[Federal Register Volume 65, Number 36 (Wednesday, February 23, 2000)]
[Notices]
[Pages 8935-8948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4250]


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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-824]


Certain Corrosion-Resistant Carbon Steel Flat Products From 
Japan: Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International TradeAdministration, U.S. 
Department of Commerce

ACTION: Notice of final results of the antidumping duty administrative 
review of certain corrosion-resistant carbon steel flat products from 
Japan.

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

SUMMARY: On August 16, 1999, the Department of Commerce (``the 
Department'') published the preliminary results of its administrative 
review of the antidumping duty order on certain corrosion-resistant 
carbon steel flat products from Japan. This period of review (``POR'') 
is from August 1, 1997 through July 31, 1998. This review covers two 
manufacturers/exporters: Nippon Steel Corporation (``NSC'') and 
Kawasaki Steel Corporation (``KSC''). We gave interested parties an 
opportunity to comment on our preliminary results. As a result of these 
comments, we have made changes to our analysis. Therefore, the final 
results differ from those presented in the preliminary results of 
review.

EFFECTIVE DATE: February 23, 2000.

FOR FURTHER INFORMATION CONTACT: Contact Doreen Chen, Brandon 
Farlander, or Rick Johnson, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th and Constitution 
Avenue, N.W., Washington DC 20230; telephone: (202) 482-0408, (202) 
482-0182, or (202) 482-3818, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are 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 19 
C.F.R. part 351 (1999).

Background

    On August 16, 1999, the Department published in the Federal 
Register the preliminary results of its administrative review of the 
antidumping duty order on certain corrosion-resistant carbon steel flat 
products from Japan. See Certain Corrosion-Resistant Carbon Steel Flat 
Products from Japan: Preliminary Results of Antidumping Duty 
Administrative Review, 64 FR 44483 (August 16, 1999) (``Preliminary 
Results''). We gave interested parties an opportunity to comment on our 
preliminary results. For NSC, we received written comments from 
petitioners (Bethlehem Steel Corporation and U.S. Steel Group (a unit 
of USX Corporation)) on September 15, 1999. We received a rebuttal 
brief from NSC on September 22, 1999. For KSC, we received written 
comments from petitioners and KSC on September 15, 1999. We also 
received a rebuttal brief from petitioners on September 22, 1999. We 
have now completed this administrative review in accordance with 
section 751(a) of the Act.

Scope of Review

    This review covers flat-rolled carbon steel products, of 
rectangular shape, either clad, plated, or coated with corrosion-
resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel-or 
iron-based alloys, whether or not corrugated or painted, varnished or 
coated with plastics or other nonmetallic substances in addition to the 
metallic coating, in coils (whether or not in successively superimposed 
layers) and of a width of 0.5 inch or greater, or in straight lengths 
which, if of a thickness less than 4.75 millimeters, are of a width of 
0.5 inch or greater and which measures at least 10 times the thickness 
or if of a thickness of 4.75 millimeters or more are of a width which 
exceeds 150 millimeters and measures at least twice the thickness, as 
currently classifiable in the Harmonized Tariff Schedule of the United 
States (``HTSUS'') under item numbers 7210.30.0030, 7210.30.0060, 
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000, 
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 
7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 
7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 
7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 
7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, and 
7217.90.5090. Included 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 are flat-rolled steel products either plated or coated with 
tin, lead, chromium, chromium oxides, both tin and lead (``terne 
plate''), or both chromium and chromium oxides (``tin-free steel''), 
whether or not painted, varnished or coated with plastics or other 
nonmetallic substances in addition to the metallic coating. Also 
excluded are clad products in straight lengths of 0.1875 inch or more 
in composite thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness. Also excluded are certain clad 
stainless flat-rolled products, which are three-layered corrosion-
resistant carbon steel flat-rolled products less than 4.75 millimeters 
in composite thickness that consist of a carbon steel flat-rolled 
product clad on both sides with stainless steel in a 20%-60%-20% ratio. 
The HTS item numbers are provided for convenience and Customs purposes. 
The written description remains dispositive of the scope of this 
review.
    Also excluded are certain corrosion-resistant carbon steel flat 
products meeting the following specifications: (1) Widths ranging from 
10 millimeters (0.394 inches) through 100 millimeters (3.94 inches); 
(2)thicknesses, including

[[Page 8936]]

coatings, ranging from 0.11 millimeters (0.004 inches) through 0.60 
millimeters (0.024 inches); (3) a coating that is from 0.003 
millimeters (0.00012 inches) through 0.005 millimeters (0.000196 
inches) in thickness and that is comprised of either two evenly applied 
layers, the first layer consisting of 99% zinc, 0.5% cobalt, and 0.5% 
molybdenum, followed by a layer consisting of chromate, or three evenly 
applied layers, the first layer consisting of 99% zinc, 0.5% cobalt, 
and 0.5% molybdenum followed by a layer consisting of chromate, and 
finally a layer consisting of silicate; (4) carbon steel flat products 
measuring 1.84 mm in thickness and 43.6 mm or 16.1 mm in width 
consisting of carbon steel coil (SAE 1008) clad with an aluminum alloy 
that is balance aluminum, 20% tin, 1% copper, 0.3% silicon, 0.15% 
nickel, less than 1% other materials and meeting the requirements of 
SAE standard 783 for Bearing and Bushing Alloys; and (5) carbon steel 
flat products measuring 0.97 mm in thickness and 20 mm in width 
consisting of carbon steel coil (SAE 1008) with a two-layer lining, the 
first layer consisting of a copper-lead alloy powder that is balance 
copper, 9% to 11% tin, 9% to 11% lead, less than 1% zinc, less than 1% 
other materials and meeting the requirements of SAE standard 792 for 
Bearing and Bushing Alloys, the second layer consisting of 45% to 55% 
lead, 38% to 50% PTFE, 3% to 5% molybdenum disulfide and less than 2% 
other materials.

Fair Value Comparisons

    To determine whether sales of subject merchandise from Japan to the 
United States 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 the preliminary 
results of review notice. In addition, we made the following changes 
from the preliminary results:. For KSC, we adjusted VOH and VCOM. See 
Comment 4 below. Also, for KSC, we adjusted G&A to include certain 
items. See Comment 5 below.

Interested Party Comments

NSC

    Comment 1: Petitioners argue that the Department should reject home 
market sales to a certain customer because the use of the sales to this 
customer results in unfair sales comparisons between EP and NV. 
Petitioners note that the number of respondent's home market (HM) sales 
matched to U.S. sales in which the customer is the same for both 
markets presents a ``remarkable situation.'' Petitioners note as well 
that for all such sales, the U.S. customer was also the importer of 
record. Additionally, petitioners note that the parent company of the 
U.S. customer was involved in the price negotiations with NSC.
    Petitioners argue that it is a fundamental principle of the 
antidumping law that ``in determining whether subject merchandise is 
being, or is likely to be, sold at less than fair value, a fair 
comparison shall be made between the export price or constructed export 
price and normal value,'' citing section 773(a) of the Trade Act, as 
amended (19 U.S.C. 1677b(a)). Petitioners argue that a ``fair 
comparison'' cannot exist where the margin is based on U.S. sales that 
are compared with sales to the same customer in the home market and 
where both seller and customer have a ``direct financial interest in 
masking any dumping that may otherwise be taking place.''
    Petitioners stress that such comparisons are inherently unfair 
because the prices are unreliable. Petitioners note that the 
antidumping statute and the Department's regulations and practice ``go 
to great lengths to ensure that the prices and in the home market and 
prices in the U.S. market are reliable and representative of sales in 
each market,'' citing section 773(a)(1)(B) of the Act (19 U.S.C. 
1677b(a)(1)(B)) (requiring that normal value be based on sales made in 
the ordinary course of trade); section 773(a)(2) of the Act (19 U.S.C. 
1677b(a)(2)) (providing that sales intended to establish a fictitious 
market shall not be used in determining normal value); section 
773(f)(2) and (3) of the Act (19 U.S.C. 1677b(f)(2) and (3) (ensuring 
that the cost of a major input not be valued at the transfer price if 
such price is below market value or less than cost); section 772(d) of 
the Act (19 U.S.C. 1677a(d)) (requiring certain adjustments to U.S. 
price where the merchandise is sold through an affiliated U.S. 
supplier); and 19 C.F.R. section 351.403 (c) (providing that sales to 
affiliated parties that are not at arm's length prices not be used in 
determining normal value).
    Petitioners argue that in the final results of the fourth 
administrative review of this proceeding, the Department acknowledged 
that sales to the same customer in both markets could support the 
rejection of such comparisons on ``fair comparison'' grounds if other 
factors were present, citing Certain Corrosion-Resistant Carbon Steel 
Flat Products from Japan: Final Results of Antidumping Duty 
Administrative Review, 64 FR 12951, 12953 (March 16, 1999) (``Fourth AD 
Final Results''). Petitioners argue that the totality of circumstances 
in this review demonstrates that the comparisons based on sales to the 
same customer in both markets are unfair.
    First, petitioners argue that the percentage of the comparisons 
based on sales to the same customer supports a finding that such 
comparisons are unfair. Second, petitioners argue that the customer at 
issue was the importer of record for the U.S. sales, and thus has a 
direct financial interest in ensuring that the margins on its sales 
would be low. Third, petitioners assert that NSC's home market prices 
to the customer at issue differs from home market prices to other 
customers for the same merchandise.
    Petitioners stress that it is not necessary for the Department to 
find evidence of actual price manipulation in order to conclude that 
the comparisons in the margin calculation are unfair and improper. 
Petitioners assert that the Court of International Trade (``CIT'') has 
held that it is sufficient if the record shows a ``potential for price 
manipulation,'' citing Koening & Bauer-Albert AG, et al. v. United 
States, 15 F.Supp. 2d 834, 840 (CIT 1998) and Koyo Seiko Co. v. United 
States, 936 F. Supp. 1040, 1048 (CIT 1996).
    Petitioners argue that the Department's conclusion in other cases 
that ``it is permissible for a respondent to reduce or eliminate 
dumping either by raising its U.S. prices or by lowering its home 
market prices' of subject merchandise does not apply to the instant 
case, citing Fourth AD Final Results, 64 FR 12594, which in turn cites 
Furfuryl Alcohol from Republic of South Africa, 62 FR 61084, 61085 
(November 14, 1997). Petitioners assert that in the ordinary case, such 
increases or decreases in price represent the respondent's selling 
practices in two different markets. Petitioners assert that in the 
instant case, by contrast, any such adjustments to price on merchandise 
sold to the customer at issue only represents NSC's selling practices 
to the customer at issue.
    Respondent argues that petitioners' argument (that the Department 
should exclude the home market sales at issue because they tend to 
reduce or eliminate a dumping margin) turns the antidumping statute 
``on its head.'' Respondent argues that any changes in pricing 
practices over time which reduce margins in fact represent the intended 
result of the antidumping statute. Respondent notes that the Department 
has stated (and in fact reaffirmed in the fourth review of this

