[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73215-73234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33235]



[[Page 73215]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-847]


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

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

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Mark Manning or Nithya Nagarajan, 
Office 4, Group II, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-3936 or (202) 482-5253, 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 made are to the Department's 
regulations codified at 19 CFR Part 351 (1998).

Final Determination

    We determine that certain cut-to-length carbon-quality steel plate 
products (``CTL plate'') from Japan 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 ``Continuation of Suspension of Liquidation'' 
section of this notice.

Case History

    Since the publication of the preliminary determination in this 
investigation (Notice of Preliminary Determination of Antidumping 
Investigation: Certain Cut-To-Length Carbon-Quality Steel Plate from 
Japan, 64 FR 41218 (July 29, 1999) (``Preliminary Determination''), the 
following events have occurred:
    In September 1999, the Department of Commerce (``the Department'') 
conducted verification of Kawasaki Steel Corporation (``KSC''), the 
sole participating respondent in the instant investigation. On October 
21, 1999, we issued our cost verification report for KSC, and on 
October 26, 1999, we issued our sales verification report. Public 
versions of our report of the results of the cost and sales 
verifications are on file in the Central Records Unit (``CRU'') located 
in room B-099 of the main Department of Commerce building, under the 
appropriate case number. Petitioners 1 and respondent 
submitted case briefs on November 5, 1999, and rebuttal briefs on 
November 10, 1999. On November 12, 1999, the Department held a public 
hearing concerning this investigation.
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    \1\ The petitioners are Bethlehem Steel Corporation, Gulf States 
Steel, Inc., IPSCO Steel Inc., Tuscaloosa Steel Corporation, the 
United Steelworkers of America, and the U.S. Steel Group (a unit of 
USX Corporation).
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Facts Available

1. Application of 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 administering authority; (B) fails to provide such information 
by the deadlines for the submission of the information or in the form 
and manner requested, subject to subsections (c)(1) and (e) of section 
782; (C) significantly impedes a proceeding under this title; or (D) 
provides such information but the information cannot be verified as 
provided in section 782(i), the administering authority * * * shall, 
subject to section 782(d), use the facts otherwise available in 
reaching the applicable determination under this title.''
    Section 782(d) of the Act provides that, if the Department 
determines that a response to a request for information does not comply 
with the request, the Department will inform the person submitting the 
response of the nature of the deficiency and shall, to the extent 
practicable, provide that person the opportunity to remedy or explain 
the deficiency.
    Pursuant to section 782(e) of the Act, notwithstanding the 
Department's determination that the submitted information is 
``deficient'' under section 782(d) of the Act, the Department shall not 
decline to consider such information if all of the following 
requirements are satisfied: (1) the information is submitted by the 
established deadline; (2) the information can be verified; (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination; (4) the interested 
party has demonstrated that it acted to the best of its ability; and 
(5) the information can be used without undue difficulties.

2. Selection of Facts Available

    In selecting from among the facts otherwise available, section 
776(b) of the Act authorizes the Department to use an adverse inference 
if the Department finds that an interested party failed to cooperate by 
not acting to the best of its ability to comply with the request for 
information. See, e.g., Certain Welded Carbon Steel Pipes and Tubes 
From Thailand: Final Results of Antidumping Duty Administrative Review, 
62 FR 53808, 53819-20 (October 16, 1997).
    Kobe Steel, Ltd. (``Kobe''), Nippon Steel Corporation (``Nippon''), 
NKK Corporation (``NKK''), and Sumitomo Metal Industries, Ltd. 
(``Sumitomo'') all declined to respond to the Department's antidumping 
questionnaire. Because these respondents have withheld requested 
information, we determine that it is appropriate to use facts 
available, in accordance with section 776(a)(2)(A) and (C) of the Act. 
We have also determined that because these respondents failed to 
respond to our questionnaire, they have not cooperated to the best of 
their abilities. Therefore, pursuant to section 776(b) of the Act, we 
used an adverse inference in selecting a margin from the facts 
available. As facts available, the Department has applied a margin rate 
of 59.12 percent, the highest alleged margin in the petition.

3. Corroboration of Information Used as Facts Available

    Section 776(c) of the Act provides that where the Department 
selects from among the facts otherwise available and relies on 
``secondary information,'' such as the petition, the Department shall, 
to the extent practicable, corroborate that information from 
independent sources reasonably at the Department's disposal. The 
Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 
103-316 (1994) (hereinafter, the ``SAA'') states that ``corroborate'' 
means to determine that the information used has probative value. See 
SAA at 870.
    In this proceeding, we considered the petition information the most 
appropriate record information to use to establish the dumping margins 
for these uncooperative respondents. In accordance with section 776(c) 
of the Act, we sought to corroborate the data contained in the 
petition. We reviewed the adequacy and accuracy 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 and foreign market research reports). See Initiation 
of Antidumping Duty Investigations: Certain Cut-To-

[[Page 73216]]

Length Carbon-Quality Steel Plate From the Czech Republic, France, 
India, Indonesia, Italy, Japan, the Republic of Korea, and the Former 
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999) 
(``Initiation Notice'').
    Moreover, for purposes of the preliminary determination, we 
corroborated the information in the petition. In this regard, we 
reexamined the export price and CV data which formed the basis for the 
highest margin in the petition in light of information obtained during 
the investigation and, to the extent practicable, found that it has 
probative value (see the July 19, 1999, memorandum to the file 
regarding Corroboration of the Petition Data, on file in the CRU). 
Since the preliminary determination, we received no new information 
which would call into question the use of petition information as facts 
available or our corroboration analysis.

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 KSC covered by the description in the ``Scope of 
Investigation'' section, above, and sold in Japan 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 respondents 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. In accordance with section 771(16)(B) of the Act, these 
physical characteristics reflect differences in the uses and value of 
the subject merchandise.
    Because KSC 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 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'').

Verification

    As provided in section 782(i) of the Act, we verified all 
information determined to be acceptable for use in making our final 
determination, in accordance with standard verification procedures.

Changes From the Department's Preliminary Determination

    Based on our analysis of the comments received, we have made 
certain changes for the final determination. Where applicable, these 
changes are discussed in the relevant sections of the party comments 
below. Specifically, we revised the following cost items to reflect 
certain adjustments arising from information obtained during 
verification: (1) KSC's interest expense ratio, and (2) KSC's G&A 
expense ratio. See Memorandum to the File, ``Verification of the Cost 
Responses of Kawasaki Steel Corporation, in the Antidumping Duty 
Investigation of Certain Cut-To-Length Carbon-Quality Steel Products 
from Japan,'' dated October 21, 1999 (``Cost Verification Report''). In 
addition, we have made the following changes to items concerning

[[Page 73217]]

KSC's home market and U.S. sales: (1) revised KSC's constructed export 
price calculation to include the operating expenses of its U.S. 
affiliate, Kawasaki Steel (America) Inc. (``KSCUSA''), (2) changed the 
application of the arm's-length test of KSC's home market sales from a 
point-of-delivery basis to a customer-specific basis, (3) granted KSC 
the CEP offset, (4) used the yen price as the starting price for KSC's 
export price transactions, (5) included three unreported U.S. sales 
disclosed at verification in our margin calculations, (6) recalculated 
Kawasho's home market credit expense to account for inconsistencies 
found during verification regarding Kawasho's reported dates of 
payment, (7) adjusted Kawasho International (USA)'s (``KI's'') short-
term interest rate to account for additional interest expenses found 
during verification, (8) corrected a clerical error in the programming 
for the preliminary determination that understated Kawasho's home 
market short-term interest rate, (9) corrected Kawasho's warehousing 
expenses to account for a clerical error disclosed during verification, 
and (10) corrected the gross unit price on two U.S. sales by KI to 
account for a clerical error disclosed at verification. For further 
details concerning the changes listed above, see Memorandum to the 
File, ``Calculation Memorandum of the Final Determination for the 
Investigation of Kawasaki Steel Corporation,'' dated December 13, 1999 
(``Final Determination Calculation Memo'').
    Throughout the investigation, KSC argued that its U.S. affiliate, 
KSCUSA, is a liaison office that provides certain after-sales services 
to the customers of KSC's customers. According to KSC, KSCUSA provides 
legal, financial, and accounting support to KSC's other U.S. subsidiary 
companies; assists KSC with public relations in the Americas; 
coordinates and receives U.S. business visits from KSC officials; 
informs KSC of political, economic, social, and business conditions in 
the United States; and provides warranty/complaint and technical 
services to U.S. end-users of KSC steel products, including subject 
merchandise. See KSC's June 23, 1999, supplemental Section A response 
at A-9 and KSC's July 22, 1999, second supplemental Section A response 
at 10-15.
    KSC states that KSCUSA is not involved in the sale of subject 
merchandise, but supports sales of KSC's entire line of steel products 
in North, South, and Central America. With respect to CTL plate sales, 
KSC states that KSCUSA's role in providing after-sale services involves 
providing technical services, handling warranty claims, and processing 
complaints by U.S. end-users. However, KSC states that there were no 
such warranty claims/complaints on subject CTL plate sales during the 
POI. See KSC's July 22, 1999, second supplemental Section A response at 
10-15.
    Although KSC argues that there were no warranty claims or 
complaints filed against CTL plate by U.S. end-users during the POI, 
this does not diminish the fact that KSCUSA was still operating and 
incurring costs (e.g., salaries, rent) to maintain the personnel and 
corporate infrastructure necessary to handle such complaints, in the 
event any are filed. For this reason, we find that KSCUSA's expenses 
should be included in the calculation of constructed export price 
(``CEP''). Since the costs incurred by KSCUSA are not specific to CTL 
plate, but rather apply to all of KSC's steel products, we consider 
these expenses to be indirect selling expenses. Because of the limited 
information on the record concerning KSCUSA's expenses, the most 
reasonable method for including these costs in KSC's CEP calculation is 
to calculate a ratio of KSCUSA's operating expenses over KSC's total 
sales in North, South, and Central America. In our calculations, we 
multiplied this ratio against KSC's gross unit price for CEP sales, and 
added the result to U.S. indirect selling expenses.

Interested Party Comments

Home Market and U.S. Sales

Comment 1: Date of Sale
    Petitioners argue that section 351.401(i) of Department's 
regulations allows it to 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.'' Petitioners argue that the documents and information 
obtained at verification support the conclusion that the material terms 
of sale are set on the order confirmation date and therefore the order 
confirmation date is the appropriate date of sale for this 
investigation.
    Petitioners observe that when KSC revises an order confirmation, 
its internal records do not identify the type of revision causing the 
revised order confirmation to be issued. Petitioners argue that 
although KSC provided evidence that some changes occurred between the 
order confirmation and invoice date for a portion of its sales, 
petitioners state that KSC is unable to identify whether these changes 
were material or not. Petitioners observe that the Department stated in 
its verification report that ``neither of these methods of analysis 
reflects the type of revision that occurred or, in the case where 
multiple revisions occurred for a single order confirmation, the total 
number of revisions for that order.'' See Memorandum to the File, 
``Verification of the Sales Responses of Kawasaki Steel Corporation, 
and its Affiliated Companies, in the antidumping Duty Investigation of 
Certain Cut-To-Length Carbon-Quality Steel Products from Japan,'' dated 
October 26, 1999, (``Sales Verification Report''), at 29. Petitioners 
conclude that there is no record evidence of the number of sales in 
which there were material changes to the terms of sale after order 
confirmation. Furthermore, petitioners note that although a portion of 
KSC's sales incurred post-order changes, the majority of KSC's sales 
had no changes of any kind after order confirmation. Therefore, in the 
absence of record evidence indicating that the material terms of sale 
were modified after order confirmation date, the Department must use 
order confirmation date as the date of sale. Petitioners cite to Notice 
of Preliminary Determination of Sales at Less Than Fair Value: Hot-
Rolled Flat-Rolled Carbon-Quality Steel Products From the Russian 
Federation, 63 FR 9312, 9315 (February 25, 1999) (``Russian Hot-
Rolled''), where the Department stated that ``there is no evidence on 
the record which indicates that, when no order amendment was provided, 
the terms of sale for the merchandise shipped differed from the terms 
of sale set in the order specification.'' Petitioners argue that in 
that case the Department preliminarily determined that it was 
appropriate to use the ``order specification date or order amendment, 
if applicable, as the date of sale.'' Id. Petitioners conclude that the 
Russian Hot-Rolled case illustrates that the Department will not adopt 
the invoice date as the date of sale when there is no record evidence 
to show modifications to the material terms of sale after the order 
date.
    Petitioners also argue that KSC's refusal to report sales based on 
order confirmation warrants use of adverse facts available. Petitioners 
note that the Department requested KSC to report all sales on the basis 
order confirmation date rather than invoice date in its Supplemental 
Section B Questionnaire. In its response, KSC stated that it ``will not 
provide sales or cost information on an order confirmation date-
basis.'' See KSC's June 23, 1990 Section B Supplemental Questionnaire 
Response, at 7. According to petitioners, this response indicates that 
KSC has failed

