[Federal Register Volume 65, Number 24 (Friday, February 4, 2000)]
[Notices]
[Pages 5554-5583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1850]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-830]


Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products From 
Brazil

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

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

-----------------------------------------------------------------------

EFFECTIVE DATE:  February 4, 2000.

FOR FURTHER INFORMATION CONTACT:  Phyllis Hall (Companhia Siderurgica 
Nacional or CSN), Martin Odenyo (Usinas Siderurgicas de Minas Gerais 
and Companhia Siderrgica Paulista or USIMINAS/COSIPA), Nancy 
Decker, or Robert M. James, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W. Washington, DC 20230; telephone: (202) 482-
1398, (202) 482-5254, (202) 482-0196 and (202) 482-5222, respectively.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations codified at 19 CFR Part 351 (April 1999).

Final Determination

    We determine that certain cold-rolled flat-rolled carbon-quality 
steel products (cold-rolled steel) from Brazil are being, or are likely 
to be, sold in the United States at less than fair value (LTFV), as 
provided in section 735 of the Act. The estimated margins of sales at 
LTFV are shown in the Suspension of Liquidation section of this notice.

Case History

    We published in the Federal Register the Preliminary Determination 
in this investigation on November 10, 1999. See Notice of Preliminary 
Determination of Sales at Less Than Fair Value: Cold-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Brazil, 64 FR 61249 (November 10, 
1999) (Preliminary Determination). Since the publication of the 
PreliminaryDetermination the following events have occurred.
    One of the respondents in this investigation, Companhia Siderurgica 
Nacional (CSN) refused verification. The Department verified sections 
A-C of Usinas Siderugicas de Minas Gerais (USIMINAS') responses from 
November 15 through November 19, 1999, at USIMINAS' administrative 
headquarters in Belo Horizonte, Brazil. The Department verified section 
D of USIMINAS' response from November 8 through November 12, 1999, at 
USIMINAS' production facility in Ipatinga, Brazil. See Memorandum For 
the File; ``Sales Verification of Sections A-C Questionnaire Responses 
Submitted by Usinas Siderurgicas de Minas Gerais, S.A., December 23, 
1999 (USIMINAS' Sales Verification Report) and Memorandum to Neal 
Halper, Acting Director, Office of Accounting; ``Verification of the 
Cost of Production and Constructed Value Data--USIMINAS,'' December 20, 
1999 (USIMINAS' Cost Verification Report).
    The Department verified sections A-C of Companhia Siderurgica 
Paulista (COSIPA's) responses from November 8 through November 12, 
1999, at COSIPA's production facility in Cubatao, Brazil. The 
Department verified section D of COSIPA's response from November 15 
through November 20, 1999, at COSIPA's production facility in Cubatao, 
Brazil. See Memorandum For the File; ``Sales Verification of Sections 
A-C Questionnaire Responses Submitted by Companhia Siderurgica Paulista 
(COSIPA),'' December 17, 1999 (COSIPA's Sales Verification Report) and 
Memorandum to Neal Halper, Acting Director, Office of Accounting; 
``Verification of the Cost of Production and Constructed Value 
Submissions of Companhia Siderurgica Paulista,'' December 23, 1999 
(COSIPA's Cost Verification Report).
    The Department verified sections A (General Information) and B 
(Home Market Sales) responses of Rio Negro Industria e Comercio de Aco 
S.A. (Rio Negro) (an affiliated distributor of USIMINAS) on November 4 
and November 5, 1999. The verification was performed at Rio Negro's 
sales branch and administrative headquarters in Guarulhos, Brazil. See 
Memorandum to the File; ``Sales Verification Report of Rio Negro 
Industria e Comercio de Aco S.A.,'' December 27, 1999, (Rio Negro's 
Sales Verification Report). Public versions of these, and all other 
Departmental memoranda referred to herein, are on file in room B-099 of 
the main Commerce building.
    On November 29, 1999, Bethlehem Steel Corporation, Gulf States 
Steel, Inc., Ispat Inland Steel, LTV Steel Company, Inc., National 
Steel Corporation, Steel Dynamics, Inc.,U.S. Steel Group, a unit of USX 
Corporation, Weirton Steel Corporation, Independent Steelworkers Union, 
and United Steelworkers of America (petitioners) requested a public 
hearing. On January 6, 1999, the petitioners withdrew requests for a 
hearing, and therefore, there was no hearing for this investigation. On 
December 30, 1999, petitioners and USIMINAS/COSIPA filed case briefs. 
We received rebuttal briefs from petitioners, USIMINAS/COSIPA and CSN 
on January 5, 2000. On December 23, 1999, the Department sent a request 
to USIMINAS to submit a new home market sales listing as a result of 
minor corrections identified at verification. The Department received 
this information on December 30, 1999.

Scope of the Investigation

    For purposes of this investigation, the products covered are 
certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel 
products, neither clad, plated, nor coated with metal, but whether or 
not annealed, painted, varnished, or coated with plastics or other non-
metallic substances, both in coils, 0.5 inch wide or wider, (whether or 
not in

[[Page 5555]]

successively superimposed layers and/or otherwise coiled, such as 
spirally oscillated coils), and also in straight lengths, which, if 
less than 4.75 mm in thickness having a width that is 0.5 inch or 
greater and that measures at least 10 times the thickness; or, if of a 
thickness of 4.75 mm or more, having a width exceeding 150 mm and 
measuring at least twice the thickness. The products described above 
may be rectangular, square, circular or other shape and include 
products of either rectangular or non-rectangular cross-section where 
such 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.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (commonly referred to as interstitial-free (IF)) steels, 
high strength low alloy (HSLA) steels, and motor lamination steels. IF 
steels are recognized as low carbon steels with micro-alloying levels 
of elements such as titanium and/or niobium added to stabilize carbon 
and nitrogen elements. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum. Motor lamination steels contain 
micro-alloying levels of elements such as silicon and aluminum.
    Steel products included in the scope of this investigation, 
regardless of definitions in the Harmonized Tariff Schedules of the 
United States (HTSUS), are products in which: (1) iron predominates, by 
weight, over each of the other contained elements; (2) the carbon 
content is 2 percent or less, by weight, and; (3) none of the elements 
listed below exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
2.25 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 (also called columbium), or
0.15 percent of vanadium, or
0.15 percent of zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not exceed any one of the noted 
element levels listed above, are within the scope of this investigation 
unless specifically excluded. The following products, by way of 
example, are outside and/or specifically excluded from the scope of 
this investigation:

 SAE grades (formerly also called AISI grades) above 2300;
 Ball bearing steels, as defined in the HTSUS;
 Tool steels, as defined in the HTSUS;
 Silico-manganese steel, as defined in the HTSUS;
 Silicon-electrical steels, as defined in the HTSUS, that are 
grain-oriented;
 Silicon-electrical steels, as defined in the HTSUS, that are 
not grain-oriented and that have a silicon level exceeding 2.25 
percent;
 All products (proprietary or otherwise) based on an alloy ASTM 
specification (sample specifications: ASTM A506, A507);
 Non-rectangular shapes, not in coils, which are the result of 
having been processed by cutting or stamping and which have assumed the 
character of articles or products classified outside chapter 72 of the 
HTSUS.
 Silicon-electrical steels, as defined in the HTSUS, that are 
not grain-oriented and that have a silicon level less than 2.25 
percent, and
(a) fully-processed, with a core loss of less than 0.14 watts/pound per 
mil (.001 inch), or
(b) semi-processed, with core loss of less than 0.085 watts/pound per 
mil (.001 inch);
 Certain shadow mask steel, which is aluminum killed cold-
rolled steel coil that is open coil annealed, has an ultra-flat, 
isotropic surface, and which meets the following characteristics:
    Thickness: 0.001 to 0.010 inch
    Width: 15 to 32 inches

                          Chemical Composition
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Element................................................                C
Weight %...............................................          0.002%
------------------------------------------------------------------------

     Certain flapper valve steel, which is hardened and 
tempered, surface polished, and which meets the following 
characteristics:
    Thickness: 1.0 mm
    Width:  152.4 mm

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element...........................  C                       Si                      Mn                      P                      S
Weight %..........................  0.90-1.05               0.15-0.35               0.30-0.50               0.03        0.006
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Tensile Strength.......................  162 Kgf/mm \2\
Hardness...............................  475 Vickers hardness number
------------------------------------------------------------------------


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Flatness...............................  0.2% of nominal strip width
------------------------------------------------------------------------

    Microstructure: Completely free from decarburization. Carbides are 
spheroidal and fine within 1% to 4% (area percentage) and are 
undissolved in the uniform tempered martensite.

[[Page 5556]]



                         Non-metallic Inclusion
------------------------------------------------------------------------
                                                     Area Percentage
------------------------------------------------------------------------
Sulfide Inclusion %............................  0.04
Oxide Inclusion %..............................  0.05
------------------------------------------------------------------------

Compressive Stress: 10 to 40 Kgf/mm \2\

                            Surface Roughness
------------------------------------------------------------------------
             Thickness (mm)                   Roughness ()
------------------------------------------------------------------------
t 0.209.....................  Rz 0.5
0.209 t 0.310...............  Rz 0.6
0.310 t 0.440...............  Rz 0.7
0.440 t 0.560...............  Rz 0.8
0.560 t................................  Rz 1.0
------------------------------------------------------------------------

 Certain ultra thin gauge steel strip, which meets the 
following characteristics:
    Thickness: 0.100 mm 7%
    Width: 100 to 600 mm

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S                   Al                  Fe
Weight %.......................  0.07      0.2-0.5             0.05     0.05     0.07     Balance
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Hardness...............................  Full Hard (Hv 180 minimum)
Total Elongation.......................  3%
Tensile Strength.......................  600 to 850 N/mm \2\
------------------------------------------------------------------------


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Surface Finish.........................  0.3 micron.
Camber (in 2.0 m)......................  3.0 mm.
Flatness (in 2.0 m)....................  0.5 mm.
Edge Burr..............................  0.01 mm greater than thickness.
Coil Set (in 1.0 m)....................  75.0 mm.
------------------------------------------------------------------------

     Certain silicon steel, which meets the following 
characteristics:
    Thickness: 0.024 inch +/-.0015 inch
    Width: 33 to 45.5 inches

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S                   Si                  Al
Min. Weight %..................  ...................  ..................  ..................  ..................  0.65                ..................
Max. Weight %..................  0.004                0.4                 0.09                0.009               ..................  0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Hardness...............................  B 60-75 (AIM 65)
------------------------------------------------------------------------


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Finish.................................  Smooth (30-60 microinches)
Gamma Crown (in 5 inches)..............  0.0005 inch, start measuring \1/
                                          4\ inch from slit edge
Flatness...............................  20 I-UNIT max.
Coating................................  C3A-.08A max. (A2 coating
                                          acceptable)
Camber (in any 10 feet)................  \1/16\ inch
Coil Size I.D..........................  20 inches
------------------------------------------------------------------------


[[Page 5557]]


                           Magnetic Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Core Loss (1.5T/60 Hz).................  3.8 Watts/Pound max.
NAAS...................................
Permeability (1.5T/60 Hz)..............  1700 gauss/oersted typical
NAAS...................................  1500 minimum
------------------------------------------------------------------------

     Certain aperture mask steel, which has an ultra-flat 
surface flatness and which meets the following characteristics:
    Thickness: 0.025 to 0.245 mm
    Width: 381-1000 mm

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         N                        Al
Weight %............................  0.01                      0.004 to 0.007           0.007
----------------------------------------------------------------------------------------------------------------

     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, which meets the following characteristics:

                                                                                      Chemical Composition
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Element.........................  C               Mn              P               S               Si              Al             As             Cu             B              N
Min. Weight %...................  0.02            0.20            ..............  ..............  ..............  0.03           .............  .............  --             0.003
Max. Weight %...................  0.06            0.40            0.02            0.023           0.03            0.08           0.02           0.08           --             0.008
                                                                                  (Aiming                         (Aiming                                                     (Aiming 0.005)
                                                                                  0.018 Max.)                     0.05)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-metallic Inclusions: Examination with the S.E.M. shall not 
reveal individual oxides >1 micron (0.000039 inch) and inclusion groups 
or clusters shall not exceed 5 microns (0.000197 inch) in length.
    Surface Treatment as follows:
    The surface finish shall be free of defects (digs, scratches, pits, 
gouges, slivers, etc.) and suitable for nickel plating.

                                                 Surface Finish
----------------------------------------------------------------------------------------------------------------
                                                        Roughness, RA Microinches (Micrometers)
                                     ---------------------------------------------------------------------------
                                                 Aim                      Min.                     Max.
----------------------------------------------------------------------------------------------------------------
Extra Bright........................  5 (0.1)                   0 (0)                    7 (0.2)
----------------------------------------------------------------------------------------------------------------

     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, which meets the following characteristics:

                                                                                      Chemical Composition
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                      Si                     Mn                     P                      S                      Al                     N
Weight %.......................  0.08                   0.04                   0.40                   0.03                   0.03                   0.010-0.025            0.0025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Tolerance: Guaranteed inside   5 percent (aim
 of 15 mm from mill edges.                4 percent)
Width Tolerance........................  -0/+7 mm
Hardness (Hv)..........................  Hv 85-110
Annealing..............................  Annealed
Surface................................  Matte
Tensile Strength.......................  >275N/mm \2\
Elongation.............................  >36%
--------------------------------------------------------------------
     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, in coils, with a certificate of analysis per 
Cable System International (``CSI'') Specification 96012, with the 
following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S
Max. Weight %..................  0.13                 0.60                0.02                0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Base Weight............................  55 pounds
Theoretical Thickness..................  0.0061 inch (+/-10 percent of
                                          theoretical thickness)
Width..................................  31 inches
Tensile Strength.......................  45,000-55,000 psi

[[Page 5558]]

 
Elongation.............................  minimum of 15 percent in 2
                                          inches
------------------------------------------------------------------------

     Certain full hard tin mill black plate, continuously cast, 
which meets the following characteristics:

                                                                  Chemical Composition:
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element.......................  C           Mn          P           S           Si          Al         As         Cu         B          N
Min. Weight %.................  0.02        0.20        ..........  ..........  ..........  0.03       .........  .........  .........  0.003
Max. Weight %.................  0.06        0.40        0.02        0.023       0.03        0.08       0.02       0.08       .........  0.008 (Aiming
                                                                     (Aiming                 (Aiming                                     0.005)
                                                                     0.018                   0.05)
                                                                     Max.)
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-metallic Inclusions: Examination with the S.E.M. shall not 
reveal individual oxides < 1 micron (0.000039 inch) and inclusion 
groups or clusters shall not exceed 5 microns (0.000197 inch) in 
length.
    Surface Treatment as follows:
    The surface finish shall be free of defects (digs, scratches, pits, 
gouges, slivers, etc.) and suitable for nickel plating.

                                                 Surface Finish
----------------------------------------------------------------------------------------------------------------
                                                        Roughness, RA Microinches (Micrometers)
                                     ---------------------------------------------------------------------------
                                                 Aim                      Min.                     Max.
----------------------------------------------------------------------------------------------------------------
Stone Finish........................  16(0.4)                   8(0.2)                   24(0.6)
----------------------------------------------------------------------------------------------------------------

     Certain ultra-bright tin mill black plate meeting ASTM 7A 
specifications for surface finish and RA of seven micro-inches or 
lower.
     Concast cold-rolled drawing quality sheet steel, ASTM A-
620-97, Type B, or single reduced black plate, ASTM A-625-92, Type D, 
T-1, ASTM A-625-76 and ASTM A-366-96, T1-T2-T3 Commercial bright/luster 
7a both sides, RMS 12 maximum. Thickness range of 0.0088 to 0.038 
inches, width of 23.0 inches to 36.875 inches.
     Certain single reduced black plate, meeting ASTM A-625-98 
specifications, 53 pound base weight (0.0058 inch thick) with a Temper 
classification of T-2 (49-57 hardness using the Rockwell 30 T scale).
     Certain single reduced black plate, meeting ASTM A-625-76 
specifications, 55 pound base weight, MR type matte finish, TH basic 
tolerance as per A263 trimmed.
     Certain single reduced black plate, meeting ASTM A-625-98 
specifications, 65 pound base weight (0.0072 inch thick) with a Temper 
classification of T-3 (53-61 hardness using the Rockwell 30 T scale).
     Certain cold-rolled black plate bare steel strip, meeting 
ASTM A-625 specifications, which meet the following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.........................  C                     Mn                    P                    S
Max. Weight %...................  0.13                  0.60                  0.02                 0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness..............................  0.0058 inch 0.0003
                                          inch
Hardness...............................  T2/HR 30T 50-60 aiming
Elongation.............................   15%
Tensile Strength.......................  51,000 psi 4.0
                                          aiming
------------------------------------------------------------------------

     Certain cold-rolled black plate bare steel strip, in 
coils, meeting ASTM A-623, Table II, Type MR specifications, which meet 
the following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S
Max. Weight %..................  0.13                 0.60                0.04                0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness..............................  0.0060 inch (0.0005
                                          inch)
Width..................................  10 inches (+\1/4\ to
                                          \3/8\ inch/-0)
Tensile strength.......................  55,000 psi max.
Elongation:............................  minimum of 15 percent in 2
                                          inches
------------------------------------------------------------------------

     Certain ``blued steel'' coil (also know as ``steamed blue 
steel'' or ``blue oxide'') with a thickness of 0.30 mm to 0.42 mm and 
width of 609 mm to 1219 mm, in coil form;
     Certain cold-rolled steel sheet, whether coated or not 
coated with porcelain enameling prior to importation, which meets the 
following characteristics:
     Thickness (nominal):  0.019 inch

[[Page 5559]]

     Width: 35 to 60 inches

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         O                        B
Max. Weight %.......................  0.004                     .......................  .......................
Min. Weight %.......................  ........................  0.010                    0.012
----------------------------------------------------------------------------------------------------------------

     Certain cold-rolled steel, which meets the following 
characteristics:
     Width: > 66 inches

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.........................  C                     Mn                    P                    Si
Max. Weight %...................  0.07                  0.67                  0.14                 0.03
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)..........................  0.800-2.000
Min. Yield Point (MPa)........................  265
Max Yield Point (MPa).........................  365
Min. Tensile Strength (MPa)...................  440
Min. Elongation %.............................  26
------------------------------------------------------------------------

     Certain band saw steel, which meets the following 
characteristics:
    Thickness:  1.31 mm
    Width:  80 mm

                                                                                      Chemical Composition
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                      Si                     Mn                     P                      S                      Cr                     Ni
Weight %.......................  1.2 to 1.3             0.15 to 0.35           0.20 to 0.35            0.03                   0.007                 0.3 to 0.5              0.25
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Other properties:
    Carbide: fully spheroidized having > 80% of carbides, which are 
 0.003 mm and uniformly dispersed
    Surface finish: bright finish free from pits, scratches, rust, 
cracks, or seams, smooth edges
    Edge camber (in each 300 mm of length):  7 mm arc height
    Cross bow (per inch of width): 0.015 mm max.
     Certain transformation-induced plasticity (TRIP) steel, 
which meets the following characteristics:

Variety 1

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.09                      1.0                      0.90
Max. Weight %.......................  0.13                      2.1                      1.7
----------------------------------------------------------------------------------------------------------------


                                       Physical and Mechanical Properties
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Thickness Range (mm)........................  1.000-2.300 (inclusive)
Min. Yield Point (MPa)......................  320
Max Yield Point (MPa).......................  480
Min. Tensile Strength (MPa).................  590
Min. Elongation %...........................  24 (if 1.000-1.199 thickness range)
                                              25 (if 1.200-1.599 thickness range)
                                              26 (if 1.600-1.999 thickness range)
                                              27 (if 2.000-2.300 thickness range)
----------------------------------------------------------------------------------------------------------------

Variety 2

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.12                      1.5                      1.1
Max. Weight %.......................  0.16                      2.1                      1.9
----------------------------------------------------------------------------------------------------------------


                                       Physical and Mechanical Properties
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Thickness Range (mm)........................  1.000-2.300 (inclusive)

