[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73215-73234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33235]
[[Page 73215]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-847]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-To-Length Carbon-Quality Steel Plate Products from Japan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 29, 1999.
FOR FURTHER INFORMATION CONTACT: Mark Manning or Nithya Nagarajan,
Office 4, Group II, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-3936 or (202) 482-5253, respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act (``URAA''). In addition, unless
otherwise indicated, all references made are to the Department's
regulations codified at 19 CFR Part 351 (1998).
Final Determination
We determine that certain cut-to-length carbon-quality steel plate
products (``CTL plate'') from Japan are being, or are likely to be,
sold in the United States at less than fair value (``LTFV''), as
provided in section 733 of the Act. The estimated margins of sales at
LTFV are shown in the ``Continuation of Suspension of Liquidation''
section of this notice.
Case History
Since the publication of the preliminary determination in this
investigation (Notice of Preliminary Determination of Antidumping
Investigation: Certain Cut-To-Length Carbon-Quality Steel Plate from
Japan, 64 FR 41218 (July 29, 1999) (``Preliminary Determination''), the
following events have occurred:
In September 1999, the Department of Commerce (``the Department'')
conducted verification of Kawasaki Steel Corporation (``KSC''), the
sole participating respondent in the instant investigation. On October
21, 1999, we issued our cost verification report for KSC, and on
October 26, 1999, we issued our sales verification report. Public
versions of our report of the results of the cost and sales
verifications are on file in the Central Records Unit (``CRU'') located
in room B-099 of the main Department of Commerce building, under the
appropriate case number. Petitioners 1 and respondent
submitted case briefs on November 5, 1999, and rebuttal briefs on
November 10, 1999. On November 12, 1999, the Department held a public
hearing concerning this investigation.
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\1\ The petitioners are Bethlehem Steel Corporation, Gulf States
Steel, Inc., IPSCO Steel Inc., Tuscaloosa Steel Corporation, the
United Steelworkers of America, and the U.S. Steel Group (a unit of
USX Corporation).
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Facts Available
1. Application of Facts Available
Section 776(a)(2) of the Act provides that ``if an interested party
or any other person--(A) withholds information that has been requested
by the administering authority; (B) fails to provide such information
by the deadlines for the submission of the information or in the form
and manner requested, subject to subsections (c)(1) and (e) of section
782; (C) significantly impedes a proceeding under this title; or (D)
provides such information but the information cannot be verified as
provided in section 782(i), the administering authority * * * shall,
subject to section 782(d), use the facts otherwise available in
reaching the applicable determination under this title.''
Section 782(d) of the Act provides that, if the Department
determines that a response to a request for information does not comply
with the request, the Department will inform the person submitting the
response of the nature of the deficiency and shall, to the extent
practicable, provide that person the opportunity to remedy or explain
the deficiency.
Pursuant to section 782(e) of the Act, notwithstanding the
Department's determination that the submitted information is
``deficient'' under section 782(d) of the Act, the Department shall not
decline to consider such information if all of the following
requirements are satisfied: (1) the information is submitted by the
established deadline; (2) the information can be verified; (3) the
information is not so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination; (4) the interested
party has demonstrated that it acted to the best of its ability; and
(5) the information can be used without undue difficulties.
2. Selection of Facts Available
In selecting from among the facts otherwise available, section
776(b) of the Act authorizes the Department to use an adverse inference
if the Department finds that an interested party failed to cooperate by
not acting to the best of its ability to comply with the request for
information. See, e.g., Certain Welded Carbon Steel Pipes and Tubes
From Thailand: Final Results of Antidumping Duty Administrative Review,
62 FR 53808, 53819-20 (October 16, 1997).
Kobe Steel, Ltd. (``Kobe''), Nippon Steel Corporation (``Nippon''),
NKK Corporation (``NKK''), and Sumitomo Metal Industries, Ltd.
(``Sumitomo'') all declined to respond to the Department's antidumping
questionnaire. Because these respondents have withheld requested
information, we determine that it is appropriate to use facts
available, in accordance with section 776(a)(2)(A) and (C) of the Act.
We have also determined that because these respondents failed to
respond to our questionnaire, they have not cooperated to the best of
their abilities. Therefore, pursuant to section 776(b) of the Act, we
used an adverse inference in selecting a margin from the facts
available. As facts available, the Department has applied a margin rate
of 59.12 percent, the highest alleged margin in the petition.
3. Corroboration of Information Used as Facts Available
Section 776(c) of the Act provides that where the Department
selects from among the facts otherwise available and relies on
``secondary information,'' such as the petition, the Department shall,
to the extent practicable, corroborate that information from
independent sources reasonably at the Department's disposal. The
Statement of Administrative Action accompanying the URAA, H.R. Doc. No.
103-316 (1994) (hereinafter, the ``SAA'') states that ``corroborate''
means to determine that the information used has probative value. See
SAA at 870.
In this proceeding, we considered the petition information the most
appropriate record information to use to establish the dumping margins
for these uncooperative respondents. In accordance with section 776(c)
of the Act, we sought to corroborate the data contained in the
petition. We reviewed the adequacy and accuracy of the information in
the petition during our pre-initiation analysis of the petition, to the
extent appropriate information was available for this purpose (e.g.,
import statistics and foreign market research reports). See Initiation
of Antidumping Duty Investigations: Certain Cut-To-
[[Page 73216]]
Length Carbon-Quality Steel Plate From the Czech Republic, France,
India, Indonesia, Italy, Japan, the Republic of Korea, and the Former
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999)
(``Initiation Notice'').
Moreover, for purposes of the preliminary determination, we
corroborated the information in the petition. In this regard, we
reexamined the export price and CV data which formed the basis for the
highest margin in the petition in light of information obtained during
the investigation and, to the extent practicable, found that it has
probative value (see the July 19, 1999, memorandum to the file
regarding Corroboration of the Petition Data, on file in the CRU).
Since the preliminary determination, we received no new information
which would call into question the use of petition information as facts
available or our corroboration analysis.
Scope of Investigation
The products covered by the scope of this investigation are certain
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or
actual thickness of not less than 4 mm, which are cut-to-length (not in
coils) and without patterns in relief), of iron or non-alloy-quality
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual
thickness of 4.75 mm or more and of a width which exceeds 150 mm and
measures at least twice the thickness, and which are cut-to-length (not
in coils). Steel products to be included in this scope are of
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is
achieved subsequent to the rolling process (i.e., products which have
been ``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum. Steel products to be included in
this scope, regardless of Harmonized Tariff Schedule of the United
States (HTSUS) definitions, are products in which: (1) Iron
predominates, by weight, over each of the other contained elements, (2)
the carbon content is two percent or less, by weight, and (3) none of
the elements listed below is equal to or exceeds the quantity, by
weight, respectively indicated: 1.80 percent of manganese, or 1.50
percent of silicon, or 1.00 percent of copper, or 0.50 percent of
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent
zirconium. All products that meet the written physical description, and
in which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
The merchandise subject to these investigations is classified in
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.
Period of Investigation
The period of investigation (``POI'') is January 1, 1998, through
December 31, 1998.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by KSC covered by the description in the ``Scope of
Investigation'' section, above, and sold in Japan during the POI to be
foreign like products for purposes of determining appropriate product
comparisons to U.S. sales. We compared U.S. sales to sales made in the
home market, where appropriate. Where there were no sales of identical
merchandise in the home market made in the ordinary course of trade to
compare to U.S. sales, we compared U.S. sales to sales of the most
similar foreign like product made in the ordinary course of trade. In
making the product comparisons, we matched foreign like products based
on the physical characteristics reported by the respondents in the
following order of importance (which are identified in Appendix V of
the questionnaire): painting, quality, grade specification, heat
treatment, nominal thickness, nominal width, patterns in relief, and
descaling. In accordance with section 771(16)(B) of the Act, these
physical characteristics reflect differences in the uses and value of
the subject merchandise.
Because KSC had no sales of non-prime merchandise in the United
States during the POI, we did not use home market sales of non-prime
merchandise in our product comparisons (see, e.g., Final Determination
of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Sweden,
63 FR 40449, 40450 (July 29, 1998) (``SSWR'').
Verification
As provided in section 782(i) of the Act, we verified all
information determined to be acceptable for use in making our final
determination, in accordance with standard verification procedures.
Changes From the Department's Preliminary Determination
Based on our analysis of the comments received, we have made
certain changes for the final determination. Where applicable, these
changes are discussed in the relevant sections of the party comments
below. Specifically, we revised the following cost items to reflect
certain adjustments arising from information obtained during
verification: (1) KSC's interest expense ratio, and (2) KSC's G&A
expense ratio. See Memorandum to the File, ``Verification of the Cost
Responses of Kawasaki Steel Corporation, in the Antidumping Duty
Investigation of Certain Cut-To-Length Carbon-Quality Steel Products
from Japan,'' dated October 21, 1999 (``Cost Verification Report''). In
addition, we have made the following changes to items concerning
[[Page 73217]]
KSC's home market and U.S. sales: (1) revised KSC's constructed export
price calculation to include the operating expenses of its U.S.
affiliate, Kawasaki Steel (America) Inc. (``KSCUSA''), (2) changed the
application of the arm's-length test of KSC's home market sales from a
point-of-delivery basis to a customer-specific basis, (3) granted KSC
the CEP offset, (4) used the yen price as the starting price for KSC's
export price transactions, (5) included three unreported U.S. sales
disclosed at verification in our margin calculations, (6) recalculated
Kawasho's home market credit expense to account for inconsistencies
found during verification regarding Kawasho's reported dates of
payment, (7) adjusted Kawasho International (USA)'s (``KI's'') short-
term interest rate to account for additional interest expenses found
during verification, (8) corrected a clerical error in the programming
for the preliminary determination that understated Kawasho's home
market short-term interest rate, (9) corrected Kawasho's warehousing
expenses to account for a clerical error disclosed during verification,
and (10) corrected the gross unit price on two U.S. sales by KI to
account for a clerical error disclosed at verification. For further
details concerning the changes listed above, see Memorandum to the
File, ``Calculation Memorandum of the Final Determination for the
Investigation of Kawasaki Steel Corporation,'' dated December 13, 1999
(``Final Determination Calculation Memo'').
Throughout the investigation, KSC argued that its U.S. affiliate,
KSCUSA, is a liaison office that provides certain after-sales services
to the customers of KSC's customers. According to KSC, KSCUSA provides
legal, financial, and accounting support to KSC's other U.S. subsidiary
companies; assists KSC with public relations in the Americas;
coordinates and receives U.S. business visits from KSC officials;
informs KSC of political, economic, social, and business conditions in
the United States; and provides warranty/complaint and technical
services to U.S. end-users of KSC steel products, including subject
merchandise. See KSC's June 23, 1999, supplemental Section A response
at A-9 and KSC's July 22, 1999, second supplemental Section A response
at 10-15.
KSC states that KSCUSA is not involved in the sale of subject
merchandise, but supports sales of KSC's entire line of steel products
in North, South, and Central America. With respect to CTL plate sales,
KSC states that KSCUSA's role in providing after-sale services involves
providing technical services, handling warranty claims, and processing
complaints by U.S. end-users. However, KSC states that there were no
such warranty claims/complaints on subject CTL plate sales during the
POI. See KSC's July 22, 1999, second supplemental Section A response at
10-15.
Although KSC argues that there were no warranty claims or
complaints filed against CTL plate by U.S. end-users during the POI,
this does not diminish the fact that KSCUSA was still operating and
incurring costs (e.g., salaries, rent) to maintain the personnel and
corporate infrastructure necessary to handle such complaints, in the
event any are filed. For this reason, we find that KSCUSA's expenses
should be included in the calculation of constructed export price
(``CEP''). Since the costs incurred by KSCUSA are not specific to CTL
plate, but rather apply to all of KSC's steel products, we consider
these expenses to be indirect selling expenses. Because of the limited
information on the record concerning KSCUSA's expenses, the most
reasonable method for including these costs in KSC's CEP calculation is
to calculate a ratio of KSCUSA's operating expenses over KSC's total
sales in North, South, and Central America. In our calculations, we
multiplied this ratio against KSC's gross unit price for CEP sales, and
added the result to U.S. indirect selling expenses.
Interested Party Comments
Home Market and U.S. Sales
Comment 1: Date of Sale
Petitioners argue that section 351.401(i) of Department's
regulations allows it to use ``a date other than the date of invoice if
the Secretary is satisfied that a different date better reflects the
date on which the exporter or producer establishes the material terms
of sale.'' Petitioners argue that the documents and information
obtained at verification support the conclusion that the material terms
of sale are set on the order confirmation date and therefore the order
confirmation date is the appropriate date of sale for this
investigation.
Petitioners observe that when KSC revises an order confirmation,
its internal records do not identify the type of revision causing the
revised order confirmation to be issued. Petitioners argue that
although KSC provided evidence that some changes occurred between the
order confirmation and invoice date for a portion of its sales,
petitioners state that KSC is unable to identify whether these changes
were material or not. Petitioners observe that the Department stated in
its verification report that ``neither of these methods of analysis
reflects the type of revision that occurred or, in the case where
multiple revisions occurred for a single order confirmation, the total
number of revisions for that order.'' See Memorandum to the File,
``Verification of the Sales Responses of Kawasaki Steel Corporation,
and its Affiliated Companies, in the antidumping Duty Investigation of
Certain Cut-To-Length Carbon-Quality Steel Products from Japan,'' dated
October 26, 1999, (``Sales Verification Report''), at 29. Petitioners
conclude that there is no record evidence of the number of sales in
which there were material changes to the terms of sale after order
confirmation. Furthermore, petitioners note that although a portion of
KSC's sales incurred post-order changes, the majority of KSC's sales
had no changes of any kind after order confirmation. Therefore, in the
absence of record evidence indicating that the material terms of sale
were modified after order confirmation date, the Department must use
order confirmation date as the date of sale. Petitioners cite to Notice
of Preliminary Determination of Sales at Less Than Fair Value: Hot-
Rolled Flat-Rolled Carbon-Quality Steel Products From the Russian
Federation, 63 FR 9312, 9315 (February 25, 1999) (``Russian Hot-
Rolled''), where the Department stated that ``there is no evidence on
the record which indicates that, when no order amendment was provided,
the terms of sale for the merchandise shipped differed from the terms
of sale set in the order specification.'' Petitioners argue that in
that case the Department preliminarily determined that it was
appropriate to use the ``order specification date or order amendment,
if applicable, as the date of sale.'' Id. Petitioners conclude that the
Russian Hot-Rolled case illustrates that the Department will not adopt
the invoice date as the date of sale when there is no record evidence
to show modifications to the material terms of sale after the order
date.
