[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73143-73155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33230]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-427-816]


Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Cut-To-Length Carbon-Quality Steel Plate Products from France

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

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Jim Terpstra or Frank Thomson, Office 
4, Group II, Import Administration, International Trade Administration,

[[Page 73144]]

U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-3965 or (202) 482-4793, 
respectively.
    The Applicable Statute: Unless otherwise indicated, all citations 
to the statute are references to the provisions effective January 1, 
1995, the effective date of the amendments made to the Tariff Act of 
1930 (``the Act'') by the Uruguay Round Agreements Act (``URAA''). In 
addition, unless otherwise indicated, all references are made to the 
Department's regulations at 19 CFR Part 351 (1998).
    Final Determination: We determine that certain cut-to-length 
carbon-quality steel plate products (``CTL plate'') from France are 
being, or are likely to be, sold in the United States at less than fair 
value (``LTFV''), as provided in section 733 of the Act. The estimated 
margins of sales at LTFV are shown in the ``Suspension of Liquidation'' 
section of this notice.

Case History

    Since the preliminary determination in this investigation (Notice 
of Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cut-To-Length Carbon-Quality Steel Plate from France, (64 FR 41198, 
July 29, 1999)) (``Preliminary Determination''), the following events 
have occurred:
    In September 1999, the Department conducted verification of Usinor 
S.A. (``Usinor'') and its affiliates (i.e., Sollac S.A. (``Sollac''), 
GTS Industries S.A. (``GTS''), SLPM, Francosteel Corporation 
(``Francosteel''), and Berg Steel Pipe Corporation (``Berg'')). A 
public version of our report of the results of this verification is on 
file in room B-099 of the main Department of Commerce building, under 
the appropriate case number.
    In November 1999, respondent submitted revised databases at the 
Department's request, pursuant to minor corrections discovered at 
verification. The petitioners (i.e., Bethlehem Steel Corporation, Gulf 
States Steel, Inc., IPSCO Steel Inc., the United Steelworkers of 
America, and the U.S. Steel Group (a unit of USX Corporation)) and the 
respondent submitted case briefs on November 12, 1999, and rebuttal 
briefs on November 23, 1999. At the request of all parties, the 
scheduled public hearing was canceled.

Scope of Investigation

    The products covered by the scope of this investigation are certain 
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a 
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or 
actual thickness of not less than 4 mm, which are cut-to-length (not in 
coils) and without patterns in relief), of iron or non-alloy-quality 
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual 
thickness of 4.75 mm or more and of a width which exceeds 150 mm and 
measures at least twice the thickness, and which are cut-to-length (not 
in coils). Steel products to be included in this scope are of 
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is 
achieved subsequent to the rolling process (i.e., products which have 
been ``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum. Steel products to be included in 
this scope, regardless of Harmonized Tariff Schedule of the United 
States (HTSUS) definitions, are products in which: (1) Iron 
predominates, by weight, over each of the other contained elements, (2) 
the carbon content is two percent or less, by weight, and (3) none of 
the elements listed below is equal to or exceeds the quantity, by 
weight, respectively indicated: 1.80 percent of manganese, or 1.50 
percent of silicon, or 1.00 percent of copper, or 0.50 percent of 
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or 
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of 
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or 
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent 
zirconium. All products that meet the written physical description, and 
in which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of these investigations 
unless otherwise specifically excluded. The following products are 
specifically excluded from these investigations: (1) Products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to 
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary 
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon 
manganese steel or silicon electric steel.
    The merchandise subject to these investigations is classified in 
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
Customs purposes, the written description of the merchandise under 
investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is January 1, 1998, through 
December 31, 1998.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Usinor covered by the description in the ``Scope 
of Investigation'' section, above, and sold in France during the POI to 
be foreign like products for purposes of determining appropriate 
product comparisons to U.S. sales. We compared U.S. sales to sales made 
in the home market, where appropriate. Where there were no sales of 
identical merchandise in the home market made in the ordinary course of 
trade to compare to U.S. sales, we compared U.S. sales to sales of the 
most similar foreign like product made in the ordinary course of trade. 
In making the product comparisons, we matched foreign like products 
based on the physical characteristics reported by the respondent in the 
following order of importance (which are identified in Appendix V of 
the questionnaire): painting, quality, grade specification, heat 
treatment, nominal thickness, nominal width, patterns in relief, and 
descaling.
    Because Usinor had no sales of non-prime merchandise in the United 
States during the POI, we did not use home market sales of non-prime 
merchandise

[[Page 73145]]

in our product comparisons See e.g., Final Determination of Sales at 
Less Than Fair Value: Stainless Steel Wire Rod from Sweden (63 FR 
40449, 40450, July 29, 1998) (``SSWR'').

Changes From the Department's Preliminary Determination

    As a result of verification findings and/or clerical errors 
outlined in the comments below, we have made the following changes from 
our Preliminary Determination: 1) we have added the additional coating, 
girthweld and unloading and stockpiling charges to Berg's gross price, 
in addition to its freight revenue, in deriving Berg's total sales 
price. See Interested Party Comment 1; 2) for those sales to the United 
States that involve Usinor's affiliated freight forwarders, we have 
used the average of the international freight expenses that do not 
involve Usinor's affiliated freight forwarders. We have used Usinor's 
reported domestic brokerage and handling expenses for all sales. See 
Interested Party Comment 3; 3) we have disregarded SLPM's reported 
indirect selling expenses in our analysis. See Interested Party Comment 
6; 4) we have denied Usinor's claimed home market packing expense 
adjustment for all SLPM sales. See Interested Party Comment 8; 5) we 
have matched certain U.S. products to identical home market products. 
See Interested Party Comment 10; 6) we have determined appropriate home 
market sales for purposes of comparison to three U.S. products whose 
specifications were corrected at verification; 7) we have recalculated 
Usinor's home market inventory carrying costs based on the revised cost 
of manufacturing discussed in Interested Party Comment 16; 8) we have 
increased Sollac's and GTS's cost of manufacturing to account for 
increased pig iron cost from an affiliated supplier, thus increasing 
Usinor's COP and CV. See Interested Party Comment 16; 9) we have 
disallowed Usinor's claimed foreign exchange gains offset to its 
consolidated financial expense ratio, thus increasing Usinor's 
financial expense ratio. See Interested Party Comment 15; 10) we have 
used the financial expense information contained in Europipe's 
financial statements to calculate the further manufacturing financial 
expense ratio. See Interested Party Comment 14; 11) we adjusted Berg's 
further manufacturing, per-unit movement costs to reflect a per metric-
ton value. See Interested Party Comment 18; 12) we have deducted home 
market imputed credit in calculating constructed value; and 13) we have 
excluded home market inventory carrying cost in calculating constructed 
value.

Use of Facts Available

    In accordance with section 776 of the Act, we have determined that 
the use of facts available is appropriate for certain portions of our 
analysis of Usinor's data. For a discussion of our application of facts 
available, see Comments 3, 6, 8, and 10.

Interested Party Comments

Comment 1: Whether the Department Should Include All Additional Berg 
Charges in Calculating the Firm's Prices

    Respondent argues that the Department's preliminary margin 
calculation erroneously derived the total price for Berg sales by only 
adding two of the six relevant data fields, the price for base pipe and 
freight revenue, while omitting the other four additional charges 
(i.e., ID coating, OD coating, girthweld, and unloading and stockpiling 
charges). Respondent asserts that its submitted U.S. sales file, like 
Berg's invoices, lists the base price and all additional charges within 
separate fields. Therefore, all fields must be summed to reach the 
total price.
    According to respondent, the Memorandum for Holly Kuga from the 
Team, ``Verification of the Responses of Usinor in the Antidumping Duty 
Investigation of Certain Cut-To-Length Carbon-Quality Steel Plate From 
France (Berg Sales)'' (Oct. 22, 1999) (``Berg Sales Verification 
Report'') supports its position. Petitioners did not comment on this 
issue.
    Department's Position: We agree with respondent that it was 
established at the Berg sales verification that, in determining the 
total Berg sales price, we should include not only the additional 
charge for freight revenue, but also the additional coating, girthweld 
and unloading and stockpiling charges. Based upon our findings at 
verification, we have included these additional charges in deriving 
Berg's total sales price for the final determination.