[[Page 73218]]

to cooperate by not acting to the best of its ability to comply with a 
request for information. Consequently, petitioners recommend that the 
Department use as adverse facts available the highest margin alleged by 
petitioners or the highest margin calculated for a single CONNUM, 
whichever is higher.
    Lastly, petitioners argue that even if the Department accepts the 
invoice date as the date of sale, KSC's refusal to provide sales and 
cost information on an order confirmation basis, as requested in the 
Department's supplemental questionnaire, constitutes uncooperative 
behavior. Petitioners note that section 776(a) of the Act states that 
when ``an interested party or any other person--(A) withholds 
information that has been requested by the [Department] * * * the 
[Department] shall * * * use the facts otherwise available in reaching 
the applicable determination under this subtitle.'' This provision of 
the statute, petitioners claim, authorizes the Department to use the 
highest margin alleged in the petition of this investigation, which, 
according to petitioners, would be an appropriate response to KSC's 
disregard for the Department's authority to request information.
    Respondent argues that, in accordance with its rules and 
established practice, the Department appropriately used KSC's invoice 
date as the date of sale in the preliminary determination of this 
investigation. KSC claims that section 351.401(i) of the Department's 
regulations establishes a presumption that invoice date be used as the 
date of sale, a rule which KSC argues the Department has consistently 
applied in recent antidumping investigations. Specifically, respondent 
cites Notice of Final Determination of Sales at Less Than Fair Value: 
Hot-Rolled Carbon-Quality Steel Products from Japan, 64 FR 24329, 24334 
(May 6, 1999) (``Hot-Rolled Steel from Japan''), and Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon 
Steel Plate From Canada: Final Results of Antidumping Duty 
Administrative Reviews and Determination To Revoke in Part, 64 FR 2173, 
2178 (January 13, 1999), as evidence that the Department reaffirmed its 
practice of using the invoice date as the proper date of sale when 
terms of sale can change between order and invoice date.
    According to KSC, the initial terms of sale are established with 
the order confirmation. KSC states that the initial terms of sale can 
and do change up to the invoice/shipment date. KSC notes that it 
provided evidence that the terms of sale changed for a significant 
portion of sales during the POI. KSC observes that the Department 
verified the accuracy of this information and stated in its 
verification report that ``[t]hroughout the course of this 
verification, we encountered several revised order confirmations and 
revised invoices'' and that ``[w]e found no discrepancies between the 
documents we examined and the explanation of order confirmation and 
invoice revisions KSC provided in its questionnaire responses.'' See 
Sales Verification Report at 30.
    KSC states that in two recent investigations on hot-rolled steel 
products from Japan and stainless steel sheet and strip products from 
Japan, and one administrative review covering corrosion-resistant steel 
from Japan, the Department requested, and KSC provided, two complete 
sales databases for both the home market and U.S. market. See Hot-
Rolled Steel from Japan; Notice of Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Sheet and Strip in Coils from Japan, 
64 FR 30574, 30585 (June 8, 1999) (``Stainless Steel Sheet and Strip 
from Japan''); and Certain Corrosion-Resistant Carbon Steel Flat 
Products From Japan: Preliminary Results of Antidumping Duty 
Administrative Review, 64 FR 4483 (August 16, 1999). For each 
proceeding, KSC submitted one database compiled using order 
confirmation dates and another database using invoice dates. KSC notes 
that in all of these proceedings, the Department's purpose for 
requesting the information was to determine the appropriate date of 
sale. KSC argues that the Department verified the submitted information 
and determined that invoice date is the appropriate date of sale in the 
final determinations of each of these three proceedings.
    Lastly, KSC argues that the invoice/shipment date is the correct 
date of sale because KSC and its affiliates participating in this 
investigation use invoice date as the date of sale in their books and 
records. Consequently, KSC states that using invoice date as the date 
of sale is consistent with its internal sources of documentation, makes 
reporting such information easier, and thus, simplifies the 
verification process.

Department's Position

    We agree with respondent that invoice/shipment date is the correct 
date of sale for all home market and U.S. sales of subject merchandise 
for KSC in this investigation.
    Under our current practice, as codified in the Department's 
regulations at section 351.401(i), in identifying the date of sale of 
the subject merchandise, the Department will normally use the date of 
invoice, as recorded in the producer's records kept in the ordinary 
course of business. See Certain Welded Carbon Steel Pipes and Tubes 
from Thailand: Final Results of Administrative Review, 63 FR 55578, 
55587 (October 16, 1998) (``Pipes and Tubes from Thailand''). However, 
in some instances, it may not be appropriate to rely on the date of 
invoice as the date of sale, because the evidence may indicate that the 
material terms of sale were established on some date other than invoice 
date. See Preamble to the Department's Final Regulations, 62 FR 27296 
(May 17, 1997) (``Preamble''). Thus, despite the general presumption 
that the invoice date constitutes the date of sale, the Department may 
determine that this is not an appropriate date of sale where the 
evidence of the respondent's selling practice points to a different 
date on which the material terms of sale were set.
    In this investigation, in response to the original questionnaire, 
KSC reported invoice/shipment date as the date of sale in both the U.S. 
and home markets. To ascertain whether KSC accurately reported the date 
of sale, the Department requested in its May 28, 1999, Section B 
supplemental questionnaire that KSC report all sales made by KSC 
pursuant to orders with confirmation dates within the POI. In its June 
23, 1999, supplemental response, KSC indicated that there were numerous 
instances in which terms such as price and quantity changed subsequent 
to the confirmation of the original orders in the U.S. and home 
markets. In view of the Department's acceptance of KSC's invoice date 
as the date of sale in previous cases, as well as the burden and 
expense for responding to the Department's request, KSC did not 
resubmit its sales or cost information on an order confirmation date-
basis. For purposes of our preliminary determination, we accepted the 
date of invoice as the date of sale subject to verification. See 
Preliminary Determination, 64 FR 41218.
    At verification, we carefully examined KSC's selling practices. We 
found that it records sales in its financial records by date of 
invoice/shipment. For both the home and U.S. markets, we reviewed 
several sales observations for which the material terms of sale (i.e., 
price and quantity) changed subsequent to the original order. Based on 
respondent's representations, and as a result of our examination of the 
company's selling records kept in the ordinary course of business, we 
are satisfied that the date of invoice/shipment should be used as

[[Page 73219]]

the date of sale because it best reflects the date on which material 
terms of sale were established for KSC's U.S. and home market sales.
    We disagree with the petitioners' claim that order confirmation 
date is the most appropriate date of sale for KSC's U.S. and home 
market sales because the majority of KSC's sales required no change in 
material terms subsequent of the issuance of the order confirmation. 
The fact that terms often changed subsequent to the initial order 
confirmation suggests that these terms remained subject to change 
(whether or not they did change with respect to individual 
transactions) until as late as the invoice date. For sales that we 
reviewed, we found this to be true for material terms of sale such as 
price and quantity.
    The Department's decision in Russian Hot-Rolled to use the order 
specification date as the date of sale for Magnitogorsk Iron & Steel 
Works (``MMK''), a Russian steel producer, was based on the fact that 
MMK stated that the terms of the sale are set in the order 
specification. See Russian Hot-Rolled, 63 FR 9314 (``MMK also stated 
that the date of the order specification would most likely be 
considered by the Department to be the most appropriate date of sale, 
because the terms of sale are set in the order specification''). Where 
order specifications were amended, MMK identified the sales containing 
such revisions and reported the date of the order amendment. Since 
there was no evidence on the record of that case indicating that, when 
no order amendment was provided, the terms of the sale for the 
merchandise shipped differed from the terms of sale set in the order 
specification, the Department accepted MMK's statement that the terms 
of the sale are set in the order confirmation, or in the order 
amendment. Furthermore, we note that in Russian Hot-Rolled, there was 
no discussion regarding the possibility or frequency of changes between 
the original order confirmation, any revised order confirmations, the 
invoice, and changes subsequent to the invoice.
    The facts of the instant case are distinguishable. In the instant 
case, pursuant to our findings at verification, the Department 
determines that there are changes between the order confirmation date 
(i.e, the date of sale proposed by petitioner) and the invoice date 
(i.e., the date of sale proposed by respondents). This fact 
distinguishes the factual record in the current case from the 
Department's decision in the Russian Hot-Rolled case. Therefore, in 
accordance with our regulations and pursuant to our findings at 
verification, we have determined that invoice date is the appropriate 
date of sale for KSC's sales, as it most accurately represents the date 
on which the material terms of sale are established. Because KSC 
provided verifiable information establishing the proper date of sale, 
we have not resorted to using facts available, as suggested by 
petitioners.
Comment 2: Critical Circumstances
    Respondent argues that the Department calculated a preliminary 
dumping margin of 10.78 percent, which is well below the 25 percent 
threshold used by the Department to impute knowledge of less than fair 
value sales and injury when determining whether critical circumstances 
exist. Furthermore, respondent states that its data shows that KSC did 
not have ``massive imports'' within the meaning of the statute and 
regulation because its shipments actually declined from the base period 
to the comparison period. Consequently, respondent argues, the 
Department's finding of critical circumstances is not in accordance 
with law or supported by substantial record evidence. Lastly, 
respondent states that the time frame used by the Department to 
determine whether KSC had massive imports was wrong as a matter of law 
because the Department has no authority to examine a period of time 
that is disconnected with the date the petition was filed. Respondent 
argues that the legislative history of the critical circumstances 
provision indicates that Congress intended that the period of time 
examined to determine whether massive imports exist be the time 
following the filing of the petition compared to a prior period of 
time. Moreover, respondent argues that the press articles relied upon 
by the Department did not support the factual conclusion that KSC knew 
about this investigation. Respondent states that those articles 
contained general comments about the state of the U.S. steel industry, 
and covered a similar period of time as the other investigations 
against steel products conducted by the Department. Thus, respondent 
concludes, the Department's initial affirmative critical circumstances 
determination was unlawful.

Department's Position

    For the reasons discussed below, we no longer find critical 
circumstances with regard to KSC or the ``all others'' companies. 
However, we continue to find critical circumstances for non-responding 
companies (Kobe, Nippon, NKK, and Sumitomo).
    Section 735(a)(3) of the Act provides that if critical 
circumstances are alleged, the Department will determine whether: 
(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.
    With respect to section 735(a)(3)(A)(ii) of the Act, in determining 
whether an importer knew or should have known that the exporter was 
selling CTL plate at less than fair value and thereby causing material 
injury, the Department normally considers margins of 25 percent or more 
and a preliminary ITC determination of material injury sufficient to 
impute knowledge of dumping and the resultant material injury. See 
Certain Cut-To-Length Carbon Steel Plate from the People's Republic of 
China, 62 FR 31972, 31978 (June 11, 1997).
    Section 351.206(h)(1) of the Department's regulations provides 
that, in determining whether imports of the subject merchandise have 
been ``massive,'' the Department normally will examine: (i) The volume 
and value of the imports; (ii) seasonal trends; and (iii) the share of 
domestic consumption accounted for by the imports. In addition, section 
351.206(h)(2) of the Department's regulations provides that an increase 
in imports during the ``relatively short period'' of over 15 percent 
may be considered ``massive.'' Section 351.206(i) of the Department's 
regulations defines ``relatively short period'' normally as the period 
beginning on the date the proceeding begins (i.e., the date the 
petition is filed) and ending at least three months later.
1. KSC
    With regard to KSC's imports, we find that there is no relevant 
history of dumping with respect to subject merchandise (discussed in 
the ``all others'' section below) and that the calculated margin is 
below the 25 percent threshold for determining whether the importers 
knew or should have known that the exporters were dumping the subject 
merchandise. For these reasons we determine that the first criterion 
under section 735(a)(3) of the Act has not been met and thus that 
critical circumstances do not exist for imports of KSC-produced CTL 
plate from Japan.

[[Page 73220]]

2. Kobe, Nippon, NKK, and Sumitomo
    With respect to imports of subject merchandise sold by Nippon, NKK, 
Kobe, and Sumitomo, we have determined the final margins for those 
companies to be 59.12 percent (based on adverse facts available), which 
exceeds the 25 percent threshold. Therefore, we determine there is a 
reasonable basis to believe or suspect that importers knew or should 
have known that Nippon, NKK, Kobe, and Sumitomo were dumping the 
subject merchandise. Since the ITC, in this investigation, found a 
reasonable indication of present material injury to the relevant U.S. 
industry, the Department further determines that a reasonable basis 
exists to impute importer knowledge that there was likely to be 
material injury by reason of the dumped imports.  ITC Preliminary 
Determination, April 1999.
    Since there is no verifiable information on the record with respect 
to Nippon, NKK, Kobe, and Sumitomo's import volumes, we must use the 
facts available in accordance with section 776(a) of the Act in 
determining whether there were massive imports of merchandise produced 
by these companies. With regard to aggregate import statistics, these 
data do not permit the Department to ascertain the import volumes for 
any individual company that failed to provide verifiable information. 
Nor do these data reasonably preclude an increase in shipments of 15 
percent or more within a relatively short period for any of these 
companies. As a result, in accordance with section 776(b) of the Act, 
we have used an adverse inference in applying facts available, and 
determine that there were massive imports from Nippon, NKK, Kobe, and 
Sumitomo over a relatively short period. See Critical Circumstances 
Preliminary Determination Memo, Attachment II. Because both of the 
necessary criteria have been met, in accordance with section 735(a)(3) 
of the Act, the Department finds that critical circumstances exist with 
respect to CTL plate products imported from Nippon, NKK, Kobe, and 
Sumitomo.
    3. ``All Others''--It is the Department's normal practice to 
conduct its critical circumstances analysis of companies in the ``all 
others'' group based on the experience of investigated companies. See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Steel Concrete Reinforcing Bars from Turkey (``Rebars from Turkey''), 
62 FR 9737, 9741 (March 4, 1997) (the Department found that critical 
circumstances existed for the majority of the companies investigated, 
and therefore concluded that critical circumstances also existed for 
companies covered by the ``all others'' rate). However, the Department 
does not automatically extend an affirmative critical circumstances 
determination to companies covered by the ``all others'' rate. See 
Stainless Steel Sheet and Strip from Japan. Instead, the Department 
considers the traditional critical circumstances criteria with respect 
to the companies covered by the ``all others'' rate.
    In the preliminary critical circumstances determination of this 
investigation, we concluded that there is a reasonable basis to believe 
or suspect that critical circumstances exist for imports plate from 
Japan. In that preliminary determination, we satisfied section 
735(a)(3)(A) of the Act through finding a history of dumping in 
conjunction with a determination that importers had knowledge of 
dumping. Specifically, we based our decision that there is a history of 
dumping on the existence of a dumping finding on carbon steel plate 
from Japan (43 FR 22937) (May 30, 1978), which was revoked based on 
changed circumstances on April 17, 1986 (51 FR 13039), and found that 
importers had knowledge of dumping by relying upon the alleged dumping 
rates contained in the petition, which were in excess of the 25 percent 
threshold. For our final critical circumstances determination, however, 
we find that there is no longer knowledge of dumping with respect to 
the ``all others'' category for purposes of satisfying 735(a)(3)(A).
    In determining knowledge of dumping, we look to the ``all others'' 
rate, which is based on the weighted-average rate of all investigated 
companies. In this case, such a weighted-average rate must, of 
necessity, be based on the individual rate of KSC, the only 
investigated company that did not receive adverse facts available in 
this investigation. KSC's rate, applied to the ``all others,'' is 10.78 
percent. This rate is not high enough to impute knowledge of dumping to 
the ``all others'' category. Furthermore, with respect to the history 
of dumping criterion, we conclude that the prior dumping finding on 
carbon steel plate from Japan does not reflect a relevant history of 
dumping for purposes of section 735(a)(3)(A). Specifically, the age of 
a previous dumping finding is taken into consideration in our 
determination of whether there exists a history of dumping. See Notice 
of Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of the Final Determination: Certain Polyester Staple Fiber 
From the Republic of Korea, 64 FR 60776, 60778-79 (November 8, 1999) 
(where the Department stated that ``[b]ased on the recent existence of 
this order, there is sufficient evidence to determine that there is a 
history of dumping of the subject merchandise and a history of material 
injury as a result thereof''). Due to the fact that the dumping finding 
on carbon steel plate from Japan is twenty-one years old and was 
revoked thirteen years ago, we no longer consider there to be a 
relevant history of dumping with respect to subject merchandise. Since 
we determined above that importers did not have knowledge of dumping of 
subject merchandise, we find that section 733(e)(1)(A) of the Act has 
not been satisfied.
    Because we find that there is no relevant history of dumping and 
that there is no evidence on the record of this investigation to 
support a finding that the ``all others'' companies had knowledge of 
dumping, the Department finds that critical circumstances do not exist 
for the ``all others'' category in this investigation.
Comment 3: Level of Trade
    Respondent argues that the Department ignored record evidence and 
violated its established policies and regulations by grouping all three 
home market CTL plate sales distribution channels into a single level 
of trade (``LOT''). According to respondent, its home market is divided 
into three channels of distribution: (1) Sales to unaffiliated trading 
companies, (2) sales to unaffiliated end-users, and (3) sales to the 
affiliated trading company Kawasho Corporation (``Kawasho''). 
Respondent notes that in its Preliminary Determination, the Department 
incorrectly grouped the three channels into one home market LOT. 
According to respondent, there are actually two distinct LOTs in the 
home market: LOT 1, which consists of direct sales by KSC to 
unaffiliated trading companies and end-users (channels 1 and 2); and 
LOT 2, which consists of KSC's sales through its affiliated trading 
company Kawasho (channel 3). The respondent argues that each LOT 
involves significantly different selling activities which occur at 
different stages in the marketing process.
    With regard to selling activities, respondent states that in LOT 1, 
KSC deals directly with its unaffiliated trading company and end-user 
customers, provides technical advice, negotiates price, manages credit 
risks, processes orders, enters relevant information into the 
specification control system, and makes freight and

