[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30664-30688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13770]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-834]


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

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

EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Maria Dybczak (POSCO), Brandon 
Farlander (Inchon) or Rick Johnson, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-5811, (202) 482-1082 or (202) 482-3818, 
respectively.

The Applicable Statute

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

Final Determination

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

Case History

    Since the preliminary determination, issued on December 17, 1998, 
(Notice of Preliminary Determination of Sales at Less Than Fair Value: 
Stainless Steel Sheet and Strip in Coils (``SSSS'') from the Republic 
of Korea (``Preliminary Determination''), 64 FR 137 (January 4, 1999)), 
the following events have occurred:
    On December 17, 1998, the Department postponed the final 
determination to 135 days after publication of the preliminary 
determination (see Notice of Preliminary Determination of Sales at Less 
Than Fair Value: Stainless Steel Sheet and Strip in Coils (``SSSS'') 
from the Republic of Korea (``Preliminary Determination''), 64 FR 137 
(January 4, 1999)). On December 28, 1998, respondent Pohang Iron & 
Steel Co., Ltd., (``POSCO'') alleged ``significant ministerial errors'' 
made in the Department's margin calculation for the preliminary 
determination. After reviewing POSCO's allegations, the Department 
agreed that it had inadvertently used daily rates instead of a 
weighted-average exchange rate, that sales made to unaffiliated 
companies were erroneously excluded from the calculation of normal 
value, and that deductions for inland freight from plant to warehouse 
and warehousing expenses were inadvertently excluded from the 
calculation of normal value. Because these errors taken together 
constitute a significant ministerial error, as defined in 19 CFR 
351.224(g), we amended our preliminary determination. On January 26, 
1999 the Department published its amended preliminary determination 
(see Notice of Amended Preliminary Determination of Sales at Less Than 
Fair Value: Stainless Steel Sheet and Strip in Coils from Korea (64 FR 
3928)), amending

[[Page 30665]]

POSCO's cash deposit rate and the All Others rate from 12.59 to 3.92 
percent. On February 23, 1999, the Department published a subsequent 
amended preliminary determination, incorporating corrected scope 
language. See Notice of Preliminary Determinations of Sales at Less 
than Fair Value: Stainless Steel Sheet and Strip in Coils from France, 
Germany, Italy, Japan, Mexico, South Korea, and United Kingdom; and 
Amended Preliminary Determination of Sales at Less Than Fair Value, 
Stainless Steel Sheet and Strip from Taiwan, 64 FR 8799 (February 23, 
1999).
    During December 1998, the Department conducted the cost 
verification of POSCO's responses to the antidumping questionnaire. On 
January 12, 1999, we issued our cost verification report (see 
Memorandum to Neal Halper, Acting Director, Office of Accounting: Cost 
Verification Report--Pohang Iron and Steel Company, Ltd. (``Cost 
Verification Report''), dated January 12, 1999). On February 12, 1999, 
we requested that POSCO provide narrative descriptions of certain home 
market variables on the first day of the home market sales verification 
(see Memorandum to File: Narrative Definitions of Certain Home Market 
Variables, dated February 12, 1999). From February 22 through February 
26, 1999, and from March 17 through March 18, 1999, we conducted the 
sales verification of POSCO's responses to the antidumping 
questionnaire. On April 2, 1999, we issued our sales verification 
report on the U.S. sales verification of Pohang Steel America 
(``POSAM'') (see Memorandum to the File: Report on the Verification of 
U.S. Sales by Pohang Steel America (``POSAM'') in the Antidumping 
Investigation of Stainless Steel Sheet and Strip in Coils from Korea 
(``POSAM Verification Report'')). On April 6, 1999, we issued our sales 
verification report on the home market and U.S. sales verification in 
Seoul, Korea (see Memorandum to the File: Report on the Sales 
Verification of Pohang Iron & Steel Company, Ltd. (``POSCO Verification 
Report'')). Following verification, POSCO submitted a revised sales 
database reflecting its pre-verification corrections on March 8, 1999.
    On February 3, 1999, we received additional comments from 
petitioners and, on February 11, 1999, we issued a second supplemental 
questionnaire to Inchon. On February 22, 1999, we received Inchon's 
second supplemental questionnaire response. We verified Inchon's sales 
and cost questionnaire responses in Inchon, South Korea, from March 1-
5, 1999. On March 15-16, 1999, we verified Hyundai U.S.A., a wholly-
owned U.S. subsidiary of Hyundai Corporation, an affiliated trading 
company of Inchon. On April 5, 1999, we issued the U.S. sales 
verification report (see Memorandum to the File: Report on the 
Verification of U.S. Sales by Hyundai U.S.A. in the Antidumping 
Investigation of Stainless Steel Sheet & Strip in Coils from South 
Korea (``Hyundai U.S.A. Verification Report'')). On April 8, 1999, we 
issued the home market sales and cost verification report (see 
Memorandum to the File: Inchon Iron & Steel Co., Ltd. Home Market 
Sales, United States Sales, and Cost of Production Verification Report 
(``Inchon Verification Report'')).
    On January 21 and January 28, 1999, respondents and petitioners, 
respectively, submitted their requests for a public hearing, and asked 
that the Department extend the procedural schedule so that the hearing 
might follow the release of all verification reports. On April 15, 
1999, respondents and petitioners submitted their case briefs and on 
April 21, 1999, all parties submitted their rebuttal briefs. A public 
hearing was held on April 26, 1999, a transcript of which has been 
placed on the record of this investigation.
    Finally, on April 1, 1999, we asked Inchon and POSCO to submit 
monthly shipment data for 1996, 1997, and 1998, requested by the 
Department for the purposes of making a final critical circumstances 
determination. On April 12, 1999, both POSCO and Inchon submitted 
monthly shipment information as requested by the Department.

Scope of Investigation

    We have made minor corrections to the scope language excluding 
certain stainless steel foil for automotive catalytic converters and 
certain specialty stainless steel products in response to comments by 
interested parties.
    For purposes of this investigation, the products covered are 
certain stainless steel sheet and strip in coils. Stainless steel is an 
alloy steel containing, by weight, 1.2 percent or less of carbon and 
10.5 percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80, 
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05, 
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36, 
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05, 
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36, 
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTS subheadings are provided for convenience and Customs 
purposes, the Department's written description of the merchandise under 
investigation is dispositive.
    Excluded from the scope of this investigation are the following: 
(1) Sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled 
sections, with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a 
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and 
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5 
percent chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional 
U.S. Note'' 1(d).
    In response to comments by interested parties, the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this investigation. These excluded products 
are described below.
    Flapper valve steel is defined as stainless steel strip in coils 
containing,

[[Page 30666]]

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 is April 1, 1997 through March 31, 
1998.

Transactions Investigated

POSCO

    According to section 351.403(d) of the Department's regulations, 
downstream sales to a home market affiliate accounting for less than 5 
percent of total sales are normally excluded from the normal value 
calculation. In the preliminary determination, since respondent's sales 
to resellers did not meet the Department's 5 percent threshold, the 
Department has considered POSCO's sales to the affiliated service 
centers and, to the extent that these sales pass the arm's length test, 
has included these sales in our calculation of margin. Additionally, as 
described in Comment 5, the Department has determined that for POSCO's 
U.S. and home market sales the date of invoice is the appropriate date 
of sale as this is the date on which the material terms of sale are 
set. Therefore, the Department has included POSCO's sales in our margin 
calculation based on invoice date.

[[Page 30667]]

Inchon

    For the final determination, the Department determines that, for 
Inchon's home market sales, the purchase order date is the appropriate 
date of sale as this is the date on which the material terms of sale 
are set. For U.S. sales, we determine that Hyundai U.S.A.'s invoice 
date (or shipment date, when shipment occurs prior to issuing the 
invoice) is the appropriate date of sale as this is the date on which 
the material terms of sale are set. See Comment 12 for additional 
information. Additionally, Inchon stated that it erroneously included 
in its home market sales database sales shipped during the POI but 
returned after the POI. Inchon provided a list of these returns. See 
Inchon Verification Report, Exhibit 1. Therefore, we have excluded the 
returns noted above from Inchon's home market sales database.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondents, covered by the description in the 
Scope of Investigation section above, and sold in the home market 
during the POI, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign like 
product on the basis of the characteristics listed in the antidumping 
duty questionnaire and the August 3, 1998 reporting instructions.

Fair Value Comparisons

    To determine whether sales of SSSS from the Republic of Korea to 
the United States were made at less than fair value, we compared export 
price (``EP'') or constructed export price (``CEP'') to the Normal 
Value (``NV''), as described below in the ``Export Price/Constructed 
Export Price'' and ``Normal Value'' sections of this notice.

POSCO

    In the preliminary determination, for sales classified as EP by 
POSCO, we compared EP to NV, and compared CEP to NV for those sales the 
respondent identified as CEP transactions. However, as discussed in 
Comment 3, the Department finds that POSCO's U.S. sales through POSAM 
(U.S. channel 2) constitute CEP sales and has therefore compared CEP to 
NV for those sales. In accordance with section 777A(d)(1)(A)(i) of the 
Act, we calculated weighted-average EPs or CEPs for comparison to 
weighted-average NVs.

Inchon

    For the final determination, we compared Inchon's U.S. sales 
through Hyundai U.S.A. (U.S. channel 1), which we classified as CEP 
sales (see Comment 19), to NV for those sales. For Inchon's sales 
through U.S. channel's 2 and 3, we compared EP to NV. In accordance 
with section 777A(d)(1)(A)(i) of the Act, we calculated weighted-
average EPs or CEPs for comparison to weighted-average NVs.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Act, to the 
extent practicable, we determine NV based on sales in the comparison 
market at the same level of trade (``LOT'') as the EP or CEP 
transaction. The NV LOT is that of the starting price sales in the 
comparison market or, when NV is based on CV, that of the sales from 
which we derive selling, general and administrative expenses (``SG&A'') 
and profit. For EP, the LOT is also the level of the starting price 
sale, which is usually from the exporter to the importer. For CEP, it 
is the level of the constructed sale from the exporter to the importer.
    To determine whether NV sales are at a different LOT from EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make a LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the differences in the levels between NV and 
CEP sales affects price comparability, we adjust NV under section 
773(A)(7)(B) of the Act (the CEP offset provision). See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Sheet and Strip from South Africa, 62 FR 61731 (November 
19, 1997).
    In the present investigation, neither respondent requested a LOT 
adjustment. To ensure that no such adjustment was necessary, in 
accordance with the principles discussed above, we examined information 
regarding the distribution systems in both the United States and Korean 
markets, including the selling functions, classes of customer, and 
selling expenses for each respondent.

POSCO

    POSCO did not claim a LOT adjustment. POSCO identified two channels 
of distribution in the home market: (1) sales made by POSCO directly to 
its customers; and (2) sales made by POSCO through its selling arm, 
POSCO Steel Sales & Services Co., Ltd. (``POSTEEL''), to customers. 
Both POSCO and POSTEEL made sales to domestic trading companies, 
service centers, and unaffiliated and affiliated end-users. For both 
channels, POSCO and POSTEEL report that they perform similar selling 
functions. Either POSCO or POSTEEL contacted customers, managed 
inventory, arranged for shipment and freight, and invoiced the 
customer. In addition, POSCO claims that either POSCO or POSTEEL 
offered, as needed, technical services and warranty processing. At 
verification, the Department confirmed the selling functions performed 
by the affiliates. See POSCO Verification Report at 10-12. Therefore, 
we determine that selling functions performed in HM Channel 1 (sales 
made by POSCO directly to customers) are similar to selling functions 
performed in HM Channel 2 (sales made by POSCO through POSTEEL to 
customers): freight and delivery, invoicing, sales negotiation, and 
limited amounts of market research, warranty services, and technical 
advice. Because channels of distribution do not qualify as separate 
LOTs when the selling functions performed for each customer class are 
sufficiently similar, we find that the home market constitutes a single 
LOT.
    POSCO reported three channels of distribution in the U.S. market: 
(1) sales made by POSTEEL directly to a U.S. end-user; (2) sales to 
U.S. end-users made by POSTEEL through its wholly-owned U.S. 
subsidiary, POSAM; and (3) sales made by POSTEEL to unaffiliated Korean 
trading companies for shipment to the United States. POSCO claimed two 
LOTs in the U.S. market, but requested no LOT adjustment for the U.S. 
LOT purported to be different from the home market LOT. The Department 
examined at verification the claimed selling functions performed by 
POSCO and its subsidiaries, POSTEEL and POSAM, for all U.S. sales. 
These selling functions included freight and delivery arrangements, 
invoicing customers, and extending credit. See POSAM Verification 
Report, at 4-6. As discussed in Comment 3 below, we have determined 
that POSCO's U.S. sales

[[Page 30668]]

through POSAM (U.S. channel 2) should be classified as CEP 
transactions.
    In order to determine whether NV was established at a different LOT 
than EP or CEP sales, we examined stages in the marketing process and 
selling functions along the chains of distribution between POSCO and 
its home market and U.S. customers. We compared the selling functions 
performed for home market sales with those performed with respect to 
the EP and CEP transactions, after deductions for economic activities 
occurring in the United States, pursuant to section 772(d) of the Act, 
to determine if the home market level of trade constituted a more 
advanced stage of distribution than the EP or CEP level of trade.
    We have determined that sales made through U.S. channels 1 or 3 
should be classified as EP transactions. Therefore, we have examined 
the selling functions performed by POSCO and/or POSTEEL, and have found 
that they are similar to the functions performed for home market sales. 
As discussed in Comment 3 below, we have determined that POSCO's U.S. 
sales through POSAM (U.S. channel 2) should be classified as CEP 
transactions. With regard to POSTEEL's selling activities and services 
offered to its U.S. affiliate (POSAM) for CEP sales, we note that POSCO 
failed to provide this information despite the Department's explicit 
request in its questionnaire (see Questionnaire at A-7). In any event, 
we found at verification that POSTEEL itself performs selling functions 
for U.S. sales. Specifically, POSTEEL conducted market research for 
initial customer contacts, sales negotiation, arranged for ocean 
freight and delivery to the U.S. port, and invoiced POSAM for sales of 
subject merchandise. See POSCO Verification Report, at 11-12. 
Therefore, we find that the selling activities in the U.S. market are 
similar to those in the home market.
    Based on our analysis of the chains of distribution and selling 
functions performed for sales in the home market and in the U.S. 
market, we find that sales to all three channels of distribution are 
made at the same stage in the marketing process and involve nearly 
identical selling functions. Therefore, we determine that POSCO and its 
subsidiaries POSTEEL and POSAM provided a sufficiently similar degree 
of services on sales to all three channels of distribution, and that 
the sales made to the United States constitute one LOT.
    Based on a comparison of the selling activities performed in the 
U.S. market to the selling activities in the home market, we find that 
there is not a significant difference in the selling functions 
performed in both markets, and thus, sales in both markets were made at 
the same LOT. Therefore, a LOT adjustment is not appropriate.

Inchon

    In the home market, Inchon reported two sales channels: (1) To 
unaffiliated distributors; and (2) to affiliated and unaffiliated end-
users. We examined record evidence to identify the selling functions 
performed for both channels. These selling functions included inventory 
maintenance, freight and delivery arrangements, and credit services. At 
verification, we confirmed the selling functions noted above. See 
Inchon Verification Report, at 20-21. Because there are no differences 
between the selling functions on sales made to either unaffiliated 
distributors or affiliated and unaffiliated end-users in the home 
market, sales through both channels constitute one LOT. Therefore, for 
the final determination, we conclude that sales to unaffiliated 
distributors and affiliated and unaffiliated end-users constitute one 
LOT in the home market.
    For its EP and CEP sales in the U.S. market, Inchon reported three 
sales channels: (1) Inchon sales through Hyundai Corporation, Inchon's 
affiliated trading company, to Hyundai U.S.A., a wholly-owned 
subsidiary of Hyundai Corporation located in the United States and an 
affiliate of Inchon, and finally, to an unaffiliated customer; (2) 
Inchon sales through Hyundai Corporation, to an unaffiliated customer; 
and (3) Inchon sales to an unaffiliated trading customer. For purposes 
of our LOT analysis, Inchon's U.S. customers for all three sales 
channels are trading companies and distributors. We examined the 
selling functions performed for each of the three U.S. sales channels. 
These selling functions included freight and delivery arrangements, 
credit services, and post-sale warehousing. With the exception of post-
sale warehousing for one sale in channel one, selling functions 
performed in the three sales channels were identical. At verification, 
we confirmed the selling functions noted above. See Hyundai U.S.A. 
Verification Report, at 4-6. Therefore, for the final determination, we 
determine that Inchon provided a sufficiently similar degree of 
services on sales to all three channels of distribution, and that the 
sales made to the United States constitute one LOT.
    Further, because we determined that the U.S. LOT and the home 
market LOT included similar selling functions, we conclude that these 
sales are made at the same LOT. Therefore, a LOT adjustment for Inchon 
is not appropriate. For a further discussion, see Analysis Memo: 
Inchon.