Comment 2: Whether GTS' French-Format and U.S.-Format Financial 
Statements Reconcile

    Respondent notes that, in the normal course of business, GTS 
prepares both French-and U.S.-format financial statements. Respondent 
argues that the Memorandum for Holly Kuga from the Team, ``Verification 
of the Responses of Usinor in the Antidumping Duty Investigation of 
Certain Cut-To-Length Carbon-Quality Steel Plate From France (GTS, 
Sollac, and SLPM)'' (Nov. 3, 1999) (``French Sales Verification 
Report'') erroneously states that the GTS U.S.-format does ``not tie to 
the French-style format in the GTS financial statements.'' According to 
respondent, the financial statements do reconcile, and further, the 
financial statements report the same revenue and expenses.
    Respondent asserts that the only difference in the two statements 
is in the presentation of expenses. According to respondent, GTS' 
French-format financial statements are prepared in accordance with 
French GAAP, whereby expenses are reported by nature (e.g., salaries, 
taxes) and are not categorized as cost of sales, commercial expenses or 
general and administrative expenses. The U.S.-format financial 
statements, by contrast, are prepared in accordance with U.S. GAAP, 
which requires the separation of cost of sales, selling expenses, and 
general and administrative expenses. Petitioners did not comment on 
this issue.
    Department's Position: We agree with respondent. Upon further 
review of the data on the record, we find that the French and U.S. 
format financial statements do in fact contain the same information.

Comment 3: Whether Usinor Has Demonstrated That Its Foreign Brokerage 
and Handling Expenses and Sollac's International Freight Expenses Are 
at Arm's Length Prices

    Respondent asserts that Usinor's affiliated transport companies 
provided freight forwarding and handling services at arm's length 
prices. Respondent maintains that, should the Department not agree with 
this assertion, it should not resort to petitioners' proposal that we 
use, as facts available, the highest foreign brokerage and handling 
expense and international freight expense reported by respondent from 
all U.S. sales. Respondent claims that only a small fraction of the 
brokerage and handling expense incurred by GTS and international 
freight expense incurred by Sollac and reported in the relevant fields 
is related to fees charged by one of these affiliates.
    Respondent takes issue with the French Sales Verification Report 
statement that Sollac and GTS failed to provide any evidence, other 
than the affiliated transport companies' income statements, that the 
charges for brokerage and handling services and international freight 
services were at arm's length prices. Respondent maintains this was the 
only documentary evidence Sollac and GTS could provide, since Usinor 
did not purchase similar services from unaffiliated companies and the 
affiliated

[[Page 73146]]

transport companies do not keep track of data that would allow the 
calculation of the costs associated with individual shipments.
    According to respondent, under the antidumping statute, where an 
input is purchased from an affiliated party, the Department is to 
evaluate the price charged by the affiliated party against a market 
price for that product or service. If the input is a ``major input,'' 
then the Department is also to evaluate the price charged by the 
affiliated party for the input against the cost of the input and use 
the highest of the price from the affiliate, the market price, or the 
cost of production. See Section 773(f)(3) of the Act and 19 CFR 
Sec. 351.407(b). Respondent argues that, in this case, the affiliated 
transport companies did not provide the same kind of services to an 
unaffiliated company that they provided to Sollac or GTS, and Sollac 
and GTS did not purchase similar services from an unaffiliated company. 
Consequently, respondent states, it is impossible to make a market 
price comparison.
    Respondent urges the Department to determine that the transfer 
price was greater than or equal to the cost of the input by examining 
the affiliated transport companies' financial statements. Specifically, 
both companies are involved only with export transactions, and work 
almost exclusively for companies affiliated with Usinor. Thus, 
according to respondent, the profits listed on the income statements of 
these two companies are nearly entirely attributable to export work 
conducted for Usinor and its affiliates. According to respondent, since 
one company posted a profit for 1998 and the other showed that its 
income equaled its expenses, their prices are the same or greater than 
the cost of providing the services.
    Respondent argues that in evaluating the prices for inputs in 
circumstances where no market price is available, the Department 
routinely uses the higher of the transfer price or cost. Respondent 
asserts that it is clear that the companies are not absorbing costs and 
that their prices equal or surpass their costs of providing the 
services. Hence, respondent concludes that the Department should use 
the affiliated transport companies' prices in the final determination.
    Respondent notes that in Notice of Final Determination of Sales at 
Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from 
France, 64 FR 30,820 (June 8, 1999) (``SSS&S''), the Department stated 
that the ``arm's length test compares prices charged by or paid to 
affiliated parties with prices which would otherwise be obtained in 
transactions with unaffiliated parties.'' The Department then found 
that a profit made on services provided by an affiliated freight 
forwarder did not prove that the prices for the services were at arm's 
length, and accordingly rejected the transfer price data. According to 
respondent, the result in SSS&S should not be followed in this case for 
three reasons.
    First, according to respondent, these affiliated transport 
companies perform basically all of their freight services for Usinor 
and its affiliates. Their financial statements establish that the 
prices charged Usinor are equal to or greater than cost. Second, 
respondent argues that the rule applied in SSS&S is more restrictive 
than the rule routinely applied by the Department regarding affiliated 
suppliers of major inputs in cost of production investigations, where 
the Department takes the highest of the price charged by nonaffiliated 
suppliers, the transfer price, or the cost. See 19 CFR Sec. 351.407(b). 
The Department should not apply a more stringent proof to suppliers of 
a minor input (e.g., freight forwarding services), than it applies to 
suppliers of major inputs. Third, respondents assert that the ruling in 
SSS&S is based upon a case involving entirely different facts. See 
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea; Final 
Results of Antidumping Duty Administrative Review, 63 FR 32,833, 32,838 
(June 16, 1998) (``Circular Welded Non-Alloy Steel Pipe''). In that 
case, respondent notes, the Department found an affiliated supplier's 
freight charges were equivalent to the prices charged by unaffiliated 
suppliers. The Department accordingly rejected evidence that the 
affiliate did not always charge a markup when it arranged for third-
party supply. In other words, respondents claim, the Department said 
that once it had evidence establishing a market-price benchmark (the 
best evidence that the transaction occurred at a market price), proof 
of the affiliate's profitability (the second best evidence) was 
irrelevant. Respondent argues that the Department's statement that it 
will not allow evidence of profitability to overcome market price 
information does not mean, however, that the Department cannot rely on 
profitability when no market price evidence exists.
    Petitioners argue that there is no record evidence to support 
respondent's claim that its affiliates provided freight-forwarding and 
handling services at arm's length prices. Petitioners argue that 
respondent's suggestion that the Department determine that the transfer 
price was greater than or equal to the cost of the input by examining 
the affiliates' financial statements is incorrect. According to 
petitioners, Usinor fails to articulate how the Department could 
utilize the affiliates' financial statements to determine that the 
transfer price was greater than or equal to the cost of the input. 
Further, petitioners contend that the affiliates' financial statements 
are not a valid source for the arm's length test because one affiliate 
in a few instances performed some services for unaffiliated companies, 
indicating that profits may have been derived from transactions with 
the unaffiliated parties.
    Petitioners state the fact that the affiliates may have been 
profitable overall is irrelevant to whether they charged arm's length 
prices for foreign brokerage and handling services to a specific entity 
because they may have been charging preferential rates to GTS and 
Sollac while earning greater profits on sales to other customers or on 
sales of non-subject merchandise. Moreover, according to petitioners, 
even if the affiliate earned a profit for services provided to GTS and 
Sollac with respect to the subject merchandise, this does not mean it 
charged arm's length prices for these sales. What is relevant, 
petitioners state, is whether the profit earned is as large as the 
profit earned on sales to other customers or for other products. Thus, 
petitioners conclude, Usinor has failed to demonstrate that it paid 
arm's length prices for this service. Petitioners suggest applying the 
highest brokerage and handling expense reported by Usinor in the 
foreign brokerage and handling field to all U.S. sales.
    Petitioners further state that Usinor also failed to demonstrate 
that international freight expenses incurred for Sollac's U.S. sales 
were at arm's length. Petitioners argue that because Usinor failed to 
demonstrate that it reported arm's length prices for Sollac 
international freight expenses, the Department should apply, as facts 
available for all U.S. sales, the highest international freight 
expenses reported by Usinor.
    Department's Position: We agree with petitioners in part. As in 
SSS&S, it is clear from the record evidence that Usinor was unable to 
demonstrate that its affiliated freight forwarder rates (brokerage and 
handling) were at arm's length prices. We disagree with respondent's 
argument that a profit made on the services the affiliated freight 
forwarders provided to GTS and Sollac proves that these services were 
at arm's length. The arm's length test for services between affiliated 
parties compares prices charged by or paid to