[[Page 8937]]

proceeding) that: ``[T]he purpose of the antidumping duty statute is to 
offset the effect of discriminatory pricing between U.S. and home 
markets. Thus, while there is no statutory requirement that a firm must 
act to eliminate price discrimination, if it decides to do so, how it 
does so is within its own discretion * * * A firm may also choose to 
increase its U.S. prices and lower its home market prices at the same 
time.'' See Taper 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 (``TRBs from 
Japan''), 62 FR 11825, 11831 (March 13, 1997).
    Respondent disagrees with petitioners' attempt to distinguish the 
instant review from the above cases and from the prior review. 
Respondent dismisses as baseless and irrelevant petitioners' contention 
that it is significant in this case that NSC's selling practices have 
not changed with respect to two different markets, but instead have 
changed with respect to one customer that has a direct financial stake 
in eliminating or reducing the margin. In this respect, respondent 
argues that petitioners offer no citation to the antidumping statute, 
regulations, or legislative history to support this distinction. 
Furthermore, respondent argues that petitioners' argument fails to 
acknowledge the distinction between the customer's physical location 
versus the ultimate country of destination. That is, respondent claims 
that the antidumping law considers NSC sales to the customer at issue 
to consist of sales to both the U.S. and home markets.
    Finally, with regard to the potential for price manipulation, 
respondent argues that petitioners' allegations ignore the fact that 
the Department verified that NSC and the customer at issue are 
unaffiliated parties and that their transactions are at arm's-length. 
Respondent maintains that verification results show that any price 
changes since 1991 of NSC merchandise affected not only sales to the 
customer at issue, but also to other customers as well.
    Respondent objects to petitioners' interpretation of the term 
``fair'' in the statute. Respondent claims that ``fair'' under section 
773 of the Act refers to the technical calculations that produce the 
essential terms `` EP or constructed export price (CEP), and NV `` of 
such a comparison. Respondent argues that ``fair'' signifies that 
calculations were made according to the relevant statutory criteria set 
forth in sections 772 and 773. Thus, respondent contends that a 
challenge as to whether a comparison is ``fair'' must allege that the 
Department has not followed the methodological approach set forth under 
sections 772 and 773 of the Act.
    Respondent contends that the factual record does not support 
petitioners' assertions regarding a potential for price manipulation. 
Respondent argues that in past cases, including the fourth review of 
this case, the Department has held that comparisons between sales to 
the same customer in two markets are valid, citing Fourth AD Final 
Results, 64 FR at 12954. Respondent asserts that in Color Television 
Receivers, Except for Video Monitors, From Taiwan, 55 FR 47093, 47100 
(November 9, 1990) (``Color Television Receivers''), the Department 
agreed with the respondent's position that ``nothing in the antidumping 
law or in the Department's regulations directs or authorizes the 
Department to ignore valid third-country sales for purposes of 
calculating normal value simply because those sales are made to a 
third-country purchaser who is related to the U.S. purchaser.'' Id.
    Moreover, respondent argues that in the fourth review, the 
Department rejected petitioners' claim that NSC had a commercial 
incentive to manipulate prices in both markets, holding that ``the 
small number of sales to the customer at issue in the U.S. in 
comparison to the number of sales to the same customer in the home 
market lessens any commercial incentive for the respondent to suppress 
the prices of its comparatively higher volume home market sales in 
order to eliminate hypothetical margins in the much smaller U.S. 
market.'' See Fourth Review Final Results, 64 FR at 12955.
    Respondent further argues that contrary to petitioners' claims, it 
is not remarkable that the customer was the same party or related to 
the party that was the importer of record. Respondent asserts that 
these factual circumstances exist in a number of antidumping cases. In 
addition, respondent disagrees with petitioners' claim that NSC's 
negotiations with the customer at issue or its customer's affiliate 
were improper or suggested evidence of manipulation. Respondent argues 
that the record shows that the sales processes criticized by 
petitioners are the same as those involving other customers and that 
the same circumstances existed in the fourth review.
    Department's Position: As an initial matter, we note that 
petitioners raised, and the Department addressed, a number of these 
same arguments in the fourth review of this proceeding, and the facts 
on the record in the fourth review were significantly comparable to the 
facts on the record of this review. Specifically, as in the fourth 
review, there are a significant number of sales to one customer in both 
the home and U.S. markets; for these sales, the U.S. customer was also 
the importer of record; and the Japanese parent was involved in price 
negotiations with NSC. In the fourth review, the Department addressed 
petitioners' arguments that use of these home market sales: (1) would 
result in unfair comparisons; and (2) would be improper because the 
potential for price manipulation existed. The Department continues to 
disagree with these arguments, as we did in the fourth review for the 
reasons stated therein. Fourth AD Final Results, 64 FR at 12953-54. We 
particularly emphasize our full agreement with NSC's position that the 
``fair comparison'' language of the antidumping law is not a ``stand 
alone provision.'' Rather, as NSC expressed it: ``far from being an 
open-ended term referring to some ill-defined notion of equity * * * 
the ``fair'' in ``fair comparison'' is a term of art that refers in 
shorthand to the technical calculations that produce the essential 
terms of such a comparison.'' We have concentrated our response in this 
review primarily on the new arguments raised by petitioners.
    First, in constructing an argument that the sales comparisons at 
issue are improper and unfair, petitioners assert that NSC's home 
market prices to the customer at issue differ from home market prices 
to other customers for the same merchandise. This argument is 
tantamount to petitioners' companion argument that the sales are 
outside the ordinary course of trade. Therefore, we have addressed this 
argument in Comment 2 below.
    Second, petitioners assert that this case differs from most cases 
with respect to a respondent's change in pricing practices in both 
markets, because in this case (in contrast) the sales to both markets 
are made to the same customer. We do not agree with petitioners that 
this distinction is compelling. As respondent has also noted, we find 
no support in either the antidumping statute, regulations, or 
legislative history for this distinction. In fact, as demonstrated by 
the fourth review, the Department's practice is to consider NSC's sales 
to the customer at issue in both the U.S. and home markets. The 
Department's discussion in TRBs from Japan, noted above by respondents, 
is particularly instructive in that the Department has identified U.S. 
prices and home market prices as the items which a respondent may wish 
to change in order to act to eliminate

[[Page 8938]]

price discrimination. This is, of course, because the purpose of the 
antidumping statute is to remedy the effect of discriminatory pricing 
between U.S. and home markets. In this context, the identity of the 
customer or customers affected by the respondent's altered pricing 
practices is not by itself a reason to disregard home market sales, 
except as otherwise contemplated under the statute (e.g., affiliated 
party transactions).
    Comment 2: Petitioners claim that the sales made to the customer at 
issue should be rejected because they constitute sales that are outside 
the ordinary course of trade. Petitioners submit that under the 
statute, the Department may reject various categories of home market 
sales because they are found to be outside the ordinary course of 
trade. Petitioners contend that although the Statement of 
Administrative Action (``SAA'') sets forth a variety of examples of 
sales that are outside the ordinary course of trade, the Department has 
the express authority to ``consider other types of sales or 
transactions to be outside the ordinary course of trade when such sales 
or transactions have characteristics that are not ordinary as compared 
to sales or transactions generally made in the same market.'' See SAA, 
reprinted in 1994 U.S.C.C.A.N. 4040, 4171 (``SAA''). Petitioners argue 
that the statute provides no limits on the number of sales that may be 
excluded from normal value. Petitioners assert that it is the condition 
and circumstances, not the volume, of sales that renders a set of sales 
to be outside the ordinary course of trade. Petitioners claim that the 
Department has broad authority to ``consider other types of sales and 
transactions to be outside the ordinary course of trade when such sales 
or transactions have characteristics that are not ordinary as compared 
to sales or transactions generally made in the same market.'' Id. 
Petitioners cite the SAA which states that: ``[T]he Administration 
intends that Commerce will interpret section 771(15) in a manner which 
will avoid basing normal value on sales which are extraordinary for the 
market in question, particularly when the use of such sales would lead 
to irrational or unrepresentative results.'' Id. Petitioners quote the 
Department's statement that its authority in determining whether sales 
meet the ``ordinary course of trade'' standard is ``far-reaching.'' 
Petitioners assert that the Department, in conducting an inquiry 
relating to course of trade, examines all of the facts in their 
entirety to determine if sales were made for ``unusual reasons'' or 
under ``unusual circumstances,'' citing Final Results of the 
Administrative Review: Electrolytic Manganese Dioxide from Japan, 58 FR 
28551, 28552 (May 14, 1993); and Final Results of the Administrative 
Review: Gray Portland Cement and Clinker from Mexico, 63 FR 12764, 
12771 (March 16, 1998).
    Petitioners assert that the Department recognized in the fourth 
administrative review that sales to a particular customer in the home 
market could be rejected as outside the ordinary course of trade if 
such sales are shown to be ``extraordinary transactions in relation to 
other sales transactions.'' Fourth AD Final Results, 64 FR at 12955. 
Petitioners maintain that in the fourth review, the Department failed 
to find that certain sales were outside the ordinary course of trade, 
stating that: ``[T]here is * * * no record evidence demonstrating any 
significant distinctions between the sales at issue and other home 
market sales. In particular, there is no evidence of a discernable 
pattern of lower sales prices to this customer as compared to NSC's 
other customers who purchased similar merchandise.'' Id. By contrast, 
petitioners assert, the record in the instant case does establish a 
significant difference between NSC's home market sales to the customer 
at issue and its sales to other purchasers. Petitioners maintain that 
the record shows a ``discernable pattern of lower home market sales 
prices'' to the customer at issue when compared to home market sales of 
similar merchandise to other customers. Petitioners argue that the 
Department considers whether selling prices to a particular customer 
are comparable to selling prices to other purchasers where the net 
prices to the customer in question are, on average, 99.5 percent of the 
prices to the other customers for the same merchandise, otherwise 
referred to as the ``arm's-length test.'' Petitioners assert that the 
``arm's-length test'' is used to analyze sales to affiliates in the 
home market, and has repeatedly been upheld by the courts as an 
appropriate and reasonable test to determine price comparability, 
citing SSAB Svenskt Stal AB v. Bethlehem Steel Corp., 976 F. Supp. 
1027, 1030-31 (CIT 1997); Usinor Sacilor v. United States, 872 F. Supp. 
1000, 1004 (CIT 1994). Petitioners claim that application of the arm's-
length test reveals that, on a CONNUM-by-CONNUM basis, NSC's prices to 
the customer at issue are on average below 99.5 percent of its prices 
to its other customers. While petitioners acknowledge that the arm's-
length test is used by the Department to analyze transactions between 
affiliated parties, petitioners argue that the arm's-length test is an 
appropriate test of price comparability and has been upheld as such by 
courts.
    Petitioners find baseless NSC's claim, in an August 3, 1999 letter 
to the Department, that NSC's sales practices with respect to the 
customer at issue are not out of the ordinary because they are 
consistent with the behavior that existed between the two parties in 
1991 before the antidumping order was issued. Petitioners argue that 
NSC's claim, which rests on data supplied in Sales Verification Exhibit 
37, fails for several reasons. First, petitioners claim that the 
comparison in Exhibit 37 was based on the average prices for all 
products, rather than on a CONNUM-by-CONNUM basis, as in the arm's-
length test. Second, petitioners argue that in Exhibit 37, NSC compares 
sales to the customer at issue only to sales to other customers from 
the same industry as the customer at issue, thereby omitting all other 
sales. Petitioners further argue that there is nothing in the record to 
support the claim that prices to customers from the same sector as that 
of the customer at issue are either at a different level of trade, or 
otherwise not comparable to the prices to any other customer. Third, 
petitioners argue that it is not clear how NSC determined which sales 
were destined for these customers from the same sector. Fourth, 
petitioners argue that, at verification, NSC was unable to re-create 
its sales data as it existed in 1991 because it did not maintain all 
the necessary records.
    Respondent argues that the law and verification results demonstrate 
that NSC's sales to the customer at issue are in the ordinary course of 
trade, and therefore, the Department must include these sales in the 
NSC's home market sales database, as the Department did in the fourth 
review. Respondent asserts that, in determining whether home market 
sales are in the ordinary course of trade, the Department ``must 
evaluate not just one factor taken in isolation but rather * * * all 
the circumstances particular to the sales in question,'' citing CEMEX, 
S.A. v. United States, 133 F.3d 897, 900 (Fed. Cir. 1998). Moreover, 
respondent asserts, the burden of proving that sales are outside the 
ordinary course of trade lies with the party making the assertion, 
citing Antidumping Duties, Countervailing Duties: Final Rule, 62 FR 
27296, 27299 (May 19, 1997).
    Respondent argues that petitioners make no allegation that NSC has 
engaged in any of the enumerated list of practices that are 
presumptively deemed to constitute conditions and practices