Export Price/Constructed Export Price

POSCO

    POSCO reported three channels of distribution for U.S. sales. In 
channel 1, POSCO Steel Sales and Service Co., Ltd. (``POSTEEL''), which 
is POSCO's affiliated trading company, sold directly to a U.S. 
customer. In channel 3, POSTEEL sold directly to unaffiliated Korean 
trading companies for resale of subject merchandise to the United 
States. We classified sales made through these two channels as EP 
sales, since the U.S. affiliate, POSAM, had no involvement in the 
selling process. In channel 2, however, POSAM was involved in all the 
sales made to unaffiliated U.S. customers, and reported that although 
the majority of sales were EP sales, there were some sales classified 
as CEP.
    For U.S. sales channels one and three, we based our calculation on 
EP, in accordance with section 772(a) of the Act, because the subject 
merchandise was sold by the producer or exporter directly to the first 
unaffiliated purchaser in the United States prior to importation, and 
CEP methodology was not otherwise indicated.
    For U.S. sales made through POSAM, we calculated CEP based on 
packed prices to unaffiliated customers in the United States. We made 
deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act; these included, where appropriate, foreign 
inland freight, foreign brokerage and handling, international freight, 
marine insurance, U.S. inland freight, U.S. Customs Duty, and U.S. 
brokerage and wharfage charges. In accordance with section 772(d)(1) of 
the Act, we deducted those selling expenses associated with economic 
activity occurring in the United States, including direct selling 
expenses (credit costs, bank charges, and U.S. commissions) and 
indirect selling expenses. In addition, we deducted a per unit direct 
selling expense to account for bad debt losses incurred by POSAM for 
sales made to a bankrupt customer. For a further discussion of the bad 
debt expense and an explanation of its calculation, please refer to 
Comment 1, and Memorandum to the File: Analysis for Final Determination 
in the Investigation of Stainless Steel Sheet and Strip in Coils from 
Korea--Pohang Iron & Steel Co., Ltd., (``Analysis Memo: POSCO''), dated 
May 19, 1999. Also, we made an adjustment for CEP profit in accordance 
with section 772(d)(3) of the

[[Page 30669]]

Act. Finally, we added to U.S. price an amount for duty drawback 
pursuant to section 772(c)(1) (B) of the Act.

Inchon

    For U.S. sales channels two and three, which are defined in the 
Level of Trade section above, we based our calculation on EP, in 
accordance with section 772(a) of the Act, because the subject 
merchandise was sold by the producer or exporter directly to the first 
unaffiliated purchaser in the United States prior to importation, and 
CEP methodology was not otherwise indicated. For U.S. sales channel 
one, which are sales made through Inchon's affiliate, Hyundai U.S.A., 
we based our calculation on CEP, in accordance with section 772(b) of 
the Act, because the merchandise was sold by or for the account of the 
producer or exporter of such merchandise or by a seller affiliated with 
the producer or exporter, to a purchaser not affiliated with the 
producer or exporter, and based on our analysis of the facts as 
discussed in this section.
    In the preliminary determination, we found that Hyundai U.S.A., the 
U.S. affiliate, did more than merely act as a ``processor of sales-
related documentation and a communication link with the unrelated U.S. 
buyer.'' See Preliminary Determination, 64 FR at 142. To ensure proper 
application of statutory definitions, where a U.S. affiliate is 
involved in making a sale, we normally consider the sale to be CEP 
unless the record demonstrates that the U.S. affiliate's involvement in 
making the sale is incidental or ancillary. The record demonstrates 
that Hyundai U.S.A.'s role exceeds that of an incidental or ancillary 
role. For a further discussion of this issue, see Analysis Memo: 
Inchon, and Comment 19 below.
    We based EP on the packed, delivered, tax and duty unpaid price to 
unaffiliated purchasers in the United States. We made deductions for 
movement expenses in accordance with section 772(c)(2)(A) of the Act; 
these included, where appropriate, foreign inland freight, foreign 
wharfage and loading, international freight, marine insurance, domestic 
inland freight, and U.S. brokerage and wharfage. Additionally, we added 
to the U.S. price an amount for duty drawback pursuant to section 
772(c)(1)(B) of the Act. For a further discussion of this issue, see 
Analysis Memo: Inchon.
    We calculated CEP, in accordance with subsections 772(b), (c), and 
(d) of the 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 deductions for movement 
expenses in accordance with section 772(c)(2)(A) of the Act; these 
included, where appropriate, foreign inland freight, foreign wharfage 
and loading, international freight, marine insurance, domestic inland 
freight, U.S. brokerage and wharfage, and U.S. warehousing expenses. In 
accordance with section 772(d)(1) of the Act, we deducted those selling 
expenses associated with economic activities occurring in the United 
States, including direct selling expenses (credit costs and bank 
charges), and indirect selling expenses. For CEP sales, we also made an 
adjustment for profit in accordance with section 772(d)(3) of the Act. 
Additionally, we added to the U.S. price an amount for duty drawback 
pursuant to section 772(c)(1)(B) of the Act. For a further discussion 
of this issue, see Analysis Memo: Inchon.
    We made certain adjustments based on minor discrepancies noted at 
Inchon's U.S. verification and pre-verification corrections to several 
CEP transactions. For one sale, we adjusted credit expenses and the 
quantity and converted quantity, in MT, sold. For several sales, Inchon 
did not report a handling commission (see Comment 14). In addition, for 
several sales, we adjusted U.S. duty per MT and, for one sale, we 
adjusted marine insurance. Further, Hyundai U.S.A. had incorrectly 
invoiced one of its customers; hence, we adjusted multiple fields for 
several sales. As this information involves proprietary information, 
see Analysis Memo: Inchon.

Normal Value

    After testing home market viability and whether home market sales 
were at below-cost prices, we calculated NV as noted in the ``Price-to-
Price Comparisons'' and ``Price-to-CV Comparison'' sections of this 
notice.

1. Home Market Viability

    As discussed in the preliminary determination, we determined that 
the home market was viable and no parties have contested that decision. 
For the final determination, we have based NV on home market sales.

2. Cost of Production Analysis

POSCO
    As discussed in the preliminary determination, we conducted an 
investigation to determine whether POSCO made sales of the foreign like 
product in the home market during the POI at prices below their cost of 
production (``COP''). In accordance with section 773(b)(3) of the Act, 
we calculated COP based on the sum of POSCO's cost of materials and 
fabrication for the foreign like product, plus amounts for home market 
SG&A, interest expenses, and packing costs. We used the information 
from POSCO's questionnaire responses and the updated sales database 
(dated March 8, 1999) to calculate COP, except in the following 
instance.
    POSCO purchased a significant amount of elements of value from 
affiliated parties during the POI. For each affiliated purchase, we 
reviewed whether the transfer price was at an arm's length price. Where 
appropriate, we increased POSCO's per unit costs to the market price or 
the supplier's cost of production, pursuant to 19 CFR 351.407(b). See 
Memorandum to Neal Halper, Acting Director, Office of Accounting: Cost 
of Production (``COP'') and Constructed Value (``CV'') Calculation 
Adjustments for the Final Determination of Pohang Iron & Steel Co., 
Ltd. (``POSCO'') (``Cost Analysis Memorandum''), dated May 19, 1999. 
See also, Comment 11.

Inchon

    As discussed in the preliminary determination, we conducted an 
investigation to determine whether Inchon made sales of the foreign 
like product in the home market during the POI at prices below their 
cost of production (``COP''). In accordance with section 773(b)(3) of 
the Act, we calculated COP based on the sum of Inchon's cost of 
materials and fabrication for the foreign like product, plus amounts 
for home market SG&A, interest expenses, and packing costs. We used the 
information from Inchon's questionnaire responses and the sales 
database to calculate COP, except in the following instance.
    Inchon stated that it erroneously used indirect selling expenses 
during the POI rather than the 1997 fiscal year. See Inchon 
Verification Report, Exhibit 1. We modified Inchon's G&A calculation 
based on a pre-verification correction.

3. Test of Home Market Sales Prices

    As in our preliminary determination, we compared the weighted-
average COP, adjusted where appropriate (see above), to home market 
sales of the foreign like product as required under section 773(b) of 
the Act. In determining whether to disregard home market sales made at 
prices less than the COP, we examined whether the sales were made (1) 
within an extended period of time in substantial quantities, and (2) 
whether such sales were made at prices which

[[Page 30670]]

permitted the recovery of all costs within a reasonable period of time.

4. Results of the COP Test

    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of respondent'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 20 percent or more of a respondent's 
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,'' as defined in section 773(b)(2)(C)(i) of the Act, within 
an extended period of time in accordance with section 773(b)(2)(B) of 
the Act. In such cases, because we compared prices to weighted-average 
COPs for the POI , we also determined that such sales were not made at 
prices which would permit recovery of all costs within a reasonable 
period of time, in accordance with section 773(b)(2)(D) of the Act. 
Therefore, we disregarded the below-cost sales.

Calculation of CV

    As in our preliminary determination, we calculated CV based on the 
sum of respondent's cost of materials, fabrication, SG&A, interest 
expenses and profit. In calculating CV, we made the same adjustments as 
those noted above, in the ``Calculation of COP'' section of the notice. 
In accordance with section 773(e)(2)(A) of the Act, we based SG&A and 
profit on the amounts incurred and realized by the respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country.

Price-to-Price Comparisons

    As in our preliminary determination, for those product comparisons 
for which there were sales at prices above the COP, we based NV on 
prices to home market customers. We made adjustments, where 
appropriate, for physical differences in the merchandise in accordance 
with section 773(a)(6)(C)(ii) of the Act.

POSCO

    We calculated NV based on the same methodology used in the 
preliminary determination, with the following exception. As discussed 
in Comment 9, we determined at verification that POSCO incorrectly 
excluded housing expenses from its calculation of POSAM's indirect 
selling expense ratio. We recalculated POSCO's indirect selling 
expenses reported for U.S. Channel 2 sales (sales through POSAM), and 
used this updated expense in deducting from NV the amount of indirect 
selling expenses, capped by the amount of the U.S. commissions.

Inchon

    We calculated NV based on the same methodology used in the 
preliminary determination, with the following exceptions. In its home 
market pre-verification corrections, Inchon discovered that it charged 
interest to certain customers, when Inchon extended the due date of the 
promissory notes. Inchon argued that because Inchon did not reduce 
credit expense by the interest income, interest income should be added, 
as noted in Inchon's Interest Revenue for STS Customer during POI 
table. See Inchon Verification Report, Exhibit 1. We made an adjustment 
to account for Inchon's interest revenue because we had accepted 
Inchon's pre-verification correction. Additionally, we adjusted U.S. 
Other Transportation Expenses for several sales, based on Inchon's 
February 22, 1999 submission.

Price-to-CV Comparisons

    For price-to-CV comparisons, we made adjustments to CV in 
accordance with section 773(a)(8) of the Act. If appropriate, we 
deducted from CV the amount of indirect selling expenses (adjusted as 
described in the ``Price-to-Price Comparisons'' section above) capped 
by the amount of the U.S. commissions.

Currency Conversion

    In the preliminary determination, the Department determined that 
the decline in the won at the end of 1997 was so precipitous and large 
that the dollar-won exchange rate cannot reasonably be viewed as having 
simply fluctuated during this time, i.e., as having experienced only a 
momentary drop in value. Therefore, the Department used daily rates 
exclusively for currency conversion purposes for HM sales matched to 
U.S. sales occurring between November 1 and December 31, 1997, and the 
standard exchange rate model with a modified benchmark for sales 
occurring between January 1, 1999 and February 28, 1999. See 
Preliminary Determination, 64 FR at 145. As discussed in Comment 2, the 
Department continues to find that use of daily exchange rates and 
modified benchmarks are warranted during the periods noted above.
    In addition, as discussed in Comment 2 and Analysis Memo: POSCO, we 
have determined that the severe and precipitous drop in the value of 
the won from November 1997 through February 1998 necessitates the use 
of two averaging periods, under 19 CFR 351.414(d)(3).

Critical Circumstances

    On October 30, 1998, petitioners alleged that there is a reasonable 
basis to believe or suspect that critical circumstances exist with 
respect to imports of SSSS from Korea. In accordance with 19 CFR 
351.206(c)(2)(i), we preliminarily determined that critical 
circumstances did not exist with respect to respondents POSCO and 
Inchon, which the Department had preliminarily determined not to have 
margins over 15 percent, the first criterion for ascertaining whether 
critical circumstances exist. See Preliminary Determination, 64 FR at 
145-46.
    Section 735(a)(3) of the Act provides that the Department will 
determine that critical circumstances exist if: (A)(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 less than its fair value and that there would be 
material injury by reason of such sales; and (B) there have been 
massive imports of the subject merchandise over a relatively short 
period.
    To determine whether there is a history of injurious dumping of the 
merchandise under investigation, in accordance with section 735(a)(3) 
of the Act, the Department considers evidence of an existing 
antidumping order on SSSS from the country in question in the United 
States or elsewhere to be sufficient. We are not aware of any 
antidumping order in any country on SSSS from any of the countries 
subject to this investigation.
    In determining whether an importer knew or should have known that 
the exporter was selling SSSS at less than fair value and thereby 
causing material injury, the Department normally considers margins of 
15 percent for CEP sales and 25 percent for EP sales or more sufficient 
to impute knowledge of dumping and of resultant material injury. See 
Notice of Final Determination of Sales Less than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate from the People's Republic of China, 
63 FR 61964, 61967 (November 20, 1997); see also Notice of Final 
Determination of Sales Less Than Fair Value: Manganese Sulphate from

[[Page 30671]]

People's of Republic of China 60 FR 52155, 52161 (October 5, 1995).
    In this investigation, respondents POSCO and Inchon, which the 
Department has determined have both EP and CEP sales, do not have 
margins over 15 percent. Based on these facts, we determine that the 
first criterion for ascertaining whether critical circumstances exist 
is not satisfied. Therefore, we determine that there is no basis to 
find that critical circumstances exist with respect to imports of SSSS 
from respondents POSCO or Inchon, pursuant to section 735(a)(3) of the 
Act. Therefore, we did not analyze the respondent's shipment data to 
examine whether imports of SSSS have been massive over a relatively 
short period. See e.g., Notice of Preliminary Determination of Sales at 
Less Than Fair Value and Postponement of Final Determination: Collated 
Roofing Nails from Korea, 63 FR 25895, 25898 (May 12, 1997).
    However, one respondent, Taihan Electric Wire (``Taihan'') has not 
responded to the Department's questionnaires, and has been assigned a 
margin based on facts otherwise available (see ``Facts Available'' 
section, below). As Taihan's margin exceeds 25 percent, the first 
criterion has been met. Also, as facts available, we consider Taihan to 
have had massive imports over a relatively short period. Therefore, 
having met both criteria, critical circumstances exist for imports of 
subject merchandise from Taihan. See Preliminary Determination of Sales 
at Less Than Fair Value: Stainless Sheet and Strip in Coils from Japan, 
64 FR 108, 112 (January 4, 1999).
    Regarding all other exporters, an ``All Others'' rate has been 
determined (see ``The All Others Rate,'' below); because this rate does 
not exceed 15 percent, we determine that critical circumstances do not 
exist for companies covered by the ``All Others'' rate.

Verification

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

Interested Party Comments

Comment 1: POSCO--Sales to a Bankrupt Customer

    Petitioners argue that POSCO's sales to a bankrupt U.S. customer 
are neither atypical nor insignificant, and that the Department should 
account for the value of these sales in its final determination. 
Petitioners contend that the Department should also not exclude the 
sales based on a ``5 percent threshold'' for the exclusion of 
insignificant sales from its analysis. Citing Gulf States Tube Div. v. 
United States, 981 F. Supp. 630 (CIT 1997) and Certain Carbon and Alloy 
Steel Wire Rod from Canada, 58 FR 62639, 62641 (November 29, 1993), 
petitioners argue that these cases stand for the proposition that the 
exclusion threshold is primarily to limit reporting of sales data that 
would place a disproportionate burden on the Department. Petitioners 
contend that no such burden exists in the instant case, as the sales 
are already on the record.
    Petitioners maintain that sales to financially troubled customers 
are an everyday occurrence, and that the terms of sale usually reflect 
the increased risk borne by the seller. Petitioners note that the chart 
of accounts for the Korean parent, POSCO, includes several accounts and 
reserves relating to bad debt. Petitioners note that the Department's 
practice in an investigation is to take a ``snapshot'' of a 
respondent's selling practices, and that since the Department uses a 
weighted average of sales in its margin determination, no sales, 
whether or not they are atypical, should be excluded from the analysis.
    Petitioner notes that in Notice of Final Determination Sales at 
Less Than Fair Value: Stainless Steel Plate in Coils (``SSPC'') from 
the Republic of Korea (``SSPC from Korea''), 64 FR 15444 (March 31, 
1999), the Department treated the cost of the bankrupt sales as direct 
selling expenses allocated to all U.S. sales. Petitioners argue that 
this treatment was correct. Petitioners further argue that under the 
Department's reasoning in the preliminary determination of this 
investigation, there would be no consequences when an importer is not 
paid for subject merchandise if the sales have been classified as EP 
sales. Petitioners further insist that POSCO must bear fees and 
production costs associated with the bankrupt sales, and that these 
must be classified as direct selling expenses since POSCO would not 
have incurred them but for the customer's bankruptcy. Petitioners 
contend that the value of these sales is most analogous to a warranty 
claim, and that the Department reached this same conclusion in SSPC 
from Korea and in Color Television Receivers from the Republic of 
Korea: Final Results of Antidumping Administrative Review (``CTVs from 
Korea''), 61 FR 4408 (February 6, 1996). Petitioners note that the 
Department, citing AOC Intl. v. United States, 721 F. Supp. 314 (CIT 
1989) and Daewoo Elecs. Co. v. United States, 712 F. Supp. 931 (CIT 
1989), concluded in SSPC from Korea, 64 FR at 15449, that ``a bad debt 
expense * * * is directly related to sales of the subject 
merchandise,'' which petitioners contend requires a direct selling 
expense adjustment to starting price. Petitioners contend that since 
the sales were never paid for, and that future payments are highly 
unlikely, the expense associated with these sales should be treated in 
the same manner as is the expense associated with merchandise returned 
for warranty claims, and that there should be no ``sale'' since the 
sales had been written off and effectively canceled by POSCO. However, 
petitioners note that there is a direct selling expense associated with 
the sale of subject merchandise, similar to a warranty-related refund 
or forgiveness of payment. Petitioners contend that the loss resulting 
from the unpaid sales is a ``direct and unavoidable consequence of the 
sale,'' and that the Department should follow its own precedent in its 
treatment of these sales.
    Petitioners also argue that, according to Timken Co. v. United 
States, 852 F. Supp. 1122, 1125 (CIT 1994), all selling expenses are 
presumed to be direct, unless the respondent can prove otherwise; 
petitioners further argue that as the respondent failed to meet that 
burden, the Department must treat these expenses associated with the 
bankrupt sales as direct selling expenses. In addition, petitioners 
argue that the expenses should be allocated to total sales of subject 
merchandise only, citing Smith-Corona Group v. United States, 713 F.2d 
1568, 1577 (Fed. Cir.1983), wherein the court stated that the 
administrating authority must make a fair value comparison, comparing 
``apples to apples.'' Petitioners contend that as information regarding 
unpaid sales of stainless steel plate in coil products is not on the 
record of this investigation, it would be inappropriate to include 
sales of these products in the denominator.
    Petitioners also argue that the Department should not include the 
bankrupt sales in its margin determination, comparing these sales to 
merchandise that was returned or lost in transit, which would not be 
considered a sale. Petitioners further argue that sales made to a 
bankrupt customer where there is no reasonable expectation of payment 
cannot be considered as ``sales'' and must instead