[[Page 5560]]

 
Min. Yield Point (MPa)......................  340
Max Yield Point (MPa).......................  520
Min. Tensile Strength (MPa).................  690
Min. Elongation %...........................  21 (if 1.000-1.199 thickness range)
                                              22 (if 1.200-1.599 thickness range)
                                              23 (if 1.600-1.999 thickness range)
                                              24 (if 2.000-2.300 thickness range)
----------------------------------------------------------------------------------------------------------------

Variety 3:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.13                      1.3                      1.5
Max. Weight %.......................  0.21                      2.0                      2.0
----------------------------------------------------------------------------------------------------------------


                                       Physical and Mechanical Properties
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Thickness Range (mm)........................  1.200-2.300 (inclusive)
Min. Yield Point (MPa)......................  370
Max Yield Point (MPa).......................  570
Min. Tensile Strength (MPa).................  780
Min. Elongation %...........................  18 (if 1.200-1.599 thickness range)
                                              19 (if 1.600-1.999 thickness range)
                                              20 (if 2.000-2.300 thickness range)
----------------------------------------------------------------------------------------------------------------

     Certain corrosion-resistant cold-rolled steel, which meets 
the following characteristics:

Variety 1:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   Cu
Min. Weight %..................  ...................  ..................  ..................  0.15
Max. Weight %..................  0.15                 0.40                0.08                0.35
----------------------------------------------------------------------------------------------------------------


                                       Physical and Mechanical Properties
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Thickness Range (mm)........................  0.600-0.800
Min. Yield Point (MPa)......................  185
Max Yield Point (MPa).......................  285
Min. Tensile Strength (MPa).................  340
Min. Elongation %...........................  31 (ASTM standard 31% = JIS standard 35%)
----------------------------------------------------------------------------------------------------------------

Variety 2:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   Cu
Min. Weight %..................  ...................  ..................  ..................  0.15
Max. Weight %..................  0.10                 0.40                0.10                0.35
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm).............  0.800-1.000
Min. Yield Point (MPa)...........  145
Max Yield Point (MPa)............  245
Min. Tensile Strength (MPa)......  295
Min. Elongation %................  31 (ASTM standard 31% = JIS standard
                                    35%)
------------------------------------------------------------------------

Variety 3:

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
-----------------------------------------------------------------------------------------------------------------------------------------------
Element.......................  C           Si          Mn          P          S          Cu         Ni         Al         Nb, Ti,    Mo
                                                                                                                            V, B
Max. Weight %.................  0.01        0.05        0.40        0.10       0.023      0.15-.35   0.35       0.10       0.10       0.30
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 5561]]


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness (mm):........................  0.7
Elongation %:..........................  35
------------------------------------------------------------------------

     Porcelain enameling sheet, drawing quality, in coils, 
0.014 inch in thickness, +0.002, -0.000, meeting ASTM A-424-96 Type 1 
specifications, and suitable for two coats.
    The merchandise subject to this investigation is typically 
classified in the HTSUS at subheadings:
7209.15.0000, 7209.16.0030, 7209.16.0060, 7209.16.0090, 
7209.17.0030, 7209.17.0060, 7209.17.0090, 7209.18.1530, 
7209.18.1560, 7209.18.2550, 7209.18.6000. 7209.25.0000, 
7209.26.0000, 7209.27.0000, 7209.28.0000, 7209.90.0000, 
7210.70.3000, 7210.90.9000, 7211.23.1500, 7211.23.2000, 
7211.23.3000, 7211.23.4500, 7211.23.6030, 7211.23.6060, 
7211.23.6085, 7211.29.2030, 7211.29.2090, 7211.29.4500, 
7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 
7212.40.5000, 7212.50.0000, 7225.19.0000, 7225.50.6000, 
7225.50.7000, 7225.50.8010, 7225.50.8085, 7225.99.0090, 
7226.19.1000, 7226.19.9000, 7226.92.5000, 7226.92.7050, 
7226.92.8050, and 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
U.S. Customs Service (``U.S. Customs'') purposes, the written 
description of the merchandise under investigation is dispositive.
    The Department received comments from a number of parties including 
importers, respondents, consumers, and the petitioners, aimed at 
clarifying the scope of these investigations. See Memorandum to Joseph 
A. Spetrini (Scope Memorandum), January 18, 2000, for a list of all 
persons submitting comments and a discussion of all scope comments 
including those exclusion requests under consideration at the time of 
the preliminary determination in these investigations.

Period of Investigation

    The period of the investigation (POI) is April 1, 1998, through 
March 31, 1999.

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.'' The statute 
requires that certain conditions be met before the Department may 
resort to the facts available. Where the Department determines that a 
response to a request for information does not comply with the request, 
section 782(d) of the Act provides that the Department will so inform 
the party submitting the response and will, to the extent practicable, 
provide that party the opportunity to remedy or explain the deficiency. 
If the party fails to remedy the deficiency within the applicable time 
limits, the Department may, subject to section 782(e), disregard all or 
part of the original and subsequent responses, as appropriate. Briefly, 
section 782(e) provides that the Department ``shall not decline to 
consider information that is submitted by an interested party and is 
necessary to the determination but does not meet all the applicable 
requirements established by [the Department]'' if the information is 
timely, can be verified, is not so incomplete that it cannot be used, 
and if the interested party acted to the best of its ability in 
providing the information. Where all of these conditions are met, and 
the Department can use the information without undue difficulties, the 
statute requires it to do so. In addition, section 776(b) of the Act 
provides that, if the Department finds that an interested party ``has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information,'' the Department may use information 
that is adverse to the interests of the party as the facts otherwise 
available. Adverse inferences are appropriate ``to ensure that the 
party does not obtain a more favorable result by failing to cooperate 
than if it had cooperated fully.'' See Statement of Administrative 
Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong. 2nd 
Sess. (1994), at 870. Furthermore, ``an affirmative finding of bad 
faith on the part of the respondent is not required before the 
Department may make an adverse inference.'' Final Rule: Antidumping 
Duties; Countervailing Duties:, 62 FR 27296, 27340 (May 19, 1997). The 
statute notes, in addition, that in selecting from among the facts 
available the Department may, subject to the corroboration requirements 
of section 776(c), rely upon information drawn from the petition, a 
final determination in the investigation, any previous administrative 
review conducted under section 751 (or section 753 for countervailing 
duty cases), or any other information on the record.
CSN
    We have determined that, in light of CSN's refusal to continue it's 
participation in this investigation, facts available are warranted with 
respect to CSN for the final determination. Further, as a result of 
CSN's refusal to permit verification, adverse inferences are 
appropriate, pursuant to section 776(b). The Department, for this final 
determination, has selected as the facts otherwise available with 
respect to CSN, the highest margin in the petition of 63.32 percent. 
Please see Comment 3 below for a more detailed explanation of this 
issue.
USIMINAS/COSIPA
    Please see comment section below.

Critical Circumstances

    As in the Preliminary Determination, 64 FR 61249, 61261 (November 
10, 1999), we continue to find critical circumstances for respondents 
USIMINAS/COSIPA as well as for ``all others.'' As for CSN, due to its 
refusal to permit verification of its company-specific shipment data 
for the base and comparison periods, we no longer have reliable data 
upon which to base a critical circumstances determination for this 
respondent. Therefore, we must use facts available in accordance with 
section 776(a) of the Act. Accordingly, we examined whether U.S. 
Customs data reasonably preclude an increase in shipments of fifteen 
percent or more within a relatively short period for CSN. However, 
these data include products not subject to this investigation and, 
therefore, we cannot rely on these data in determining whether there 
were massive shipments of subject merchandise over a relatively short 
period. Moreover, these data do not permit the Department to ascertain 
the import volumes for any individual company, including CSN. 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 CSN over a relatively short period.
    With respect to companies in the ``all others'' category, it is the 
Department's normal practice to base its determination on the 
experience of

[[Page 5562]]

investigated companies. See Notice of Final Determination of Sales at 
Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate 
From Japan, 64 FR 73215, 73218 (December 29, 1999), and Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Steel Concrete 
Reinforcing Bars from Turkey , 62 FR 9737, 9741 (March 4, 1997). 
However, for companies in the ``all others'' category we do not use 
adverse facts available. Accordingly, we considered the verified 
shipping data of the other mandatory respondents (USIMINAS/COSIPA). In 
this case, we found massive imports for USIMINAS/COSIPA, based on an 
increase in imports of more than 100 percent. We also considered 
whether U.S. customs data would permit the Department to analyze 
imports of subject merchandise by other producers (by, for example, 
backing out shipments by USIMINAS/COSIPA). However, these data include 
products not subject to this investigation. Therefore, it is not 
appropriate to base our critical circumstances determination on these 
data. (See Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Sheet and Strip in Coils From Germany, 64 FR 30710, 
30728 (June 8, 1999)). We considered that the sole respondent with 
verified scope-specific shipment data for the base and comparison 
periods demonstrated massive imports. See Preliminary Determination, 64 
FR 61249,61261 (November 10, 1999) Based on these facts, we find that 
there were massive imports from the uninvestigated companies.
    Accordingly, for this final determination we find that critical 
circumstances exist for USIMINAS/COSIPA, CSN and for the ``all others'' 
category.

Fair Value Comparisons

    To determine whether sales of cold-rolled steel products from 
Brazil were made at less than fair value, we compared the export price 
(EP) to the normal value (NV), as described in the Export Price and 
Normal Value sections of this notice below. In accordance with section 
777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs for 
comparison to weighted-average NVs.

Product Comparisons

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

Affiliated Respondents

    In our preliminary determination, we determined that USIMINAS and 
COSIPA were affiliated parties, and we collapsed these entities. See 
Collapsing Memorandum to Joseph A. Spetrini from Richard Weible, 
October 12, 1999 (Collapsing Memo). For the purpose of this 
investigation, we continue to consider these two respondents as a 
single entity. Petitioners also argue that all three respondents are 
affiliated and should be collapsed. For this final determination, the 
Department determined that there is insufficient evidence on the record 
to warrant a collapsing of all three respondents. See Comment 1 below 
for a further discussion of this issue.

Level of Trade

USIMINAS/COSIPA
    In our preliminary determination, the Department found that in the 
home market USIMINAS/COSIPA made sales to end-users, affiliated 
distributors, and unaffiliated distributors. USIMINAS/COSIPA claims 
seven ``channels of distribution'' with respect to home market sales: 
(1) Mill to original equipment manufacturer (OEMs); (2) mill to 
affiliated distributor; (3) mill to unaffiliated distributor; (4) 
affiliated distributor to affiliated distributor; (5) affiliated 
distributor to OEM; (6) affiliated distributor to non-affiliated 
distributor; and (7) affiliated distributor to retailer. As in the 
Preliminary Determination, we determine that the selling functions of 
the affiliates for downstream sales were significantly different than 
those for mill direct sales, and therefore, we determine that 
downstream sales by affiliates were made at a different level of trade 
(LOT) than other HM sales.
    In addition, while USIMINAS/COSIPA mill direct sales to end-users 
(whether or not further processed) and mill direct sales to 
unaffiliated distributors involve different channels of distribution, 
these sales do not involve significant differences in selling 
functions. Therefore, we do not consider these channels to represent 
different levels of trade. Thus, we determine that downstream sales and 
mill direct sales represent two different home market LOTs.
    In the U.S. market USIMINAS/COSIPA claim that all sales were made 
at one level of trade, through one channel of distribution. USIMINAS/
COSIPA state that all U.S. sales were made to unaffiliated trading 
companies. As in the Preliminary Determination, the Department finds 
U.S. sales to be at the same LOT as home market mill direct sales. 
Therefore, U.S. sales were only compared to home market mill direct 
sales, and no LOT adjustment was necessary.

Export Price

    The Department based its calculations on EP in accordance with 
section 772(a) of the Act, because the subject merchandise was sold by 
the producer or exporter directly to the first unaffiliated purchaser 
in the United States prior to importation. The Department calculated EP 
based on packed prices charged to the first unaffiliated customer in 
the United States.
    We calculated EP for USIMINAS/COSIPA based on the same methodology 
employed in the Preliminary Determination, except as noted in the 
comment section below, and in addition, amounts reported as warranty 
for U.S. sales are treated as movement expenses in the final 
determination (see Final Analysis Memorandum dated January 18, 2000).

Normal Value

Home Market Viability

    As discussed in the Preliminary Determination, we determined that 
the home market was viable for USIMINAS/COSIPA. Therefore, we based NV 
on home market sales in the usual commercial quantities and in the 
ordinary course of trade.

Affiliated-Party Transactions and Arm's Length Test

    Sales to affiliated customers in the home market not made at arm's 
length prices (if any) were excluded from our analysis because we 
consider them to be outside the ordinary course of trade. See 19 CFR 
351.102. To test whether these sales were made at arm's length prices, 
we compared, on a model-specific basis, the prices of sales to 
affiliated and unaffiliated customers, net of all movement charges, 
direct selling expenses, and packing. Where, for the tested models of 
subject merchandise, prices to the affiliated party were on average 
99.5% or more of the price to unaffiliated parties, we determined that 
sales made to the affiliated party were at arm's length. See 19 CFR 
351.403(c) and Preamble to 19 CFR 351.403(c). In

[[Page 5563]]

instances where no price ratio could be constructed for an affiliated 
customer because identical merchandise was not sold to unaffiliated 
customers, we were unable to determine that sales to that affiliated 
customer were made at arm's length prices and, therefore, we excluded 
them from our LTFV analysis. See, e.g., Final Determination of Sales at 
Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products 
from Argentina, 58 FR 37062, 37077 (July 9, 1993).
    Where the exclusion of such sales eliminated all sales of the most 
appropriate comparison product, we made a comparison to the next most 
similar model.

Cost of Production Analysis

    Petitioners provided reasonable grounds to believe or suspect that 
USIMINAS/COSIPA's sales of the foreign like product under consideration 
for determining NV may have been at prices below the cost of production 
(COP), as provided in section 773(b)(2)(A)(ii) of the Act. Therefore, 
pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation of sales by the respondents in this investigation.
    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP based on the sum of respondents' cost of 
materials, fabrication, general expenses, and packing costs. We relied 
on USIMINAS/COSIPA's submitted COP, except in the following specific 
instances:
    1. For USIMINAS we adjusted the transfer price for iron ore 
obtained from an affiliated supplier in accordance with the major input 
rule. See Comment 20.
    2. Consistent with the preliminary determination we revised its 
submitted G&A expense ratio to exclude packing expenses from the cost 
of goods sold used as the denominator in the calculation of the ratio. 
In addition, for the final determination we revised the G&A expense 
ratio to include employee profit sharing expenses and write-offs of 
idled-assets. See Comments 22 and 24.
    3. We revised the reported cost of manufacturing (COM) to include 
idled-asset depreciation expense in COSIPA's costs. See Comment 23.
    4. Consistent with the preliminary determination we revised 
respondents submitted financial expense ratio to include expenses for 
export financing and exclude foreign exchange losses related to 
accounts receivable. See Comment 21.

Test of Home Market Prices

    We compared the weighted-average COP for each respondent, adjusted 
where appropriate (see above), to home market sales of the foreign like 
product, as required under section 773(b) of the Act, in order to 
determine whether these sales had been made at prices below the COP. In 
determining whether to disregard home market sales made at prices below 
the COP, we examined whether such sales were made (1) within an 
extended period of time in substantial quantities, and (2) at prices 
which permitted the recovery of all costs within a reasonable period of 
time in the normal course of trade, in accordance with sections 
773(b)(1)(A) and (B) of the Act. On a product-specific basis, we 
compared the COP to home market prices (including billing adjustments), 
less any applicable movement charges, discounts and rebates, and vat 
taxes (ICMS and IPI).

Results of the COP Test

    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of the respondent's sales of a given product were at prices 
less than the COP, we did not disregard any below-cost sales of that 
product because we determined that the below-cost sales were not made 
in substantial quantities. Where 20 percent or more of the respondent's 
sales of a given product during the POI were at prices less than the 
COP, we determined such sales to have been made in substantial 
quantities within an extended period of time, in accordance with 
section 773(b)(2)(B) of the Act. Because we compared prices to POI or 
fiscal year average costs, we also determined that such sales were not 
made at prices which would permit recovery of all costs within a 
reasonable period of time, in accordance with section 773(b)(2)(D) of 
the Act. Therefore, we disregarded the below-cost sales.

Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
general expenses, U.S. packing costs, and profit. We made adjustments 
to each respondent's reported cost as indicated above in the COP 
section. In accordance with section 773(e)(2)(A) of the Act, we based 
selling, general and administrative expenses and profit on the amounts 
incurred and realized by each respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in Brazil. For selling expenses, we used the 
actual weighted-average home market direct and indirect selling 
expenses.

Price-to-Price Comparisons

    We performed price-to-price comparisons where there were sales of 
comparable merchandise in the home market that did not fail the cost 
test. We made adjustments, where appropriate, for physical differences 
in the merchandise in accordance with section 773(a)(6)(C)(ii) of the 
Act, as well as for differences in circumstances of sale (COS) in 
accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 
of the Department's regulations. In accordance with section 773(a)(6) 
of the Act, we deducted home market packing costs and added U.S. 
packing costs (see Comment 8).
    As in the Preliminary Determination, we find it is appropriate to 
use two averaging periods to avoid the possibility of a distortion in 
the dumping calculation. This methodology is consistent with our policy 
adopted in Stainless Steel Plate in Coils from Korea, 64 FR 15444, 
15452 (March 31, 1999) (SSPC from Korea) and Stainless Steel Sheet and 
Strip from Korea, 64 FR 30664, 30676 (June 8, 1999) (Stainless Sheet 
from Korea). Therefore, for all respondents, we have used two averaging 
periods for this final determination, the beginning of the POI through 
January 12, 1999, and January 13, 1999, through the end of the POI.
    We calculated NV for USIMINAS/COSIPA based on the same methodology 
employed in the Preliminary Determination except as noted in the 
comment section below, in addition to minor changes noted in the Final 
Analysis Memorandum as a result of verification.

Currency Conversion

    As in the Preliminary Determination, our analysis of dollar-real 
exchange rates show that the real declined rapidly in early 1999, 
losing over 40 percent of its value in January 1999, when the Brazilian 
government ended its exchange rate restrictions. The decline was, in 
both speed and magnitude, many times more severe than any change in the 
dollar-real exchange rate during recent years, and it did not rebound 
significantly in a short time. As such, we determine that the decline 
in the real during January 1999 was of such magnitude that the dollar-
real exchange rate cannot reasonably be viewed as having simply 
fluctuated at that time, i.e., as having experienced only a momentary 
drop in value relative to the normal benchmark. We find that there was 
a large, precipitous drop in the value of the real in relation to the 
U.S. dollar in January 1999.

[[Page 5564]]

    We used daily rates from January 13, 1999 through March 4, 1999 
based on the analysis discussed in the preliminary determination. We 
then resumed the use of our normal methodology through the end of the 
period of investigation (March 31, 1999), starting with a benchmark 
based on the average of the 20 reported daily rates on March 5, 1999. 
See Comment 3 below for further discussion of our methodology.