[[Page 73221]]

delivery and/or warehousing arrangements when necessary. In LOT 2, 
respondent states that Kawasho markets the product to its customers, 
forecasts demand, negotiates price, manages credit risks, processes 
orders, enters relevant information into the specification control 
system, makes freight and delivery arrangements, and maintains direct 
customer contact. Furthermore, respondent states that although KSC 
performed some common manufacturer-related selling activities (e.g., 
confirming the order once production was agreed, warranty and rebate 
administration, and product brochures) for all three channels of 
distribution, this minor overlap of services does not control the 
analysis.
    In regard to marketing stages, respondent states that KSC's sales 
directly to unaffiliated trading companies and end-users (channels 1 
and 2) involve one stage in the marketing process (KSC to customer), 
while KSC's sales through Kawasho involve a different stage in the 
marketing process (KSC to affiliated trading company to customer). 
Respondent argues that the reported sales by Kawasho, just like sales 
by any other trading company, are a full level of distribution removed 
from KSC's direct sales. Respondent concludes that sales through LOT 1 
(channels 1 and 2) are at a less-advanced stage in the marketing 
process than are Kawasho's sales.
    Respondent also argues that, in the recent Hot-Rolled Steel from 
Japan investigation, the Department found that KSC had two home market 
LOTs: LOT 1, which contained sales directly to unaffiliated trading 
companies and end-users; and LOT 2, which contained downstream sales 
through Kawasho.
    Petitioners argue that the Department should reject KSC's claim 
that there exist two LOTs in the home market. Petitioners argue that 
the record indicates that KSC performed virtually the same selling 
functions for its direct channel one sales to unaffiliated trading 
companies as it does for its channel three sales to unaffiliated end-
users through Kawasho. According to petitioners, KSC's supplemental 
Section A response identified eleven selling functions performed in its 
channel three home market sales. Petitioners contend that the record 
indicates that KSC provided eight of these eleven selling functions for 
its channel one sales. Moreover, petitioners argue that of the eight 
selling functions KSC provides for its channel one sales, it provides 
seven of these functions in channel three sales. Petitioners state that 
the only difference is sales processing, which is performed by KSC in 
channel one sales and Kawasho in channel three sales. Petitioners also 
argue that KSC provides nearly the same level of services for both 
channels. According to petitioners, KSC provides exactly the same level 
of service for technical advice, warranty, warehousing, rebate 
administration, advertising, and freight and delivery services in its 
channel one and channel three sales. Petitioners state that the only 
difference between the two channels is in performing the specification 
control system, where KSC's role is ``high'' for channel one sales, but 
``low'' for channel three sales.
    Lastly, petitioners argue that when comparing the sales activities 
performed for a company's direct sales with those performed for its 
downstream sales, the Department looks to the combined sales activities 
of the company and its affiliated reseller. Therefore, petitioners 
contend that channel three sales should be placed in a separate LOT 
from channel one and two sales only if the sales services performed for 
those channel three customers were substantially different, regardless 
of whether it was KSC or Kawasho which performed the selling functions. 
Petitioners conclude that there is no evidence on the record of this 
proceeding to make such a determination.

Department's Position

    We do not agree that KSC's home market sales are made at two 
distinct LOTs. In accordance with section 773(a)(1)(B)(i) of the Act, 
to the extent practicable, we determine normal value (``NV'') based on 
sales in the comparison market at the same LOT as the export price 
(``EP'') or CEP transaction. The NV LOT is that of the starting price 
sales in the comparison market or, when NV is based on constructed 
value (``CV''), that of the sales from which we derive selling, 
general, and administrative (``SG&A'') expenses and profit.
    To determine the LOT of a company's sales (whether in the home 
market or in the U.S. market), we examine stages in the marketing 
process and selling functions along the chain of distribution between 
the producer and the unaffiliated customer. See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997) 
(``CTL Plate from South Africa'').
    KSC sells subject merchandise in the home market through three 
channels of distribution: channel one involves sales by KSC to 
unaffiliated trading companies, channel two involves sales by KSC to 
unaffiliated end-users, and channel three involves sales by KSC's 
affiliate, Kawasho, to unaffiliated customers. For the preliminary 
determination, the Department found that KSC's sales to these three 
types of home market customers involved essentially the same level of 
selling functions. After a careful analysis of the information on the 
record, we continue to find that there was not a substantial difference 
in the selling functions performed by KSC in making sales to its 
unaffiliated customers and the combined selling functions performed by 
KSC and its affiliated company, Kawasho, for Kawasho's sales to 
unaffiliated customers. Therefore, we continue to find that there is 
one LOT in the home market.
    In its discussion of LOT, KSC collapsed home market channels of 
distribution one and two into a single channel of distribution because 
its sales to unaffiliated customers, regardless of whether the customer 
is a trading company or end-user, involve the same selling functions. 
According to KSC, there are substantial differences in the selling 
activities performed by KSC for sales through this combined channel of 
distribution, hereafter referred to as channel 1, and its sales through 
channel 3 (i.e., sales by Kawasho to unaffiliated customers).
    In the preliminary determination, we conducted our analysis of LOT 
by comparing the selling functions performed for sales in the home 
market to the first unaffiliated customer. According to Exhibit 7 of 
its June 23, 1999, supplemental Section A response, KSC indicated that 
it provides the following selling activities for its sales to 
unaffiliated customers: technical advice, warranty services, 
advertising, freight and delivery arrangements, warehousing, inputting 
specification control system, sales processing, and rebate 
administration. KSC also indicated that the selling functions performed 
by itself and Kawasho, for Kawasho's sales to unaffiliated customers, 
consist of the following activities: technical advice, warranty 
services, advertising, marketing, freight and delivery arrangements, 
warehousing, inputting specification control system, sales processing, 
rebate administration, and demand forecasting. Comparing the selling 
functions performed for the first unaffiliated customer in channel one 
and channel three sales indicates that marketing services and demand 
forecasting are the only two selling activities performed for channel 
three sales that are not performed in channel one sales. Thus,

[[Page 73222]]

eight of the ten 2 selling functions are performed in both 
channel one and channel three sales. Therefore, the information on the 
record indicates that the types of selling functions and activities 
performed by KSC on sales to unaffiliated customers as compared to the 
types of selling functions and activities performed by both KSC and 
Kawasho on sales to unaffiliated customers are not substantially 
different. KSC's argument that there are differences between these 
selling functions is not supported by the evidence on the record.
---------------------------------------------------------------------------

    \2\  KSC actually reports eleven home market selling functions. 
Since KSC reported that neither it nor its affiliates provide 
inventory maintenance for sales through any channel of distribution, 
in either the home or U.S. markets, we have disregarded this selling 
function from our analysis.
---------------------------------------------------------------------------

    With regard to the degree of selling functions provided in each 
channel, we note that seven of the eight types of selling functions 
provided in both channels are provided in the same amount for both 
channel one and channel three sales. See KSC's June 23, 1999, 
supplemental Section A response at Exhibit 7. The only selling function 
provided for in different amounts is freight and delivery, which the 
respondent provides in a ``medium'' amount for channel one sales and a 
``high'' amount for channel three sales. Lastly, we note that of the 
two selling functions provided for channel three sales, but not in 
channel one sales (i.e., market services and demand forecasting), are 
provided for in a ``high'' level. Therefore, although there is a 
difference in the amount of market services, demand forecasting, and 
freight and delivery activities between channel one and channel there 
sales, we do not consider these differences to be substantial enough as 
to warrant finding two different LOTs on this basis alone.
    The substantial similarity in types of selling activities and level 
at which they are performed belies KSC's argument that channel one and 
channel three sales are made at different marketing stages. Because the 
customer types are the same, the types of selling functions are 
substantially the same, and there are not substantial differences in 
the level of functions performed, we continue to find that there is one 
LOT in the home market.
Comment 4: CEP Offset
    Respondent argues that it is statutorily entitled to a CEP offset 
because its home market sales include more sales functions and selling 
activities (i.e., are at a more advanced LOT) than do its U.S. market 
CEP sales. Respondent states that a CEP offset adjustment is required 
where NV is established at a more advanced LOT than the LOT of CEP 
sales and a LOT adjustment cannot be determined. Respondent notes that 
in the recent investigation of Hot-Rolled Steel from Japan, the 
Department granted KSC a CEP offset, concluding that the CEP LOT was 
different and less advanced than KSC's two home market LOTs. See Hot-
Rolled Steel from Japan, 64 FR at 24340-24341. Since the same factual 
scenario exists in the instant case, respondent argues that the 
Department should be consistent in its administration of the 
antidumping statute and find the same result here.
    Respondent argues that the Department's characterization of selling 
services performed by Kawasaki and/or Kawasho for CEP sales is 
inconsistent with KSC's responses and fails to account for role in 
marketing and selling for CEP sales provided by KI. According to 
respondent, KSC performs some common manufacturer-related services in 
support of all steel sales in the home market and U.S. market, 
including technical advice, warranty service, and product brochures. 
According to respondent, these are the bulk of the services offered by 
KSC and Kawasho to CEP customers. Respondent contends that neither KSC 
nor Kawasho forecasts demand, provides marketing services, warehouses, 
processes the final sale, or maintains regular customer contact in CEP 
sales. Instead, respondent states that KI is responsible for these 
services in CEP sales.
    Respondent claims that the record demonstrates that KSC's home 
market LOTs were at a more advanced stage of distribution and more 
remote from the factory than the CEP LOT. Respondent explains that the 
CEP LOT involves three marketing stages: (1) KSC sells to Kawasho, (2) 
Kawasho sells to KI, and (3) KI sells to unaffiliated end-users and 
distributors. Since KI is the company that sells the merchandise to the 
first unaffiliated customer in the United States, respondent states 
that the bulk of sales functions for CEP sales are performed by KI. 
Since the record does not provide an appropriate basis for quantifying 
a LOT adjustment on comparison market sales, respondent argues that the 
Department should grant KSC a CEP offset.
    Petitioners argue that respondent has failed to establish that its 
home market sales are made at a more remote LOT involving more 
substantial selling functions than its CEP sales. According to 
petitioners, the combined selling functions of KSC/Kawasho for the CEP 
sales are very similar to the selling functions performed for KSC's 
home market sales. Petitioners contend that there are only three 
selling functions, out of eleven functions, which are performed on the 
home market sales at a higher level than they are performed for the CEP 
sales. Specifically, petitioners note that KSC performs the following 
services for its home market sales but not for CEP sales: warehousing, 
sales processing, and rebate administration. According to petitioners, 
these services are not substantial enough to warrant a finding that the 
home market sales were made at a more remote LOT. Moreover, petitioners 
note that KSC/Kawasho performed a slightly higher level of services for 
its CEP sales than for its home market sales in another three 
categories (i.e., marketing service, freight and delivery arrangements, 
and demand forecasting). Petitioners conclude that because the home 
market sales did not involve substantially greater selling functions 
than the CEP sales, and were therefore not at a more remove LOT, these 
sales should be compared without a CEP offset.

Department's Position

    We agree with respondent that it should be granted a CEP offset. 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.
    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. 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 CTL Plate from 
South Africa, 62 FR at 61731.

