[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73234-73244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33236]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-475-826]


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

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

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Howard Smith or Maisha Cryor, Office 
IV, 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) 
482-5193 or (202) 482-5831, respectively.

The Applicable Statute

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

Final Determination

    We determine that certain cut-to-length carbon-quality steel plate 
products (``CTL plate'') from Italy are being, or are likely to be, 
sold in the United States at less than fair value (``LTFV''), as 
provided in section 733 of the Act. The estimated margins of sales at 
LTFV are shown in the ``Suspension of Liquidation'' section of this 
notice.

Case History

    Since the preliminary determination in this investigation 
(Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cut-To-Length Carbon-Quality Steel Plate Products From Italy, 64 FR 
41213 (July 29, 1999) (``Preliminary Determination'')), the following 
events have occurred:
    On July 28, 1999, ILVA S.p.A, (``ILVA'') alleged that the 
Department of Commerce (``the Department'') made a ministerial error in 
the preliminary determination because it incorrectly

[[Page 73235]]

excluded from its analysis all of ILVA's U.S. sales that were entered 
under a temporary importation bond and subsequently re-exported to a 
country that is a party to the North American Free Trade Agreement 
(``NAFTA''). We disagreed with ILVA's allegation because our decision 
to exclude these sales was intentional and, thus, could not be 
considered a ministerial error (for further discussion of the 
ministerial error, see the Memorandum from Howard Smith to Holly Kuga 
dated August 17, 1999, on file in the Central Records Unit (``CRU'') in 
room B-099 of the main Department of Commerce building, under the 
appropriate case number). However, as noted in comment 6 of the 
comments below, for the final determination we have included these 
sales in our analysis.
    In September 1999, the Department conducted sales and cost 
verifications of Palini & Bertoli S.p.A (``Palini'') and ILVA, the two 
respondents in the instant investigation. At verification, both 
respondents submitted corrections to the data used in the preliminary 
determination. These corrections are reflected in the data used in the 
final determination. A list of the corrections can be found in the 
public versions of the Department's verification reports which are on 
file in the CRU in room B-099 of the main Department of Commerce 
building, under the appropriate case number. For ILVA, see the 
memoranda from Howard Smith and James Nunno to The File dated October 
29, 1999 regarding the sales and cost verifications. For Palini, see 
the memoranda from Maisha Cryor and Zev Primor to The File dated 
October 29, 1999 regarding the sales and cost verifications.
    The petitioners (i.e., Bethlehem Steel Corporation, U.S. Steel 
Group, a unit of USX Corporation, Gulf States Steel, Inc., IPSCO Steel 
Inc., and United States Steelworkers of America) and the respondents 
submitted case briefs on November 5, 1999, and rebuttal briefs on 
November 12, 1999. On November 10, 1999, the petitioners, the only 
party to the proceeding to request a hearing, withdrew their request 
for a hearing. Therefore, we did not hold a public hearing.

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 the respondents covered by the description in the 
``Scope of Investigation'' section, above, and sold in Italy 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 Department's March 1999 questionnaire): painting, quality, grade 
specification, heat treatment, nominal thickness, nominal width, 
patterns in relief, and descaling.
    Because neither Palini nor ILVA had 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'')).

[[Page 73236]]

Changes From the Department's Preliminary Determination

    Except where noted in the comments below, we reached our final 
determination using the same methodology as that used in the 
preliminary determination. However, we made certain adjustments to the 
reported data based on our verification findings. Specifically, with 
respect to ILVA's sales data, we recalculated home market credit 
expenses, temporary importation bond's (``TIB'') and indirect selling 
expenses, and reclassified as entries under TIB certain U.S. sales 
which ILVA had incorrectly reported as having been entered for 
consumption. In addition, we revised the international freight expense 
reported for one U.S. sale. With respect to ILVA's cost data, we 
recalculated general and administrative expenses and revised the cost 
of iron pellets included in the reported costs. For Palini, we 
recalculated home market credit expenses, inventory carrying costs, 
home market warranty expense and indirect selling expenses and 
reclassified warranty expenses as direct selling expenses for sales in 
the home and U.S. markets. In addition, we revised the quantity and 
commission reported for one U.S. sale. With respect to Palini's cost 
data, we recalculated general and administrative expenses and 
recalculated the value of scrap and scale. For details regarding these 
adjustments, see the company-specific memoranda to The File dated 
December 13, 1999 regarding the calculations for the final 
determination.

Interested Party Comments

ILVA

Comment 1: Failure to Identify Overrun Sales in the Home Market

    The petitioners contend that ILVA's failure to identify all overrun 
sales in the home market may understate the actual dumping margin 
because the margin will be calculated based on comparisons of lower-
priced overrun sales in the home market to non-overrun sales in the 
United States. In its response to section B of the Department's 
questionnaire, ILVA noted that it reported as overrun sales those 
overrun quantities which it sold as secondary merchandise. However, the 
petitioners point out that ILVA failed to report as overrun sales those 
overrun quantities that were sold as prime merchandise to either the 
customer who placed the order or another customer. In addition, 
according to the petitioners, ILVA acknowledged that in instances where 
the original customer agreed to purchase the overrun merchandise, the 
price may or may not differ from the original price negotiated with the 
customer. Because ILVA failed to comply with the Department's 
questionnaire instruction to identify all overrun sales during the POI, 
the petitioners urge the Department to apply partial facts available in 
the final determination. As facts become available, the petitioners 
request that the Department treat as overrun sales all sales where the 
gross unit price is equal to or less than the maximum gross unit price 
of sales that ILVA identified as overrun sales.
    ILVA claims that it properly reported as overrun sales those 
overrun quantities that were sold as prime merchandise to someone other 
than the customer who ordered the merchandise. However, ILVA notes that 
it could not report as overruns the excess prime merchandise that was 
sold with the order that generated the excess because its record 
keeping system does not separately identify such sales as overruns. 
According to ILVA, the record evidence (i.e., the verification results 
and home market sales file) supports its claim that it properly 
reported prime merchandise overruns that were sold to someone other 
than the customer who ordered the merchandise. Moreover, ILVA claims 
that the data on the record show that the prime merchandise sales 
identified as overruns were made within the ordinary course of trade 
and, thus, should be included in the Department's analysis. 
Specifically, ILVA compared the price, quantity, sales terms, and 
product specifications of prime merchandise overrun and non-overrun 
sales in the home market and submitted statistics 1 which 
demonstrate, according to ILVA, that its sales of prime merchandise 
identified as overruns did not involve unusual product specifications 
or unusual sales terms (i.e. aberrational prices, unusual quantities, 
unusual delivery terms). Regarding prime merchandise overruns that ILVA 
sold with the order that generated them, ILVA maintains that the prices 
for these sales are arm's-length prices and that the sales are 
commercially indistinguishable from, and included as part of, other 
sales of prime merchandise. Since there is no evidence that any of 
ILVA's sales of prime merchandise, which may or may not contain overrun 
quantities, are outside the normal course of trade and, thus, would 
distort the margin calculation, ILVA submits that these sales should be 
used in the Department's analysis. Finally, ILVA asserts that the use 
of facts available is unsupported and unfair given that it reported 
overruns, where possible, and that the overruns not identified as such 
were part of commercial sales made within the ordinary course of trade.
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    \1\ These statistics, which are proprietary, can be found on 
page 5 of ILVA's November 12, 1999 case brief.
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    DOC Position:

    We agree with ILVA. The relevant provisions of section 776 of 
the Act state that if--
    (1) necessary information is not available on the record, or
    (2) an interested party or any other person--
    (A) withholds information that has been requested by the 
administering authority or the Commission under this title * * * the 
administering authority and the Commission shall, subject to section 
782(d), use the facts otherwise available in reaching the applicable 
determination under this title.