[[Page 30672]]

be considered as a direct selling expense. Petitioners contend, 
however, that should the Department include the sales in its margin 
analysis, it must impute a credit period, and should assume that 
payment was made on the date of the final determination.
    Petitioners argue that POSCO has provided no support for its 
contention that unpaid sales to the bankrupt customer represent 
indirect selling expenses. They contend that in Notice of Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Wire 
Rod from Korea (``SSWR from Korea''), 63 FR 40404, 40406 (July 29, 
1998), the Department treated an accrual for bad debt as an indirect 
selling expense, not an actual expense. Petitioners distinguish that 
treatment with the instant case, wherein POSCO incurred a tangible loss 
directly related to the sales of subject merchandise. In Notice of 
Final Determination of Sales at Less Than Fair Value: Bicycles from the 
People's Republic of China (``Bicycles from the PRC''), 61 FR 19026, 
19044 (April 30, 1996) , petitioners contend, the Department never 
addressed the issue of whether the bad debt expense was a direct or an 
indirect selling expense: ``(t)hese expenses (have) been deducted from 
U.S. price as part of CEP deductions. Because we are not making a 
corresponding CEP offset * * * the classification of these expenses as 
direct or indirect is moot.'' Petitioners argue that in Bicycles from 
the PRC, there was no indication on the record that the expenses in 
question were accruals or actual expenses, or whether they involved 
subject merchandise. Petitioners note that there are no such questions 
in the instant case, and that the expenses are clearly actual and 
directly related to subject merchandise. Petitioners note that Final 
Determination of Sales at Less Than Fair Value: Certain Fresh Cut 
Flowers from Columbia (``Flowers from Columbia''), 52 FR 6842 (March 5, 
1987), cited by POSCO, is also distinguishable from this investigation. 
In Flowers from Columbia, petitioners note, it was not clear from the 
record whether the bad debt expense was related to subject merchandise, 
or whether the company had written off the bad debt. In the instant 
case, petitioners argue, the bad debt expense is directly related to 
subject merchandise, and the respondent has written off the sale.
    However, petitioners do not agree with the Department's statement 
in Flowers from Columbia that it ``consider(s) bad debt, by its very 
nature, to be an indirect selling expense since, under generally 
accepted accounting principles (``GAAP''), bad debt is recovered over 
time by future price increases.'' Instead, they note that GAAP is 
concerned with the measurement of economic activity at the time when 
such measurements are recorded. In addition, petitioners argue that 
basic accounting principles require a finding that such an expense 
would not have occurred but for the making of a sale. Petitioners argue 
that the accumulated costs incurred to generate a sale are recognized 
when the merchandise is sold, and that therefore, the costs associated 
with the bankrupt sales are directly related to the sales, since absent 
the sale, they would not have been recognized in POSCO's or POSAM's 
accounting system.
    Petitioners further contend that POSAM's transfer price for the 
bankrupt sales is not a valid basis for determining the amount of the 
direct selling expense. Petitioners argue that the transfer price is a 
meaningless figure for dumping purposes, and that the Department should 
use, as it did in the SSPC from Korea, the more objective benchmark of 
the constructed value of the sales.
    Respondent argues that sales for which it never received payment 
due to the customer's bankruptcy are atypical, and that inclusion of 
these sales would distort the margin calculation. POSCO notes that in 
the preliminary determination of this investigation, the Department did 
not include the sales in the margin calculation, but did include the 
cost of those sales (namely, the transfer price between the parent 
company and the U.S. affiliate) as an indirect selling expense. 
However, as respondent notes, the Department chose a different 
treatment of these sales in SSPC from Korea, including the sales to the 
bankrupt customer in the calculation of U.S. price and allocating the 
actual cost of producing the merchandise (rather than the transfer 
price) over all U.S. sales of subject merchandise as a per unit direct 
selling expense. Respondent claims that this treatment increased 
POSCO's preliminary deposit margin by over 300 percent.
    POSCO argues that the Department has ample discretion to exclude 
U.S. sales in an investigation where it finds that the sales are 
atypical, not part of the respondent's ordinary business practice, and 
would undermine the fairness of the comparison, citing Final 
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from 
Colombia (``Roses from Colombia''), 60 FR 6980, 7004 (February 6, 
1995), and Final Determination of Sales at Less Than Fair Value: 
Professional Electric Cutting and Sanding/Grinding Tools from Japan, 58 
FR 30144, 30146 (May 26, 1993). Respondent notes that the Department 
has used this discretion in an investigation because the initial 
deposit rate is intended as an estimate of future behavior, which 
should not be calculated on extraordinary or unusual circumstances, 
citing Koenig v. United States, 15 F. Supp. 2d 834, 841 (CIT 1998), 
wherein the court distinguished between investigations, which are 
intended to determine an estimated margin on future sales, and a 
review, which is intended to assess actual duties. POSCO maintains that 
the unpaid sales in the instant investigation constitute less than 5 
percent of total U.S. sales, while in the companion investigation of 
stainless steel plate in coils, the quantity was higher. POSCO notes 
that the Department has traditionally treated 5 percent as its 
threshold measure for determining significance, citing 19 CFR 
351.403(d) (stating that downstream sales to affiliates in the home 
market accounting for less than 5 percent of total sales are excluded 
from the normal value calculation); and 19 CFR 351.404(b) (stating that 
a home market is viable if it accounts for five percent of sales to the 
United States). Respondent argues that petitioner's suggestion that 
these sales are not atypical is wrong. POSCO notes that the scenario 
``devised'' by petitioners in which a home market customer receives a 
discount for high volume sales is in no way analogous with the 
situation involved in the instant case. POSCO points to the fact that 
voluntary discounts and terms of sale are negotiated by parties; in the 
instant case, the customer's bankruptcy was not under POSCO's control.
    Respondent argues that its U.S. affiliate, POSAM, has otherwise 
never sold merchandise to a customer that did not eventually pay, and 
as the Department verified, POSAM does not have an account for bad debt 
in its accounting system. Accordingly, POSCO maintains that these sales 
must be considered atypical and should not be included in the margin 
calculation. In addition, respondent maintains that the inclusion of 
these sales would undermine the fairness of the pricing comparison and 
distort the margin, as they maintain occurred in SSPC from Korea.
    Respondent contends that the Department further erred in SSPC from 
Korea when it treated sales made to a bankrupt customer as both sales 
for the purposes of the margin calculation and bad debt in terms of 
allocating the cost of the sales as a per unit direct selling expense. 
POSCO maintains that by treating the transactions as both sales

[[Page 30673]]

and bad debt, the Department would render the most distortive outcome 
possible, violating the United States' obligations under the WTO 
Antidumping Agreement to make a fair comparison between export price 
and the normal value, citing Federal-Mogul Corp. v. United States, 872 
F. Supp. 1011 (CIT 1994) and Melamine Chemicals v. United States 
(``Melamine''), 732 F.2d 924, 933 (Fed. Cir. 1984). Respondent further 
adds that, contrary to petitioners' contention, the Department has the 
authority to take into account ``extraordinary events'' that were 
``infrequent in occurrence,'' as cited by petitioners from Floral Trade 
Council v. United States, 16 CIT 1014, 1016-17 (1992). POSCO argues 
that the inclusion of these sales in the margin calculation would 
constitute an unfair comparison between export price and normal value.
    POSCO argues that it reported the transactions as sales rather than 
bad debt because the transactions coincide with the Department's 
definition of a sale and because POSCO fully expected to be paid for 
these sales. Respondent notes that in administrative reviews the 
Department normally leaves unpaid sales in the database for purposes of 
the margin calculation, rather than to treat them as a bad debt 
expense. As support for this contention, respondent cites Brass Sheet 
and Strip from Sweden, Final Results of Antidumping Administrative 
Review, 60 FR 3617, 3621 (January 18, 1995); Polythylene Terephthalate 
Film, Sheet and Strip from Korea: Final Results of Administrative 
Review, 60 FR 42835, 42839 (August 17, 1995); and Certain Internal-
Combustion, Industrial Forklift Trucks from Japan: Final Results of 
Antidumping Administrative Reviews (``Forklift Trucks''), 57 FR 3167, 
3173 (January 28, 1992). Respondent maintains that in these cases the 
Department applied a credit period to the unpaid sales to reflect the 
credit expense in the final margin. POSCO notes that in Forklift 
Trucks, the Department treated the unpaid sales as subject sales since 
the merchandise had been sold in the normal course of trade in the 
period of review.
    POSCO argues that the Department also erred in its reliance on CTVs 
from Korea. Respondent argues that CTVs from Korea was an 
administrative review, not an investigation. As such, POSCO contends 
that the Department is responsible in the instant case for calculating 
a cash deposit rate that can be relied on as a predictor and reasonable 
estimate of future duties, whereas in a review, an actual assessment is 
made and exclusions are not ordinarily allowed. Respondent argues that 
in CTVs from Korea, the bad debt treated as a direct selling expense 
was associated with sales in a prior period and recorded in the 
company's bad debt expense account. Therefore, POSCO contends that the 
Department did not treat the unpaid sales as sales in the database and 
simultaneously as bad debt, instead allocating the expense amount as a 
direct expense to the period of review sales that were actually paid.
    POSCO further contends that the Department's policy is to treat 
recognized bad debt as an indirect selling expense rather than a direct 
selling expense. As support for this contention, respondent cites to 
several cases: Flowers from Columbia, 52 FR at 6850; SSWR from Korea, 
63 FR at 40406; and Bicycles from the PRC, 61 FR at 19041. Respondent 
further points out that the Department recognized the cost of these 
sales as an indirect selling expenses, based on the definition of 
indirect expenses as those which are incurred whether or not a sale is 
made. POSCO contends that the cost of these sales bear no direct 
relationship to any other sale on the database, and that the cost, 
represented by POSAM's payment to POSCO, would have been incurred even 
if POSAM made no other U.S. sales. POSCO argues that for these reasons, 
the cost of these sales is not a direct selling expense, and should not 
be allocated to subject merchandise alone, but to all of POSCO's U.S. 
sales.
    Respondent argues that the Department's purpose for treating bad 
debt as a direct expense in CTVs from Korea was to avoid distortion. 
POSCO argues that in Daewoo Electronics v. United States, 712 F. Supp. 
931, 938 (CIT 1989), cited in CTVs from Korea, the CIT remanded the 
Department's determination, finding that the Department's practice of 
disregarding selling expenses for bad debt losses, while granting 
adjustments for warranty expenses which were not directly related to 
the sales under review, was arbitrary and likely to result in distorted 
margin calculations. Respondent maintains that the CIT did not direct 
the Department to treat bad debt as a direct selling expense in all 
cases, but to avoid distortion in the margin.
    POSCO argues that even if the Department were to treat the cost of 
sales as a direct selling expense, it should do so based on the 
transfer price from the parent company to the affiliate, rather than 
the constructed value of the merchandise. Respondent argues that in 
CTVs from Korea, the bad debt directly expensed was based on the amount 
recorded as bad debt in the respondent's normal books and records, not 
on the cost of production. Respondent contends that the Department 
verified that POSAM records the transfer price between itself and 
POSTEEL as the cost of its sale, that the expense was captured in 
POSAM's financial statements, not POSCO's, and that POSAM does not have 
any accounts for bad debt in its accounting system.
    Therefore, respondent argues that the cost reflected in POSAM's 
accounting records, which POSCO argues is the transfer price, should be 
the basis for any allocation of bad debt expense.
    Respondent further argues that, should the Department include the 
cost of the bankrupt sales in its margin calculation, the cost should 
be allocated over all U.S. sales of stainless steel, not just 
restricted to sales of subject merchandise. POSCO notes that the total 
amount of stainless steel sales for the POI had been verified and 
recorded as part of the Department's verification, and that therefore, 
there is no reason why any recognized expense should not be allocated 
over sales of all stainless products.
    Respondent argues that petitioner's comparison between the bankrupt 
sales and defective or lost merchandise is incorrect. POSCO contends 
that defective merchandise is generally returned to the producer and 
either resold or reincorporated into the production process. Likewise, 
POSCO argues that lost merchandise is covered by insurance and would 
not be accounted for in an investigation. Respondent maintains that 
while a producer can be held responsible for defective merchandise 
resulting in a warranty claim, a customer's bankruptcy is beyond the 
producer's control, and that therefore, these transactions should be 
excluded from the Department's analysis to the extent that they cause 
distortion to the margin.
    Department's Position: We agree with petitioners in part. Although 
we disregarded the sales in the preliminary determination, we have 
reconsidered our determination and find that the sales to the bankrupt 
customer for which payment was not received should be included in the 
margin analysis. POSCO reported the bankrupt sales as U.S. sales 
because the material terms of sale were final, as required under the 
statute. Section 772(a) of the Act. There was nothing atypical about 
the terms of the sales at the time they were made; we agree with 
petitioners that there is an inherent risk, when selling to customers 
on a credit basis, that the customer might not make full or even 
partial payment. Moreover, the price of the sales themselves is not 
necessarily distortive because, at the time they were

[[Page 30674]]

made, POSCO was not aware that the customer would declare bankruptcy. 
Therefore, these sales must be included in the database. In addition, 
respondent's arguments regarding the relative significance of these 
sales compared to POSAM's total sales is inapposite. Although the 
Department employs a 5 percent threshold in regard to other issues in 
investigations (namely, reporting of downstream sales and home market 
viability), none of the instances described by respondent apply to this 
case.
    As petitioners have noted, the Department uses the 5 percent 
threshold, for example, in determining whether to require a party to 
report home market (or U.S.) downstream sales data. Where that data, 
even if it constitutes less than 5 percent, has already been supplied, 
there is no basis for the Department to refuse to use such data. 
Furthermore, the Department has chosen a 5 percent benchmark to ease 
the administrative burden of an investigation, operating under the 
general assumption that there is less likelihood of introducing 
distortions into the margin calculation if fewer than 5 percent of a 
sales database is excluded. The Department, however, is not persuaded 
by respondent's argument that the exclusion of reported sales is 
necessary to eliminate distortions. As noted above, there is nothing 
atypical or distortive about the price of such sales because, at the 
time of such sales, POSCO was not aware that the customer would declare 
bankruptcy.
    We also disagree with respondent's claim that the Department 
``double counted'' the sales by including the sales in the margin 
calculation and treating the cost of the sales as a direct selling 
expense. As the Department noted in SSPC from Korea, and in CTVs from 
Korea, it is our practice to ``include sales which incur bad debt in 
the database and treat the bad debt expense as a direct selling expense 
when the expense is incurred on sales of subject merchandise.'' See 
SSPC from Korea, 64 FR at 15448, and CTVs from Korea, 61 FR at 4412. In 
addition, in Notice of Final Determination of Sales at Less Than Fair 
Value: Foam Extruded PVC and Polystyrene Framing Stock from the United 
Kingdom, 61 FR 51411, 51417 (October 2, 1996), the Department treated 
bad debt expenses as direct selling expenses, as they were ``incurred 
with respect to sales of the subject merchandise and to specific 
customers which went bankrupt during the POI.'' Consequently, as in 
SSPC from Korea, we have treated the bad debt expense as a direct 
selling expense. However, we have not imputed a credit period for these 
sales, due to its distortive effect on the margin. Thus, the Department 
did not double-count the cost of the unpaid sales.
    Furthermore, contrary to respondent's contention, the appellate 
court ruling in Melamine is not relevant to the credit expense issue in 
the instant case. In Melamine, the Court ruled that margins created 
solely through fluctuations in exchange rates would be unreal, 
unreasonable, and unfair. Unlike exchange rate fluctuations, companies 
can control credit expenses through negotiation and contractual 
agreement. In the instant case, POSAM's decision to sell to this 
particular customer and extend credit was solely within its control. 
POSAM could have chosen to insure itself against the risk that this (or 
any) customer would not pay, as do other companies which sell on a 
credit basis. Finally, POSAM could also have negotiated different terms 
of sale, which in fact it did when it sold subject merchandise to the 
same customer on a cash-on-delivery basis after the customer had 
declared bankruptcy.
    With regard to the classification of the expense related to these 
sales, at verification, the Department found that POSAM reversed the 
sales in its books at year-end by issuing negative invoices to the 
customer for the unpaid merchandise in question. See POSAM Verification 
Report at 6, and Exhibit 6. Although POSAM does not maintain separate 
bad debt accounts, these sales have been effectively classified as a 
type of bad debt. As in SSPC from Korea and CTVs from Korea, this bad 
debt expense is directly related to sales of the subject merchandise. 
See AOC International v. US, 721 F. Supp. 314 (CIT 1989) and Daewoo 
Electronics v. US, 712 F. Supp. 931 (CIT 1989). We have determined that 
the bad debt expense should be treated as a direct selling expense, 
since but for the sale made to the bankrupt customer, the bad debt 
expense would not have been incurred. We agree with petitioners that 
the cases cited by POSCO do not support its contention that the 
Department has a practice of treating bad debt expense as an indirect 
selling expense in all instances. In all three cases, Bicycles from the 
PRC, Flowers from Columbia, and SSWR from Korea, either the bad debt 
expensed was an accrual versus an actual expense, or the bad debt could 
not be tied to sales of subject merchandise. In the instant case, there 
is no dispute that the expense was incurred, since POSAM's own records 
indicate that the sales had been written off, and that the expense was 
directly related to sales of subject merchandise.
    We also agree with petitioners that it is most appropriate to use 
an objective measure of the expense incurred for these unpaid sales 
(namely, the constructed value of the sales), rather than an intra-
company transfer price which may not accurately reflect the cost of the 
merchandise. The constructed value of the sales are determined based on 
the actual cost of the inputs to the subject merchandise, which have 
been verified by the Department in its Cost Verification. The transfer 
price's basis is unknown, and may be based on a percentage of sale 
price basis, or a fixed amount equally unrelated to the actual cost of 
the product in question. In addition, we agree with petitioners that 
the most appropriate allocation of the cost of the sales would be to 
sales of subject merchandise, as the expenses plainly resulted from 
subject merchandise sales. As petitioners noted, the Department is 
required to make a fair value comparison on a fair basis, comparing 
``apples to apples,'' citing Smith-Corona Group v. United States, 713 
F.2d. 1568, 157 (Fed. Circ. 1983), and as the bad debt directly relates 
only to subject merchandise sold to a U.S. customer, the appropriate 
calculation is to allocate the direct selling expense over the total 
U.S. sales of subject merchandise. For our calculation of the per unit 
direct selling expense, see Analysis Memo: POSCO.