[[Page 73223]]

    In the preliminary determination, the Department denied a CEP 
offset adjustment to the NV of KSC's sales that were compared to CEP 
sales in the United States, because the Department preliminarily found 
that all of KSC's home market sales were made at the same LOT as the 
LOT of KSC's CEP sales in the United States. Upon further analysis of 
the record evidence, we now determine that the selling functions 
performed by KSC and Kawasho in Japan in connection with the CEP sales 
through KI, the U.S. affiliate, are less and different than the selling 
functions provided by KSC/Kawasho for home market sales to unaffiliated 
customers. Specifically, we note that in combination, KSC and Kawasho 
provide a high level of marketing services, warehousing, sales 
processing, rebate administration, and demand forecasting in the home 
market to unaffiliated customers, but did not provide the same level of 
services on its CEP sales to the United States. Instead, these services 
are provided by KI in the United States (i.e., marketing services, 
sales processing, demand forecasting) or are not offered for CEP sales 
(i.e., warehousing and rebates). See KSC's April 27, 1999, Section A 
response at Exhibit 13 and June 23, 1999, supplemental Section A 
response at Exhibit 7. We note that the Department verified this 
information and is therefore satisfied that it has substantial, 
reliable information to reach a decision as to the levels of trade at 
which KSC and its affiliates sell subject merchandise. See Sales 
Verification Report. Thus, after further examination of the record, the 
Department is now granting a CEP offset because the facts on the record 
indicate that KSC's CEP LOT is different from and less advanced than 
KSC's home market levels of trade and that the data on the record do 
not permit the Department to make a LOT adjustment based on the effect 
of the LOT difference on price comparability.
Comment 5: Downstream Sales to Affiliated Parties
    Petitioners note that KSC sold through Kawasho subject merchandise 
to 26 affiliated resellers/processors in the home market and that such 
sales constitute a significant portion of the home market sales. 
Petitioners observe that although the Department's questionnaire 
required KSC to report the downstream sales, KSC replied that it is 
unable to report such sales for two reasons: (1) The affiliates are 
unable to ``systematically distinguish'' CTL plate produced by KSC from 
that produced by other manufacturers, and (2) even if they could 
identify such merchandise, the affiliates' sales records do not contain 
the information concerning product characteristics that is necessary to 
construct the CONNUM. Petitioners note that KSC claimed that it can 
only determine the appropriate CONNUM based on the complete order 
information stored at KSC, which is obtained through KSC's order 
confirmation number.
    Petitioners argue that during verification of one such affiliated 
processor, the Department learned that KSC's claim that the affiliated 
resellers/processors could not ``systematically distinguish'' subject 
merchandise produced by KSC from that produced by other manufacturers 
is incorrect. According to petitioners, verification showed that the 
processor examined could use its internal, computerized documentation 
to electronically link sales invoices to KSC plate identification 
numbers. Thus, petitioners conclude that the affiliate can identify KSC 
as the manufacturer for each sale using the KSC plate identification 
number.
    Moreover, petitioners argue that KSC's claim that the affiliated 
resellers/processors cannot report complete product characteristics 
necessary for constructing the CONNUM does not excuse KSC's failure to 
report the downstream sales. Petitioners note that verification 
revealed that the processor examined maintains records of four of the 
product characteristics used in constructing the CONNUM. According to 
petitioners, even if only partial information on the product 
characteristics was available from the affiliated resellers/processors, 
KSC should have complied with the Department's questionnaire by 
reporting its downstream sales to the fullest extent possible. In fact, 
petitioners claim that it is the Department's practice to use a 
modified matching program where there are missing product 
characteristics in the reported database. See Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon 
Steel Plate from Canada, 61 FR 13815, 13830-31 (March 28, 1996) 
(``Plate from Canada'').
    Furthermore, petitioners argue that since the processor examined at 
verification electronically records the KSC plate identification 
number, KSC could have reported all product characteristics used in 
creating the CONNUM by linking these plate identification numbers to 
its own computerized production or sales records. Even if linking its 
own sales records to plate identification numbers supplied by the 
affiliates was not possible, petitioners argue that KSC could still 
have reported the complete product characteristics of the merchandise 
sold to the affiliated resellers/processors by examining the general 
characteristics of the merchandise sold to each affiliate. 
Specifically, petitioners note that the record indicates that KSC sold 
merchandise with a limited number of product characteristics to the 
processor examined at verification. Petitioners argue that since this 
processor maintains records with respect to four of the product 
characteristics, KSC could have deduced the remaining product 
characteristics from its general knowledge of the characteristics of 
the merchandise it sold to the processor. Therefore, petitioners 
conclude that KSC could have combined the characteristics supplied by 
the affiliate with the characteristics it can determine through its 
knowledge of the merchandise sold to the affiliate, and constructed the 
full CONNUM. Petitioners contend that all of the product 
characteristics necessary to comprise the CONNUM were available to KSC 
and could have been reported.
    Moreover, petitioners claim that, contrary to KSC's statements, the 
verification report indicates that the processor examined can match 
sales invoices to the KSC order confirmation, which would allow KSC to 
construct a CONNUM for sales through this company. According to 
petitioners, the verification report indicates that the processor 
examined can electronically link its sales invoices to its production 
instruction slips, which contain the plate identification numbers. 
Petitioners contend that this allows the processor to identify all 
sales of plate produced by KSC. The petitioners assert that while the 
processor cannot electronically link its sales invoices to the KSC 
order confirmation number, it can manually match the plate 
identification number to the mill certificate, which lists the KSC 
order confirmation number. Therefore, petitioners argue, the processor 
can, for purposes of reporting downstream sales, match its sales 
invoices to the KSC order confirmation number through a combined 
electronic and manual process. Petitioners argue that the manual 
portion of this process is not unreasonably burdensome given the ample 
time allowed for response.
    Petitioners conclude that since KSC incorrectly claimed that the 
affiliated resellers/processors could not identify KSC as the 
manufacturer of its purchased plate and did not report downstream sales 
to the best of its ability, the Department should apply adverse facts 
available for the sales to the affiliated resellers/processors that do 
not pass the arm's-length test.

[[Page 73224]]

Petitioners argue that section 776(a) of the Act directs the Department 
to use ``facts otherwise available'' because KSC failed to (1) provide 
``necessary information'' for the calculation of NV, (2) KSC and its 
affiliated resellers ``withheld information that has been requested'', 
and (3) KSC ``failed to cooperate to the best of its ability to 
comply'' with the Department's request for data on sales of foreign 
like product made through affiliated resellers.
    As adverse facts available, petitioners recommend that the 
Department treat the sales to the affiliates that fail the arm's-length 
test as having passed this test. Then, petitioners continue, for the 
U.S. sales that match to those upstream sales which had previously 
failed the arm's length test, the Department should apply as adverse 
facts available the highest calculated margin for any KSC CONNUM.
    Respondent argues that the Department correctly used its upstream 
sales to the affiliated resellers/processors in place of downstream 
sales by those affiliated companies in the preliminary determination. 
Respondent states that it cannot report downstream sales to the first 
unaffiliated customer through the affiliated resellers/processors in 
the home market because the sales records of those affiliates do not 
permit systematic linkage of final sales data with relevant product 
characteristics. Without such product characteristics, respondent 
states that it cannot create a reportable CONNUM for these sales. To 
construct the CONNUM, respondent states that it must link its order 
confirmation number to the sales data of the affiliated resellers/
processors. According to respondent, allowing KSC to report upstream 
sales in place of unreportable downstream sales is consistent with the 
Department's regulations and practice. As evidence, respondent cites to 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden, 
and the United Kingdom, 63 FR 33320, 33341 (June 18, 1998), where the 
Department allowed a respondent to report upstream sales to affiliates 
where they were unable to report downstream sales because of the 
affiliates' unsophisticated computer systems.
    Respondent states that petitioners make three arguments in their 
effort to demonstrate that KSC should have reported the downstream 
sales from the affiliated resellers/processors. First, respondent 
states that petitioners maintain that it was possible for all 
affiliated resellers/processors to report downstream sales because one 
such affiliate could manually identify the manufacturer and link its 
downstream sales to the required product characteristics. The 
respondent observes that the verification exhibits indicate that while 
the production instruction slips record the plate identification 
number, it is hand-written and not entered into the system like other 
information in the documents. Therefore, respondent argues that the 
affiliated processor would have to manually examine its production 
instruction slips to identify KSC plate identification numbers and then 
manually link the production instruction slips to the mill certificate 
to obtain the KSC order confirmation number. According to respondent, 
this task is not possible for the processor examined, nor the other 25 
affiliated resellers/processors, given the volume of sales involved and 
the tight time frame of this investigation.
    Respondent states that the second argument made by petitioners is 
that KSC could have reported all product characteristics by having the 
affiliated resellers/processors report the limited product 
characteristics available in their computerized records and then having 
KSC provide the remaining characteristics either through linking its 
upstream sales to the affiliate (via the plate identification number) 
or through its general knowledge of the merchandise sold to the 
affiliate. According to respondent, this argument is incorrect and 
largely grounded on petitioners' hindsight analysis of the upstream 
sales to the examined processor on the present home market sales file. 
Respondent states that the processor examined can derive a limited 
database of sales containing plate specification, width, thickness, 
quantity, and price from its computerized sales/production records. 
However, respondent argues that the processor could only manually 
identify the original manufacturer of the CTL plate from each 
(physical) production instruction slip because the manufacturer-
specific product identification number is physically hand-written, 
rather than electronically entered, on the instruction slip. Thus, 
respondent concludes that the affiliated processor is not able to 
systematically identify the plate manufacturer in the sales and 
production records.
    Furthermore, respondent notes that petitioners suggest that KSC has 
the capacity to report the other product characteristics such as paint, 
patterns in relief, and descaling because products with these 
characteristics were not sold to the examined processor during the POI. 
According to respondent, this argument can only be made in hindsight 
and with the benefit of an already completed home market sales file. 
Respondent states that this analysis does not use the examined 
processor's, or the other affiliated resellers/processors', 
computerized sales records and begs the question of how such 
information would be reported without linking to KSC's order 
confirmation number. Respondent argues that petitioners are suggesting 
a multi-step process whereby KSC and Kawasho provide data that may or 
may not be relevant that the affiliate must match by a process of 
manual examination, all within the time frame of responding to the 
Department's questionnaires. Respondent states that given the practical 
limitations of reporting these sales within the statutory and 
regulatory schedules in place and the affiliates' inability to identify 
sales of subject merchandise except through a process of sale-by-sale 
manual examination, the Department must conclude that the only method 
for the affiliated resellers/processors to report accurate CONNUM 
information is to link back to Kawasaki's order confirmation number.
    Lastly, respondent states that petitioners put forward a third 
argument that KSC should report incomplete CONNUMs based upon the 
limited product characteristic information recorded by the affiliated 
resellers/processors. Respondent states that petitioners would then 
have the Department plug the missing product characteristic data and 
use the downstream sales information for purposes of its margin 
calculation. According to respondent, the case cited by petitioners, 
Plate from Canada, as evidence supporting their argument is factually 
dissimilar to the instant investigation. Respondent argues that in 
Plate from Canada, a respondent was unable to identify product 
characteristics for ``a very small portion'' of secondary and excess 
prime merchandise U.S. market sales, and that the Department accepted 
the reporting of only ``relevant'' physical characteristics in ``this 
limited circumstance.'' In the instant investigation, respondent 
concludes, the downstream sales by affiliated resellers/processors (1) 
equal much more than ``a very small portion'' of home market sales and 
(2) would be missing product characteristics that cannot be dismissed 
as irrelevant.

Department's Position

    We disagree with petitioners that KSC is able to report the 
downstream sales by the 26 affiliated resellers/processors. KSC is 
directly affiliated with one

[[Page 73225]]