Petitioners also argue that KSC's refusal to report sales based on
order confirmation warrants use of adverse facts available. Petitioners
note that the Department requested KSC to report all sales on the basis
order confirmation date rather than invoice date in its Supplemental
Section B Questionnaire. In its response, KSC stated that it ``will not
provide sales or cost information on an order confirmation date-
basis.'' See KSC's June 23, 1990 Section B Supplemental Questionnaire
Response, at 7. According to petitioners, this response indicates that
KSC has failed
[[Page 73218]]
to cooperate by not acting to the best of its ability to comply with a
request for information. Consequently, petitioners recommend that the
Department use as adverse facts available the highest margin alleged by
petitioners or the highest margin calculated for a single CONNUM,
whichever is higher.
Lastly, petitioners argue that even if the Department accepts the
invoice date as the date of sale, KSC's refusal to provide sales and
cost information on an order confirmation basis, as requested in the
Department's supplemental questionnaire, constitutes uncooperative
behavior. Petitioners note that section 776(a) of the Act states that
when ``an interested party or any other person--(A) withholds
information that has been requested by the [Department] * * * the
[Department] shall * * * use the facts otherwise available in reaching
the applicable determination under this subtitle.'' This provision of
the statute, petitioners claim, authorizes the Department to use the
highest margin alleged in the petition of this investigation, which,
according to petitioners, would be an appropriate response to KSC's
disregard for the Department's authority to request information.
Respondent argues that, in accordance with its rules and
established practice, the Department appropriately used KSC's invoice
date as the date of sale in the preliminary determination of this
investigation. KSC claims that section 351.401(i) of the Department's
regulations establishes a presumption that invoice date be used as the
date of sale, a rule which KSC argues the Department has consistently
applied in recent antidumping investigations. Specifically, respondent
cites Notice of Final Determination of Sales at Less Than Fair Value:
Hot-Rolled Carbon-Quality Steel Products from Japan, 64 FR 24329, 24334
(May 6, 1999) (``Hot-Rolled Steel from Japan''), and Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon
Steel Plate From Canada: Final Results of Antidumping Duty
Administrative Reviews and Determination To Revoke in Part, 64 FR 2173,
2178 (January 13, 1999), as evidence that the Department reaffirmed its
practice of using the invoice date as the proper date of sale when
terms of sale can change between order and invoice date.
According to KSC, the initial terms of sale are established with
the order confirmation. KSC states that the initial terms of sale can
and do change up to the invoice/shipment date. KSC notes that it
provided evidence that the terms of sale changed for a significant
portion of sales during the POI. KSC observes that the Department
verified the accuracy of this information and stated in its
verification report that ``[t]hroughout the course of this
verification, we encountered several revised order confirmations and
revised invoices'' and that ``[w]e found no discrepancies between the
documents we examined and the explanation of order confirmation and
invoice revisions KSC provided in its questionnaire responses.'' See
Sales Verification Report at 30.
KSC states that in two recent investigations on hot-rolled steel
products from Japan and stainless steel sheet and strip products from
Japan, and one administrative review covering corrosion-resistant steel
from Japan, the Department requested, and KSC provided, two complete
sales databases for both the home market and U.S. market. See Hot-
Rolled Steel from Japan; Notice of Final Determination of Sales at Less
Than Fair Value: Stainless Steel Sheet and Strip in Coils from Japan,
64 FR 30574, 30585 (June 8, 1999) (``Stainless Steel Sheet and Strip
from Japan''); and Certain Corrosion-Resistant Carbon Steel Flat
Products From Japan: Preliminary Results of Antidumping Duty
Administrative Review, 64 FR 4483 (August 16, 1999). For each
proceeding, KSC submitted one database compiled using order
confirmation dates and another database using invoice dates. KSC notes
that in all of these proceedings, the Department's purpose for
requesting the information was to determine the appropriate date of
sale. KSC argues that the Department verified the submitted information
and determined that invoice date is the appropriate date of sale in the
final determinations of each of these three proceedings.
Lastly, KSC argues that the invoice/shipment date is the correct
date of sale because KSC and its affiliates participating in this
investigation use invoice date as the date of sale in their books and
records. Consequently, KSC states that using invoice date as the date
of sale is consistent with its internal sources of documentation, makes
reporting such information easier, and thus, simplifies the
verification process.
Department's Position
We agree with respondent that invoice/shipment date is the correct
date of sale for all home market and U.S. sales of subject merchandise
for KSC in this investigation.
Under our current practice, as codified in the Department's
regulations at section 351.401(i), in identifying the date of sale of
the subject merchandise, the Department will normally use the date of
invoice, as recorded in the producer's records kept in the ordinary
course of business. See Certain Welded Carbon Steel Pipes and Tubes
from Thailand: Final Results of Administrative Review, 63 FR 55578,
55587 (October 16, 1998) (``Pipes and Tubes from Thailand''). However,
in some instances, it may not be appropriate to rely on the date of
invoice as the date of sale, because the evidence may indicate that the
material terms of sale were established on some date other than invoice
date. See Preamble to the Department's Final Regulations, 62 FR 27296
(May 17, 1997) (``Preamble''). Thus, despite the general presumption
that the invoice date constitutes the date of sale, the Department may
determine that this is not an appropriate date of sale where the
evidence of the respondent's selling practice points to a different
date on which the material terms of sale were set.
In this investigation, in response to the original questionnaire,
KSC reported invoice/shipment date as the date of sale in both the U.S.
and home markets. To ascertain whether KSC accurately reported the date
of sale, the Department requested in its May 28, 1999, Section B
supplemental questionnaire that KSC report all sales made by KSC
pursuant to orders with confirmation dates within the POI. In its June
23, 1999, supplemental response, KSC indicated that there were numerous
instances in which terms such as price and quantity changed subsequent
to the confirmation of the original orders in the U.S. and home
markets. In view of the Department's acceptance of KSC's invoice date
as the date of sale in previous cases, as well as the burden and
expense for responding to the Department's request, KSC did not
resubmit its sales or cost information on an order confirmation date-
basis. For purposes of our preliminary determination, we accepted the
date of invoice as the date of sale subject to verification. See
Preliminary Determination, 64 FR 41218.
At verification, we carefully examined KSC's selling practices. We
found that it records sales in its financial records by date of
invoice/shipment. For both the home and U.S. markets, we reviewed
several sales observations for which the material terms of sale (i.e.,
price and quantity) changed subsequent to the original order. Based on
respondent's representations, and as a result of our examination of the
company's selling records kept in the ordinary course of business, we
are satisfied that the date of invoice/shipment should be used as
[[Page 73219]]
the date of sale because it best reflects the date on which material
terms of sale were established for KSC's U.S. and home market sales.
We disagree with the petitioners' claim that order confirmation
date is the most appropriate date of sale for KSC's U.S. and home
market sales because the majority of KSC's sales required no change in
material terms subsequent of the issuance of the order confirmation.
The fact that terms often changed subsequent to the initial order
confirmation suggests that these terms remained subject to change
(whether or not they did change with respect to individual
transactions) until as late as the invoice date. For sales that we
reviewed, we found this to be true for material terms of sale such as
price and quantity.
The Department's decision in Russian Hot-Rolled to use the order
specification date as the date of sale for Magnitogorsk Iron & Steel
Works (``MMK''), a Russian steel producer, was based on the fact that
MMK stated that the terms of the sale are set in the order
specification. See Russian Hot-Rolled, 63 FR 9314 (``MMK also stated
that the date of the order specification would most likely be
considered by the Department to be the most appropriate date of sale,
because the terms of sale are set in the order specification''). Where
order specifications were amended, MMK identified the sales containing
such revisions and reported the date of the order amendment. Since
there was no evidence on the record of that case indicating that, when
no order amendment was provided, the terms of the sale for the
merchandise shipped differed from the terms of sale set in the order
specification, the Department accepted MMK's statement that the terms
of the sale are set in the order confirmation, or in the order
amendment. Furthermore, we note that in Russian Hot-Rolled, there was
no discussion regarding the possibility or frequency of changes between
the original order confirmation, any revised order confirmations, the
invoice, and changes subsequent to the invoice.
The facts of the instant case are distinguishable. In the instant
case, pursuant to our findings at verification, the Department
determines that there are changes between the order confirmation date
(i.e, the date of sale proposed by petitioner) and the invoice date
(i.e., the date of sale proposed by respondents). This fact
distinguishes the factual record in the current case from the
Department's decision in the Russian Hot-Rolled case. Therefore, in
accordance with our regulations and pursuant to our findings at
verification, we have determined that invoice date is the appropriate
date of sale for KSC's sales, as it most accurately represents the date
on which the material terms of sale are established. Because KSC
provided verifiable information establishing the proper date of sale,
we have not resorted to using facts available, as suggested by
petitioners.
Comment 2: Critical Circumstances
Respondent argues that the Department calculated a preliminary
dumping margin of 10.78 percent, which is well below the 25 percent
threshold used by the Department to impute knowledge of less than fair
value sales and injury when determining whether critical circumstances
exist. Furthermore, respondent states that its data shows that KSC did
not have ``massive imports'' within the meaning of the statute and
regulation because its shipments actually declined from the base period
to the comparison period. Consequently, respondent argues, the
Department's finding of critical circumstances is not in accordance
with law or supported by substantial record evidence. Lastly,
respondent states that the time frame used by the Department to
determine whether KSC had massive imports was wrong as a matter of law
because the Department has no authority to examine a period of time
that is disconnected with the date the petition was filed. Respondent
argues that the legislative history of the critical circumstances
provision indicates that Congress intended that the period of time
examined to determine whether massive imports exist be the time
following the filing of the petition compared to a prior period of
time. Moreover, respondent argues that the press articles relied upon
by the Department did not support the factual conclusion that KSC knew
about this investigation. Respondent states that those articles
contained general comments about the state of the U.S. steel industry,
and covered a similar period of time as the other investigations
against steel products conducted by the Department. Thus, respondent
concludes, the Department's initial affirmative critical circumstances
determination was unlawful.
Department's Position
For the reasons discussed below, we no longer find critical
circumstances with regard to KSC or the ``all others'' companies.
However, we continue to find critical circumstances for non-responding
companies (Kobe, Nippon, NKK, and Sumitomo).
Section 735(a)(3) of the Act provides that if critical
circumstances are alleged, the Department will determine whether:
(A)(i) There is a history of dumping and material injury by reason of
dumped imports in the United States or elsewhere of the subject
merchandise, or (ii) the person by whom, or for whose account, the
merchandise was imported knew or should have known that the exporter
was selling the subject merchandise at less than its fair value and
that there would be material injury by reason of such sales, and (B)
there have been massive imports of the subject merchandise over a
relatively short period.
With respect to section 735(a)(3)(A)(ii) of the Act, in determining
whether an importer knew or should have known that the exporter was
selling CTL plate at less than fair value and thereby causing material
injury, the Department normally considers margins of 25 percent or more
and a preliminary ITC determination of material injury sufficient to
impute knowledge of dumping and the resultant material injury. See
Certain Cut-To-Length Carbon Steel Plate from the People's Republic of
China, 62 FR 31972, 31978 (June 11, 1997).
Section 351.206(h)(1) of the Department's regulations provides
that, in determining whether imports of the subject merchandise have
been ``massive,'' the Department normally will examine: (i) The volume
and value of the imports; (ii) seasonal trends; and (iii) the share of
domestic consumption accounted for by the imports. In addition, section
351.206(h)(2) of the Department's regulations provides that an increase
in imports during the ``relatively short period'' of over 15 percent
may be considered ``massive.'' Section 351.206(i) of the Department's
regulations defines ``relatively short period'' normally as the period
beginning on the date the proceeding begins (i.e., the date the
petition is filed) and ending at least three months later.
1. KSC
With regard to KSC's imports, we find that there is no relevant
history of dumping with respect to subject merchandise (discussed in
the ``all others'' section below) and that the calculated margin is
below the 25 percent threshold for determining whether the importers
knew or should have known that the exporters were dumping the subject
merchandise. For these reasons we determine that the first criterion
under section 735(a)(3) of the Act has not been met and thus that
critical circumstances do not exist for imports of KSC-produced CTL
plate from Japan.
[[Page 73220]]
2. Kobe, Nippon, NKK, and Sumitomo
With respect to imports of subject merchandise sold by Nippon, NKK,
Kobe, and Sumitomo, we have determined the final margins for those
companies to be 59.12 percent (based on adverse facts available), which
exceeds the 25 percent threshold. Therefore, we determine there is a
reasonable basis to believe or suspect that importers knew or should
have known that Nippon, NKK, Kobe, and Sumitomo were dumping the
subject merchandise. Since the ITC, in this investigation, found a
reasonable indication of present material injury to the relevant U.S.
industry, the Department further determines that a reasonable basis
exists to impute importer knowledge that there was likely to be
material injury by reason of the dumped imports. ITC Preliminary
Determination, April 1999.