Comment 2: POSCO--Multiple Averaging Periods

    Petitioners argue that the Department should calculate weighted-
average prices for multiple averaging periods to account for the 
devaluation of the Korean won during the POI. Noting that the 
Department accounted for this devaluation in the preliminary 
determination by using daily and modified exchange rates during the 
devaluation period, petitioners contend that this treatment did not 
adequately account for the decline in the won, because the rates were 
tied to the date of sale reported by respondents. Petitioners urge the 
Department to calculate two separate weighted-average price comparisons 
for each product under investigation to avoid a dilution of pre-
existing dumping margins solely as the result of the severe and 
precipitous drop in the value of the won.
    Petitioners argue that in recent investigations involving Korea 
(i.e. SSPC from Korea and Final Determination of Sales at Less Than 
Fair Value: Emulsion Styrene-Butadiene Rubber from the Republic of 
Korea (``Rubber from Korea''), 64 FR 14865

[[Page 30675]]

(March 29, 1999)), the Department has determined that multiple 
averaging periods are appropriate. In fact, in a review of the 
Department's preliminary determination, petitioners find that there are 
virtually no findings of sales at less than fair value during the 
November 1997--March 1998 period, which coincides with the period of 
currency devaluation. Petitioners argue that these results were 
directly related to the Department's failure to adequately account for 
the decline in the won.
    Petitioners also argue that section 777A(d)(1)(A) of the Act allows 
the Department to employ an average-to-average comparison of U.S. sales 
to the relevant home market or third country sales, and, according to 
the Statement of Administrative Action (``SAA''), time is a factor 
which may affect the comparability of sales. Petitioners contend that 
the effect of the currency decline on POSCO's costs and prices would be 
``blended'' together with pre-crisis costs. They cite to Melamine, 
noting that dumping margins should not be artificially eliminated 
because of unanticipated changes in the exchange rate. Petitioners also 
cite several cases supporting the Department's authority to make 
special adjustments to take extraordinary circumstances into account, 
including Floral Trade Council v. United States, 16 CIT 1014 (1992), 
and Notice of Final Determination of Sales at Less Than Fair Value: 
Large Newspaper Presses and Components Thereof, Whether Assembled or 
Unassembled, from Japan, 61 FR 38139, 38153 (July 23, 1996). 
Petitioners specifically cite to two cases involving adjustments for 
currency issues, Final Determination of Sales at Less Than Fair Value: 
Industrial Nitrocellulose from Brazil, 55 FR 23120 (June 6, 1990); and 
Certain Fresh Cut Flowers from Columbia: Final Results and Partial 
Recission of Antidumping Duty Administrative Review, 62 FR 53287, 53297 
(October 14, 1997), and refer to these cases as illustrative of the 
Department's authority to use a variety of methods to compare prices in 
determining whether sales at less than fair value exist. In addition, 
petitioners note that the Department's regulations allow it to employ 
special procedures for exchange rate conversion where foreign 
currencies appreciate vis-a-vis the dollar so that currency 
fluctuations do not ``create'' dumping margins. Petitioners urge the 
Department to adopt similar measures in this case to prevent currency 
fluctuations from reducing dumping margins, and cite to Koyo Seiko, 20 
F.3d 1156, 1159 (Fed. Cir. 1994) as indicative of the Department's 
obligation to rely on alternative methods to calculate dumping margins 
to ensure a fair result.
    Petitioners argue that POSCO's arguments against the use of shorter 
averaging periods are without merit. Petitioners contend that the fact 
that different product matches could result from using shorter 
averaging periods does not outweigh the need to employ multiple periods 
given the sudden and precipitous drop in the won's value. Petitioners 
also argue that POSCO's contention that the use of daily exchange rates 
is sufficient to account for the drop in the currency is invalidated by 
the Department's use of shorter periods in a significant inflation 
scenario. Petitioners also maintain that respondent's argument that use 
of shorter periods in the instant case will result in arguments for 
multiple periods in all cases involving exchange rate fluctuations is 
incorrect, and note that the extraordinary two-month 47 percent drop in 
the won's value cannot equate to a typical currency fluctuation.
    Respondent POSCO argues that the Department has no basis for a 
decision to alter the standard price comparison period. POSCO contends 
that because the Department has already applied a mechanism to address 
the exchange rate fluctuations (namely, adjusting the exchange rates 
used in the calculation of export price/constructed export price and 
normal value) in the preliminary determination of this investigation, 
there is no further need to alter the comparison period in the final 
determination. Citing the Department's policy bulletin on this issue 
(Policy Bulletin 96-1: Currency Conversions, 61 FR 9434 (March 8, 
1996)), respondent maintains that the Department's treatment of 
exchange rates in the preliminary determination ensured that exporters, 
when setting U.S. prices, would know with certainty the exchange rate 
the Department would use in a dumping analysis. POSCO contends that the 
use of averaging periods would eliminate this certainty, and allow for 
manipulation of the margin. Respondent further argues that the 
Department's own regulations under the Uruguay Round Agreements Act 
(``URAA'') stipulate that the Department may only use weighted averages 
for shorter periods ``when normal values, export prices or constructed 
export prices differ significantly over the course of the period of 
investigation.'' POSCO contends that it sold subject merchandise based 
on negotiated prices and whatever ``macroeconomic conditions'' existed 
in the market during the POI. POSCO argues that the mere fact that 
exchange rates fluctuated during the POI does not demonstrate that its 
prices, pricing practices, and/or costs changed during the POI.
    POSCO further argues that in recent cases, the Department has not 
varied the averaging period due to exchange rate fluctuations alone. 
Citing Notice of Final Determination of Sales At Less Than Fair Value: 
Certain Mushrooms from Indonesia (``Mushrooms''), 63 FR 72268, 72272 
(December 31, 1998), respondents contend that the case reflects the 
Department's decision not to use two averaging periods to account for 
the effect of currency devaluation. POSCO also cites Notice of 
Preliminary Determination of Sales at Less Than Fair Value; 
Postponement of Final Determination: Certain Preserved Mushrooms from 
Indonesia, 63 FR 41783, 41785 (August 5, 1998) (``Preserved 
Mushrooms''). Although POSCO states that the Department noted in both 
SSPC from Korea and Mushrooms that it also considers prolonged large 
changes in exchange rates, respondent maintains that the changes in won 
during the POI were addressed by the Department's currency conversion 
policy. Respondent points to another case, Final Determination of Sales 
at Less Than Fair Value: Polyvinyl Alcohol from Taiwan (``Polyvinyl 
Alcohol''), 61 FR 14064, 14069 (March 29, 1996), which the Department 
distinguished in Mushrooms based on the facts of that case: the 
respondent (in Polyvinyl Alcohol) ``changed the way it conducted 
business with its principal home market customers, including its price 
structure, while at the same time, U.S. prices and input cost trends 
moved in tandem (citing Preserved Mushrooms, 63 FR at 41785). 
Respondent argues that, as in Preserved Mushrooms, it did not change 
the way it conducted its business or its pricing structure during the 
POI.
    Respondent also argues that the use of multiple periods has the 
potential to distort the margin for reasons wholly unrelated to the 
exchange rate. As an example, POSCO notes that the use of shorter 
averaging periods may result in U.S. sales being matched to less 
similar home market sales because of sales patterns wholly unrelated to 
currency issues. POSCO argues that the purpose of calculating margins 
based on POI averages is to eliminate the impact of such patterns on 
the overall margin. Citing Melamine, 732 F.2d at 932, POSCO contends 
that basing a margin on a factor beyond the control of the exporter 
would be unreal, unreasonable, and unfair.
    Department's Position: We agree with petitioners. Given the 
economic

[[Page 30676]]

situation in Korea during the POI, it is most appropriate to use daily 
and modified exchange rates in this case, for the reasons explained in 
the preliminary determination, and to employ two averaging periods in 
calculating the dumping margin. Under section 777A(d)(1)(A) of the Act, 
the Department has broad authority to use a number of methodologies in 
calculating the average prices used to determine whether sales at less 
than fair value exist. More specifically, under 19 C.F.R. 
351.414(d)(3), the Department may use averaging periods of less than 
the POI when normal value, export price, or constructed export price 
varies significantly over the POI. In this investigation, in the last 
five months of the POI, NV (in dollars) differed significantly from NV 
earlier in the POI, due primarily to a significant change in the 
underlying dollar value of the won, evidenced by the precipitous drop 
in the won's value that began in November 1997 and continued through 
December 1997. In the span of two months, the won's value decreased by 
more than 40 percent in relation to the dollar. Consequently, it is 
appropriate to use two averaging periods to avoid the possibility of a 
distortion in the dumping calculation. Moreover, we disagree with 
respondent's claim that the use of averaging periods is dependent upon 
a change in a respondent's selling practices. In the final 
determination of Preserved Mushrooms, the Department stated that ``in 
addition to changes in selling practices, we believe that we should 
also consider other factors, such as prolonged large changes in 
exchange rates, in determining whether it is appropriate to use more 
than one averaging period.'' See Notice of Final Determination of Sales 
at Less Than Fair Value: Certain Preserved Mushrooms from Indonesia, 63 
FR 72268, 72272 (December 31, 1998). Therefore, for both POSCO and 
Inchon, we have used two averaging periods for the final determination: 
January through October 1997 and November 1997 through March 1998.

Comment 3: POSCO--CEP vs. EP

    Petitioners argue that the Department should classify sales made 
through POSCO's U.S. affiliate as CEP sales. Petitioners note that the 
Department has found that where the U.S. subsidiary: (1) was the 
importer of record and took title to the merchandise; (2) financed the 
relevant sales transactions; (3) arranged and paid for further 
processing; and (4) assumed the seller's risk, such sales were 
classified as CEP sales (citing Certain Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products from Korea: Preliminary Results of 
Antidumping Duty Administrative Review, 61 FR 51882, 51885 (October 4, 
1996); and upheld in Final Results, 62 FR 18404 (April 15, 1997). 
Petitioners argue that POSCO's U.S. affiliate meets the criteria set 
forth in that case. They contend that POSAM was the importer of record, 
financed the sales to the U.S. customer, and assumed the risk 
associated with these sales (as is evident with regard to the bankrupt 
sales). Although no further processing was reported after importation, 
petitioners argue that POSAM was responsible for other post-importation 
services, such as arranging customs clearance, U.S. freight, invoicing 
customers, and collecting payment.
    In addition, petitioners note that in SSPC from Korea, the 
Department determined that POSAM is more than a processor of sales-
related documentation, and that all sales through the affiliate were 
CEP sales. Petitioners contend that POSAM is the only contact for the 
U.S. customer, follows up initial contacts made by the Korean parent, 
incurs the cost of unpaid sales, and is responsible for collecting 
payment from customers. Petitioners also cite to several other cases 
wherein the Department reclassified sales as CEP transactions when the 
respondents' U.S. affiliates were found to have significant selling 
functions in the United States (e.g. following up on calls made to U.S. 
customers; market research for POSTEEL; receiving and preparing orders; 
and collecting payments from customers).
    Petitioners also argue that the Department should infer from 
POSAM's size, both in terms of its staff and its asset value, that 
POSAM is involved in setting U.S. prices. Petitioners urge the 
Department to find as a general proposition that the mere existence of 
a U.S. subsidiary the size of POSAM is a strong indication that the 
activity of the staff must be ``significant.'' Petitioners note that 
the level of sales and expenditures attributed to POSAM indicate that 
POSAM has a significant involvement in setting prices for the subject 
merchandise. In addition, petitioners contend that POSAM's selling 
expenses should be deducted from the starting price, and should be 
modified to reflect expenses for only those sales made to unaffiliated 
parties.
    Petitioners argue that the Department has found in all recent 
cases, with the single exception of SSWR from Korea, that U.S. sales 
made through POSCO's affiliate warrant CEP treatment, citing Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from 
Korea: Final Results of Antidumping Duty Administrative Reviews 
(``Carbon Steel from Korea-3rd Review''), 63 FR 13170, 13182-183 (March 
18, 1998); and Certain Cold-Rolled and Corrosion-Resistant Carbon Steel 
Flat Products from Korea: Final Results of Antidumping Duty 
Administrative Reviews (``Carbon Steel from Korea--4th Review''), 64 FR 
12927, 12937-38 (March 16, 1999).
    POSCO argues that its sales through POSAM meet the Department's 
criteria for classification as EP sales. Citing Final Results of 
Antidumping Duty Administrative Review and Partial Termination of 
Administrative Review: Circular Welded Non-Alloy Steel Pipe from Korea, 
62 FR 55574, 55579 (October 27, 1997), respondent notes that the 
Department considers whether (1) the merchandise was shipped directly 
from the manufacturer to the unaffiliated U.S. customer; (2) this was 
the customary commercial channel between the parties involved; and (3) 
the functions of the U.S. affiliates were limited to that of processors 
of sales-related documentation and communication links with the 
unaffiliated U.S. buyer. POSCO argues that the Department has 
classified sales as EP when all three criteria have been met, and has 
considered the routine functions of the exporter as merely having been 
relocated geographically from the country of exportation to the United 
States, citing Industrial Phosphoric Acid from Belgium; Preliminary 
Results of Antidumping Duty Administrative Review, 63 FR 25830, 25831 
(May 11, 1998) and AK Steel Corporation v. United States, Slip Op. 98-
159, 1998 WL 846764 (CIT, November 23, 1998).
    Respondent argues that POSAM's role in U.S. sales is that of a 
processor of sales-related documentation. POSCO argues that POSTEEL, 
POSAM's Korean-based affiliate, determines the material terms of sale, 
and performs all sales-related activities, with the exception of 
arranging freight for certain delivered sales, and arranging credit for 
certain transactions. POSCO contends that POSAM communicates inquiries, 
purchase orders, and confirmations between the U.S. customer and 
POSTEEL, and that it has no negotiating authority, as petitioners 
suggest. POSCO states that, contrary to petitioners' contention, POSAM 
is not the first and only point of contact for the U.S. customer, 
noting that POSCO or POSTEEL originated all of the contacts and 
relationships with U.S. customers, and that the Korean affiliates 
maintain direct contact with these customers through marketing trips to 
the United

[[Page 30677]]