    ILVA reported overrun sales of prime merchandise where it could 
identify such sales in its records. However, ILVA's record keeping 
system does not identify as overruns the overrun quantities that were 
sold with the order that generated them. By not reporting such sales as 
overruns, ILVA did not withhold information from the Department because 
such information was not available. Moreover, the overrun information 
is unnecessary in the instant investigation since there is no evidence 
on the record that ILVA's failure to identify all overrun sales 
distorts the Department's margin calculation. Under such circumstances, 
the facts available remedy suggested by the petitioners is not 
warranted (see Olympic Adhesives v. United States, 899 F.2d 1565 (Fed. 
Cir. 1990); see also 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)). To avoid distortion, the 
Department will exclude from its analysis sales that are outside the 
ordinary course of trade. Section 351.102 of the Department's 
regulations notes that sales outside the ordinary course of trade might 
include:

    Sales or transactions involving off-quality merchandise or 
merchandise produced according to unusual product specifications, 
merchandise sold at aberrational prices or with abnormally high 
profits, merchandise sold pursuant to unusual terms of sale, or 
merchandise sold to an affiliated party at a non-arm's length price.

    The petitioners provided no evidence that any of ILVA's sales, 
including overrun sales of prime merchandise that may not have been 
included as overruns, were outside the ordinary course of trade. 
Therefore, with respect

[[Page 73237]]

to these overruns, we have accepted the information as reported.

Comment 2: Market Warehousing Expense

    ILVA reported separate weighted-average warehousing expenses for 
direct sales and sales through resellers. The petitioners urge the 
Department to reject the warehousing expense reported for sales through 
resellers because it is not clear from the record that the sales for 
which the expense was reported are reseller sales. According to the 
petitioners, the sales file shows that the sales for which ILVA 
reported the reseller warehousing expense are sales from stock to the 
customer. If these were reseller sales, the petitioners contend that 
the file should indicate that the sale was through a service center to 
the customer, not from stock to the customer. Because of this 
contradiction, the petitioners request that the Department reject the 
reported reseller warehousing expense.
    ILVA claims that the petitioners are mistaken because it only 
reported reseller warehousing expense for those sales that were 
identified as reseller sales in the home market sales file. 
Furthermore, ILVA claims that such sales were from the stock of the 
reseller and, thus, identifying a sale as being from stock and made by 
a reseller is not a contradiction. Finally, ILVA notes that contrary to 
the petitioners' suggestion, the reseller sales in question should not 
have been classified as sales through service centers because ILVA's 
resellers are not service centers.
    DOC Position: We agree with ILVA. ILVA only reported reseller 
warehousing expense for those sales that were identified as reseller 
sales in the home market sales file. Moreover, the fact that ILVA's 
home market sales file identifies the resellers' sales as being from 
stock is consistent with information on the record indicating that the 
resellers sold merchandise from their warehouses. Thus, we have 
accepted the reseller warehousing expense as reported.

Comment 3: Correcting Data Files in Accordance With Verification 
Findings

    The petitioners request that the Department adjust the reported 
general and administrative expense ratio and the reported cutting costs 
in accordance with its verification findings. Also, the petitioners 
request that the Department recalculate home market credit expense 
using the correct interest rate identified at verification. ILVA agrees 
with the petitioners.
    DOC Position: We agree with both parties. We adjusted the reported 
costs and general and administrative expense ratio as appropriate. In 
addition, for the final determination we recalculated home market 
credit expense.

Comment 4: Failure To Establish the Market Price of Electricity

    The petitioners claim that ILVA was unable to demonstrate that the 
price it paid to purchase electricity from an affiliated party is an 
arm's-length price. In addition, the petitioners assert that ILVA did 
not demonstrate that the affiliated party's price is greater than the 
cost of production since it did not provide documentation to support 
the affiliate's reported cost of producing electricity. Therefore, as 
facts available, the petitioners request that the Department base the 
electricity cost used in the final determination on the greatest 
electricity price reported in Appendix D-6(d) of ILVA's June 29, 1999 
supplemental questionnaire response.
    ILVA maintains that the petitioners' claim is without merit because 
it did, in fact, demonstrate that it paid a market price for 
electricity and that the price was greater than the affiliate's cost of 
producing electricity. During the POI, ILVA purchased electricity from 
both an affiliated and an unaffiliated party. According to ILVA, the 
disparity in the quantities of electricity purchased from these two 
parties precludes one from comparing the parties' prices in order to 
determine whether the affiliated party price is a market price. ILVA 
notes that it was unable to obtain actual electricity prices that the 
unaffiliated supplier charged other parties. Likewise, ILVA notes that, 
for reasons which are proprietary, it was unable to provide electricity 
prices that the affiliated supplier charged other parties. Thus, in 
order to provide the Department with a price comparison, ILVA compared 
the affiliated party price to a constructed unaffiliated party price. 
Specifically, ILVA used electricity rates published by the unaffiliated 
party to construct a weighted-average unit price that the party would 
have charged ILVA if all purchased electricity had been supplied by the 
unaffiliated party. ILVA points out that during the verification 
Department officials examined the calculation of the constructed 
unaffiliated party price and found no indication that the constructed 
price was based on inaccurate or incomplete information. Moreover, ILVA 
notes that the constructed price is based on publicly available 
information and, thus, it is reliable. Furthermore, ILVA submits that 
the constructed unaffiliated party price overstates the actual price 
that ILVA would pay for electricity since it is based on published 
rates that do not take into account the discounts that large consumers 
of electricity, such as ILVA, are able to negotiate. Finally, ILVA 
states that during the verification Department officials examined 
source documents supporting the affiliate's cost of producing 
electricity and found nothing to suggest that the documents were 
unreliable. For the foregoing reasons, ILVA urges the Department to 
accept the reported electricity costs.
    DOC Position: We agree with ILVA. Although ILVA was unable to 
provide evidence of market prices based on actual transactions between 
unaffiliated parties, in response to the Department's request for a 
market price, ILVA used electricity rates published by its unaffiliated 
supplier to construct a weighted-average market price between 
unaffiliated parties. At verification, we examined the information used 
to construct that price and found no discrepancies. Moreover, at 
verification, we accepted the consumption and rate data provided by 
ILVA's affiliated electricity supplier, which demonstrated that the 
prices it charged ILVA are greater than its cost of production. 
Therefore, we have determined that the use of facts available to value 
electricity is unwarranted for the final determination.