Since there is no verifiable information on the record with respect
to Nippon, NKK, Kobe, and Sumitomo's import volumes, we must use the
facts available in accordance with section 776(a) of the Act in
determining whether there were massive imports of merchandise produced
by these companies. With regard to aggregate import statistics, these
data do not permit the Department to ascertain the import volumes for
any individual company that failed to provide verifiable information.
Nor do these data reasonably preclude an increase in shipments of 15
percent or more within a relatively short period for any of these
companies. As a result, in accordance with section 776(b) of the Act,
we have used an adverse inference in applying facts available, and
determine that there were massive imports from Nippon, NKK, Kobe, and
Sumitomo over a relatively short period. See Critical Circumstances
Preliminary Determination Memo, Attachment II. Because both of the
necessary criteria have been met, in accordance with section 735(a)(3)
of the Act, the Department finds that critical circumstances exist with
respect to CTL plate products imported from Nippon, NKK, Kobe, and
Sumitomo.
3. ``All Others''--It is the Department's normal practice to
conduct its critical circumstances analysis of companies in the ``all
others'' group based on the experience of investigated companies. See
Notice of Final Determination of Sales at Less Than Fair Value: Certain
Steel Concrete Reinforcing Bars from Turkey (``Rebars from Turkey''),
62 FR 9737, 9741 (March 4, 1997) (the Department found that critical
circumstances existed for the majority of the companies investigated,
and therefore concluded that critical circumstances also existed for
companies covered by the ``all others'' rate). However, the Department
does not automatically extend an affirmative critical circumstances
determination to companies covered by the ``all others'' rate. See
Stainless Steel Sheet and Strip from Japan. Instead, the Department
considers the traditional critical circumstances criteria with respect
to the companies covered by the ``all others'' rate.
In the preliminary critical circumstances determination of this
investigation, we concluded that there is a reasonable basis to believe
or suspect that critical circumstances exist for imports plate from
Japan. In that preliminary determination, we satisfied section
735(a)(3)(A) of the Act through finding a history of dumping in
conjunction with a determination that importers had knowledge of
dumping. Specifically, we based our decision that there is a history of
dumping on the existence of a dumping finding on carbon steel plate
from Japan (43 FR 22937) (May 30, 1978), which was revoked based on
changed circumstances on April 17, 1986 (51 FR 13039), and found that
importers had knowledge of dumping by relying upon the alleged dumping
rates contained in the petition, which were in excess of the 25 percent
threshold. For our final critical circumstances determination, however,
we find that there is no longer knowledge of dumping with respect to
the ``all others'' category for purposes of satisfying 735(a)(3)(A).
In determining knowledge of dumping, we look to the ``all others''
rate, which is based on the weighted-average rate of all investigated
companies. In this case, such a weighted-average rate must, of
necessity, be based on the individual rate of KSC, the only
investigated company that did not receive adverse facts available in
this investigation. KSC's rate, applied to the ``all others,'' is 10.78
percent. This rate is not high enough to impute knowledge of dumping to
the ``all others'' category. Furthermore, with respect to the history
of dumping criterion, we conclude that the prior dumping finding on
carbon steel plate from Japan does not reflect a relevant history of
dumping for purposes of section 735(a)(3)(A). Specifically, the age of
a previous dumping finding is taken into consideration in our
determination of whether there exists a history of dumping. See Notice
of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of the Final Determination: Certain Polyester Staple Fiber
From the Republic of Korea, 64 FR 60776, 60778-79 (November 8, 1999)
(where the Department stated that ``[b]ased on the recent existence of
this order, there is sufficient evidence to determine that there is a
history of dumping of the subject merchandise and a history of material
injury as a result thereof''). Due to the fact that the dumping finding
on carbon steel plate from Japan is twenty-one years old and was
revoked thirteen years ago, we no longer consider there to be a
relevant history of dumping with respect to subject merchandise. Since
we determined above that importers did not have knowledge of dumping of
subject merchandise, we find that section 733(e)(1)(A) of the Act has
not been satisfied.
Because we find that there is no relevant history of dumping and
that there is no evidence on the record of this investigation to
support a finding that the ``all others'' companies had knowledge of
dumping, the Department finds that critical circumstances do not exist
for the ``all others'' category in this investigation.
Comment 3: Level of Trade
Respondent argues that the Department ignored record evidence and
violated its established policies and regulations by grouping all three
home market CTL plate sales distribution channels into a single level
of trade (``LOT''). According to respondent, its home market is divided
into three channels of distribution: (1) Sales to unaffiliated trading
companies, (2) sales to unaffiliated end-users, and (3) sales to the
affiliated trading company Kawasho Corporation (``Kawasho'').
Respondent notes that in its Preliminary Determination, the Department
incorrectly grouped the three channels into one home market LOT.
According to respondent, there are actually two distinct LOTs in the
home market: LOT 1, which consists of direct sales by KSC to
unaffiliated trading companies and end-users (channels 1 and 2); and
LOT 2, which consists of KSC's sales through its affiliated trading
company Kawasho (channel 3). The respondent argues that each LOT
involves significantly different selling activities which occur at
different stages in the marketing process.
With regard to selling activities, respondent states that in LOT 1,
KSC deals directly with its unaffiliated trading company and end-user
customers, provides technical advice, negotiates price, manages credit
risks, processes orders, enters relevant information into the
specification control system, and makes freight and
[[Page 73221]]
delivery and/or warehousing arrangements when necessary. In LOT 2,
respondent states that Kawasho markets the product to its customers,
forecasts demand, negotiates price, manages credit risks, processes
orders, enters relevant information into the specification control
system, makes freight and delivery arrangements, and maintains direct
customer contact. Furthermore, respondent states that although KSC
performed some common manufacturer-related selling activities (e.g.,
confirming the order once production was agreed, warranty and rebate
administration, and product brochures) for all three channels of
distribution, this minor overlap of services does not control the
analysis.
In regard to marketing stages, respondent states that KSC's sales
directly to unaffiliated trading companies and end-users (channels 1
and 2) involve one stage in the marketing process (KSC to customer),
while KSC's sales through Kawasho involve a different stage in the
marketing process (KSC to affiliated trading company to customer).
Respondent argues that the reported sales by Kawasho, just like sales
by any other trading company, are a full level of distribution removed
from KSC's direct sales. Respondent concludes that sales through LOT 1
(channels 1 and 2) are at a less-advanced stage in the marketing
process than are Kawasho's sales.
Respondent also argues that, in the recent Hot-Rolled Steel from
Japan investigation, the Department found that KSC had two home market
LOTs: LOT 1, which contained sales directly to unaffiliated trading
companies and end-users; and LOT 2, which contained downstream sales
through Kawasho.
Petitioners argue that the Department should reject KSC's claim
that there exist two LOTs in the home market. Petitioners argue that
the record indicates that KSC performed virtually the same selling
functions for its direct channel one sales to unaffiliated trading
companies as it does for its channel three sales to unaffiliated end-
users through Kawasho. According to petitioners, KSC's supplemental
Section A response identified eleven selling functions performed in its
channel three home market sales. Petitioners contend that the record
indicates that KSC provided eight of these eleven selling functions for
its channel one sales. Moreover, petitioners argue that of the eight
selling functions KSC provides for its channel one sales, it provides
seven of these functions in channel three sales. Petitioners state that
the only difference is sales processing, which is performed by KSC in
channel one sales and Kawasho in channel three sales. Petitioners also
argue that KSC provides nearly the same level of services for both
channels. According to petitioners, KSC provides exactly the same level
of service for technical advice, warranty, warehousing, rebate
administration, advertising, and freight and delivery services in its
channel one and channel three sales. Petitioners state that the only
difference between the two channels is in performing the specification
control system, where KSC's role is ``high'' for channel one sales, but
``low'' for channel three sales.
Lastly, petitioners argue that when comparing the sales activities
performed for a company's direct sales with those performed for its
downstream sales, the Department looks to the combined sales activities
of the company and its affiliated reseller. Therefore, petitioners
contend that channel three sales should be placed in a separate LOT
from channel one and two sales only if the sales services performed for
those channel three customers were substantially different, regardless
of whether it was KSC or Kawasho which performed the selling functions.
Petitioners conclude that there is no evidence on the record of this
proceeding to make such a determination.
Department's Position
We do not agree that KSC's home market sales are made at two
distinct LOTs. In accordance with section 773(a)(1)(B)(i) of the Act,
to the extent practicable, we determine normal value (``NV'') based on
sales in the comparison market at the same LOT as the export price
(``EP'') or CEP transaction. The NV LOT is that of the starting price
sales in the comparison market or, when NV is based on constructed
value (``CV''), that of the sales from which we derive selling,
general, and administrative (``SG&A'') expenses and profit.
To determine the LOT of a company's sales (whether in the home
market or in the U.S. market), we examine stages in the marketing
process and selling functions along the chain of distribution between
the producer and the unaffiliated customer. See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997)
(``CTL Plate from South Africa'').
KSC sells subject merchandise in the home market through three
channels of distribution: channel one involves sales by KSC to
unaffiliated trading companies, channel two involves sales by KSC to
unaffiliated end-users, and channel three involves sales by KSC's
affiliate, Kawasho, to unaffiliated customers. For the preliminary
determination, the Department found that KSC's sales to these three
types of home market customers involved essentially the same level of
selling functions. After a careful analysis of the information on the
record, we continue to find that there was not a substantial difference
in the selling functions performed by KSC in making sales to its
unaffiliated customers and the combined selling functions performed by
KSC and its affiliated company, Kawasho, for Kawasho's sales to
unaffiliated customers. Therefore, we continue to find that there is
one LOT in the home market.
In its discussion of LOT, KSC collapsed home market channels of
distribution one and two into a single channel of distribution because
its sales to unaffiliated customers, regardless of whether the customer
is a trading company or end-user, involve the same selling functions.
According to KSC, there are substantial differences in the selling
activities performed by KSC for sales through this combined channel of
distribution, hereafter referred to as channel 1, and its sales through
channel 3 (i.e., sales by Kawasho to unaffiliated customers).
In the preliminary determination, we conducted our analysis of LOT
by comparing the selling functions performed for sales in the home
market to the first unaffiliated customer. According to Exhibit 7 of
its June 23, 1999, supplemental Section A response, KSC indicated that
it provides the following selling activities for its sales to
unaffiliated customers: technical advice, warranty services,
advertising, freight and delivery arrangements, warehousing, inputting
specification control system, sales processing, and rebate
administration. KSC also indicated that the selling functions performed
by itself and Kawasho, for Kawasho's sales to unaffiliated customers,
consist of the following activities: technical advice, warranty
services, advertising, marketing, freight and delivery arrangements,
warehousing, inputting specification control system, sales processing,
rebate administration, and demand forecasting. Comparing the selling
functions performed for the first unaffiliated customer in channel one
and channel three sales indicates that marketing services and demand
forecasting are the only two selling activities performed for channel
three sales that are not performed in channel one sales. Thus,
[[Page 73222]]
eight of the ten 2 selling functions are performed in both
channel one and channel three sales. Therefore, the information on the
record indicates that the types of selling functions and activities
performed by KSC on sales to unaffiliated customers as compared to the
types of selling functions and activities performed by both KSC and
Kawasho on sales to unaffiliated customers are not substantially
different. KSC's argument that there are differences between these
selling functions is not supported by the evidence on the record.
---------------------------------------------------------------------------
\2\ KSC actually reports eleven home market selling functions.
Since KSC reported that neither it nor its affiliates provide
inventory maintenance for sales through any channel of distribution,
in either the home or U.S. markets, we have disregarded this selling
function from our analysis.
---------------------------------------------------------------------------
With regard to the degree of selling functions provided in each
channel, we note that seven of the eight types of selling functions
provided in both channels are provided in the same amount for both
channel one and channel three sales. See KSC's June 23, 1999,
supplemental Section A response at Exhibit 7. The only selling function
provided for in different amounts is freight and delivery, which the
respondent provides in a ``medium'' amount for channel one sales and a
``high'' amount for channel three sales. Lastly, we note that of the
two selling functions provided for channel three sales, but not in
channel one sales (i.e., market services and demand forecasting), are
provided for in a ``high'' level. Therefore, although there is a
difference in the amount of market services, demand forecasting, and
freight and delivery activities between channel one and channel there
sales, we do not consider these differences to be substantial enough as
to warrant finding two different LOTs on this basis alone.
The substantial similarity in types of selling activities and level
at which they are performed belies KSC's argument that channel one and
channel three sales are made at different marketing stages. Because the
customer types are the same, the types of selling functions are
substantially the same, and there are not substantial differences in
the level of functions performed, we continue to find that there is one
LOT in the home market.
Comment 4: CEP Offset
Respondent argues that it is statutorily entitled to a CEP offset
because its home market sales include more sales functions and selling
activities (i.e., are at a more advanced LOT) than do its U.S. market
CEP sales. Respondent states that a CEP offset adjustment is required
where NV is established at a more advanced LOT than the LOT of CEP
sales and a LOT adjustment cannot be determined. Respondent notes that
in the recent investigation of Hot-Rolled Steel from Japan, the
Department granted KSC a CEP offset, concluding that the CEP LOT was
different and less advanced than KSC's two home market LOTs. See Hot-
Rolled Steel from Japan, 64 FR at 24340-24341. Since the same factual
scenario exists in the instant case, respondent argues that the
Department should be consistent in its administration of the
antidumping statute and find the same result here.
Respondent argues that the Department's characterization of selling
services performed by Kawasaki and/or Kawasho for CEP sales is
inconsistent with KSC's responses and fails to account for role in
marketing and selling for CEP sales provided by KI. According to
respondent, KSC performs some common manufacturer-related services in
support of all steel sales in the home market and U.S. market,
including technical advice, warranty service, and product brochures.
According to respondent, these are the bulk of the services offered by
KSC and Kawasho to CEP customers. Respondent contends that neither KSC
nor Kawasho forecasts demand, provides marketing services, warehouses,
processes the final sale, or maintains regular customer contact in CEP
sales. Instead, respondent states that KI is responsible for these
services in CEP sales.