States. POSCO acknowledges that POSAM discusses the U.S. market 
situation and prices with its parent in order to provide insight to 
POSCO since POSAM is closer to the market. Respondent also contends 
that petitioners' claim that POSAM's size indicates the level of 
involvement in sales is inaccurate. POSCO argues that the Department 
verified that only two employees at POSAM's headquarters are 
responsible for sales of subject merchandise (as well as other product 
sales) along with two accounting personnel who are responsible for 
processing payment information for all customers and all products. 
Respondent argues that petitioners' suggestion that the extent of 
POSAM's involvement can be directly linked to the value of merchandise 
recorded in POSAM's accounting records is totally irrelevant, and 
points out that processing an invoice takes the same amount of time no 
matter what its value. POSCO contends that, contrary to petitioners' 
claim, the ``mere existence'' of a U.S. subsidiary does not dictate CEP 
treatment.
    Citing Final Determination of Sales at Less Than Fair Value: Coated 
Groundwood Paper from Belgium, 56 FR 56359, 56362 (November 4, 1991) 
and Final Determination of Sales at Less Than Fair Value: Coated 
Groundwood Paper from Finland, 56 FR 56363, 56371 (November 4, 1991), 
POSCO contends that the Department has held that the fact that an 
affiliated U.S. company quotes prices to U.S. customers does not lead 
to CEP designations, nor does a U.S. affiliate's identifying and 
maintaining contact with customers. POSCO also cites to Final 
Determination of Sales at Less Than Fair Value: Extruded Rubber Thread 
from Malaysia, 57 FR 38465, 38469 (August 25, 1992), noting that the 
Department found that the role of a branch office whose functions 
include ``receiving orders, preparing and executing order 
confirmations, invoices, packing lists, and other sales-related 
documentation, and receiving and processing payments from customers' 
was not sufficient to classify the affiliates' activities as beyond 
those of a mere processor of documents or communications link.
    Respondent further argues that petitioners' suggestion that the 
Department segregate POSAM's indirect selling expenses by product is 
wholly without merit. POSCO contends that, at verification in New 
Jersey, the Department examined the activities of POSAM's employees, 
and found that the sales and support staff are responsible for all 
sales. Respondent notes that allocating POSAM's total indirect selling 
expenses across all of its sales is the method by which the Department 
has calculated all other reviews and investigations with which POSCO is 
involved, including SSPC from Korea.
    Department's Position: We agree with petitioners that sales through 
POSAM are more appropriately treated as CEP transactions. Although the 
facts in this investigation are similar to the facts in the stainless 
steel wire rod determination cited by respondent, there are several 
significant differences on the record of the present case which lead 
the Department to change its decision from the preliminary 
determination and conclude that POSCO's U.S. sales through POSAM 
warrant classification as CEP sales, as we did in SSPC from Korea.
    The Department treats sales through an agent in the United States 
as CEP sales, unless the activities of the agent are merely ancillary 
to the sales process. Specifically, where sales are made prior to 
importation through a U.S. based affiliate to an unaffiliated customer 
in the United States, the Department examines several factors to 
determine whether these sales warrant classification as EP sales. As 
respondents have noted, these factors are: (1) whether the merchandise 
was shipped directly from the manufacturer to the unaffiliated U.S. 
customer without being introduced into the physical inventory of the 
affiliated selling agent; (2) whether this sale is the customary 
commercial channel between the parties involved; and (3) whether the 
function of the U.S. selling agent is limited to that of a ``processor 
of sales-related documentation'' and a ``communication link'' with the 
unrelated U.S. buyer. Where the factors indicate that the activities of 
the U.S. selling agent are ancillary to the sale (e.g., arranging 
transportation or customs clearance), we treat the transactions as EP 
sales. Where the U.S. selling agent is substantially involved in the 
sales process (e.g., negotiating prices), we treat the transactions as 
CEP sales. See Certain Cut-to-Length Carbon Steel Plate from Germany: 
Final Results of Antidumping Administrative Review, 62 FR 18389, 18391 
(April 15, 1997); Mitsubishi Heavy Industries v. United States, Slip 
Op. 98-82 at 6 (CIT, June 23, 1998).
    We note that neither party has disputed that POSCO's U.S. sales 
through POSAM meet the first two criterion of the Department's 
standard. Therefore, the determining factor in this case is the degree 
of involvement by POSAM in the sales process. In the preliminary 
determination, the Department based its EP classification of sales 
through POSAM on POSCO's statement that POSTEEL determined price and 
terms of sale. However, in our preliminary determination, we noted that 
we would conduct an in-depth examination of the most appropriate 
classification of POSCO's U.S. sales through POSAM (i.e., CEP versus 
EP) at verification. See Preliminary Determination, 64 FR at 142.
    Although POSTEEL performs many selling activities for U.S. sales 
through POSAM, including meeting with potential U.S. customers of the 
subject merchandise (see POSCO Verification Report, at 11-12 and 
Exhibit 15), the record does not support POSCO's assertion that POSAM 
is merely a processor of sales-related documentation. First, POSAM is 
the primary point of contact for the U.S. unaffiliated customer. POSAM 
officials explained that because of the time zone difference and the 
cost of long distance, it would be expensive and inconvenient for the 
customer to contact POSTEEL directly. See POSCO Verification Report at 
11. In addition, POSAM also conducts, albeit informally, market 
research for POSTEEL, in that POSAM officials report market conditions 
and pricing information to POSTEEL.
    Also, as demonstrated by the unpaid sales to the bankrupt customer, 
POSAM incurs the ``seller's risk'' for U.S. Channel 2 sales. The record 
indicates that it was POSAM, not POSTEEL, who incurred the cost of the 
unpaid sales, as POSAM pre-pays POSTEEL. See POSAM Verification Report 
at 6. Moreover, it is POSAM, not POSTEEL, who is responsible for 
collecting payment from the customer through bankruptcy proceedings. 
See POSAM Verification Report, Exhibit 9. Bearing such financial risk 
is indicative of a seller, not a mere facilitator. This selling 
arrangement between POSAM and POSTEEL differs from the one between 
POSAM and Changwon, addressed in SSWR from Korea, where the ``U.S. 
customers remit payment to POSAM, which subsequently transfers the 
payment to POSTEEL, which, in turn, transfers it to Changwon.'' See 
SSWR from Korea, 63 FR at 40419 (emphasis added).
    Therefore, because of the significant risk incurred by POSAM in 
addition to its other selling activities, we find that POSAM's 
activities are more than ancillary to the sales process and have 
classified POSCO's U.S. sales through POSAM as CEP transactions.
    Additionally, we disagree with petitioners that the reported 
indirect selling expenses for POSAM should be adjusted. Petitioners 
have not stated that POSCO's calculation was incorrect or is

[[Page 30678]]

in any way distortive. We verified POSCO's calculation of POSAM's 
indirect selling expense at verification and noted no discrepancies. 
See POSAM Verification Report at 11-12. Thus, for CEP sales, we have 
deducted an amount for indirect selling expenses incurred in the United 
States using POSCO's reported indirect selling expense for POSAM.

Comment 4: POSCO--Local Letter of Credit Sales

    Respondent argues that the Department should calculate normal value 
for ``local'' sales made in the home market based on the U.S. dollar 
price at which those sales were invoiced. Local sales are sales of 
subject merchandise to home market customers who will further process 
the merchandise into non-subject products for export. Respondent 
maintains that although POSCO is paid in Korean won, the amount of 
payment is based on the U.S. dollar-invoiced price. Respondent contends 
that because POSCO's local sales are denominated and invoiced in U.S. 
dollars, the invoiced prices do not require conversion to won for U.S. 
comparison prices, and that the conversion of the U.S. dollar price to 
won and then back to dollars is not only unnecessary, but would 
significantly distort the margin. Respondent cites to Final 
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from 
Columbia (``Roses from Columbia''), 60 FR 6980, 7006 (February 6, 
1995), noting that the Department agreed and accepted the U.S. prices 
for sales invoiced in U.S. dollars, notwithstanding that the respondent 
received payment from the customer in the home market currency. 
Respondent argues that in the final determination in SSPC from Korea, 
the Department's concern was that POSCO's customers paid for local 
sales in won, the sales amounts were recorded in won in POSCO's 
accounting records, and that the exchange rates utilized by POSCO to 
determine the won equivalents were different from those exchange rates 
used by the Department. Respondent contends that the fact that payment 
is made in won is irrelevant, since both the contract and the invoice 
reflect a U.S. dollar price, and that sales are converted to won for 
the purposes of consistency with POSCO's accounting records, which are 
maintained in won.
    Petitioners claim that the use of the dollar value for local sales 
in the home market would be inappropriate, given that POSCO receives 
payment in won. Petitioners distinguish this case from Roses from 
Columbia by noting that in that case, the Department was factoring in 
the effects of inflation in the cost-of-production analysis, costs were 
converted into dollars; the payments in local currencies had reflected 
the prevailing exchange rate, and all home market sales had been 
invoiced in dollars and paid in pesos. Petitioners further contend that 
in Roses from Columbia, the decision to use U.S. dollar-based prices 
was presumably made for convenience and consistency, as costs were also 
dollar-denominated. Petitioners further note that the disparity between 
the exchange rates reflected in the price conversion and the rates used 
by the Department is too great to reconcile, and is in contrast to the 
situation in Roses from Columbia. Petitioners argue that the use of a 
constant index such as the dollar is used by the Department in the face 
of currency depreciation or significant deflation, and should not be 
applied selectively to reduce a dumping margin.
    Department's Position: We agree with petitioners. First, we believe 
that respondent's reliance on Roses from Columbia is misplaced. In that 
case, all prices and costs, both in the home market and in the U.S., 
were dollar denominated, and the exchange rates reflected in the 
dollar-to-peso conversion coincided with the exchange rates used by the 
Department. Given these facts, the use of dollar-denominated prices 
provided consistency throughout the Department's analysis in that case. 
Neither of these facts are present in the instant case. At 
verification, we found that local sales are the only sales made in the 
home market that are expressly linked to a dollar value, but that the 
sale is ultimately a won-denominated sale. Additionally, the vast 
majority of the costs incurred for home market and U.S. sales are 
denominated and paid by POSCO in won. See POSCO Verification Report at 
14-18. Finally, as we note above, there is a disparity between the 
exchange rates reflected in POSCO's accounting records and those used 
by the Department (see POSCO Verification Report, Exhibit 17). Although 
the sales are linked to a dollar value, there is no question that the 
respondent receives payment in won, and therefore, the use of the 
dollar-denominated gross unit price for local letter of credit sales in 
the home market is unwarranted. In addition, in recent cases involving 
POSCO (e.g. SSPC from Korea, and Carbon Steel from Korea--3rd Review), 
the Department has used the won-denominated price for local letter of 
credit sales in the home market because we found that, as in the 
instant case, the local sales were paid in won and recorded in POSCO's 
accounting records in won, and the exchange rates used by POSCO were 
dissimilar from those used by the Department. See SSPC from Korea, 63 
FR at 15456.

Comment 5: POSCO--Date of Sale

    Petitioners argue that the Department should use the order 
confirmation date as the date of sale for both home market and U.S. 
sales unless the circumstances of a particular sale indicated use of 
some other date. They contend that the Department ``may use a date 
other than the date of invoice if the Secretary is satisfied that a 
different date better reflects the date on which the exporter or 
producer establishes the material terms of the sale,'' including price 
and quantity. See 19 CFR 351.401(i). Petitioners contend that the 
Department has the authority to treat order date as the date of sale, 
and has done so in the recent past, citing Final Results of Antidumping 
Administrative Review: Circular Welded Non-Alloy Steel Pipe from the 
Republic of Korea (``Pipe from Korea''), 63 FR 32833, 32835-36 (June 
16, 1998)). Petitioners argue that the documents included in the 
Department's verification exhibits illustrate that, with the exception 
of special circumstances (involving bankrupt sales) the material terms 
of sale are set on the order date and do not change prior to shipment 
and invoice. Petitioners maintain that documentation reviewed at 
verification indicates that POSCO knew well before actual shipment the 
order quantity of the invoice. Petitioners note that, with the 
exception of two sales involving merchandise originally intended for a 
bankrupt customer, the other seven sales (involving either a home 
market or a U.S. sale) reviewed at verification did not involve changes 
in quantity or price from order date to invoice date.
    Petitioners argue that for U.S. sales in channel 2, the Department 
should use as the date of sale the date of POSAM's invoice to the U.S. 
customer, rather than the date of POSTEEL's invoice to POSAM. 
Petitioners further contend that this invoice is meaningless because it 
represents the transfer price on an intra-company transaction.
    Respondent does not deny that the Department has the discretion to 
use a date other than invoice date as date of sale, but noted that in 
SSPC from Korea, the Department chose not to alter its date of sale 
methodology. POSCO disputes that use of invoice date requires that 
price and/or quantity change frequently between order date and invoice 
date, contending that the fact that whether material terms change after 
the order date does not diminish

[[Page 30679]]

the fact that they could and sometimes do change, so that material 
terms are not firmly established as of the order date. Respondent cites 
to recent cases as precedent for the Department's decision to use 
invoice date as date of sale, including Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
from Canada, 64 FR 2173, 2178 (January 13, 1999), wherein the 
Department found at verification that quantity changed between the 
order date and the invoice date, and determined that invoice date was 
the most appropriate date to use in accordance with normal practice. 
POSCO distinguishes the instant case from Pipe from Korea, wherein the 
material terms had been set in the U.S. contract, and that subsequent 
changes were immaterial in nature. Contrary to petitioners' contention, 
POSCO argues that the documents provided at verification support 
invoice date as the date of sale, rather than order date, as 
petitioners claim. Respondent further argues that the Department's 
obligation with regard to date of sale is to determine when price and 
quantity are normally finalized, and that the reason for a change in 
terms is irrelevant to the Department's analysis. Therefore, POSCO 
submits that there is no reason for the Department to deviate from its 
standard practice of using invoice date as date of sale.
    Respondent believes that the Department, in its preliminary 
determination, properly used the date of POSTEEL's invoice to POSAM as 
the date of sale since the material terms of sale were finalized upon 
shipment to the customer from Korea (the point at which POSTEEL issues 
its invoice to POSAM). Moreover, POSCO maintains that the Department 
has a well-established rule that the date of sale must precede or be 
equal to the date of shipment, citing Carbon Steel from Korea--4th 
Review. Respondent further argues that petitioners' contention that the 
invoice between POSTEEL and POSAM is meaningless is immaterial to the 
determination of the date of sale. POSCO notes that use of an invoice 
date between a U.S. affiliate and its unaffiliated customer would only 
be appropriate with regard to CEP transactions.
    Department's Position: We agree with respondents in part. Under the 
Department's regulations, we normally use date of invoice as the date 
of sale. 19 CFR 351.401(i). However, we may use another date, such as 
date of order confirmation, if that date better reflects the date on 
which the material terms of the sale were established. In adopting this 
regulation, we explained that the purpose was, whenever possible, to 
establish a uniform event which could be used as the date of sale. 
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27348-49 (May 19, 1997). We further explained that we do not treat an 
initial agreement as establishing the material terms of sale between 
the buyer and seller when changes to such an agreement are common, even 
if, for a particular sale, the terms did not actually change. 
Consequently, our analysis focuses on whether changes are sufficiently 
common to allow us to conclude that initial agreements should not be 
considered to finally establish the material terms of sale. As 
discussed in detail in the Analysis Memo: POSCO (at 1-2), a review of 
the sales documentation supports POSCO's contention that certain 
material terms of sale (i.e., price and quantity) are subject to change 
until the invoice date. Moreover, we find petitioners' contention that 
the record supports use of order confirmation date as date of sale to 
be without merit. As the Department noted in Carbon Steel from Korea--
4th Review, ``even if documentation from a few sample U.S. sales 
suggests that essential terms of sale did not change after initial 
contract date, this does not demonstrate that essential terms of sale 
were not subject to change after the initial contract date, or that 
essential terms of sale did not in fact change after the initial 
contract date for significant numbers of sales.'' See Carbon Steel from 
Korea--4th Review, 64 FR at 12935. While we note that, at verification, 
we discovered that POSCO's methodology in determining the frequency of 
pricing changes overstated the actual number of occurrences (see 
Analysis Memo: POSCO), based upon our examination of the frequency of 
pricing changes for home market sales, and for U.S. sales classified as 
EP transactions, we have determined that invoice date is the 
appropriate date for date of sale. However, in keeping with the 
Department's practice, the date of sale cannot occur after the date of 
shipment. Therefore, when the date of shipment precedes the date of the 
invoice to the first unaffiliated purchaser in the United States, we 
have used shipment date as the date of sale, in accordance with recent 
reviews involving POSCO (see Carbon Steel from Korea--4th Review, 64 FR 
at 12935, citing Carbon Steel from Korea--3rd Review, 63 FR at 13172-
73).

