[Federal Register Volume 65, Number 34 (Friday, February 18, 2000)]
[Notices]
[Pages 8338-8342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3986]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-809]


Certain Cut-to-Length Carbon Steel Plate From Mexico: Final 
Results of Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On September 7, 1999, the Department of Commerce (the 
Department) published the preliminary results of the 1997-98 
administrative review of the antidumping duty order on certain cut-to-
length (CTL) carbon steel plate from Mexico (64 FR 48584). This review 
covers one manufacturer/exporter of the subject merchandise, Altos de 
Hornos de Mexico (AHMSA). The period of review (POR) is August 1, 1997 
through July 31, 1998. Based on analysis of the comments received and 
the results of the cost verification, we have changed the results from 
those presented in our preliminary results of review.

EFFECTIVE DATE: February 18, 2000.

FOR FURTHER INFORMATION CONTACT: Thomas Killiam or Robert James, 
Enforcement Group III, Office 8, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-3019 
or 482-0649, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute

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

Background

    On September 7, 1999, the Department published the preliminary 
results of the 1997-98 administrative review of the antidumping duty 
order on certain CTL carbon steel plate from Mexico. See Certain Cut-
to-Length Carbon Steel Plate from Mexico: Preliminary Results of 
Antidumping Administrative Review, (64 FR 48584) (Preliminary Results). 
We gave interested parties an opportunity to comment on the preliminary 
results. We received both comments and rebuttals from AHMSA and the 
petitioners, Bethlehem Steel Corporation, Geneva Steel, Gulf Lakes 
Steel, Inc., of Alabama, Inland Steel Industries, Inc., Lukens Steel 
Company, Sharon Steel Corporation, and U.S. Steel Group (a unit of USX 
Corporation). The Department has now completed this administrative 
review in accordance with section 751(a) of the Act.

Scope of the Review

    The products covered in this review include hot-rolled carbon steel 
universal mill plates (i.e., flat-rolled products rolled on four faces 
or in a closed box pass, of a width exceeding 150 millimeters but not 
exceeding 1,250 millimeters and of a thickness of not less than 4 
millimeters, not in coil and without patterns in relief), of 
rectangular shape, neither clad, plated nor coated with metal, whether 
or not painted, varnished, or coated with plastics or other nonmetallic 
substances; and certain hot-rolled carbon steel flat-rolled products in 
straight lengths, of rectangular shape, hot rolled, neither clad, 
plated, nor coated with metal, whether or not painted, varnished, or 
coated with plastics or other nonmetallic substances, 4.75 millimeters 
or more in thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness, as currently classifiable in the 
Harmonized Tariff Schedule (HTS) under item numbers 7208.31.0000, 
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 
7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 
7212.40.5000, and 7212.50.0000. Included in this review are flat-rolled 
products of 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. Excluded from this review is grade X-
70 plate. These HTS item numbers are provided for convenience and U.S. 
Customs purposes. The written descriptions remain dispositive.

Analysis of Comments Received

Comment 1: Facts Available

    Petitioners argue that AHMSA's cost of production (COP) and 
constructed

[[Page 8339]]