[[Page 8939]]

outside the ordinary course of trade as prescribed in section 771(15) 
of the Act, nor have petitioners alleged that the sales at issue are 
characterized by factors similar to those that have been found to 
constitute sales outside of the ordinary course of trade in other 
cases, citing CEMEX, 133 F.3d at 901-2; Sulfur Dyes, Including Sulfur 
Vat Dyes, From the United Kingdom: Final Results of the Antidumping 
Administrative Review, 58 FR 3253, 3256 (January 8, 1993); and 
Manganese Metal from the People's Republic of China: Final Results of 
the Antidumping Administrative Review, 60 FR 56045, 56046 (November 6, 
1995).
    Respondent argues that petitioners rely on a single factor to 
support their claim that the sales are outside the ordinary course of 
trade--that NSC's sales prices to the customer at issue differ from 
those to other customers. Respondent argues that this factor alone does 
not meet the legal standard enunciated in the statute, regulations, and 
case law in support of the contention. Respondent finds that 
petitioners' reliance on one factor, without taking into account other 
relevant facts (such as long-term relationship or largest customers) is 
inappropriate.
    Further, respondent maintains that petitioners' analysis regarding 
NSC's pricing patterns with respect to the customer is based upon an 
inappropriate methodology. Respondent finds inappropriate petitioners' 
use of the ``arm's-length test'' for purposes of evaluating whether 
NSC's sales to the customer at issue were made in the ``ordinary course 
of trade.'' Respondent argues that the arm's-length test applies only 
to sales between affiliated parties and is not relevant for purposes of 
determining whether NSC's sales to the customer at issue are in the 
ordinary course of trade. First, respondent argues that the arm's-
length test does not demonstrate pricing patterns, as argued by 
petitioner; rather, it measures a single average price of one customer 
against a single average price for a pool of customers at a particular 
point in time. Second, respondent argues that the arm's-length test 
does not provide a meaningful way to determine whether sales to the 
customer at issue were comparable to sales to customers in similar 
market segments. Respondent contends that the arm's-length test pools 
the entire universe of customers with common CONNUMs. Respondent 
maintains that the definition of CONNUMs is fairly broad, and thus the 
universe of sales examined under the arm's-length test can encompass 
more than one market segment. Respondent claims that price fluctuations 
between market segments are common and expected in the ordinary course 
of trade. Third, respondent argues that the petitioners' application of 
the arm's-length test to unaffiliated customers ignores commercial 
realities that may significantly and legitimately affect pricing. 
Respondent maintains that the Department's questionnaire even 
contemplates such different pricing considerations, as evidenced by the 
various fields for various pricing elements in its computer 
instructions for reporting sales. Finally, respondent argues that under 
petitioners' methodology, sales to a number of other unaffiliated 
customers would also have to be considered outside the ordinary course 
of trade. Respondent therefore concludes that using petitioners' 
methodology may lead to eliminating viable sales, leaving only the 
highest-priced home market sales as normal value.
    Respondent further argues that the Department conducted an 
exhaustive review of the sales to the customer at issue and confirmed 
that they are bona fide arm's-length transactions. Respondent argues 
that the Department both verified and issued questionnaires regarding 
various aspects of NSC's relationship with the customer at issue. In 
particular, at verification, the Department examined a chart which 
compares NSC's corrosion resistant steel sales to the customer at issue 
and to other customers (from an industry sector similar to the customer 
at issue) in 1991 and during the fifth review period. Respondent argues 
that this chart, provided as Verification Exhibit 37, demonstrates that 
NSC's sales and pricing practices with respect to corrosion resistant 
steel destined to the customer at issue are consistent with its normal 
business behavior that existed before the corrosion resistant steel 
antidumping petition. Respondent maintains that the Department verified 
that the chart provided in Verification Exhibit 37 reconciled to NSC's 
audited financial statements and the Department found that ``the 
relationship between the 1997 Sales Journal and the MOF Report is 
consistent with that observed in 1991.'' See NSC Sales Verification 
Report at p. 11.
    Respondent rebuts petitioners' arguments against the validity of 
Verification Exhibit 37. Respondent argues that petitioners are 
incorrect that the comparisons in Verification Exhibit 37 are invalid 
because the exhibit was based on ``average prices for all products, 
rather than on a CONNUM-by-CONNUM basis.'' Respondent argues that the 
data from the exhibit concerns sales made through a sales department 
which only sells corrosion resistant steel to a particular industry. 
Therefore, respondent maintains, the particular corrosion resistant 
steel sold to these customers is similar. Second, respondent argues, 
the exhibit is based only on sales to customers from the same industry, 
and thus is the most accurate foundation for price comparisons. 
Respondent argues that comparing NSC's sales to the customer at issue 
with sales to other customers from differing industries would distort 
the Department's analysis because such a comparison would include 
dissimilar products and reflect different market conditions. Respondent 
asserts this comparison is consistent with 19 U.S.C. 
Sec. 1677(15)(section 771(15) of the Act), which calls for the 
examination of the ``conditions and practices * * * normal in the 
trade.'' Finally, respondent challenges petitioners' accusation that `` 
NSC was unable to re-create its sales data as they existed in 1991 
because it did not maintain all the necessary records.'' Respondent 
maintains that the Department performed a quantity and value 
reconciliation on the 1991 data to ensure that it was compiled 
properly, and thereby verified the reliability of NSC's 1991 data.
    Respondent argues that NSC's pricing to the customer at issue may 
have been slightly different from prices charged to other customers in 
the same industry during the period of review, but this difference is 
fully consistent with the long-term ``conditions and practices'' of 
NSC's business in the ordinary course of trade. Respondent argues that 
Verification Exhibit 37 shows that the rebates to the customer at issue 
on average as a percentage of price are unchanged from 1991. Respondent 
asserts that there are several legitimate commercial reasons why 
certain long-term customers are charged differently from other 
customers. Respondent submits that the record shows that the 
``conditions and practices'' did not change materially between the 
periods of comparison and that NSC's sales to the customer at issue 
satisfy the statutory definition of sales in the ``ordinary course of 
trade.''
    Department's Position: The statute and SAA are clear that a 
determination of whether sales (other than those specifically addressed 
in section 771(15) of the Act) are in the ordinary course of trade must 
be based on an analysis comparing the sales in question with sales of 
merchandise of the same class or kind generally made in the home 
market. Commerce must evaluate not just ``one factor taken in isolation 
but rather * * * [a]ll the circumstances