Respondent claims that the record demonstrates that KSC's home
market LOTs were at a more advanced stage of distribution and more
remote from the factory than the CEP LOT. Respondent explains that the
CEP LOT involves three marketing stages: (1) KSC sells to Kawasho, (2)
Kawasho sells to KI, and (3) KI sells to unaffiliated end-users and
distributors. Since KI is the company that sells the merchandise to the
first unaffiliated customer in the United States, respondent states
that the bulk of sales functions for CEP sales are performed by KI.
Since the record does not provide an appropriate basis for quantifying
a LOT adjustment on comparison market sales, respondent argues that the
Department should grant KSC a CEP offset.
Petitioners argue that respondent has failed to establish that its
home market sales are made at a more remote LOT involving more
substantial selling functions than its CEP sales. According to
petitioners, the combined selling functions of KSC/Kawasho for the CEP
sales are very similar to the selling functions performed for KSC's
home market sales. Petitioners contend that there are only three
selling functions, out of eleven functions, which are performed on the
home market sales at a higher level than they are performed for the CEP
sales. Specifically, petitioners note that KSC performs the following
services for its home market sales but not for CEP sales: warehousing,
sales processing, and rebate administration. According to petitioners,
these services are not substantial enough to warrant a finding that the
home market sales were made at a more remote LOT. Moreover, petitioners
note that KSC/Kawasho performed a slightly higher level of services for
its CEP sales than for its home market sales in another three
categories (i.e., marketing service, freight and delivery arrangements,
and demand forecasting). Petitioners conclude that because the home
market sales did not involve substantially greater selling functions
than the CEP sales, and were therefore not at a more remove LOT, these
sales should be compared without a CEP offset.
Department's Position
We agree with respondent that it should be granted a CEP offset. In
accordance with section 773(a)(1)(B)(i) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same LOT as the EP or CEP transaction. The NV LOT is that of the
starting price sales in the comparison market or, when NV is based on
CV, that of the sales from which we derive SG&A and profit. For CEP
sales, the Department makes its analysis at the level of the
constructed export sale from the exporter to the affiliated importer.
To determine whether NV sales are at a different LOT than EP or CEP
sales, we examine stages in the marketing process and selling functions
along the chain of distribution between the producer and the
unaffiliated customer. If the comparison market sales are at a
different LOT, and the difference affects price comparability, as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison market sales at the LOT of
the export transaction, we make a LOT adjustment under section
773(a)(7)(A) of the Act. For CEP sales, if the NV level is more remote
from the factory than the CEP level and there is no basis for
determining whether the differences in the LOTs between the NV and the
CEP sales affects price comparability, we adjust NV under section
773(A)(7)(B) of the Act (the CEP offset provision). See CTL Plate from
South Africa, 62 FR at 61731.
[[Page 73223]]
In the preliminary determination, the Department denied a CEP
offset adjustment to the NV of KSC's sales that were compared to CEP
sales in the United States, because the Department preliminarily found
that all of KSC's home market sales were made at the same LOT as the
LOT of KSC's CEP sales in the United States. Upon further analysis of
the record evidence, we now determine that the selling functions
performed by KSC and Kawasho in Japan in connection with the CEP sales
through KI, the U.S. affiliate, are less and different than the selling
functions provided by KSC/Kawasho for home market sales to unaffiliated
customers. Specifically, we note that in combination, KSC and Kawasho
provide a high level of marketing services, warehousing, sales
processing, rebate administration, and demand forecasting in the home
market to unaffiliated customers, but did not provide the same level of
services on its CEP sales to the United States. Instead, these services
are provided by KI in the United States (i.e., marketing services,
sales processing, demand forecasting) or are not offered for CEP sales
(i.e., warehousing and rebates). See KSC's April 27, 1999, Section A
response at Exhibit 13 and June 23, 1999, supplemental Section A
response at Exhibit 7. We note that the Department verified this
information and is therefore satisfied that it has substantial,
reliable information to reach a decision as to the levels of trade at
which KSC and its affiliates sell subject merchandise. See Sales
Verification Report. Thus, after further examination of the record, the
Department is now granting a CEP offset because the facts on the record
indicate that KSC's CEP LOT is different from and less advanced than
KSC's home market levels of trade and that the data on the record do
not permit the Department to make a LOT adjustment based on the effect
of the LOT difference on price comparability.
Comment 5: Downstream Sales to Affiliated Parties
Petitioners note that KSC sold through Kawasho subject merchandise
to 26 affiliated resellers/processors in the home market and that such
sales constitute a significant portion of the home market sales.
Petitioners observe that although the Department's questionnaire
required KSC to report the downstream sales, KSC replied that it is
unable to report such sales for two reasons: (1) The affiliates are
unable to ``systematically distinguish'' CTL plate produced by KSC from
that produced by other manufacturers, and (2) even if they could
identify such merchandise, the affiliates' sales records do not contain
the information concerning product characteristics that is necessary to
construct the CONNUM. Petitioners note that KSC claimed that it can
only determine the appropriate CONNUM based on the complete order
information stored at KSC, which is obtained through KSC's order
confirmation number.
Petitioners argue that during verification of one such affiliated
processor, the Department learned that KSC's claim that the affiliated
resellers/processors could not ``systematically distinguish'' subject
merchandise produced by KSC from that produced by other manufacturers
is incorrect. According to petitioners, verification showed that the
processor examined could use its internal, computerized documentation
to electronically link sales invoices to KSC plate identification
numbers. Thus, petitioners conclude that the affiliate can identify KSC
as the manufacturer for each sale using the KSC plate identification
number.
Moreover, petitioners argue that KSC's claim that the affiliated
resellers/processors cannot report complete product characteristics
necessary for constructing the CONNUM does not excuse KSC's failure to
report the downstream sales. Petitioners note that verification
revealed that the processor examined maintains records of four of the
product characteristics used in constructing the CONNUM. According to
petitioners, even if only partial information on the product
characteristics was available from the affiliated resellers/processors,
KSC should have complied with the Department's questionnaire by
reporting its downstream sales to the fullest extent possible. In fact,
petitioners claim that it is the Department's practice to use a
modified matching program where there are missing product
characteristics in the reported database. See Certain Corrosion-
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon
Steel Plate from Canada, 61 FR 13815, 13830-31 (March 28, 1996)
(``Plate from Canada'').
Furthermore, petitioners argue that since the processor examined at
verification electronically records the KSC plate identification
number, KSC could have reported all product characteristics used in
creating the CONNUM by linking these plate identification numbers to
its own computerized production or sales records. Even if linking its
own sales records to plate identification numbers supplied by the
affiliates was not possible, petitioners argue that KSC could still
have reported the complete product characteristics of the merchandise
sold to the affiliated resellers/processors by examining the general
characteristics of the merchandise sold to each affiliate.
Specifically, petitioners note that the record indicates that KSC sold
merchandise with a limited number of product characteristics to the
processor examined at verification. Petitioners argue that since this
processor maintains records with respect to four of the product
characteristics, KSC could have deduced the remaining product
characteristics from its general knowledge of the characteristics of
the merchandise it sold to the processor. Therefore, petitioners
conclude that KSC could have combined the characteristics supplied by
the affiliate with the characteristics it can determine through its
knowledge of the merchandise sold to the affiliate, and constructed the
full CONNUM. Petitioners contend that all of the product
characteristics necessary to comprise the CONNUM were available to KSC
and could have been reported.
Moreover, petitioners claim that, contrary to KSC's statements, the
verification report indicates that the processor examined can match
sales invoices to the KSC order confirmation, which would allow KSC to
construct a CONNUM for sales through this company. According to
petitioners, the verification report indicates that the processor
examined can electronically link its sales invoices to its production
instruction slips, which contain the plate identification numbers.
Petitioners contend that this allows the processor to identify all
sales of plate produced by KSC. The petitioners assert that while the
processor cannot electronically link its sales invoices to the KSC
order confirmation number, it can manually match the plate
identification number to the mill certificate, which lists the KSC
order confirmation number. Therefore, petitioners argue, the processor
can, for purposes of reporting downstream sales, match its sales
invoices to the KSC order confirmation number through a combined
electronic and manual process. Petitioners argue that the manual
portion of this process is not unreasonably burdensome given the ample
time allowed for response.
Petitioners conclude that since KSC incorrectly claimed that the
affiliated resellers/processors could not identify KSC as the
manufacturer of its purchased plate and did not report downstream sales
to the best of its ability, the Department should apply adverse facts
available for the sales to the affiliated resellers/processors that do
not pass the arm's-length test.
[[Page 73224]]
Petitioners argue that section 776(a) of the Act directs the Department
to use ``facts otherwise available'' because KSC failed to (1) provide
``necessary information'' for the calculation of NV, (2) KSC and its
affiliated resellers ``withheld information that has been requested'',
and (3) KSC ``failed to cooperate to the best of its ability to
comply'' with the Department's request for data on sales of foreign
like product made through affiliated resellers.
As adverse facts available, petitioners recommend that the
Department treat the sales to the affiliates that fail the arm's-length
test as having passed this test. Then, petitioners continue, for the
U.S. sales that match to those upstream sales which had previously
failed the arm's length test, the Department should apply as adverse
facts available the highest calculated margin for any KSC CONNUM.
Respondent argues that the Department correctly used its upstream
sales to the affiliated resellers/processors in place of downstream
sales by those affiliated companies in the preliminary determination.
Respondent states that it cannot report downstream sales to the first
unaffiliated customer through the affiliated resellers/processors in
the home market because the sales records of those affiliates do not
permit systematic linkage of final sales data with relevant product
characteristics. Without such product characteristics, respondent
states that it cannot create a reportable CONNUM for these sales. To
construct the CONNUM, respondent states that it must link its order
confirmation number to the sales data of the affiliated resellers/
processors. According to respondent, allowing KSC to report upstream
sales in place of unreportable downstream sales is consistent with the
Department's regulations and practice. As evidence, respondent cites to
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden,
and the United Kingdom, 63 FR 33320, 33341 (June 18, 1998), where the
Department allowed a respondent to report upstream sales to affiliates
where they were unable to report downstream sales because of the
affiliates' unsophisticated computer systems.
Respondent states that petitioners make three arguments in their
effort to demonstrate that KSC should have reported the downstream
sales from the affiliated resellers/processors. First, respondent
states that petitioners maintain that it was possible for all
affiliated resellers/processors to report downstream sales because one
such affiliate could manually identify the manufacturer and link its
downstream sales to the required product characteristics. The
respondent observes that the verification exhibits indicate that while
the production instruction slips record the plate identification
number, it is hand-written and not entered into the system like other
information in the documents. Therefore, respondent argues that the
affiliated processor would have to manually examine its production
instruction slips to identify KSC plate identification numbers and then
manually link the production instruction slips to the mill certificate
to obtain the KSC order confirmation number. According to respondent,
this task is not possible for the processor examined, nor the other 25
affiliated resellers/processors, given the volume of sales involved and
the tight time frame of this investigation.
Respondent states that the second argument made by petitioners is
that KSC could have reported all product characteristics by having the
affiliated resellers/processors report the limited product
characteristics available in their computerized records and then having
KSC provide the remaining characteristics either through linking its
upstream sales to the affiliate (via the plate identification number)
or through its general knowledge of the merchandise sold to the
affiliate. According to respondent, this argument is incorrect and
largely grounded on petitioners' hindsight analysis of the upstream
sales to the examined processor on the present home market sales file.
Respondent states that the processor examined can derive a limited
database of sales containing plate specification, width, thickness,
quantity, and price from its computerized sales/production records.
However, respondent argues that the processor could only manually
identify the original manufacturer of the CTL plate from each
(physical) production instruction slip because the manufacturer-
specific product identification number is physically hand-written,
rather than electronically entered, on the instruction slip. Thus,
respondent concludes that the affiliated processor is not able to
systematically identify the plate manufacturer in the sales and
production records.
Furthermore, respondent notes that petitioners suggest that KSC has
the capacity to report the other product characteristics such as paint,
patterns in relief, and descaling because products with these
characteristics were not sold to the examined processor during the POI.
According to respondent, this argument can only be made in hindsight
and with the benefit of an already completed home market sales file.
Respondent states that this analysis does not use the examined
processor's, or the other affiliated resellers/processors',
computerized sales records and begs the question of how such
information would be reported without linking to KSC's order
confirmation number. Respondent argues that petitioners are suggesting
a multi-step process whereby KSC and Kawasho provide data that may or
may not be relevant that the affiliate must match by a process of
manual examination, all within the time frame of responding to the
Department's questionnaires. Respondent states that given the practical
limitations of reporting these sales within the statutory and
regulatory schedules in place and the affiliates' inability to identify
sales of subject merchandise except through a process of sale-by-sale
manual examination, the Department must conclude that the only method
for the affiliated resellers/processors to report accurate CONNUM
information is to link back to Kawasaki's order confirmation number.
Lastly, respondent states that petitioners put forward a third
argument that KSC should report incomplete CONNUMs based upon the
limited product characteristic information recorded by the affiliated
resellers/processors. Respondent states that petitioners would then
have the Department plug the missing product characteristic data and
use the downstream sales information for purposes of its margin
calculation. According to respondent, the case cited by petitioners,
Plate from Canada, as evidence supporting their argument is factually
dissimilar to the instant investigation. Respondent argues that in
Plate from Canada, a respondent was unable to identify product
characteristics for ``a very small portion'' of secondary and excess
prime merchandise U.S. market sales, and that the Department accepted
the reporting of only ``relevant'' physical characteristics in ``this
limited circumstance.'' In the instant investigation, respondent
concludes, the downstream sales by affiliated resellers/processors (1)
equal much more than ``a very small portion'' of home market sales and
(2) would be missing product characteristics that cannot be dismissed
as irrelevant.