value (CV) data are fatally flawed because AHMSA used a cost model 
which was rejected in a previous review to derive that data. 
Petitioners assert that AHMSA's COP and CV response contains serious 
cost calculation errors, lacks information necessary to complete the 
review, and fails to present data in a form and manner requested by the 
Department. Petitioners assert that the Department should resort to 
total adverse facts available, as it did in Notice of Final 
Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from the Russian Federation, 64 FR 38626, 
38633 (July 19, 1999) (``Russian Hot-Rolled''), because the cost data 
provided by respondent are unusable and the response in toto is flawed 
and unreliable. Petitioners assert that these errors include (1) 
Incorrect calculation of the per-unit average plate cost, (2) An 
erroneous calculation of fixed overhead, (3) Incorrect application of 
the major input rule, (4) A failure by AHMSA to differentiate costs 
based on the number of passes a slab makes in the rolling mill, and (5) 
An inappropriate exclusion of certain other income and expense items. 
Petitioners conclude that for the final results, the Department should 
reject AHMSA's submitted costs in their entirety and resort to total 
adverse facts available to calculate AHMSA's dumping margin.
    AHMSA argues in rebuttal that the calculation errors cited by 
petitioners were minor and were presented to the Department at the 
start of the cost verification. AHMSA states that notwithstanding a few 
minor errors, which it corrected before verification, AHMSA's data were 
verified by the Department. AHMSA argues that it demonstrated at 
verification that it had reported all costs associated with the 
production of subject merchandise.
    AHMSA claims that it submitted all information necessary to 
calculate product-specific costs and that the revised quarterly cost 
model fully accounts for costs incurred in producing the subject 
merchandise. AHMSA argues that the quarterly cost model accounts for 
cost differences in producing plate of different thicknesses because 
the productivity factor calculated by AHMSA reflects the fact that the 
number of passes necessary to produce a given thickness is a function 
of the reheating time the slab undergoes as it enters the plate mill. 
AHMSA argues that the Department should accept the allocation of costs 
for different gauge plate computed by its quarterly cost model, citing 
Final Results of Antidumping Duty Administrative Review: Circular 
Welded Non-Alloy Steel Pipe and Tube from Mexico, 62 FR 37014, 37025, 
(July 10, 1997) (``Standard Pipe from Mexico''). In that determination, 
AHMSA notes, the Department accepted respondent's allocation as 
reasonable, even though the respondent's records did not allow for a 
cost allocation specifically based on processing time. AHMSA further 
notes that here, as in Standard Pipe from Mexico, the rolling costs in 
question represent a small portion of total overall costs.
    Department's Position: We disagree with petitioners' contention 
that the methodologies used by AHMSA to prepare its COP and CV 
responses warrant wholesale rejection of those responses and the use of 
adverse facts available. We address petitioners' comments on particular 
deficiencies in AHMSA's data below.
    We conducted numerous tests, described in our cost verification 
report, which supported the overall accuracy of AHMSA's reported data. 
See Memorandum from P. Scholl to N. Halper, October 8, 1999 (Cost 
Verification Report). Where we noted discrepancies in AHMSA's COP and 
CV information, we revised AHMSA's reported data based upon information 
obtained at verification. As discussed below in response to this and 
other comments, we have remedied the deficiencies noted by petitioners 
and have applied partial facts available, based on AHMSA's verified 
data. Because AHMSA provided a substantially complete and accurate 
response, and because AHMSA fully cooperated in this review, the 
deficiencies in AHMSA's COP and CV data do not warrant use of adverse 
facts available.
    The errors in the average plate costs and fixed overhead 
percentages were minor and do not warrant complete rejection of AHMSA's 
response as provided for in section 776(a) and (b) of the Act. AHMSA 
provided the necessary information for the Department to make the 
adjustment necessary to apply the major input rule. (See Comment 3 
below for a further discussion of the major input rule.) Therefore, 
AHMSA did not fail to provide information or significantly impede the 
proceeding as defined in section 776(a) of the Act.
    Similarly, in regards to petitioners' concerns regarding rolling 
costs and the exclusion of certain other income and expenses, AHMSA, in 
its responses and at verification, complied with the Department's 
requests and provided the information we needed to accurately calculate 
these expenses.
    We disagree with petitioners' argument that the serious 
deficiencies found with AHMSA's quarterly cost model in the prior 
review necessitate rejection of that cost model in this review. For 
this review, AHMSA corrected the deficiencies that were identified in 
the quarterly cost model in the prior review. With the exception of the 
allocation of rolling costs, we found that the quarterly cost model 
used by AHMSA reasonably reflects product-specific costs. Because we 
were able to use most of the data provided by AHMSA, this case is 
distinct from Russian Hot Rolled.
    We also do not believe that the facts in this case are analogous 
with those of Standard Pipe from Mexico, in which the Department 
accepted the respondent's allocation of rolling costs because that 
allocation method accurately captured product-specific costs. As 
explained in more detail in Comment 4 below, in this case we did not 
find that AHMSA's method for allocating rolling costs to plate 
accurately reflected the costs resulting from different processing 
(i.e., the number of passes) on a product-specific basis.
    In sum, AHMSA supplied the data requested and notified the 
Department of its calculation errors prior to verification, and we were 
able to correct or complete the significant missing data using AHMSA's 
own data from its responses and verification. Use of total facts 
available is therefore not warranted.