[[Page 73147]]

affiliated parties with prices which would otherwise be obtained in 
transactions with unaffiliated parties. See Circular Welded Non-Alloy 
Steel Pipe. The level of profit on these services is not a relevant 
consideration.
    However, we disagree with petitioners' contention that adverse 
facts available should be utilized. In accordance with Section 776(b) 
of the Act, Usinor acted to the best of its ability to prove that these 
transactions were at arm's length. Specifically, the affiliated 
transport companies did not provide the same kind of services to an 
unaffiliated company that they provided to Sollac or GTS, and Sollac 
and GTS did not purchase similar services from an unaffiliated company. 
Thus, at verification Usinor provided us with the only information 
available with respect to the issue of brokerage and handling cost.
    Usinor's attempt, therefore, to prove the arm's length nature of 
these transactions by supplying the affiliates' income statements, in 
light of the lack of any other information, constitutes a reasonable 
attempt to cooperate with the Department's requests. Because Usinor 
cooperated fully, but was unable to provide the requested information 
in the exact manner requested, adverse facts available is an 
inappropriate basis on which to calculate this adjustment. Because we 
find that Usinor has acted to the best of its ability with respect to 
this adjustment, and because there are no unaffiliated transactions 
that we can utilize as facts available, we have used Usinor's domestic 
brokerage and handling expense as reported. Finally, we note that for 
international freight expenses, the record does contain expenses from 
unaffiliated parties. Because Usinor's international freight expenses 
from affiliated parties were less than such expenses from unaffiliated 
parties, as non-adverse facts available for affiliated transactions we 
have used the average of the unaffiliated international freight 
expenses.

Comment 4: Whether Usinor Has Adequately Demonstrated Differences in 
Levels of Trade (``LOT'')

    Petitioners note that in the preliminary determination, the 
Department identified two LOTs in France, one comprised of sales by GTS 
and Sollac, and a second comprised of sales by SLPM. The Department 
found that the LOT of the U.S. sales differed from both of these 
because Usinor claimed that it performed fewer selling activities for 
U.S. sales than for home market sales at either level. Petitioners 
state that at verification, the Department found that it could not 
verify Usinor's LOT representations, and accordingly should reject 
Usinor's claim for a CEP offset based on different LOTs.
    Petitioners quote from the French Sales Verification Report in 
regard to GTS: ``Company officials explained the information included 
in the [LOT] chart submitted to the Department and provided no 
supporting documentation.'' Petitioners quote from the French Sales 
Verification Report in regard to Sollac: ``Included in the list of 
corrections * * * are minor revisions to the [LOT] chart most recently 
submitted to the Department. Company officials explained the 
information included in the [LOT] chart and provided no supporting 
documentation.'' Petitioners argue that, as the Department was unable 
to verify Usinor's information submitted with regard to GTS and Sollac, 
there is no basis upon which to presume that home market LOT one is 
distinct from the U.S. LOT. Petitioners next state that the Department 
also has no basis upon which to conclude that Usinor's second home 
market LOT, which involves sales by SLPM, is distinct from the U.S. 
LOT, because the Department could not verify SLPM's warehousing 
expenses and its indirect selling expenses and selling activities (two 
of the activities which led to the preliminary LOT determination.)
    Respondent states that, as requested by the Department, Usinor 
provided comprehensive charts detailing the various activities 
performed by the various companies in each market, including the degree 
to which each function was performed. Respondent argues that these LOT 
charts reveal that Sollac and GTS conduct more selling activities, and 
to a greater degree, in France than they do in the United States 
because the U.S. companies are fully engaged in the selling effort and 
perform themselves the selling functions that the French companies 
undertake at home. Respondent reiterates Usinor's statements from its 
initial questionnaire response that: ``Sales in the respective markets 
are at different [LOTs]--to end users and service centers in France, 
and to a super-distributor, Francosteel, and an affiliated pipe 
producer, Berg, in the United States. As such, all sales made by Sollac 
and GTS in France are at a different [LOT], representing a more 
advanced stage of distribution [than that for U.S. sales]. In the 
United States, Francosteel and Berg effectively relieve Sollac and GTS, 
as applicable, of virtually all of the selling functions that they bear 
in connection with their home market sales.''
    Respondent argues that the mode of analysis undertaken by the 
Department in evaluating LOTs, as reflected in its July 19, 1999, LOT/
CEP Memorandum and the Preliminary Determination, was proper and in 
accordance with the requirements of the law. Respondent argues that 
nothing in the French Sales Verification Report raises any question 
about the Department's preliminary determination that a CEP offset was 
appropriate. Respondent argues that the French Sales Verification 
Report does not state that the LOT charts failed to verify, rather, it 
stated that respondent did not provide any additional new documentary 
evidence at verification on LOT. In fact, respondent contends, the 
record contains myriad evidence, verified by the Department, 
demonstrating from every possible angle the differences in selling 
activities conducted in selling to France versus those for selling to 
the United States.
    Respondent contends that Sollac Vente France's (SVF)'s and SLPM's 
activities, which are conducted solely for sales in France, demonstrate 
that a CEP offset is warranted. Respondent asserts that it has 
submitted copious data supporting SVF's activities, including French 
sales traces demonstrating SVF involvement, a list of SVF's eleven 
sales offices, and a certified response elaborating its role in the 
sales process. Respondent states that a comparison of the home market 
and U.S. sales traces exhibits that SVF does not conduct any activities 
regarding sales to or in the United States. For SLPM sales, both SVF 
and SLPM provide services, drawing into even starker relief the 
differences in the selling activities for France vis-a-vis CEP sales to 
Francosteel and Berg for the U.S. market.
    According to respondent, further confirmation of the significant 
differences in selling activities for respondent's sales in France 
compared with its sales to the United States is provided by the 
verified selling expenses provided in respondent'' computer files. 
Respondent states that the average level of expenses for sales in the 
home market is anywhere from 50 to 1200 percent higher than for sales 
to the United States.
    Respondent argues that the Department was able to orally verify the 
LOT charts with the company officials who, by virtue of their daily 
involvement in CTL plate sales, are intimately aware of the degree of 
selling activities conducted in each country. According to respondent, 
the charts were put together by the companies after lengthy 
consultations with personnel who have direct, day-to-day involvement in 
the sale of CTL plate in the United States and France, and many of 
these same people were present and

[[Page 73148]]