Department's Position
We disagree with petitioners that KSC is able to report the
downstream sales by the 26 affiliated resellers/processors. KSC is
directly affiliated with one
[[Page 73225]]
reseller/processor and is affiliated through Kawasho to an additional
25 resellers/processors. Jointly, the downsteam sales from these
resellers/processors constitute a substantial portion of home market
sales. In its questionnaire responses, KSC stated that these affiliates
cannot report their downstream sales for two basic reasons: (1) the
affiliates are unable to ``systematically distinguish'' CTL plate
produced by KSC from that produced by other manufacturers, and (2) even
if they could identify such merchandise, the affiliates' sales records
do not contain the information concerning product characteristics that
is necessary to construct the CONNUM.
During verification, we selected one of Kawasho's affiliated
resellers/processors, referred to hereafter as Company X, to examine
the feasibility of this affiliate reporting its downstream sales, in
order to determine the veracity of KSC's representations. Having
verified Company X's records and internal tracking systems, we agree
with KSC that Company X is unable to use its computerized records to
systematically link its sales invoices to (1) plate produced by KSC and
(2) the KSC order confirmation number. During verification we found
that Company X can electronically link its sales invoices to the
relevant production instruction slip. This slip contains the hand-
written, rather than electronically entered, plate identification
number. Thus, Company X would have to manually search its production
instruction slips in order to identify KSC-produced CTL plate.
Furthermore, Company X stated during verification that, in its normal
course of business, it manually matches the plate identification number
found on the production instruction slip to the appropriate mill
certificate, which is mailed to its customer. The mill certificate
contains the order confirmation number that is used by KSC to construct
the CONNUM. While petitioners are correct in that Company X must have
an organized system in which it does this match, that does not diminish
the fact that this process is manual and that Company X would have to
search its records again for purposes of reporting downstream sales.
Therefore, although Company X can combine a computerized and manual
search process to identify plate produced by KSC and link it back to
the KSC order confirmation number, given the number of sales Company X
had during the POI, we find that this process is unreasonably
burdensome given the time constraints of an antidumping investigation.
We also disagree with petitioners argument that KSC can link its
own sales records to the plate identification numbers supplied by the
affiliated resellers/processors, or use its knowledge of the types of
products sold to those affiliates, in order to supply any missing
product characteristics. This argument assumes that the affiliated
resellers/processors can systematically identify both the manufacturer
and the plate identification numbers. In the case of Company X, we
found that it can electronically link its sales invoices to the
relevant production instruction slip. Although the production
instruction slip does contain the plate identification number, it is
hand-written, rather than electronically entered onto the slip. Thus,
Company X can identify KSC produced merchandise and the KSC plate
identification number only through a manual search of its production
instruction slips. Given the volume of sales at Company X, and the time
constraints of an investigation, this manual search would be
unreasonably burdensome.
Lastly, we disagree with petitioners argument that KSC should have
reported whatever limited information concerning the product
characteristics that comprise the CONNUM that is available through its,
or the affiliates records. Each product characteristic is a vital and
necessary component of the CONNUM used by the Department in order to
match United States and home market sales. Reporting a partial CONNUM
is of no use in our margin calculations in this investigation. As
respondent points out, the case cited by petitioners as evidence
supporting its position is factually distinguishable from the instant
case. In Plate from Canada, the Department used a modified model match
methodology for sales in the United States and home market where the
respondent was unable to report the full product characteristics. In
that case, the Department concluded that it was appropriate to conduct
a modified model match on sales of excess prime merchandise for which
there were limited product characteristics reported because (1) the
Department verified that respondent reported all physical
characteristics it could, (2) sales of such merchandise represented a
very small portion of its home market and United States sales, and (3)
the missing physical characteristics were not important to the
respondent's customers or relevant to the way the product was sold. In
the instant case, were the Department to require the affiliated
resellers/processors to report the characteristics available to them,
there is no evidence on the record to determine that the missing
characteristics (e.g., whether painted, heat treated, patterned, or
descaled) are not important to the respondent's customers or irrelevant
to the way the product is sold.
Comment 6: Currency for the Gross Unit Price of EP Sales
Petitioners observe that respondent negotiates its EP sales prices
with unaffiliated trading companies in U.S. dollars and then converts
this dollar price into a yen price using the exchange rate in effect a
certain number of days after shipment. Petitioners note that respondent
originally reported the gross unit price for EP sales in yen, but in
response to a Departmental request, converted the yen prices into
dollars (using the exchange rate in effect a certain number of days
after shipment). Furthermore, petitioners note that respondent tracks
the yen price, rather than the dollar price, as the price actually paid
to KSC by the trading company and is the price KSC tracks through its
internal books and records. In addition, petitioners note that the
dollar price that appears on KSC's invoice contains the trading
company's markup, and is therefore the price to the trading company's
customer. However, petitioners observe that the yen price listed on the
invoice is the price to KSC's customer, the unaffiliated trading
company.
Considering the above facts, petitioners argue that the Department
should use the gross unit price in yen for the purposes of its final
determination. Petitioners cite the recent final determination in the
Hot-Rolled Steel from Japan investigation, where the Department faced
an identical set of facts for one of the respondents and found the yen
price to be the appropriate gross unit price for use in the margin
calculation. See Hot-Rolled Steel from Japan, 64 FR at 24345. In order
to be consistent with Hot-Rolled from Japan, and because the yen price
is the price that appears on the invoice, is paid to KSC, and is
tracked through KSC's internal records, petitioners recommend that the
Department use the yen price in its final determination.
Respondent urges the Department to use the dollar price of its EP
sales to unaffiliated Japanese trading companies because EP sales are
first negotiated and set in dollars. According to respondent, the final
invoice contains the dollar price (which includes the trading company
markup), the yen price (which does not include the trading company
[[Page 73226]]
market), and the exchange rate used by KSC to convert from dollars to
yen. Respondent explains that in its supplemental responses, it used
the exchange rate listed on the invoice to convert the yen price into a
dollar denominated invoice price, exclusive of the trading company
markup. Respondent concludes that the Department should use the dollar
price of EP sales because dollar-based prices represent the original
negotiated price and currency. According to respondent, this is
consistent with the Department's supplemental request that the sales be
reported in the currency in which they are set.
In its rebuttal brief, respondent notes that the petitioners argue
that the Department should be consistent with its recent final
determination in Hot-Rolled Steel from Japan, where it used the yen-
based prices for EP sales. Respondent notes, however, that petitioners
have initiated legal action in the Court of International Trade
(``CIT''), challenging the Department's use of the same yen-based EP
prices in the Hot-Rolled Steel from Japan investigation that they are
asking the Department to use in the instant case. In the instant case,
respondent contends that the Department can simply and most accurately
obtain dollar-denominated prices for use in its margin calculation by
using KSC's reported dollar-based prices.
Department's Position
We disagree with the respondent that the Department should use the
reported gross unit U.S. price in dollars and not the price in yen.
Record evidence indicates that KSC negotiates the purchase price in
dollars with unaffiliated Japanese trading companies and converts this
price into yen using an exchange rate in effect a certain number of
days after shipment. KSC records on the invoice the negotiated dollar
value (which includes the trading company markup), the yen value (which
does not include the trading company markup), and the exchange rate
used by KSC to convert the dollar price to yen. The record also
indicates that KSC is paid by its customers in yen and tracks the yen
price from the invoice through its internal books and records.
The Department verified that the dollar price negotiated between
KSC and the Japanese trading companies is converted to yen using the
exchange rate in effect a certain number of days after shipment, which
is listed on the invoice. This conversion is made pursuant to the terms
of sale agreed upon by the parties at the time of the order
confirmation. We also verified that KSC receives payment in yen and
tracks the yen value from the invoice through its accounting records as
part of its normal course of business. Therefore, since KSC (1) records
the yen price negotiated between KSC and the unaffiliated trading
company on the invoice, (2) receives payment in yen, and (3) the yen
value is tracked through KSC's accounting records, we find that the
price in yen is the appropriate price to use in our calculations.
In reporting U.S. sales to the Department, KSC originally reported
the yen invoice price as the gross unit price for EP sales. Pursuant to
the Department's request, KSC revised its U.S. sales listing and
converted its yen invoice price into the dollar price originally
negotiated between KSC and the unaffiliated trading companies using the
exchange rate in effect a certain number of days after invoice/
shipment. Since the yen invoice price is the proper starting point for
calculating KSC's U.S. price, we converted the dollar price back into
yen by applying KSC's reported exchange rate to the dollar price.
However, in the normal course of our margin calculations, EP sales are
converted from the foreign currency into dollars at an exchange rate
determined by the Department to be in effect on the date of sale.
Therefore, for purposes of our calculations, we converted the yen
invoice price into dollars using the Department's exchange rate in
effect on the date of sale.
Comment 7: Kawasho's Date of Payment
Petitioners note that of the five home market Kawasho sales
verified by the Department, only two sales did not show a discrepancy
between the reported payment date and the actual payment date.
Petitioners observe that in response to these discrepancies, the
Department examined an additional twenty home market Kawasho sales. Of
these twenty, petitioners note that only seven sales reported the
correct payment dates. Moreover, petitioners note that, of the 25 total
sales examined, only nine contained the correct payment dates.
Therefore, petitioners argue that the frequency of errors (i.e., 64
percent) render the data unreliable. Since the ``necessary information
is not available on the record'' with respect to Kawasho's payment
dates, petitioners argue that the Department should reject Kawasho's
reported payment dates in favor of facts available. In addition,
petitioners contend that since Kawasho is in possession of the sales
documents that show the correct date of payment, it should have
reviewed those documents to ensure that it had correctly reported such
information in its original sales response. Petitioners state that
because respondent did not act ``to the best of its ability'' in
providing accurate payment dates, the Department should employ an
adverse inference. As adverse facts available, petitioners recommend
that the Department base the credit expenses for all of Kawasho's home
market sales on the shortest payment period for all such sales.
Respondent states that the payment date discrepancies found during
verification applied to a group of national defense specification
products sold to defense contractors in the home market. Respondent
notes that, as demonstrated at verification, Kawasho relied on the
payment term stated in the invoice to determine the actual payment
dates included in the file because actual payment date information was
not accessible by computer and could not be manually obtained given the
time constraints of this investigation for Kawasho's large volume of
home market sales. Respondent notes that the discrepancies resulted
from instances of both early and late payment. Thus, respondent notes
that for these sales, Kawasho both over- and under-estimated imputed
credit expenses. Furthermore, respondent notes that besides the sales
of national defense products, there is no evidence on the verified
record that Kawasho's payment dates and credit expenses were
systematically underreported. Respondent argues that since Kawasho
correctly identified the payment date according to the invoice payment
terms in the other verified sales, should the Department accept
petitioners' arguments, the application of facts available should be
limited to sales of national defense specification products and not
categorically applied to all Kawasho sales as petitioners have
suggested.
Respondent also argues that Kawasho could not systematically gather
and report the actual payment dates of its customers because the
payment date information contained in ``Collection Summary by
Customer'' and ``Accounts Receivable by Customer'' is inaccessible by
computer. According to respondent, Kawasho used the terms of payment to
compute the payment date since Kawasho's customers almost always pay
according to the payment terms.
Respondent states that of the 25 Kawasho home market sales
examined, 22 were of sales of unique national defense specification
products. Respondents argue that none of these products are sold in the
United States and represent a very small percent of the total number of
home market
[[Page 73227]]
transactions. Respondent concludes that the payment date discrepancies
should be viewed in the context that they primarily involved sales of
national defense products. Therefore, respondent concludes that any
conclusions drawn by the Department with regard to payment dates must
be limited to Kawasho's sales of those products.
Department's Position
We agree with petitioners in part. During verification, we examined
five home market sales made through Kawasho. Actual payment was
received earlier than the reported date of payment for two of the
sales, while actual payment was received later than the reported date
of payment for a third sale. In response to these inaccuracies, the
Department examined the reported date of payment for the twenty home
market sales with the highest reported credit expenses. Of these twenty
sales, the correct date of payment was reported for seven sales, the
date of payment was incorrectly reported for seven sales (actual
payment was received earlier than the reported date), and six sales had
no reported date of payment. Since we identified the actual date of
payment for the six sales with no reported date of payment, we have
recalculated the credit expenses for these sales using the actual date
of payment and, therefore, did not include these sales in our analysis
of the sales with incorrectly reported dates of payment.
Of the remaining 19 sales reviewed, we found that 10 had incorrect
dates of payment. We also found that four of the five customers
associated with the total 25 sales we examined had at least one
inaccurate date of payment. Although these 25 sales do not constitute a
random sample of the home market sales made by Kawasho, we did not
place any customer or time constraints on their selection. Therefore,
we find that the results from these sales have value in representing
Kawasho's home market sales. Thus, we find that the date of payment
discrepancies found for four out of five customers are indicative of
problems regarding date of payment for Kawasho's other customers.
Concerning respondent's argument that the inaccuracies found in the
date of payment are limited to national defense specification products,
we note that there were date of payment inconsistencies found during
verification for sales of non-defense specification products. In fact,
respondent states in its rebuttal brief that ``(t)he Department found
two additional inconsistencies in Kawasho's reporting of payment dates
for non-national defense specification products causing credit to be
under-reported for one sale and over-reported for the other.'' See
KSC's November 10, 1999, submission at 22. Thus, two of the ten sales
which had an inaccurate date of payment were found to involve non-
defensive specification products. These two sales indicate that the
problem regarding the reported date of payment is not limited to
national defense products. Moreover, even if we were to agree with
respondent and limit our conclusions concerning this issue to only
national defense specification products, we note that there is no
evidence on the record identifying all of the specifications used for
national defense products. As we are unable to rely upon the reported
dates of payment to calculate home market credit expenses, we determine
it is appropriate to resort to the use of facts available, pursuant to
section 776(a)(2)(D) of the Act.