Comment 2: Fixed Overhead

    Petitioners allege that AHMSA incorrectly applied its fixed 
overhead ratio to the total variable cost of each specific product to 
obtain product-specific depreciation and other fixed costs. Petitioners 
maintain that AHMSA should have applied its fixed overhead ratio to 
variable costs plus direct labor costs. AHMSA, in rebuttal, states that 
it treats all labor costs as fixed costs in the normal cost accounting 
system. AHMSA states that it used the same variable cost definition as 
it uses in the normal course of business to calculate the fixed 
overhead rate, and these variable costs do not include labor costs. 
Since the variable costs used in the fixed overhead ratio do not 
contain labor costs, AHMSA concludes that would be inappropriate to 
apply the fixed overhead percentage to variable costs plus direct labor 
costs.
    Department's Position: We agree with AHMSA. The fixed overhead 
ratio was computed by dividing fixed overhead without labor costs by 
the variable cost of plate without labor costs. We then applied this 
ratio to the variable cost of manufacture without labor. This

[[Page 8340]]

calculation reasonably and accurately reflects AHMSA's fixed overhead 
rate.

Comment 3: Major Input

    Petitioners argue that the Act mandates that major inputs acquired 
from affiliates are to be valued at the highest of their transfer 
price, market value or COP. Petitioners state that the ``fair value'' 
provision of the Act recognizes that affiliated party transactions are 
inherently suspect. Petitioners assert that it is therefore necessary 
to compare transfer prices with market prices to obtain a fair value. 
Petitioners further argue that the rationale supporting the law would 
be undermined if the Department were to use the COP of AHMSA's 
affiliated material suppliers, as opposed to the highest of market 
value, transfer price or COP, as the Act mandates.
    AHMSA argues that it is a vertically integrated steel producer, 
that AHMSA's affiliated suppliers of raw materials are one-hundred 
percent owned by AHMSA and are dependent upon AHMSA for their business, 
and that AHMSA and its affiliates should be treated as a single entity 
for determining COP. AHMSA states that since it owns all of the 
production assets involved in producing the subject merchandise, the 
Department should value the raw materials used in production at cost, 
not at the highest of cost, transfer price or market price. Although 
these assets are owned by a separate corporate entity, AHMSA claims it 
nevertheless has complete control of those assets, including raw 
materials, from mining through liquid steel production. AHMSA further 
argues that if the Department decides to apply the major input rule to 
certain raw material inputs obtained from affiliated suppliers, then 
the Department should correct the proposed adjustment outlined in the 
verification report, to reflect the percentage of limestone purchased 
from AHMSA's affiliated supplier during the cost calculation period.
    Department's Position: We agree with petitioners that it is 
appropriate to use the highest of the market price, transfer price or 
cost to value the major inputs supplied to AHMSA by its affiliated 
producers in accordance with 19 CFR 351.407(b). The Department's 
practice is to request information on both the transfer price and the 
market value of the input and chooses the higher of the two valuations. 
The Department may value major inputs at the affiliate's cost of 
producing the input if it is higher than both the transfer price and 
the market price. All parties agree that the inputs in question are 
major inputs.
    AHMSA's affiliated suppliers, who are producers of these major 
inputs, are separate corporate entities and not mere divisions of 
AHMSA. Therefore, materials purchased from them are subject to the 
major input rule. See Final Results of Antidumping Duty Administrative 
Reviews and Determination to Revoke in Part: Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon 
Steel Plate from Canada, 64 FR 2173, 2190 (January 13, 1999). We have 
therefore applied the major input rule and have corrected the limestone 
percentages accordingly for the final results.

