' Petitioners' Case Brief at 109. 
Therefore, petitioners assert that given these circumstances, KTN 
should not be allowed to succeed in pressing its claim for proprietary 
treatment for the affiliates' identities and should not only be 
required to release the names under APO, but should publicly identify 
these parties for the record.
    Department's Position: We disagree with petitioners. From the 
outset of this investigation KTN has not released the names of its 
affiliates in the U.S. or home market under APO, instead choosing to 
double-bracket their names. On September 28, 1998, petitioners wrote 
the Department requesting that KTN be required to replace double-
bracketed affiliated party names with single bracketing or, at a 
minimum, use a naming convention or coding of affiliates that would 
permit the consistent and reliable tracking of affiliations throughout 
the investigation. In a November 5, 1998 letter, KTN argued that in 
accordance with section 771(c)(1)(A) of the Tariff Act, it should not 
be required to disclose the names of KTN's customers to counsel for 
petitioners. Petitioners responded on November 12, 1998, by submitting 
documentation in support of its assertions that the affiliates' names 
which KTN was attempting to withhold from disclosure under APO were, in 
fact, in the public domain. After a thorough review of the record, on 
December 4, 1998, we notified KTN that ``we will permit the double 
bracketing of all customers in both the home market and U.S. market. We 
require however, that you code the affiliated customers in both 
markets.'' Letter from Ann Sebastian to Hogan & Hartson, December 4, 
1998. On December 15, 1998, KTN submitted this coding, as instructed. 
On January 11, 1999, petitioners again placed information on the record 
attempting to bolster their original claim that these names deserved 
treatment as public information.
    Section 777(c)(1)(A) of the Tariff Act states that ``[c]ustomer 
names obtained during any investigation which requires a determination 
under section 705(b) or 735(b) may not be disclosed by the 
administering authority under protective order until either an order is 
published under section 706(a) or 736(a) as a result of an 
investigation or the investigation is suspended or terminated.'' 
Further, the Department's regulations hold that ``[t]he Secretary will 
require that all business proprietary information presented to, or 
obtained or generated by, the Secretary during a segment of a 
proceeding be disclosed to authorized applicants, except (i) customer 
names submitted in an investigation.'' 19 CFR 351.304(a)(2) (emphasis 
added).
    Based on the plain language of both the statute and the 
Department's regulations we have concluded that KTN was entitled to 
withhold the names of affiliates in the U.S. and home market from 
release under APO during this investigation. While petitioners provided 
voluminous documentation that KTN's affiliates' names were publicly 
available during the POI, we must defer to the statute's sensitivity 
regarding the improper disclosure of customer names during an 
antidumping duty investigation. Of all categories of business 
proprietary information routinely collected by the Department in 
antidumping duty proceedings, the Tariff Act specifically prohibits 
only the disclosing of customer names by ``the administering 
authority,'' i.e., the Department. 9 After thorough review 
we have determined that petitioners' documentation does not 
definitively indicate whether or not these parties were indeed 
customers of KTN. Thus, while these parties' names may be available 
through public means, the nature and extent of their dealings with one 
another are not. Requiring KTN to publicly release such information 
without conclusive public evidence of their roles has the potential for 
causing competitive harm to KTN. Further, it is important to note that 
the Department instituted one of the petitioners' proposed compromise 
solutions by requiring KTN to provide codes for its affiliates which 
were then released to petitioners. Therefore, for this final 
determination we will continue to allow KTN to withhold the identities 
of its affiliated customers in both the home and U.S. markets.
---------------------------------------------------------------------------

    \9\ Section 777(c)(1) also protects from disclosure privileged 
and classified information, which rarely factors into antidumping 
investigations, and ``information of a type for which there is a 
clear and compelling need to withhold from disclosure.''
---------------------------------------------------------------------------

Comment 33: Erroneous Subtraction of Home Market Billing Adjustments

    KTN claims that the Department erred by adding, rather than 
subtracting, its reported billing adjustments when creating a variable 
to represent total discounts, rebates and billing adjustments. These 
billing adjustments, KTN asserts, should be added to the home market 
gross price, not deducted as in the Preliminary Determination.
    Department's Position: We agree with KTN. We inadvertently deducted 
KTN's home market billing adjustments in our calculation of home market 
net price. Therefore, for these final results we have subtracted KTN's 
billing adjustment from our calculation of total discounts and rebates, 
which has the net effect of adding them to gross unit price, as 
appropriate.

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 
imports of subject merchandise 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. We will instruct 
the Customs Service to require a cash deposit or the posting of a bond 
equal to the weighted-average amount by which the NV exceeds the export 
price or constructed export price, as indicated in the chart below. 
These suspension-of-liquidation instructions will remain in effect 
until further notice. The weighted-average dumping margins are as 
follows:

------------------------------------------------------------------------
                                                            Weighted-
                 Exporter/manufacturer                   average  margin
                                                           (in percent)
------------------------------------------------------------------------
Krupp Thyssen Nirosta GmbH.............................            25.72
All Others.............................................            25.72
------------------------------------------------------------------------

International Trade Commission Notification

    In accordance with section 735(d) of the Tariff Act, we have 
notified the Commission of our determination. As our final 
determination is affirmative, the Commission will determine within 45 
days after our final determination

[[Page 30750]]

whether imports of stainless steel sheet and strip in coils from 
Germany are materially injuring, or threaten material injury to, the 
U.S. industry. If the Commission determines that material injury, or 
threat thereof, does not exist, the proceeding will be terminated and 
all securities posted will be refunded or canceled. If the Commission 
finds that such injury does exist, the Department will issue an 
antidumping duty order directing the Customs Service to assess 
antidumping duties on all imports of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the effective 
date of the suspension of liquidation.
    This determination is published pursuant to sections 735(d) and 
777(i)(1) of the Tariff Act.

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13682 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P