Comment 5: Failure To Establish the Market Price of Iron Pellets

    In the preliminary determination, the Department found that ILVA 
failed to establish that the price it paid to purchase iron pellets 
from an affiliated party was a market price. Therefore, in reaching its 
preliminary determination, the Department valued iron pellets using the 
weighted-average Italian import values of iron ore as provided by the 
petitioners in their July 8, 1999 submission.
    ILVA contends that the Department should not rely on the values 
submitted by the petitioners for two reasons. First, the value that the 
petitioners submitted is for iron ore and iron ore concentrates while 
ILVA only purchased iron pellets. Thus, the value that the petitioners 
submitted is for a basket of products that is overly broad. Second, it 
is important to identify the iron content of products before comparing 
their prices; however, there is no mention of iron content in the 
information submitted by the petitioners. Therefore, ILVA calls on the 
Department to reject the petitioners price data, which ILVA 
characterizes as general and incomplete, and to value iron pellets 
using verified information.
    The petitioners urge the Department to continue to value iron 
pellets using the Italian import price for iron ores and

[[Page 73238]]

concentrates for three reasons. First, ILVA failed to demonstrate that 
the Italian import value of iron ores and concentrates is 
unrepresentative of the costs incurred by ILVA for iron pellets. 
Second, ILVA submitted the ``verified'' information regarding the 
market price of iron pellets at verification which is after the 
regulatory deadline for submitting factual information. The petitioners 
note that section 351.301(b)(1) of the Department's regulations 
provides that in an antidumping duty investigation, factual information 
is due no later than:

    Seven days before the date on which the verification of any 
person is scheduled to commence, except that factual information 
requested by the verifying officials from a person normally will be 
due no later than seven days after the date on which the 
verification of that person is completed.

    The petitioners assert that there is no evidence on the record that 
the Department requested this information from ILVA. Therefore, the 
petitioners maintain that the ``verified'' information is untimely and 
should be rejected. Finally, the petitioners point out that the 
``verified'' information consists of a constructed market price for 
iron pellets which is based, in part, on costs incurred by a Dutch 
producer and, thus, this information is not representative of the price 
ILVA would have actually paid to purchase iron pellets from its 
suppliers. For the foregoing reasons, the petitioners request that the 
Department reject the ``verified'' information and continue to value 
iron pellets using the Italian import value used in the preliminary 
determination.
    DOC Position: We agree with ILVA. During the POI, ILVA purchased 
iron pellets from an affiliated supplier and a supplier which it 
identified as an unaffiliated party. In order to demonstrate that the 
affiliated party price for iron pellets is a market price, ILVA 
compared the prices that it paid its two suppliers for iron pellets. 
However, we preliminarily determined that ILVA and the supplier whom 
ILVA identified as an unaffiliated party are, in fact, affiliated 
pursuant to section 771(33)(F) of the Act. Thus, as noted above, for 
the preliminary determination we disregarded the prices that ILVA paid 
for iron pellets and valued the pellets using, as fact available, the 
price supplied by the petitioners. However, in making that decision, we 
stated in the preliminary notice that we were going to disregard the 
transactions whereby ILVA purchased iron pellets unless ILVA could 
demonstrate that such transactions reflect a market value. In keeping 
with this position, our verification outline requested ILVA to provide 
information regarding its claim that it bought iron pellets from 
affiliated parties at world market prices. ILVA provided both a 
constructed market price for iron pellets and an actual iron pellet 
price that one of its suppliers charged certain other customers during 
1998. We have accepted this information because (1) during the 
verification ILVA provided this information in response to our request 
and, thus, the information is timely according to section 351.301(b)(1) 
of the Department's regulations; and (2) there is no information on the 
record to indicate that the actual price that ILVA's supplier charged 
certain other customers during 1998 is not representative of a market 
price for iron pellets. Therefore, for the final determination, we used 
the information obtained at verification to value iron pellets in 
accordance with section 773(f)(3) of the Act.

Comment 6: Treatment of U.S. Sales Entered Under Temporary Importation 
Bond

    ILVA alleges that the Department should not have excluded from its 
preliminary analysis its sales of merchandise which entered the United 
States under TIB and was subsequently re-exported to 
Canada.2 ILVA has taken this position because it believes 
that the U.S. law implementing the NAFTA requires the Department to 
assess antidumping and countervailing duties on such entries. Based on 
article 303(3) of the NAFTA, ILVA contends that merchandise which 
enters the United States under a TIB and is subsequently re-exported to 
another NAFTA party is considered ``entered for consumption'' and is 
therefore subject to all applicable customs duties. Article 303(3) 
states:

    \2\ However, ILVA requests that the Department continue to 
exclude from its analysis of all ILVA's TIB entries that were re-
exported to non-NAFTA parties.
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    Where a good is imported into the territory of a Party pursuant 
to a duty deferral program and is subsequently exported to the 
territory of another Party, or is used as a material in the 
production of another good that is subsequently exported to the 
territory of another Party, or is substituted by an identical or 
similar good used as a material in the production of another good 
that is subsequently exported to the territory of another Party, the 
Party from whose territory the good is exported: (a) shall assess 
the customs duties as if the exported good had been withdrawn for 
domestic consumption * * *.

    Moreover, ILVA notes that Congress implemented NAFTA article 303 by 
amending the Tariff Act of 1930 as follows:

    [N]o merchandise that is subject to NAFTA drawback * * * that is 
manufactured or otherwise changed in condition shall be exported to 
a NAFTA country * * * without an assessment of a duty on the 
merchandise in its condition and quantity, and at its weight, at the 
time of its exportation * * * and the payment of the assessed duty 
before the 61st day after the date of exportation of the article. * 
* *.

    North American Free Trade Agreement Implementation Act, 
Sec. 203(b)(5)(B), codified at 19 U.S.C. Sec. 81c(a). Furthermore, ILVA 
notes that 19 U.S.C. Sec. 333, which defines certain imported goods 
that are not subject to 19 U.S.C. Sec. 81c(a), states that:

    Nothing in this section [concerning goods subject to NAFTA duty 
deferral and drawback] or the amendments made by it shall be 
considered to authorize the refund, waiver, or reduction of 
countervailing duties or antidumping duties imposed on an imported 
good.