Comment 4: Rolling Costs

    Petitioners state that AHMSA's cost methodology as verified by the 
Department fails to account for product-specific rolling costs in the 
plate mill. Petitioners argue that the costs of rolling slab to a 
specified plate thickness can vary significantly. Petitioners urge the 
Department to reject respondent's costs altogether and apply total 
facts available.
    AHMSA argues that its quarterly cost model contains a productivity 
factor which properly allocates plate rolling costs by internal grade 
group and thickness range. AHMSA disputes the Department's conclusion 
that AHMSA's quarterly cost model does not properly account for rolling 
costs. AHMSA argues that the productivity factor in the cost model is 
based on the size of the input slab and the reheating time necessary to 
produce a particular plate (i.e., by thickness and grade) from a 
particular slab. AHMSA argues that this productivity factor does 
account for the number of passes needed to produce plate of a 
particular thickness, because the number of passes is a function of the 
size of the input slab and of reheating time.
    Department's Position: We agree with petitioners that the 
respondent's costing method does not adequately capture variations in 
rolling costs by model, but we do not agree that the appropriate remedy 
in this case is the application of total facts available.
    As we noted at verification, the quarterly cost model used to 
derive the reported costs does not account for cost variations 
resulting from the number of passes that a slab may go through in the 
plate rolling process. See Cost Verification Report, page 12. Contrary 
to AHMSA's claim, the productivity factor does not specifically account 
for the rolling costs for plate of different thicknesses (i.e., the 
number of passes required to achieve the desired thickness). Since 
there are differences in the number of passes required to achieve a 
desired thickness in the rolling mill, we consider it appropriate to 
take this into account in determining product-specific costs. 
Therefore, we have reallocated the plate mill costs based on the number 
of passes a plate required to achieve the desired thickness as provided 
by AHMSA at verification. See Memorandum from P. Scholl to N. Halper, 
``Cost of Production and Constructed Value Adjustments for Final 
Results'', January 5, 1999 at 2 and Attachment 3.

Comment 5: General and Administrative Expenses

    Petitioners contend that restructuring charges and foreign exchange 
losses relate to AHMSA's overall operations, and therefore should be 
included as general and administrative (G&A) expenses. Respondent did 
not comment on this issue.
    Department's Position: We agree with petitioners. We added 
restructuring charges to G&A because these costs relate to the general 
operations of the company as a whole. See Cost Verification Report, 
page 25. See also Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et al.; Final Results of 
Antidumping Duty Administrative Reviews and Partial Termination, 61 FR 
66472, 66496 (December 17, 1996). We added foreign exchange losses from 
purchases to AHMSA's calculated G&A expense rate, as opposed to 
manufacturing costs, because we are unable to determine whether these 
costs relate to the general operations of the company as a whole or 
solely to purchases of materials used in the production of subject 
merchandise. See Notice of Final Determination of Sales at Less Than 
Fair Value: Saccharin from Korea, 59 FR 58826, 58828 (November 15, 
1994).

Comment 6: Interest

    AHMSA argues that the Department should reverse its preliminary 
decision to disallow the gain on monetary position from AHMSA's 
calculation of the net interest expense ratio. This item, AHMSA argues, 
is a required component of financial expenses under Mexican GAAP. AHMSA 
argues that the Department's practice in Mexican cases has been to 
include such gains or losses in the calculation of the interest expense 
ratio, and that to exclude the gain distorts the financial expenses 
incurred in real terms by AHMSA's parent company, Grupo Acero del 
Norte, S.A. de C.V.
    Petitioners assert that the Department properly excluded the 
monetary

[[Page 8341]]

correction from the calculation of net interest expense, because the 
monetary correction does not represent actual income to AHMSA. 
Petitioners point out that the inclusion of the monetary correction as 
an income offset in the calculation of the net interest expense would 
not comport with U.S. generally accepted accounting principles 
(``GAAP''), because accounts are not adjusted for the effect of 
inflation under U.S. GAAP. Petitioners contend that when an economy is 
not hyper-inflationary, but does experience significant inflation, the 
Department will use actual current period costs and prices, unadjusted 
for inflation. See Final Results of Antidumping Administrative Review: 
Certain Fresh Cut Flowers from Colombia, 63 FR 31724, 31728 (June 10, 
1998). Since the Mexican economy was not hyper-inflationary during the 
POR, petitioners argue, the Department's exclusion of the monetary 
correction from the calculation correctly rendered the net expense rate 
consistent with the historical, unadjusted cost of manufacturing (COM) 
to which the expense rate was applied. Petitioners state the Department 
has previously determined that monetary correction adjustments of non-
monetary assets and liabilities should not be included in the 
calculation of the COP and CV, because monetary correction adjustments 
of non-monetary assets and liabilities do not constitute, in any 
meaningful sense, true income or expense to the company. Rather, such 
corrections represent the restatement of non-monetary assets and 
liabilities into current price levels, not gains or losses. Petitioners 
cite in this regard the Department's determination in Notice of Final 
Determination of Sales At Less Than Fair Value: Certain Preserved 
Mushrooms from Chile, 63 FR 56613, 56621 (October 22, 1998).
    Department's Position: We agree with petitioners. AHMSA incorrectly 
applied an inflation-adjusted net interest expense rate to a historical 
COM. We excluded the monetary correction for inflation adjustment from 
the calculation of net interest expense because it would distort the 
COP. The COM, as reported by respondents, was based on historical costs 
exclusive of any inflationary adjustments. Eliminating the monetary 
correction from the calculated net interest expense rate provided a 
historical cost net interest expense rate which is consistent with the 
historical costs to which the rate was applied. AHMSA's methodology 
would allow it to report lower historical costs of manufacturing while 
obtaining the benefits of monetary correction gains which result from 
inflation indexation. This methodology clearly distorts the COP and CV. 
The historical net interest expense is consistent with the historical 
COM data provided by AHMSA. Accordingly, for these final results, we 
have continued to exclude respondent's monetary correction from the 
calculation of the net interest expense rate.