We disagree with petitioners that we should make an adverse
inference in applying facts available. We verified that Kawasho is
unable to systematically determine the actual date of payment. As
verification Exhibit K-17 indicates, Kawasho officials had to use their
accounts receivable by customer journal, collection summary by customer
journal, outstanding collection details journal, and collection
schedule journal in order to demonstrate the actual date of payment for
the sales in question. Therefore, we find that Kawasho's use of the
terms of payment to compute the payment date reflected a reasonable
attempt to comply with the Department's request for information given
the very large volume of Kawasho's home market sales and the time
constraints of this investigation.
Therefore, in order to correct for these inaccuracies, we are using
the information obtained during verification to adjust the date of
payment reported for Kawasho's home market sales. Specifically, we
calculated the difference between the actual date of payment and the
reported date of payment for the 10 sales with incorrectly reported
dates. We then summed the number of days difference for each of the 10
sales, including the sales for which the actual date of payment was
earlier than the reported date of payment and the one sale for which
the actual payment was after the reported date of payment. We divided
this sum by the total number of sales examined with reported dates of
payment (i.e., 19 sales) to calculate the average number of days
difference between actual and reported payment dates. Lastly, we
subtracted this number from the reported date of payment for all of
Kawasho's home market sales.
Comment 8: The Arm's-Length Test
Respondent argues that the Department does not have the authority
to exclude sales made to affiliates for consumption from its margin
analysis, and by doing so, has violated the antidumping statute and the
WTO Antidumping Agreement. Respondent states that an examination of
relevant statutory language of the Act reveals that Congress gave the
Department no authority to disregard home market sales to affiliates
for consumption. According to respondent, this lack of authority is
apparent by noting that Congress gave the Department the authority to
exclude home market sales to affiliates in only two provisions of the
Act: (1) Section 773(a)(5) provides for the exclusion of sales to
affiliates who sell to downstream purchasers in favor of using the
downstream sales, and (2) section 773(b)(1) allows for the exclusion of
certain sales from the calculation of NV that are made at less than the
cost of production. In addition, respondent argues that two other
statutory provisions, which define export price and constructed export
price, also make explicit reference to affiliation. Respondent
concludes from these passages that Congress selectively and
deliberately accorded the Department authority to exclude sales to
affiliated parties and knew how to provide guidance and instruction to
the Department in this area. Respondent argues that there is no
evidence in the statute that Congress intended the Department's
authority to extend to home market sales to affiliates for consumption.
By applying an arm's-length test to exclude sales for consumption, the
Department has acted beyond Congresses' delegation of authority in this
matter.
Further, respondent claims that the exclusion of non-matching sales
violates the requirement that a ``fair comparison'' be made between
sales in the home and U.S. markets. Respondent observes that the WTO
Antidumping Agreement provides that a fair comparison of NV and export
price requires the Department to include all sales absent a
demonstration that their inclusion would affect price comparability.
Respondent argues that the Department's arm's-length test, as applied,
rejects any demonstrations or evidentiary standard in favor of an
inflexible rule, which violates the due process protections of the
Fifth Amendment to the Constitution, since the Department's rule makes
the exclusion without providing any
[[Page 73228]]
opportunity to present rebuttable evidence. However, respondent notes
that the record of the case demonstrates that not all sales to
affiliates are made at less than arm's-length because the Department's
preliminary analysis indicates that many such sales passed the arm's-
length test. Thus, respondent states that the Department's presumption
about these sales is not universally or necessarily true. Respondent
concludes that absent positive evidence showing sales to affiliated
parties are not at arm's-length, the Department has no basis for not
including them in its calculation of NV.
Lastly, respondent argues that the Department should apply its
arm's-length test on a customer-specific basis, and not on a point-of-
delivery basis as it did in the preliminary determination.
Petitioner argues that the Department has the authority to exclude
from NV certain sales made to affiliated parties for consumption
because they were made on a non-arm's-length basis and were outside the
ordinary course of trade. Petitioners claim that the fact that
merchandise was sold to an affiliated party for consumption rather than
resale does not indicate that the sale was made at arm's-length or was
otherwise made in the ordinary course of trade. Furthermore,
petitioners note that the CIT has on numerous occasions upheld the
Department's application of the arm's length test to home market sales.
Petitioners state that the CIT ruling in Usinor Sacilor v. United
States, 872 F. Suppl 1000, 1004 (CIT 1994), which upheld the
application of the arm's-length test to home market sales to affiliated
companies, is dispositive of this issue.
Petitioners argue that section 773(a)(1)(B) of the Act gives the
Department the discretion to use the prices of sale made through
affiliated parties in determining NV and permits, but does not require,
the Department to base NV on sales to affiliated parties in the home
market. Moreover, petitioners contend that the SAA directs the
Department to ignore sales to affiliated parties which cannot be
demonstrated to be at arm's-length prices for purposes of calculating
NV. See SAA at 827. Petitioners argue that section 773(a)(5) of the
Act, contrary to respondent's interpretation, is not a grant of
authority to exclude sales of affiliated resellers, but is instead a
grant of discretion to include such sales. Petitioners contend that
there is nothing in the statute which in any way limits the
Department's authority to exclude sales to affiliates based on the fact
that they consume the merchandise. Moreover, petitioners claim that
sales to affiliates for consumption can be just as unrepresentative of
normal selling practices as sales to affiliates for resale. Petitioners
assert that the critical question is whether there is any evidence to
lead the Department to conclude that such sales were made on an arm's-
length basis.
Petitioners also argue that it has been the Department's
longstanding practice to exclude sales to affiliated parties ``where no
related customer ratio could be constructed because identical
merchandise was not sold to unrelated customers, (and the Department)
is unable to determine that these sales were made at arm's-length.''
See Certain Cold-Rolled Carbon-Steel Flat Products from Argentina, 58
FR 37062, 37077 (July 9, 1993). Moreover, section 351.403(c) of the
Department's regulations permits the use of sales to affiliates ``only
if satisfied that the price (to the affiliated party) is comparable.''
Petitioners argue that it is the burden of the respondent to prove that
sales to related parties are at arm's-length prices and that the Court
of Appeals on the Federal Circuit (``CAFC''), in NEC Home Electronics.,
Ltd. v. United States, 54 F.3d 736 (Fed. Cir. 1995) at 744, rejected
the argument that it is somehow the Department's burden to prove that a
sale to an affiliated party was not made at arm's length. Therefore,
petitioner concludes that absent any evidence that KSC's sales made to
affiliated parties for which there are no sales of identical
merchandise to unaffiliated parities were made at arm's-length, the
Department should continue to determine that such sales were not made
on an arm's-length basis and are outside the ordinary course of trade.
Department's Position:
We disagree with KSC. Section 773(a)(5) of the Act provides that
sales of the foreign like product between affiliated parties ``may be
used in determining NV.'' Thus, the statute provides the Department
with discretion in determining whether to include sales between
affiliates in the calculation of NV. The SAA, however, limits this
discretion and provides that ``Commerce will continue to ignore sales
to affiliated parties which cannot be demonstrated to be at arm's-
length prices for purposes of calculating normal value.'' SAA at 827,
citing section 773(a)(5) of the Act. Moreover, the Department's
regulations state that NV may be calculated based upon sales between
affiliated parties ``only if * * * the price is comparable to the price
at which the exporter or producer sold the foreign like product to a
person who is not affiliated with the seller.'' See 19 CFR 351.403(c).
As the CAFC has noted, ` ``[c]ommon sense, of course, would
indicate that strictly by themselves sales to a related purchaser would
be a questionable guarantee of a fair home market price.' '' NEC Home
Electronics v. United States, 54 F.3d 736, 739 (Fed. Cir. 1995),
quoting Connors Steel Co. v. United States, 527 F. Supp. 350, 354 (CIT
1981). ``There is a perceived danger that a foreign manufacturer will
sell to related companies in the home market at artificially low
prices, thereby camouflaging true [normal value] and achieving a lower
antidumping duty margin.'' NEC Home Electronics, 54 F.3d at 739, citing
Ansaldo Componenti, S.p.A. v. United States, 628 F. Supp. 198, 204 (CIT
1986) (``Related party home-market sales tend to be lower in price
because related companies generally decrease prices to each other to
the advantage of the principal entity'').
In order to determine whether sales to affiliated parties should be
included in the NV calculation, the Department has consistently
required respondents to demonstrate that the merchandise is sold to
affiliates at arm's-length prices. In this regard, the Department
treats prices to an affiliated purchaser as ``arm's-length'' prices if
the prices to affiliated purchasers are on average at least 99.5
percent of the prices charged to unaffiliated purchasers. See Preamble
to Antidumping Regulations, 62 FR 27295, 27355 (May 19, 1997); Notice
of Preliminary Determination of Sales at Less Than Fair Value: Certain
Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64
FR 61249, 61257 (November 10, 1999) (``Cold-Rolled Steel from
Brazil''). As petitioners correctly note, this test has been affirmed
by the courts. See Usinor Sacilor v. United States, 872 F. Supp. 1000,
1094 (CIT 1994). We note that this decision does not distinguish
between merchandise sold for consumption or resale in affirming the
application of the arm's-length test. Therefore, we reject KSC's
argument that it is unlawful to exclude home market sales to affiliated
purchasers where those sales are for consumption.
The Department's exclusion of KSC's home-market sales to affiliated
parties that have not been demonstrated to be at arm's-length prices is
consistent with the above-described law and practice. Contrary to KSC's
arguments, these exclusions do not reflect the application of an
irrebutable presumption. Instead, the arm's-length test provides
respondents with an opportunity to demonstrate that including home
market sales to affiliates in the calculation of NV is appropriate
[[Page 73229]]
pursuant to section 773(a)(5) of the Act. Stated differently, a
respondent which demonstrates that prices are at arm's length rebuts
the presumption that ``a foreign manufacturer will sell to related
companies in the home market at artificially low prices * * *.'' See
NEC Home Electronics, 54 F.3d at 739. Moreover, the CAFC in NEC Home
Electronics affirmed the CIT's decision which confirmed that the burden
is on respondents to come forward with evidence demonstrating that
sales to affiliated parties are at arm's-length prices. Id. at 744. See
also Cold-Rolled Steel from Brazil, 64 FR 61257 (excluding sales to
affiliates where no price ratio could be constructed because identical
merchandise was not sold to unaffiliated customers).
In this case, KSC did not offer any evidence that such sales were
made at arm's-length prices. While KSC is correct to note that the
arm's-length test could not be applied to sales for which no identical
merchandise is sold to unaffiliated parties, KSC did not offer any
alternative means of demonstrating the arm's-length nature of such
sales. Indeed, in the preamble to the Department's antidumping
regulations, the Department indicated that, in addition to the arm's-
length test, ``there may be other methods available'' of determining
the arm's-length nature of sales to affiliated parties. However,
without any evidence to the contrary, we must continue to conclude
that, pursuant to section 773(a)(5) of the Act and 19 CFR 351.403(b),
respondent has not demonstrated that sales to its affiliates were at
arm's-length prices. Consequently we have continued to exclude such
sales for purposes of calculating NV. As the Department has excluded
such sales in accordance with the antidumping statute, there has been
no violation of KSC's due process rights, as argued by KSC.
We also disagree with KSC's argument that the exclusion of such
sales from NV violates the United States' obligations under the WTO
Antidumping Agreement. As the CAFC in Federal Mogul Corp. v. United
States, 63 F.3d 1572 (Fed. Cir. 1995), explained: ``GATT agreements are
international obligations, and absent express Congressional language to
the contrary, statutes should not be interpreted to conflict with
international obligations.'' Federal Mogul, 63 F.3d at 1581. Indeed,
the United States Supreme Court elaborated on this canon of
construction. ``It has also been observed that an act of Congress ought
never to be construed to violate the law of nations, if any other
possible construction remains * * *.'' Murray v. Schooner Charming
Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804). See also Fundicao Tupy S.A.
v. United States, 652 F. Supp. 1538, 1543 (CIT 1987) (``An
interpretation and application of the statute which would conflict with
the GATT Codes would clearly violate the intent of Congress.'');
Footwear Dist. and Retailers of America v. United States, 852 F. Supp.
1078, 1092-93 (CIT 1994), quoting Restatement (Third) of the Foreign
Relations Law of the United States, at 115, comment a, p. 64 (1987)
(``Congress does not intend to repudiate an international obligation of
the United States * * * Therefore, when an act of Congress and an
international agreement * * * relate to the same subject, the courts,
regulatory agencies, and the Executive Branch will endeavor to construe
them so as to give effect to both.''). Rather, the statutory provisions
discussed above implement the United States' obligations under the WTO
Antidumping Agreement, including Article 2.4 cited by KSC, with respect
to the calculation of NV. Because KSC's home-market sales to affiliated
parties not demonstrated to be made at arm's-length prices affect price
comparability, the statutory and regulatory scheme, as applied in this
case, are consistent with Article 2.4 of the Antidumping Agreement.
Thus, the United States has fully implemented its WTO obligations with
respect to the calculation of NV in cases where home market sales to
affiliated parties are not demonstrated to be made at arm's-length
prices.
With respect to KSC's argument that the Department should apply its
arm's-length test on a customer-specific basis rather than a point of
delivery basis, we agree with respondent and have changed our
methodology accordingly.
Comment 9: Kawasho's Warehouse Expenses
Petitioners argue that the Department should reject Kawasho's
reported warehousing expenses because Kawasho's allocation methodology
causes inaccuracies and distortions in these reported costs.