[[Page 8940]]

particular to the sales in question.'' Murata Mfg. Co. v. United 
States, 820 F. Supp. 603, 607 (CIT 1993); CEMEX, 133 F.3d at 900.
    In this respect, we believe that petitioners have drawn an 
inaccurate conclusion based on the Department's discussion of this 
issue from the fourth review period. The Department noted in that 
review that: ``[T]here is no record evidence demonstrating any 
significant distinctions between the sales at issue and other home 
market sales. In particular, there is no evidence of a discernible 
pattern of lower sales prices to this customer as compared to NSC's 
other customers who purchased similar merchandise.'' See Fourth AD 
Final Results, 64 FR at 12955. This statement should not be read to 
indicate that the mere presence of evidence, or even the actual 
existence, of lower average prices to one unaffiliated customer is 
sufficient evidence to consider a sale to be outside the ordinary 
course of trade. Thus, the arm's-length test, which was developed to 
determine whether sales between affiliated companies may be used, is 
not adequate to determine whether sales to an unaffiliated customer are 
outside the ordinary course of trade. Indeed, such a reading is 
contrary to the statute and, as NSC argues, would lead to disregarding 
large portions of sales databases submitted in many of the antidumping 
cases the Department administers. In fact, in the fourth review, the 
Department noted that there existed further factors which the 
Department considered, and which did not compel the Department to 
consider the sales in question to have been made outside the ordinary 
course of trade (i.e., the relative volume of sales to the customer in 
both markets suggested there was little commercial incentive for the 
respondent to engage in the suppression of home market prices to 
eliminate hypothetical margins; there was nothing unusual about the 
fact that there were sales made to both markets through one customer; 
there was no other evidence demonstrating any significant distinctions 
between the sales to the customer at issue and other home market 
sales).
    Therefore, as we did in the fourth review, we have evaluated the 
circumstances particular to the sales in question in reaching our final 
determination in this case. First, we note that the volume of sales to 
the customer at issue for the home market is large. We note that the 
existence of a small quantity of sales of a certain type is one factor 
Commerce considers when assessing whether sales had been made outside 
the ordinary course of trade. See, e.g., Mantex v. United States, 17 
CIT 1385, 841 F. Supp. 1290, 1307-08 (CIT 1993). While this fact alone 
does not mean that sales cannot be considered outside the ordinary 
course of trade if they were made in significant quantities, we note 
that the statute and the SAA are clear that a determination of whether 
sales (other than those specifically addressed in section 771(15) of 
the Act) are in the ordinary course of trade must be based on an 
analysis comparing the sales in question with sales of merchandise of 
the same class or kind generally made in the home market. As a general 
proposition, the more significant the sales to the customer in question 
are, in comparison to overall home market sales, the more difficult it 
becomes to separate the sales in question from those ``generally'' made 
in the home market. Therefore, we believe that as the percentage of 
sales in question rises, so should the overall evidentiary requirements 
supporting a finding of sales outside the ordinary course of trade be 
all the more rigorous.
    We also find that the non-price factors we considered in support of 
our finding in the fourth review (i.e., the relative volume of sales to 
the customer in both markets suggested there was little commercial 
incentive for the respondent to engage in the suppression of home 
market prices to eliminate hypothetical margins; there was nothing 
unusual about the fact that there were sales made to both markets 
through one customer) are equally applicable in this review.
    With regard to relative pricing, we do not find the record evidence 
determinative in either direction. Specifically, while petitioners have 
argued that prices to the customer at issue demonstrate a ``discernable 
pattern of lower home market sales prices,'' we note that the test 
petitioners applied to reach their conclusion is a price comparability 
test (arm's-length test) which has been developed specifically to 
examine whether prices to affiliated parties are comparable to prices 
to unaffiliated parties in the home market. Petitioners have offered no 
rationale and no basis in law, Department regulations, or practice to 
support the proposition that the arm's-length test is the appropriate 
model for analyzing sales to an unaffiliated party. In this regard, we 
note that there do exist theoretical alternatives for conducting an 
analysis (e.g., the pattern of price differences analysis which the 
Department has used in other cases to determine whether a level of 
trade adjustment may be warranted for different levels of trade, and 
respondent's own alternative analysis, as presented in Sales 
Verification Exhibit 37). On the other hand, we agree with petitioners 
that respondent's methodology takes the class of customer into 
consideration even though there is no evidence on the record to 
otherwise suggest that sales were made by NSC at different levels of 
trade during the period of review.
    In summary, we believe that the evidence on the record supports a 
determination that these sales were made in the ordinary course of 
trade.
    Comment 3: Petitioners note that there was an error in the model-
match program which incorrectly referenced NSC's sales to its 
affiliate. NSC agreed with petitioners' comment and also found that the 
reference to the sales date of NSC's sales to its affiliate was 
incorrect.
    Department's Position: We agree with petitioners and NSC and have 
modified the calculations for the final results of review accordingly.

KSC

    Comment 4: Petitioners argue that the Department did not correctly 
adjust KSC's variable costs of manufacturing (``VCOM'') and variable 
overhead (``VOH'') in the preliminary results to eliminate the double-
counting of labor costs contained in KSC's reported VCOM. Petitioners 
argue that the Department incorrectly adjusted for this double-counting 
by multiplying the supervisory portion of total direct labor costs from 
DIRLAB, and subtracting this cost from VOH. Instead, petitioners argue 
that the Department should have multiplied the direct labor portion of 
total labor costs by direct labor (``DIRLAB''), and subtracted this 
cost from VOH.
    Respondent did not submit rebuttal comments on this issue.
    Department's Position: We agree with petitioners and we have 
modified our recalculation of KSC's VOH and VCOM for the final results 
of review accordingly. See Final Analysis Memorandum for KSC (``Final 
Analysis Memo for KSC'') (February 14, 2000) (Business Proprietary 
Version) for the calculation.
    Comment 5: Petitioners argue that the Department should adjust 
KSC's general and administrative (``G&A'') expenses to include the 
following items: (1) expenses on special retirement payment; (2) past 
service portion of pension cost; (3) extraordinary loss on disposal of 
tangible fixed assets; and (4) loss on disposal of fixed assets. 
Petitioners argue that the expenses from these four expense item 
categories were erroneously not included by KSC in its calculation of 
G&A. In support of their argument, petitioners cite the Department's 
original questionnaire,

[[Page 8941]]

dated September 30, 1998, D-20, which requests that KSC include 
``period expenses which relate indirectly to the general production 
operations of the company rather than directly to the production 
process for the subject merchandise.'' Also, petitioners argue that the 
Department has, in past cases, included such expenses in the 
calculation of respondent's GA, citing Notice of Final Determination of 
Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils 
from Japan (``Final Determination of Stainless Steel from Japan''), 64 
FR 30574, 30589-30591 (June 8, 1999); Notice of Preliminary 
Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Japan (``Preliminary Determination 
for Hot-Rolled Steel from Japan''), 64 FR 8291, 8296 (February 19, 
1999); and Notice of Final Determination of Sales at Less Than Fair 
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan 
(``Final Determination of Hot-Rolled Steel from Japan''), 64 FR 24329, 
24356-24357 (May 6, 1999).
    Respondent did not submit rebuttal comments.
    Department's Position: We agree with petitioners and have included 
the above four expense items in our calculation of KSC's G&A for the 
final results of review. The first three items are classified by KSC as 
extraordinary loss items and are from its audited non-consolidated 
financial statement (ending March 31, 1998), and the fourth item is 
classified by KSC as a non-operating expense from KSC's Ministry of 
Finance (``MOF'') report (ending March 31, 1998), which is filed with 
the Japanese government. We have used the financial statement period 
ending March 31, 1998 because it most closely corresponds to the POR. 
Although KSC has classified the first three items as extraordinary 
expenses under Japanese GAAP, we determine, as we did in prior cases 
for these types of expenses for KSC, that the first two expense items 
are not extraordinary. Therefore, we have included these expenses in 
our calculation of KSC's G&A expense rate. See Final Determination of 
Hot-Rolled Steel from Japan and Final Determination of Stainless Steel 
from Japan.
    For KSC's losses on its disposal of fixed assets (items three and 
four, noted above), as stated in prior cases for these types of 
expenses for KSC, it is our practice to calculate G&A expenses using 
the operations of the company as a whole, regardless of whether these 
assets are used purely for the production of subject merchandise or 
non-subject merchandise. See Final Determination of Hot-Rolled Steel 
from Japan and Final Determination of Stainless Steel from Japan. We 
note that KSC excluded these losses from the disposal of fixed assets 
because they pertain to non-subject merchandise. As referenced in the 
above cases for KSC, our practice is to include the gains or losses 
from the disposal of fixed assets in GA. Therefore, in this case, we 
have included the losses on KSC's disposal of fixed assets in our 
calculation of KSC's G&A expense rate.
    Comment 6: KSC argues that the Department's level of trade 
(``LOT'') analysis did not properly consider record evidence and 
violated established policies and regulations by combining, in the same 
home market (``HM'') LOT, direct sales to unaffiliated trading 
companies made by KSC and KSC's affiliated producer, Kawatetsu 
Galvanizing Co., Ltd. (``Kawahan'') (channel one) with resales to 
downstream purchasers through KSC's affiliated trading company, Kawasho 
Corporation (``Kawasho'') (channel three). KSC argues that Kawasho 
competes with the unaffiliated trading companies that purchased KSC- 
and Kawahan-produced subject merchandise, and the sales by Kawasho and 
these unaffiliated trading companies are at the same LOT. KSC argues 
that Kawasho's resales to downstream purchasers are at a different 
stage of marketing, and have different selling activities when compared 
to KSC's and Kawahan's direct sales, and should be treated by the 
Department as such for the final results. KSC argues that the 
Department's failure to segregate sales involving different marketing 
activities is a violation of the statutory directive to recognize 
separate LOTs when such levels involve the performance of different 
selling activities, citing 19 U.S.C. 1677b(a)(7)(A)(i) (1999)(section 
773(a)(7)(A)(i) of the Act).
    KSC further argues that the Department erroneously determined that 
channel one sales (unaffiliated trading companies) were at a different 
LOT from sales made from KSC and Kawahan to end-users (channel two), 
despite these sales being at the same marketing stage (i.e., direct 
from the mill) and having comparable selling activities. Specifically, 
KSC argues that the selling activities for channels one and two are at 
similarly low levels of activity for end-user price negotiations, 
credit checks, and payment collection.
    KSC argues that the Department underestimated the selling 
activities in channel three by not examining Kawasho's selling 
activities. KSC argues that the Department must analyze the selling 
activities of KSC, Kawahan, and Kawasho for the reported sales through 
channel three. KSC notes that, contrary to the Department's preliminary 
finding that there were nine selling activities through channel three, 
sales in channel three have twelve selling activities when Kawasho's 
selling activities are also considered. KSC argues that Kawasho 
exclusively performs the following three additional selling activities: 
credit checks, arranging for freight, and payment collection. KSC 
further argues that the channel three selling activities are at a 
significant level for all twelve selling activities. In contrast, KSC 
argues that eight of these twelve selling activities are either not 
offered or offered at minimal levels through channel one. KSC then 
argues that the Department is not constrained to combine channels one 
and three into one LOT just because there are several similar selling 
activities that are offered in both channels, citing the Preamble to 
the Department's regulations, Final Rule, 62 FR at 27371; and the SAA 
at 830, 1994 U.S.C.C.A.N. at 4168.
    KSC also cites 19 C.F.R. 351.412(c)(2) to support its argument that 
the Department finds sales at separate LOTs if the sales are at 
different marketing stages. KSC argues that channel one sales involve 
only one marketing stage (producer to unaffiliated party), while 
channel three sales involve two marketing stages (producer to 
affiliated party, then affiliated party to unaffiliated purchaser). 
Thus, KSC argues that channel one sales are at a less-developed stage 
in the marketing process than are channel three sales.
    Finally, KSC argues that the Department must consider where in the 
distribution chain the reported sales are made, citing a Department 
policy bulletin, which states:

    In asking for LOT information, the Department is trying to 
determine where in the distribution chain the respondent's customer 
falls (end user, distributor, retailer). The presumption is that the 
net price and/or selling expenses and, therefore, the foreign market 
value (FMV) are different at each LOT. See Import Administration 
Policy Bulletin 92/1 at 2.