Comment 7: Home Market Inland Freight

    Petitioners argue that the Department should deny freight expense 
adjustments for any home market sales where the sales terms, as 
reported in one data field, suggest that AHMSA should not have incurred 
freight expenses. AHMSA argues in rebuttal that it explained in its 
responses that on some sales with terms that would normally indicate no 
delivery charges, AHMSA nevertheless incurred some freight expenses, 
and the amounts reported are justified claims.
    Department's Position: We agree with AHMSA that the freight 
expenses in question have been repeatedly and plainly explained on the 
record. Accordingly, we have continued to make a deduction for home 
market inland freight in these final results.

Comment 8: Foreign Inland Freight

    Based on a sample U.S. price quote provided in AHMSA's responses, 
the petitioners argue that AHMSA's reported U.S. prices must be 
inclusive of freight, and that the Department should use the sample in 
question to derive a uniform per-ton freight expense to deduct from 
AHMSA's U.S. prices. AHMSA counters that it reported exact per-
transaction freight costs on each U.S. sale and that the Department, in 
its preliminary results, properly accounted for U.S. freight expense.
    Department's Position: We agree with AHMSA that it properly 
reported the actual freight expenses that it incurred on its U.S. sales 
and made its calculation method quite plain on the record (see, for 
example, Exhibit C-24 of AHMSA's November 16, 1998 response). 
Accordingly, for these final results, we have continued to use the 
actual freight expenses which AHMSA reported.

Final Results of Review

    As a result of this review, we have determined that the following 
weighted-average dumping margin exists for the period August 1, 1997 
through July 31, 1998:

------------------------------------------------------------------------
                                                                Margin
          Manufacturer/exporter                 Period        (percent)
------------------------------------------------------------------------
AHMSA....................................    8/1/97-7/31/98         2.64
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
shall issue appraisement instructions directly to the Customs Service. 
Because there is only one importer of the subject merchandise, we have 
calculated an importer specific duty assessment rate for the 
merchandise based on the ratio of the total amount of antidumping 
duties calculated for the examined sales to the total entered value of 
sales.
    Furthermore, the following deposit requirements shall be effective 
upon publication of this notice of final results of review for all 
shipments of certain CTL carbon steel plate from Mexico, entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date, as provided for by section 751(a)(1) of the Tariff Act: (1) The 
cash deposit rate for the reviewed company will be the rate stated 
above; (2) For previously investigated companies not listed above, the 
cash deposit rate will continue to be the company-specific rate 
published for the most recent period; (3) If the exporter is not a firm 
covered in these reviews or the original LTFV investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacturer of the merchandise; and (4) 
If neither the exporter nor the manufacturer is a firm covered in this 
review, the cash deposit rate for this case will continue to be 49.25 
percent, the ``All Others'' rate in the LTFV investigation. These 
deposit requirements shall remain in effect until publication of the 
final results of the next administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 351.402(f) to file a certificate regarding 
the reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could

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result in the Secretary's presumption that reimbursement of antidumping 
duties occurred and the subsequent assessment of double antidumping 
duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 351.305(a)(3)(1999). Timely written 
notification of the return or destruction of APO materials, or 
conversion to judicial protective order, is hereby requested. Failure 
to comply with the regulations and terms of an APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.

    Dated: February 9, 2000.
Robert S. La Russa,
Assistant Secretary for Import Administration.
[FR Doc. 00-3986 Filed 2-17-00; 8:45 am]
BILLING CODE 3510-DS-P