    Based on these provisions, ILVA asserts that the Department has a 
statutory mandate to assess antidumping and countervailing duties on 
goods entered under a TIB and then re-exported to Canada.
    Additionally, ILVA points out that in Oil Country Tubular Goods 
From Japan: Preliminary Results and Recission in Part of Antidumping 
Duty Administrative Review, 64 FR 48589 (September 7, 1999) (OCTG from 
Japan) the Department commented on goods which were imported under TIBs 
and re-exported to Canada stating that ``the TIB status of such entries 
does not necessarily insulate [them] from the assessment of antidumping 
duties'' (OCTG from Japan, 64 FR at 48591). However, ILVA also notes 
that in OCTG from Japan, the Department concluded from article 1901.3 
of the NAFTA that ``if it is possible to read the NAFTA rules in a 
manner consistent with the law and practice discussed above [the 
antidumping law and Departmental practice regarding TIB entries], the 
entries in question [TIB entries re-exported to Canada] should not be 
subject to antidumping duties'' (OCTG from Japan, 64 FR at 48591). 
Article 1901.3 provides that:

    No provision of any other Chapter of this Agreement shall be 
construed as imposing obligations on a Party with respect to the 
Party's antidumping law or countervailing duty law.

    ILVA makes the following points regarding the Departments comments 
in OCTG from Japan. First, ILVA maintains that the Department must base 
its opinion on this issue on U.S.

[[Page 73239]]

law, not the NAFTA. According to ILVA, the plain language of 19 U.S.C. 
Secs. 81c(a) and 333 unambiguously requires the Department to assess 
antidumping duties on ILVA's TIB entries that were re-exported to a 
NAFTA party (``NAFTA TIB entries''). While ILVA acknowledges that the 
Department may be correct when it observed in OCTG From Japan that the 
NAFTA ``does not compel the assessment of antidumping or countervailing 
duties that would not otherwise be applied under a party's domestic 
law,'' ILVA notes that in implementing the provisions of the NAFTA, 
Congress has required the Department to assess antidumping and 
countervailing duties on NAFTA TIB entries. Specifically, ILVA points 
out that the House Report on the NAFTA Implementation Act explains that 
Congress implemented article 303(3) of the NAFTA because it believed it 
``critical to ensure'' that the NAFTA member countries do not become an 
``export platform'' for materials produced in other regions of the 
world (see H.R. Rep. No. 103-361 (I), at 39-40 (1993), reprinted in 
1993 U.S.C.C.A.N 2552, 2589-2590). According to ILVA, were the 
Department to adopt a practice of excluding NAFTA TIB entries, the 
Department's actions would contravene the expressly stated intent of 
Congress. Finally, ILVA observes that the Department's analysis in OCTG 
From Japan strongly suggests that it may exclude NAFTA TIB entries 
based on the fact that they are not entries for consumption. However, 
ILVA maintains that in implementing the NAFTA, Congress simply directed 
the Department to assess antidumping and countervailing duties on NAFTA 
TIB entries without defining such entries as being for consumption. 
Therefore, whether or not the entries are for consumption is immaterial 
in deciding whether to assess antidumping and countervailing duties on 
NAFTA TIB entries.
    Additionally, ILVA notes that the Court of International Trade 
(``CIT'') has treated the Department's normal practice concerning TIBs 
as applying equally to countervailing and antidumping duties. 
Therefore, ILVA submits that if the Department were to continue to 
exclude ILVA's NAFTA TIB entries from its analysis in the antidumping 
duty investigation, it must also do so in the countervailing duty 
investigation. Nevertheless, ILVA contends that unless advised to the 
contrary, the U.S. Customs Service (``Customs'') will collect 
antidumping and countervailing duties on ILVA's NAFTA TIB entries. 
Therefore, if the Department continues to exclude ILVA's NAFTA TIB 
entries from its analysis, ILVA requests that the Department instruct 
Customs to liquidate without liability for countervailing or 
antidumping duties, all TIB entries by ILVA that are subsequently re-
exported to a NAFTA country.
    The petitioners assert that the NAFTA and U.S. law are clear on 
this issue--the TIB entries in question are excluded from dumping 
margin calculations, but not exempted from the assessment (i.e., 
collection) of antidumping and countervailing duties.3 
According to the petitioners, ILVA's reliance on article 303(3) of the 
NAFTA and 19 U.S.C. sections 81c(a) and 333 is misplaced. The 
petitioners contend these provisions do not address the NAFTA's effect 
on U.S. antidumping and countervailing law; rather they deal with duty 
drawback and deferral programs and the collection of customs duties by 
Customs. The petitioners hold that Customs statutes, regulations, 
rulings and practices are not binding on the Department and, 
accordingly, ILVA's reliance on such is not determinative. On the other 
hand, the petitioners claim that article 1901.3 of the NAFTA is an 
explicit statement by the parties to the agreement that the agreement 
does not control the application of each parties antidumping and 
countervailing law. In addition, the petitioners disagree with ILVA's 
position that ``U.S. law and not the wording of the NAFTA should 
control the Department's conduct in this matter.'' On the contrary, the 
petitioners believe that both the U.S. laws necessary to implement the 
NAFTA and the NAFTA itself are dispositive of U.S. obligations under 
the agreement. If this were not the case, the petitioners argue that 
all of the NAFTA provisions not specifically addressed in the U.S. 
statute implementing NAFTA would have no effect, leaving the United 
States in the position of having not adopted the NAFTA in its entirety. 
Thus, the petitioners contend that ILVA cannot argue that article 
1901.3 of the NAFTA is without effect. Moreover, the petitioners 
maintain that sections 81c(a) and 333 of the statute implementing the 
NAFTA were included so as to preclude any conflict between the NAFTA 
and the customs statutes in existence prior to implementation of the 
NAFTA. According to the petitioners, the absence of specific 
antidumping and countervailing duty provisions in the statute 
implementing the NAFTA is proof that, consistent with article 1901.3 of 
the NAFTA, the current U.S. law and practice controls the treatment of 
TIB entries for purposes of calculating dumping margins (i.e., 
excluding such entries from the margin calculation). Moreover, the 
petitioners state that in OCTG From Japan, the Department noted that 
``the parties [to NAFTA] made clear that NAFTA did not require any 
changes in antidumping duty law or practice'' (OCTG From Japan, 64 FR 
at 48590-91). Thus, the petitioners hold that the Department's 
exclusion of NAFTA TIB entries from its analysis in the preliminary 
determination is appropriate because it is consistent with existing law 
and Departmental practice which has been upheld by the CIT (see 
Titanium Metals Corp. v. United States, 901 F. Supp. 362, 367 (Ct. 
Int'l Trade 1995)). Nevertheless, the petitioners note that sections 
81c(a) and 333 of the statute implementing the NAFTA and Article 303(3) 
of the NAFTA compel Customs to collect antidumping and countervailing 
duties on ILVA's NAFTA TIB entries as though the entries were withdrawn 
for domestic consumption. The petitioners note that this position is 
consistent with the Department's analysis in OCTG From Japan. Although 
the implementation of the NAFTA may lead to differing results in the 
manner in which the Department and Customs treat NAFTA TIB entries, the 
petitioners assert that the pertinent articles of the NAFTA and the 
U.S. customs law are unequivocal--NAFTA TIB entries must be excluded 
from dumping margin calculations, but not exempted from the assessment 
(i.e., collection) of antidumping and countervailing duties.
---------------------------------------------------------------------------