Analysis of Interested Party Comments

I. Issues Pertaining to All Three Respondents

Comment 1: Whether To Collapse USIMINAS/COSIPA With CSN
    Petitioners assert that in addition to collapsing USIMINAS/COSIPA, 
all of the respondents should be collapsed into a single entity for 
purposes of this investigation. They argue that CSN and USIMINAS/COSIPA 
produce the same products, share common directors, and have intertwined 
operations, all of which create the potential for the manipulation of 
price or production. Referring to the Letter from Dewey Ballantine LLP 
to the U.S. Department of Commerce, Case No. A-351-828 (March 11, 1999) 
(Collapsing Comments) and the November 8, 1999, submission by 
petitioners in the instant case, petitioners argue that the linkages 
between all three respondents clearly satisfy the affiliation and 
collapsing criteria set out in the Department's regulations.
    Petitioners cite to the definition of affiliated parties and what 
constitutes ``control'' of one entity over another in section 
771(33)(E) and (G) of the Act and in the Statement of Administrative 
Action, H.R. Doc. No. 103-316, at 838-30 (1994) (SAA). Petitioners 
maintain that CSN, in conjunction with Companhia Vale do Rio Doce 
(CVRD) and other affiliated companies, or the ``CSN/CVRD group,'' is 
affiliated with USIMINAS/COSIPA as evidenced by (1) the CSN/CVRD group 
sharing equity and managerial relationships, thereby establishing a 
single business unity under the control of Benjamin Steinbruch, the 
chairman of the board of CSN and CVRD; (2) the CSN/CVRD group being the 
largest single shareholder in USIMINAS. See Memorandum from Case 
Analysts to the File, Case No. A-351-830 at Exhibit 2, page 1 (December 
23, 1999) (USIMINAS Sales Verification Report); and (3) the ``CSN/CVRD 
group'' sharing board members with USIMINAS.
    Petitioners note that the Department's regulations at section 
351.401(f)(2) provide that two or more affiliated producers will be 
collapsed where producers have production facilities for similar and 
identical products that would not require substantial retooling of 
either facility in order to restructure manufacturing priorities, and 
the Secretary concludes there is significant potential for manipulation 
of price or production. Referring to this same section, which explains 
that the Department examines the following factors, among others: (i) 
The level of common ownership; (ii) overlapping board of directors; and 
(iii) whether operations are intertwined, such as through involvement 
in production and pricing decisions, petitioners claim that there is a 
potential for CSN and USIMINAS/COSIPA to manipulate price and 
production. According to petitioners, CSN and USIMINAS/COSIPA are 
capable of easily shifting production among themselves, as evidenced by 
similar production facilities and similar products. Additionally, 
petitioners point out that the Brazilian government determined that 
CVRD, the biggest shareholder in USIMINAS and a major shareholder in 
CSN, should sell off some or all of its steel assets on the basis of 
``unacceptable concentration of interests and abuse of economic 
power.'' See Petitioners' November 8, 1999 submission at 2-3 and 
Attachment 1 (``CVRD Told to Sell Steel Interests,'' Metal Bulletin, 
August 19, 1999, at 19). Petitioners also point out that the Brazilian 
government has been investigating, and recently fined, CSN, USIMINAS, 
and COSIPA for price-fixing and allegedly operating a cartel. See 
Petitioners' November 8, 1999 submission at 2-3 and Attachment 2 
(``Brazilian Mills Deny Price-Fixing, Face Large Fines,'' Metal 
Bulletin, November 1, 1999, at 3).
    Petitioners cite cases (see FAG Kugelfischer v. United States, 932 
F. Supp. 315 (CIT 1996); Nihon Cement Co., Ltd. v. United States, 17 
CIT 400 (1993); Queen's Flowers de Colombia, et al., v. United States, 
981 F. Supp. 617 (CIT 1997)) in which the U.S. Court of International 
Trade (the Court) upheld the Department's articulation of these 
collapsing criteria. Petitioners state that the central issue according 
to the Court is ``whether parties are sufficiently related to present 
the possibility of price manipulation.'' Petitioners stress that there 
is more than a ``possibility'' of price manipulation in the instant 
investigation, and that evidence confirms that the three companies are 
extensively intertwined and act collectively to manipulate prices and 
production.
    According to petitioners, CSN's refusal to cooperate in this 
investigation or to permit verification at its facilities casts doubts 
on CSN's assertion that it operates independently. Furthermore, 
petitioners claim that the factors in this investigation are similar to 
those relied upon in prior determinations such as Final Results of 
Antidumping Duty Administrative Review: Certain Fresh Cut Flowers from 
Columbia, 61 FR 42833, 42853 (August 19, 1996) (Fresh Cut Flowers); 
Final Results of Antidumping Duty Administrative Review: Gray Portland 
Cement and Clinker from Mexico, 64 FR 13148, 13151 (March 17, 1999); 
Final Determination of Sales at Less than Fair Value: Stainless Steel 
Wire Rod from Sweden, 63 FR 40449, 40453-54 (July 29, 1998); and Final 
Results of Antidumping Duty Administrative Review and Partial 
Termination of Administrative Review: Circular Welded Non-Alloy Steel 
Pipe from the Republic of Korea, 62 FR 55574, 55587-88 (October 27, 
1997), in which the Department collapsed respondents. Petitioners argue 
that the record in the instant case is even more compelling because of 
the findings of the Brazilian government. Petitioners concluded that 
the three companies should be assigned a single rate in this 
investigation based on the companies meeting the statutory standard for 
affiliation and collapsing, the documentation of collusive practices by 
the Brazilian government, CSN's refusal to cooperate, and the 
Department's previous decisions.
    CSN counters that petitioners have not provided any new or 
convincing arguments or information to support collapsing. CSN stresses 
that two criteria in section 351.401(f)(1) of the Department's 
regulations must be met with respect to collapsing: (1) The companies 
are affiliated, and (2) the companies have similar production 
facilities that could be used to restructure manufacturing priorities 
and there is a significant potential for manipulation of price or 
production. Regarding criterion one, CSN argues that shareholdings and 
board memberships have not changed since the Hot-Rolled Steel from 
Brazil investigation, where the Department found an absence of 
affiliation (see Notice of Final Determination of Sales at Less Than 
Fair Value; Certain Hot-Rolled Flat-Rolled Carbon Quality Steel 
Products from Brazil, 64 FR 38756, 38762-63 (July 19, 1999) (Hot-Rolled 
Steel from Brazil)) nor have they changed since the cold-rolled 
countervailing verification of CSN and CVRD (CVD Verification Report of 
CVRD at 1-2 (December 1, 1999); and

[[Page 5565]]

CVD Verification Report of CSN at 2 (December 1, 1999).
    CSN points out that the Brazilian government findings, which it 
claims is the only new information proffered by petitioners, does not 
meet criterion two: the potential for the manipulation of price or 
production. CSN states that the Brazilian government was merely 
recommending CVRD sell some or all of its steel assets, and that the 
government observed the ``possibility'' of limited competition. CSN 
claims that this does not mean that CVRD controls either CSN or 
USIMINAS/COSIPA, or that petitioners have produced any new facts. 
Regarding the charges of price-fixing between CSN and USIMINAS/COSIPA, 
CSN maintains that these charges are not true. Nonetheless, CSN claims 
that the Brazilian government's investigation proves that CSN and 
USIMINAS/COSIPA are not affiliated, since affiliated companies are 
permitted to discuss and set prices. Furthermore, CSN emphasizes that 
the Brazilian government claimed that the companies were resembling a 
cartel not a monopoly; but, in any case, the government has not brought 
up charges.
    CSN concludes that the second criterion of the law cannot be used 
to prove the first criterion, and that petitioners have failed to 
present anything new on the issue of affiliation. Although petitioners 
presented new information on the issue of price manipulation, CSN 
states that this information, which is being appealed, does not prove 
that the companies are affiliated.
    USIMINAS/COSIPA (hereinafter, referred to as respondents) agree 
with CSN that the collapsing argument is moot because the Department 
has already rejected it six times in four consecutive investigations. 
Respondents assert that, in the Hot-Rolled Steel from Brazil 
investigation, the Department had rejected the significance of USIMINAS 
and CSN sharing a board member and the allegations of price fixing. See 
Hot-Rolled Steel From Brazil, 64 FR 38756, 38762-38763. Additionally, 
respondents point out that Mr. Gabriel Stoliar, who petitioners claim 
was a member of the board for both USIMINAS and CSN during the POI, has 
not served on the USIMINAS board since June 1999. See USIMINAS Sales 
Verification Report at 9-10.
    On the subject of price-fixing, respondents state that USIMINAS/
COSIPA and CSN are fierce competitors. See CVD Verification Report of 
CSN at 3 (December 1, 1999). Respondents argue that the Brazilian 
authorities' price-fixing allegations, which USIMINAS/COSIPA have 
denied, support their claim that they have a competitive relationship 
with CSN and that the companies are not affiliated. Referring to Milton 
Handler et Al., Trade Regulation ch. 4 (3d ed. 1990) (discussing 
``Competitor Collaboration on Price Fixing and Division of Markets,'') 
respondents argue that price-fixing arises when competitors share price 
information, not when different arms of the same company share it.
    Respondents also agree with CSN that the Brazilian government's 
recommendation that CVRD divest itself of certain investments was 
merely an unenforceable policy recommendation. Respondents follow up by 
stressing that CVRD does not face any sanctions or penalties if it does 
not act on the Brazilian government's recommendation. See CVD 
Verification Report of CVRD at 2. Additionally, respondents agree with 
CSN that this information does not prove that CVRD actually controls 
both CSN and USIMINAS.
    Respondents argue that petitioners documented links between CVRD 
and CSN, not between CSN and USIMINAS or even CVRD and USIMINAS. In any 
case, respondents emphasize that neither CSN nor CVRD controls 
USIMINAS, as noted in the Hot-Rolled Steel From Brazil, 64 FR 38756, 
38763 and the CVD Verification Report of CVRD at 2, or COSIPA. 
Furthermore, respondents claim that CVRD almost sued USIMINAS to 
withdraw its investment, the two companies are moving toward a more 
distant relationship, and CVRD refused to assist USIMINAS in responding 
to the Department's requests for information. See USIMINAS and COSIPA's 
Section A Response, July 20, 1999, at Exhibit. 9; USIMINAS Verification 
Report at 7 and 8; CVD Verification Report of CVRD at 2, and 
Respondents Rebuttal Brief, January 5, 2000 at Exhibit 3.
    As to petitioners comments regarding CSN's refusal to cooperate in 
verification, respondents counter that the Department did verify CSN 
extensively in the CVD proceeding, but have no opinion as to whether 
the Department should apply adverse facts available against CSN for not 
participating further in the instant investigation (see Comment 2). 
However, respondents strongly disagree with petitioners' argument that 
the Department apply adverse facts available against USIMINAS/COSIPA 
because of CSN's withdrawal from the case. Respondents state that 
applying adverse facts available on one company based on the actions of 
another unaffiliated company is against WTO agreements, the U.S. 
``facts available'' statute, the Department's regulations, and the 
Department's practice (see Section 773e(b) of the Act). Respondents 
emphasize that they fully cooperated with the Department on the 
collapsing issue; therefore the Department cannot render its collapsing 
decision on the basis of facts available (see 19 U.S.C. section 1677e). 
Furthermore, respondents contend that applying adverse facts available 
in the collapsing issue would reward CSN for its non-participation, 
while penalizing USIMINAS/COSIPA for their full cooperation, because 
this would result in lower weighted-average rate for CSN and a higher 
rate for USIMINAS/COSIPA than the rates calculated in the Preliminary 
Determination.
    Respondents conclude that the cases petitioners discussed with 
respect to the collapsing issue are based on factors that are 
completely absent from the instant investigation. USIMINAS/COSIPA and 
CSN should not be collapsed because they are not mutually controlled by 
a third party, and do not control each other. In addition, respondents 
note that petitioners have abandoned their argument in the parallel 
countervailing duty investigation.
Department's Position
    We disagree with petitioners. The Department has determined that 
USIMINAS and COSIPA should be collapsed for margin calculation 
purposes. To collapse CSN with USIMINAS/COSIPA, as petitioners suggest, 
requires that we first find that CSN and USIMINAS/COSIPA are affiliated 
parties within the meaning of section 771(33) of the Act. Because we 
find that USIMINAS/COSIPA is not affiliated with CSN, we have not 
collapsed these entities for purposes of this investigation.
    The issue of whether CSN is affiliated with USIMINAS/COSIPA is 
governed by section 771(33) of the Act, which deems the following 
persons to be affiliated: (A) Members of a family; (B) any officer or 
director of an organization and such organization; (C) partners; (D) 
employer and employees; (E) any person directly or indirectly owning, 
controlling, or holding with power to vote, 5% or more of the 
outstanding voting stock or shares of any organization and such 
organization; (F) two or more persons directly or indirectly 
controlling, controlled by, or under common control with, any person; 
and (G) any person who controls any other person and such other person. 
For purposes of this provision, a person controls another person if the 
person is in a position to exercise restraint or direction over the

[[Page 5566]]

other person. Petitioners arguments for finding USIMINAS/COSIPA and CSN 
affiliated appear to be based on subparagraphs (E) and (G) of section 
771(33) of the Act.
    Pursuant to section 771(33)(E), the Department examined CSN's 
ownership interest, direct or indirect, in USIMINAS (USIMINAS/COSIPA 
does not own or control any shares in CSN). CSN owns a 31% equity 
interest in Valepar, which owns 27% of CVRD. Throughout the POI, CVRD, 
in turn, had a 15.48%, 23.14%, or 22.99% interest in USIMINAS, with 
changes in equity interest taking place in July 1998 and January 1999. 
Even assuming the highest possible percentages of equity ownership by 
CSN in Valepar, by Valepar in CVRD, and by CVRD in USIMINAS, CSN would 
own well under 5% of USIMINAS. Based on this evidence, CSN and 
USIMINAS/COSIPA are not affiliated within the meaning of section 
771(33)(E) of the Act.
    With respect to affiliation based on control, petitioners have not 
clearly identified which entities they believe are in a position to 
exercise control over CSN and USIMINAS (or USIMINAS/COSIPA) or on which 
specific subparagraph (F or G) of section 771(33) they are relying in 
their analysis. Therefore, we have analyzed petitioners comments under 
both section 771(33)(F) and (G).
    In accordance with section 771(33)(F), we first examined whether 
the record establishes common control over these entities by Mr. 
Steinbruch, CVRD, or Previ pension fund (which itself holds significant 
ownership interests in CSN, CVRD, and USIMINAS) as separate entities. 
Assuming arguendo that we were to conclude that Mr. Steinbruch, as 
chairman of CSN's board of directors, controls CSN, the record contains 
no evidence that he controls USIMINAS.
    CVRD is affiliated with both CSN and USIMINAS under section 
771(33)(E). CVRD directly owns more than 5% of USIMINAS (22.99% of the 
voting shares at the end of the POI) and indirectly owns, through its 
holdings in Docenave, more than 5% of CSN (10.3% of the voting shares). 
However, CVRD does not control both CSN and USIMINAS. Mr. Gabriel 
Stoliar, the CEO of CVRD, serves on the eight-to-ten-member boards of 
both CSN and USIMINAS. However, Brazilian law prohibits board members 
from representing any other company's interests while serving on the 
board of a different company. See COSIPA's Sales Verification Report at 
4. In addition, the record indicates that the USIMINAS board of 
directors (the ``administrative council'') is responsible for 
macroeconomic issues such as investment matters and does not control 
daily operations. See USIMINAS' Sales Verification Report at 9. 
Finally, CVRD is not a member of the USIMINAS shareholder's agreement, 
whose members control 50.52% of the voting stock of that company. The 
Department finds that, under the circumstances of this case, CVRD is 
not in a position to control USIMINAS within the meaning of section 
771(33) of the Act. Because CVRD does not control USIMINAS, it cannot 
exercise common control over both CSN and USIMINAS within the meaning 
of subsection (F). Therefore, the issue of whether CVRD controls CSN is 
moot for purposes of this analysis.
    Previ, like CVRD, is affiliated with both CSN and USIMINAS through 
equity ownership. However, subsection (F) requires a finding of common 
control, not merely of common affiliation. Previ is not a member of the 
USIMINAS shareholders' agreement, which controls 50.52% of the voting 
stock of that company. Nor is there other evidence that Previ is in a 
position to control USIMINAS. Because the record evidence does not 
establish that Previ is in a position to control USIMINAS, we find that 
CSN and USIMINAS are not affiliated by virtue of common control by 
Previ.
    The SAA recognizes that, even in the absence of an equity 
relationship, control may be established ``through corporate or family 
groupings'' (see SAA at 838), i.e., a corporate or family group may 
constitute a ``person'' within the meaning of section 771(33) of the 
Act. See Ferro Union v. United States, Slip Op. 99-27 (CIT, March 23, 
1999). In such a case, the control factors of individual members of the 
group (e.g., stock ownership, management positions, board membership) 
are considered in the aggregate. Accordingly, the Department considered 
whether USIMINAS and CSN are affiliated by virtue of common control by 
a corporate or family group.
    What constitutes a ``corporate group'' for purposes of the 
affiliation analysis is not defined; the Department must address the 
issue on a case-by-case basis. The cases in which the Department has 
recognized that affiliation exists by virtue of participation in the 
same corporate or family group involved common control of the firms at 
issue by members of the same family, the same group of investors, or 
the same group of corporations. In other words, the ``control group'' 
language in the SAA does not add a new criterion to the statutory 
definition of ``affiliation.'' It merely acknowledges that the 
controlling entity of the ``common control'' provision can be something 
other than a physical or legal person, and can exercise that common 
control by means other than equity ownership. It does not allow for 
treating all affiliation relationships as if they created new ``control 
groups.'' With respect to USIMINAS and CSN, there is no such pattern of 
common control. We do not find any definable corporate group that 
controls both CSN and USIMINAS. Thus, we do not have a basis in the 
record to find affiliation under section 771(33)(F) of the Act.
    With respect to section 771(33)(G) of the Act, petitioners have 
again failed to clearly identify a basis for finding that CSN controls 
USIMINAS (or USIMINAS/COSIPA), or vice versa. Petitioners appear to 
argue that CSN and CVRD are a ``corporate group'' for purposes of the 
affiliation analysis. While we agree that CSN and CVRD are affiliated, 
that by itself is not sufficient to consider them a ``corporate group'' 
for purposes of an affiliation analysis. Moreover, even if the 
Department were to treat CSN and CVRD as a corporate group, there is no 
evidence that the alleged ``CSN/CVRD group'' controls USIMINAS within 
the meaning of section 771(33)(G) of the Act. More to the point, we do 
not find a sufficient basis in the record to treat CSN, CVRD and Previ 
as a corporate group for purposes of the affiliation analysis. See Hot-
Rolled Steel From Brazil, 64 FR 38756, 38762.
    Although petitioners have submitted new information since the Hot-
Rolled Steel From Brazil on the investigation by the Brazilian Ministry 
of Justice of these companies, there is not sufficient evidence on the 
record to determine that USIMINAS/COSIPA and CSN should be collapsed. 
As noted by respondents, section 351.401(f)(1) of the Department's 
regulations indicates that the two criteria must be met with respect to 
collapsing: (1) the companies are affiliated, and (2) the companies 
have similar production facilities that could be used to restructure 
manufacturing priorities and there is a significant potential for 
manipulation of price or production. While the Brazilian Ministry of 
Justice investigation may relate to the second criterion, the first 
threshold requirement, affiliation, has not been met.
    Because the record evidence does not support a finding that 
USIMINAS (or USIMINAS/COSIPA) and CSN are affiliated under any 
provision of section 771(33), there is no basis to apply the collapsing 
criteria in section 351.401(f). Therefore, the Department has continued 
to treat CSN and USIMINAS/

[[Page 5567]]

COSIPA as separate entities for the purposes of this investigation.