Comment 6: POSCO--Sales of Non-Prime Merchandise

    POSCO argues that in the final determination, the Department should 
distinguish between prime and secondary merchandise. POSCO explains 
that it had submitted control numbers corresponding to each product 
reported as subject merchandise, and assigned to each control number a 
suffix of either ``P'' for prime merchandise or ``N'' for non-prime 
merchandise. However, respondent noted that the Department truncated 
the suffix from the control numbers, collapsing prime and non-prime 
material for the purposes of the cost test. Respondent argues that the 
Department's methodology contradicts its practice of distinguishing 
between prime and secondary merchandise in its analysis. POSCO cites to 
Memorandum from Roland L. MacDonald to Joseph A. Spetrini, dated April 
19, 1995 (``Carbon Steel Memorandum''), and Certain Cold-Rolled Carbon 
Steel Flat Products from the Netherlands (``Carbon Steel from the 
Netherlands''), 61 FR 48465 (September 13, 1996), wherein the 
Department segregated secondary merchandise from prime merchandise for 
the purposes of conducting the arm's length test, the cost test, and 
the margin calculation. POSCO notes that the Department also segregated 
secondary from prime merchandise in SSPC from Korea and should follow 
the same methodology in the instant case.
    Petitioners argue that the Department should not distinguish 
between prime and secondary merchandise for purposes of its cost test. 
Petitioners contend that a respondent can selectively label merchandise 
as ``non-prime'' in order to avoid having low-priced sales tested with 
other sales of the same control number, and cause below-cost home 
market prices to artificially pass the cost test. Petitioners further 
contend that Carbon Steel from the Netherlands stands for the 
proposition that the Department acknowledges that prime and secondary 
merchandise incur identical costs. Citing Extruded Rubber Thread from 
Malaysia: Final Results of Antidumping Duty Administrative Review, 63 
FR 12752 (March 16, 1998), petitioners note that the Department's 
practice is not to distinguish between first and second quality 
merchandise in conducting the cost test.
    Department's Position: We agree with respondent. As noted in the 
Carbon Steel Memorandum, ``separating prime and seconds for the cost 
test has the benefit of facilitating an untainted analysis of the 
majority of sales (prime merchandise).'' See Carbon Steel Memorandum at 
4. Consistent with Carbon Steel from the Netherlands and IPSCO, 965 
F.2d 1056 (Fed. Cir. 1992), in this case, POSCO has reported the

[[Page 30680]]

same cost of production for sales of prime and non-prime merchandise. 
However, we do not regard prime and non-prime merchandise as identical 
for the purposes of our analysis, as prime and secondary products are 
typically fundamentally different from each other, since the latter 
normally possess defects resulting from errors in the production 
process. For this reason, the Department's model matching methodology 
in fact prevents any matches of prime to non-prime merchandise. In the 
instant case, POSCO noted that merchandise classified as non-prime does 
not meet any standard specification (see POSCO's November 23, 1998 
supplemental response at 15), and at verification we examined POSCO's 
coding process for prime vis-a-vis non-prime and noted no discrepancies 
(see POSCO Verification Report at 5).
    The cost test compares the price and cost of all comparison market 
sales, by model (identified by control number, or ``CONNUM''). Pursuant 
to section 773(b)(2)(C) of the Act, where less than 20 percent of 
respondent's sales of a given product were at prices less than the COP, 
we do not disregard any below-cost sales of that product because we 
determine that the below-cost sales were not made in ``substantial 
quantities.'' If we were to combine prime and non-prime sales for a 
given CONNUM in the cost test (thereby affecting whether the 20 percent 
threshold has been met), sales of prime could be disregarded in the 
calculation of NV or, alternatively, sales of below-cost non-prime 
could be the basis of NV, solely because the analysis combined prime 
with secondary merchandise. This result would stem from the fact that 
it is more likely that non-prime sales are sold below cost.
    Further, we note that petitioners reliance upon Extruded Rubber 
Thread from Malaysia is misplaced. In that case, as in the Carbon Steel 
Memorandum, the Department ran separate cost tests for prime and non-
prime merchandise in order to avoid distortions. Thus, for the final 
determination in the instant case, we have distinguished prime from 
non-prime merchandise using POSCO's reported control numbers for 
purposes of the cost test and margin analysis.

Comment 7: POSCO--Application of Facts Available for U.S. Sale

    Petitioners argue that POSCO failed to report a U.S. sale to the 
Department and that facts available based on the highest transaction 
margin calculated for reported sales should be applied to this 
``unreported'' quantity. Petitioners also contend that two invoices 
excluded from the U.S. sales database based on POSTEEL's invoice date 
should be included as POSAM's invoice date for these sales is within 
the POI, and should be similarly factored into the margin calculation 
with the highest transaction margin.
    Respondents argue that the U.S. sale to which petitioners refer had 
been discovered during the Department's Korean verification, and had 
been reported as a correction at the New Jersey verification (see POSAM 
Verification Report, at 1 and Exhibit 1). POSCO contends that the other 
sale to which petitioner refers as having been incorrectly excluded 
from the database is a sale whose shipment date is before the POI, and 
that therefore, the sales had been properly excluded from the U.S. 
sales database.
    Department's Position: We agree with respondent. The U.S. sale that 
respondent inadvertently excluded from the sales database was accepted 
by the Department as a minor correction at the beginning of the New 
Jersey sales verification. Information relating to the sale was 
examined and verified. In addition, the two sales shipped prior to the 
POI were correctly excluded from the sales database, as the Department 
recognizes the date of sale as the earlier of POSAM's invoice date to 
the U.S. customer or the date of shipment from Korea. As such, the use 
of facts available for these sales is unwarranted.

Comment 8: POSCO--Correction of POSTEEL's Credit Expense for U.S. sales

    Petitioners contend that the Department should correct credit for 
U.S. sales involving POSTEEL to reflect the revision noted in the 
Department's verification report (see POSCO Verification Report, at 2). 
Respondent argues that it had presented the correction to U.S. credit 
expense for POSTEEL for all U.S. channel 1 and 3 sales in its pre-
verification corrections, that it had presented the Department with an 
updated sales listing incorporating the correct rate on March 8, 1999, 
and that no other revisions are necessary.
    Department's Position: We agree with respondent. POSCO presented 
its pre-verification correction to POSTEEL's short-term borrowing rate 
for U.S. dollars and the corresponding corrections to U.S. credit 
expenses for sales in channels 1 and 3. In addition, POSCO had 
presented these corrections in an updated sales listing, and we find 
that no other revisions are required.

Comment 9: POSCO--POSAM's Indirect Selling Expenses

    Petitioners argue that POSAM's indirect selling expenses were 
understated. Petitioners urge the Department to add to POSAM's indirect 
selling expense figure the amount of short-term interest incurred by 
POSAM, claiming that such offsets to indirect selling expenses have 
been explicitly rejected by the Department (citing Extruded Rubber 
Thread from Malaysia, 63 FR 12578). In addition, petitioners also argue 
that the amount of housing expenses for POSAM employees incurred in the 
year of consideration should be added to total indirect selling 
expenses.
    Respondent contends that the Department's policy and practice is to 
deduct short-term interest expenses from indirect selling expense 
figures, as these short-term interest expenses relate to financing 
accounts receivable. Because credit expense is calculated separately, 
respondent argues that the inclusion of the short-term interest expense 
would constitute double counting credit expenses in the U.S. market, 
citing SSPC from Korea and Carbon Steel from Korea--4th Review in 
support of this contention. Respondent further contends that the 
housing expenses noted by petitioners bear no relation to POSAM's sales 
during the POI, and therefore, do not require inclusion. However, POSCO 
does note that once income derived from housing is deducted from the 
expense, the net expense has a negligible effect on the ratio.
    Department's Position: We agree in part with respondents. It is the 
Department's practice to exclude short-term borrowing expenses in the 
calculation of indirect selling expenses when credit expense has been 
otherwise accounted for, and the borrowing expense is clearly related 
to sales, as in SSPC from Korea and Carbon Steel from Korea--4th 
Review. However, we note that the housing expenses found at 
verification should be included (less housing income) in the 
calculation of the indirect selling expense ratio, as the housing 
expenses related to housing provided for POSAM's employees, and no 
evidence presented at verification indicated that the expenses bore no 
relation to POSAM's sales during the POI. See POSAM Verification Report 
at 12. For this calculation, see Analysis Memo: POSCO.

Comment 10: POSCO--Offset to Financial Expenses

    Petitioners argue that foreign exchange gains and interest income

[[Page 30681]]

should not be allowed because the Department's verification revealed 
that POSCO could not support its reported offsets to financial 
expenses. Petitioners state that the reported financial expense ratio 
should be recalculated for the final determination.
    Respondent asserts that its financial expenses were correctly 
reported. POSCO explains that the Department verified the 
reasonableness of its reported short-term interest income and the 
foreign exchange gains and losses related to debt for the consolidated 
company.
    Department's Position: We agree with respondent. POSCO calculated 
consolidated short-term interest income and consolidated foreign 
exchange gains and losses based on the relative percentage of these 
items from the unconsolidated financial statements. At verification we 
examined the figures used in the calculation and traced them to POSCO's 
unconsolidated financial statements. Since POSCO's unconsolidated 
financial statements comprise a significant portion of its consolidated 
financial statements, we consider the allocation based on the 
unconsolidated percentages to be a reasonable surrogate.

Comment 11: POSCO--Affiliated Party Purchases

    Petitioners argue that the Department should amend POSCO's reported 
costs by valuing raw material inputs purchased from affiliated parties 
at the highest of transfer price, COP, or market price in accordance 
with the major input rule. Petitioners argue that the major input rule 
requires the Department to value purchases from affiliated parties at 
the highest of transfer price, the affiliate's COP, or market value, as 
cited in section 773(f)(3) of the Act. Petitioners note that the 
Department's February 4, 1999 cost verification report indicates that 
POSCO's weighted-average purchase price for some affiliated party 
inputs occurred at prices that were less than the related parties' COP. 
Petitioners state that POSCO failed altogether to report a market price 
benchmark for an additional alloy, which requires the Department to 
apply facts available for the alloy.
    POSCO asserts that material inputs purchased from affiliated 
parties do not meet the statutory definition of a major input and 
represent arm's length transactions based on the relationship of the 
price paid to the affiliated supplier and the cost incurred by that 
supplier. POSCO claims that even if the Department were to define one 
or more of the inputs as a major input, there is no basis on which to 
adjust the submitted costs.
    Department's Position: We agree in part with respondent and in part 
with petitioners. POSCO obtained three inputs from both affiliated and 
non-affiliated suppliers. Sections 773(f)(2) and (3) of the Act allow 
the Department to test whether transactions between affiliated parties 
are at arm's length. Section 773(f)(2) allows the Department to test 
whether transactions between affiliated parties involving any element 
of value are at prices that ``fairly reflect * * * the market under 
consideration.'' Section 773(f)(3) allows the Department to test 
whether transactions between affiliated parties involving a major input 
are above the affiliated supplier's cost of production. In other words, 
if an understatement in the value of an input would have a significant 
impact on the reported cost of the subject merchandise, the law allows 
the Department to insure that the transfer price or market price is 
above the affiliated suppliers' cost. The determination as to whether 
an input is considered major is made on a case-by-case basis. See 
Antidumping Duties; Final Rule, 62 FR 27296, 27362 (May 19, 1997). In 
determining whether an input is considered major, among other factors, 
the Department looks at both the percentage of the input obtained from 
affiliated suppliers (verses un-affiliated suppliers) and the 
percentage the individual element represents of the subject 
merchandise's COM (i.e. whether the value of inputs obtained from an 
affiliated supplier comprises a substantial portion of the total cost 
of production for subject merchandise).
    In the instant case, we looked at these percentages for each of the 
three inputs. For one of the three inputs we found that section 
773(f)(3) of the Act does apply to POSCO's purchases from affiliated 
parties. See Memorandum to Neal Halper: Cost of Production (``COP'') 
and Constructed Value (``CV'') calculation adjustments for the Final 
Determination of Pohang Iron & Steel Co., Ltd. (``POSCO''), dated May 
19, 1999. For this input, we then compared the transfer price between 
POSCO and its affiliated supplier to that supplier's actual cost of 
production. Since the affiliated supplier's actual cost of production 
exceeded the transfer price, we have increased the COM of the subject 
merchandise to reflect the cost of the affiliated supplier. However, 
for the other two inputs we have determined that because of the limited 
amounts of these inputs obtained from affiliated suppliers and the 
relatively small percentage that the individual elements represent of 
the subject merchandise's COM, section 773(f)(3) of the Act does not 
apply. Furthermore, for these two inputs we found that the transfer 
price with POSCO's affiliates are reflective of a market price. 
Therefore, we have accepted the transfer price from POSCO's affiliate 
as the cost with respect to these inputs and have not adjusted the COM 
of the subject merchandise, pursuant to section 773(f)(2) of the Act.

Comment 12: Inchon--Date of Sale

    Petitioners argue that, based on the verified record, the 
appropriate date of sale for home market sales is the invoice date. 
Petitioners argue that Inchon does not accept the basic terms of sale 
until the shipment request is entered into the warehousing/shipping 
document which coincides with the issuance of the invoice to the 
customer. Petitioners cite the Department's verification findings, 
which state that a ``sale representative enters the order into the 
system and awaits sales approval. Inchon's sales team explained that 
price and quantity terms had to be approved by sales management; once 
approval is gained, the sales team enters a shipment request to the 
warehousing/shipping department.'' See Inchon Verification Report, at 
20. Petitioners argue that, based on the above verification findings, 
Inchon does not accept the material terms of sale until ``sometime 
after the order is received from the customer.'' Also, petitioners 
argue that it is the Department's preference to use the invoice date 
unless the material terms of sale are established at a different date, 
citing Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 
27296, 27349 (May 19, 1997).
    Respondent agrees with petitioners that, for home market sales, the 
invoice date should be used, instead of the purchase order/order 
confirmation date. Respondent argues that the use of the purchase order 
date in the preliminary determination is directly contrary to the 
Department's date of sale regulations, which state that ``[i]n 
identifying the date of sale of the subject merchandise or foreign like 
product, the Secretary normally will use the date of invoice, as 
recorded in the exporter or producer's records kept in the ordinary 
course of business. However, the Secretary may use a date other than 
the date of invoice if the Secretary is satisfied that a different date 
better reflects the date on which the exporter or producer establishes 
the material terms of sale.'' See 19 CFR 351.401(i). Inchon argues that 
while the vast majority of home market sales are filled from inventory 
on hand, and the shipping and invoicing takes place within one or two 
days of

[[Page 30682]]

the order, if Inchon does not have a requested product in inventory, it 
will (if the order is approved) produce the product. Respondent 
concludes that if Inchon produces the product, the essential terms of 
sale often change between the purchase order date and the invoice date; 
thus, the most appropriate date of sale is the invoice date.
    For U.S. sales, petitioners argue that the Department should use 
the order date/contract date as the date of sale, and not the invoice 
date, as the Department preliminarily determined. Petitioners note that 
``once material terms and schedules are set, a firm offer is sent by 
Inchon to Hyundai Corporation, which sends its firm offer to Hyundai 
U.S.A., which finally sends a firm offer to the final customer.'' See 
Inchon Verification Report, at 21. Also, petitioners support their 
argument by citing to the verification report: ``[a]ccording to Inchon, 
it also sends a sales contract to the final contract [sic], which lists 
all terms of the sale; this contract is signed by both parties.'' Id.
    Petitioners argue that the Department should use the date of 
contract/order as the U.S. date of sale unless there is record evidence 
that demonstrates that ``the material terms of sale change frequently 
enough on U.S. sales so as to give both buyers and sellers any 
expectation that the final terms will differ from those agreed to in 
the contract'', citing SSPC from Korea and Circular Welded Non-Alloy 
Steel Pipe From the Republic of Korea; Final Results of Antidumping 
Duty Administrative Review (``Circular Welded Non-Alloy Steel Pipe From 
the Republic of Korea''), 63 FR 32833, 32836 (June 16, 1998).
    Petitioners argue that respondent's two sales examples (see 
Inchon's November 19, 1998 response, at 21 and Exhibit A-28) do not 
demonstrate a change in the material terms of sale between the date of 
contract/order and the invoice date. In the first example, petitioners 
argue that the U.S. customer asked for a split-shipment of the quantity 
ordered and it did not cancel the quantity. In the second example, 
``the customer sent a purchase order requesting multiple products; 
however, Inchon agreed to supply one of the products from each of the 
purchase orders.'' Petitioners argue that this example only illustrates 
Inchon's sales process, where Inchon only sends a firm contract to the 
customer after the material terms of sale are established.
    Petitioners allege that the sales processes in the home market and 
in the U.S. market differ because home market sales are usually made 
from inventory and U.S. sales are made-to-order. Petitioners argue 
another comparison point between the U.S. and home market sales 
concerning the terms of payment and invoicing; however, as this subject 
involves proprietary information, please see Inchon Analysis Memorandum 
for the Final Results of the 1997/1998 Investigation for Stainless 
Steel Sheet and Strip in Coils from Korea (``Analysis Memo: Inchon'') 
for a more complete discussion of this issue. Petitioners argue that 
the Department, in a similar factual situation (Circular Welded Non-
Alloy Steel Pipe From the Republic of Korea, 63 FR at 32835), noted 
differences between the U.S. and home market sales process. In the 
above Korean case, petitioners noted that the Department used the 
invoice date for home market sales from inventory and the date of 
contract for U.S. made-to-order sales.
    Furthermore, petitioners argue that Inchon's price and quantity 
change chart is inaccurate. See Exhibit C-24 of Inchon's November 19, 
1998 response. Petitioners note that respondent claims that this chart 
illustrates that the price and quantity changed between order date and 
the invoice date on 17% of U.S. sales, by sales volume. Petitioners 
argue that an accurate comparison would be to compare any price or 
quantity changes between Inchon's contract/order date and invoice date, 
and not between the customer's purchase order date and the invoice 
date. Petitioners argue that, based on the Hyundai U.S.A. verification 
exhibits, there were no changes in the material terms of sale (i.e., 
price or quantity) between Inchon's contract/order date and the invoice 
date.
    Finally, petitioners argue that if the Department disagrees with 
petitioners' above arguments to use the date of contract/order as the 
U.S. date of sale, the Department should use the date of invoice from 
Hyundai U.S.A. to the unaffiliated U.S. customer and not the date of 
invoice from Inchon to either unaffiliated customers (channel 3) or 
affiliated customers (channels 1 and 2).
    Respondent argues that, for U.S. sales, the Department should 
continue to use Inchon's invoice date as the date of sale. Respondent 
argues that petitioners were incorrect in stating that Inchon's 
specific example of a change in quantity from the contract to the 
invoice was a split shipment contract. Respondent argues that in this 
example, the final shipment was canceled by the U.S. customer because 
of a failure to agree on a price and that this information was verified 
by the Department. Respondent argues that this is an example of how the 
material terms of sale (in this case, quantity) can change after the 
date of contract. Respondent argues that petitioners understand that 
Inchon uses the terms ``PO'' and ``contract'' interchangeably and that 
the reference to ``P/O QTY,'' in Exhibit C-24 of Inchon's November 19, 
1998 response refers to the customer contract quantities, and that the 
quantities in both the purchase order and customer contract are the 
same. Also, respondent argues that in similar cases where there are 
documented changes in material terms of sale, the Department has used 
the invoice date as the date of sale. See Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
from Canada, 64 FR 2173, 2178 (January 13, 1999).
    Respondent also disagrees with petitioners' argument that if the 
Department uses invoice date as the date of sale, the Department should 
use the invoice date from Hyundai U.S.A. to the unaffiliated U.S. 
customer. Respondent argues that using this invoice date is contrary to 
the Department's long-standing position that date of sale may not be 
after the date of shipment to the unaffiliated customer, citing Carbon 
Steel from Korea--3rd Review, 63 FR at 13172-73. Respondent notes that 
the Department did use the invoice date to the unaffiliated customer 
for U.S. sales through POSAM, the U.S. affiliate of POSCO in SSPC from 
Korea; however, the U.S. sales through POSAM were classified as CEP 
sales, and not EP sales. See SSPC from Korea, 64 FR at 15456.
    Department's Position: We disagree with both parties' assertions 
that we should use invoice date for home market sales. For our 
preliminary determination, we used the purchase order/order 
confirmation date as the home market date of sale because, by 
respondents' own admission, ``there would rarely be significant 
differences in the sales terms'' between order date and invoice date. 
See Inchon's November 19, 1998 supplemental questionnaire response. 
Finally, at verification, we noted that for the home market sales 
traces, there were no changes in the material terms of sale between 
order date and invoice date.
    Inchon's case brief states that when Inchon accepts an order for a 
product which it does not have in inventory, it produces the requested 
product, and, in these instances, the essential terms of sale can often 
change. This fact (of which, we note, we were aware at the time of our 
preliminary determination) does not change the fact that, for the large 
majority of Inchon's home market sales, the essential terms of sale do 
not change between order date and invoice date. As we noted in the 
preamble to the