    KSC notes that the Department's determinations in recent cases 
support its argument. First, KSC cites Preliminary Determination for 
Hot-Rolled Steel from Japan, 64 FR 8291, 8297 (February 19, 1999) 
(upheld at final), in which, under the same set of circumstances, the 
Department determined that the following two LOTs existed: (1) LOT one, 
which consists of sales to unaffiliated trading companies and end-
users; and (2) LOT two, which

[[Page 8942]]

consists of downstream sales through Kawasho). Also, KSC cites Notice 
of Final Determination of Sales at Less Than Fair Value: Stainless 
Steel Sheet and Strip in Coils From France (``Final Determination for 
Stainless Steel from France''), 64 FR 30820, 30824 (June 8, 1999), in 
which KSC notes that the Department determined that two LOTs existed, 
with one LOT consisting of sales to unaffiliated trading companies and 
end-users (LOT one), and the other LOT consisting of downstream sales 
through an affiliate (LOT two). KSC argues that, in this case, the 
Department determined that two LOTs existed because sales through the 
affiliate were made at a more remote marketing stage than sales in LOT 
one, and that there were significant distinctions in selling activities 
between the two LOTs. Finally, KSC argues that in Preliminary 
Determination of Sales at Less Than Fair Value: Certain Cut-To-Length 
Carbon-Quality Steel Plate Products from France (``Preliminary 
Determination for Cut-To-Length Steel from France''), 64 FR 41197, 
41200 (July 29, 1999), the Department determined that there were two 
LOTs on the basis that downstream sales through the affiliate were at a 
more remote marketing stage, and there were distinctions between the 
marketing activity for the distribution channels.
    Furthermore, KSC argues that the differences in marketing functions 
and selling activities among the channels of trade are reflected in 
KSC's reported indirect selling expenses, which KSC argues are higher 
as an aggregate percentage of channel three sales than of channels one 
and two sales. KSC asserts that the weighted average of indirect 
selling expenses as a percentage of gross unit price for channel three 
sales is approximately double the corresponding expense figures for 
channels one and two, and that the expense figures for channels one and 
two are relatively close. KSC argues that, according to the 
Department's regulations and past practice, such differences in selling 
expenses give credibility to a LOT claim, citing the Preamble to 
Department's regulations, 62 FR at 27371, which states that: 
``Substantial differences in the amount of selling expenses associated 
with two groups of sales also may indicate that the two groups are at 
different levels of trade,'' and Notice of Final Results and Partial 
Rescission of Antidumping Duty Administrative Review: Certain Welded 
Carbon Steel Pipe and Tube from Turkey, 63 FR 35190, 35193(June 29, 
1998) (``[W]ith respect to the level of selling expenses involved at 
each channel of distribution, our examination of the expenses reported 
to the home market sales indicates that * * * the per-unit indirect 
selling expenses are higher for sales made through LOT C than for those 
made at LOT A/B. Consistent with the Department's practice and 
regulations, we have considered this as an additional factor in our 
determination that LOT C is separate from, and more advanced than, LOT 
A/B.'')
    Finally, KSC argues that it should be allowed a LOT adjustment, if 
the Department continues to combine channels one and three at a 
separate LOT. KSC argues that there exists a consistent pattern of 
price differences between channel three sales compared to sales through 
channels one and two in support of this argument.
    Petitioners did not comment on this issue.
    Department's Position: We disagree with KSC in part. While KSC is 
correct that the Department failed to consider Kawasho's selling 
activities when analyzing the selling activities for channel three 
sales, we find that an analysis of the selling activities offered for 
all three channels of trade shows that all HM sales have been made at 
the same LOT.
    In the Preliminary Results, the Department first noted that KSC and 
Kawahan sold subject merchandise to two types of customers: (1) Trading 
companies (affiliated or unaffiliated), and (2) end-users, which 
represent two different points in the chain of distribution between the 
producers and the final end-user. See Preliminary Results, 64 FR at 
44485. As a result, we noted that these sales to different points in 
the distribution chain to appear to represent different levels of trade 
in the home market.
    Next, the Department examined the selling activities reported for 
each type of customer. Specifically, the Department noted that certain 
differences existed with respect to the selling activities KSC and 
Kawahan performed in making sales to these two types of customers 
(i.e., trading companies and end-users). As a result, the Department 
concluded the following:

    Based on the different points in the chain of distribution and 
the differences in selling functions between the trading companies 
and the end-users, the Department preliminarily finds that two 
levels of trade exist for KSC's sales in the home market.Id.

    For this final results, we have reconsidered our preliminary 
findings. Specifically, we agree with KSC that it is appropriate for 
the Department to also consider the selling activities offered for the 
reported sale, which, in the case of channel three sales, includes any 
selling activities performed by Kawasho, the affiliated reseller. As a 
result of consideration of these additional selling activities, we now 
find that the selling functions among all three channels of trade are 
sufficiently similar to warrant a determination that there exists only 
one level of trade in the home market.
    In our analysis to determine that there was one level of trade in 
the home market, we examined the following twelve selling activities: 
market intelligence, end-user information, end-user contact lead role, 
marketing services, credit checks, end-user price negotiations, daily 
issues end-user contact, warehousing, processing, arranging for 
freight, payment collection, and evaluating warranty claims.
    For channel one (KSC or Kawahan sales to unaffiliated trading 
companies), we determine that eleven of the twelve selling activities 
were performed, with the following seven selling activities being 
performed at a low level: market intelligence, end-user information, 
end-user contact lead role, marketing services, credit checks, end-user 
price negotiations, and daily issues end-user contact. Finally, KSC and 
Kawahan do not perform payment collection.
    For channel two (KSC or Kawahan sales to end-users), we determine 
that all of the above twelve selling activities are performed; however, 
credit checks, end-user price negotiations, and payment collection are 
performed at a low level.
    For channel three (the selling activities of KSC and Kawasho or 
Kawahan and Kawasho combined), all twelve selling activities are 
performed.
    Based on the above selling activities, all or virtually all of the 
selling activities are performed in all three channels, although at 
somewhat different levels in certain cases. Thus, on an overall basis, 
it appears that all three channels offer similar selling activities.
    We wish to stress that while the Department may consider 
differences in the distribution chain, equally important in making a 
level of trade determination is the level of selling activities. This 
principle was explicitly noted in the preliminary results, in which we 
stated that: ``To determine whether NV sales are at a different LOT 
than EP, we examine stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer.'' See Preliminary Results, 64

[[Page 8943]]

FR at 44484; see also 19 C.F.R. Sec. 351.412(c)(2).
    KSC cites several cases in support of its argument that channels 
one and two should be in one LOT and channel three in a separate LOT. 
KSC's reliance on Final Determination for Hot-Rolled Steel from Japan, 
Preliminary Determination for Cut-To-Length Steel from France, and 
Final Determination for Stainless Steel from France is without merit. 
We examined record evidence from the Final Determination for Hot-Rolled 
Steel from Japan, and have determined that while KSC had the same three 
HM channels as in the instant case, we did not determine that KSC's 
sales through Kawasho (channel three) represent a separate LOT, as KSC 
had requested. Instead, we determined that sales to end-users, either 
direct (channel two) or via Kawasho (channel three), were at one LOT 
and sales to unaffiliated trading companies (channel one) were at 
another LOT. We made this determination based on the KSC's selling 
activities, which are at different levels when compared to the selling 
activities in the instant case. We also examined record evidence 
regarding the Preliminary Determination for Cut-To-Length Steel from 
France and Final Determination for Stainless Steel from France cases, 
and we have confirmed that we created separate LOTs for sales through 
affiliates. However, in those cases, we determined to create separate 
LOTs for sales through affiliates because those sales were made at a 
more remote marketing stage than other sales, and there were 
significant distinctions in selling activities between the LOTs, which 
is not the case here. Accordingly, all the cases relied upon by KSC are 
distinguishable from the instant case.
    The Department's concentration on examining differences in selling 
activities when making level of trade determinations is well-
established, including in cases involving this respondent. See e.g., 
Final Determination of Stainless Steel from Japan, 64 FR at 30580 
(``Based on the above-referenced distinctions between the selling 
functions of KSC to end-users and those of KSC to affiliated trading 
companies, and then to unaffiliated customers, we consider the 
respondent's request that the Department treat KSC's sales to all end-
users as one level of trade to be unpersuasive.''); Preliminary 
Determination for Hot-Rolled Steel from Japan, 64 FR at 8298 (upheld at 
final) (``Based upon our analysis, we found a difference in the selling 
functions performed on EP sales as compared to sales at each of the two 
distinct levels of trade in the home market. Therefore, the Department 
preliminarily determined that the information on the record justifies 
treating KSC's EP sales as having been made at a different LOT from the 
two home market levels of trade''). Therefore, in keeping with recent 
Departmental practice, we consider the similarities in selling 
activities to all home market customers are significant enough to 
preclude a determination that separate levels of trade exist with 
respect to sales made through different distribution channels.
    With regard to KSC's discussion of indirect selling expenses, we 
examined indirect selling expenses and we agree with KSC that Kawasho's 
weighted average indirect selling expenses as a percentage of gross 
unit price, for channel three sales, is approximately double the same 
corresponding figures for channels one and two, and that the figures 
for channels one and two are relatively close. We also agree with KSC 
that the Department has stated that substantial differences in the 
amount of selling expenses associated with two groups of sales may 
indicate that the two groups are at different levels of trade. However, 
we determine, in the instant case, when comparing Kawasho's and KSC's/
Kawahan's indirect selling expenses, that the difference is not 
significant enough as a percentage of total sales to consider reversing 
our decision that channel three is in a separate LOT than channels one 
and two. In addition, any differences in indirect selling expenses 
among the three channels are outweighed by the overall similarities in 
selling activities.
    Finally, KSC's argument regarding an LOT adjustment based on a 
finding of a consistent pattern of price differences among HM LOTs is 
moot because we have determined that there is only one HM LOT.
    As stated in Preliminary Results, we determined that the sole U.S. 
sale in channel one (unaffiliated trading company) was at the same LOT 
as the HM sales to trading companies. However, for the final results, 
we have determined that the U.S. selling activities are different from 
the HM LOT. Based on record evidence, KSC reported that, for the sole 
U.S. sale, KSC only performed (or may perform) two of the twelve 
selling activities: end-user price negotiations and evaluating warranty 
claims. Based on the differences in the selling activities performed in 
the HM LOT and U.S. LOT, we determine that record evidence justifies 
treating KSC's U.S. EP sale as having been made at a different LOT than 
the HM LOT.
    If the comparison-market sales are at a different LOT and the 
difference affects the price comparability, as manifested in a pattern 
of consistent price differences between the sales on which NV is based 
and comparison-market sales at the LOT of the export transaction, we 
make a LOT adjustment under section 773(a)(7)(A) of the Act. Here, we 
have determined that there is one LOT in the HM, and that this HM LOT 
is at a different LOT than in the United States. However, KSC has not 
established that the difference had an effect on price comparability by 
demonstrating a pattern of consistent price differences in the home 
market. See 19 C.F.R. Sec. 351.412(d), and 351.401(b)(1). Furthermore, 
we have independently examined additional information reasonably 
available to us, including information from the other respondent in 
this review (NSC), but have been unable to identify information which 
could establish a pattern of consistent price differences. Therefore, 
because we have no information to establish that the difference in LOT 
affected price comparability, we did not adjust NV for the U.S. sale 
comparison to HM sales made at a different LOT.
    Comment 7: KSC argues that the Department does not have the 
authority, either in the antidumping statute or in the Agreement on 
Implementation of Article VI of the General Agreement on Tariffs and 
Trade 1994 (``Antidumping Agreement''), to exclude HM sales to 
affiliated parties that purchase goods for consumption on the basis of 
their failure to pass the arm's-length test. KSC argues that the 
antidumping statute is explicit (both with respect to home market sales 
and U.S. sales) with regard to which sales the Department may exclude 
from its margin analysis. Specifically, concerning home market sales, 
KSC argues that the Department may consider excluding only the 
following home market sales: (1) sales to affiliates who sell to 
downstream customers (section 773(a)(5) of the Act); and (2) sales that 
fail the cost test (section 773(b)(1) of the Act).
    Also, KSC argues that the Department's application of the arm's-
length test is illegal and, in fact, unconstitutional because it 
eliminates sales to affiliates (irrespective of whether for consumption 
or resale) if there are no sales of an identical product to 
unaffiliated customers. The Department's exclusion of these unmatched 
affiliated sales violates the Antidumping Agreement and U.S. 
antidumping laws, KSC argues, without evidence that these sales were 
not made at arm's length. KSC argues that the