    \3\ The petitioners note that they assume that ILVA is referring 
to the Department's margin calculations when it used the term 
``assess'' in its arguments. According to the petitioners, to do 
otherwise would render ILVA's arguments wholly inconsistent.
---------------------------------------------------------------------------

    DOC Position: Article 303 of the NAFTA addresses duty drawback and 
duty deferral programs, including TIB. In particular, Article 303(3) 
provides that merchandise entered into the United States under a TIB 
and subsequently re-exported to another NAFTA party shall be considered 
to be entered for consumption and shall be subject to all relevant 
customs duties. No party in this case disputes the requirement, 
established by Article 303, that the Department assess antidumping 
duties on subject merchandise entered under a TIB and re-exported to 
another NAFTA party. Rather, the petitioners contend that while the 
Department is required to assess antidumping duties on NAFTA TIB 
entries, it should nonetheless exclude from the calculation of the 
dumping margin those U.S. sales that entered under a TIB and

[[Page 73240]]

were subsequently re-exported to a NAFTA party. The petitioners' 
positions are incongruous.
    In accordance with section 733(d)(2) of the Act, the Department can 
only assess antidumping duties on subject merchandise entered for 
consumption in the United States. See Titanium Metals Corp. v. United 
States, 901 F. Supp. 362 (CIT 1995). Normally, TIB entries are not 
entered for consumption, and the Department therefore does not assess 
antidumping or countervailing duties on TIB entries. Consistent with 
its treatment on assessment of duties, the Department's practice is to 
exclude those sales that entered under a TIB from its margin 
calculation because there will be no assessment of antidumping duties 
on such entries. See e.g., Titanium Sponge From the Republic of 
Kazakhstan; Notice of Preliminary Results of Antidumping Duty 
Administrative Review, 64 FR 48793, 48794 (September 8, 1999). By 
contrast, where, as here, the Department will assess antidumping duties 
on entries, there is no basis to exclude the relevant sales from the 
margin calculation. Accordingly, we have included in the margin 
calculation of all ILVA's U.S. sales to unaffiliated parties that were 
entered for consumption under Article 303(3) of the NAFTA.

Comment 7: Collapsing Affiliates and Application of the Major Input 
Rule

    During the POI, ILVA produced slabs which it sold to its wholly 
owned subsidiary, ILVA Lamiere e Tubi S.p.A. (``ILT''). ILT rolled the 
slabs into quarto plate and sold the plate to ILVA. During the POI, ILT 
only sold plate to ILVA (i.e., ILT did not sell plate to any one else), 
which resold the plate to affiliated and unaffiliated customers in the 
U.S. and home markets. Prior to the preliminary determination, the 
petitioners argued that the Department should value the slabs that ILVA 
sold to ILT in accordance with the major input rule of section 
773(f)(3) of the Act. ILVA argued that the Department should collapse 
ILT and ILVA and, in doing so, not apply the major input rule. In the 
preliminary determination, the Department did not treat ILT as a 
producer of the merchandise under investigation because it only 
supplied one service, namely rolling, in a larger production process 
wherein ILVA supplied all of the other material inputs and services 
required to produce plate. The Department determined that there was not 
a significant potential for price manipulation and, thus, no basis for 
collapsing ILT and ILVA. Since the Department did not collapse ILT with 
the producer ILVA, it used the major input rule to value ILT's rolling 
service. For the final determination, both the petitioners and ILVA 
contend that the Department erred by not treating ILT as a producer of 
the merchandise under investigation.4 However, the parties 
differ as to whether the major input rule should be applied.
---------------------------------------------------------------------------

    \4\ Although the petitioners maintain that ILT is a producer, 
they did not address the issue of whether the Department should 
collapse ILT with ILVA.
---------------------------------------------------------------------------

    According to the petitioners, the record demonstrates that ILT is a 
supplier and seller of plate and, thus, the Department should apply the 
major input rule to ILT's purchases of slab from ILVA irrespective of 
whether it collapses ILT with ILVA. The petitioners note that ILVA 
reported, and the Department verified, that ILT purchased slabs from 
ILVA, rolled the slabs into plates, and sold the plates to ILVA. Thus, 
according to the petitioners, ``there is no tolling arrangement between 
ILVA and ILT.'' The petitioners submit that transactions between 
affiliated parties should be valued under the major input rule and, 
thus, they urge the Department to apply this rule in the instant 
situation. According to the petitioners, the decision to collapse 
entities is a sales, not a cost, issue and, therefore, it should have 
no bearing on the application of the major input rule. Specifically, 
the petitioners maintain that the purpose behind collapsing is 1) to 
ensure that all sales of a producer or reseller are reviewed; 2) to 
ensure that antidumping margins are calculated as accurately as 
possible; and, 3) to prevent evasion of antidumping duty orders by the 
establishment of alternate sales channels (see Queen's Flowers de 
Colombia et al. v. United States, 981 F. Supp. 617, 622 (CIT 1997). 
Thus, the petitioners contend that the decision to collapse entities is 
made in the limited context of ensuring that the Department has 
included all of a respondent's U.S. sales in its margin calculation. 
Hence, the petitioners assert that collapsing should not affect the 
application of the major input rule. Because ILVA failed to provide a 
market price for slabs, as required by the Department for application 
of the major input rule, the petitioners request that as facts 
available, the Department value ILVA's slabs using the market price 
that the petitioners provided in their July 8, 1999 submission.
    ILVA agrees that ILT and ILVA are both producers of the merchandise 
under investigation, but also contends that they satisfy the regulatory 
criteria for collapsing. Consequently, ILVA contends that the 
Department should collapse these two entities and not apply the major 
input rule. ILVA notes that during the POI, it produced CTL plate from 
plate in coil while ILT, a separate affiliated legal entity, produced 
another type of CTL plate, referred to as quarto plate. Based on the 
independent legal status of ILT, along with the fact that legal title 
belongs to ILT until ILT sells the plate to ILVA, ILVA maintains that 
the Department must find that ILT is a producer of plate and not merely 
a subcontractor as the Department held in its preliminary 
determination. ILVA believes that the Department's decision not to 
treat ILT as a producer of plate is wrong for the following reasons. 
First, ILVA reiterates that ILT cannot be considered a subcontractor 
because it acquires ownership of the subject merchandise. Second, ILVA 
argues that even if the Department considers ILT to be a 
``subcontractor,'' the Department's regulations preclude it from 
finding that ILT is not a producer. Specifically, ILVA notes that 19 
CFR 351.401(h) states the following:

    (h) Treatment of subcontractors (``tolling'' operations). The 
Secretary will not consider a toller or subcontractor to be a 
manufacturer or producer where the toller or subcontractor does not 
acquire ownership, and does not control the relevant sale of the 
subject merchandise or foreign like product.