Petitioners note that KSC, in its Section B response, stated that
Kawasho incurs warehousing expenses for certain home market sales, but
not for all such sales. Petitioners observe that KSC stated that
Kawasho is unable to report transaction specific warehousing costs
because it records its warehousing costs by product category, rather
than on a sale-by-sale basis. Petitioners note that Kawasho allocated
its warehousing costs to all home market sales by dividing its total
warehousing expenses incurred for the CTL plate product category by the
total tonnage sold of the CTL plate product category. Furthermore,
petitioners state that, according to KSC, Kawasho's CTL plate product
category includes both subject and non-subject merchandise. Because
KSC's allocation methodology allocates warehousing costs to certain
sales that were not warehoused, and the methodology includes non-
subject merchandise, petitioners conclude that KSC's reported
warehousing expenses are inaccurate and distortive.
Respondent argues that Kawasho's warehousing expenses were reported
on the most specific basis possible, given how Kawasho maintains its
internal books and records. According to respondent, Kawasho's
warehousing expenses are maintained by product-category, rather than on
a transaction-specific basis. Respondent argues that Kawasho has a CTL
plate category that includes subject and non-subject merchandise. Since
Kawasho keeps its records in this manner during the normal course of
business, respondent argues that it is not feasible to report Kawasho's
warehouse expenses on a more specific basis. Moreover, respondent
argues that section 773(a)(6)(B)(ii) of the Act allows the Department
to reduce NV for movement expenses, such as warehousing expenses, and
that section 351.401(g)(4) of the regulations directs the Department
not to reject an allocation methodology solely because the method
includes expenses incurred with respect to sales of non-subject
merchandise. Respondent argues that during verification, the Department
examined the warehouse records kept by Kawasho and verified the
accuracy of the numbers used for the calculation. Specifically, the
Department examined ``the quantity and warehousing expenses listed for
both subject merchandise product codes and non-subject merchandise
product codes * * * (and) found no discrepancies.'' See Sales
Verification Report at 44. Thus, respondent argues, there is no
evidence on the record that the out-of-scope merchandise incurred a
disproportionate amount of warehousing expense. Respondent concludes
that the Department should reject petitioners' argument and continue to
use Kawasho's warehousing expenses in the final determination.
Department's Position: While we prefer that respondents report
warehousing charges on a transaction-specific basis, we are satisfied
that, based on its records, Kawasho is unable to report its warehouse
expenses on that basis. Moreover, we note that section 351.401(g) of
the Department's regulations provides that we may consider allocated
expenses and price adjustments when transaction-specific
[[Page 73230]]
reporting is not feasible, provided we are satisfied that the
allocation method used does not cause inaccuracies or distortions.
As we stated in Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom, 63 FR 33320, 33340
(June 18, 1998), ``while we do initially examine transaction-specific
information on home-market sales, ultimately we calculate a weighted-
average home-market price for comparison to U.S. sales. The averaging
of net home-market prices has the effect of averaging the components
used to calculate those net prices, including inland freight.
Therefore, the use of an allocated expense would not necessarily result
in a distortion of home-market prices.'' Although that case was
referring to a respondent's inability to report transaction-specific
inland freight expenses, we find that the same principle applies here.
KSC explained that Kawasho maintains its warehouse expenses on a
product-category specific basis in its books and records, and that this
product category contains both subject and non-subject CTL plate. See
KSC's June 23, 1999, supplemental Section B response at 25. During
verification, we examined Kawasho's warehouse expenses and found no
evidence that such expenses could be reported on a transaction-specific
basis. Since Kawasho does not maintain transaction-specific warehousing
expenses, we agree with KSC that allocating Kawasho's total warehouse
expense for subject and non-subject CTL over its total tonnage sold of
subject and non-subject CTL plate is the most accurate per-unit expense
that Kawasho can derive from its books and does not unreasonably
distort the reported expense. Moreover, we are satisfied that KSC
reported Kawasho's expenses in the most specific manner feasible and
allocated these expenses reasonably for the calculation of NV.
Accordingly, we have continued to use Kawasho's warehousing expenses in
our final determination.
Comment 10: KI's Short-Term Interest Rate
Petitioners argue that the Department's verification report
indicates that KSC did not fully report KI's short-term interest
expenses. According to petitioners, the Department learned at
verification that KI did not report the interest expenses it incurred
with respect to (1) export sales of log and lumber products to Japan
and (2) certain overnight loans that occurred during the POI. Because
KI has not provided the interest rates paid on the above borrowings,
petitioners contend that the information necessary to calculate KI's
overall interest rate is not available on the record. Therefore,
petitioners urge the Department, pursuant to Policy Bulletin 98.2, to
recalculate KI's U.S. dollar short-term interest rate based on the
average prime rate in effect during the POI.
Respondent asserts that the Department should reject petitioners'
argument and use KI's reported short-term interest rate. Respondent
argues that credit costs are imputed based on the time value of money,
and not based on the cost of debt actually incurred. Respondent states
that in this respect, it is important that a respondent provide an
interest rate for imputing credit expense that reflects commercial
reality. With respect to the overnight loans, respondent states that it
excluded this rate as one that KI would not reasonably incur to finance
receivables. Moreover, respondent claims that because the average
interest rate for these loans is lower than that for the reported
short-term borrowings, it would have actually benefitted by
incorporating this interest rate into its reported interest rate, as it
would have raised its CEP price by reducing U.S. credit expenses.
Respondent also states that it properly excluded the item
``Interest on Export Bills Discounted (Log & Lumber)'' from its
calculation of a short-term interest expenses because the ``interest
expense'' incurred does not even relate to actual interest paid for
short-term borrowings to finance working capital requirements, but
rather consists of discounted payments received by KI from the bank
upon presentation of letters of credit. Moreover, respondent states
that this interest expense is also incurred only by KI's Seattle office
on sales of lumber products to Japan, and does not involve the sale of
subject merchandise to the United States. Since KI's reported interest
rate accurately represents a commercially reasonable payment for
financing receivables, and this information was thoroughly verified by
the Department, respondent argues that the short-term borrowing
expenses for CEP sales as reported in KSC's Section C response are
correct.
Department's Position: We agree with petitioners that KSC should
have reported its interest expenses associated with overnight loans,
but we disagree with petitioners that KSC should have reported the
expenses associated with KI's export sales of log and lumber products
to Japan. The Department calculates a respondent's imputed credit
expenses using ``a short-term interest rate tied to the currency in
which the sales are denominated. We will base this interest rate on the
respondent's weighted-average short-term borrowing experience in the
currency of the transaction.'' See Policy Bulletin 98.2 at 6, dated
February 23, 1998. During verification, we learned that KI incurred
interest expenses on overnight loans that were used for various
corporate purposes during the POI. Since these overnight loans are
short-term in nature, denominated in the currency of the sales
transaction, and are obtained in the normal course of business, we
determine that these loans should have been included in KSC calculation
of KI's weighted-average short-term interest rate. During verification,
we noted the total amount of interest paid by KI for these overnight
loans obtained during the POI. Since the average balance of these loans
for the POI is not on the record, we are unable to calculate the
weighted-average POI interest rate for these loans. In light of our
verification findings, we have added the POI interest expense paid on
overnight loans to the reported interest paid on KI's short-term
borrowings. Using this larger amount for interest paid during the POI,
we have recalculated KI's short-term interest rate.
With respect to the expense KI incurred on its export sales of log
and lumber products to Japan, we agree with KSC that it was proper not
to report these expenses. During verification, we learned that KI's
Seattle office exports log and lumber products to Japan on a letter of
credit basis, with an extended term of payment for its Japanese
customers. The expenses in question are the discounted payment KI
receives from the bank upon presentation of the letter of credit. We
have not included these interest expenses in our calculation of the
short-term interest rate used to calculate imputed credit expense on
U.S. sales because these expenses are not the best measure of the
opportunity cost associated with sales of subject merchandise.
Comment 11: KSC's Usance Expenses
Respondent argues that the Department should not include the
usance-related expenses incurred by KSC on the importation of certain
raw materials. Respondent states that it purchases certain raw
materials from trading companies who obtain usance loans from Japanese
banks for the ``upstream'' purchase of the raw material from the actual
supplier (e.g., mining company). Respondent alleges that these usance
loans between the bank and trading company are
[[Page 73231]]
denominated in U.S. dollars. Respondent argues that although KSC
negotiates directly with the bank and sets the terms of the usance loan
obtained by the trading company, it is the trading company, not KSC,
that receives the funds from the loan to purchase raw materials and
eventually pays back the bank. Respondent states that in return for
offering KSC an extended period of payment (i.e., two to three months)
on such raw material purchases, KSC pays the trading companies a yen-
denominated interest amount. Respondent notes that KSC pays the
purchase price, plus the interest amount, to the trading companies, not
the banks.
According to respondent, there are two reasons for not including
the expenses KSC pays to the trading companies in KSC's yen-based
short-term borrowings. First, respondent states that including these
expenses would violate the Department's practice by calculating a
respondent's credit expenses based on another entity's borrowings.
According to respondent, the Department has ``a clear preference for
the actual borrowing experience of the respondent'' in calculating
credit expenses and will incorporate usance interest only for loans
actually obtained by a respondent. See Certain Steel Concrete
Reinforcing Bars from Turkey, 64 FR 49150, 49155 (September 10, 1999).
In the instant case, respondent states that it does not obtain usance
loans, rather it purchases raw materials in yen from trading companies
that obtain usance loans.
Respondent argues that where usance loans are obtained by another
entity that is not the respondent, the Department will not include a
usance-related interest in the short-term interest calculation. Citing
to Color Television Receivers from the Republic of Korea, 55 FR 26225
(June 27, 1990), respondent states that the Department considered
petitioners' contention that usance loan interest should be
incorporated into respondent's short-term borrowing rate, even though
respondent did not actually obtain usance loan funds. According to KSC,
the respondent in that case argued that the usance loan funds were not
provided to it directly, but rather to its suppliers. KSC states that
the Department agreed with respondent and excluded the usance interest
rate from the short-term interest calculation, concluding that ``these
particular usance loans, which are not available for general financing
purposes such as accounts receivable, were properly excluded from the
calculation of the company's average short-term borrowing rate.'' Id.
In addition, respondent argues that the Department should not impute a
dollar-based interest rate to KSC's short-term borrowings that are
exclusively in yen. Respondent argues that in LMI-La Metalli
Industriale S.p.A. v. United States, 912 F.2d 455, 460-61 (Fed Cir.
1990), the CAFC noted that different interest rates correspond to
different currencies and rejected the government's position that it
could impute a lira-denominated interest rate to dollar-denominated
U.S. sales. It concluded that the cost of credit ``must be imputed on
the basis of usual and reasonable commercial behavior'' using short-
term interest rates that conform with ``commercial reality.'' Id.
According to respondent, any short-term interest rate calculated
for KSC must be a yen-based rate because its CTL plate transactions are
yen-denominated transactions. Citing to Policy Bulletin 98.2 at 2,
respondent contends that the Department's practice for calculating
imputed credit expenses is to use a ``short-term interest rate on the
respondent's weighted-average short-term borrowing experience in the
currency of the transaction.'' Respondent contends that it pays the
trading company for the raw material inputs in yen, receives payment
from its customers in yen, and records all sales in its books in yen.
Accordingly, respondent argues that the Department must denominate its
short-term borrowing rate and credit expenses in yen.
Petitioners did not comment on this issue.
Department's Position: We have not included KSC's usance-related
expenses in our calculation of KSC's imputed credit expenses. These
expenses relate to the terms of sale between KSC and its suppliers and
thus are similar to other fees and interest paid to suppliers, such as
late-payment charges. Therefore, we did not include these expenses in
determining KSC's short-term borrowing rate.
Comment 12: Deduction of Profit from CEP Sales
Respondent argues that the Department's methodology of deducting
CEP profit from the U.S. price for CEP sales violates the ``Fair
Comparison'' requirement established in Article 2.4 of the Antidumping
Agreement, which provides that the Department may make adjustments to
the extent needed to account for differences that affect price
comparability (e.g., profit). Respondent argues that profit is properly
adjusted for in U.S. sales involving further manufacturing, where a
portion of the U.S. profit is based on the additional value resulting
from the physical change in the good. Unlike further manufacturing,
respondent states that normal CEP goods and their home market
counterparts are physically identical. Moreover, respondent contends
that in the instant proceeding, there is no record evidence to support
a finding that CTL plate sold in CEP transactions through KI and CTL
plate sold by KSC in the home market are not physically comparable.
Therefore, respondent contends that deducting CEP profit in KSC's CEP
sales violates the fair comparison provision of Article 2.4.
Respondent argues that the inherent unfairness in the Department's
methodology is even more evident when the CEP offset is added to the
analysis. In situations where the Department grants an offsetting
deduction of indirect selling expenses from normal value, this offset
rebalances the comparison by deducting from normal value the same kind
and character of indirect selling expenses deducted in determining CEP,
but only in part. Respondent argues that profit assigned to the CEP
selling expenses was deducted along with those expenses, but no profit
was allocated to the selling expenses deducted from normal value, even
though the express purpose of the offset is to put the transactions on
an equal footing (i.e., produce a fair comparison). Respondent
concludes that in order to achieve a fair comparison, the Department
must adjust its methodology and eliminate the automatic deduction of
profit when determining CEP.
Petitioners argue that the Department should reject KSC's argument
because Section 772(d)(3) of the Act states that ``the price used to
establish constructed export price shall also be adjusted by * * * the
profit allocated to the expenses described in paragraphs (1) and (2).''
Petitioners contend that the Department, in the preliminary
determination, calculated CEP with an adjustment for profit in
accordance with this statutory provision. In fact, argue petitioners,
this statutory provision does not leave the deduction of profit to the
Department's discretion. Rather, petitioners contend that this
provision explicitly requires the Department to make this adjustment.
Lastly, petitioners argue that the deduction of profit from CEP does
not result in an unfair comparison in violation of the Antidumping
Agreement, as claimed by Kawasaki. In support of their position,
petitioners cite to the SAA, which states ``(the) deduction of profit
is a new adjustment in U.S. law, consistent with the language of the
Agreement, which
[[Page 73232]]
reflects that constructed export price is now calculated to be, as
closely as possible, a price corresponding to an export price between
non-affiliated exporters and importers.''