[[Page 30683]]

governing regulations, we have established a ``preference for using a 
single date of sale for each respondent, rather than a different date 
of sale for each sale.'' See Preamble, 62 FR at 27348. In this case, 
where the record assertions and evidence support the conclusion that 
the essential terms of sale for the ``vast majority'' of sales are 
established at order date, our preference to utilize a uniform date of 
sale leads to our conclusion that order date is the more appropriate 
date. Similarly, we note that petitioners' reference to our 
verification findings regarding the sales process does not contradict 
Inchon's statements that ``the vast majority'' of home market sales are 
made from inventory and that the terms of sale rarely change between 
the purchase order date and the invoice date. Hence, we disagree with 
both petitioners and respondent's arguments and continue to determine 
that the purchase order date, and not the invoice date, is the most 
appropriate sale date for home market sales in this case.
    For U.S. sales, we disagree with petitioners' arguments to use the 
purchase order date instead of the invoice date from Inchon to either 
unaffiliated customers (channel 3) or affiliated customers (channels 1 
and 2). While we agree with petitioners' argument that Inchon's home 
and U.S. sales process differ, it does not automatically follow that we 
must therefore use invoice date for home market sales and purchase 
order date for U.S. sales. We note that in the case cited by 
petitioners, Circular Welded Non-Alloy Steel Pipe From the Republic of 
Korea (63 FR at 32836), the Department considered a factual pattern in 
which ``[t]he material terms of sale in the U.S. [were] set on the 
contract date and any subsequent changes [were] usually immaterial in 
nature or, if material, rarely [occurred].'' This is not the situation 
for Inchon's U.S. sales, where Inchon has provided evidence that there 
were changes to the essential terms of sale for a significant portion 
of its U.S. sales. For example, we note that the two examples cited by 
Inchon, as well as its price and quantity change chart (see Exhibit C-
24 of Inchon's November 19, 1998 response), demonstrate that the 
material terms of sale can and do change often enough to justify using 
invoice date. Therefore, for U.S. sales, we determine that Hyundai 
U.S.A.'s invoice date (or shipment date, if earlier) is the appropriate 
date of sale for Inchon's U.S. sales.
    Moreover, for U.S. sales, we disagree with respondent's arguments 
that Inchon's invoice date should be used as the date of sale for the 
final determination. For U.S. sales categorized as either EP or CEP 
transactions, it is the Department's practice to use the date of the 
invoice to the first unaffiliated purchaser in the United States. We 
note that for Inchon's sales made through Hyundai Corporation, 
respondent has provided the date of Inchon's invoice to Hyundai 
Corporation as the invoice date rather than the date of Hyundai 
Corporation's invoice to the first unaffiliated U.S. purchaser. 
However, as noted above in Comment 5, the date of sale cannot occur 
after the date of shipment. Therefore, when date of shipment to the 
first unaffiliated purchaser in the United States precedes the date of 
the invoice, we will use shipment date as the date of sale (see Carbon 
Steel from Korea--4th Review, 64 FR at 12935, citing Carbon Steel from 
Korea--3rd Review, 63 FR at 13172-73).

Comment 13: Inchon--Net Price vs. Gross Unit Price

    Petitioners argue that the Department should recalculate both home 
market credit expenses and indirect selling expenses based on the net 
price (i.e., after accounting for billing adjustments) rather than the 
gross unit price. Petitioners argue that Inchon used incorrect formulas 
for its calculation of home market credit expenses and indirect selling 
expenses, which were listed on pages B-27 and B-31, respectively, of 
Inchon's September 23, 1998 response.
    Respondent rebuts petitioners' argument that the Department should 
adjust Inchon's home market credit and indirect selling expenses based 
on the net price because these adjustments would be ``insignificant 
adjustments'' within the meaning of 19 CFR 351.413 (1998). Respondent 
argues that these adjustments do not affect the calculation of Inchon's 
normal value by more than 1 percent, and would be a waste of the 
Department's time and resources to implement.
    Department's Position: We agree with petitioners and have 
recalculated both home market credit expenses and indirect selling 
expenses based upon net price. As noted in the original questionnaire 
in this case, the Department uses in its margin calculations a price 
net of adjustments, such as discounts, rebates, and post-sale price 
adjustments, that are reflected in the purchaser's net outlay. See 19 
CFR 351.102(b) and 351.401(c). This calculation formula error was noted 
in petitioners' February 3, 1999 alleged deficiency comments. 
Respondent's argument for us to use 19 CFR 351.413 to justify not 
making the calculation formula change is unfounded. As noted in the 
preamble to the governing regulations, ``[section] 351.413 give[s] the 
Department the flexibility to determine, on a case-by-case basis, 
whether it should disregard a particular insignificant adjustment.'' 
See Preamble, 62 FR 27372. It would be more of a burden upon the 
Department to calculate a margin both with the adjustment and without 
the adjustment, compare the results, and determine whether the 
adjustment is ``insignificant.'' Therefore, we have used Inchon's net 
price to the customer as the basis for credit and indirect selling 
expenses.

Comment 14: Inchon--U.S. Handling Commission Fee Adjustment

    Petitioners argue that the Department should apply the highest per 
unit handling commission fee to all Hyundai U.S.A. sales with a 
particular term of payment, as partial facts available, because the 
Department discovered at verification that Inchon failed to disclose 
the handling commission fee. Because Inchon did not report the handling 
commission fee and because the Department discovered the fee at the 
Hyundai U.S.A. verification, petitioners argue that the Department 
should apply facts available and use the highest per unit handling 
commission fee for those U.S. sales with this particular term of 
payment.
    Respondent argues that at Inchon's U.S. verification, Inchon 
realized that it had inadvertently excluded a handling commission fee 
for certain of its U.S. sales, and that the Department should apply the 
actual transaction-specific adjustment, based on the calculations in 
U.S. Verification Exhibit 12. Respondent argues that the Department 
should not apply facts available or adverse facts available because the 
Department has the information on the record to make the transaction-
specific adjustments. Also, respondent argues that this is the type of 
minor correction that the Department normally makes after verification.
    Department's Position: We agree with respondent and will apply the 
U.S. handling commission fee transaction-specific adjustments, where 
applicable. We discovered, and then calculated, the handling commission 
fee expenses at verification for all U.S. sales. See Hyundai U.S.A. 
Verification Report, Exhibit 12. We disagree with petitioners' argument 
to apply partial facts available. First, there is no missing 
information with respect to these minor adjustments. Second, the 
Department verified the accuracy of these minor adjustments for all 
U.S. sales. Thus, the

[[Page 30684]]

application of facts available is unwarranted. See Notice of Final 
Results and Partial Rescission of Antidumping Duty Administration 
Review: Certain Pasta from Turkey, 63 FR 68,429, 68,432 (December 11, 
1998) (Department adjusted freight expenses to reflect verification 
findings, despite an argument that the ``adjustment is negligible and 
may be ignored,'' citing 19 CFR 351.413.) Therefore, for the final 
determination, we have adjusted for these expenses on a transaction-
specific basis. See Analysis Memo: Inchon for a discussion of the 
calculations.

Comment 15: Inchon--Converted Quantity

    Petitioners argue that the Department should use the converted 
quantity field in the U.S. sales database, with quantities in metric 
tons, instead of the quantities reported in field QTYU, which, 
petitioners argue, contains mixed units of measurement, for the 
purposes of calculating an overall antidumping margin.
    Respondent Inchon agrees with petitioners that the Department 
should use the converted quantity field in the U.S. sales database for 
the quantity sold.
    Department's Position: We agree with both parties that we should 
use the converted quantity field from the U.S. sale database. Because 
Inchon had to convert some U.S. sales from short tons into metric tons, 
using the converted quantity field in the U.S. sales database assures 
us that the quantities used for the final determination are based upon 
the same measurement, which is an actual per ton basis, for each 
transaction.

Comment 16: Inchon--Other Freight Expenses

    Petitioners argue that the Department should correct the U.S. sale 
database based on the discovery, at verification, of an error regarding 
Inchon's failure to include a standard handling fee as part of other 
freight expenses for a particular U.S. sales observation.
    Respondent agrees with petitioners that the Department should 
correct the error discovered at verification. However, respondent 
argues that this handling fee pertains only to merchandise which Inchon 
exported through the ports of Pusan or Pohang. Thus, respondent argues 
that, in making the handling fee adjustments, the database should be 
adjusted only when Inchon shipped through the ports of Pusan or Pohang.
    Department's Position: We agree with both parties that, based on 
our findings at verification, Inchon had not added a standard handling 
fee for all shipments through the ports of Pohang and Pusan. This error 
was discovered during verification and the correct figure was 
calculated for the U.S. sales observation. See Inchon Verification 
Report, at 1. Additionally, we agree with respondent that the error 
exists only with respect to those sales which were exported through 
Pusan or Pohang. This conclusion is consistent with the information 
gathered at verification. See Inchon Verification Report, Exhibit 18. 
Therefore, for the final determination, we will adjust the expenses 
associated with domestic inland freight to the port of export for all 
applicable U.S. sales.

Comment 17: Inchon--Scrap Recovery Value

    Petitioner's argue that the Department should reject Inchon's new 
methodology for calculating scrap recovery. Previously, Inchon valued 
scrap recovery based on net realizable value. However, at the start of 
verification, Inchon changed the valuation methodology to the actual 
sales value. Petitioners argue that the Department should accept 
Inchon's original scrap recovery rate based on net realizable value 
because that method is based on Inchon's normal books and records. 
Petitioners cite section 773(f)(1)(A) of the Act, which states that 
costs shall normally be calculated based on the records of the exporter 
or producer if those records are prepared in accordance with the home 
country's generally accepted accounting principles, and reasonably 
reflect the cost of producing the merchandise.
    Petitioners claim that there is no evidence on the record to 
suggest that Inchon's normal accounting of scrap recovery costs 
recorded in its normal books and records are not reasonable. 
Furthermore, petitioners assert that this change in methodology and the 
submission of new factual information was not a minor correction; thus 
it was untimely filed and pursuant to section 351.302(d) of the 
regulations, the Department should not consider or retain in the 
official record of the proceeding untimely filed information. 
Petitioners claim that the Department only accepts new information at 
verification when: (1) The need for that information was not evident 
previously, (2) the information makes minor corrections to information 
already on the record, or (3) the information corroborates, supports, 
or clarifies information already on the record. Petitioners assert that 
on all points, Inchon's submission of new factual information is not a 
minor correction.
    Inchon states that in the normal course of business it values scrap 
at its net realizable value. However, to comply with the Department's 
policy to reduce material costs by the actual revenue received on sales 
of scrap during the POI, Inchon provided a revised scrap recovery 
calculation based on actual scrap revenue. Inchon asserts that the 
information used in the new scrap recovery calculation was placed on 
the record in its November 19, 1998 supplemental D response in exhibit 
D-21. Thus, petitioner's argument that the information was submitted 
untimely are without merit.
    Department's Position: We agree with petitioners' assertion that 
the net realizable value scrap recovery method should be used in for 
this case. Inchon uses the net realizable method in its normal books 
and records which reasonably reflects the costs associated with the 
production and sale of the subject merchandise, pursuant to section 
773(f)(1)(A) of the Act. We agree that the actual scrap value, as 
opposed to a standard or theoretical scrap value, should be used to 
reduce material costs. However, the costs associated with obtaining the 
scrap (i.e., transportation and processing costs) should be deducted 
from the actual sales revenue to arrive at a net value for scrap used 
as a reduction in material costs. Inchon has not provided sufficient 
evidence to demonstrate that the net realizable method does not 
reasonably reflect costs, and therefore, should not be relied upon in 
the stainless steel sheet and strip case.

Comment 18: Inchon--Depreciation

    Petitioners argue that Inchon's change in useful lives and change 
in depreciation method was not justified nor consistent with the 
depreciation methodologies that it employed in prior years. 
Petitioner's cite Carbon Steel from Korea--3rd Review, where the 
Department denied respondent's change in useful life, even though the 
change was in accordance with Korean GAAP. In that case, the Department 
found that the respondent failed to sufficiently justify the change, 
and therefore, the Department calculated the depreciation expense based 
on the original useful lives of the assets. Petitioners assert that in 
the instant case, Inchon did not provide sufficient justification for 
the changes and the depreciation should be recalculated based on the 
original method and useful lives of the assets.
    Inchon argues that its change in depreciation methodology is fully 
consistent with Korean GAAP. Inchon cites section 773(f)(1)(A) of the 
Act which requires the Department to base its calculation of costs on 
GAAP in the country of manufacture unless the result

[[Page 30685]]

is distortive. Inchon claims that the petitioners have not demonstrated 
any such distortion. Furthermore, Inchon asserts that Carbon Steel from 
Korea--3rd Review cited by petitioners is not applicable because it 
involves an administrative review. Inchon states that in administrative 
reviews, the Department must be concerned about possible distortions 
arising from changes in methodology from one review period to another, 
which could result in some costs never being captured in any review 
period. Additionally, in a review, the Department may have legitimate 
concerns about respondents making strategic changes to accounting 
methodologies in order to affect dumping margins. Inchon argues that in 
the instant case neither concern is applicable because in this initial 
investigation, the change in depreciation methods and change in useful 
lives occurred before the dumping case was filed.
    Department's Position: We agree with Inchon. At verification we 
examined the change in depreciation method and useful lives, noting 
that the changes were neither unusual nor unreasonable. These changes 
were reflected in Inchon's December 31, 1997 audited financial 
statements in accordance with Korean generally accepted accounting 
principles. In addition, the change in depreciation method and useful 
lives occurred prior to the initiation of this investigation. We agree 
that, where changes in accounting principles and costing methodologies 
occur subsequent to the initiation of an antidumping proceeding, the 
Department has concerns about the possible distortions which could 
result. However, since Inchon provided evidence that its change in 
depreciation methods and useful lives were reasonable, and that the 
change occurred in a time period prior to the initiation of the 
investigation, we have relied on the new methodologies and have not 
made adjustments to Inchon's depreciation expense.