    Since ILT acquires ownership of the subject merchandise and both 
elements of 19 CFR 351.401(h) must be satisfied before a company, even 
if deemed a subcontractor, cannot be treated as a producer, ILVA claims 
that the Department must determine that ILVA is a producer.
    Third, ILVA alleges that the Department reached its preliminary 
determination on this matter by improperly focusing on the operational 
relationship between ILVA and ILT rather than the legal relationship. 
Again, ILVA notes that the legal relationship involves ILT purchasing 
slabs from ILVA, holding title to those slabs, using the slabs to 
produce plates, and selling the plates, for which ILT also holds title, 
to ILVA. According to ILVA, finding that an entity is not a producer 
based on an ``operational reality test'' would not withstand judicial 
scrutiny because it conflicts with the Department's practice of 
focusing only on legal relationships when employing the major input 
rule. Specifically, ILVA notes that the Department consistently looks 
to the legal status of the responding parties rather than their 
operational relationship in determining whether the ``transactions 
disregarded'' and ``major input rules'' of the Act are applicable. ILVA 
contends that the Department

[[Page 73241]]

would be hard-pressed to explain to a Court why it looks at the 
operational relationship between parties to determine whether an entity 
is a producer but refuses to look at the operational relationship when 
employing the major input rule. ILVA adds that this is especially so 
since the logical consequence of being treated as a ``subcontractor'' 
based on the ``operational reality test'' leads to the application of 
the major input rule.
    Fourth, ILVA notes that its relationship with ILT is identical to 
the relationship that existed between two affiliated in the antidumping 
duty investigation of stainless steel wire rod from Sweden and yet, in 
that investigation, the Department found that both the affiliates were 
producers (see Notice of Final Determination of Sales at Less Than fair 
Value: Stainless Steel Wire Rod From Sweden, 63 FR 40449 (July 29, 
1998) (``SSWR From Sweden'')). ILVA and ILT operate under an agreement 
whereby, in general, ILT must purchase from ILVA all of the slabs that 
it uses to produce plates and it must sell the plates that it produces 
only to ILVA. According to ILVA, its relationship with ILT is identical 
to the relationship between Fagersta and Sandvik, the two affiliates in 
SSWR From Sweden, because Sandvik, a producer of stainless steel wire 
rod (``SSWR'') operated under an exclusive purchase and supply 
agreement with Fagersta whereby Fagersta was ``required to purchase 
only from Sandvik the billets that it processes into SSWR for sale to 
Sandvik'' (see SSWR From Sweden, 63 FR at 40454). Unlike the 
Department's finding in the instant investigation, in SSWR From Sweden, 
the Department found that Fagersta was a producer. Moreover, ILVA 
points out that the Department's preliminary analysis on this issue, 
which seems to focus on the commercial relationship between ILVA and 
ILT as described in their exclusive supply and purchase agreement, is 
flawed because it does not consider certain provisions in the agreement 
that indicate that ILT is a separate entity that is operationally 
independent from ILVA. Finally, ILVA argues that the fact that ILT did 
not export subject merchandise to the United States does not prohibit 
the Department from treating ILT as a producer and collapsing the two 
entities. ILVA notes that in Certain Fresh Cut Flowers From Colombia; 
Preliminary Results of Antidumping Duty Changed Circumstances Review, 
63 FR 25447, 25448 (May 8, 1998) (Certain Fresh Cut Flowers From 
Colombia), the Department collapsed a potential exporter that was not 
even producing subject merchandise during the period of review because 
the company had the capability of producing subject merchandise. For 
the foregoing reasons, ILVA urges the Department to treat ILT as a 
producer.5
---------------------------------------------------------------------------

    \5\ ILVA also contends that the Department's decision not to 
collapse ILT because ILT is not a producer nullifies the 
``significant potential for manipulation'' provision of the 
regulations. According to ILVA, ``the fact that the Department 
determined that ILT is not a producer because of the exclusive 
supply arrangement with ILVA is simply not dispositive of whether 
the Department should collapse ILVA.'' ILVA contends that its 
agreement with ILT could change whereupon ILT would sell subject 
merchandise and ``this is exactly the situation that the 
Department's collapsing regulation is intended to address.''
---------------------------------------------------------------------------