[[Page 8944]]

statute instructs the Department to provide a ``fair comparison'' 
between the export price or constructed export price and normal value, 
citing 19 U.S.C. 1677b(a) (1999)(section 773(a) of the Act). KSC 
further notes that the WTO Antidumping Agreement specifies that the 
Department must include all sales, unless including certain sales 
affects price comparability, citing Article 2.4 of the Antidumping 
Agreement.
    KSC continues that the Department, by automatically excluding these 
non-matched sales, violated its due process, as guaranteed under the 
Fifth Amendment to the U.S. Constitution, in not allowing KSC to 
demonstrate that these non-matched sales were made at arm's length, 
citing NEC Corp. v. United States, 151 F.3d 1361, 1370 (Fed. Cir. 
1998), cert. denied, 119 S.Ct. 1029 (1999); and Techsnabexport, Ltd. v. 
United States, 795 F. Supp. 428, 435-36 (CIT 1992). KSC claims that the 
Department's exclusion of these non-matched affiliated party sales 
amounts to an irrebuttable presumption of fact that violated KSC's due 
process, citing Rogers v. United States, 575 F. Supp. 4, 9-10 (D. Mont. 
1982); and Universal Restoration, Inc. v. United States, 798 F.2d 1400, 
1406 (Fed. Cir. 1986). According to KSC, the Department has presumed 
that these non-matched sales were made at less than arm's-length 
prices. However, KSC argues that not all sales to affiliates were made 
at less than arm's-length prices; hence, the Department's presumption 
that all non-matched sales to affiliates were not at arm's-length 
prices cannot be universally true, citing Steven M. v. Gilhool, 700 F. 
Supp. 261, 264-65 (E.D. Pa. 1988) (an irrebuttable presumption can only 
survive if the proposition on which it is based is universally true).
    Finally, KSC argues that the Department, in its arm's-length test, 
analyzed sales to certain customers by customer-facility rather than by 
customer. KSC argues that where a customer has multiple delivery 
locations, the Department should collapse those facilities into a 
single comparison for the customer.
    Petitioners argue that the statutory language cited by KSC in fact 
provides the Department with the discretion to use affiliated party 
sales in determining normal value. Specifically, petitioners note that 
the statute states that: ``If the foreign like product is sold * * * 
through an affiliated party, the prices at which the foreign like 
product is sold * * * by such affiliated party may be used in 
determining normal value.'' 19 U.S.C. 1677b(a)(5)(section 773(a)(5) of 
the Act)(emphasis by petitioners). Petitioners continue that the SAA 
states that: ``[S]ection 773(a)(1)(B) permits (but does not require) 
Commerce to base normal value on sales to related (now affiliated) 
parties in the home market. However, Commerce will continue to ignore 
sales to affiliated parties which cannot be demonstrated to be at arm's 
length prices for purposes of calculating normal value.'' See SAA at 
827, reprinted in 1994 U.S.C.C.A.N., 4040, 4166.
    Petitioners also argue that the Department's regulations, including 
19 C.F.R. 351.403(c), 351.403(d), and 351.102, outline the 
circumstances under which it will exercise its discretion to include or 
exclude certain sales made to or through affiliated parties. 
Specifically, petitioners note that 351.403(c) states that the 
Department will use sales to affiliated parties ``only if [the 
Secretary is] satisfied that the price is comparable to the price at 
which the exporter or producer sold the foreign like product to a 
person who is not affiliated with the seller.''
    Petitioners continue that the CIT has upheld the Department's 
application of the arm's-length test in a number of cases, including, 
e.g., Sanyo Elec. Co. v. United States, Slip Op. 99-49 (CIT June 4, 
1999); NTN Bearing Corp. v. United States, 905 F. Supp. 1083, 1100 (CIT 
1995); SSAB Svenskt Stal AB v. United States, 976 F. Supp. 1027, 1030-
31 (CIT 1997); Micron Tech. Inc. v. United States, 893 F. Supp. 21, 38 
(CIT 1995); and Usinor Sacilor v. United States, 872 F. Supp. 1000, 
1004 (CIT 1994).
    Finally, petitioners argue that, contrary to KSC's argument, 
section 773(a)(5) grants the Department the authority to include (not 
exclude) the sales of affiliated resellers. Petitioners argue that the 
statute does not limit the Department's authority to exclude sales to 
affiliates simply because these affiliates consume the merchandise; in 
fact, petitioners argue that sales to affiliates for consumption may be 
as unrepresentative of normal selling practices as sales to affiliates 
for resale. Therefore, petitioners argue that, in Preliminary Results, 
the Department properly excluded sales which failed the arm's-length 
test.
    With respect to the exclusion of non-matched home market affiliated 
party transactions, petitioners note that it is the Department's 
practice to exclude sales to affiliated parties if there were no non-
affiliated party sales of identical merchandise. Without non-affiliated 
party sales of identical merchandise, petitioners note, the Department 
has stated that it is unable to determine whether these sales were made 
at arm's length, citing, e.g., Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062, 37077 (July 9, 1993); Cold-Rolled 
Carbon Steel Flat Products from the Netherlands, 64 FR 48775, 48776 
(September 8, 1999); Certain Cut-to-Length Carbon-Quality Steel Plate 
from France, 64 FR 41198, 41201 (July 29, 1999); and Stainless Steel 
Wire Rod from Sweden, 63 FR 40449, 40454 (July 29, 1998). Petitioners 
note that section 351.403(c) of the Department's regulations state that 
the Department may use sales to affiliated parties if these prices are 
comparable. Petitioners argue that the courts are supportive of the 
proposition that it is the respondent's burden, and not the 
Department's burden, to prove that a sale to an affiliated party was 
made at arm's length, citing, e.g., Sanyo Elec. Co., Slip Op. 99-49 
(CIT June 4, 1999); and NEC Home Elecs., Ltd. v. United States, 54 F.3d 
736, 744 (Fed. Cir. 1995)).
    In addition, petitioners argue that KSC did not provide evidence 
that these sales to affiliated parties were at arm's length, nor that 
the Department's exclusion of these sales would violate the U.S. 
Constitution and the ``fair comparison'' provision of the antidumping 
statute. Finally, petitioners argue that the Uruguay Round Agreements, 
including the WTO Antidumping Agreement, are not self-executing and 
thus their legal effect in the United States is governed by the 
implementing legislation; and furthermore, that the WTO Antidumping 
Agreement does not trump U.S. legislation, where there is regulatory 
and legal support for the exclusion of non-matched sales, citing 
Hyundai Elecs. Co. v. United States, 53 F. Supp. 2d 1334, 1343 (CIT 
1999); and Suramerica de Aleaciones Laminada, C.A. v. United States, 
966 F.2d 660, 668 (Fed. Cir. 1992).
    Department's Position: We disagree with KSC in part. Departmental 
regulation 19 C.F.R. 351.403(c) is clear that the Department will 
include sales to an affiliated party only if we are satisfied that the 
price is comparable to the price sold to a person who is not affiliated 
with the seller. No distinction has been made in this section of the 
regulations with regard to the final disposition of the merchandise 
sold to the affiliated party. The statutory authority stems directly 
from section 773(a)(1)(B) of the Act, which (as noted above by 
petitioners) the SAA has explicitly clarified to mean that Commerce 
``will continue to ignore sales to affiliated parties which cannot be 
demonstrated to be at arm's-length prices for purposes of calculating 
normal value.'' See SAA at 827,