II. Company Specific Sales Comments

CSN
Comment 2: Use of Total Facts Available for CSN
    Petitioners state that CSN's abrupt refusal to cooperate in this 
investigation warrants the use of total adverse facts available. 
Petitioners specifically reference CSN's failure to provide a 
reconciliation of its submitted costs to the amounts in its cost of 
manufacturing statement. In addition, petitioners point out that CSN 
refused to provide information regarding its reported commission 
payments, and on the eve of verification, refused to respond to any 
requests for further information, and would not permit the Department 
to verify any information.
    Citing section 782(i)(1) of the Act, petitioners state that the 
Department must verify information before making a final determination 
or must use facts available if the information cannot be verified. 
Petitioners further assert that it is the Department's longstanding 
practice, which the courts have upheld, to use total facts available, 
including information and comments on the record, when a party prevents 
the Department from verifying its data and withdraws from participation 
in an investigation. Petitioners maintain that CSN stands to benefit 
from its lack of cooperation and its withdrawal from this proceeding; 
therefore, using total adverse facts available is justified.
    Petitioners note that the statute permits the Department, in 
relying on facts available, to draw an adverse inference where a 
respondent has failed to cooperate by not acting to the best of its 
ability. Petitioners argue that this is the case here, since CSN has 
withdrawn from the proceeding, refuses further participation, and would 
not permit verification of its information. Petitioners note that the 
Department's well-established practice in such cases is to employ total 
adverse facts available. Petitioners further note that when a company 
refuses to cooperate or otherwise significantly impedes an 
investigation, the Department uses as adverse facts available the 
highest of: (1) The highest margin in the petition (or initiation); (2) 
the highest margin calculated for another respondent within the same 
country for the same class or kind of merchandise, or (3) the estimated 
margin found in the Preliminary Determination.
    With respect to adverse facts available, petitioners cite Notice of 
Final Determination of Sales at Less Than Fair Value of Foam Extruded 
PVC and Polystyrene Framing Stock from the United Kingdom, 61 FR at 
51411, 51412 (October 2, 1996), where the respondent withdrew from the 
proceeding and the Department used the respondent's own information to 
calculate the margin because it was higher than the highest margin 
alleged in the petition or the highest calculated rate of any 
respondent in the investigation. Petitioners conclude that the instant 
investigation requires the Department to use a margin of 63.32 percent, 
which is the highest margin provided in the Petition, as adverse facts 
available.
    CSN responds by referring to its November 2, 1999 letter to the 
Department, where it announced that it was pulling out of the 
investigation because any results of the investigation ``would have no 
basis in reality.'' CSN states that the verified dumping margin would 
have been close to, and just as commercially prohibitive as, the facts 
available rate. While CSN expected to be painted as uncooperative, CSN 
claims it did not want the Department to invest its resources in 
verifying data that would have still resulted in a market-prohibitive 
rate reflective of a time when the Brazilian real was overvalued.
    In sum, CSN expects the Department to use facts available to 
determine CSN's deposit rate, and denies that it has ever ``frustrated 
the Department's inquiry.'' CSN claims that it submitted the cost 
reconciliations cited by petitioners. Additionally, CSN stresses that 
it has not prevented the Department from investigating the affiliation 
issue. According to CSN, these issues were verified in the instant 
countervailing duty investigation, as well as in the hot-rolled steel 
investigation.
Department's Position
    We agree with petitioners that the application of adverse facts 
available is warranted. Section 776(a)(2) of the Act provides that if 
an interested party withholds information that has been requested by 
the Department, fails to provide such information by the deadlines for 
the submission of information or in the form and manner requested, 
significantly impedes a proceeding under the antidumping statute, or 
provides such information but the information cannot be verified, the 
Department shall, subject to subsections 782 (c)(1) and (e) of the Act, 
use facts otherwise available in reaching the applicable determination. 
Because the respondent CSN withdrew from the proceeding following the 
Preliminary Determination, CSN's questionnaire response on the record 
is unverifiable. See ``Letter to the Secretary of Commerce from Counsel 
for CSN'', November 2, 1999. In addition, CSN failed to respond to a 
second supplemental questionnaire of October 15, 1999. Therefore, under 
sections 776 (a)(2)(B), (C), and (D) of the Act, the Department must 
use facts otherwise available in making its determination.
    In addition, as required by section 782(d), CSN was warned that 
failure to participate in the investigation or permit verification 
constituted a deficiency which could result in the use of the facts 
available. Moreover, section 782(e) is not applicable as CSN did not 
permit verification, the information CSN submitted cannot serve as a 
reliable basis for making the final determination, and CSN has not 
demonstrated that it has acted to the best of its ability to provide 
the information requested and to meet other requirements (e.g. 
verification) established by the Department with respect to the 
information. Thus, the use of facts available is also warranted under 
section 782.
    Section 776(b) provides that, where facts available are otherwise 
appropriate, an adverse inference may be used when a party has failed 
to cooperate by not acting to the best of its ability to comply with 
requests for information. (See also SAA at 198.) Such adverse inference 
may include reliance on information derived from the petition. To 
determine whether the respondent cooperated by acting to the best of 
its ability under 776(b), the Department considers, among other facts, 
the accuracy and completeness of submitted information and whether the 
respondent has hindered the calculation of accurate dumping margins. 
See, e.g, Final Results of Antidumping Duty Administrative Review: 
Certain Welded Carbon Steel Pipes and Tubes from Thailand;, 62 FR 
53808, 53819-53820, (October 16, 1997) (Certain Welded Carbon Steel 
from Thailand); Final Results of Antidumping Duty Administrative 
Review: Brass Sheet and Strip from Germany; 63 FR 42823, 42824 (August 
11, 1998).
    CSN's failure to participate following the Preliminary 
Determination and refusal to permit verification of its information on 
the record demonstrate the CSN has failed to cooperate to the best of 
its ability in this investigation. Thus, the Department has determined 
that, in selecting among the facts otherwise available, an adverse 
inference is warranted with regard to CSN. The Department's well-
established practice in such cases is to employ total adverse facts 
available. Consistent with Department practice in cases in which a 
respondent fails to cooperate to the

[[Page 5568]]

best of its ability by withdrawing from the investigation and refusing 
to respond to the supplemental questionnaires, and pursuant to section 
776(b)(1) of the Act, we have applied, as facts available, a margin 
based on the highest margin alleged in the petition. See, e.g., Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Steel 
Concrete Reinforcing Bars From Turkey, 62 FR 9737-9738 (March 4, 1997).
    Section 776(c) of the Act requires the Department to corroborate, 
to the extent practicable, secondary information used as facts 
available. Secondary information is described in the SAA at 870 as 
``[i]nformation derived from the petition that gave rise to the 
investigation or review, the final determination concerning the subject 
merchandise, or any previous review under section 751 concerning the 
subject merchandise.''
    The SAA further provides that ``corroborate'' means simply that the 
Department will satisfy itself that the secondary information to be 
used has probative value. See SAA at 870. Thus, to corroborate 
secondary information, to the extent practicable, the Department will 
examine the reliability and relevance of the information used.
    During the Department's pre-initiation analysis of the petition, we 
reviewed the adequacy and accuracy of the information in the petition, 
to the extent appropriate information was available for this purpose 
(e.g., import statistics, foreign market research reports, and data 
from U.S. producers). See Initiation of Antidumping Duty 
Investigations; Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel 
Products from Argentina, Brazil, the People's Republic of China, 
Indonesia, Japan, the Russian Federation, Slovakia, South Africa, 
Taiwan, Thailand, Turkey and Venezuela, 64 FR 34194 (June 25, 1999) 
(Notice of Initiation) and ``Import Administration AD Investigation 
Initiation Checklist,'' (June 21, 1999). The estimated dumping margins 
of the petitioners were based on two different methods. First, EP was 
determined based on the import average unit value (AUV) for the three 
ten-digit categories of the HTSUS accounting for 90 percent of in-scope 
imports from Brazil during the fourth quarter of 1998. Petitioners 
presumed that the customs values used to calculate the AUV for each 
HTSUS category reflect the actual ``transaction value'' of the 
merchandise being shipped by Brazilian mills. Second, EP was determined 
based on Brazilian producers' offers for sale of CR flat products in 
the United States. Petitioners obtained this information from industry 
sources in the United States. The Department determined the adequacy 
and accuracy of the information from which the petition margin was 
calculated by reviewing all of the data presented and by requesting 
clarification and confirmation from petitioners and their sources as 
needed. See Attachment B to the Initiation Checklist and Memorandum to 
the File: Telephone Conversation with Market Research Firm Regarding 
the Petition for the Imposition of Antidumping Duties (June 21, 1999).
    We noted that the U.S. price quote of the per unit values of the 
subject merchandise derived by petitioners were well within the range 
of the average unit values reported by U.S. Customs. U.S. official 
import statistics are sources which we consider to require no further 
corroboration by the Department. See Notice of Final Determination of 
Sales at Less Than Fair Value: Collated Roofing Nails From the People's 
Republic of China, 62 FR 5140, 51412 (October 1, 1997). To further 
corroborate the home market prices in the petition, for the final 
determination, we reexamined the highest margin in the petition in 
light of information obtained during the investigation to the extent it 
is practicable, and determined it has probative value. Specifically, we 
compared the ex works home market prices in the petition to the 
verified home market prices for similar steel products (i.e., of the 
same quality, dimensions, etc.) reported by USIMINAS/COSIPA, net of all 
movement expenses, discounts and billing adjustments, and direct 
selling expenses. We found that the petition prices were well within 
the range of prices reported by respondents for similar products; in 
fact, these prices were quite conservative compared to the actual 
prices reported by respondents. Based on the above, we find that the 
estimated margins set forth in the petition have probative value. 
Therefore, we are assigning to CSN the highest margin in the petition 
of 63.32 percent.
Comment 3: Currency Conversion Methodology
    Petitioners do not agree with how the Department handled its 
currency conversion methodology for the Preliminary Determination. 
Citing sections 773A(a) of the Act and 351.415(c) of the Department's 
regulations, petitioners stress that the Department is to employ daily 
exchange rates for currency conversion purposes, but that fluctuations 
in exchange rates shall be ignored. Petitioners note that this language 
is mandatory and provides no exceptions. Petitioners assert that no 
mention is made in the statute of special treatment for large and 
precipitous drops. Petitioners do acknowledge that the Change in Policy 
Regarding Currency Conversion, 61 FR 9434 (March 8, 1996) (Policy 
Bulletin 96-1) calls for the use of actual daily rates when declines in 
the value of foreign currency are so ``precipitous and large'' as to 
reasonably preclude the possibility that it is only fluctuating. 
However, they argue that while the Department has the discretion to 
establish the definition ``fluctuation in exchange rates,'' that 
definition must be reasonable. See Chevron U.S.A., Inc. v. Natural 
Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984) (Chevron). 
Petitioners assert that the Department's exception to its stated 
definition is unreasonably pro-respondent and has no basis in law or 
logic. Petitioners further argue that Policy Bulletin 96-1, in effect, 
allows countries to dump during times of financial crisis.
    In conclusion, petitioners state that in accordance with the 
statute, the Department must ignore fluctuations in all exchange rates, 
regardless of their size or speed. Moreover, petitioners emphasize that 
the Department should apply the normal 40-day benchmark standard in 
this investigation. Otherwise, petitioners recommend that if the 
Department should persist in adhering to its policy in dealing with 
large and precipitous declines, certain legal and methodological 
defects must be rectified. Petitioners note the Department's 
methodology does not adequately indicate when a precipitous decline 
occurs, and the methodology fails to adhere to the underlying rationale 
as to why currency fluctuations are ignored, namely because they 
provide an inaccurate representation of reality. Therefore, petitioners 
recommend the Department find that a ``precipitous decline'' occurs 
whenever the daily exchange rate is more than 25 percent below the 
preceding 40-day average. In addition, petitioners suggest that if the 
Department finds a 40-day benchmark is too long to reflect the 
volatility of exchange rates in a period of decline, then it could 
instead use a 10-day benchmark during periods when daily exchange rates 
deviated from the 40-day benchmark figure by more than 25 percent.
    Respondents disagree with petitioners and request that the 
Department continue applying its well-established currency conversion 
methodology. Respondents maintain that 773A(a) of the Act ``ensure[s] 
that the process of currency conversion does not distort

[[Page 5569]]

dumping margins.'' (see also SAA at 841). According to respondents, 
Policy Bulletin 96-1 recognizes that there can be precipitous and large 
declines, precluding the possibility that a currency is only 
fluctuating. Respondents argue that the Department has applied this 
aspect of its currency-conversion methodology in other cases involving 
precipitous currency changes. (See Preliminary Determination 64 FR 
61249, 61258 (November 10, 1999).
    Respondents argue that the currency conversion methodology employed 
by the Department is necessary to ensure its calculations are 
consistent with the objectives of the antidumping law. Respondents 
point out that the Department has the discretion to interpret 
antidumping laws. Furthermore, respondents argue that cases that 
petitioners cite do not support their proposition that the Department's 
currency conversion methodology should be changed. To ensure a fair 
comparison, respondents state that the Department must ensure that its 
calculation methodology continually reflects all changes in the 
commercial circumstances of a particular producer that effect the 
analysis of comparative revenue, such as dramatic declines in the 
exchange rate. Citing Stainless Steel Plate in Coils from the Republic 
of Korea, 64 FR 15444, 15451 (March 31, 1999). Respondents argue that 
``[d]umping margins should not be `artificially' created simply due to 
unforeseen changes in the exchange rate.''
    Respondents further assert that the Department's currency 
conversion methodology ensures that calculations accurately measure the 
existence or absence of dumping on a sale-by-sale basis. Respondents 
claim that U.S. law and the WTO Antidumping Agreement mandate that the 
Department focus on whether calculations accurately compare the per 
unit revenue received by a producer for a particular export sale with 
the per unit revenue received for a contemporaneous home market sale, 
rather than the results of the calculations. Respondents maintain that 
the purpose of the trade laws is not to punish companies for whom 
dramatic currency drops in short periods of time--which are utterly 
beyond their control--distort their home market sales prices once they 
are converted to U.S. dollars.
    Respondents cite Stainless Sheet from Korea, SSPC from Korea and 
Certain Welded Carbon Steel from Thailand, stating that the 
Department's methodology is not ``pro-respondent'' because it often 
leads to a more favorable result for petitioners. Furthermore, 
respondents argue that there is no bias in acknowledging that a 
precipitous drop in a currency's value presents different 
methodological problems than a routine fluctuation. According to 
respondents, petitioners' proposed alternative to the Department's 
established methodology would produce inaccurate results. Respondents 
further assert that petitioners did not provide any evidence or support 
for their proposition. In addition, respondents point out that 
petitioners' proposed methodology would overstate the actual exchange 
rate, causing unjustifiable rises and falls during particular periods. 
Respondents conclude that the Department should continue to use the 
currency-conversion methodology it has used for almost four years.
Department's Position
    We disagree with petitioners that our exchange rate methodology has 
no basis in law or logic. As stated in the preliminary results, we made 
currency conversions into U.S. dollars in accordance with section 773A 
of the Act. Section 773A(a) of the Act directs the Department to use a 
daily exchange rate in order to convert foreign currencies into U.S. 
dollars unless the daily rate involves a fluctuation. It is the 
Department's practice to find that a fluctuation exists when the daily 
exchange rate differs from the benchmark rate by 2.25 percent. The 
benchmark is defined as the moving average of rates for the past 40 
business days. When we determine a fluctuation to have existed, we 
substitute the benchmark rate for the daily rate, in accordance with 
established practice. See Policy Bulletin 96.1; see also Preliminary 
Results of Antidumping Duty Administrative Review; Aramid Fiber Formed 
of Poly Para-Phenylene Terephthalamide From the Netherlands, 64 FR 
36841, 36843 (July 8, 1999); Notice of Preliminary Results and Partial 
Rescission of Antidumping Duty Administrative Review: Canned Pineapple 
Fruit From Thailand, 64 FR 30476, 30480 (June 8, 1999). (An exception 
to this rule is described below.)
    Further, section 773A(b) of the Act directs the Department to allow 
a 60-day adjustment period when a currency has undergone a sustained 
movement. A sustained movement occurs when the weekly average of actual 
daily rates exceeds the weekly average of benchmark rates by more than 
five percent for eight consecutive weeks. (For an explanation of this 
method see Policy Bulletin 96-1: such an adjustment period is required 
only when a foreign currency is appreciating against the U.S. dollar.) 
However, because the current case involves a decrease rather than an 
increase in the value of a foreign currency, this provision does not 
apply. See SAA at 842.
    In adopting its currency conversion policy, the Department 
recognized that a sudden large decrease in the value of a currency 
without any significant rebound could meet the technical definition of 
a fluctuation. To avoid this unintended result, in Policy Bulletin 96.1 
the Department explained that we would apply the average benchmark rate 
in the case of an exchange rate ``fluctuation'' but also stated that we 
would use daily rates when ``the decline in the value of a foreign 
currency is so precipitous and large as to reasonably preclude the 
possibility that it is merely fluctuating.'' We recognize the Policy 
Bulletin did not define a ``precipitous and large'' decline in the 
value of a foreign currency, because the Department had not yet faced 
the situation, but properly left this determination to be made in 
future cases. In Notice of Final Determination of Sales at Less Than 
Fair Value: Emulsion Styrene-Butadiene Rubber From The Republic of 
Korea, 64 FR 14865,14867 (March 29, 1999) (Rubber from Korea) and other 
Korean cases, the Department found that a decline of more than 40 
percent within a two-month period was sufficiently large and 
precipitous that use of daily rates was warranted during this two-month 
period. In contrast, in Notice of Final Determination of Sales at Less 
Than Fair Value: Extruded Rubber Thread from Indonesia, 64 FR 14690, 
14693 (March 26, 1999) (Extruded Rubber Thread from Indonesia), the 
Department found that a decline of some 50 percent spread over five 
months was not precipitous and large and continued to employ its normal 
exchange rate methodology. See 64 FR 14690, 14693 (March 26, 1999). See 
Notice of Final Results of Antidumping Duty Administrative Review: 
Certain Welded Carbon Steel Pipes and Tubes from Thailand, 64 FR 56759, 
56763 (October 21, 1999) (Pipe and Tube from Thailand). See also, DRAMS 
from Korea: Final Results of Antidumping Duty Administrative Review, 64 
FR 69694, 69703-04 (December 14, 1999).
    Our analysis of dollar-real exchange rates show that the real 
declined rapidly in early 1999, losing over 40 percent of its value in 
January 1999, when the Brazilian government ended its exchange rate 
restrictions. The decline was, in both speed and magnitude, many times 
more severe than any