reseller/processor and is affiliated through Kawasho to an additional 
25 resellers/processors. Jointly, the downsteam sales from these 
resellers/processors constitute a substantial portion of home market 
sales. In its questionnaire responses, KSC stated that these affiliates 
cannot report their downstream sales for two basic reasons: (1) the 
affiliates are unable to ``systematically distinguish'' CTL plate 
produced by KSC from that produced by other manufacturers, and (2) even 
if they could identify such merchandise, the affiliates' sales records 
do not contain the information concerning product characteristics that 
is necessary to construct the CONNUM.
    During verification, we selected one of Kawasho's affiliated 
resellers/processors, referred to hereafter as Company X, to examine 
the feasibility of this affiliate reporting its downstream sales, in 
order to determine the veracity of KSC's representations. Having 
verified Company X's records and internal tracking systems, we agree 
with KSC that Company X is unable to use its computerized records to 
systematically link its sales invoices to (1) plate produced by KSC and 
(2) the KSC order confirmation number. During verification we found 
that Company X can electronically link its sales invoices to the 
relevant production instruction slip. This slip contains the hand-
written, rather than electronically entered, plate identification 
number. Thus, Company X would have to manually search its production 
instruction slips in order to identify KSC-produced CTL plate. 
Furthermore, Company X stated during verification that, in its normal 
course of business, it manually matches the plate identification number 
found on the production instruction slip to the appropriate mill 
certificate, which is mailed to its customer. The mill certificate 
contains the order confirmation number that is used by KSC to construct 
the CONNUM. While petitioners are correct in that Company X must have 
an organized system in which it does this match, that does not diminish 
the fact that this process is manual and that Company X would have to 
search its records again for purposes of reporting downstream sales. 
Therefore, although Company X can combine a computerized and manual 
search process to identify plate produced by KSC and link it back to 
the KSC order confirmation number, given the number of sales Company X 
had during the POI, we find that this process is unreasonably 
burdensome given the time constraints of an antidumping investigation.
    We also disagree with petitioners argument that KSC can link its 
own sales records to the plate identification numbers supplied by the 
affiliated resellers/processors, or use its knowledge of the types of 
products sold to those affiliates, in order to supply any missing 
product characteristics. This argument assumes that the affiliated 
resellers/processors can systematically identify both the manufacturer 
and the plate identification numbers. In the case of Company X, we 
found that it can electronically link its sales invoices to the 
relevant production instruction slip. Although the production 
instruction slip does contain the plate identification number, it is 
hand-written, rather than electronically entered onto the slip. Thus, 
Company X can identify KSC produced merchandise and the KSC plate 
identification number only through a manual search of its production 
instruction slips. Given the volume of sales at Company X, and the time 
constraints of an investigation, this manual search would be 
unreasonably burdensome.
    Lastly, we disagree with petitioners argument that KSC should have 
reported whatever limited information concerning the product 
characteristics that comprise the CONNUM that is available through its, 
or the affiliates records. Each product characteristic is a vital and 
necessary component of the CONNUM used by the Department in order to 
match United States and home market sales. Reporting a partial CONNUM 
is of no use in our margin calculations in this investigation. As 
respondent points out, the case cited by petitioners as evidence 
supporting its position is factually distinguishable from the instant 
case. In Plate from Canada, the Department used a modified model match 
methodology for sales in the United States and home market where the 
respondent was unable to report the full product characteristics. In 
that case, the Department concluded that it was appropriate to conduct 
a modified model match on sales of excess prime merchandise for which 
there were limited product characteristics reported because (1) the 
Department verified that respondent reported all physical 
characteristics it could, (2) sales of such merchandise represented a 
very small portion of its home market and United States sales, and (3) 
the missing physical characteristics were not important to the 
respondent's customers or relevant to the way the product was sold. In 
the instant case, were the Department to require the affiliated 
resellers/processors to report the characteristics available to them, 
there is no evidence on the record to determine that the missing 
characteristics (e.g., whether painted, heat treated, patterned, or 
descaled) are not important to the respondent's customers or irrelevant 
to the way the product is sold.
Comment 6: Currency for the Gross Unit Price of EP Sales
    Petitioners observe that respondent negotiates its EP sales prices 
with unaffiliated trading companies in U.S. dollars and then converts 
this dollar price into a yen price using the exchange rate in effect a 
certain number of days after shipment. Petitioners note that respondent 
originally reported the gross unit price for EP sales in yen, but in 
response to a Departmental request, converted the yen prices into 
dollars (using the exchange rate in effect a certain number of days 
after shipment). Furthermore, petitioners note that respondent tracks 
the yen price, rather than the dollar price, as the price actually paid 
to KSC by the trading company and is the price KSC tracks through its 
internal books and records. In addition, petitioners note that the 
dollar price that appears on KSC's invoice contains the trading 
company's markup, and is therefore the price to the trading company's 
customer. However, petitioners observe that the yen price listed on the 
invoice is the price to KSC's customer, the unaffiliated trading 
company.
    Considering the above facts, petitioners argue that the Department 
should use the gross unit price in yen for the purposes of its final 
determination. Petitioners cite the recent final determination in the 
Hot-Rolled Steel from Japan investigation, where the Department faced 
an identical set of facts for one of the respondents and found the yen 
price to be the appropriate gross unit price for use in the margin 
calculation. See Hot-Rolled Steel from Japan, 64 FR at 24345. In order 
to be consistent with Hot-Rolled from Japan, and because the yen price 
is the price that appears on the invoice, is paid to KSC, and is 
tracked through KSC's internal records, petitioners recommend that the 
Department use the yen price in its final determination.
    Respondent urges the Department to use the dollar price of its EP 
sales to unaffiliated Japanese trading companies because EP sales are 
first negotiated and set in dollars. According to respondent, the final 
invoice contains the dollar price (which includes the trading company 
markup), the yen price (which does not include the trading company

[[Page 73226]]

market), and the exchange rate used by KSC to convert from dollars to 
yen. Respondent explains that in its supplemental responses, it used 
the exchange rate listed on the invoice to convert the yen price into a 
dollar denominated invoice price, exclusive of the trading company 
markup. Respondent concludes that the Department should use the dollar 
price of EP sales because dollar-based prices represent the original 
negotiated price and currency. According to respondent, this is 
consistent with the Department's supplemental request that the sales be 
reported in the currency in which they are set.
    In its rebuttal brief, respondent notes that the petitioners argue 
that the Department should be consistent with its recent final 
determination in Hot-Rolled Steel from Japan, where it used the yen-
based prices for EP sales. Respondent notes, however, that petitioners 
have initiated legal action in the Court of International Trade 
(``CIT''), challenging the Department's use of the same yen-based EP 
prices in the Hot-Rolled Steel from Japan investigation that they are 
asking the Department to use in the instant case. In the instant case, 
respondent contends that the Department can simply and most accurately 
obtain dollar-denominated prices for use in its margin calculation by 
using KSC's reported dollar-based prices.

Department's Position

    We disagree with the respondent that the Department should use the 
reported gross unit U.S. price in dollars and not the price in yen. 
Record evidence indicates that KSC negotiates the purchase price in 
dollars with unaffiliated Japanese trading companies and converts this 
price into yen using an exchange rate in effect a certain number of 
days after shipment. KSC records on the invoice the negotiated dollar 
value (which includes the trading company markup), the yen value (which 
does not include the trading company markup), and the exchange rate 
used by KSC to convert the dollar price to yen. The record also 
indicates that KSC is paid by its customers in yen and tracks the yen 
price from the invoice through its internal books and records.
    The Department verified that the dollar price negotiated between 
KSC and the Japanese trading companies is converted to yen using the 
exchange rate in effect a certain number of days after shipment, which 
is listed on the invoice. This conversion is made pursuant to the terms 
of sale agreed upon by the parties at the time of the order 
confirmation. We also verified that KSC receives payment in yen and 
tracks the yen value from the invoice through its accounting records as 
part of its normal course of business. Therefore, since KSC (1) records 
the yen price negotiated between KSC and the unaffiliated trading 
company on the invoice, (2) receives payment in yen, and (3) the yen 
value is tracked through KSC's accounting records, we find that the 
price in yen is the appropriate price to use in our calculations.
    In reporting U.S. sales to the Department, KSC originally reported 
the yen invoice price as the gross unit price for EP sales. Pursuant to 
the Department's request, KSC revised its U.S. sales listing and 
converted its yen invoice price into the dollar price originally 
negotiated between KSC and the unaffiliated trading companies using the 
exchange rate in effect a certain number of days after invoice/
shipment. Since the yen invoice price is the proper starting point for 
calculating KSC's U.S. price, we converted the dollar price back into 
yen by applying KSC's reported exchange rate to the dollar price. 
However, in the normal course of our margin calculations, EP sales are 
converted from the foreign currency into dollars at an exchange rate 
determined by the Department to be in effect on the date of sale. 
Therefore, for purposes of our calculations, we converted the yen 
invoice price into dollars using the Department's exchange rate in 
effect on the date of sale.
Comment 7: Kawasho's Date of Payment
    Petitioners note that of the five home market Kawasho sales 
verified by the Department, only two sales did not show a discrepancy 
between the reported payment date and the actual payment date. 
Petitioners observe that in response to these discrepancies, the 
Department examined an additional twenty home market Kawasho sales. Of 
these twenty, petitioners note that only seven sales reported the 
correct payment dates. Moreover, petitioners note that, of the 25 total 
sales examined, only nine contained the correct payment dates. 
Therefore, petitioners argue that the frequency of errors (i.e., 64 
percent) render the data unreliable. Since the ``necessary information 
is not available on the record'' with respect to Kawasho's payment 
dates, petitioners argue that the Department should reject Kawasho's 
reported payment dates in favor of facts available. In addition, 
petitioners contend that since Kawasho is in possession of the sales 
documents that show the correct date of payment, it should have 
reviewed those documents to ensure that it had correctly reported such 
information in its original sales response. Petitioners state that 
because respondent did not act ``to the best of its ability'' in 
providing accurate payment dates, the Department should employ an 
adverse inference. As adverse facts available, petitioners recommend 
that the Department base the credit expenses for all of Kawasho's home 
market sales on the shortest payment period for all such sales.
    Respondent states that the payment date discrepancies found during 
verification applied to a group of national defense specification 
products sold to defense contractors in the home market. Respondent 
notes that, as demonstrated at verification, Kawasho relied on the 
payment term stated in the invoice to determine the actual payment 
dates included in the file because actual payment date information was 
not accessible by computer and could not be manually obtained given the 
time constraints of this investigation for Kawasho's large volume of 
home market sales. Respondent notes that the discrepancies resulted 
from instances of both early and late payment. Thus, respondent notes 
that for these sales, Kawasho both over- and under-estimated imputed 
credit expenses. Furthermore, respondent notes that besides the sales 
of national defense products, there is no evidence on the verified 
record that Kawasho's payment dates and credit expenses were 
systematically underreported. Respondent argues that since Kawasho 
correctly identified the payment date according to the invoice payment 
terms in the other verified sales, should the Department accept 
petitioners' arguments, the application of facts available should be 
limited to sales of national defense specification products and not 
categorically applied to all Kawasho sales as petitioners have 
suggested.
    Respondent also argues that Kawasho could not systematically gather 
and report the actual payment dates of its customers because the 
payment date information contained in ``Collection Summary by 
Customer'' and ``Accounts Receivable by Customer'' is inaccessible by 
computer. According to respondent, Kawasho used the terms of payment to 
compute the payment date since Kawasho's customers almost always pay 
according to the payment terms.
    Respondent states that of the 25 Kawasho home market sales 
examined, 22 were of sales of unique national defense specification 
products. Respondents argue that none of these products are sold in the 
United States and represent a very small percent of the total number of 
home market

[[Page 73227]]

transactions. Respondent concludes that the payment date discrepancies 
should be viewed in the context that they primarily involved sales of 
national defense products. Therefore, respondent concludes that any 
conclusions drawn by the Department with regard to payment dates must 
be limited to Kawasho's sales of those products.

Department's Position

    We agree with petitioners in part. During verification, we examined 
five home market sales made through Kawasho. Actual payment was 
received earlier than the reported date of payment for two of the 
sales, while actual payment was received later than the reported date 
of payment for a third sale. In response to these inaccuracies, the 
Department examined the reported date of payment for the twenty home 
market sales with the highest reported credit expenses. Of these twenty 
sales, the correct date of payment was reported for seven sales, the 
date of payment was incorrectly reported for seven sales (actual 
payment was received earlier than the reported date), and six sales had 
no reported date of payment. Since we identified the actual date of 
payment for the six sales with no reported date of payment, we have 
recalculated the credit expenses for these sales using the actual date 
of payment and, therefore, did not include these sales in our analysis 
of the sales with incorrectly reported dates of payment.
    Of the remaining 19 sales reviewed, we found that 10 had incorrect 
dates of payment. We also found that four of the five customers 
associated with the total 25 sales we examined had at least one 
inaccurate date of payment. Although these 25 sales do not constitute a 
random sample of the home market sales made by Kawasho, we did not 
place any customer or time constraints on their selection. Therefore, 
we find that the results from these sales have value in representing 
Kawasho's home market sales. Thus, we find that the date of payment 
discrepancies found for four out of five customers are indicative of 
problems regarding date of payment for Kawasho's other customers.
    Concerning respondent's argument that the inaccuracies found in the 
date of payment are limited to national defense specification products, 
we note that there were date of payment inconsistencies found during 
verification for sales of non-defense specification products. In fact, 
respondent states in its rebuttal brief that ``(t)he Department found 
two additional inconsistencies in Kawasho's reporting of payment dates 
for non-national defense specification products causing credit to be 
under-reported for one sale and over-reported for the other.'' See 
KSC's November 10, 1999, submission at 22. Thus, two of the ten sales 
which had an inaccurate date of payment were found to involve non-
defensive specification products. These two sales indicate that the 
problem regarding the reported date of payment is not limited to 
national defense products. Moreover, even if we were to agree with 
respondent and limit our conclusions concerning this issue to only 
national defense specification products, we note that there is no 
evidence on the record identifying all of the specifications used for 
national defense products. As we are unable to rely upon the reported 
dates of payment to calculate home market credit expenses, we determine 
it is appropriate to resort to the use of facts available, pursuant to 
section 776(a)(2)(D) of the Act.
    We disagree with petitioners that we should make an adverse 
inference in applying facts available. We verified that Kawasho is 
unable to systematically determine the actual date of payment. As 
verification Exhibit K-17 indicates, Kawasho officials had to use their 
accounts receivable by customer journal, collection summary by customer 
journal, outstanding collection details journal, and collection 
schedule journal in order to demonstrate the actual date of payment for 
the sales in question. Therefore, we find that Kawasho's use of the 
terms of payment to compute the payment date reflected a reasonable 
attempt to comply with the Department's request for information given 
the very large volume of Kawasho's home market sales and the time 
constraints of this investigation.
    Therefore, in order to correct for these inaccuracies, we are using 
the information obtained during verification to adjust the date of 
payment reported for Kawasho's home market sales. Specifically, we 
calculated the difference between the actual date of payment and the 
reported date of payment for the 10 sales with incorrectly reported 
dates. We then summed the number of days difference for each of the 10 
sales, including the sales for which the actual date of payment was 
earlier than the reported date of payment and the one sale for which 
the actual payment was after the reported date of payment. We divided 
this sum by the total number of sales examined with reported dates of 
payment (i.e., 19 sales) to calculate the average number of days 
difference between actual and reported payment dates. Lastly, we 
subtracted this number from the reported date of payment for all of 
Kawasho's home market sales.
Comment 8: The Arm's-Length Test
    Respondent argues that the Department does not have the authority 
to exclude sales made to affiliates for consumption from its margin 
analysis, and by doing so, has violated the antidumping statute and the 
WTO Antidumping Agreement. Respondent states that an examination of 
relevant statutory language of the Act reveals that Congress gave the 
Department no authority to disregard home market sales to affiliates 
for consumption. According to respondent, this lack of authority is 
apparent by noting that Congress gave the Department the authority to 
exclude home market sales to affiliates in only two provisions of the 
Act: (1) Section 773(a)(5) provides for the exclusion of sales to 
affiliates who sell to downstream purchasers in favor of using the 
downstream sales, and (2) section 773(b)(1) allows for the exclusion of 
certain sales from the calculation of NV that are made at less than the 
cost of production. In addition, respondent argues that two other 
statutory provisions, which define export price and constructed export 
price, also make explicit reference to affiliation. Respondent 
concludes from these passages that Congress selectively and 
deliberately accorded the Department authority to exclude sales to 
affiliated parties and knew how to provide guidance and instruction to 
the Department in this area. Respondent argues that there is no 
evidence in the statute that Congress intended the Department's 
authority to extend to home market sales to affiliates for consumption. 
By applying an arm's-length test to exclude sales for consumption, the 
Department has acted beyond Congresses' delegation of authority in this 
matter.
    Further, respondent claims that the exclusion of non-matching sales 
violates the requirement that a ``fair comparison'' be made between 
sales in the home and U.S. markets. Respondent observes that the WTO 
Antidumping Agreement provides that a fair comparison of NV and export 
price requires the Department to include all sales absent a 
demonstration that their inclusion would affect price comparability. 
Respondent argues that the Department's arm's-length test, as applied, 
rejects any demonstrations or evidentiary standard in favor of an 
inflexible rule, which violates the due process protections of the 
Fifth Amendment to the Constitution, since the Department's rule makes 
the exclusion without providing any