    Furthermore, ILVA contends that as producers, ILT and ILVA satisfy 
all of the regulatory criteria for collapsing. ILVA states that 
pursuant 19 CFR. 351.401(f), the Department will collapse two producers 
where the Department finds; 1) the producers are affiliated under 
section 771(33) of the Act; 2) the producers have production facilities 
for similar or identical products that would not require substantial 
retooling in order to restructure manufacturing priorities; and 3) 
there is a significant potential for the manipulation of price or 
production. ILVA believes that it meets all of the above criteria for 
the following reasons. First, ILVA notes that it owns 100 percent of 
ILT and, thus, ILVA and ILT are affiliated according to section 771 
(33)(e) of the Act which states that an organization and any person 
owning 5 percent or more of the organization are affiliated. Second, 
ILVA maintains that it produces plates that are the same or similar to 
the plates produced by ILT. In fact, ILVA notes that using the 
Department's model-matching characteristics, there are some control 
numbers that include both ILVA and ILT produced plates. Hence, ILVA 
concludes that it meets the second of the Department's requirements for 
collapsing. Lastly, ILVA argues that in the instant situation, there is 
a significant potential for the manipulation of prices or production. 
According to ILVA, in order to determine whether a significant 
potential for manipulation exists, the Department considers; 1) the 
level of common ownership between the affiliates, 2) the extent to 
which managerial employees or board members of one firm sit on the 
board of directors of an affiliated firm; and 3) whether the operations 
of the affiliated firms are intertwined. ILVA believes that it meets 
each of these criteria because it owns 100 percent of ILT, certain 
members of its board of directors are also on the board of directors of 
ILT, and it shares information concerning sales, production and pricing 
with ILT. Moreover, ILVA contends that given its exclusive purchase and 
supply agreement with ILT, the two companies intimately coordinate 
production activities and, thus, their operations are intertwined. ILVA 
notes that the Department found the exclusive purchase and supply 
agreement in SSWR From Sweden to be a significant factor in its 
determination to collapse Sandvik and Fagersta. Additionally, ILVA 
maintains that in the preliminary determination, the Department did not 
collapse ILVA and ILT because it did not consider ILT to be a producer. 
However, as noted above, ILVA believes that ILT is a producer and 
argues that the petitioners agree with that conclusion. Thus, ILVA 
contends that it should be collapsed with ILT.
    If the Department collapses ILVA and ILT, ILVA maintains that 
precedent requires the Department to disregard the major input rule. AK 
Steel Corp. v. United States, 34 F. Supp.2d 756 (CIT 1998); see Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from 
Korea: Final Results of Antidumping Duty Administrative Reviews, 63 FR 
13170, 13185 (March 18, 1998); see also Certain Cut-to-Length Carbon 
Steel Plate from Brazil: Final Results of Antidumping Duty 
Administrative Review, 63 FR 12744, 12749-50 (March 16, 1998) In fact, 
ILVA notes that the Department was very specific on this point in SSWR 
From Sweden where it stated that ``because we have collapsed Fagersta, 
Sandvik, and Kanthal, we find that the major input rule does not apply 
in this instance and have used Sandvik's billet costs as the basis for 
COP'' (see SSWR From Sweden, 63 FR at 40454). Given the Department's 
precedents, ILVA urges the Department to collapse ILVA and ILT and to 
disregard the major input rule.
    DOC Position: We disagree with both parties. The two issues at hand 
are whether to collapse ILVA and ILT and whether to apply the major 
input rule. With respect to collapsing, section 351.401(f) of the 
Department's regulations describes the circumstances whereby the 
Department will treat two or more affiliated producers as a single 
entity (i.e., collapse the parties). As in the preliminary 
determination, we do not consider ILT to be a producer because the 
terms of its exclusive supply and purchase agreement with ILVA require 
ILT to sell to ILVA all of the plate that it rolls in its facility. In 
arguing that ILT is a producer, the petitioners focused on the fact 
that

[[Page 73242]]

actual sales of slabs and plates took place between ILVA and ILT and, 
thus, according to the petitioners, ``there is no tolling arrangement 
between ILVA and ILT.'' ILVA also focused on the legal form of the 
transactions between ILVA and ILT, noting that ``based on the 
independent legal status of ILT, along with the fact that legal title 
[to the plates] belongs to ILT until ILT sells the merchandise to ILVA, 
the Department must determine that ILT is a producer.'' However, the 
transfer of legal title is not the only factor that the Department 
considers when deciding whether an entity that is involved in 
manufacturing subject merchandise or foreign like product is a producer 
(see Notice of Final Determination of Sales of Less Than Fair value: 
Dynamic random Access Memory Semiconductors of One Megabit and Above, 
64 FR 56308, 56318 (October 19, 1999 (``DRAMs'' From Taiwan)). 
Significantly, section 351.401(h) of the Department's regulations notes 
that a subcontractor will not be considered to be a producer where the 
subcontractor ``does not acquire ownership and does not control the 
pertinent sale of the subject merchandise or foreign like product.'' 
This provision indicates that ownership of the produced merchandise and 
control of the relevant sale of such merchandise are important 
considerations in identifying the producer. Contrary to ILVA's claim, 
however, it does not require the Department to consider an entity to be 
a producer where one of the two conditions is not satisfied. Moreover, 
the Department has discretion in both selecting the factors that it 
considers in order to identify a producer and in determining the 
importance of those factors. In this case, we find that control of the 
relevant sale, i.e., the sale of subject merchandise or foreign like 
product to unaffiliated parties, is a particularly important 
characteristic for the producer to possess. Under the terms of the 
exclusive supply and purchase agreement, ILT does not sell plates to 
unaffiliated parties and, thus, does not control the relevant sale 
(i.e., the sale to an unaffiliated party). Rather, ILVA controls the 
first sale of the plates to unaffiliated parties. In essence, ILT only 
performs a rolling service for ILVA, obtaining slab from ILVA and 
returning the finished plate to ILVA. Thus, we do not consider ILT to 
be a producer of subject merchandise. Therefore, because ILT is not a 
producer, it is not appropriate to collapse ILVA and ILT into one 
entity under 19 CFR 351.401(f) for purposes of this final 
determination. Furthermore, there is no other basis on which to 
collapse ILVA and ILT.
    The cases cited by ILVA as support for treating ILT as a producer 
differ from the instant case with respect to control of the relevant 
sale. In those cases, there is no indication that the parties which the 
Department treated as producers were contractually precluded from 
selling subject merchandise or foreign like product to unaffiliated 
customers. In fact, in SSWR From Sweden, each of the parties which the 
Department identified as producers and subsequently collapsed sold 
subject merchandise to the United States during the POI. In the 
preliminary results of the changed circumstances review in Certain 
Fresh Cut Flowers From Colombia, the Department collapsed Flores El 
Talle S.A. (``Flores''), the party that requested the review, with the 
Flores Colombianas Group (``the Group''), and found that the revocation 
of the antidumping order with respect to the Group also applied to 
Flores. In that case the Department noted that Flores' shipments would 
not be subject to suspension of liquidation if it were collapsed with 
the Group. Thus, unlike ILT, Flores, although not currently producing 
the subject merchandise due to soil infestation, was a producer of 
subject merchandise in a position to sell subject merchandise and 
foreign like product to unaffiliated customers once it resumed 
production. Thus, the fact that the Department treated Flores as a 
producer is not inconsistent with the Department's treatment of ILT in 
the instant case.
    Furthermore, we do not find that the provisions which ILVA pointed 
to in the exclusive supply and purchase agreement sufficiently mitigate 
the restrictions that the agreement places on ILT's ability to sell 
plates. The agreement is clear that in the ordinary course of business, 
control of the relevant sale belongs to ILVA, and, in fact, during the 
POI, it was ILVA, not ILT, that sold plates to unaffiliated parties.
    Finally, we disagree with ILVA's contention that the Department's 
decision not to collapse ILVA and ILT nullifies the ``significant 
potential for manipulation'' provision of section 351.401(f) of the 
Department's regulations. As the Department has noted, it ``does not 
collapse affiliated companies for margin-calculation purposes unless 
both companies produce or sell the subject merchandise since the 
Department collapses affiliated companies only where the potential for 
price manipulation exists'' (see Notice of Final Results and Partial 
Recission of Antidumping Duty Administrative Review: Certain Pasta From 
Italy, 64 FR 6615, 6628 (February 10, 1999)). Thus, rather than 
nullifying the ``significant potential for manipulation'' provision, in 
making our decision we have specifically considered whether such 
potential exists by examining the role that ILVA and ILT played in 
manufacturing and selling the merchandise under investigation. 
Moreover, the fact that ILVA and ILT can alter their agreement and 
change the role that each plays in manufacturing and selling the 
merchandise under investigation has not escaped our attention. Should 
we issue an order with respect to ILVA, we intend to revisit this issue 
if the relationship between ILVA and ILT should change in any future 
administrative review.
    Because we have not collapsed ILVA and ILT and we treated ILVA as 
the producer, we have continued to apply the major input rule to value 
the rolling services provided by ILT. In the absence of a market price 
or a transfer price for rolling slabs, as in the preliminary 
determination, we constructed a transfer price by increasing the 
reported rolling costs for quarto plate by ILT's G&A expenses and 
profit.