available for questioning by the Department at verification.
    Respondent further asserts that a CEP offset to reflect the 
demonstrated differences in selling activities is warranted in this 
case. Respondent states that it provided complete and accurate data 
regarding the level of selling activities conducted in each country, 
including: information regarding the extensive selling activities of 
Sollac, GTS, SVF, and SLPM in France and the substantially less or non-
existent selling activities of those companies for sales to the United 
States, including sales traces revealing these differences, addresses 
of SVF's commercial offices in France and the lack of such offices in 
the United States, addresses and maps of SLPM's commercial offices and 
warehouses in France and the lack of such offices in the United States, 
verified information regarding warehousing expenses, warranty expenses, 
indirect selling expenses, commission expense and inventory carrying 
cost incurred for sales in France and for the United States, and 
complete access to personnel at all companies who could confirm the 
differences in selling activities.
    Department's Position: We disagree with petitioners that Usinor's 
CEP offset should be denied. In accordance with section 773(a)(1)(B)(i) 
of the Act, to the extent practicable, we determine NV based on sales 
in the comparison market at the same LOT as the EP or CEP transaction. 
The NV LOT is that of the starting price sales in the comparison market 
or, when NV is based on CV, that of the sales from which we derive SG&A 
and profit. For CEP sales, the Department makes its analysis at the 
level of the constructed export sale from the exporter to the 
affiliated importer.
    Because of the statutory mandate to take LOT differences into 
consideration, the Department is required to conduct a LOT analysis in 
every case, regardless of whether or not a respondent has requested a 
LOT adjustment or a CEP offset for a given group of sales. To determine 
whether NV sales are at a different LOT than EP or CEP sales, we 
examine stages in the marketing process and selling functions along the 
chain of distribution between the producer and the unaffiliated 
customer. If the comparison market sales are at a different LOT, and 
the difference affects price comparability, as manifested in a pattern 
of consistent price differences between the sales on which NV is based 
and comparison market sales at the LOT of the export transaction, we 
make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, 
for CEP sales, if the NV level is more remote from the factory than the 
CEP level and there is no basis for determining whether the differences 
in the LOTs between the NV and the CEP sales affects price 
comparability, we adjust NV under section 773(A)(7)(B) of the Act (the 
CEP offset provision). See Certain Cut-to-Length Carbon Steel Plate 
from South Africa, 62 FR at 61731.
    In the Preliminary Determination, the Department made a CEP offset 
adjustment to the normal values that were compared to CEP sales in the 
United States, because the Department preliminarily found that all of 
Usinor's home market sales were made at LOTs different from and more 
advanced than the LOT of Usinor's CEP sales in the United States, and 
there was no basis for determining whether the differences in the LOTs 
between the NV and the CEP sales affects price comparability. See LOT/
CEP Memorandum, dated July 19, 1999. In particular, the Department 
found that Usinor performed fewer and different selling functions in 
connection with its CEP sales than in connection with home market sales 
to its unaffiliated customers. Further, the Department found that it 
was not possible to quantify a LOT adjustment based on the available 
data. The fact that Usinor identified a slightly different LOT pattern 
at verification than it had in its questionnaire response is not 
determinative. As explained above, the Department conducts its own LOT 
analysis, rather than merely accepting the assertions of the parties. 
The Department is satisfied that it has sufficient reliable information 
to reach a decision as to the LOTs at which Usinor and its affiliates 
sell subject merchandise. Furthermore, the Department verified the data 
used in making this analysis. See the French Sales Verification Report, 
which notes that we reviewed the LOT charts with company officials, and 
substantiated the claimed LOT differences through documentation such as 
that collected in the sample sales traces and verification exhibits 
related to the relevant expenses. Although we disagree with 
respondent's assertion that SVF's and SLPM's lack of commercial offices 
in the United States is relevant, after further examination of the 
relevant information on the record, the Department has continued to 
make a CEP offset because the facts on the record indicate that 
Usinor's CEP LOT is different from and less advanced than Usinor's home 
market LOTs, and that the data of record do not permit it to, instead, 
make a LOT adjustment based on the effect of the LOT difference on 
price comparability.

Comment 5: Whether Usinor Has Failed To Provide Accurate Inventory 
Carrying Cost Information for Sollac Home Market Sales

    Petitioners argue that the inventory carrying cost information 
Usinor has reported for Sollac sales does not reflect the inventory 
experience of Sollac for the entire period of investigation, but rather 
ignores seventeen percent of the period. Petitioners quote from the 
French Sales Verification Report: ``Sollac utilized the daily inventory 
balance during the period March 9 through Dec. 31, 1998, because, 
according to company officials, Sollac no longer had the information 
for the first two months of the year in their system to cover the 
entire POI.'' Petitioners state that the Department should not deem 
this information accurate or representative, and, accordingly, should 
not include Sollac's reported inventory carrying costs as part of that 
adjustment.
    Respondent contends that the Department verified the accuracy of 
the information used to calculate Sollac's average number of days 
between production and shipment for the March 9, 1998 through December 
31, 1998 period. Respondent states that the earliest date for which 
Sollac's database had detailed inventory movement data was March 9, 
1998, and that its method of calculating average inventory days is more 
precise than the general method.
    Respondent contends that the general method used by accountants to 
calculate annual average inventory days or turnover is by dividing the 
average of beginning and ending inventory balances by average daily 
shipments or costs of goods sold during the year. So, according to 
respondent, the general method is based upon only two observations.
    On the other hand, for each shipment of plate to a customer in 
France during the period from March 9, 1998 through December 31, 1998, 
Sollac calculated the actual number of days between the date when the 
plate entered finished or semi-finished goods inventory and the date 
when the plate was shipped to the customer. Thus, according to 
respondent, Sollac's calculation was based on 291 observations rather 
than the two observations that is the norm for this calculation. 
Further, respondent argues, Sollac calculated its average inventory 
days specific to the subject merchandise, not on a larger product group 
as is typically the case. Respondent asserts that Sollac's calculation 
is more representative than the data typically prepared by companies, 
and accordingly, the

[[Page 73149]]

Department should reject petitioners' request that the Department not 
include Sollac's inventory carrying costs.
    Department's Position: We agree with respondent. We verified the 
accuracy of the information used to calculate Sollac's average number 
of days between production and shipment for the March 9, 1998 through 
December 31, 1998 period, and find this period to be an accurate 
representation of the POI for purposes of tracking inventory movement. 
We found that respondent's explanation for the absence of inventory 
information for the first two months of the POI was reasonable, and 
noted no discrepancies in tracing the relevant information through 
Sollac's books and records. See the French Sales Verification Report.

Comment 6: Whether Usinor Accurately Reported Indirect Selling Expenses 
for SLPM's Home Market Sales

    Petitioners argue that Usinor's reported indirect selling expenses 
for SLPM's home market sales are deficient, and thus the Department 
should not include this information in the adjustment to normal value. 
Petitioners cite to the SLPM Indirect Selling Expense section of the 
French Sales Verification Report in support of their above contention.
    Respondent argues that the Department verified the accuracy of 
SLPM's indirect selling expenses. Respondent first states that the 
discrepancy cited by petitioners that its receivables insurance was 
inadvertently included in the calculation of indirect selling expenses 
is clearly immaterial and was well known to the Department. Respondent 
next disagrees with petitioners' arguments regarding SLPM's allocation 
of costs by function. Respondent asserts that SLPM maintains its costs 
by nature, which is in accordance with French GAAP (note, an example of 
maintenance of cost ``by nature'' as distinguishable from costs ``by 
function'' would be tracking total electricity costs rather than 
electricity usage by process or factory.) Further, respondent asserts, 
SLPM's submitted cost worksheet allocated its costs by nature into the 
form requested by the Department and accounts for all costs.
    According to respondent, the Department verified that the costs 
reported tied to SLPM's 1998 income statement and general ledger, then 
requested that SLPM demonstrate the basis for its allocations of these 
costs among functions. Respondent states that SLPM provided detailed 
worksheets for electricity and the other allocations specifically 
reviewed by the Department, and SLPM's controller and financial 
director explained how he used his knowledge of the company to make the 
allocation judgements. Respondent argues that petitioners do not 
question whether all of SLPM's costs and expenses were properly 
reported to the Department, but rather whether they were properly 
allocated. According to respondent, petitioners point to no contrary 
record evidence to buttress their claim that the allocation is 
incorrect and to warrant the Department rejecting SLPM's indirect 
selling expenses.
    Department's Position: We agree with petitioners. As noted in the 
French Sales Verification Report, SLPM provided no documentation to 
support its estimated allocations used to determine the costs included 
in its reported indirect selling expenses. We disagree with 
respondent's contention that SLPM provided detailed worksheets for 
electricity and the other allocations specifically reviewed by the 
verifiers. The worksheets provided by respondent at verification merely 
listed the estimates used to derive SLPM's allocations, and did not 
offer any supporting documentation on how those estimates were derived.
    In conducting verification the burden is on respondents to 
demonstrate that the information in their questionnaire response is 
complete and accurate. While the verifier asks different questions and 
employs different methods to evaluate the reported expenses, it is 
respondents who have the most complete knowledge of available 
information sources, who must devise a way of demonstrating the 
accuracy and completeness of their reported data. For indirect selling 
expenses, which by their very nature are general expenses that must be 
allocated over relevant sales, it is sometimes difficult to allocate 
expenses in a precise manner. Nevertheless, some reasonable and 
consistent method has to be developed which can be tested and evaluated 
at verification. In the instant case, respondent did not provide a 
reasonable or consistent basis for the reported expense, but merely 
estimated the relevant amount. We are unable to accept respondent's 
estimates without some basis for critically evaluating whether they are 
reasonable at verification. Accordingly, we have disregarded SLPM's 
reported home market indirect selling expenses.