[[Page 5570]]

change in the dollar-real exchange rate during recent years, and it did 
not rebound significantly in a short time. Indeed, the decline in value 
of the real was as large and more rapid than the decline in the value 
of the Korean won in 1997, which we have found to be precipitous and 
large in numerous recent cases. As such, we continue to determine that 
the decline in the real during January 1999 was of such magnitude that 
the dollar-real exchange rate cannot reasonably be viewed as having 
simply fluctuated at that time, i.e., as having experienced only a 
momentary drop in value relative to the normal benchmark. We find that 
there was a large, precipitous drop in the value of the real in 
relation to the U.S. dollar in January 1999, warranting application of 
daily exchange rates.
    We recognize that, following a large and precipitous decline in the 
value of a currency, a period may exist during which exchange rate 
expectations are revised and thus it is unclear whether further 
declines are a continuation of the large and precipitous decline or 
merely fluctuations. Under the circumstances of this case, such 
uncertainty may have existed following the large, precipitous drop in 
January 1999. Thus, we devised a methodology for identifying the point 
following a precipitous drop at which it is reasonable to presume the 
rates were merely fluctuating. Beginning on January 13, 1999, we used 
only actual daily rates until the daily rates were not more than 2.25 
percent below the average of the 20 previous daily rates for five 
consecutive days. At that point, we determined that the pattern of 
daily rates no longer reasonably precluded the possibility that they 
were merely ``fluctuating.'' Using a 20-day average for this purpose 
provides a reasonable indication that it is no longer necessary to 
refrain from using the normal methodology, while avoiding the use of 
daily rates exclusively for an excessive period of time. Accordingly, 
from the first of these five days, we resumed classifying daily rates 
as ``fluctuating'' or ``normal'' in accordance with our standard 
practice, except that we began with a 20-day benchmark and on each 
succeeding day added a daily rate to the average until the normal 40-
day average was restored as the benchmark. See Pipe and Tube from 
Thailand.
    Applying this methodology in the instant case, we used daily rates 
from January 13, 1999, through March 4, 1999. We then resumed the use 
of our normal methodology through the end of the period of 
investigation (March 31, 1999), starting with a benchmark based on the 
average of the 20 reported daily rates on March 5, 1999.
    While petitioners have suggested a 10-day benchmark (instead of a 
20 or 40-day benchmark), they have not submitted any information to 
indicate that a 10-day average would be any more appropriate or produce 
more accurate results than a 20-day average, which day-by-day builds 
back up to a 40-day benchmark.
Comment 4: Home Market Sales With Warranty Expenses
    Petitioners request that the Department reclassify all of USIMINAS' 
home market sales with home market warranty (WARRH) amounts as sales of 
non-prime merchandise, and exclude all of these particular sales from 
the calculation of normal values. Petitioners note that WARRH equals 
the amount of credit notes provided to customers for product quality 
problems, and that warranty expenses are sale-specific.
    Respondents counter that petitioners' request must be rejected for 
several reasons. First, early in this investigation, respondents note 
that the Department rejected the petitioners' request for blanket 
reclassification of respondent's sales of prime product into non-prime 
product; in its supplemental questionnaire, the Department redirected 
respondents to classify all sales as prime or non-prime on a ``sold 
as'' basis. Second, respondents state that there have been no 
developments since the Department originally rejected the petitioners' 
identical request. Although the petitioners cite the Department's 
verification report finding that USIMINAS' warranties relate to quality 
problems, respondents argue that this statement only confirms that the 
Department verified that respondents' warranty expenses are based on 
customer claims of product quality problems after a sale is made. 
Third, respondents state that warranty expenses are based on customer 
claims of product quality problems, and are in a separate field from 
the prime/non-prime field. Respondents argue that the significance of 
this designation at the time of sale is important because it is fair to 
assume that a seller will price prime products differently than non-
prime products. Respondents further state that the prime/non-prime 
fields allows the Department to segregate sales based on information 
that was known to the buyer and seller at the time of sale.
    Respondents argue that the objective of the warranty field is 
entirely different. Respondents state that all purchasers of prime 
material assume that they are in fact buying a prime product that meets 
the specifications requested. Respondents explain that it is 
inevitable, in the course of doing business, that some customers will 
claim, after receipt of the product, that the product does not meet its 
expectations, due to defects, shipping damages or a number of other 
reasons. Respondents note that in all of these circumstances, the 
underlying ``problem'' with the steel occurs after the sale.
    Respondents explain that when a company reimburses the customer for 
a warranty claim, because it warrants that its products will always 
meet the customer's expectations, the company incurs a warranty cost. 
Respondents state that the entire purpose of the Department's field is 
to isolate these costs either on a sale-specific or a product line-
specific basis. Respondents continue to state that there is no 
Department practice whereby sale-specific warranty expenses are used as 
a key to then reclassify all sales for which warranty expenses were 
incurred from prime to non-prime sales.
    Respondents, citing Notice of Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Sheet and Strip in Coils from Italy, 
64 FR 30750, 30753 (June 8, 1999), also noted that for most companies, 
there are never any warranty costs for non-prime sales, which are sales 
where a buyer forfeits his right to a warranty claim. Therefore, 
respondents maintain that all sales with warranty claims should not be 
reclassified as non-prime merchandise because it would make the 
Department's warranty field meaningless. Respondents conclude that the 
warranty expense field presumes that the product was purchased and sold 
as a prime product.
Department's Position
    We agree with the petitioners in part and with respondents in part. 
The Department has reclassified USIMINAS' home market sales as non-
prime sales when no quantity adjustment was reported but there is a 
warranty claim. When the Department examined two invoices from a list 
of invoices with warranty reported during verification, the company 
noted that the material was not returned, but was reclassified as scrap 
or irregular blank scrap. Since all sales examined with warranties (and 
no returned quantity) were for sales of merchandise that ended up being 
non-prime, we have assumed all sales with warranties (and no returned 
quantities) are non-prime. This is appropriate since the net price 
reported (gross unit price less warranties) is representative of non-
prime merchandise, which is what the customer ended up receiving.

[[Page 5571]]

    In addition, as noted on page 39 of the USIMINAS' Sales 
Verification Report, we have found (and at verification USIMINAS 
agreed) that where a warranty adjustment was reported and a partial 
quantity adjustment was also reported, these sales are actually partial 
returns and warranty is not applicable. Therefore, we have set the 
warranty field (WARRH) to zero where there was a partial return of 
merchandise.
Comment 5: Home Market Discounts
    Petitioners argue that the Department should deny adjustments for 
USIMINAS' reported home market discounts. Petitioners state that the 
Court of Appeals for the Federal Circuit (Federal Circuit) recently 
held that price adjustments must relate exclusively to merchandise 
within the scope of the proceeding, unless the same rebate percentage 
is uniformly applied to both subject and non-subject merchandise. See 
SKF USA Inc. v. United States, 180 F.3d 1370 (Fed. Cir. 1999) (SKF) and 
SKF, 180 F.3d 1376, citing Smith-Corona Group, Consumer Products Div. 
v. United States, 713 F.2d 1568, 1580-81 (Fed. Cir. 1983). Petitioners 
argue that USIMINAS used both subject and non-subject merchandise to 
calculate the rebate percentage for discounts, and did not provide the 
Department with documentation regarding the ``unusually high'' discount 
in the other discount category, reported in the field OTHDISH. 
Therefore, petitioners conclude that the Department should deny 
USIMINAS' claimed home market discounts (quantity discounts (QTYDISH) 
and OTHDISH) to customers.
    Respondents counter that the Department should allow this 
adjustment to NV. Respondents explain that USIMINAS was not able to 
report discounts on a sale-by-sale basis given the difficulties in 
tracing these adjustments to the actual sale. Respondents note the 
allocation methodology used by USIMINAS is the same as the Department 
accepted in Hot-Rolled Steel from Brazil which was based on the same 
facts. Respondents further state that USIMINAS' allocation methodology 
is consistent with the Department's regulations and the SAA. 
Respondents note that while petitioners imply SKF breaks new ground, 
the Federal Circuit emphasized its decision was consistent with its 
past decisions and those of the Court that accepted reasonable 
apportionment of adjustments. Respondents note that the Department was 
able to verify all information from USIMINAS, with a single exception. 
Respondent argue that although USIMINAS was unable to provide a 
requested document because of the many demands placed on it during 
verification, this single omission cannot serve as a reasonable basis 
to deny USIMINAS' home market discount adjustment as requested by 
petitioners.
Department's Position
    We agree in part with both petitioners and respondents. Two types 
of discounts were reported by USIMINAS: (1) Quantity discounts, which 
were reported on a customer specific basis; and (2) other discounts, 
which were reported based on an aggregate amount for the POI. Both 
types of discounts involved dividing all discounts granted in the 
period (by customer in the case of quantity discounts) for subject and 
non-subject merchandise, by the total sales in the period (by customer 
in the case of quantity discounts) for subject and non-subject 
merchandise.
    Section 351.401(g) of the Department's regulations state that the 
Secretary may consider allocated expenses when transaction-specific 
reporting is not feasible, provided the Secretary is satisfied that the 
allocation method used does not cause inaccuracies or distortions. In 
addition, any party seeking to report an expense or price adjustment on 
an allocated basis must demonstrate to the Secretary's satisfaction 
that the allocation is calculated on as specific a basis as is 
feasible. Also, the Secretary will not reject an allocation method 
solely because the method includes expenses incurred, or price 
adjustments made, with respect to sales of merchandise that does not 
constitute subject merchandise or a foreign like product (whichever is 
applicable). We note that the cases cited by petitioner relate to the 
Department's practice prior to changes made by the URAA and adoption of 
the Department's new regulations.
    For quantity discounts, we find that USIMINAS has reported this 
discount in the most specific basis that is feasible. Moreover, having 
examined the information provided by USIMINAS regarding the products it 
manufactures, we find no reason to conclude that discounts would be 
granted disproportionately on its out-of-scope steel products as 
opposed to its in-scope steel products as this merchandise is broadly 
similar in value, physical characteristics and the manner in which it 
is sold. Therefore, this adjustment meets the criteria of section 
351.401(g) of the Department's regulations, and we are continuing to 
allow an adjustment to NV for quantity discounts.
    For other discounts, we were unable to verify one large item 
(composing the vast majority of this expense). In addition, the 
allocation on this expense was done in the aggregate, for various types 
of discounts. In other words, several discounts were lumped together 
for sales of all products to all customers; thus, the allocation was 
not customer-, product-, or even discount-specific. Therefore, we are 
not satisfied that USIMINAS submitted this adjustment in the most 
specific basis that is feasible. Therefore, we are disallowing the 
adjustment to NV for other discounts.
Comment 6: Home Market Interest Revenue
    Petitioners point out that USIMINAS' late payment interest plus 
fines charges (INTREVH) are applied to all sales on a global basis 
rather than to specific sales. Referring to SKF, petitioners argue that 
the interest revenue is not uniformly applied. Furthermore, they 
contend that the interest revenue adjustment for USIMINAS' home market 
sales is calculated based on both subject and non-subject merchandise. 
In the instant investigation, according to petitioners, the amount of 
interest revenue that USIMINAS receives from the customer is not the 
same for each sale let alone for each product, as it depends on factors 
that vary from sale-to-sale, such as the number of days after the due 
date that interest is charged. Petitioners request the Department to 
deny USIMINAS' calculation of the adjustment for home market interest 
revenue, and, as facts available, instead add the highest reported 
amount for INTREVH to the price of all home market sales.
    Respondents argue that it is well established that a company may 
allocate price adjustments when transaction-specific reporting is not 
feasible. Respondents indicate that the Department allowed USIMINAS to 
report home market interest revenue in this manner in Hot-Rolled Steel 
From Brazil investigation, and granted the same adjustment. Respondents 
state that petitioners miss the point with their argument in that of 
course, the amount that USIMINAS receives in interest will vary from 
sale to sale, because there is no reasonable basis for the Department 
to expect every delinquent customer to withhold payment the exact same 
number of days. Moreover, respondents note, when the customer has an 
acceptable reason for late payment then USIMINAS may decide to extend 
the due date without charging interest revenue as stated in the Section 
B response. Respondents maintain that USIMINAS reported interest 
revenue amounts to the best of its ability, and that its methodology 
was reasonable and

[[Page 5572]]

not distortive. Further, Respondents argue that the Department verified 
the accuracy of USIMINAS' reported home market interest revenue.
Department's Position
    We agree with respondents that it is reasonable for USIMINAS to 
allocate price adjustments when transaction-specific reporting is not 
feasible, and that the price adjustment methodology used was 
appropriate. In Hot-Rolled Steel from Brazil, 64 FR 38756, 38790-38791 
(July 19, 1999) we accepted a similar allocation methodology for 
USIMINAS' interest revenue. Section 351.401(g) of the Department's 
regulations state that the Secretary may consider allocated expenses 
when transaction-specific reporting is not feasible, provided the 
Secretary is satisfied that the allocation method used does not cause 
inaccuracies or distortions. In addition, any party seeking to report 
an expense or price adjustment on an allocated basis must demonstrate 
to the Secretary's satisfaction that the allocation is calculated on as 
specific a basis as is feasible. Also, the Secretary will not reject an 
allocation method solely because the method includes expenses incurred, 
or price adjustments made, with respect to sales of merchandise that 
does not constitute subject merchandise or a foreign like product 
(whichever is applicable). Therefore, this adjustment meets the 
criteria of section 351.401(g) of the Department's regulations, and we 
are continuing to accept USIMINAS' calculation of the adjustment for 
home market interest revenue.
Comment 7: Indirect Selling Expenses/Warehousing Expenses
    Petitioners argue that the Department should reclassify all of 
USIMINAS' U.S. indirect selling expenses as movement expenses. 
Petitioners point out that USIMINAS includes warehousing expenses 
incurred at the port of export in its indirect selling expenses. 
Petitioners note that at verification, when asked to break out 
warehousing expenses from its indirect selling expenses, USIMINAS 
stated it had no means of precisely ascertaining these costs. 
Petitioners insist that the Department has established a clear practice 
of treating post-shipment warehousing expenses as movement expenses, as 
prescribed in section 351.401(e)(2) of the Department's Regulations. 
Respondents state that USIMINAS' warehousing expenses are properly 
treated as indirect selling expenses based on verification and the 
Department's determination in past investigations. Respondents note 
that USIMINAS has consistently classified its port warehouse expenses 
as indirect selling expenses because it is unable to isolate all of its 
warehouse costs from other indirect selling expenses, i.e. these 
expenses are fixed expenses and are aggregated with other fixed selling 
expenses in USIMINAS' accounting system. Respondents argue that the 
Department has consistently accepted USIMINAS's treatment of its port 
expenses as indirect selling expenses, including in Hot-Rolled Steel 
from Brazil and the facts surrounding these expenses have not changed. 
It is further claimed that there is nothing inequitable in USIMINAS' 
treatment of its warehouse expense as indirect selling expenses, 
because USIMINAS treated all warehouse expenses the same, regardless of 
whether they were related to home market sales, export sales, or both.
Department's Position
    We disagree with petitioners. Respondents consistently informed the 
Department that USIMINAS was unable to segregate warehousing expenses 
from its indirect selling expenses and that it had reported all 
warehousing as part of these expenses. See respondents' Section B 
response at B-50 (August 30, 1999). The Department did not uncover any 
information at verification to indicate that USIMINAS was able to 
segregate warehousing from indirect expense. Therefore, we have 
accepted USIMINAS' data, as reported, and are not reclassifying 
USIMINAS' indirect selling expenses as movement expenses for this final 
determination.
Comment 8: Home Market Packing
    Petitioners request that the Department exclude COSIPA's home 
market packing expenses from its home market sales analysis because the 
Department was unable to examine and confirm these costs during 
verification. Petitioners assert that at verification, COSIPA explained 
it had selected a month as representative of POI-wide packing costs, 
but that the Department was unable to examine and confirm the validity 
of the underlying presumption that one month was, in fact, 
representative.
    Respondents state that the Department should deny the petitioners' 
request. Respondents note that Section B of COSIPA's response made it 
clear that the adjustment for packing materials was based on two 
components: valuation of per unit cost and a quantification of types of 
materials used for each packing type. Respondents argue that with 
respect to the valuation of the per unit costs for each type of 
packing, COSIPA explained at verification that it used the value of 
material inputs in the month of September 1998 as a representative 
month for per unit packing materials costs. Respondents note that 
COSIPA used the same methodology for the packing adjustment for home 
market sales and export sales, so the methodology was market-neutral.
    Respondents point out that the Department verified that the 
material cost valuations were based on its September 1998 inventory 
values after viewing similar records for purchases from other months to 
see if September was distortive.
    According to respondents, although there were minor variations in 
per unit packing for some other packing materials, the variations did 
not undermine COSIPA's methodology of using prevailing inventory 
valuations in September as a surrogate for per unit values during the 
POI. Respondents point out that there was a decision to defer 
additional verification of the packing adjustment to the cost 
verification to give COSIPA time to prepare similar documents for 
additional months. Respondents note that during the cost verification, 
COSIPA presented the additional information requested at the sales 
verification but the cost verifiers did not dedicate time in the cost 
verification to COSIPA's packing adjustment.
    Respondents note that the Department will accept a Respondent's 
packing adjustment if reasonable and not distortive. Respondents state 
the Department should reject the petitioners' request to apply adverse 
inferences and to reject the petitioners home market packing costs, and 
that COSIPA provided details of its packing adjustment in its Section 
B/C responses, as well as explained and prepared additional 
documentation of all aspects of packing adjustment at verification.
Department's Position
    We agree with petitioners that COSIPA's home market packing 
expenses should be excluded from the final determination. The COSIPA 
verification report notes that COSIPA based its packing costs solely on 
company records for September 1998. While the verification team 
attempted to establish that these mid-POI costs were representative by 
comparing the reported figures to those for other periods at the 
beginning and end of the POI, we were unable to do so, because COSIPA 
did not provide the appropriate

[[Page 5573]]

data from its microfiched records. Although COSIPA had been 
specifically advised in the verification outline that the Department 
would be looking into its home market packing claim, COSIPA only 
produced worksheets purporting to reflect packing material costs 
throughout the POI at the very end of verification. These data, 
however, were untimely and, in any case, unverifiable, given that they 
arrived when there was no longer time to look into their accuracy. 
Thus, we have not reviewed this data for the final determination.
    We also note that COSIPA used the same methodology for its U.S. 
packing expense which, as on the home market side, could not be 
verified. Because of this verification failure for U.S. and home market 
packing expenses, we are, as an adverse inference, using the reported 
packing figures for export sales while denying them for normal value as 
the facts otherwise available, in accordance with sections 776(a) and 
(b) of the Act. Section 776 (a)(2)(D) requires the use of facts 
available where information can not be verified. Section 776(b) calls 
for the Department to use an adverse inference where it finds, as here, 
that a party failed to act to the best of its ability to respond to the 
Department's requests for information. As was made abundantly clear at 
verification, the necessary documentation to calculate accurate packing 
costs for both markets based on a POI-wide sampling of costs, was 
readily at hand for COSIPA. In spite of this, COSIPA elected to base 
its claim for adjustments for packing costs solely on a single month's 
inventory cost reports, without making any effort to establish the 
validity of this assumption. Accordingly, we find that COSIPA did not 
act to the best of its ability to report these costs, indeed, 
disregarding readily-available cost data for this adjustment. 
Therefore, as an adverse inference, we are denying the home market 
packing adjustment, while using the reported U.S. packing costs, based 
on verified data for September, for calculating EP. This approach is 
fully consistent with the intent of section 776(b) of the Act, as well 
as the Court's holding in Timken Company v. United States, 673 F. Supp. 
495, 512 (CIT 1987).
Comment 9: COSIPA's Home Market Billing Adjustments
    Petitioners request that the Department deny COSIPA's claimed home 
market billing adjustments in their entirety because those adjustments 
could not be verified or, alternatively, revise the adjustments to the 
amounts that the Department identified during verification. Petitioners 
claim that COSIPA's billing adjustment methodology is questionable 
because the Department disagreed with some of COSIPA's amounts during 
verification.
    Respondents state the Department should reject petitioners' 
argument and continue to grant COSIPA's home market billing adjustment, 
as corrected. Respondents state the billing adjustment for the first 
home-market sales trace was properly verified. Respondents argue that 
the petitioners base their claim on a corrected billing adjustment and 
an ambiguous sentence in the verification report regarding an apparent 
overstatement of the billing adjustment because the supplemental nota 
fiscal on its face indicated a different corrected billing adjustment 
than that presented by COSIPA. Respondents note that the ``difference'' 
identified on the supplementary nota fiscal does not reflect the 
Department's prescribed calculation (total credit divided by tons 
shipped) but the calculator tape (in COSIPA Sales Verification Exhibit 
26) divides the value of the supplemental nota fiscal by the total 
quantity shipped to arrive at the corrected billing adjustment.
    Respondents point out that on all other home market pre-select and 
surprise sales traces, the Department noted no discrepancies. 
Therefore, respondents see no reason to reject all home market billing 
adjustments, as petitioners suggest.
    In their rebuttal briefs, petitioners state that the Department 
should treat billing adjustments (BILLADJH) not as a deduction to gross 
unit price (GRSUPRH), but as an addition to the gross unit price. 
Petitioners state that a careful analysis of COSIPA's data indicates 
that the company's reported billing adjustments represent increases to 
gross unit price (as opposed to deductions). Petitioners state that in 
the Preliminary Determination, the Department subtracted billing 
adjustments (BILLADJH) from gross unit price (GRSUPRH) for all of 
COSIPA's home market sales. Petitioners urge the Department to correct 
this alleged error by adding billing adjustments to gross unit price, 
or alternatively, by employing a second variable (GRSUPRH2) which 
represents the fully-adjusted gross unit price amounts (i.e., the 
prices after all billing adjustments have been taken into account). 
Also in their rebuttal, petitioners withdraw their original argument 
that these adjustments were improperly reported as they believe it 
would be inappropriate for the Department to reward COSIPA for any 
errors that may have been found at verification.
Department's Position
    The Department reviewed the per-ton calculation of COSIPA's billing 
adjustments at verification and, minor mathematical corrections aside, 
had no reason to question the underlying methodology. The correct 
adjustment was calculated on a transaction-specific basis as the 
adjustment's total value, inclusive of taxes, divided by the applicable 
tonnage. After reviewing the respondents' clarifications on the proper 
treatment of these billing adjustments the Department does not find 
error with the methodology used for calculating the corrected billing 
adjustment for this sale. Therefore, we agree with the respondents that 
billing adjustment values were properly calculated.
    We also agree with the argument raised by petitioners in their 
rebuttal brief. After careful analysis of the information on the 
record, we agree that COSIPA's billing adjustments represent increases 
to gross unit price, rather than deductions from gross unit price. See 
Memorandum to the File, dated January 7, 2000. The Department has 
corrected this error in the final determination by employing GRSUPRH2, 
which represents the fully-adjusted gross unit price amounts (i.e., the 
prices after all billing adjustments have been taken into account).
Comment 10: COSIPA's Home Market Resales
    Petitioners point out that COSIPA has certain resales that were not 
linked to their original production records. Instead, petitioners 
state, COSIPA relied on product characteristics as described on the 
billing invoice to generate CONNUMs, making COSIPA's reported material 
specifications questionable. Petitioners note that the specifications 
reported by COSIPA for such resales are not specifications of the 
material actually sold, since the material was originally produced to a 
different order. Petitioners further assert that COSIPA made no attempt 
to link the material involved in such resales to production records 
even though it said it was possible to do so. Petitioners recommend 
that the Department exclude all sales of such resales, but since the 
resales cannot be separately identified, as facts available, the 
Department should exclude all home market sales below a specific price.
    Respondents state that the Department should use COSIPA's databases 
as submitted and verified by the Department. Respondents stress that 
petitioners argument that the