[[Page 73228]]

opportunity to present rebuttable evidence. However, respondent notes 
that the record of the case demonstrates that not all sales to 
affiliates are made at less than arm's-length because the Department's 
preliminary analysis indicates that many such sales passed the arm's-
length test. Thus, respondent states that the Department's presumption 
about these sales is not universally or necessarily true. Respondent 
concludes that absent positive evidence showing sales to affiliated 
parties are not at arm's-length, the Department has no basis for not 
including them in its calculation of NV.
    Lastly, respondent argues that the Department should apply its 
arm's-length test on a customer-specific basis, and not on a point-of-
delivery basis as it did in the preliminary determination.
    Petitioner argues that the Department has the authority to exclude 
from NV certain sales made to affiliated parties for consumption 
because they were made on a non-arm's-length basis and were outside the 
ordinary course of trade. Petitioners claim that the fact that 
merchandise was sold to an affiliated party for consumption rather than 
resale does not indicate that the sale was made at arm's-length or was 
otherwise made in the ordinary course of trade. Furthermore, 
petitioners note that the CIT has on numerous occasions upheld the 
Department's application of the arm's length test to home market sales. 
Petitioners state that the CIT ruling in Usinor Sacilor v. United 
States, 872 F. Suppl 1000, 1004 (CIT 1994), which upheld the 
application of the arm's-length test to home market sales to affiliated 
companies, is dispositive of this issue.
    Petitioners argue that section 773(a)(1)(B) of the Act gives the 
Department the discretion to use the prices of sale made through 
affiliated parties in determining NV and permits, but does not require, 
the Department to base NV on sales to affiliated parties in the home 
market. Moreover, petitioners contend that the SAA directs the 
Department to ignore sales to affiliated parties which cannot be 
demonstrated to be at arm's-length prices for purposes of calculating 
NV. See SAA at 827. Petitioners argue that section 773(a)(5) of the 
Act, contrary to respondent's interpretation, is not a grant of 
authority to exclude sales of affiliated resellers, but is instead a 
grant of discretion to include such sales. Petitioners contend that 
there is nothing in the statute which in any way limits the 
Department's authority to exclude sales to affiliates based on the fact 
that they consume the merchandise. Moreover, petitioners claim that 
sales to affiliates for consumption can be just as unrepresentative of 
normal selling practices as sales to affiliates for resale. Petitioners 
assert that the critical question is whether there is any evidence to 
lead the Department to conclude that such sales were made on an arm's-
length basis.
    Petitioners also argue that it has been the Department's 
longstanding practice to exclude sales to affiliated parties ``where no 
related customer ratio could be constructed because identical 
merchandise was not sold to unrelated customers, (and the Department) 
is unable to determine that these sales were made at arm's-length.'' 
See Certain Cold-Rolled Carbon-Steel Flat Products from Argentina, 58 
FR 37062, 37077 (July 9, 1993). Moreover, section 351.403(c) of the 
Department's regulations permits the use of sales to affiliates ``only 
if satisfied that the price (to the affiliated party) is comparable.'' 
Petitioners argue that it is the burden of the respondent to prove that 
sales to related parties are at arm's-length prices and that the Court 
of Appeals on the Federal Circuit (``CAFC''), in NEC Home Electronics., 
Ltd. v. United States, 54 F.3d 736 (Fed. Cir. 1995) at 744, rejected 
the argument that it is somehow the Department's burden to prove that a 
sale to an affiliated party was not made at arm's length. Therefore, 
petitioner concludes that absent any evidence that KSC's sales made to 
affiliated parties for which there are no sales of identical 
merchandise to unaffiliated parities were made at arm's-length, the 
Department should continue to determine that such sales were not made 
on an arm's-length basis and are outside the ordinary course of trade.

Department's Position:

    We disagree with KSC. Section 773(a)(5) of the Act provides that 
sales of the foreign like product between affiliated parties ``may be 
used in determining NV.'' Thus, the statute provides the Department 
with discretion in determining whether to include sales between 
affiliates in the calculation of NV. The SAA, however, limits this 
discretion and provides that ``Commerce will continue to ignore sales 
to affiliated parties which cannot be demonstrated to be at arm's-
length prices for purposes of calculating normal value.'' SAA at 827, 
citing section 773(a)(5) of the Act. Moreover, the Department's 
regulations state that NV may be calculated based upon sales between 
affiliated parties ``only if * * * the price is comparable to the price 
at which the exporter or producer sold the foreign like product to a 
person who is not affiliated with the seller.'' See 19 CFR 351.403(c).
    As the CAFC has noted, ` ``[c]ommon sense, of course, would 
indicate that strictly by themselves sales to a related purchaser would 
be a questionable guarantee of a fair home market price.' '' NEC Home 
Electronics v. United States, 54 F.3d 736, 739 (Fed. Cir. 1995), 
quoting Connors Steel Co. v. United States, 527 F. Supp. 350, 354 (CIT 
1981). ``There is a perceived danger that a foreign manufacturer will 
sell to related companies in the home market at artificially low 
prices, thereby camouflaging true [normal value] and achieving a lower 
antidumping duty margin.'' NEC Home Electronics, 54 F.3d at 739, citing 
Ansaldo Componenti, S.p.A. v. United States, 628 F. Supp. 198, 204 (CIT 
1986) (``Related party home-market sales tend to be lower in price 
because related companies generally decrease prices to each other to 
the advantage of the principal entity'').
    In order to determine whether sales to affiliated parties should be 
included in the NV calculation, the Department has consistently 
required respondents to demonstrate that the merchandise is sold to 
affiliates at arm's-length prices. In this regard, the Department 
treats prices to an affiliated purchaser as ``arm's-length'' prices if 
the prices to affiliated purchasers are on average at least 99.5 
percent of the prices charged to unaffiliated purchasers. See Preamble 
to Antidumping Regulations, 62 FR 27295, 27355 (May 19, 1997); Notice 
of Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 
FR 61249, 61257 (November 10, 1999) (``Cold-Rolled Steel from 
Brazil''). As petitioners correctly note, this test has been affirmed 
by the courts. See Usinor Sacilor v. United States, 872 F. Supp. 1000, 
1094 (CIT 1994). We note that this decision does not distinguish 
between merchandise sold for consumption or resale in affirming the 
application of the arm's-length test. Therefore, we reject KSC's 
argument that it is unlawful to exclude home market sales to affiliated 
purchasers where those sales are for consumption.
    The Department's exclusion of KSC's home-market sales to affiliated 
parties that have not been demonstrated to be at arm's-length prices is 
consistent with the above-described law and practice. Contrary to KSC's 
arguments, these exclusions do not reflect the application of an 
irrebutable presumption. Instead, the arm's-length test provides 
respondents with an opportunity to demonstrate that including home 
market sales to affiliates in the calculation of NV is appropriate

[[Page 73229]]

pursuant to section 773(a)(5) of the Act. Stated differently, a 
respondent which demonstrates that prices are at arm's length rebuts 
the presumption that ``a foreign manufacturer will sell to related 
companies in the home market at artificially low prices * * *.'' See 
NEC Home Electronics, 54 F.3d at 739. Moreover, the CAFC in NEC Home 
Electronics affirmed the CIT's decision which confirmed that the burden 
is on respondents to come forward with evidence demonstrating that 
sales to affiliated parties are at arm's-length prices. Id. at 744. See 
also Cold-Rolled Steel from Brazil, 64 FR 61257 (excluding sales to 
affiliates where no price ratio could be constructed because identical 
merchandise was not sold to unaffiliated customers).
    In this case, KSC did not offer any evidence that such sales were 
made at arm's-length prices. While KSC is correct to note that the 
arm's-length test could not be applied to sales for which no identical 
merchandise is sold to unaffiliated parties, KSC did not offer any 
alternative means of demonstrating the arm's-length nature of such 
sales. Indeed, in the preamble to the Department's antidumping 
regulations, the Department indicated that, in addition to the arm's-
length test, ``there may be other methods available'' of determining 
the arm's-length nature of sales to affiliated parties. However, 
without any evidence to the contrary, we must continue to conclude 
that, pursuant to section 773(a)(5) of the Act and 19 CFR 351.403(b), 
respondent has not demonstrated that sales to its affiliates were at 
arm's-length prices. Consequently we have continued to exclude such 
sales for purposes of calculating NV. As the Department has excluded 
such sales in accordance with the antidumping statute, there has been 
no violation of KSC's due process rights, as argued by KSC.
    We also disagree with KSC's argument that the exclusion of such 
sales from NV violates the United States' obligations under the WTO 
Antidumping Agreement. As the CAFC in Federal Mogul Corp. v. United 
States, 63 F.3d 1572 (Fed. Cir. 1995), explained: ``GATT agreements are 
international obligations, and absent express Congressional language to 
the contrary, statutes should not be interpreted to conflict with 
international obligations.'' Federal Mogul, 63 F.3d at 1581. Indeed, 
the United States Supreme Court elaborated on this canon of 
construction. ``It has also been observed that an act of Congress ought 
never to be construed to violate the law of nations, if any other 
possible construction remains * * *.'' Murray v. Schooner Charming 
Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804). See also Fundicao Tupy S.A. 
v. United States, 652 F. Supp. 1538, 1543 (CIT 1987) (``An 
interpretation and application of the statute which would conflict with 
the GATT Codes would clearly violate the intent of Congress.''); 
Footwear Dist. and Retailers of America v. United States, 852 F. Supp. 
1078, 1092-93 (CIT 1994), quoting Restatement (Third) of the Foreign 
Relations Law of the United States, at 115, comment a, p. 64 (1987) 
(``Congress does not intend to repudiate an international obligation of 
the United States * * * Therefore, when an act of Congress and an 
international agreement * * * relate to the same subject, the courts, 
regulatory agencies, and the Executive Branch will endeavor to construe 
them so as to give effect to both.''). Rather, the statutory provisions 
discussed above implement the United States' obligations under the WTO 
Antidumping Agreement, including Article 2.4 cited by KSC, with respect 
to the calculation of NV. Because KSC's home-market sales to affiliated 
parties not demonstrated to be made at arm's-length prices affect price 
comparability, the statutory and regulatory scheme, as applied in this 
case, are consistent with Article 2.4 of the Antidumping Agreement. 
Thus, the United States has fully implemented its WTO obligations with 
respect to the calculation of NV in cases where home market sales to 
affiliated parties are not demonstrated to be made at arm's-length 
prices.
    With respect to KSC's argument that the Department should apply its 
arm's-length test on a customer-specific basis rather than a point of 
delivery basis, we agree with respondent and have changed our 
methodology accordingly.
Comment 9: Kawasho's Warehouse Expenses
    Petitioners argue that the Department should reject Kawasho's 
reported warehousing expenses because Kawasho's allocation methodology 
causes inaccuracies and distortions in these reported costs. 
Petitioners note that KSC, in its Section B response, stated that 
Kawasho incurs warehousing expenses for certain home market sales, but 
not for all such sales. Petitioners observe that KSC stated that 
Kawasho is unable to report transaction specific warehousing costs 
because it records its warehousing costs by product category, rather 
than on a sale-by-sale basis. Petitioners note that Kawasho allocated 
its warehousing costs to all home market sales by dividing its total 
warehousing expenses incurred for the CTL plate product category by the 
total tonnage sold of the CTL plate product category. Furthermore, 
petitioners state that, according to KSC, Kawasho's CTL plate product 
category includes both subject and non-subject merchandise. Because 
KSC's allocation methodology allocates warehousing costs to certain 
sales that were not warehoused, and the methodology includes non-
subject merchandise, petitioners conclude that KSC's reported 
warehousing expenses are inaccurate and distortive.
    Respondent argues that Kawasho's warehousing expenses were reported 
on the most specific basis possible, given how Kawasho maintains its 
internal books and records. According to respondent, Kawasho's 
warehousing expenses are maintained by product-category, rather than on 
a transaction-specific basis. Respondent argues that Kawasho has a CTL 
plate category that includes subject and non-subject merchandise. Since 
Kawasho keeps its records in this manner during the normal course of 
business, respondent argues that it is not feasible to report Kawasho's 
warehouse expenses on a more specific basis. Moreover, respondent 
argues that section 773(a)(6)(B)(ii) of the Act allows the Department 
to reduce NV for movement expenses, such as warehousing expenses, and 
that section 351.401(g)(4) of the regulations directs the Department 
not to reject an allocation methodology solely because the method 
includes expenses incurred with respect to sales of non-subject 
merchandise. Respondent argues that during verification, the Department 
examined the warehouse records kept by Kawasho and verified the 
accuracy of the numbers used for the calculation. Specifically, the 
Department examined ``the quantity and warehousing expenses listed for 
both subject merchandise product codes and non-subject merchandise 
product codes * * * (and) found no discrepancies.'' See Sales 
Verification Report at 44. Thus, respondent argues, there is no 
evidence on the record that the out-of-scope merchandise incurred a 
disproportionate amount of warehousing expense. Respondent concludes 
that the Department should reject petitioners' argument and continue to 
use Kawasho's warehousing expenses in the final determination.
    Department's Position: While we prefer that respondents report 
warehousing charges on a transaction-specific basis, we are satisfied 
that, based on its records, Kawasho is unable to report its warehouse 
expenses on that basis. Moreover, we note that section 351.401(g) of 
the Department's regulations provides that we may consider allocated 
expenses and price adjustments when transaction-specific