Comment 19: Inchon--CEP vs. EP

    Respondent argues that the Department should determine that 
Inchon's channel one U.S. sales are EP sales, and not CEP sales as 
preliminarily determined. Respondent stated that ``[i]n determining 
whether U.S. sales made by an affiliated U.S. importer prior to 
importation should be classified as EP or CEP sales, the Department 
considers whether: (1) The merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer; (2) this was the 
customary commercial channel between the parties involved; and (3) the 
functions of the U.S. sales affiliates were limited to that of 
processors of sales-related documentation and communications links with 
the unaffiliated U.S. buyer,'' citing Preliminary Results of 
Antidumping Review: Circular Welded Non-Alloy Steel Pipe from Korea, 62 
FR 55574, 55579 (October 27, 1997). Respondent also argues that when 
the above three criteria are met, the Department classifies the 
transactions as EP sales, citing, e.g., Industrial Phosphoric Acid from 
Belgium, 63 FR 25830, 25831 (May 11, 1998); Independent Radionic 
Workers of America v. United States, 19 CIT 375 (1995); and AK Steel 
Corporation v. United States, Slip Op. 98-159, WL 846764 (CIT, November 
23, 1998).
    Respondent argues that in this investigation, the first two 
criteria are met because Inchon's channel one U.S. sales through 
Hyundai U.S.A. were shipped directly from the manufacturer to the 
unaffiliated U.S. customer, which is the customary commercial channel 
of distribution for Inchon's channel one U.S. sales. Respondent notes 
that for one invoice, which covered four U.S. transactions, at the 
unaffiliated U.S. customer's request, Hyundai U.S.A. arranged for a 
brief period of warehousing at a commercial warehouse at the U.S. port 
of entry. Respondent argues that this post-sale warehousing does not 
void Inchon's claim for EP treatment because: (i) it was done at the 
customer's request; (ii) the goods never entered the inventory of 
Hyundai U.S.A.; and (iii) after warehousing, the goods were shipped 
directly to the unaffiliated U.S. customer.
    Concerning the third criterion, respondent argues that Hyundai 
U.S.A. acted as a processor of sales-related documentation and a 
communication link with the unrelated U.S. buyer. Respondent argues 
that Hyundai U.S.A.'s role was therefore that of a classic sales 
processor and communications link: forwarding orders to Inchon for 
approval, serving as a contact point for customer inquiries, arranging 
for importation, freight, and delivery to the customer, and performing 
invoicing and payment collection functions on behalf of Inchon. More 
specifically, respondent argues that the Hyundai U.S.A. Verification 
Report demonstrates Hyundai U.S.A.'s limited role in these 
transactions. First, respondent argues that Inchon, not Hyundai U.S.A., 
identified U.S. channel one customers and determined which potential 
customers should be served through this sales channel. Respondent also 
argues that Inchon's own sales personnel would travel from Korea to 
make joint sales calls for important U.S. customers. See Hyundai U.S.A. 
Verification Report, at 4. Second, respondent argues that it does not 
have a specific department or division for stainless steel sales and 
the U.S. sales through Hyundai U.S.A. were sold by sales personnel that 
are primarily responsible for other non-subject products. Third, 
respondent argues that Hyundai U.S.A. was not responsible for setting 
prices or other key terms of sale, and that, while Hyundai U.S.A. 
personnel were familiar with Inchon's prices and did communicate 
current prices to U.S. customers, Hyundai U.S.A. had no authority to 
accept or approve sales of subject merchandise. Respondent argues that 
Inchon approved all sales and Inchon, after receiving a sales inquiry 
from Hyundai U.S.A., would often change the material terms of sale, 
which the Department verified.
    In addition, respondent argues that none of the following 
activities justify the Department's preliminary determination that 
Hyundai U.S.A.'s sales should be CEP sales: (i) that Hyundai U.S.A. 
sometimes quotes prices to unaffiliated customers, (ii) that Hyundai 
U.S.A. arranged for post-sale warehousing for one customer, (iii) that 
Hyundai U.S.A. invoices and collects payment from the U.S. customer, 
and (iv) that Hyundai U.S.A. extends credit to the U.S. customer.
    Citing Final Determination of Sales at Less Than Fair Value: Coated 
Groundwood Paper from Belgium, 56 FR 56359, 56362 (November 4, 1991) 
and Final Determination of Sales at Less Than Fair Value: Coated 
Groundwood Paper from Finland, 56 FR 56363, 56371 (November 4, 1991), 
respondent contends that the Department has held that the fact that an 
affiliated U.S. company quotes prices to U.S. customers does not lead 
to CEP designations, nor does a U.S. affiliate's identifying and 
maintaining contact with customers. Respondent also cites to Final 
Determination of Sales at Less Than Fair Value: Extruded Rubber Thread 
from Malaysia, 57 FR 38465, 38469 (August 25, 1992), noting that the 
Department found that the role of a branch office whose functions 
include ``receiving orders, preparing and executing order 
confirmations, invoices, packing lists, and other sales-related 
documentation, and receiving and processing payments from customers'' 
was not sufficient to classify the affiliate's activities as beyond 
those of a mere processor of documents or communications link. 
Respondents also cite E.I. DuPont de Nemours & Co. v.

[[Page 30686]]

United States, 841 F. Supp. 1237, 1249-50 (CIT 1994) in support of this 
proposition.
    Petitioners argue that the Hyundai U.S.A. sales are CEP because 
Hyundai U.S.A. solicits sales, negotiates contracts, and finalizes the 
sale. Petitioners argue that these activities are not ancillary 
activities in making the U.S. sale. Petitioners note that the 
Department has stated that, ``[w]here the U.S. affiliate has more than 
an incidental involvement in making sales (e.g., solicits sales, 
negotiates contracts or prices) or provides customer support, we treat 
the transactions as CEP sales,'' citing, e.g., Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon 
Steel Plate from Canada: Final Results of Antidumping Duty 
Administrative Review (``Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plate from Canada''), 
63 FR 12725, 12738 (March 16, 1998).
    Petitioners argue that record evidence shows that Hyundai U.S.A. 
solicits sales. Specifically, petitioners note that the Hyundai U.S.A. 
Verification Report, at 4-5, states that ``Hyundai U.S.A. would contact 
potential customers'' and ``(w)hen only Hyundai U.S.A. is making sales 
calls, company officials stated that they would know Inchon's current 
steel market prices because they review a publicly available industry 
publication (with prices) and are in contact with Inchon concerning 
Inchon's price structure.'' Also, petitioners argue that the Hyundai 
U.S.A. Verification Report supports the conclusion that Hyundai U.S.A. 
negotiates contracts. Specifically, petitioners cite the Hyundai U.S.A. 
Verification Report, at 5, which states that ``negotiations would 
continue between Inchon, Hyundai U.S.A., and the customer.'' 
Petitioners argue that the above record indicates that these are not 
ancillary activities in making the U.S. sale, and therefore, the 
Department must consider sales through Hyundai U.S.A. to be CEP 
transactions.
    Department's Position: We agree with petitioners that Inchon's 
sales through Hyundai U.S.A. should continue to be classified as CEP 
sales for the final determination. The Department treats sales through 
an agent in the United States as CEP sales, unless the activities of 
the agent are merely ancillary to the sales process. Specifically, 
where sales are made prior to importation through a U.S.-based 
affiliate to an unaffiliated customer in the United States, the 
Department examines several factors to determine whether these sales 
warrant classification as EP sales. These factors are: (1) Whether the 
merchandise was shipped directly from the manufacturer to the 
unaffiliated U.S. customer without being introduced into the physical 
inventory of the affiliated selling agent; (2) whether this sale is the 
customary commercial channel between the parties involved; and (3) 
whether the function of the U.S. selling agent is limited to that of a 
``processor of sales-related documentation'' and a ``communication 
link'' with the unrelated U.S. buyer. Where the factors indicate that 
the activities of the U.S. selling agent are ancillary to the sale 
(e.g., arranging transportation or customs clearance), we treat the 
transactions as EP sales. Where the U.S. selling agent is substantially 
involved in the sales process (e.g., negotiating prices), we treat the 
transactions as CEP sales. See Certain Cut-to-Length Carbon Steel Plate 
from Germany: Final Results of Antidumping Administrative Review, 62 FR 
18389, 18391 (April 15, 1997); Mitsubishi Heavy Industries v. United 
States, Slip Op. 98-82 at 6 (CIT, June 23, 1998). The Department has 
stated that, ``(w)here the U.S. affiliate has more than an incidental 
involvement in making sales (e.g., solicits sales, negotiates contracts 
or prices) or provides customer support, we treat the transactions as 
CEP sales,'' citing, e.g., Certain Corrosion-Resistant Carbon Steel 
Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 
63 FR 12725, 12738 (March 16, 1998).
    In this case, we note that Hyundai U.S.A.'s level of sales 
activities cannot be regarded as merely ancillary. While Inchon 
performs many selling activities for U.S. sales through Hyundai U.S.A., 
including undertaking business trips to meet with potential U.S. 
customers of the subject merchandise (see Hyundai U.S.A. Verification 
Report, at 4), the record contradicts respondent's assertion that 
Hyundai U.S.A. is merely a processor of sales-related documentation.
    In this case, the facts on the record, taken together, indicate 
that Hyundai U.S.A. plays a significant role in the sales process. 
First, we note that Hyundai U.S.A. ``arranged for a brief period of 
warehousing at a commercial warehouse at the U.S. port of entry.'' Id.
    Second, Hyundai U.S.A. solicits sales. The record shows that, as 
part of the normal course of business, Hyundai U.S.A.'s employees 
travel with Inchon employees to make U.S. sales calls. Once Inchon had 
provided its affiliate a list of potential customers, ``Hyundai U.S.A. 
would contact these potential customers.'' In addition, Hyundai U.S.A. 
employees would make sales calls without Inchon employees, because 
Hyundai U.S.A. employees have knowledge of Inchon's prices. Id.
    Third, Hyundai U.S.A. assumed the credit risk because it invoiced 
the U.S. customer and was responsible for collecting payment from the 
U.S. customer. Hyundai U.S.A. was not collecting the payment on behalf 
of Inchon, as respondent argues, but for itself. Bearing such financial 
risk is indicative of a seller, not a mere facilitator.
    Fourth, Hyundai U.S.A. itself has noted that it also ``conducts 
market research and reports to Inchon on steel market conditions.'' Id.
    All of these activities performed by Hyundai U.S.A., taken 
together, constitute significant selling activities, and therefore, we 
find that Hyundai U.S.A.'s activities are more than ancillary to the 
sales process and have classified Inchon's U.S. sales through Hyundai 
U.S.A. as CEP transactions.

Comment 20: Inchon--Packing Expense

    Respondent argues that the Department should base packing expenses 
on the revised figures provided as a pre-verification correction. 
Respondent states that the packing expenses submitted by Inchon in its 
September 23, 1998 response, on pages B-32 and C-40 and Exhibits B-13 
and C-22, were based on a certain coil size, which, respondent claims, 
is the smallest coil size Inchon uses. Respondent argues that using 
this particular certain coil size overstated packing costs because the 
same amount of packing cost is incurred for each coil, regardless of 
coil size. In its pre-verification corrections, Inchon argues that it 
provided an average coil size for both U.S. and home shipments, and 
provided revised U.S. and home packing per-unit costs. See Inchon 
Verification Report, Exhibit 1. Hence, respondent argues that the 
Department should accept the modified packing expense figures.
    Petitioners argue that the modified packing expense figures, 
presented by Inchon as a pre-verification correction, are untimely new 
factual information that the Department should not consider or retain 
as part of the official record.
    Department's Position: We agree with respondent and have accepted 
Inchon's pre-verification correction to its packing expenses. We 
accepted this packing expense data at the beginning of verification 
because we determined that it was a minor correction to the U.S. and 
home market sales databases, rather than new factual information. We 
disagree with petitioners' argument that this packing expense 
correction is untimely new factual information, since Inchon's packing 
expense correction was made with regard to the underlying

[[Page 30687]]

coil size, which was the basis for its reported per unit packing 
expense. Therefore, for the final determination, we adjusted packing 
expenses in both the U.S. and home markets, based on Inchon's submitted 
pre-verification corrections. See Analysis Memo: Inchon for specific 
packing expense data.

Comment 21: Inchon--Payment Date

    Respondent argues that the Inchon Verification Report was incorrect 
when it reported that for a U.S. sales trace, there was a discrepancy 
regarding whose payment date was reported on the record. See Inchon 
Verification Report, at 1-2. Respondent argues that the U.S. sales 
trace package (Home Market Verification Exhibit #18) has documentation 
which supports respondent's position concerning whose payment date was 
reported on the record. Petitioners did not comment on this issue.
    Department's Position: We agree with respondent. We reviewed the 
documents included in the U.S. sales trace package in question, (Inchon 
Verification Report, Exhibit #18) and have determined that the report 
did not reflect the correct information on this issue. Although Inchon 
officials had reported that the document reflected payment to one 
affiliate, further examination of the document revealed that payment 
had been received by the correct affiliate, and that the corresponding 
payment date reported to the Department was correct.

Facts Available

    Section 776(a)(2) of the Act provides that if an interested party 
or any other person (A) withholds information that has been requested 
by the administrating authority; (B) fails to provide such information 
by the deadlines for the submission of information or in the form and 
manner requested, subject to subsections (c)(1) and (e) of section 782 
of the Act; (C) significantly impedes a proceeding under the 
antidumping statute; or (D) provides such information, but the 
information cannot be verified as provided in section 782(i) of the 
Act, the Department shall, subject to section 782(d) of the Act, use 
facts otherwise available in reaching the applicable determination. As 
discussed in Preliminary Determination, Taihan failed to respond to the 
Department's questionnaire. Accordingly, we find, under section 
776(a)(2)(A), that we must base our determination for that company on 
facts available.
    Section 776(b) of the Act further provides that adverse inferences 
may be used for a party that has failed to cooperate by not acting to 
the best of its ability to comply with a request for information (see 
also the Statement of Administrative Action (``SAA''), accompanying the 
URAA, H.R. Rep. No. 103-316 at 870). Given the company's refusal to 
comply with the Department's request for information, Taihan has failed 
to cooperate to the best of its ability in this investigation. A 
respondent's refusal to respond to the Department's request for 
information, much less provide information, is an extreme example of a 
party's failure to cooperate to the best of its ability. Therefore, the 
Department has determined that an adverse inference is warranted with 
respect to Taihan.
    In this proceeding, we used the information from the petition, as 
adjusted by the Department for the purposes of initiation, to form the 
basis for a dumping margin for this respondent. Thus, consistent with 
the Department's practice (see Notice of Preliminary Determination of 
Sales at Less Than Fair Value: Stainless Steel Wire Rod from Germany, 
63 FR 10847 (March 5, 1998) (``SSWR from Germany'')), the Department is 
assigning to Taihan the highest margin alleged in the petition, as 
adjusted, for Korean producers, which is 58.79 percent (see June 30, 
1998, ``Import Administration Antidumping Investigation Initiation 
Checklist (``Initiation Checklist'') and Initiation of Antidumping Duty 
Investigations: Stainless Steel Sheet and Strip from France, Germany, 
Italy, Japan, Mexico, South Korea, Taiwan, and the United Kingdom, 63 
FR 37521 (July 13, 1998) for a discussion of the margin calculations in 
the petition).
    Section 776(c) of the Act provides that when the Department relies 
on ``secondary information'' (e.g., the petition) as the facts 
available, the Department shall, to the extent practicable, corroborate 
that information with independent sources reasonably at the 
Department's disposal. The SAA accompanying the URAA clarifies that the 
petition is ``secondary information.'' See SAA at 870. The SAA also 
clarifies that ``corroborate'' means to determine whether the 
information used has probative value. Id. See also 19 C.F.R. 
351.308(c)(1) and (d).
    We reviewed the accuracy and adequacy of the information in the 
petition during our pre-initiation analysis of the petition, to the 
extent appropriate information was available for this purpose (e.g., 
import statistics, foreign market research reports, and data from U.S. 
producers). See Initiation Checklist. Specifically, in the petition, 
the petitioners based both EP and NV on foreign market research, 
affidavits concerning prices and freight costs, official U.S. import 
statistics, U.S. government sources and International Financial 
Statistics.
    With respect to gross U.S. and home market unit prices used in the 
margin calculations included in the petition, which were developed 
based on foreign market research (see Memorandum to the File--Re: 
Foreign Market Research, dated June 20, 1998), we have compared the 
information provided by Inchon and POSCO with the information provided 
in the petition. We find that the margins provided in the petition are 
corroborated by the pricing and cost information provided by POSCO and 
Inchon. See Memorandum to the File: Final Determination of the Sales at 
Less Than Fair Value Investigation of Stainless Steel Sheet and Strip 
in Coils (``SSSS'') from Korea: Application of Total Adverse Facts 
Available for Taihan Electric Wire Co., Ltd. (``Facts Available 
Memo''), dated May 19, 1999. We further note that the Department has, 
in other cases, for facts available purposes, used margins developed in 
a petition that are based in part on foreign market research. See, 
e.g., SSWR from Germany, and Notice of Preliminary Determination of 
Sales at Less Than Fair Value and Postponement of Final Determination: 
Melamine Institutional Dinnerware Products from Indonesia, 61 FR 43333 
(August 22, 1996).
    In addition, as certain other information included in the 
petition's margin calculation is from public, independent sources 
(e.g., international freight and insurance, U.S. harbor maintenance and 
U.S. merchandise processing fees, SG&A, and profit), we find that this 
information also has probative value. Finally, we also have examined 
the reliability of the other information provided in the petition (see 
Memorandum to the File--Re: Foreign Market Research, dated June 20, 
1998), and find that it has probative value in light of the information 
provided on the record by Inchon and POSCO. For example, we determined 
that the price quotes for EP and NV reported in the petition fell 
within the range of price information reported in Inchon's and POSCO's 
responses. Similarly, for COP and CV data reported in the petition, we 
determined that such data also fell within the range of COP and CV data 
reported by Inchon and POSCO. See Facts Available Memo.
    Based upon the above, we have determined that the information 
reported in the petition is corroborated in this case. Accordingly, the 
Department has relied on information provided in the petition as the 
basis of facts available.

[[Page 30688]]

The All Others Rate

    Section 735(c)(5)(A) of the Act provides that the estimated all-
others rate shall be an amount equal to the weighted average of the 
estimated dumping margins established for exporters and producers 
individually investigated, excluding any zero and de minimis margins, 
and any margins determined entirely under section 776 of the Act. As 
Inchon's rate has been determined to be zero, and Taihan's rate has 
been determined under section 776 of the Act (determinations on the 
basis of the facts available), for this final determination, the all-
others rate is simply the calculated rate for POSCO.

Continuation of Suspension of Liquidation

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

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                        margin
                                                              percentage
------------------------------------------------------------------------
Pohang Iron & Steel Co., Ltd...............................        12.12
Inchon Iron & Steel Co., Ltd...............................         0.00
Taihan Electric Wire Co., Ltd..............................        58.79
All Others.................................................        12.12
------------------------------------------------------------------------

    Since the final weighted average margin percentage for Inchon is 
zero, Inchon is excluded from an antidumping order on stainless steel 
sheet and strip in coils from the Republic of Korea as a result of this 
investigation.

ITC Notification

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

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13770 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P