[[Page 5574]]

Department should exclude all of COSIPA's home market sales with no 
production records from its home market database demonstrates a 
wholesale misunderstanding of the products sold.
    Respondents point out that COSIPA's initial Section B response 
indicated that for some isolated product characteristic fields, in 
limited circumstances, COSIPA believed it was helpful to reference its 
production records to confirm the correct product characteristic code. 
Respondents note that for a limited category of grades, COSIPA 
referenced production records if there was differing yield strength 
information (i.e., whereas some grades specified a minimum yield 
strength, some grades only identified a maximum.) In addition, 
respondents note that reference to production records and customer 
orders was also helpful in coding the thickness tolerance field. 
Respondents state that reference to production records was entirely 
unnecessary as COSIPA's invoices provided all of the necessary 
information.
    Respondents note that in the event COSIPA was unable to link a 
particular invoice with a particular production record, COSIPA used 
alternative methodology for these sales for certain product 
characteristic fields. Respondents point out that in the case of a 
customer returning and COSIPA then reselling this product to another 
customer, COSIPA would lose the link between the final sale and the 
original production records. Respondents note that COSIPA used the 
information in the invoice or customer order or other resource as a 
basis to decide the product characteristic of the product sold. 
Respondents claim that the use of alternative information such as the 
invoice is not distortive, and that it is fair to presume a company 
would not mischaracterize its product characteristics on an invoice.
    Respondents claim that petitioners logic is twisted because they 
assert affirmatively that the specifications reported by COSIPA for 
resales are not the specifications of the material actually sold. 
Respondents point out that at the time of invoicing when the product is 
resold, COSIPA is able to ascertain the product characteristics of the 
product to be sold. Respondents note that in rare cases, COSIPA was not 
in a position to confirm the product characteristic on the invoice with 
the information for a particular production run. Respondents state that 
in many dumping investigations, respondents are not able to access 
production information for each individual invoice.
    Respondents argue that petitioners wrongly claim that COSIPA ``made 
no attempt'' to link the material invoiced and sold to underlying 
production records. Respondents note that COSIPA explored several 
methods to attempt to correlate production records with invoices for 
resales; however, at verification, for any given resale COSIPA was not 
always able to find the production records, invoice or order related to 
the original sale. Respondents note that this is not the same as COSIPA 
not attempting to make the link at all.
Department's Position
    We agree with respondents that sales with no production records 
should not be excluded. Respondents have consistently acknowledged 
COSIPA's inability to link production records to a limited amount of 
sales. However, COSIPA used alternative methodologies, such as 
referencing the invoice and customer order, to confirm the product 
characteristics of the products sold. At verification, for each home 
market and U.S. sales traced, we compared product characteristics as 
recorded on COSIPA's nota fiscal with underlying production records and 
did not find a single instance where these characteristics differed 
between the two sources. Therefore, we conclude that the nota-fiscal is 
a valid substitute for the missing production records in this case, and 
we find no evidence which would cast doubt on the reported 
specifications and characteristics of COSIPA's sales. Accordingly, we 
have accepted the reported product specifications and characteristics 
for this group of sales.
Comment 11: Date of Sale for COSIPA's U.S. Sales
    According to petitioners, per section 351.401(i) of the 
Department's regulations, the essential terms of COSIPA's U.S. sales 
were established by export contract before the commercial invoice was 
issued because sales price did not change after the export contract 
date. Petitioners urge the Department to use COSIPA's contract date in 
lieu of the commercial invoice date as the official U.S. date of sale. 
Since contract dates are not reported, petitioners suggest that, as 
facts available, the Department revise sales dates by subtracting an 
average number of days between the export contract and commercial 
invoice from the reported sale dates, excluding any sales whose revised 
dates of sales fall outside of the POI.
    Respondents state that the Department should continue to use the 
date of sale as identified by COSIPA i.e., the earlier of the 
commercial invoice or the not a fiscal date, as the date of sale, not 
the petitioner's proposed use of a surrogate export contract date as 
the date of sale. Respondents note that the Department presumptively 
used the invoice date as date of sale, although it may use another date 
only if satisfied that a different date better reflects the date on 
which the exporter or producer established the material terms of sales.
    Respondents argue that use of the export contract date would be 
unlawful and unreasonable. Respondents point out the export contract 
date does not establish the critical term of sale: actual quantity 
produced and sold. According to respondents, quantity is not known 
until, at the earliest, the steel is actually produced and leaves the 
factory. Respondents further note that COSIPA's date of sale 
methodology was based on its entire universe of sales during the POI, 
not a limited sample of 4 or 5 sales. Therefore, that the Department's 
sales traces at verification found no instance of the price or quantity 
changing is of little moment. Additionally, the Department addressed 
this very issue in Hot-Rolled Steel from Brazil, rejecting petitioners' 
arguments regarding COSIPA's date of sale.
    Further, respondents state that petitioners' allegations are 
untimely since the Department's practice is to address the date of sale 
issue in the early stages of an investigation in the Section A 
response. Respondents argue that during this proceeding neither the 
petitioners nor the Department ever suggested COSIPA's export contract 
date would be a more appropriate date of sale at the supplemental 
Section A or C stages nor at verification, nor did the Department 
request that COSIPA alter its date of sale methodology. This eleventh-
hour challenge must be rejected, COSIPA insists, as it raised at a 
stage in the proceeding which precludes any correction.
Department's Position
    We agree with the respondents that the evidence on the record does 
not establish that the contract date best represents the date of sale 
for COSIPA's U.S. sales. Thus, for date of sale, we have continued to 
use the earlier of the commercial invoice date or the nota fiscal date. 
Petitioners make reference to page 9 of the COSIPA verification report, 
which states that the export contract ``for U.S. sales shows the total 
tonnage, price and product quality. It also specifies the estimated 
delivery time, sales conditions, payment terms, and has the date of 
issuance.'' This statement is accurate; however, this statement only 
relates to the tiny number of COSIPA's sales examines,

[[Page 5575]]

and does not establish that the sales conditions and payment terms do 
not change after the contract date. With no evidentiary basis for 
disregarding the presumptive date of sale identified in our 
regulations, we have continued to use COSIPA's reported sale dates, 
consistent with our approach in Hot-Rolled Steel from Brazil 64 FR 
38756, 38780 (July 19, 1996).
Comment 12: Direct Selling Expense Related to U.S. Sales
    Petitioners point out that COSIPA sells to the United States via 
COSIPA Overseas, located in the Cayman Islands. Petitioners argue that 
activities conducted on behalf of COSIPA Overseas'  and the 
expenditures associated with them relate exclusively to export 
transactions. (The precise nature of these expenses necessitates 
extensive reference to business proprietary information. For a complete 
discussion of this issue, and our position thereon, please see the 
Final Analysis Memorandum, January 18, 2000, a public version of which 
is on file in room B-099 of the main Commerce building.) Petitioners go 
on to indicate that COSIPA funds these expenditures by paying an amount 
to COSIPA Overseas on sales from COSIPA to COSIPA Overseas. Petitioners 
assert that the Department found this should have been a direct 
expense. Therefore, petitioners state that the Department should deduct 
this amount from the U.S. price.
    Respondents assert that while COSIPA's accounting books refer to 
these amounts as a specific type of expense, this label is not entirely 
accurate, thus explaining the ``confusion'' engendered by statements 
referenced in the Department's COSIPA Sales Verification Report. In 
fact, respondents conclude, there is no basis in fact or law for 
concluding that these amounts represent direct selling expenses or for 
deducting these amounts from COSIPA's U.S. sales prices.
Department's Position
    We disagree with petitioners. After careful review of the record, 
the Department has determined that the foreign sales expense identified 
by petitioners cannot be considered a direct expense, since the 
accounting entries do not represent an ``expense'' at all. Therefore, 
despite the ambiguity engendered by statements recounted in the COSIPA 
verification report on this subject, the Department cannot treat these 
accounting entries between COSIPA Overseas and COSIPA as direct selling 
expenses because they do not invoice ``expenses'' of any kind. See 
Final Analysis Memorandum for an additional discussion of this issue.
Comment 13: Imputed Interest Revenue
    Respondents argue that the Department should not impute interest 
revenue on sales for which COSIPA has never been paid and therefore 
never collected such revenue. Respondents note that for COSIPA's home 
market sales that remained unpaid as of October 1, 1999 (the date of 
its first supplemental response), the Department selected October 1, 
1999, as a surrogate payment date and used that date to calculate an 
imputed interest revenue. Respondents state that in the Preliminary 
Determination, the Department's decision to impute interest revenue is 
based upon an incorrect assumption that COSIPA will inevitably be paid 
for these sales and will collect interest and penalties. Respondents 
acknowledge that it receives interest revenue from customers who pay 
late, but states it has reported these receipts appropriately. However, 
respondents state that the record does not support the Department's 
decision to impute interest revenue receipts on sales for which no 
payment at all has been received, and that COSIPA cannot predict with 
certainty when, or if, certain customers will pay the invoiced amount 
(including late payment charges). Respondents state that the 
Department's reference in the Preliminary Determination to Section 
776(b) of the Act, which authorizes the use of adverse inferences 
against parties who fail to cooperate, is unwarranted with regard to 
home market interest revenue on unpaid sales. Respondents reference 
Olympic Adhesives Inc. v. United States, 899 F2nd 1565, 1573 (Fed. Cir. 
1990) and state that a company's inability to provide information is 
not the same as a refusal to provide that information.
    Petitioners state that if it is in fact the case, as respondents 
claim, that there is ample reason to believe that the sales with 
missing payments within COSIPA's home market dataset are sales for 
which full payment is not expected by COSIPA, then the Department 
should classify all of those sales as being made outside of the 
ordinary course of business, and should exclude those sales from its 
margin analysis. Petitioners state that companies such as COSIPA will 
not ordinarily sell merchandise to customers from whom they do not 
expect payment in full for the merchandise. Petitioners emphasize that 
while non-payment of some portion of bills is a possibility, it is not 
the normal practice for any company within a market economy desiring to 
stay in business for very long.
Department's Position
    We disagree with the respondents' argument, and agree, in part, 
with the petitioners' argument. We agree with the general principle of 
the petitioners' argument that it is not the normal practice for a 
company operating within a market economy to continue operating for any 
length of time under conditions of non-payment for a significant 
portion of its invoices. At minimum, if a company over time does not 
receive a significant portion of payments, the company would certainly 
try to minimize this loss by discontinuing selling to, or altering the 
level of business conducted with these customers. Although COSIPA may 
indeed not receive full payment (with interest and penalties) for a 
certain number of sales, the Department cannot assume non-payment for 
all sales with missing payments reported to the Department. Without any 
additional evidence supporting the respondent's claim on this matter, 
the Department is not in a position to assume non-payment of interest 
revenue for all of these sales. Stating this, the Department likewise 
cannot assume the petitioners' argument that these sales are sales 
outside the ordinary course of trade is accurate, absent additional 
record evidence. Therefore, for sales with unreported payment dates, we 
are continuing as we did in the Preliminary Determination, 64 FR 61249, 
61259 (November 10, 1999) to calculate an imputed interest revenue 
expense for COSIPA. See Final Analysis Memorandum.
Comment 14: Home Market Freight Adjusted by ICMS Tax
    Respondents argue that the Department should not make a downward 
adjustment to the reported home market freight adjustments for ICMS. 
Respondents note that in the Preliminary Determination, the Department 
excluded from home market inland freight costs the associate ICMS 
taxes. Respondents state that the Department is obligated to make 
deductions from normal value for all inland freight expenses associated 
with home market sales. See 19 U.S.C. 1677b(a)(6)(B). Respondents state 
that neither the Department is obligated to make deductions from normal 
value for all inland freight expenses associated with home market 
sales. See 19 U.S.C. 1677b(a)(6)(B). Respondents state that neither the 
Department nor the petitioners have suggested that the

[[Page 5576]]

respondents are receiving some form of tax credit as they do in 
connection with the ICMS paid on raw materials purchases; nor can this 
inference be gathered from any other Brazilian proceeding. Respondents 
conclude that the Department should find that taxes paid on freight 
expenses are part of movement expenses, and deduct the ICMS incurred on 
freight from normal value (in addition to the expense for the freight 
service itself), as it has done in all previous investigations and 
administrative reviews involving Respondents. See Final Results of 
Antidumping Duty Administrative Review: Silicon Metal from Brazil, 63 
FR 6899, 6908 (February 11, 1998).
    Petitioners argue that the Department correctly subtracted ICMS 
taxes from the respondents' home market inland freight amounts. 
Petitioners state that the ICMS tax is unquestionably a VAT tax and 
that the Department's adjustment is consistent with its current 
methodology (petitioners cite to Hot Rolled Steel from Brazil). 
Petitioners claim that the respondents' assertion that the Department 
has included ICMS taxes in home market freight expenses in ``all 
previous investigations and administrative reviews'' involving 
respondents is not accurate, and that there is no basis on the record 
in this investigation to deviate from the Department's stated practice.
Department's Position
    We agree with petitioners. For USIMINAS' U.S. sales examined at 
verification, respondents did not include ICMS tax within home market 
inland freight for U.S. sales, but did include ICMS taxes in inland 
freight for home market sales. Likewise, COSIPA did not include ICMS 
taxes within home market inland freight for U.S. sales. For COSIPA's 
home market sales, the evidence is unclear. The vast majority of sales 
examined at verification were within Sao Paulo state and, thus, freight 
charges would not be subject to ICMS taxes; the freight invoice for one 
remaining home market observation indicated no ICMS taxes were 
included. However, COSIPA has stated affirmatively that ``freight 
charges are based on the services plus any applicable taxes (i.e., ICMS 
tax). In this scenario, the freight provider then remits the taxes 
collected from * * * COSIPA and USIMINAS to the state.'' USIMINAS/
COSIPA Case Brief at 5 (original emphasis); see also Respondents' 
Supplemental Questionnaire Response, October 29, 1999, at 9. Thus, we 
conclude that the preponderance of record evidence indicates that for 
USIMINAS/COSIPA, home market freight carriers on interstate runs 
include ICMS in their freight charges. This is similar to the reporting 
of ICMS taxes on sales of the merchandise under investigation (ICMS 
taxes are paid on home market sales and not on U.S. sales; we deduct 
ICMS taxes from reported gross unit price). If ICMS taxes are included 
within movement expenses, which are deducted from the gross unit price, 
and we calculate gross unit price net of ICMS taxes, then the movement 
expenses should similarly be a net of the ICMS taxes. ICMS taxes must 
be concurrently deducted from movement expenses, as well as gross unit 
price to make the entire calculation tax-neutral.
    In the Second Supplemental Questionnaire, we asked respondents to 
report, for each individual sale, the ICMS taxes paid on inland freight 
on the sales tape. Respondents replied: ``[w]hether or not the ICMS is 
included in the transport expense paid by Respondents depends on the 
destination of the shipment. For example, for shipments by COSIPA to 
destinations within the state of Sao Paulo, COSIPA pays the transporter 
its fee for the transport services, and then COSIPA pays the ICMS 
directly to the state. For shipments outside the state of Sao Paulo, it 
is the transporter's responsibility to pay ICMS.'' See Respondents' 
Supplemental Response at 9 (October 29, 1999). Respondents stated that 
the Department should deduct any ICMS paid by respondents directly to 
the state, but if they could not identify these ICMS taxes, it would 
only prejudice them. Respondents claimed that they were unable to 
perfectly isolate ICMS related to freight in the time permitted (see 
Id. at 10). Therefore, they did not report it separately. Printouts in 
USIMINAS'' sales verification exhibits indicate that they are indeed 
able to break out ICMS paid to the freight provider. Because 
respondents have failed to provide information by the deadline for 
submission, the Department is required to apply facts available under 
section 776(a)(2)(A). Moreover, because respondents has not acted to 
the best of its ability to identify the amount ICMS an adverse 
inference is appropriate under 776(b). Consequently, as facts 
available, we have deducted ICMS tax from movement expenses (for all 
home market sales with inland freight reported, by USIMINAS/COSIPA and 
their affiliated resellers) based on the highest rate applicable to 
respondents, 18 percent. See Respondents' Section B Response at B-42 
(August 30, 1999). While COSIPA may not have paid taxes on some of 
those sales, we are deducting ICMS taxes nonetheless since we have no 
way of distinguishing which sales had ICMS tax since respondents did 
not break out the taxes as requested.
Comment 15: Non-Rectangular Blanks
    Respondents argue that the Department should exclude all non-
rectangular blanks from the scope of the investigation. Respondents 
submit a brief historical overview:(1) Respondents submitted on July 
12, 1999 a letter requesting the Department to exclude all non-
rectangular blanks from the scope of the investigation; (2) the 
Department's November 1, 1999, Memorandum from Case Analyst to Joseph 
A. Spetrini (Scope Memorandum) did not identify or address the 
respondent's scope request; and (3) since the Preliminary 
Determination, petitioners have requested the Department to exclude 
most non-rectangular blanks from the scope of the investigation.
    Respondents emphasize that there is a subset of non-rectangular 
blanks that is covered by the respondents exclusion request which is 
not covered by petitioners' request. The petitioners' exclusion request 
proposes to limit the exclusion only to non-rectangular blanks that are 
in the ``approximate shape or outline of a finished article.''
    Respondents argue that the Department should revise petitioners' 
proposed exclusion definition for several reasons: (1) It would be 
difficult for U.S. Customs officials to determine, on an entry-by-entry 
basis, whether a particular non-rectangular blank approximates the 
shape or outline of a finished article; (2) the petitioners' exclusion 
request does not consider the fact that consumers of non-rectangular 
blanks normally require the manufacturer to stamp the product into a 
shape that is similar to the shape of the final finished product; for 
the customer to do otherwise would not be economical; (3) an 
application of the Diversified Products criteria demonstrates that all 
non-rectangular blanks should be excluded. In particular, there are 
significant and meaningful differences in the physical characteristics 
of the product, the expectations of the ultimate purchasers, the 
ultimate use of the product, and the channels of trade in which the 
product is sold, from the primary cold-rolled steel products subject to 
this investigation. See Diversified Products v. United States, 572 F. 
Supp 883 (CIT 1983). Respondents refer to their July 12, 1999, analysis 
of the Diversified Products criteria and state that the application of 
the Diversified Products