Palini

Comment 1: Classification of Warranty Expenses

    The petitioners contend that Palini improperly classified as 
indirect selling expenses the U.S. credit notes issued by Palini 
pursuant to warranty claims made by U.S. customers. The petitioners 
argue, citing Zenith Electronics Corporation v. United States, that the 
Department's regulations allow for the classification of warranty 
expenses as indirect selling expenses only where the warranty expenses 
relate to non-variable costs. 77 F.3d 426, 433-34 (Fed. Cir. 1996). In 
contrast, in this case, the petitioners assert that Palini's warranty 
expenses are variable expenses, because the credit notes were issued 
for defective and non-conforming merchandise and therefore directly 
relate to specific sales. Therefore, the petitioners request that, for 
the final results, the Department treat Palini's warranty expenses as 
direct selling expenses.
    Palini claims that it properly reported its warranty expenses as 
indirect selling expenses. Palini contends that, according to Tapered 
Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, 
and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, 
and Components Thereof, From Japan (TRB's from Japan), the Department 
recognizes that

[[Page 73243]]

period of review (``POR'') warranty expenses cannot always be linked to 
POR sales, because the expenses may result from sales that occurred 
before the POR. 62 FR 11825 (March 13, 1997). Therefore, Palini asserts 
that its reported warranty expenses must be allocated because the 
expenses cannot be reported on a transaction-specific basis. Id. 
Further, in accordance with TRB's from Japan, Palini contends that 
warranty expenses may be classified as indirect selling expenses, when 
the expenses cannot be reported on a transaction-specific basis. 
Therefore, for the final results, Palini requests that, because it 
issued credit notes on a customer-specific basis, as opposed to a 
transaction-specific basis, the Department should treat its warranty 
expenses as indirect selling expenses. However, Palini notes, if the 
Department were to reclassify the company's U.S. warranty expenses as 
direct selling expenses, it should similarly treat its home market 
warranty expenses, because the expenses are incurred in the same manner 
in both markets.
    DOC Position: We agree with the petitioners and have treated 
Palini's warranty expenses as a direct expense in both the U.S. and 
home markets. Section 351.410 of the Department's regulations states 
that direct selling expenses are expenses, such as warranties, that 
result from, and bear a direct relationship to, the particular sale in 
question. In this case, Palini stated, at verification, that it issued 
credit notes for customer claims concerning defective or non-conforming 
merchandise. Thus, these expenses arise directly from the sales of 
subject merchandise and, consequently, pursuant to section 351.410 of 
the Department's regulations, we find that Palini's issuance of credit 
notes relates directly to specific sales.6
---------------------------------------------------------------------------

    \6\ We note, as stated in the Antidumping Manual, Chapter 8, 
page 17, and in accordance with Department practice, that 
``warranties are included even though the expense can not be tied to 
a particular sale because of the lapse of time between sale and 
expense. Yet it is inescapable that had there been no sales, there 
would have been no warranty expense.''
---------------------------------------------------------------------------

    However, we agree with Palini that to the extent we reclassify its 
warranty expenses as direct selling expenses in the U.S. market, we 
should also do so in the home market because evidence on the record 
indicates that such expenses were incurred in the same manner in both 
markets. Therefore, for these final results, we have determined that 
Palini's warranty expenses should be treated as direct selling expenses 
for both the home and U.S. markets.

Comment 2: Minor Corrections

    The petitioners contend that Palini's submission of its revised 
U.S. warranty expense, presented as a minor correction at the beginning 
of verification, should not be accepted as such by the Department. The 
petitioners argue that the amount of the reduction from the reported 
value to the value presented at verification, was such a substantial 
change that it should be rejected by the Department as an untimely 
submission of new factual information.
    In response, Palini asserts that its revision to U.S. warranty 
expenses was properly submitted as part of the minor corrections 
presented at the beginning of verification, pursuant to Department 
practice, and should be accepted as such by the Department.
    DOC Position: We agree with Palini. During our verification of 
Palini, we examined and traced selected credit notes to Palini's 
financial records and completed an overall financial reconciliation, 
which substantiated the validity of Palini's U.S. warranty expense 
revision. Following Department practice, because the corrections are 
limited to U.S. warranty expenses and were verified to our 
satisfaction, we accepted these corrections for purposes of the final 
results.

Comment 3: Early Payment Discounts

    The petitioners argue that Palini did not substantiate its claim 
that all customers who were offered an early payment discount actually 
made an early payment. The petitioners assert that pursuant to section 
351.308 of the regulations, the Department should disallow all home 
market early payment discounts as facts available because Palini failed 
to provide information that distinguished between sales where the 
discount was granted and sales where the discount was not granted.
    Palini argues that its reported early payment discounts were 
properly treated as a price adjustment in the preliminary 
determination. Palini states the Department affirmatively verified that 
when an early payment discount is granted, the amount of the discount 
is indicated in the invoice price. Therefore, Palini argues that the 
Department should not apply facts available to its early payment 
discount, but should treat it as a price adjustment to NV in the final 
results.
    DOC Position: We agree with Palini. During our home market 
verification of Palini, we conducted thorough sales traces which 
included ensuring the accuracy of Palini's early payment discounts 
through an examination of the reported gross unit price and the invoice 
price. We found no discrepancies. Furthermore, we were satisfied that 
for those sales transactions reviewed at verification, which included 
early payment discounts, the customer did utilize the early payment 
option whenever offered by Palini. Therefore, for these final results, 
we have continued to allow an adjustment to NV for Palini's reported 
early payment discounts.

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 Italy that were entered, or 
withdrawn from warehouse, for consumption on or after July 29, 1999 
(the date of publication of the Preliminary Determination in the 
Federal Register). The Customs Service shall continue to require a cash 
deposit or posting of a bond equal to the estimated amount by which the 
normal value exceeds the U.S. price as shown below. These suspension of 
liquidation instructions will remain in effect until further notice. 
The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                               Weighted-average margin
           Exporter/Manufacturer                     percentage
------------------------------------------------------------------------
Palini B Bertoli S.p.A....................  8.97
Ilva S.p.A................................  de minimis
All others................................  8.97
------------------------------------------------------------------------

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.


[[Page 73244]]


    Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33236 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-D