Comment 7: Whether Usinor Accurately Provided Warehousing Expense 
Information for Sollac's Home Market Sales to SLPM

    Petitioners argue that Usinor did not provide verifiable warehouse 
expense information for Sollac's home market sales. Petitioners cite to 
the French Sales Verification Report: ``to support its per metric ton 
warehouse expense amount, SLPM provided a computer screen print which, 
according to company officials, cannot be linked to SLPM's accounting 
system . . . SLPM informed us that warehousing information is entered 
when received and does not connect to any other information or 
accounting system.'' Petitioners claim that, as this expense could not 
be tied to SLPM's accounting system, the Department has no way of 
ensuring the accuracy of the reported expenses, and thus should not 
include Sollac's warehousing expense in the adjustment to normal value 
for all SLPM sales.
    Respondent disagrees with petitioners' contention that SLPM's 
warehousing costs should not be included as an adjustment to normal 
value because SLPM could not link the tons warehoused to its accounting 
systems. Respondent maintains that accounting systems track revenue and 
costs rather than tonnage, so it is understandable that the tons 
warehoused were not mentioned in SLPM's accounting system. Respondent 
asserts that SLPM appropriately provided the Department with a query of 
its inventory database that tracked the number of tons shipped from its 
warehouses. Respondent argues that the Department verified that this 
database is maintained in the normal course of business, and that SLPM 
accurately reported its per-unit cost of warehousing.
    Department's Position: We agree with respondent. We verified that 
SLPM's inventory database is maintained in the normal course of 
business, and traced the relevant information from this database to 
SLPM's calculated per-unit cost of warehousing as reported to the 
Department.

Comment 8: Whether Usinor Provided Accurate Home Market Packing Costs 
for SLPM Sales

    Petitioners claim that the French Sales Verification Report 
indicates that the packing expenses reported with respect to SLPM sales 
do not pertain to the POI. Petitioners quote from the French Sales 
Verification Report, ``SLPM acknowledged that its packing costs were 
based on May 1998 estimated costs for which it could not provide 
detailed specifications.'' Petitioners argue that, as these reported 
amounts were estimated and do not pertain to, and thus cannot be linked 
to, sales made during the POI, the Department should deny Usinor's 
claimed home market

[[Page 73150]]

packing expense adjustment for all SLPM sales.
    Respondent disagrees with petitioners' contention that the 
Department should deny Usinor's claimed home market packing expense 
adjustment for all SLPM sales. Respondent states that petitioners' cite 
from the French Sales Verification Report only refers to a small amount 
of SLPM's sales, those which are not further processed. Respondent 
states that, when SLPM ships product in the same form as received from 
the manufacturer, it assigns a Franc per ton charge to the shipment. 
Respondent argues that this charge represents a reasonable estimate of 
SLPM's handling costs that it has used for its own internal accounting 
purposes in the normal course of business. Respondent argues that, for 
the other SLPM sales, it provided detailed support for its calculated 
packing costs at verification and met its burden of demonstrating that 
these expenses were properly reported.
    Department's Position: We agree with petitioners. Each pre-selected 
sales invoice reviewed and discussed in the French Sales Verification 
Report involving SLPM indicated that the subject merchandise was not 
further processed by SLPM. The packing type for subject merchandise 
that was not further processed by SLPM is that for which SLPM was 
unable to substantiate its estimated packing cost. See French Sales 
Verification Report at page 37, where we noted that ``SLPM acknowledged 
that its packing costs were based on May 1998 estimated costs for which 
it could not provide detailed specifications.'' With respect to the 
packing types SLPM utilized when it further processed the subject 
merchandise, notwithstanding respondent's claim that it ``calculated 
packing costs in detail and provided support for its calculation,'' the 
respondent provided no documentation on the record to support its cost 
breakdown (listed in SLPM verification exhibit 13). We have thus denied 
Usinor's claimed home market packing expense adjustment for all SLPM 
sales.

Comment 9: Whether Sales of Certain Merchandise Should Be Reclassified 
as Non-Prime Sales

    Petitioners argue that the Department treated sales of certain 
merchandise as prime merchandise in the preliminary determination when, 
in fact, Usinor has stated that such merchandise is non-prime. 
Petitioners note that Usinor has stated ``GTS guarantees neither the 
grade nor the length of this merchandise; it only guarantees 
thickness,'' and that the French Sales Verification Report confirmed 
this assertion. Petitioners assert that this merchandise is non-prime 
material that is priced differently from other CTL plate sold in the 
home market, and thus should be treated as non-prime sales in the final 
determination.
    Respondent contends that the Department should not alter its 
Preliminary Determination with respect to this merchandise. Respondent 
argues that the only difference between this merchandise and full prime 
merchandise is the possibility of changes in the mechanical properties 
of the slab over the six-month waiting period. This merchandise, 
according to respondent, is superior to non-prime merchandise because 
it is warranted except for grade, while non-prime is not warranted at 
all. Respondent argues that it would be distortive to treat this 
merchandise as non-prime merchandise because it is much closer in 
characteristics and price to the prime merchandise sold by GTS.
    Department's Position: We agree with respondent that it would be 
distortive to treat this merchandise as non-prime. We have stated, in 
Notice of Final Determination of Sales at Less Than Fair Value; Certain 
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil 64 FR 
38756 (July 19, 1999) (``Hot-Rolled Steel from Brazil''), that ``to 
determine if sales or transactions are outside the ordinary course of 
trade, the Department evaluates all of the circumstances particular to 
the sales in question. Examples of sales that we might consider outside 
the ordinary course of trade are sales involving off-quality 
merchandise or merchandise produced according to unusual product 
specifications, merchandise sold at aberrational prices or with 
abnormally high profits, merchandise sold pursuant to unusual terms of 
sale, or merchandise sold to an affiliated party at a non-arm's length 
price. See 19 CFR 351.102.''
    In this case, the CTL plate described above is not defective in any 
way, but is merely prime plate that has been in inventory for a period 
long enough to possibly alter some mechanical properties of the 
merchandise. See French Sales Verification Report at page 3. Although 
the existence of such differences is speculative, in the interest of 
full disclosure, respondent identifies this merchandise to customers. 
However, we found no evidence at verification that customers actually 
treat this merchandise any differently from full prime merchandise. 
Thus, unlike that discussed in Hot-Rolled Steel from Brazil, these 
products are not off-quality merchandise, and therefore the sales may 
be considered within the ordinary course of trade. As such, we have 
continued to treat this plate as prime merchandise for purposes of the 
final determination.

Comment 10: Whether Usinor Has Provided Complete Information on Product 
Specifications

    Petitioners argue that the model matching hierarchies provided by 
Usinor for two of its U.S. CTL plate specifications do not indicate 
identical home market matches, when in fact Usinor sold merchandise 
with these exact specifications in its home market. See Final 
Calculation Memo, dated December 13, 1999, for a description of these 
proprietary specifications. Petitioners assert that the Department 
should revise its model match program to permit identical matches 
between these U.S. and home market specifications.
    Respondent contends that petitioners' argument in this regard is 
simply incorrect, and that for these two U.S. CTL plate specifications, 
the identical home market specification was sold in the home market and 
has been identified.
    Department's Position: We agree with respondent that it provided 
accurate supplemental model-matching information in its May 25, 1999, 
submission. Usinor identified the identical home market specification 
for both of these U.S. specifications in its submission. Therefore, for 
the final determination, we have matched the relevant U.S. sales to 
home market sales with identical specifications.

Comment 11: Whether Usinor Failed to Report Inland Freight Expenses 
That Were Incurred for Numerous U.S. Sales

    Petitioners assert that for numerous U.S. sales with reported sales 
terms that indicate inland freight expenses, Usinor failed to report 
freight expense. Petitioners argue that, as facts available, the 
Department should deduct the highest reported freight charge from each 
of these transactions.
    Respondent maintains that these sales were correctly reported as 
incurring no freight expenses. According to respondent, the Department 
specifically reviewed a transaction at the Francosteel sales 
verification where the sales terms were reported as delivered but the 
freight expense was zero, and verified that the zero freight expense 
was correct. Respondent further argues that the other fields in the 
Berg and Francosteel records corroborate that no U.S. freight expense 
was incurred.
    Department's Position:  We agree with respondent. Item 5 of 
Francosteel

[[Page 73151]]

verification exhibit 1 (list of corrections) from the ``Verification of 
the Responses of Usinor in the Antidumping Duty Investigation of 
Certain Cut-To-Length Carbon-Quality Steel Plate From France 
(Francosteel Sales)'' (Oct. 22, 1999) (``Francosteel Sales Verification 
Report'') contains the list of invoices in which Francosteel 
incorrectly labeled the delivery terms ``delivered'' in its previous 
sales databases. We verified specific invoice items from this list and 
found that Francosteel incurred no freight expense for these invoices. 
Further, we noted no discrepancies at the Berg sales verification when 
verifying Berg's freight adjustment factor for its U.S. inland freight 
expense.