[[Page 5577]]

criteria is identical whether or not the non-rectangular blank conform 
with the petitioners' proposed definition of the non-rectangular blanks 
excluded from the investigation.
    Petitioners initially point out although parties agree on the term 
``blanks,'' petitioners did not exclude all cold-rolled steel of non-
rectangular shape. See Scope Exclusion Letter at 2. Petitioners 
maintain that if cold-rolled steel imports are within the scope 
definition, then they are covered by the investigation, regardless of 
their shape. Referring to Chapter 72, Note 1.(k) of the HTSUS (already 
set up), petitioners state that non-rectangular shapes are properly 
classified as ``flat-rolled products.'' Petitioners stress that 
products that should not be classified as ``flat-rolled products'' are 
those that assume the character of products of other headings.
    Petitioners argue that if the Department were to revise the scope 
of the investigation, it would be an invitation to circumvent this 
proceeding, an abuse of its discretion, and a direct contradiction to 
recent pronouncements by the Administration that the law will be 
vigorously enforced. According to petitioners, respondents' argument 
that there is ``no commercial incentive'' for a customer to insert an 
additional step into its production process is false. Petitioners 
maintain that if respondents can avoid a duty cost with a less 
expensive change--i.e., cutting a corner of a steel sheet--then there 
is, in fact, a ``commercial incentive,'' and such imported products 
would compete for sales with products made by the domestic industry.
    With regard to respondents' argument that the definition provided 
in Petitioners' Scope Clarification Letter would be ``unmanageable'' by 
the U.S. Customs Service, petitioners maintain that the letter makes 
clear that products that assume the character and parts or finished 
articles are not intended to be covered. Petitioners also disagree with 
respondents' contention that application of Diversified Products 
criteria suggests that all non-rectangular blanks should be excluded. 
According to petitioners, their letter reveals that the products not 
included are those that are actually dedicated components of other 
items or complete articles themselves. Petitioners note that there is a 
real difference between a steel sheet that has been cut to a shape that 
is technically non-rectangular and a piece of steel that can only be 
used as part of some other article.
    Petitioners submitted a clarification to the scope exclusion, which 
replaces petitioners' November 3, 1999 submission. Petitioners agree 
that the following product should be excluded from the scope of the 
instant investigation: ``Non-rectangular shapes, not in coils, which 
are the result of having been processed by cutting or stamping and 
which have assumed the character of articles or products classified 
outside chapter 72 of the HTSUS.'' See Petitioners' Draft of Scope 
Exclusion/Clarification Letter (January 12, 2000). Petitioners 
emphasize that any product that does not meet these specifications is 
included within the scope of the investigation.
Department's Position
    We agree with petitioners, who have revised the scope, carefully 
articulating the ``non-rectangular'' products that are excluded. It has 
been determined that the HTSUS will be the governing factor for 
classifying these products. In this case, products that are no longer 
commercially recognized as basic steel mill products--i.e., advanced 
products which have assumed the character of articles or products 
classified outside Chapter 72 of the HTSUS--will not be included in the 
scope. See ``Scope of the Investigation,'' above.
Comment 16: Thickness Tolerance
    The respondents contend that the Department should recognize 
COSIPA's \3/4\ mill thickness tolerance code distinctions. Respondents 
note that the Department's antidumping questionnaire identifies codes 
for thickness tolerance to include \1/4\ mil tolerance, \1/2\ mil 
tolerance, and standard mil tolerance. Respondents further state that 
the questionnaire also allows respondents to specify and explain any 
other codes for thickness tolerances which they consider applicable to 
the subject merchandise. In response to the questionnaire, respondents 
note that they provided a code which represents subject merchandise 
with a \3/4\ mil thickness tolerance.
    Respondents note that in the Preliminary Determination, the 
Department treated \3/4\ mil tolerance as standard mill tolerance. The 
respondents state that the Department has not provided an explanation 
why it recognized some tolerance distinctions while at the same time it 
has ignored other tolerance distinctions of the same magnitude. 
Respondents believe that the Department should revise its computer 
programs so that \3/4\ mil thickness tolerance sales are kept distinct 
from standard tolerance sales.
    Petitioners disagree with the respondents' argument that \3/4\ mil 
thickness tolerance sales should be kept distinct from standard 
tolerance sales. Petitioners believe the Department should reject this 
argument since respondents were offered an opportunity to propose a \3/
4\ mil thickness tolerance in their response to the Department's model-
matching criteria, and did not. Petitioners make reference to 
respondents' August 30, 1999, questionnaire response, which states that 
sales are categorized as standard tolerance sales which meet the 
following conditions: (1) Customer did not specify a thickness 
tolerance; (2) sales which cannot be linked to a customer order; (3) 
sales from inventory.
    Petitioners state that the burden is on the respondents to justify 
the need for an additional tolerance category, and that the 
respondents' case brief has offered nothing more than the unsupported 
assertion that the \3/4\ mil thickness tolerance is a ``fairly common 
customer specification'' for COSIPA sales. Petitioners believe that the 
Department's decision to place these \3/4\ mil tolerance sales into the 
standard mil category is consistent with respondents' own practice of 
assigning various categories of sales to the standard category, which 
in effect uses that category as a ``catchall''.
Department's Position
    We agree with petitioners. The respondents were given every 
opportunity to propose a \3/4\ mil thickness tolerance in their 
response to the Department's model-match criteria, and did not. In 
fact, the antidumping questionnaire explicitly states that if the 
respondents need to add subcategories to the thickness tolerances, the 
respondents should contact the Department immediately and describe why 
the Department should use this information to define identical and 
similar merchandise. Respondents did not contact the Department as 
requested, nor did the Respondents place any information on the record 
to indicate that \3/4\ mil tolerance is a industry-wide recognized mil 
tolerance category. In their questionnaire response, the respondents 
simply stated that they were adding this additional thickness tolerance 
to the mil thickness tolerances categories provided by the Department. 
However, respondents failed to submit any information or documentation 
which would indicate that the steel industry recognizes ``\3/4\ mil'' 
tolerances as a production standard, as it does \1/4\ mil and mil 
tolerances. Therefore, for the Final Determination, we continued to 
treat the limited number of \3/4\ mil tolerance sales as standard mil 
tolerance.

[[Page 5578]]

Comment 17: Credit Cost Calculations
    The respondents note that in the Preliminary Determination the 
Department adjusted the credit cost calculation for USIMINAS because 
USIMINAS had calculated credit costs based on a gross price. The 
Department adjusted the credit cost calculation by deducting taxes from 
gross price. Respondents state that in the event the Department 
continues to deduct taxes from gross price prior to calculating credit 
costs, the Department may now use USIMINAS' reported credit costs, 
since the adjustment was already made to the respondent's data in the 
October 29, 1999, submission.
    Petitioners do not address this issue in their rebuttal briefs.
Department's Position
    The Department concludes that it is appropriate to deduct taxes 
from gross unit price for the calculation of credit costs in the Final 
Determination. We accept the respondents' adjusted credit costs, which 
were calculated using prices net of taxes.
Comment 18: Theoretical Weight Sales
    Respondents state that the Department adjusted all home market 
sales with a conversion factor, which was used by the Department in a 
recent administrative review involving cold-rolled steel. Respondents 
note that on October 29, 1999, USIMINAS provided the Department with a 
conversion factor based on its historical sales experience. Respondents 
assert that the Department verified the conversion factor and that the 
Department verified that USIMINAS sells sheet in the home market based 
on both theoretical weight and adjusted theoretical weight. Respondents 
note that all USIMINAS'' U.S. sheet sales are on adjusted theoretical 
basis. Therefore, respondents contend that in matching these U.S. sales 
of sheet to home market sales, it is necessary to adjust the home 
market sheet sales sold on a theoretical weight basis to an adjusted 
theoretical weight basis.
    Respondents contend that in light of USIMINAS' submissions, the 
Department can now adjust price and charges for USIMINAS' home market 
theoretical weight sales. They note that the adjusted theoretical 
weight is always greater than the theoretical weight. Respondents note 
that when the Department adjusts prices and charges, the Department 
must divide by the conversion factor. Respondents note that this 
applies to all adjustments except freight and other adjustments not 
dependent on invoice weight. Respondents contend that freight costs are 
invoiced by freight providers on a gross weight basis. Respondents note 
this also applies to packing costs which were calculated on an actual 
weight basis.
    Petitioners argue that Department should reject the conversion 
factor provided by USIMINAS, and as facts available, continue to 
convert all of USIMINAS' home market theoretical weight sales to an 
actual weight basis by multiplying the reported quantities for these 
sales by 0.96 and dividing the reported prices for these sales by that 
factor.
    Petitioners state that the conversion factor provided by USIMINAS 
at verification relates exclusively to conversions from a theoretical 
weight basis to an adjusted theoretical weight basis, meaning that the 
company still has never provided a conversion factor that might be used 
to convert actual weight to a theoretical weight basis (or vice versa). 
Petitioners argue that the conversion factor provided by USIMINAS is 
suspect, and state that the respondents have not put forward any 
arguments which provides the Department with any reason to alter its 
use of facts available for the final determination. Petitioners also 
refer to the verification report which states that the USIMINAS 
conversion factor was based on a study done a long time ago. 
Petitioners argue that this statement provides reason to doubt whether 
the figure provided by USIMINAS represents the relationship between the 
company's theoretical weight quantities and adjusted theoretical weight 
sales quantities during the period of investigation.
Department's Position
    In the Preliminary Determination we treated all USIMINAS' U.S. 
sales as actual weight sales, and we treated all USIMINAS' home market 
sales of sheet as theoretical weight sales. USIMINAS later clarified 
that its U.S. sales of sheet are in adjusted theoretical weight and its 
home market sales are in adjusted theoretical and theoretical weight, 
and it provided a conversion factor between theoretical and adjusted 
theoretical weight.USIMINAS claimed that adjusted theoretical weight 
approximates actual weight.
    While we verified the relationship between theoretical and adjusted 
theoretical weight using this factor, we find that USIMINAS did not 
submit convincing evidence that adjusted theoretical weight 
approximates actual. Therefore, for the final determination, we are 
using the factor submitted by USIMINAS to convert its U.S. and home 
market adjusted theoretical weight sales to theoretical weight 
(including conversion of all prices and adjustments, excepting 
packing). We then converted the U.S. and home market theoretical weight 
to actual weight (including conversion of all prices and adjustments, 
excepting packing) using the factor used in the Preliminary 
Determination 64 FR 61249, 61259 (November 10, 1999).
Comment 19: PIS/COFINS Taxes
    Respondents argue that the Department incorrectly declined to 
deduct PIS and COFINS taxes from home market prices. Respondents note 
that the tax adjustment provision of section 773(a)(6)(B)(iii) of the 
Act ensures that the Department makes a tax-neutral comparison when 
comparing normal value to export price by requiring the Department to 
adjust normal value by the amount of any indirect taxes imposed on home 
market sales, but not on export sales. Respondents state that, until 
recently, the Department considered Brazil's Programa de Integracao 
Social (PIS) and Contribuicao do FinSocial (COFINS) taxes to be 
indirect taxes that fall within the meaning of the tax adjustment 
provision. The Department's change in its treatment of these taxes, 
according to respondents, is based on a factually incorrect assumption 
that these taxes apply to total gross revenues and on a legally 
improper understanding of what indirect taxes are.
    Respondents point out that the statute and prior case law make 
clear that three circumstances must exist for the tax adjustment 
provision to apply to a particular tax. First, the tax must be 
``directly'' imposed on the home market product. Second, it must be 
rebated or not collected on export sales. Third, it must be added to or 
included in the price of the home market sale. Respondents argue that 
the fact that these taxes are not imposed on exports has never been an 
issue. Thus, respondents state that the only requirements of 
significance in this review are the first and third requirements.
    With the Department failing to adjust respondents' home market 
price for Brazil's PIS/COFINS taxes in the Preliminary Determination, 
respondents argue that the Department incorrectly determined that 
``these taxes are levied on total revenues.'' Respondents state that 
until recently, the Department consistently held that PIS/COFINS fall 
within the meaning of the tax adjustment provision. Respondents cite 
numerous antidumping cases from Brazil in support of their position 
that PIS and COFINS should be deducted

[[Page 5579]]

from home market price. See respondents' Case Brief at 17.
    Respondents contend that in the Final Administrative Review of 
Silicon Metal from Brazil, 62 FR 1970 (January 14, 1997) (Silicon Metal 
from Brazil, 1997), the Department erroneously determined that PIS/
COFINS are analogous to two Argentine taxes previously determined not 
to be indirect taxes within the meaning of the tax adjustment 
provision. Respondents state that in the Final Determination of the 
Less-Than-Fair Value Investigation of Silicon Metal from Argentina, 56 
FR 37891 (August 9, 1991) (Silicon Metal from Argentina), the 
Department refused to make an upward adjustment to U.S. price for two 
Argentine taxes because these taxes were based on non-sales revenue as 
well as sales revenue. Respondents argue that the Department concluded 
that these taxes were not ``directly'' imposed on Argentine sales 
within the meaning of section 773(a)(6)(B)(iii) of the Act.
    According to respondents, petitioners in Silicon Metal from Brazil, 
1997 glossed over the fact that Brazilian and Argentine taxes are, in 
fact, vastly different by asserting that PIS/COFINS are ``almost 
identical'' to the two Argentine taxes. Respondents state that, 
contrary to the Argentine taxes, PIS/COFINS are imposed only on a 
company's sales revenue.
    In addition, respondents claim that the Department's decision not 
to make an adjustment for PIS and COFINS is unsupported by any 
accounting or economic analysis. Respondents contend that the fact that 
PIS and COFINS sales taxes are calculated on an aggregate basis as 
opposed to an invoice-specific basis is irrelevant--the tax liability 
is the same. In respondents' view, no basis exists to conclude that the 
manner of calculating a tax disqualifies a tax from an adjustment under 
section 773(a)(6)(B)(iii) of the Act.
    Respondents state that the Department has not, in any of its 
decisions relating to this issue, identified any support for its 
classification of a sales tax as a ``gross revenue tax'' simply because 
it is calculated on an aggregate basis. As a result, respondents 
reiterate that the taxes are based exclusively on home market sales and 
for this reason the Department for almost two decades found these taxes 
to qualify for a circumstance of sale adjustment.
    Respondents state that the third prong, inclusion of the taxes in 
the home market price, is satisfied in the instant case; the Department 
has never based its denial of the PIS/COFINS adjustment on a specific 
or explained finding that the taxes were not included in the price and 
passed through to the home market customer. Respondents note that in 
the Final Administrative Review of Color Television Receivers from 
Korea, 49 FR 50420 (December 28, 1984), the Department made an 
adjustment for home market taxes based on the conclusion that the taxes 
were fully passed through to the home market customers. Respondents 
assert that the Department determined that it was authorized to make an 
adjustment under section 772(d)(1)(C) of the Act. Therefore, 
respondents urge the Department to determine that PIS and COFINS are 
included in the home market price, and passed through to home market 
customers. In addition, respondents assert that in the Preliminary 
Determination, the Department did not cite to any record evidence that 
there is no pass-through, nor did it prepare any questions related to 
the pass-through aspect of these taxes in its questionnaires or at 
verification. Since the Department never asked respondents to rebut any 
newfound presumption that these taxes were not included in the home 
market price to the customers, respondents believe the Department is 
not justified in finding no pass-through in this investigation.
    If the Department were to argue that PIS and COFINS are not 
included in the price because they are not itemized on the invoice 
(like the IPI and ICMS taxes), respondents maintain that it would be 
wrong for two reasons: (1) PIS and COFINS were not itemized on the 
Brazilian invoices in all the Department's previous investigations 
which allowed adjustments to normal value for these taxes, yet it 
always found that these taxes were included in the home market price, 
and qualified for an adjustment; (2) whether or not the tax is itemized 
on the invoice is irrelevant to a pass-through finding. Respondents 
note that if the tax is not itemized, it is simply included in the 
gross unit price. According to respondents, itemization on the invoice 
only indicates how the tax is calculated in the accounting records of 
the company.
    Respondents conclude that there is no justification for the 
Department's preliminary decision to ignore the necessary deduction for 
PIS and COFINS. Respondents argue that the PIS/COFINS adjustment is 
consistent with Department findings (except for recent ``erroneous'' 
decisions), and decisions by the Courts. Moreover, according to 
respondents, there is no evidence on the record to support a Department 
presumption that PIS/COFINS are not included in the home market price. 
Respondents state that the PIS/COFINS adjustment is required to ensure 
that the Department's LTFV comparisons are tax neutral, as contemplated 
by the U.S. dumping law and Article 2.4 of the WTO Antidumping 
Agreement.
    Petitioners argue that PIS/COFINS taxes should not be deducted from 
normal value. Petitioners state that the statute and the SAA clearly 
state that downward adjustments to normal value may only be made for 
tax amounts directly imposed upon sales of the foreign like product. 
See section 773(a)(6)(B)(iii) of the Act and SAA at 827 and 828. 
Petitioners refer to the COSIPA verification report at 22, which states 
that PIS and COFINS taxes use the same base of calculation. Petitioners 
claim that the base of calculation is the total gross revenue of the 
corporation, and that neither the PIS nor the COFINS tax is directly 
imposed on sales of the foreign like product. Petitioners maintain that 
these taxes are imposed on all of the company's domestic sales revenue, 
including service revenue, on an aggregate basis. Accordingly, 
petitioners argue, these taxes are not imposed directly upon the 
foreign like product or components thereof, and there is no statutory 
basis for their deduction from normal value.
    Contrary to respondents' suggestion that the Department lacks an 
understanding of indirect taxes, petitioners state that the Department 
is intimately familiar with the way the PIS/COFINS taxes are imposed 
and collected, and the Department has painstakingly reviewed this issue 
in several recent cases. Petitioners make special note of the Final 
Results of Antidumping Duty Administrative review of Certain Cut-to-
Length Carbon Steel Plate from Brazil, 63 FR 6889, 6911 (February 11, 
1998) and add that the respondents simply seek to overturn the 
Department's practice based on no new facts or new arguments.
Department's Position
    Since 1997, the Department has consistently disallowed claimed 
adjustments to normal value for PIS/COFINS taxes. According to section 
773(a)(6)(B)(iii) of the Act, normal value of the merchandise will be 
reduced by the amount of any taxes imposed directly upon the foreign-
like product or components thereof which have been rebated, or which 
have not been collected, on the subject merchandise, but only to the 
extent that such taxes are added to or included in the price of the 
foreign-like product.
    PIS/COFINS taxes do not appear to be imposed on subject merchandise 
or components thereof, leading to no statutory basis to deduct them 
from NV.

[[Page 5580]]

See page 29 of USIMINAS' Sales Verification Report and Verification 
Exhibit 24. Citing to Silicon Metal from Brazil: Notice of Final 
Results of Antidumping Duty Administrative Review, 64 FR 6305, 6318 
(February 9, 1999) (Silicon Metal from Brazil), the Department 
determined that ``a deduction of the PIS and COFINS taxes is not 
correct in the calculation of NV because these taxes are levied on 
total revenues (except for export revenues), and thus the taxes are 
direct, similar to taxes on profit or wages.'' See Hot-Rolled Steel 
from Brazil at 38765. Therefore, the Department will not deduct the 
PIS/COFINS taxes from the NV in the Final Determination.