[[Page 73230]]

reporting is not feasible, provided we are satisfied that the 
allocation method used does not cause inaccuracies or distortions.
    As we stated in Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Romania, Singapore, Sweden, and the United Kingdom, 63 FR 33320, 33340 
(June 18, 1998), ``while we do initially examine transaction-specific 
information on home-market sales, ultimately we calculate a weighted-
average home-market price for comparison to U.S. sales. The averaging 
of net home-market prices has the effect of averaging the components 
used to calculate those net prices, including inland freight. 
Therefore, the use of an allocated expense would not necessarily result 
in a distortion of home-market prices.'' Although that case was 
referring to a respondent's inability to report transaction-specific 
inland freight expenses, we find that the same principle applies here.
    KSC explained that Kawasho maintains its warehouse expenses on a 
product-category specific basis in its books and records, and that this 
product category contains both subject and non-subject CTL plate. See 
KSC's June 23, 1999, supplemental Section B response at 25. During 
verification, we examined Kawasho's warehouse expenses and found no 
evidence that such expenses could be reported on a transaction-specific 
basis. Since Kawasho does not maintain transaction-specific warehousing 
expenses, we agree with KSC that allocating Kawasho's total warehouse 
expense for subject and non-subject CTL over its total tonnage sold of 
subject and non-subject CTL plate is the most accurate per-unit expense 
that Kawasho can derive from its books and does not unreasonably 
distort the reported expense. Moreover, we are satisfied that KSC 
reported Kawasho's expenses in the most specific manner feasible and 
allocated these expenses reasonably for the calculation of NV. 
Accordingly, we have continued to use Kawasho's warehousing expenses in 
our final determination.
Comment 10: KI's Short-Term Interest Rate
    Petitioners argue that the Department's verification report 
indicates that KSC did not fully report KI's short-term interest 
expenses. According to petitioners, the Department learned at 
verification that KI did not report the interest expenses it incurred 
with respect to (1) export sales of log and lumber products to Japan 
and (2) certain overnight loans that occurred during the POI. Because 
KI has not provided the interest rates paid on the above borrowings, 
petitioners contend that the information necessary to calculate KI's 
overall interest rate is not available on the record. Therefore, 
petitioners urge the Department, pursuant to Policy Bulletin 98.2, to 
recalculate KI's U.S. dollar short-term interest rate based on the 
average prime rate in effect during the POI.
    Respondent asserts that the Department should reject petitioners' 
argument and use KI's reported short-term interest rate. Respondent 
argues that credit costs are imputed based on the time value of money, 
and not based on the cost of debt actually incurred. Respondent states 
that in this respect, it is important that a respondent provide an 
interest rate for imputing credit expense that reflects commercial 
reality. With respect to the overnight loans, respondent states that it 
excluded this rate as one that KI would not reasonably incur to finance 
receivables. Moreover, respondent claims that because the average 
interest rate for these loans is lower than that for the reported 
short-term borrowings, it would have actually benefitted by 
incorporating this interest rate into its reported interest rate, as it 
would have raised its CEP price by reducing U.S. credit expenses.
    Respondent also states that it properly excluded the item 
``Interest on Export Bills Discounted (Log & Lumber)'' from its 
calculation of a short-term interest expenses because the ``interest 
expense'' incurred does not even relate to actual interest paid for 
short-term borrowings to finance working capital requirements, but 
rather consists of discounted payments received by KI from the bank 
upon presentation of letters of credit. Moreover, respondent states 
that this interest expense is also incurred only by KI's Seattle office 
on sales of lumber products to Japan, and does not involve the sale of 
subject merchandise to the United States. Since KI's reported interest 
rate accurately represents a commercially reasonable payment for 
financing receivables, and this information was thoroughly verified by 
the Department, respondent argues that the short-term borrowing 
expenses for CEP sales as reported in KSC's Section C response are 
correct.
    Department's Position: We agree with petitioners that KSC should 
have reported its interest expenses associated with overnight loans, 
but we disagree with petitioners that KSC should have reported the 
expenses associated with KI's export sales of log and lumber products 
to Japan. The Department calculates a respondent's imputed credit 
expenses using ``a short-term interest rate tied to the currency in 
which the sales are denominated. We will base this interest rate on the 
respondent's weighted-average short-term borrowing experience in the 
currency of the transaction.'' See Policy Bulletin 98.2 at 6, dated 
February 23, 1998. During verification, we learned that KI incurred 
interest expenses on overnight loans that were used for various 
corporate purposes during the POI. Since these overnight loans are 
short-term in nature, denominated in the currency of the sales 
transaction, and are obtained in the normal course of business, we 
determine that these loans should have been included in KSC calculation 
of KI's weighted-average short-term interest rate. During verification, 
we noted the total amount of interest paid by KI for these overnight 
loans obtained during the POI. Since the average balance of these loans 
for the POI is not on the record, we are unable to calculate the 
weighted-average POI interest rate for these loans. In light of our 
verification findings, we have added the POI interest expense paid on 
overnight loans to the reported interest paid on KI's short-term 
borrowings. Using this larger amount for interest paid during the POI, 
we have recalculated KI's short-term interest rate.
    With respect to the expense KI incurred on its export sales of log 
and lumber products to Japan, we agree with KSC that it was proper not 
to report these expenses. During verification, we learned that KI's 
Seattle office exports log and lumber products to Japan on a letter of 
credit basis, with an extended term of payment for its Japanese 
customers. The expenses in question are the discounted payment KI 
receives from the bank upon presentation of the letter of credit. We 
have not included these interest expenses in our calculation of the 
short-term interest rate used to calculate imputed credit expense on 
U.S. sales because these expenses are not the best measure of the 
opportunity cost associated with sales of subject merchandise.
Comment 11: KSC's Usance Expenses
    Respondent argues that the Department should not include the 
usance-related expenses incurred by KSC on the importation of certain 
raw materials. Respondent states that it purchases certain raw 
materials from trading companies who obtain usance loans from Japanese 
banks for the ``upstream'' purchase of the raw material from the actual 
supplier (e.g., mining company). Respondent alleges that these usance 
loans between the bank and trading company are

[[Page 73231]]

denominated in U.S. dollars. Respondent argues that although KSC 
negotiates directly with the bank and sets the terms of the usance loan 
obtained by the trading company, it is the trading company, not KSC, 
that receives the funds from the loan to purchase raw materials and 
eventually pays back the bank. Respondent states that in return for 
offering KSC an extended period of payment (i.e., two to three months) 
on such raw material purchases, KSC pays the trading companies a yen-
denominated interest amount. Respondent notes that KSC pays the 
purchase price, plus the interest amount, to the trading companies, not 
the banks.
    According to respondent, there are two reasons for not including 
the expenses KSC pays to the trading companies in KSC's yen-based 
short-term borrowings. First, respondent states that including these 
expenses would violate the Department's practice by calculating a 
respondent's credit expenses based on another entity's borrowings. 
According to respondent, the Department has ``a clear preference for 
the actual borrowing experience of the respondent'' in calculating 
credit expenses and will incorporate usance interest only for loans 
actually obtained by a respondent. See Certain Steel Concrete 
Reinforcing Bars from Turkey, 64 FR 49150, 49155 (September 10, 1999). 
In the instant case, respondent states that it does not obtain usance 
loans, rather it purchases raw materials in yen from trading companies 
that obtain usance loans.
    Respondent argues that where usance loans are obtained by another 
entity that is not the respondent, the Department will not include a 
usance-related interest in the short-term interest calculation. Citing 
to Color Television Receivers from the Republic of Korea, 55 FR 26225 
(June 27, 1990), respondent states that the Department considered 
petitioners' contention that usance loan interest should be 
incorporated into respondent's short-term borrowing rate, even though 
respondent did not actually obtain usance loan funds. According to KSC, 
the respondent in that case argued that the usance loan funds were not 
provided to it directly, but rather to its suppliers. KSC states that 
the Department agreed with respondent and excluded the usance interest 
rate from the short-term interest calculation, concluding that ``these 
particular usance loans, which are not available for general financing 
purposes such as accounts receivable, were properly excluded from the 
calculation of the company's average short-term borrowing rate.'' Id. 
In addition, respondent argues that the Department should not impute a 
dollar-based interest rate to KSC's short-term borrowings that are 
exclusively in yen. Respondent argues that in LMI-La Metalli 
Industriale S.p.A. v. United States, 912 F.2d 455, 460-61 (Fed Cir. 
1990), the CAFC noted that different interest rates correspond to 
different currencies and rejected the government's position that it 
could impute a lira-denominated interest rate to dollar-denominated 
U.S. sales. It concluded that the cost of credit ``must be imputed on 
the basis of usual and reasonable commercial behavior'' using short-
term interest rates that conform with ``commercial reality.'' Id.
    According to respondent, any short-term interest rate calculated 
for KSC must be a yen-based rate because its CTL plate transactions are 
yen-denominated transactions. Citing to Policy Bulletin 98.2 at 2, 
respondent contends that the Department's practice for calculating 
imputed credit expenses is to use a ``short-term interest rate on the 
respondent's weighted-average short-term borrowing experience in the 
currency of the transaction.'' Respondent contends that it pays the 
trading company for the raw material inputs in yen, receives payment 
from its customers in yen, and records all sales in its books in yen. 
Accordingly, respondent argues that the Department must denominate its 
short-term borrowing rate and credit expenses in yen.
    Petitioners did not comment on this issue.
    Department's Position: We have not included KSC's usance-related 
expenses in our calculation of KSC's imputed credit expenses. These 
expenses relate to the terms of sale between KSC and its suppliers and 
thus are similar to other fees and interest paid to suppliers, such as 
late-payment charges. Therefore, we did not include these expenses in 
determining KSC's short-term borrowing rate.
Comment 12: Deduction of Profit from CEP Sales
    Respondent argues that the Department's methodology of deducting 
CEP profit from the U.S. price for CEP sales violates the ``Fair 
Comparison'' requirement established in Article 2.4 of the Antidumping 
Agreement, which provides that the Department may make adjustments to 
the extent needed to account for differences that affect price 
comparability (e.g., profit). Respondent argues that profit is properly 
adjusted for in U.S. sales involving further manufacturing, where a 
portion of the U.S. profit is based on the additional value resulting 
from the physical change in the good. Unlike further manufacturing, 
respondent states that normal CEP goods and their home market 
counterparts are physically identical. Moreover, respondent contends 
that in the instant proceeding, there is no record evidence to support 
a finding that CTL plate sold in CEP transactions through KI and CTL 
plate sold by KSC in the home market are not physically comparable. 
Therefore, respondent contends that deducting CEP profit in KSC's CEP 
sales violates the fair comparison provision of Article 2.4.
    Respondent argues that the inherent unfairness in the Department's 
methodology is even more evident when the CEP offset is added to the 
analysis. In situations where the Department grants an offsetting 
deduction of indirect selling expenses from normal value, this offset 
rebalances the comparison by deducting from normal value the same kind 
and character of indirect selling expenses deducted in determining CEP, 
but only in part. Respondent argues that profit assigned to the CEP 
selling expenses was deducted along with those expenses, but no profit 
was allocated to the selling expenses deducted from normal value, even 
though the express purpose of the offset is to put the transactions on 
an equal footing (i.e., produce a fair comparison). Respondent 
concludes that in order to achieve a fair comparison, the Department 
must adjust its methodology and eliminate the automatic deduction of 
profit when determining CEP.
    Petitioners argue that the Department should reject KSC's argument 
because Section 772(d)(3) of the Act states that ``the price used to 
establish constructed export price shall also be adjusted by * * * the 
profit allocated to the expenses described in paragraphs (1) and (2).'' 
Petitioners contend that the Department, in the preliminary 
determination, calculated CEP with an adjustment for profit in 
accordance with this statutory provision. In fact, argue petitioners, 
this statutory provision does not leave the deduction of profit to the 
Department's discretion. Rather, petitioners contend that this 
provision explicitly requires the Department to make this adjustment. 
Lastly, petitioners argue that the deduction of profit from CEP does 
not result in an unfair comparison in violation of the Antidumping 
Agreement, as claimed by Kawasaki. In support of their position, 
petitioners cite to the SAA, which states ``(the) deduction of profit 
is a new adjustment in U.S. law, consistent with the language of the 
Agreement, which