[[Page 8945]]

reprinted in 1994 U.S.C.C.A.N., at 4166. Furthermore, we agree with 
petitioners that the courts have upheld the Department's authority to 
exclude sales, either for consumption or resale, that have not been 
established to be at arm's-length prices pursuant to our arm's-length 
test. See, e.g., Sanyo Elec. Co. v. United States, Slip Op. 99-49 at 
16-17 (CIT June 4, 1999). There are no matching sales to unaffiliated 
parties in this case which would allow us to determine whether the sale 
to the affiliated party was made at arm's length. Therefore, we find 
that the Department has the authority to exclude these sales to 
affiliated parties, whether consumed or resold, because it has not been 
established that they were made at arm's-length prices.
    With regard to KSC's argument that the exclusion of unmatched sales 
to affiliated parties violates the Fifth Amendment to the Constitution, 
we disagree. As petitioners have noted, the burden of proving that 
affiliated party prices are at arm's length does not rest with the 
Department. In fact, the Federal Circuit has specifically stated, in 
NEC Home Elecs., that the CIT properly rejected NEC's suggestion that 
``Commerce must carry the burden of proving that NEC's related party 
price is not an arm's length price.'' NEC Home Elecs., 54 F.3d at 744. 
As petitioners have noted, KSC has provided no such evidence.
    The presumption, as upheld by the courts, is that respondent must 
carry the burden of showing that transactions between affiliated 
parties should be used in calculating normal value. This presumption is 
carried through in the Department's regulations, at 19 C.F.R. 
351.403(c). This regulation states that we may use sales to affiliated 
parties if these prices are comparable to sales to non-affiliated party 
sales. Id. (emphasis added). Therefore, because we were unable to 
determine if these sales to affiliated parties were comparable to sales 
to unaffiliated parties, we properly excluded them from our calculation 
of normal value in the Preliminary Results. Of course, the Department's 
authority to exclude such sales has indeed been exercised in numerous 
cases. See, e.g., Stainless Steel Wire Rod from Sweden, 63 FR 40449, 
40454 (July 29, 1998).
    Finally, we agree with KSC that, for sales of merchandise to 
affiliated parties for which we could make an appropriate unaffiliated 
party comparison, in the Preliminary Results, we did not perform the 
arm's-length test on a customer-specific basis, but inadvertently 
analyzed certain sales on the basis of divisions or delivery points 
within a single customer. Also, we agree with KSC that, at 
verification, it provided unique identification numbers so that the 
Department could collapse customer's divisions or delivery points into 
a single customer code. See Sales Verification Exhibit 24. Therefore, 
for the final results, we collapsed those customer codes which 
represent divisions or delivery points into a single customer, because 
it is the Department's practice to analyze sales on a customer-specific 
basis.
    Comment 8: KSC argues that the Department correctly used KSC's and 
Kawahan's invoice date as the date of sale in the Preliminary Results. 
KSC asserts that the Department verified that KSC's and Kawahan's 
material terms of sale can and do change between the order date and the 
invoice date. KSC argues that using the invoice date is more efficient 
than using other dates as the date of sale because invoice dates are 
used by KSC, Kawahan, and Kawasho in their books and records, and that, 
moreover, these companies either do not issue order confirmations or do 
not maintain order confirmation records. KSC also argues that the use 
of invoice date is consistent with the other dumping cases in which KSC 
has been involved, citing Final Determination of Stainless Steel from 
Japan, 64 FR at 30586-30587; Preliminary Determination for Hot-Rolled 
Steel from Japan, 64 FR at 8294; and Final Determination of Hot-Rolled 
Steel from Japan, 64 FR at 24334. In this regard, KSC argues that it 
uses the same invoicing system and sales processes for the steel 
products from the above two cases as with subject merchandise. 
Furthermore, KSC argues that the above two final determinations serve 
as the Department's reaffirmation of its practice of using invoice date 
as the date of sale if the material terms of sale can change between 
order date and invoice date, even if changes are not frequent, and the 
reporting company uses invoice date in its internal records.
    KSC also notes that the Department's regulations state that it will 
normally use for the date of sale the invoice date as recorded in the 
exporter or producer's records kept in the ordinary course of business, 
as long as the Department does not find that some other date is more 
appropriate, citing 19 C.F.R 351.401(i). KSC notes that the selection 
of invoice date as date of sale has been justified under this 
regulation in numerous instances, citing, e.g., Final Determination of 
Stainless Steel from Japan; Certain Corrosion-Resistant Carbon Steel 
Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada: 
Final Results of Antidumping Duty Administrative Reviews and 
Determination to Revoke in Part, 64 FR 2173, 2178 (January 13, 1999); 
Notice of Final Results and Partial Rescission of Antidumping Duty 
Administrative Review: Canned Pineapple Fruit From Thailand (``Canned 
Pineapple Fruit From Thailand, 95-96 Final''), 63 FR 43661, 43668 
(August 14, 1998); Carbon Steel Wire Rope from Mexico; Final Results of 
Antidumping Duty Administrative Review, 63 FR 46753, 46755 (September 
2, 1998).
    In addition, KSC argues that the Department's Preamble to its 
regulations (``Preamble''), 62 FR 27296, 27348 (May 19, 1997), supports 
the proposition that the Department prefers to use a single date of 
sale for each respondent to simplify the reporting and verification of 
information. Thus, KSC argues that because it uses invoice date in its 
books and records, using the invoice date as the date of sale 
simplifies the reporting of information and its verification, which 
results in an efficient use of KSC's and the Department's resources. 
KSC then argues that the Department has stated in the Preamble, and has 
demonstrated in practice, a presumption that the date of sale is the 
invoice date unless there is satisfactory evidence that the terms of 
sale were finally established on a different date, citing the Preamble, 
62 FR at 27349; Canned Pineapple Fruit From Thailand, 95-96 Final; and 
Certain Welded Carbon Steel Pipes and Tubes from Thailand; Final 
Results of Antidumping Duty Administrative Review, 63 FR 55578, 55587-
88 (October 16, 1998).
    Petitioners argue that the record does not support KSC's assertion 
that the invoice date should be the date of sale. Petitioners note the 
Department's preference for using the invoice date as the date of sale; 
however, petitioners also point out that the section 351.401(i) of the 
Department's regulations state that another date may be used if the 
Department is satisfied that a different date better reflects the date 
on which the exporter or producer establishes the material terms of 
sale. Petitioners argue that the Department will not use the invoice 
date where the ``material terms of sale usually are established on some 
date other than the date of invoice,'' citing Notice of Final Results 
of Antidumping Duty Administrative Review: Canned Pineapple Fruit From 
Thailand, 63 FR 7392, 7394 (February 13, 1998); Preamble, 62 FR at 
27349; and Canned Pineapple Fruit From Thailand, 95-96 Final. Also, 
petitioners note that the Department has stated that: ``If [the] 
invoice date does not reasonably approximate the date on which the 
material terms of sale were made in either of the markets under

[[Page 8946]]

consideration, then its blanket use as the date of sale in an 
antidumping analysis is untenable,'' citing Circular Welded Non-Alloy 
Steel Pipe From the Republic of Korea; Final Results of Antidumping 
Duty Administrative Review, 63 FR 32833, 32835-36 (June 16, 1998).
    Petitioners argue that, based on KSC's case brief and response, 
KSC's and Kawahan's selling processes demonstrate that the material 
terms of sale are established at the order confirmation date. 
Petitioners argue that KSC has stated that its and Kawahan's customers 
agree to the material terms of sale at the time of order confirmation, 
and that subject merchandise is made-to-order, then invoiced and 
shipped.
    Thus, petitioners argue that the invoice date would be used as the 
date of sale only if the record demonstrates that there are frequent 
changes to the material terms of sale between the order confirmation 
date and the invoice date/shipment date. Petitioners note that the 
Department has stated that it will use the order confirmation date if, 
for a large majority of sales, the essential terms of sale do not 
change between order date and invoice date, citing Notice of Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Sheet 
and Strip in Coils From the Republic of Korea, 64 FR 30664, 30682 (June 
8, 1999).
    Petitioners disagree, based on the record, that KSC has met the 
standard set by the Department's regulations and practice to use the 
invoice date as the date of sale. Petitioners note that KSC stated that 
it was unable to determine whether the changes between the order 
confirmation date and the invoice date were material, citing Kawasaki's 
Response to the Department's Supplemental Section B Questionnaire, 
dated January 11, 1999, at pp. B-1-2 (Public Version) (in which KSC 
stated that it and Kawahan's record systems do not allow KSC to 
``determine the types of changes that occurred (i.e., whether the 
change is to significant terms, such as price and quantity) or to 
insignificant terms''). Petitioners note that KSC reported that it was 
unable to determine which specific term(s) of the order changed or 
whether changes after an order confirmation were major or 
insignificant, citing Kawasaki's Response to the Department's 
Supplemental Section A Questionnaire, dated December 4, 1998, at pg. 4 
(Public Version). Thus, petitioners argue that the percentage figures 
regarding the frequency of changes cannot be relied on for date of sale 
purposes, noting that the revisions to the orders could have involved 
immaterial items, such as payment terms, packing method, or a change in 
the spelling of a customer's name. In addition, petitioners note that 
KSC has reported that, for KSC, Kawahan, and Kawasho, changes to the 
terms of sale between the order confirmation date and the invoice date/
shipment date are infrequent, citing KSC's October 28, 1998 response, 
at pp. A-41--A-42. Finally, petitioners argue that, at verification, 
the Department verified the percentage figures regarding the frequency 
of changes based on KSC's computer system, and did not examine the 
nature of the changes.
    Department's Position: We agree with KSC that the invoice/shipment 
date is the most appropriate date on which the material terms of sale 
(e.g., price, quantity, or material specification) is established. 
Therefore, for the final results, and consistent with the Preliminary 
Results, we determine that the invoice/shipment date best reflect the 
date on which the material terms of sale is established.
    As stated in the Preliminary Results, it is the Department's 
current practice normally to use the invoice date as the date of sale. 
See Preliminary Results, 64 FR at 44486. However, we may use a date 
other than the invoice date if we are satisfied that a different date 
better reflects the date on which the exporter or producer establishes 
the material terms of sale. See 19 CFR 351.401(i).
    At verification, we confirmed that KSC's and Kawahan's material 
terms of sale (e.g., price, quantity, or material specification) can 
and do change between the order or order confirmation date and the 
invoice date/shipment date. While we agree with petitioners that the 
percentage change figures provided by KSC in their questionnaire 
response submission of March 22, 1999, at pg. 6, are not instructive 
because they include changes which were non-material in nature, we 
agree with KSC that the Department verified that the material terms of 
sale can and do change after order confirmation date. Specifically, we 
note that the information obtained at verification, including specific 
information gathered for ten HM verification sales trace exhibits, 
supports KSC's record statements that material terms of sale can and do 
change. Based on our examination of this information, we believe that 
KSC's invoice/shipment date is the most appropriate date to use as the 
date of sale. Because the results of our analysis contain proprietary 
information, see Final Analysis Memo for KSC.
    Comment 9: KSC claims that the Department's decision, in the 
Preliminary Results, to excuse KSC from reporting certain downstream 
sales is consistent with its regulations and practice, and requests 
that the Department affirm its decision in the final results, citing, 
e.g., Extruded Rubber Thread From Malaysia, 57 FR 38465, 38468 (August 
25, 1992) (Final Determination) (where, in an antidumping 
investigation, the Department stated that it does not need to 
investigate each and every U.S. sale); and Notice of Final 
Determination of Sales at Less Than Fair Value: Bicycles From the 
People's Republic of China, 61 FR 19026, 19041 (April 30, 1996) (where, 
in an antidumping investigation, the Department stated that it is not 
required to examine every sale).
    KSC notes that the Department does not normally require the 
reporting of downstream sales if total sales of the foreign like 
product by a firm to all affiliated customers account for five percent 
or less of the firm's total sales of the foreign like product. 
Additionally, KSC notes that the Department stated, in the Preliminary 
Results, that imposing the burden of reporting small numbers of 
downstream sales often is not warranted, and that the accuracy of 
determinations generally is not compromised by the absence of such 
sales.
    KSC argues that in a factually similar case, the Department did not 
require the reporting of an affiliate's downstream sales where such 
reporting would represent a significant or impossible burden, citing 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden, 
and the United Kingdom; Final Results of Antidumping Duty 
Administrative Reviews (``Antifriction Bearings''), 63 FR 33320, 33341 
(June 18, 1998) (where, KSC argues, the Department stated that the 
respondent attempted to obtain affiliated downstream sales but was 
unable to because the affiliates were small companies with 
unsophisticated computer systems that do not permit them to retain the 
sales data required by the Department).
    KSC notes that the Department has excused respondents from 
reporting downstream sales because of the burden of reporting these 
sales relative to the potential utility of the sales, citing, e.g., 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
From Korea: Preliminary Results of Antidumping Duty Administrative 
Reviews, 62 FR 47422, 47424 (September 9, 1997); Certain Cold-Rolled 
Carbon Steel Flat Products From Germany; Preliminary Results of 
Antidumping Duty Administrative