Comment 12: Whether Usinor Has Failed To Report Warehousing Expenses 
for Sales by Berg

    Petitioners assert that Usinor's supplemental questionnaire 
responses indicate that Berg incurred warehousing expenses on U.S. 
sales because Usinor did not address the Department's request that it 
explain the apparent contradiction between a statement Usinor had made 
``which implies warehousing expenses were sometimes incurred in the 
United States.'' Petitioners argue that the Department should apply 
facts available to account for possible unreported warehousing expense 
for all Berg sales. Petitioners suggest that the Department apply as 
facts available the highest reported warehousing expense reported in 
the home market.
    Respondent maintains that petitioners are incorrect in implying 
that there are possible unreported warehousing expenses for Berg sales. 
Respondent states that Berg, as it stated in its initial questionnaire 
response and as the Department verified, never incurred such warehouse 
expense.
    Department's Position: We agree with respondent. We found no 
evidence of unreported warehousing expenses at the Berg sales 
verification, and have therefore utilized Berg's reported expenses. See 
Berg Sales Verification Report at sections Accounting Overview and 
Reconciliations, Sales Process, U.S. Sales Transactions, and the 
various expenses, where no evidence of unreported expenses are noted.

Comment 13: Whether the Department Should Reject Usinor's Most Recent 
Dataset

    Petitioners argue that a comparison of Usinor's August 23, 1999, 
data submission and its most recent, November 10, 1999, data submission 
reveals that Usinor made a number of changes to its datasets which the 
company fails to acknowledge in its November 10 memorandum. Petitioners 
cite the following unacknowledged changes: (1) The number of home 
market sales transactions increased; (2) the mean gross unit price for 
U.S. sales increased for numerous customers; (3) the mean value for 
domestic brokerage and handling for U.S. sales decreased for numerous 
customers; and (4) the mean value for international freight for U.S. 
sales decreased for numerous customers. Petitioners argue that, because 
Usinor has made these unexplained and apparently unauthorized changes 
to its data, the Department should utilize the August 23, 1999 data 
submission for the final determination.
    Respondent argues that petitioners' list of ``unacknowledged and 
unauthorized'' changes to the U.S. and home market sales files 
submitted on November 10, 1999 in fact were discussed in respondent's 
minor corrections filings and presented to the Department on the first 
day of each verification. Respondent states that in the letter that 
accompanied the files in the November 10 post-verification submission, 
it incorporated by reference the minor corrections and verification 
exhibits that described these corrections in detail.
    Department's Position: We agree with respondent that in the letter 
that accompanied the files in the November 10, post-verification 
submission, it incorporated by reference the minor corrections and 
verification exhibits that described these corrections in detail. At 
verification we accepted these minor corrections, and accordingly, we 
utilized Usinor's most recently submitted data for the final 
determination.

Comment 14: Calculation of Further Manufacturer's Financial Expense 
Ratio

    Usinor first argues that the Department should not use Europipe 
Gmbh's (``Europipe'') (i.e., Berg's parent) financial expense ratio to 
calculate Berg's further manufacturing financial expense. Instead, 
Usinor believes that Dillinger Hutte's (``Dillinger'') financial 
expense ratio should be used because this company is the ultimate 
parent of both Berg and Europipe. However, if the Department does 
determine that Europipe's financial expense ratio should be used for 
the final determination, Usinor requests that the Department make 
certain corrections to the calculation of the ratio. First, Usinor 
claims that Europipe's financial expenses should be offset by short-
term interest income. According to Usinor, the Department normally 
allows such offsets, and cites to the Final Determination of Sales at 
Less than Fair Value: Stainless Steel and Strip in Coils from the 
United Kingdom, 64 FR 30688, 30710 (June 8, 1999) to support its claim. 
Second, Usinor recommends that the Department include Europipe's 
product specific research and development (``R&D'') expenses in the 
calculation of denominator (i.e., cost of goods sold) that the 
Department uses to determine the financial expense ratio. Although 
Europipe records this expense as a separate line item on the income 
statement, Usinor notes that the Department should consider it as a 
cost of manufacturing because the expense is product-specific. 
According to Usinor, the Department normally considers product-specific 
R&D as a component of cost of goods, citing Final Results of 
Administrative Review; Static Random Access Memory Semiconductors from 
the Republic of Korea, 63 FR 8934, 8939 (February 23, 1998) to support 
its claim.
    In contrast, petitioners do not take issue with the use of 
Europipe's financial expense ratio to calculate Berg's further 
manufacturing financial expense. As for the calculation of the 
financial expense ratio, the petitioners believe that Usinor's 
suggested changes would misstate the financial expense of Berg. 
Petitioners also assert that Usinor has not met the burden of proof in 
supporting its claim for either adjustment. Specifically, petitioners 
claim that Europipe's financial expense should not be altered because 
Usinor has not shown that this income was in fact short-term interest 
income. Likewise, the petitioners state that Usinor has not 
demonstrated that Europipe's R&D expenses were product-specific. 
According to petitioners, the Department considers product-specific or 
process-specific R&D as a cost of manufacturing only if the benefits of 
the R&D relate to a single product; otherwise, the R&D is considered a 
G&A expense. See e.g., Negative Final Determination of Circumvention of 
Antidumping Duty Order; Portable Electric Typewriters from Japan; 56 FR 
58031, 58040 (November 15, 1991). In addition, the petitioners note 
that Europipe's income statement did not classify its R&D as a 
manufacturing expense. For these reasons, the petitioners claim that 
the Department should not adjust the calculation.
    Department's Position: We disagree with respondent that we should 
not use Europipe's financial expense ratio to calculate Berg's further 
manufacturing financial expenses. In the instant case, Europipe is the 
parent company of Berg. Europipe, in turn, is a joint venture owned by 
Dillinger (a Usinor affiliate)

[[Page 73152]]

and another company. Berg calculated its financial expense ratio based 
on the information contained in the consolidated financial statements 
of Dillinger. However, we note that Dillinger includes neither Berg's 
nor Europipe's financial results in its consolidated financial 
statements. Thus, Europipe's financial statement is the highest level 
of consolidation available. As such, we have relied on the information 
contained in Europipe's consolidated statements to calculate the 
financial expense ratio. This method is consistent with our normal 
practice. See Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Round Wire From Canada, 64 FR 17324-17336 (April 9, 
1999) (the Department relied on the amounts reported in the 
consolidated financial statements of the highest level available to 
calculate the financial expense ratio); Final Determination of Sales at 
Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from 
France, 64 FR 30820, 30842-43 (June 8, 1999) (where the Department 
agreed with Usinor that it was appropriate to use the highest 
consolidation level available to calculate the financial expense 
ratio.)
    We also disagree with Usinor's suggestion that we make certain 
corrections to the calculation of Europipe's financial expense ratio. 
Specifically, we have not allowed an offset for interest income because 
Usinor did not provide any evidence to substantiate that the amount it 
claimed as an offset is short-term interest income. Moreover, 
Europipe's audited financial statements did not report any breakdown of 
long- vs. short-term investments or interest income. Consistent with 
our past practice, we have disallowed Europipe's claimed short-term 
interest income offset in the financial expense calculation where 
respondents have not substantiated their claim. See, e.g., Final 
Results of Antidumping Duty Administrative Review and Determination Not 
to Revoke in Part: Silicon Metal From Brazil, 64 FR 6305, 6313 
(February 9, 1999), where the Department disallowed the short-term 
offset because of lack of supporting evidence.
    In addition, we disagree with Usinor that R&D expenses should be 
included in the denominator (i.e., cost of sales) used in calculating 
the financial expense ratio. In the instant investigation, we did not 
include Europipe's R&D expenses in the denominator used to calculate 
the financial expense ratio because Usinor did not provide evidence to 
substantiate that its R&D is a cost of manufacturing. We note that the 
only information on the record that identifies the nature of Europipe's 
R&D is a footnote in the company's financial statement. However, this 
footnote only provides a generic description of the expense and it does 
not identify the R&D as product-specific. In addition, we note that 
Europipe's income statement classifies this expense as a period cost 
(similar to general expenses) rather than a component of its cost of 
goods sold. Thus, we have found that Europipe's R&D expense is not a 
product-specific cost of manufacturing. This determination is 
consistent with our determination in the Final Results of Antidumping 
Duty Administrative Review: Antifriction Bearings (other Than Tapered 
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan, 
Singapore, and the United Kingdom; 62 FR 2081, 2112 (January 15, 1997) 
(the Department treated R&D as a G&A expense because respondent did not 
provide information indicating that the R&D relates to a specific 
product). For the final determination, we have not included Europipe's 
expense as part of the cost of goods sold for purposes of calculating 
the financial expense.