[[Page 73232]]

reflects that constructed export price is now calculated to be, as 
closely as possible, a price corresponding to an export price between 
non-affiliated exporters and importers.''
    Department's Position: We disagree with respondent. Consistent with 
section 772(d)(3) of the Act, we properly reduced CEP by the profit 
allocated to certain enumerated expenses (e.g., commissions, credit, 
and warranties). Indeed, KSC does not argue that the Department's 
deduction of CEP profit is inconsistent with U.S. law, but instead 
argues that the deduction is inconsistent with U.S. obligations under 
Article 2.4 of the Antidumping Agreement. We do not agree. Section 
772(d)(3) of the Act implements Article 2.4 of the Antidumping 
Agreement, which requires that a ``fair comparison'' shall be made 
between export price and normal value. However, Article 2.3 states that 
where there is no export price because of an affiliation between 
exporter and importer, a constructed export price may be calculated. 
When such constructed export price is used, Article 2.4 makes clear 
that there shall be ``allowances for costs * * * and for profits 
accruing * * *'' Article 2.4 (emphasis added). Thus, when promulgating 
section 772(d)(3) which provides for the deduction of CEP profit, the 
administration made clear that ``[t]he deduction of profit is a new 
adjustment in U.S. law, consistent with the language of the Agreement, 
which reflects that constructed export price is now calculated to be, 
as closely as possible, a price corresponding to an export price 
between non-affiliated exporters and importers.'' SAA at 823. In this 
regard, section 772(d)(3) clearly implements U.S. obligations under 
Article 2 of the Antidumping Agreement and the Department's deduction 
of CEP profit in this case is consistent with these obligations.
Comment 13: U.S. Sales Disclosed at Verification
    The respondent argues that the Department should add the additional 
U.S. sale disclosed during verification to KSC's U.S. sales database. 
According to respondent, the Department's verification team asked KSC 
whether Kawasho made any direct sales to the United States other than 
through its U.S. affiliate, KI. In response to this question, 
respondent contends that it investigated whether Kawasho had any direct 
sales during the POI to the United States and uncovered a single, 
unreported, direct sale to the United States by Kawasho. Respondent 
argues that although this sale consisted of three separate shipments, 
the Department should consider it to be a single sale. Respondent 
states that upon finding this inadvertent omission, it immediately, and 
voluntarily, brought this sale to the verification team's attention. In 
order to demonstrate to the Department that there were no further 
unreported sales, respondent states that it provided the verification 
team with substantial documentation proving that the U.S. sales file is 
now complete. In addition, respondent notes that it provided a full 
sales trace package for this omitted sale, complete with all necessary 
documentation to support the sales adjustments KSC claims are 
associated with this sale. Respondent notes that the quantity and value 
and sales adjustment documentation were accepted by the verification 
team. Respondent argues that this lone sale is a clerical error and 
represents an insignificant portion of KSC's U.S. sales transactions, 
and if it is included in the U.S. sales database, will have a de 
minimis effect on the final dumping calculations.
    Respondent argues that failure to include this sale in the 
Department's analysis, or to use the data relevant to this sale, would 
result in an inaccurate margin, in derogation of the statutes's 
purpose. Respondent cites to several cases where the Department added 
unreported U.S. sales to the respondent's U.S. sales database after the 
omission of such sales was discovered at verification in order to 
determine current margins as accurately as possible. Respondent states 
that in Stainless Steel Sheet and Strip in Coils from the Republic of 
Korea, 64 FR 30664, 30680 (June 8, 1999), the Department added one 
unreported U.S. sale to the file after its omission was discovered at 
verification. Moreover, respondent notes that in the Korean case, the 
Department accepted the corrective information concerning this sale 
nearly one month after the end of verification. Respondent states that 
in Notice of Final Determination of Sales at Less Than Fair Value: 
Fresh Atlantic Salmon From Chile, 63 FR 31411, (June 9, 1998) 
(``Atlantic Salmon from Chile''), the Department added twenty-seven 
U.S. sales to the U.S. sales database that were disclosed during 
verification. See Atlantic Salmon from Chile, Analysis Memorandum for 
Pesquera Mares Australes, dated June 1, 1998, at 2. Respondent also 
cites to Notice of Final Determination of Sales at Less Than Fair 
Value: Stainless Steel Sheet and Strip in Coils From Mexico, 64 FR 
30790, 30812 (June 8, 1999) (``Stainless Steel Sheet and Strip from 
Mexico''), where the Department added sales to the sales database and 
stated that ``we have no reason to believe that respondent 
intentionally withheld from the Department the sales at issue here * * 
*'' we are satisfied that the record is now complete and accurate 
regarding this company's sales of subject merchandise during the 
POI.''' Id. (citation omitted). According to respondent, there is 
nothing on the record of the instant investigation that would support a 
conclusion that KSC deliberately withheld the one sale at issue from 
the Department. In addition, respondent cites to Usinor Sacilor, Sollac 
v. United States, 872 F. Supp. 1000, 1008 (CIT 1994), and argues that 
the Department's decision to reject information is governed by the 
interests of accuracy and fairness, and whether accepting new 
information will impose a burden on the Department. According to 
respondent, the most accurate margin requires that all sales be 
included in the sales databases, determining an accurate margin is the 
most fair calculation for all parties concerned, and adding the 
disclosed sale imposes only a minimal, if any, burden on the 
Department.
    Respondent also argues that KSC's disclosed sale constitutes a 
minor correction to information already on the record and therefore 
should be accepted by the Department. As supporting evidence, 
respondent cites to Notice of Final Determination of Sales at Less Than 
Fair Value; Stainless Steel Sheet and Strip in Coils From the United 
Kingdom, 64 FR 30688, 30701 (June 8, 1999), where the Department 
utilized its minor errors practice to accept a small quantity of 
additional home market sales mistakenly omitted by the respondent, that 
were disclosed at verification. In Stainless Steel Sheet and Strip from 
Mexico, 64 FR at 30812, respondent claims that the Department added 
unreported U.S. sales disclosed at verification to the sales database 
when the volume of sales at issue was a very small percentage of 
respondent's U.S. sales. Lastly, respondent cites to Notice of Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Round 
Wire from Taiwan, 64 FR 17336, 17340 (April 9, 1999), where the 
Department accepted missing sales disclosed at verification because the 
sales were minor in scope and immaterial.
    Respondent notes that the Department may also disregard the 
unreported sale altogether. According to respondent, in one case, the 
Department ignored unreported sales and declined to use facts available 
against the relevant sales in Bicycles from the People's Republic of 
China, 61 FR 19026, 19041 (April 30, 1996), and Random Access Memory 
Semiconductors of One Megabit and Above from Taiwan (``DRAMs''), 64 FR

[[Page 73233]]

56308, 56318 (October 19, 1999). Moreover, respondent notes that in 
DRAMs, the Department stated that ``the amount of sales in question is 
relatively insignificant, both in terms of quantity and value of 
respondent's home market sales. Thus, we are disregarding those sales 
discovered during verification because the volume of unreported sales 
is relatively insignificant.'' Id. In the instant case, respondent 
argues that the single unreported sale accounts for a very small 
percentage of KSC's total U.S. sales and will have a de minimis impact 
on the final margin.
    Lastly, respondent argues that if the Department considers the sale 
to be an error in KSC's data that was disclosed after the deadline for 
submission of factual information, the sale should still qualify for 
inclusion on the U.S. sales database under the Department's policy for 
correcting clerical errors. The respondent argues that the Department, 
in Certain Fresh Cut Flowers From Colombia; Final Results of 
Antidumping Duty Administrative Reviews, 61 FR 42833, 42834 (August 19, 
1996) (``Certain Fresh Cut Flowers from Colombia''), identified six 
criteria under which it will accept corrections of clerical errors. 
Respondent claims that the sale in question meets each of these 
criteria: (1) the sale was not disclosed because it was a simple 
oversight, (2) the corrective documentation provided to the Department 
at verification is reliable and was verified to be accurate, (3) KSC 
disclosed the unreported sale at the earliest reasonable opportunity 
and provided corrective information, (4) the clerical error allegation 
and corrective documentation were submitted well before KSC's due date 
for the administrative case brief, (5) adding the disclosed sale to the 
U.S. sales database does not require a substantial revision of the 
response, and (6) KSC's corrective documentation does not contradict 
information previously determined to be accurate at verification. For 
these reasons, respondent argues that its disclosed sale qualifies as a 
clerical error for which the Department should accept a correction.
    Some of the petitioners argue that they have at numerous times over 
the course of this investigation raised the issue of whether Kawasho 
made any sales to the United States other than sales through its U.S. 
affiliate, KI. In each instance, petitioners state that KSC claimed in 
strong terms that all U.S. sales have been reported and that Kawasho 
only made sales to the United States through KI. Petitioners argue that 
the three sales disclosed at verification clearly contradict all of 
KSC's past denials and renders respondent's data unreliable. Moreover, 
petitioners claim that the strong manner in which respondent previously 
denied the existence of EP sales through Kawasho, indicates that KSC's 
omission cannot fairly be characterized as ``inadvertent.'' To the 
contrary, petitioners argue that the record strongly suggests that KSC 
acted aggressively to prevent the discovery of relevant information. 
Petitioners observe that KSC claims that the unreported sales are an 
isolated incident. According to petitioners, the issue is not merely of 
a small number of missing sales, rather it is about the discovery of an 
unreported kind of sale, through an unreported channel of distribution. 
Since the purpose of verification is to test a representative sample of 
sales for discrepancies, petitioners claim that the discovery of these 
unreported U.S. sales should be understood as representative of a 
substantial percentage of incorrectly classified and unreported sales. 
For this reason, petitioners contend that the Department cannot trust 
the veracity of KSC's sales data. Based on the discovery of unreported 
U.S. sales and KSC's false claim that it is unable to report downstream 
home market sales, petitioners conclude that KSC has failed the 
verification tests of its home market and U.S. sales. These petitioners 
argue that KSC has not acted to the best of its ability to provide 
information requested by the Department and urges the Department to 
apply total adverse facts available.
    Other petitioners argue that the Department should apply partial 
facts available to the quantity of KSC's three unreported U.S. sales. 
Although the respondent characterizes its disclosure as voluntary, 
petitioners note that KSC did not report the unreported sales until 
several days into the verification, rather than at the outset. 
Furthermore, petitioners argue that the Department has applied adverse 
facts available under circumstances where the respondent has been more 
forthcoming than KSC in this case, such as where the respondent 
identified unreported U.S. sales on the first day of verification. See 
Final Determination of Sales at Less Than Fair Value; Stainless Steel 
Sheet and Strip in Coils From Germany, 64 FR 30710, 30732 (June 8, 
1999) (``Stainless Steel Strip from Germany''), Petitioners also argue 
that even though KSC claims its omission was inadvertent, KSC had 
numerous opportunities during the course of the investigation to review 
its U.S. sales database and check it for completeness. Petitioners 
state that KSC clearly failed to do so.
    Petitioners also note that although KSC provided a package of 
supporting documentation concerning its three unreported sales on the 
record at verification, there is no requirement that the Department use 
such information for its final determination. Petitioners cite to 
Stainless Steel Strip in Coils from Germany, where the respondent KTN 
similarly ``provided a complete packet containing copies of each of the 
relevant invoices'' at verification concerning previously unreported 
U.S. sales and claimed that the ``corrected information was verified.'' 
Petitioners contend that the Department emphasized the respondent's 
responsibility to provide complete U.S. sales information and rejected 
the corrective information in favor of partial adverse facts available. 
Petitioners contend that the facts are similar with regard to KSC and 
that given the untimeliness of the proffered information, the 
Department should consider only the quantity of the missing sales and 
reject all of the other transaction-specific data.
    Petitioners also argue that the cases cited by respondent do not 
support its position. In Atlantic Salmon from Chile, 63 FR 31411, the 
Department's analysis memorandum shows that the unreported sales were 
made in the United States by an unaffiliated reseller. Petitioner 
concludes that, unlike the instant case, application of facts available 
in Atlantic Salmon from Chile would not have been proper since the 
respondent had no control over the conduct of the reseller. Moreover, 
petitioners state that in Stainless Steel Sheet and Strip in Coils from 
Mexico, 64 FR at 30812, unlike the instant case, the respondent 
reported the missing sales to the Department on the first day of 
verification. According to petitioners, reporting missing sales on the 
first day of verification is important because it is the only way to 
ensure that the disclosure is in fact voluntary. Petitioners argue that 
since KSC disclosed this sale while the Department was testing for 
completeness, KSC now finds itself in the position of attempting to 
dispel the inference that disclosure occurred because the Department's 
discovery of such sales would have been inevitable.
    Lastly, petitioners argue that KSC is wrong in its statement that 
the Department can properly accept its new sales information as a 
``correction of a clerical error.'' Petitioners observe that one of the 
criteria set forth in Fresh Cut Flowers from Colombia for correcting 
alleged clerical errors is that ``the error in question must be 
demonstrated to be a clerical error, not a methodological error, an 
error in judgement or a substantive error.'' In the instant case, 
petitioners assert that KSC's failure to

[[Page 73234]]

report the sales was demonstrably not clerical. Rather, petitioners 
state that it was based on KSC's substantive error that Kawasho did not 
make any direct sales to a U.S. customer. Thus, petitioners concluded 
that the Department cannot accept the new sale as a clerical error. 
These petitioners recommend that the Department apply adverse facts 
available to the quantity of this sale. As adverse facts available, 
petitioner urges the Department to apply the highest calculated margin 
on KSC's other sales to the unreported sales and include the unreported 
sales in the overall weighted-average margin.
    Department's Position: We disagree with petitioners that the three 
unreported sales disclosed at verification by KSC are not minor. During 
verification, while the Department was conducting various completeness 
tests, KSC voluntarily disclosed that it had found a previously 
unreported sale to the United States made by Kawasho. Since this sale 
comprised three individual shipments, and we are defining a sale as a 
single shipment in this investigation, we concluded that there were 
actually three unreported sales disclosed at verification. These sales, 
which were made by Kawasho directly to an unaffiliated Japanese trading 
company that in turn sold the CTL plate to its U.S. affiliate, are 
properly classified as EP sales through Kawasho. During verification, 
KSC provided substantial quantity and value information to support its 
assertion that there are no additional unreported U.S. sales. We 
examined this quantity and value information and are satisfied that 
there are no additional unreported U.S. sales.
    The Department's practice is to accept new information during 
verification only when that information constitutes minor corrections 
to information already on the record, or when that information 
corroborates, supports, or clarifies information already on the record. 
We agree with KSC that these disclosed sales constitute minor 
corrections to information already on the record. Therefore, we 
included the information we accepted at verification concerning these 
three sales in our margin analysis for the final determination.

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 Japan that were entered, or 
withdrawn from warehouse, for consumption on or after April 30, 1999 
(90 days prior to the date of publication of the Preliminary 
Determination in the Federal Register) for Kobe, Nippon, NKK, and 
Sumitomo, which received the petition rate of 59.12 as adverse facts 
available. In addition, we will continue to suspend liquidation of all 
entries of subject merchandise from Japan 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) 
for KSC and those companies which received the ``all others'' rate. We 
shall refund cash deposits and release bonds for KSC and ``all others'' 
companies for the period between April 30, 1999 and July 29, 1999 
(i.e., the critical circumstances period). The Customs Service shall 
continue to require a cash deposit or posting of a bond equal to the 
estimated amount by which the NV 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
------------------------------------------------------------------------
Kawasaki Steel Corporation.................................        10.78
Kobe Steel, Ltd............................................        59.12
Nippon Steel Corporation...................................        59.12
NKK Corporation............................................        59.12
Sumitomo Metal Industries, Ltd.............................        59.12
All Others.................................................        10.78
------------------------------------------------------------------------

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 to, the U.S. industry. If the ITC determines that 
material injury, or threat of material injury does not exist, the 
proceeding will be terminated and all securities posted will be 
refunded or canceled. If the ITC determines that such injury does 
exist, the Department will issue an antidumping duty order directing 
Customs officials to assess antidumping duties on all imports of the 
subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the effective date of the suspension of 
liquidation.
    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Act.

    Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33235 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P