[[Page 8947]]

Review, 60 FR 39355, 39356 (August 2, 1995); and Certain Cut-to-Length 
Carbon Steel Plate From Brazil: Preliminary Results of Antidumping Duty 
Administrative Review, 62 FR 47436, 47437 (September 9, 1997).
    In this case, KSC argues that it acted to the best of its ability 
to report downstream sales by Kawasho's affiliates and reported such 
sales where possible. KSC argues that due to limitations in the record-
keeping maintained by most of Kawasho's affiliates, which were noted 
several times in its response, KSC could not report sales by most 
Kawasho affiliates. KSC argues that, at verification, the Department 
compared Kawasho's sales invoices to its affiliates with the invoices 
from the affiliates' downstream sales, and notes that it was impossible 
to link the two together, citing the Department's Sales Verification 
Report, dated August 6, 1999, at pp. 12-13. KSC argues that, as stated 
in its response, because it is unable to trace the downstream sales to 
the original coil, it is impossible to report these sales in the form 
needed by the Department.
    KSC additionally asserts that, at verification, the Department was 
unable to link sales by certain Kawahan affiliates to its downstream 
customers because there was not enough product characteristic 
information. KSC noted that, at verification, the Department examined 
documentation which KSC claims demonstrates that another of Kawahan's 
affiliates was unwilling to provide downstream sales information.
    In conclusion, KSC argues that, based on verified evidence on the 
record demonstrating the impossibility of reporting downstream sales by 
certain affiliates, the Department must continue to excuse KSC and 
Kawahan from reporting such downstream sales.
    Petitioners argue that KSC misunderstands the Department's 
reporting requirements in concentrating on the fact that KSC was unable 
to trace or link the affiliate's downstream sale to the original coil 
sold by KSC to the affiliate. Petitioners argue that the only 
Departmental requirement is that the producer of the merchandise sold 
downstream be the same producer whose sales are under review, citing 
section 771(16) of the Act. Petitioners note that the Department's 
questionnaire required KSC to report the sales from the affiliated 
resellers to the unaffiliated customers. Thus, petitioners argue that 
when an affiliated entity of the producer resells the subject 
merchandise, all resales of this producer's merchandise must be 
reported. Petitioners argue that there is no requirement that the 
resale be limited to sales by that producer to the affiliate.
    Petitioners assert that it is irrelevant that KSC was unable to 
link certain downstream resales to the original coil, and that the 
Department has never required this linkage as a requirement to report 
these downstream sales. Petitioners argue that this is not a legitimate 
basis for failing to report certain downstream sales. In conclusion, 
petitioners argue that a respondent must report its affiliate's resales 
of its merchandise to unaffiliated parties during the relevant period 
to the fullest extent possible.
    Department's Position: We agree with KSC that it was appropriate to 
excuse KSC from reporting certain downstream sales. The Department's 
questionnaire requires the reporting of sales from affiliated resellers 
to unaffiliated customers, unless the respondent's sales to all 
affiliated customers constitute less than five percent of the 
respondent's total sales in the home or third-country markets, or if 
the respondent is unable to collect information on such resales, in 
which case the respondent is instructed to notify the official in 
charge in writing. See the Department's questionnaire, dated September 
30, 1998, pg. G-6; see also 19 C.F.R. section 351.403(d). In this case, 
we believe that the verified facts of the case do not support 
petitioners' assertion that KSC can report affiliated resales of KSC- 
and Kawahan-produced subject merchandise.
    As stated in our Preliminary Results, in certain instances, KSC and 
Kawahan sell to an affiliate, Kawasho, which then sells the product to 
affiliated processors/distributors who further process the subject 
merchandise and sell it back to Kawasho. See Preliminary Results, 64 FR 
at 44487. The Department noted in the Preliminary Results that the 
verification results were consistent with KSC's claim that most of 
Kawasho's affiliated processors/distributors do not maintain the 
information necessary to report these downstream sales by Kawasho to 
the Department. Id. Thus, record evidence supports KSC's claim that it 
was unable to report certain Kawasho downstream sales of KSC- and 
Kawahan-produced merchandise to non-affiliates. Specifically, neither 
KSC nor its affiliates were able to determine (through, e.g., 
identifying information such as Kawasho's invoice number or specific 
product characteristics) which Kawasho sales of subject merchandise 
were originally produced by KSC and/or Kawahan, as opposed to other 
producers.
    In addition, as noted in the Preliminary Results, one of Kawahan's 
affiliated customers refused to provide its downstream sales data, 
despite Kawahan's request. Thus, because this affiliate refused to 
cooperate, despite Kawahan's attempt to collect this sales data (which 
the Department reviewed at verification, as noted in the Department's 
Sales Verification Report, dated August 6, 1999, at p. 11), we conclude 
that there is no evidence to contradict KSC's claim that it acted to 
the best of its ability to report this affiliates' downstream sales, 
despite its failure to report these sales.
    Petitioners do not contest the above facts. Instead, they argue 
that these facts are irrelevant to the issue. We disagree. A respondent 
must be able to identify sales of subject merchandise it produced in 
order to accurately fulfill its reporting requirements. In this regard, 
section 771(16)(A) of the Act requires identification of: ``The subject 
merchandise* * * which * * *was produced in the same country by the 
same person.'' In this case, it would be improper for KSC to report all 
of Kawasho's downstream sales of the merchandise under review, because 
Kawasho sells subject merchandise from producers other than KSC and 
Kawahan. Therefore, in order to be able to properly identify sales of 
KSC's merchandise, Kawasho would have to be able to tie, though 
identifying information, such as an order confirmation number, its 
downstream sales back to KSC's or Kawahan's sale to Kawasho. Yet in 
this regard, KSC was unable to link certain resales to the original 
coil that it sold to the affiliate.
    Thus, based on the above information and in accordance with past 
practice, we believe that it would not be appropriate to penalize KSC 
for its inability to report a certain portion of its (downstream) home 
market sales database, because we determine that, in the instant case, 
reporting these sales would represent an undue burden. See, e.g., 
Antifriction Bearings, 63 FR at 33341 (where the Department excused a 
respondent from reporting downstream sales information from its 
affiliates and accepted respondent's sales data to affiliates in lieu 
of sales by respondent's affiliates because its affiliates were small 
companies with unsophisticated computer systems which do not permit 
them to retain the sales data required by the Department).
    With regard to the affiliated company which refused to provide the 
sales information, we note that the Department has stated, in the 
Preamble, that ``in instances where a respondent does not report 
downstream sales, the

[[Page 8948]]

Department will consider the nature of the affiliation in deciding how 
to apply facts available.'' See Preamble, 62 FR at 27356. As noted 
above, KSC attempted unsuccessfully to obtain the downstream sales 
information from this company. Given the level of affiliation (see 
KSC's October 28, 1998, Section A Questionnaire Response, Exhibit 14, 
which is proprietary information), we find that it is appropriate to 
simply disregard the downstream sales in question.

Final Results of Review

    As a result of our review, we determine that the following 
weighted-average dumping margin exists for the period June 30, 1997, 
through July 1, 1998:

 
------------------------------------------------------------------------
                                                                Margin
                   Manufacturer/Exporter                      (percent)
------------------------------------------------------------------------
Nippon Steel Corporation...................................         2.47
Kawasaki Steel Corporation.................................         1.61
------------------------------------------------------------------------

    The Department will determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. We will 
calculate importer-specific duty assessment rates on a unit value per 
metric ton basis. To calculate the per metric ton unit value for 
assessment, we sum the dumping margins on U.S. sales, and then divide 
this sum by the total metric tons of all U.S. sales examined. The 
Department will issue appraisement instructions directly to the Customs 
Service.
    Furthermore, the following cash deposit requirements will be 
effective upon publication of these final results for all shipments of 
the subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the publication date of these final results of 
administrative review, as provided by section 751(a)(1) of the Act: (1) 
The cash deposit rate for the reviewed companies will be the rate 
listed above (except that if the rate for a particular product is de 
minimis, i.e., less than 0.5 percent, a cash deposit rate of zero will 
be required for that company); (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 this review, a prior review, or 
the original less than fair value (``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) 
the cash deposit rate for all other manufacturers or exporters will 
continue to be the ``all others'' rate of 36.41 percent, which is the 
all others rate established in the LTFV investigation. These deposit 
requirements, when imposed, shall remain in effect until publication of 
the final results of the next administrative review.

Notification of Interested Parties

    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 351.402(f)(2) 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 result in the Secretary's presumption that 
reimbursement of the 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 (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 351.305, that continues to govern 
business proprietary information in this segment of the proceeding. 
Timely written notification of the return/destruction of APO materials 
or conversion to judicial protective order is hereby requested. Failure 
to comply with the regulations and the terms of an APO is a 
sanctionable violation.
    This determination is issued and published in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: February 14, 2000.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 00-4250 Filed 2-22-00; 8:45 am]
BILLING CODE 3510-DS-P