III. Cost Issues

Comment 20: Major Inputs
    USIMINAS and COSIPA argue that the Department does not have 
evidence on the record to support disregarding the transfer price of 
iron ore from its affiliate CVRD or demonstrating that the transfer 
price is below CVRD's cost of production. Respondents assert that the 
Department has confirmed that the iron ore prices charged by CVRD are 
above the prices charged by unaffiliated suppliers. Further, 
respondents maintain that, even though they could not compel CVRD to 
provide its COP for iron ore, the evidence on the record shows that 
CVRD made a profit during the POI in its ore and metals division; 
therefore, the Department has no reasonable grounds to believe that 
iron ore was being supplied at less than its COP and the use of facts 
available for this issue is not warranted. As support respondents cite 
article 2.2.1.1 of the international antidumping agreement which states 
that ``costs shall normally be calculated on the basis of records kept 
by the exporter or producer under investigation, provided that such 
records are in accordance with generally accepted accounting principles 
of the exporting country and reasonably reflect the costs associated 
with the production and sale of the product under consideration.''
    Moreover, respondents claim that the cost of iron ore does not 
represent a significant portion of the cost of the merchandise under 
investigation as the regulations suggest. COSIPA argues that not only 
is iron ore a minor input, but its relationship with CVRD is indirect 
and does not permit influence or control over the company, and thus 
does not constitute affiliation. COSIPA points to the fact that the 
relationship exists strictly because of CVRD's minority stock ownership 
in USIMINAS.
    Additionally, COSIPA asserts that in the preliminary determination 
the Department violated the statute by using adverse inferences (i.e., 
petition rate) in the application of facts available relating to the 
major input rule. Both USIMINAS/COSIPA note that they were unable to 
compel CVRD to provide cost of production information. However, they 
maintain that under section 776(b) of the Act, the Department must find 
that ``the respondent failed to cooperate to the best of its ability,'' 
in order to resort to adverse inferences in applying facts available. 
Respondents state that the record shows that they attempted in every 
way to obtain the cost of production from CVRD, but CVRD refused. Thus, 
if the Department decides to use information other than the invoice 
price from CVRD to determine iron ore costs, it should use corroborated 
information from independent sources.
    Petitioners contend that the Department's use of adverse facts 
available in valuing the iron ore acquired by respondents' from CVRD is 
appropriate. According to petitioners, the record clearly indicates 
that (1) iron ore is a major input to the production of subject 
merchandise, (2) CVRD is affiliated with both USIMINAS and COSIPA, (3) 
respondents refused to provide the Department with CVRD's cost of 
producing iron ore, thereby failing to act to the best of their ability 
to provide requisite information, and (4) the statute mandates valuing 
the purchase of a major input from an affiliated party at the highest 
of the transfer price, the market price, or the cost of production. 
Thus, in lieu of CVRD's actual production cost information, the 
Department had no choice but to resort to facts available.
Departments Position
    We have applied the major input rule in accordance with section 
773(f)(3) of the Act in valuing the iron ore received from CVRD. In 
doing so, we have used, as non-adverse facts available, the COP 
information provided in the June 2, 1999 petition as the COP of iron 
ore from CVRD since respondents' did not provide the COP information as 
requested by the Department.
    We consider iron ore to be a major input in accordance with section 
773(f)(3) of the Act. In determining whether an input is considered 
major, among other factors, the Department considers both the 
percentage of the input obtained from affiliated suppliers (versus 
unaffiliated suppliers) and the percentage the individual element 
represents of the product's COM. We determined in this case that iron 
ore represents a significant percentage of the total cost of 
manufacturing and that USIMINAS receives a significant portion of its 
iron ore from its affiliate CVRD. The combination of the significant 
amounts of the inputs obtained from CVRD and the relatively large 
percentage the iron ore represents of the product's COM increases the 
risk of misstatement of the subject merchandise's costs to such a 
degree that we have determined that section 773(f)(3) of the Act 
applies to this input.
    Section 773(f)(2) allows the Department to test whether 
transactions between affiliated parties involving any element of value 
(i.e., major or minor inputs) are at prices that ``fairly reflect the 
market under consideration.'' Section 773(f)(3) allows the Department 
to test whether, for transactions between affiliated parties involving 
a major input, the value of the major input is less than the affiliated 
supplier's COP where there is reasonable cause to believe or suspect 
the price of iron ore is below COP. In other words, if an 
understatement in the value of an input would have a significant impact 
on the reported cost of the subject merchandise, the law allows the 
Department to ensure that the transfer price or market price is not 
below cost. We consider the initiation of a sales-below-cost 
investigation reasonable grounds to believe or suspect that major 
inputs to the foreign like product may also have been sold at prices 
below the COP within the meaning of section 773(f)(3) of the Act. See, 
e.g., Final Results of Antidumping Administrative Review: 
Silicomanganese from Brazil, 62 FR 37871 (July 15, 1997).
    Because we have determined that iron ore purchased from an 
affiliate is a major input in production of cold-rolled steel, the 
statute requires that, for the dumping analysis, the major input should 
be valued at the higher of transfer price, market price or COP. See 
Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Round Wire from Canada, 64 FR 17324, 17335 (April 9, 
1999). In accordance with sections 773(f)(2) and (3) of the Act, we 
attempted to compare the transfer price for iron ore purchased from 
USIMINAS/COISPA's affiliated supplier to the supplier's COP and a 
market price. As noted above, even though the Department requested that 
USIMINAS/COSIPA provide its affiliated supplier's actual COP for iron 
ore in the original section D questionnaire, the supplemental 
questionnaires and at verification, USIMINAS failed to do so. Contrary 
to USIMINAS/COSIPA's assertion, the fact that CVRD's metals division 
may be

[[Page 5581]]

profitable does not demonstrate that the prices it charged to USIMINAS 
and COSIPA were above its COP.
    Section 776(a) of the Act provides for the use of facts available 
where necessary information is not available on the record. As a result 
of USIMINAS' and COSIPA's failure to provide the requested information, 
we have used partial facts available to ensure the COP of the major 
input is taken into consideration in applying the major input rule. As 
a gap filling facts available, we included the iron ore cost from the 
petition as the COP of iron ore to preform the major input rule test. 
We note that we have not made an adverse inference in selecting the 
facts available as respondents claim. Rather, it is a gap filling facts 
available based on the only information on the record related to the 
COP of iron ore.
Comment 21: Financial Expense
    USIMINAS/COSIPA argue that in the Preliminary Determination the 
Department improperly included interest expenses and foreign exchange 
losses related to export sale-specific financing and improperly 
excluded foreign exchange gains related to accounts receivable. 
According to respondents, Brazilian law permits banks to provide 
advance financing to companies, based on a letter of credit obtained 
from customers for export sales. Respondents state that under the 
financing agreement they pay the bank interest and assume the risk of 
exchange rate gains or losses until the merchandise is shipped. The 
bank assumes the risk of the exchange rate gains or losses from the 
date of shipment to the date of payment from the customer. Because the 
financing costs are incurred exclusively on export sales, the 
respondent asserts that the costs should not be included in the COP 
calculation. As support respondents cite AK Steel Corp. v. United 
States, Slip Op. 97-152, at 12 n. 2 (CIT November 14, 1997) which 
states ``when referring to the cost of producing the merchandise the 
statute plainly means the merchandise in question sold in the home 
market.''
    Further, respondents contend that the petitioners argument that 
money is fungible does not justify the inclusion of these expenses in 
the COP and CV calculations. According to respondents, the Department 
does not recognize that all money is fungible, because it does not 
permit income from long-term assets or non-operating income to reduce 
financial costs. If all money was fungible such income would be used to 
reduce financial costs of production. In addition, respondents argue 
that if money is fungible there is no justification for including all 
financial expenses while including only some financial income, as in 
the instant case where income generated by foreign exchange gains 
related to accounts receivable has been excluded.
    Petitioners contend that the Department properly included the 
financing costs under the fungibility principle. Petitioners claim that 
it's the Department's longstanding policy to treat interest expense as 
financial expenses not selling expenses. Petitioners assert that funds 
obtained from export sales financing could be used in producing the 
merchandise sold in the home market. Therefore, the Department 
appropriately included these costs in the calculation of COP and CV 
because they do relate to production of merchandise for all markets.
    Further, petitioners argue that the Department properly excluded 
foreign exchange gains related to accounts receivable from the 
calculation of the financial expense ratio. According to petitioners, 
only foreign exchange gains and losses related to debt are relevant to 
the financial expense calculation. Thus, the foreign exchange gains 
generated from accounts receivable relate to sales transactions and 
were properly excluded from the financial expense ratio calculation.
Department's Position
    We agree with petitioners that interest expense and foreign 
exchange losses incurred on advance financing for export sales should 
be included in the financial expense ratio calculation. The 
Department's longstanding practice recognizes the fungible nature of a 
company's invested capital   resources (i.e., debt and equity). This 
practice was upheld in Camargo Correa Meais, S.A. v. United States, 17 
C.I.T. 897, 902 (August 13, 1993), where the court approved the 
Department's policy of recognizing the fungible nature of invested 
capital resources. In this case, we determined that the interest 
expense and foreign exchange losses incurred on the export financing 
represent financing activities of the entity. As noted by the 
petitioners, the funds received from using the accounts receivable as 
collateral may be used in any capacity the company decides, such as, in 
producing subject merchandise. Accordingly, the interest expense and 
foreign exchange losses incurred on these types of agreements are 
related to the companies' debt. Therefore, we have included both the 
expense and losses in the calculation of the financial expense ratio.
    We disagree with respondents' argument that we should include 
foreign exchange gains related to accounts receivable as an offset to 
interest expense in the calculation of financial expenses. The 
Department typically includes in its calculation of COP and CV foreign 
exchange gains and losses resulting from transactions related to a 
company's manufacturing activities (e.g., purchases of inputs). See 
Notice of Final Determination of Sales at Less Than Fair Value: Steel 
Wire Rod from Trinidad and Tobago, 63 FR 9177, 9181 (February 24, 
1998). We do not consider exchange gains and losses resulting from 
sales transactions to be related to the manufacturing activities of the 
company. Thus, for the final determination we have disallowed foreign 
exchange gains related to accounts receivable as an offset to financial 
expenses.
Comment 22: Including Employee Profit Sharing Expenses in the G&A 
Expense Ratio
    For the final determination, petitioners assert that the Department 
should recalculate USIMINAS/COSIPA's combined G&A expense ratio to 
include employee profit-sharing expenses. According to petitioners, the 
Department typically includes these expenses in the calculation of the 
COP. For example, petitioners cite the Final Determination of Sales at 
Less Than Fair Value: Certain Stainless Steel Sheet and Strip in Coils 
from France, 64 FR 30820, 30823 (June 8, 1999), in which the Department 
included similar profit-sharing costs in the calculation of COP.
    USIMINAS/COSIPA did not comment on this issue.
Department's Position
    We agree with petitioners that respondents' employee profit sharing 
expense should be included in the calculation of COP and CV. It is the 
Department's established practice to include this type of expense in 
the calculation of COP and CV. Because employee profit sharing is a 
cost of labor and it is an expense recognized within the POI it should 
be included in the reported cost in accordance with full absorption 
costing principle. See, e.g., Final Results and Partial Rescission of 
Antidumping Duty Administrative Review: Certain Pasta from Turkey, 63 
FR 68429 (December 11, 1998). For the final determination we included 
USIMINAS' employee profit sharing expenses in the combined G&A expense 
rate calculation.

[[Page 5582]]

Comment 23: Idled-Assets
    Petitioners argue that COSIPA did not include idled-asset 
depreciation expense as an element of its production costs. Petitioners 
assert that the Department has a longstanding practice of including 
depreciation on idled-assets in the reported costs, citing Final 
Results of Antidumping Duty Administrative Reviews; Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, From Japan, and 
Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and 
Components Thereof, From Japan, 63 FR 20585, 20609 (April 27, 1998) 
(TRBs from Japan). As further support, petitioners cite, Final Results 
of Antidumping Duty Administrative Review and Determination Not to 
Revoke in Part; Silicon Metal From Brazil, 62 FR 1954, 1958 (January 
14, 1997) where the Department adjusted the respondents depreciation 
expense stating ``fully absorbed costs, including idle-equipment 
depreciation expense for producing the subject merchandise should be 
included in the COP and CV.'' Thus, petitioners contend that in the 
final determination the Department should include the depreciation 
expense related to COSIPA's idled-assets in the reported costs.
    COSIPA did not comment on this issue.
Department's Position
    We agree with the petitioners that depreciation expense of idled-
assets should be included in the COP and CV. It is the Department's 
practice to include in fully absorbed factory overhead the depreciation 
of equipment not in use or temporarily idled, notwithstanding home 
market accounting standards which may allow companies to refrain from 
doing so. See, TRBs from Japan. See also NTN Bearing Corp. of America, 
et al., plaintiffs, v. United States, Slip Op. 93-129 (CIT August 4, 
1993), where the court upheld the Department's decision to include 
depreciation expenses for idled equipment. Accordingly, in the final 
determination we included the idled-asset depreciation expense in 
COSIPA's costs.
Comment 24: Write-Offs of Idled-Assets
    During the POI, COSIPA wrote off certain production assets, but 
excluded the loss from write-offs from the reported COP and CV. 
Petitioners maintain that it is the Department's standard practice to 
include the costs related to write-offs of production assets in the 
reported costs, citing Final Results of Antidumping Duty Administrative 
Review: Extruded Rubber Thread From Malaysia, 61 FR 54767, 54772 
(October 22, 1996) (Extruded Rubber Thread). Accordingly, Petitioners 
contend that in the final determination the Department should include 
the costs related to COSIPA's write-offs of production assets in the 
reported costs.
    COSIPA argues that the Department should not include the costs 
related to write-offs of production assets in the reported costs 
because these assets were idled before and after the POI and are 
classified as ``non-operating costs'' under Brazilian GAAP. Respondent 
maintains that in Final Determination of Sales at Less Than Fair Value; 
Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line 
and Pressure Pipe From Italy, 60 FR 31981, 31990 (June 19, 1995), the 
Department refused to include as a cost of production the cost of idled 
assets which ``relate clearly to discontinued operations from a prior 
period and are no longer productive assets.'' According to the 
respondent, the Department normally uses the last completed fiscal year 
of the POI to calculate the G&A expense ratio. Therefore, since a large 
portion of the written-off assets were idled before the POI and the 
remaining amount relates to assets idled in the first two months of the 
1999 fiscal year these costs should not be included in the G&A expense 
ratio, which is calculated based on the 1998 fiscal year. As support, 
respondent cites the Final Determination of Sales at Less Than Fair 
Value: Furfuryl Alcohol From Thailand, 60 FR 22557, 22560 (May 8, 
1995). Further, the respondent asserts that if the Department decides 
to include the expense for the assets written-off in the numerator for 
calculating the G&A expense rate, then the Department should also 
include this amount in the denominator.
Department's Position
    We disagree with the respondent. In accordance with past practice, 
the Department has included write-offs of the permanently idled assets 
in COP and CV. See, e.g., Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Wire Rod From Spain, 63 FR 40391, 40403 
(July 29, 1998), wherein the Department included write-offs of 
permanently idled assets and related spare parts in the COP and CV. We 
do not consider write-offs of idled assets to be the type of expense we 
would exclude from the COP and CV. This equipment was related to the 
production operations of the company, the undepreciated value has never 
been charged against income, and it was expensed during the period of 
review. The loss realized from the assets written off is an actual 
expense to the company. Accordingly, the Department normally includes 
this type of equipment write-off in the calculation of COP and CV. See 
Extruded Rubber Thread., Final Determination of Sales at Less Than Fair 
Value: Small Diameter Circular Seamless Carbon and Alloy Steel, 
Standard, Line and Pressure Pipe from Italy, 60 FR 31981, 31990 (June 
19, 1995); Final Results of Antidumping Duty Administrative Review: 
Certain Cut-To-Length Carbon Steel Plate from Germany, 61 FR 13834, 
13836 (March 28, 1996); and Final Results of Antidumping Duty 
Administrative Review: High-Tenacity Rayon Filament Yarn from Germany, 
59 FR 15897, 15899 (March 28, 1995).
    The Small Diameter Circular Seamless Carbon and Alloy Steel, 
Standard, Line and Pressure Pipe case cited by the respondent is not 
controlling because during that investigation a gain or loss on the 
discontinued operations had yet to be recognized in the company's 
normal books and records. However, the notice did state that ``upon 
disposal of the assets, the gain or loss on the sales will be included 
on the respondent's income statement and we will include the gain or 
loss in COP/CV.'' In this case, we are including write-offs of 
equipment which were being recognized by the company during the POI.
    Regarding respondent's argument concerning including the write-offs 
in both the numerator and denominator in calculating the G&A rate, we 
disagree. If the Department calculated the G&A expense ratio as 
respondent suggest, the result would distort the dumping analysis 
because we would be applying a ratio which includes write-offs in the 
denominator to a base (i.e., COM) which does not include write-offs. In 
order to correctly reflect the G&A expenses incurred by respondents, 
the G&A ratio must be calculated using a COS figure that excludes 
write-offs and applied to a COM that excludes write-offs. This is 
consistent with the methodology used in the Notice of Final Results of 
Antidumping Duty Administrative Review: Circular Welded Non-Alloy Steel 
Pipe from the Republic of Korea, 63 FR 32833, 32837 (June 16, 1998) and 
the Final Determination of Sales at Less Than Fair Value: Static Random 
Access Memory Semiconductors from Taiwan, 63 FR 8910, 8933 (February 
23, 1998).
Comment 25: Weighted-Average Cost by CONNUM
    USIMINAS and COSIPA contend that for collapsing purposes the 
Department should use a single cost of manufacture and general expense 
ratio for each

[[Page 5583]]

company, calculate a dumping margin for each company, then weight-
average the two margins to obtain a single dumping margin. Respondents 
make this assertion because the two companies: (1) Have separate 
production facilities, (2) are located in two different regions of 
Brazil, (3) are separately run on a day-to-day basis, (4) have 
different production costs, (5) possess different machinery and 
processes, and (6) maintain different cost accounting systems. Thus, 
given these differences it is unreasonable for the Department to expect 
either company to price its products above the other company's COP.
    Further, respondents claim that the first court decision approving 
the Department's collapsing policy makes clear that it is limited to 
``calculating a single dumping margin.'' According to respondents, the 
purpose for the policy was to protect against price manipulation. 
However, in the present case, the Department has allegedly extended the 
collapsing policy beyond the intended purpose of the policy for no 
reason.
    Petitioners maintain that the Department has properly calculated a 
combined cost of manufacture and a combined G&A rate for USIMINAS and 
COSIPA. Petitioners contend that it is the Department's stated policy 
to treat collapsed companies as divisions of the same corporate entity, 
rather than as affiliated parties, for cost reporting purposes. See 
Final Results of Antidumping Duty Administrative Reviews: Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea, 
63 FR 13170, 13185 (March 18, 1998). Petitioners counter respondent's 
argument against the use of a combined cost of manufacture by stating 
that USIMINAS is COSIPA's parent company and that the costs of the two 
companies are combined in the preparation of USIMINAS' consolidated 
financial statements. USIMINAS and COSIPA also produce essentially the 
same products and therefore the potential for cost and price 
manipulation exists.
Department's Position
    We agree with the petitioners that it is the Department's standard 
practice to weight-average the collapsed entity's separate costs into a 
single COP. Section 351.401(f) of the regulations provides for special 
treatment of affiliated producers where the potential for manipulation 
of prices or production in an effort to evade antidumping duties 
imposed on the sale of subject merchandise exists. In accordance with 
this section of the regulations, we collapse all sales prices and 
production costs of the affiliated entities as if they were a single 
company with different production facilities. See, e.g., Final Results 
and Partial Rescission of Antidumping Duty Administrative Review: 
Certain Pasta From Italy, 64 FR 6615, 6622 (February 10, 1999). See 
also Final Results of Antidumping Duty Administrative Reviews: Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From 
Korea, 63 FR 13170, 13185 (March 18, 1998), wherein the Department 
weight-averaged the cost across all collapsed entities. Accordingly, in 
the final determination we calculated a combined cost of manufacture 
and a combined G&A rate for USIMINAS and COSIPA.

Suspension of Liquidation

    Pursuant to section 735(c)(1)(B) of the Act, we are instructing 
Customs to continue to suspend liquidation of all entries of cold-
rolled flat-rolled, carbon-quality steel products from Brazil that are 
entered, or withdrawn from warehouse, for consumption on or after 
August 12, 1999 (90 days prior to the date of publication of the 
Preliminary Determination in the Federal Register). The Customs Service 
shall continue to require a cash deposit or the posting of a bond equal 
to the estimated amount by which the normal value exceeds the U.S. 
price shown below. The suspension of liquidation instructions will 
remain in effect until further notice. The weighted-average dumping 
margins are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter manufacturer                        margin
                                                              (percent)
------------------------------------------------------------------------
CSN........................................................        63.32
USIMINAS/COSIPA............................................        46.68
All Others.................................................        46.68
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (ITC) of our determination. As our final 
determination is affirmative, the ITC will determine, within 45 days, 
whether these imports are causing material injury, or threat of 
material injury, to an industry in the United States. If the ITC 
determines that material injury, or threat of 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 in antidumping 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: January 18, 2000.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 00-1850 Filed 2-3-00; 8:45 am]
BILLING CODE 3510-DS-P