Comment 15: Offsetting Financial Expenses with Net Foreign Exchange 
Gains

    Usinor argues that the Department should include its net foreign 
exchange gains in the calculation of its financial expenses. Usinor 
admits that it could not identify the various components of this gain 
because it does not have the necessary information to identify specific 
foreign currency gains or losses as having arisen from transactions 
involving accounts receivable, loans receivable, accounts payable, 
loans payable, other sources, etc. This information, according to 
Usinor, could not be provided because the company is made up of more 
than thirty companies and does not separately track the foreign 
currency transactions conducted for each of these companies. Thus, 
Usinor argues that it should not be punished for failing to provide 
data that it does not have. Moreover, Usinor claims that section 
773(f)(1)(A) of the Act provides that the Department will calculate 
costs based on the producer's records if such records are kept in 
accordance with GAAP in the producer's home market and reasonably 
reflect the costs associated with production and sale of the 
merchandise. According to Usinor, its financial statements are prepared 
in accordance with French GAAP and, as such, reasonably reflect costs 
incurred by the company, including those costs related to foreign 
exchange gains and losses.
    Petitioners counter that the Department should disallow Usinor's 
net foreign exchange gains from the calculation of financial expenses. 
According to petitioners, Usinor has not demonstrated that its net 
exchange gains resulted from short-term investments or that the gain 
excludes amounts related to accounts receivables. According to 
petitioners, the Department requires that respondents provide this 
distinction, citing to Final Determination of Sales at less than Fair 
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 
64 FR 24329, 24350 (May 6, 1999) (``it is the Department's normal 
practice to distinguish between foreign exchange gains and losses from 
other types of transactions''). Petitioners additionally argue that 
Usinor does have the information necessary to segregate the gains 
related to specific transactions. Thus, petitioners claim that if 
Usinor's claimed offset is allowed, the Department would reward Usinor 
for failing to provide data that was available. According to 
petitioners, these type of gains and losses normally arise on a 
transaction-specific basis. Therefore, even if Usinor does not have the 
information at the consolidated level, the petitioners claim the 
subsidiaries would have it. The petitioners further note that 
disallowing this offset does not ``punish'' Usinor, as Usinor claims, 
but simply adopts a reasonable adverse inference from Usinor's refusal 
to provide information the company has the ability to produce.
    Department's Position: We agree with the petitioner that we should 
not include Usinor's net foreign exchange gains in the calculation of 
its financial expenses. To calculate its reported financial expense, 
Usinor offset its financial expenses with the total net foreign 
exchange gains realized on all transactions. However, Usinor was unable 
to demonstrate the source of these consolidated foreign exchange gains 
and losses. Thus, contrary to our normal practice, Usinor did not 
distinguish between exchange gains and losses realized or incurred in 
connection with sales transactions and those associated with purchase 
transactions. Specifically, our normal practice is to include a portion 
of these foreign-exchange gains and losses in the calculation of COP 
and CV. See, e.g., Notice of Final Determination of Sales at Less Than 
Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR 9177, 9181 
(February 24, 1998) (Steel Wire Rod from Trinidad and Tobago). We 
normally include in the calculation of COP and CV the foreign-exchange 
gains and losses that result from transactions

[[Page 73153]]

related to a company's manufacturing activities. We do not consider 
exchange gains and losses from sales transactions to be related to the 
manufacturing activities of the company. See, e.g., Steel Wire Rod from 
Trinidad and Tobago and Final Determination of Sales at Less Than Fair 
Value: Fresh Atlantic Salmon from Chile, 63 FR 31411, 31430 (June 
9,1998).
    In addition, we disagree with Usinor's position that this issue 
involves or questions the respondent's use of generally accepted 
accounting principles (``GAAP''). The issue at hand involves the fact 
that Usinor has not shown that the components of this foreign exchange 
gain are associated with manufacturing activities of the company.
    We agree with petitioners that respondent has the burden of proof 
to demonstrate, substantiate and document this type of adjustment. See 
e.g., Timken Company v. United States, 673 F. Supp. 495, 513 (CIT 
1987); and Final Results of Antidumping Duty Administrative Review: 
Gray Portland Cement and Clinker from Japan; 60 FR 43761, 43767 (August 
23, 1995); see also 19 CFR Sec. 351.401(b)(1) of our regulations.

Comment 16: Calculation of Depreciation Expense

    Usinor claims that it properly excluded the stepped-up basis of an 
affiliate supplier's depreciation expense in calculating the cost of 
producing pig iron obtained from an affiliate. According to Usinor, the 
affiliate is merely a wholly owned subsidiary that was created to hold 
the production assets used by the Usinor organization in manufacturing 
pig iron. Usinor asserts that this subsidiary does not actually 
manufacture or produce pig iron because it is just an accounting entity 
that exists for tax purposes. Since the transfer of the ownership of 
the assets had only a tax effect, Usinor believes it is appropriate to 
exclude the additional depreciation expense associated with the 
stepped-up basis. Thus, Usinor claims that the Department should rely 
on the depreciation expense as recorded in Usinor's consolidated 
financial statements that exclude the adjustment. Petitioners did not 
comment on this issue.
    Department's Position: We disagree with Usinor that the 
depreciation expense associated with its affiliate's revaluation of 
assets (i.e., ``stepped-up basis'') should be excluded from the 
calculation of COP. Specifically, Usinor obtained pig iron from an 
affiliate company and reported the affiliate's cost of production. In 
calculating the affiliate's cost of production, Usinor did not include 
the depreciation expense reported in the company's normal books and 
records. Instead, Usinor included a depreciation expense figure based 
on its historical cost of the assets. Our normal practice, however, is 
to rely on the depreciation expense recorded in the normal accounting 
records. See, e.g., Cinsa S.A. de C.V. v. United States, 966 F. Supp 
1230, 1234 (CIT 1997) (upholding the Department's reliance on 
depreciation expense reported on the financial statements); Laclede 
Steel Co. v. United States, 965 Slip OP 94-160, *24 (CIT 1994) 
(upholding the Departments reliance on depreciation expense reported on 
the financial statements); see also Final Results of Administrative 
Review: Silicon Metal from Brazil, 64 FR, 6305, 6321 (February 9, 
1999).
    Contrary to Usinor's argument, we also do not find it appropriate 
to rely on the depreciation expense of the affiliated supplier as 
calculated at the consolidated level because it would circumvent the 
major-input rule. See, sections 773(f)(2) and (3)of the Act. Here, the 
affiliated company in question is a separate legal entity in France 
that maintains its own books and records. Consistent with prior 
determinations, we find that the legal form dictates whether we should 
use that affiliate's production costs as reported in its books and 
records. See, e.g., Notice of Final Results and Partial Rescission of 
Antidumping Duty Administrative Review: Certain Pasta From Italy, 64 FR 
6615, 6622 (February 10, 1999) (the Department treated an affiliated 
supplier as a separate entity for reporting costs because of its legal 
form). Therefore, we have adjusted the cost of pig iron to reflect the 
affiliate's cost of production in accordance with section 773(f)(3) of 
the Act.

Comment 17: Calculation of Reported Costs

    Petitioners allege that Usinor uses a standard cost accounting 
system but refused to provide variances to the Department. According to 
petitioners, Usinor's failure to provide a variance between its 
standard and actual costs means that the Department cannot use the 
reported CONNUM-specific standard costs. Without this variance, the 
petitioners continue that the Department has no assurance that Usinor 
has accurately reported product-specific costs. Moreover, petitioners 
claim that Usinor has consistently refused to provide this information. 
Therefore, petitioners believe that the Department should reject 
Usinor's cost data and resort to the use of facts available as it has 
done in similar situations in the past, citing Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Preserved 
Mushrooms from Indonesia, 63 FR 72,268, 72,276 (December 31, 1998).
    Petitioners further counter Usinor's explanation that a variance is 
not necessary in this case because it used actual costs; according to 
petitioners, Usinor has stated both that it had reported actual product 
specific costs and that the product specific costs are based on 
standards. Thus, petitioners claim that Usinor is obliged to provide 
variances because the statute requires that COP and CV be based on the 
producer's actual costs. In addition, the petitioners discount the 
importance of Usinor's claim that its total aggregate extra and 
aggregate base costs equal aggregate actual costs. According to 
petitioners, this does not signify that the product-specific costs upon 
which the reported COP and CV data are based were accurate. In fact, 
petitioners claim that the Department has rejected such arguments in 
the past, citing Final Results of Antidumping Duty Administrative 
Review: Certain Cut-to-Length Carbon Steel Plate from Mexico, 64 FR 
7679 (January 4, 1999). To demonstrate the possible distortions that 
may occur with the use of a ``base cost'' system which accounts for 
actual costs on an aggregate level, petitioners refer to proprietary 
information which cannot be adequately summarized. However, in essence, 
petitioners argue that because of the possible differences between 
actual costs and potentially erroneous standards, the Department cannot 
have confidence that Usinor's base cost system is accurate.
    Finally, petitioners contend that the Department's testing 
performed at verification does not provide assurance that Usinor's 
standard costs are accurate. For example, petitioners argue that the 
verification step to reconcile the cost of an extra (i.e., the cost 
variations associated with a product's unique physical 
characteristics), with the amounts used in the cost build up means only 
that Usinor adhered to its base plus extra method. Likewise, the 
verification step to compare the consistency of the reported extras 
with those outside the POI only indicates that the inaccuracies 
contained in Usinor's previous figures also appear in the reported 
costs.
    Usinor argues that petitioners are incorrect in alleging that it 
did not report any cost variances and therefore the Department should 
reject all product-specific costs. Usinor states that its base-plus-
extra costing system reflects the actual production costs of

[[Page 73154]]

the company. To calculate the reported costs, respondent states that it 
calculated the unit cost of the base product, the average extra costs 
associated with the base product, and any extras associated with a 
product's specifications. It then subtracted the average cost of extras 
from the average base product cost and added the extra costs associated 
with each unique product which resulted in the actual production costs 
for each product. Respondent argues that a similar methodology was 
verified and accepted by the Department in two recent cases. See Final 
Results of Antidumping Duty Administrative Review: Certain Cold-Rolled 
Carbon Steel Flat Products from Germany, 60 FR 65264, 65267 (1995) 
(``Certain Cold-Rolled Carbon Steel Flat Products from Germany''); see 
also Final Results of Antidumping Duty Administrative Review: Certain 
Cold-Rolled Carbon Steel Plate from Finland, 63 FR 2952, 2957 (January 
20, 1998) (``Certain Cut-to-Length Carbon Steel Plate from Finland'').
    Furthermore, Usinor argues that there is no support for 
petitioners' contention that the Department's cost verification 
confirms that Usinor's reported costs are based on standard costs and 
not actual costs. Rather, Usinor states that the Department recognized 
that the base-plus-extra cost system is founded on actual production 
costs and not standard costs adjusted to actual. Based upon this 
argument, Usinor urges the Department to accept the reported 
methodology just as it did in Certain Cut-to-Length Carbon Steel Plate 
from Finland. Finally, respondent states that the antidumping law 
allows costs to be computed based on the producer's normal accounting 
records, provided that it is kept in accordance with GAAP. In the 
instant case, respondent argues that the reported costs are kept in 
accordance with GAAP and are therefore an accurate basis for the 
calculation of COP and CV.
    Department's Position: We disagree with petitioners' contention 
that we must reject Usinor's submitted COP and CV data for this 
investigation. In its normal accounting records, Usinor determines its 
product-specific costs by using a ``base plus extras'' method. For 
submission purposes, the company relied on this methodology. Contrary 
to petitioners' assertions, Usinor does not use a standard cost 
accounting system nor does it calculate variances. Instead, the system 
begins and ends with actual production costs. Specifically, Usinor's 
cost accounting system accumulates the actual costs incurred and actual 
tonnages produced by product group. The company then takes these total 
costs and deducts the total cost of extras to derive its base product 
costs. To calculate the product specific costs, Usinor simply adds the 
unique ``extras'' of a model to the base. Usinor used engineering 
studies to determine the cost of product-specific extras. Contrary to 
petitioners' allegation, we found nothing inherently unreliable or 
theoretically unsound about Usinor's underlying cost allocation 
methodology. In fact, we note that this method of using base-plus-extra 
is quite common for the industry. See, e.g., Certain Cold-Rolled Carbon 
Steel Flat Products from Germany and Certain Cut-to-Length Carbon Steel 
Plate from Finland. In both of these proceedings, the Department 
accepted COP and CV values calculated from the respondent's ``base-
plus-extra'' cost accounting systems used in the normal course of 
business. Moreover, the record in the instant case contains the 
following factual information that justifies using Usinor's normal 
accounting system to calculate the unique cost of a CONNUM.
    First, Usinor supported its product-specific costs with source 
documentation that was verifiable. For example, in its June 30, 1999, 
supplemental section D questionnaire response, Usinor provided 
documentation of the detailed calculations used to derive its quality 
extras. As noted earlier, Usinor based these calculations on 
engineering standards and its production experience. After reviewing 
and testing this information, we have no reason to believe that 
Usinor's extra cost calculations, which were based on data used by the 
company in its normal accounting records, do not reasonably represent 
the cost differences incurred to produce individual products. 
Furthermore, we note that section 773(f)(1)(A) of the Act specifically 
requires that costs be calculated based on the records of the exporter 
or producer of the merchandise, if such records are kept in accordance 
with the GAAP of the exporting country and reasonably reflect the costs 
associated with the production and sale of the merchandise. We have 
found that following the GAAP provides the respondent and the 
Department with a reasonable, objective and predictable basis by which 
to compute costs for the merchandise under investigation. In accordance 
with the statutory directive, the Department will accept the company's 
``normal'' costs if the cost data can be reasonably allocated to 
subject merchandise. In this instant case, we find the Usinor's costs 
do reasonably reflect the costs of the merchandise under investigation.
    Second, the record contains several overall cost reconciliations 
that identify no misstatement or mis-allocations. For example, we 
reconciled Usinor's reported product-specific costs to its audited 
financial statements and noted no significant discrepancies. See 
``Verification Report on the Cost of Production and Constructed Value 
Data Submitted by USINOR'' (October 27, 1999) at page 9 through 12, 
(``Cost Verification Report''). Thus, we confirmed that Usinor 
accounted for all of the manufacturing costs it incurred during the 
POI. In addition, we compared per-unit inventory values to reported 
per-unit CONNUM values and noted no significant discrepancies. 
Furthermore, we confirmed that Usinor's reported costs reasonably 
reflected the values as recorded in the ordinary course of business.
    Finally, Usinor's product-specific costs are supported by detailed 
tests performed by the Department during verification. For example, we 
tested Usinor's calculations of weighted-average costs, base costs, and 
extra costs. See Cost Verification Report at pages 12 through 18. In 
addition, we documented that the costs for extras used by Usinor in the 
normal accounting system were in fact based on actual production and 
cost data, engineering standards, and company experience. For these 
reasons, we have relied on Usinor's base-plus extra costs for the final 
determination.

Comment 18: Calculation of Freight Expenses Included in Further 
Manufacturing Expenses

    Petitioners claim that the Department should correct Berg's 
reported movement expenses. According to petitioners, Usinor calculated 
and reported the per-unit amount on a short-ton basis and not the 
metric-ton basis used for all other costs. Usinor did not comment on 
this issue.
    Department's Position: We agree with petitioners that we should 
correct for this clerical error. As noted by petitioners, Berg reported 
its per unit movement expense (i.e., inbound freight from port to 
production facility) for plate in short-tons. Usinor reported all other 
further manufacturing costs on a metric ton basis. Therefore, we 
adjusted the reported per-unit movement costs to reflect a per metric-
ton value for the final determination.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are 
directing

[[Page 73155]]

the Customs Service to continue to suspend liquidation of all entries 
of subject merchandise from France that were entered, or withdrawn from 
warehouse, for consumption on or after July 29, 1999 (the date of 
publication of the Department's preliminary determination). 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
------------------------------------------------------------------------
Usinor.....................................................        10.43
All others.................................................        10.43
------------------------------------------------------------------------

ITC Notification

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

    Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33230 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P