Department's Position: We disagree with respondent. Consistent with
section 772(d)(3) of the Act, we properly reduced CEP by the profit
allocated to certain enumerated expenses (e.g., commissions, credit,
and warranties). Indeed, KSC does not argue that the Department's
deduction of CEP profit is inconsistent with U.S. law, but instead
argues that the deduction is inconsistent with U.S. obligations under
Article 2.4 of the Antidumping Agreement. We do not agree. Section
772(d)(3) of the Act implements Article 2.4 of the Antidumping
Agreement, which requires that a ``fair comparison'' shall be made
between export price and normal value. However, Article 2.3 states that
where there is no export price because of an affiliation between
exporter and importer, a constructed export price may be calculated.
When such constructed export price is used, Article 2.4 makes clear
that there shall be ``allowances for costs * * * and for profits
accruing * * *'' Article 2.4 (emphasis added). Thus, when promulgating
section 772(d)(3) which provides for the deduction of CEP profit, the
administration made clear that ``[t]he deduction of profit is a new
adjustment in U.S. law, consistent with the language of the Agreement,
which reflects that constructed export price is now calculated to be,
as closely as possible, a price corresponding to an export price
between non-affiliated exporters and importers.'' SAA at 823. In this
regard, section 772(d)(3) clearly implements U.S. obligations under
Article 2 of the Antidumping Agreement and the Department's deduction
of CEP profit in this case is consistent with these obligations.
Comment 13: U.S. Sales Disclosed at Verification
The respondent argues that the Department should add the additional
U.S. sale disclosed during verification to KSC's U.S. sales database.
According to respondent, the Department's verification team asked KSC
whether Kawasho made any direct sales to the United States other than
through its U.S. affiliate, KI. In response to this question,
respondent contends that it investigated whether Kawasho had any direct
sales during the POI to the United States and uncovered a single,
unreported, direct sale to the United States by Kawasho. Respondent
argues that although this sale consisted of three separate shipments,
the Department should consider it to be a single sale. Respondent
states that upon finding this inadvertent omission, it immediately, and
voluntarily, brought this sale to the verification team's attention. In
order to demonstrate to the Department that there were no further
unreported sales, respondent states that it provided the verification
team with substantial documentation proving that the U.S. sales file is
now complete. In addition, respondent notes that it provided a full
sales trace package for this omitted sale, complete with all necessary
documentation to support the sales adjustments KSC claims are
associated with this sale. Respondent notes that the quantity and value
and sales adjustment documentation were accepted by the verification
team. Respondent argues that this lone sale is a clerical error and
represents an insignificant portion of KSC's U.S. sales transactions,
and if it is included in the U.S. sales database, will have a de
minimis effect on the final dumping calculations.
Respondent argues that failure to include this sale in the
Department's analysis, or to use the data relevant to this sale, would
result in an inaccurate margin, in derogation of the statutes's
purpose. Respondent cites to several cases where the Department added
unreported U.S. sales to the respondent's U.S. sales database after the
omission of such sales was discovered at verification in order to
determine current margins as accurately as possible. Respondent states
that in Stainless Steel Sheet and Strip in Coils from the Republic of
Korea, 64 FR 30664, 30680 (June 8, 1999), the Department added one
unreported U.S. sale to the file after its omission was discovered at
verification. Moreover, respondent notes that in the Korean case, the
Department accepted the corrective information concerning this sale
nearly one month after the end of verification. Respondent states that
in Notice of Final Determination of Sales at Less Than Fair Value:
Fresh Atlantic Salmon From Chile, 63 FR 31411, (June 9, 1998)
(``Atlantic Salmon from Chile''), the Department added twenty-seven
U.S. sales to the U.S. sales database that were disclosed during
verification. See Atlantic Salmon from Chile, Analysis Memorandum for
Pesquera Mares Australes, dated June 1, 1998, at 2. Respondent also
cites to Notice of Final Determination of Sales at Less Than Fair
Value: Stainless Steel Sheet and Strip in Coils From Mexico, 64 FR
30790, 30812 (June 8, 1999) (``Stainless Steel Sheet and Strip from
Mexico''), where the Department added sales to the sales database and
stated that ``we have no reason to believe that respondent
intentionally withheld from the Department the sales at issue here * *
*'' we are satisfied that the record is now complete and accurate
regarding this company's sales of subject merchandise during the
POI.''' Id. (citation omitted). According to respondent, there is
nothing on the record of the instant investigation that would support a
conclusion that KSC deliberately withheld the one sale at issue from
the Department. In addition, respondent cites to Usinor Sacilor, Sollac
v. United States, 872 F. Supp. 1000, 1008 (CIT 1994), and argues that
the Department's decision to reject information is governed by the
interests of accuracy and fairness, and whether accepting new
information will impose a burden on the Department. According to
respondent, the most accurate margin requires that all sales be
included in the sales databases, determining an accurate margin is the
most fair calculation for all parties concerned, and adding the
disclosed sale imposes only a minimal, if any, burden on the
Department.
Respondent also argues that KSC's disclosed sale constitutes a
minor correction to information already on the record and therefore
should be accepted by the Department. As supporting evidence,
respondent cites to Notice of Final Determination of Sales at Less Than
Fair Value; Stainless Steel Sheet and Strip in Coils From the United
Kingdom, 64 FR 30688, 30701 (June 8, 1999), where the Department
utilized its minor errors practice to accept a small quantity of
additional home market sales mistakenly omitted by the respondent, that
were disclosed at verification. In Stainless Steel Sheet and Strip from
Mexico, 64 FR at 30812, respondent claims that the Department added
unreported U.S. sales disclosed at verification to the sales database
when the volume of sales at issue was a very small percentage of
respondent's U.S. sales. Lastly, respondent cites to Notice of Final
Determination of Sales at Less Than Fair Value: Stainless Steel Round
Wire from Taiwan, 64 FR 17336, 17340 (April 9, 1999), where the
Department accepted missing sales disclosed at verification because the
sales were minor in scope and immaterial.
Respondent notes that the Department may also disregard the
unreported sale altogether. According to respondent, in one case, the
Department ignored unreported sales and declined to use facts available
against the relevant sales in Bicycles from the People's Republic of
China, 61 FR 19026, 19041 (April 30, 1996), and Random Access Memory
Semiconductors of One Megabit and Above from Taiwan (``DRAMs''), 64 FR
[[Page 73233]]
56308, 56318 (October 19, 1999). Moreover, respondent notes that in
DRAMs, the Department stated that ``the amount of sales in question is
relatively insignificant, both in terms of quantity and value of
respondent's home market sales. Thus, we are disregarding those sales
discovered during verification because the volume of unreported sales
is relatively insignificant.'' Id. In the instant case, respondent
argues that the single unreported sale accounts for a very small
percentage of KSC's total U.S. sales and will have a de minimis impact
on the final margin.
Lastly, respondent argues that if the Department considers the sale
to be an error in KSC's data that was disclosed after the deadline for
submission of factual information, the sale should still qualify for
inclusion on the U.S. sales database under the Department's policy for
correcting clerical errors. The respondent argues that the Department,
in Certain Fresh Cut Flowers From Colombia; Final Results of
Antidumping Duty Administrative Reviews, 61 FR 42833, 42834 (August 19,
1996) (``Certain Fresh Cut Flowers from Colombia''), identified six
criteria under which it will accept corrections of clerical errors.
Respondent claims that the sale in question meets each of these
criteria: (1) the sale was not disclosed because it was a simple
oversight, (2) the corrective documentation provided to the Department
at verification is reliable and was verified to be accurate, (3) KSC
disclosed the unreported sale at the earliest reasonable opportunity
and provided corrective information, (4) the clerical error allegation
and corrective documentation were submitted well before KSC's due date
for the administrative case brief, (5) adding the disclosed sale to the
U.S. sales database does not require a substantial revision of the
response, and (6) KSC's corrective documentation does not contradict
information previously determined to be accurate at verification. For
these reasons, respondent argues that its disclosed sale qualifies as a
clerical error for which the Department should accept a correction.
Some of the petitioners argue that they have at numerous times over
the course of this investigation raised the issue of whether Kawasho
made any sales to the United States other than sales through its U.S.
affiliate, KI. In each instance, petitioners state that KSC claimed in
strong terms that all U.S. sales have been reported and that Kawasho
only made sales to the United States through KI. Petitioners argue that
the three sales disclosed at verification clearly contradict all of
KSC's past denials and renders respondent's data unreliable. Moreover,
petitioners claim that the strong manner in which respondent previously
denied the existence of EP sales through Kawasho, indicates that KSC's
omission cannot fairly be characterized as ``inadvertent.'' To the
contrary, petitioners argue that the record strongly suggests that KSC
acted aggressively to prevent the discovery of relevant information.
Petitioners observe that KSC claims that the unreported sales are an
isolated incident. According to petitioners, the issue is not merely of
a small number of missing sales, rather it is about the discovery of an
unreported kind of sale, through an unreported channel of distribution.
Since the purpose of verification is to test a representative sample of
sales for discrepancies, petitioners claim that the discovery of these
unreported U.S. sales should be understood as representative of a
substantial percentage of incorrectly classified and unreported sales.
For this reason, petitioners contend that the Department cannot trust
the veracity of KSC's sales data. Based on the discovery of unreported
U.S. sales and KSC's false claim that it is unable to report downstream
home market sales, petitioners conclude that KSC has failed the
verification tests of its home market and U.S. sales. These petitioners
argue that KSC has not acted to the best of its ability to provide
information requested by the Department and urges the Department to
apply total adverse facts available.
Other petitioners argue that the Department should apply partial
facts available to the quantity of KSC's three unreported U.S. sales.
Although the respondent characterizes its disclosure as voluntary,
petitioners note that KSC did not report the unreported sales until
several days into the verification, rather than at the outset.
Furthermore, petitioners argue that the Department has applied adverse
facts available under circumstances where the respondent has been more
forthcoming than KSC in this case, such as where the respondent
identified unreported U.S. sales on the first day of verification. See
Final Determination of Sales at Less Than Fair Value; Stainless Steel
Sheet and Strip in Coils From Germany, 64 FR 30710, 30732 (June 8,
1999) (``Stainless Steel Strip from Germany''), Petitioners also argue
that even though KSC claims its omission was inadvertent, KSC had
numerous opportunities during the course of the investigation to review
its U.S. sales database and check it for completeness. Petitioners
state that KSC clearly failed to do so.
Petitioners also note that although KSC provided a package of
supporting documentation concerning its three unreported sales on the
record at verification, there is no requirement that the Department use
such information for its final determination. Petitioners cite to
Stainless Steel Strip in Coils from Germany, where the respondent KTN
similarly ``provided a complete packet containing copies of each of the
relevant invoices'' at verification concerning previously unreported
U.S. sales and claimed that the ``corrected information was verified.''
Petitioners contend that the Department emphasized the respondent's
responsibility to provide complete U.S. sales information and rejected
the corrective information in favor of partial adverse facts available.
Petitioners contend that the facts are similar with regard to KSC and
that given the untimeliness of the proffered information, the
Department should consider only the quantity of the missing sales and
reject all of the other transaction-specific data.
Petitioners also argue that the cases cited by respondent do not
support its position. In Atlantic Salmon from Chile, 63 FR 31411, the
Department's analysis memorandum shows that the unreported sales were
made in the United States by an unaffiliated reseller. Petitioner
concludes that, unlike the instant case, application of facts available
in Atlantic Salmon from Chile would not have been proper since the
respondent had no control over the conduct of the reseller. Moreover,
petitioners state that in Stainless Steel Sheet and Strip in Coils from
Mexico, 64 FR at 30812, unlike the instant case, the respondent
reported the missing sales to the Department on the first day of
verification. According to petitioners, reporting missing sales on the
first day of verification is important because it is the only way to
ensure that the disclosure is in fact voluntary. Petitioners argue that
since KSC disclosed this sale while the Department was testing for
completeness, KSC now finds itself in the position of attempting to
dispel the inference that disclosure occurred because the Department's
discovery of such sales would have been inevitable.
Lastly, petitioners argue that KSC is wrong in its statement that
the Department can properly accept its new sales information as a
``correction of a clerical error.'' Petitioners observe that one of the
criteria set forth in Fresh Cut Flowers from Colombia for correcting
alleged clerical errors is that ``the error in question must be
demonstrated to be a clerical error, not a methodological error, an
error in judgement or a substantive error.'' In the instant case,
petitioners assert that KSC's failure to
[[Page 73234]]
report the sales was demonstrably not clerical. Rather, petitioners
state that it was based on KSC's substantive error that Kawasho did not
make any direct sales to a U.S. customer. Thus, petitioners concluded
that the Department cannot accept the new sale as a clerical error.
These petitioners recommend that the Department apply adverse facts
available to the quantity of this sale. As adverse facts available,
petitioner urges the Department to apply the highest calculated margin
on KSC's other sales to the unreported sales and include the unreported
sales in the overall weighted-average margin.
Department's Position: We disagree with petitioners that the three
unreported sales disclosed at verification by KSC are not minor. During
verification, while the Department was conducting various completeness
tests, KSC voluntarily disclosed that it had found a previously
unreported sale to the United States made by Kawasho. Since this sale
comprised three individual shipments, and we are defining a sale as a
single shipment in this investigation, we concluded that there were
actually three unreported sales disclosed at verification. These sales,
which were made by Kawasho directly to an unaffiliated Japanese trading
company that in turn sold the CTL plate to its U.S. affiliate, are
properly classified as EP sales through Kawasho. During verification,
KSC provided substantial quantity and value information to support its
assertion that there are no additional unreported U.S. sales. We
examined this quantity and value information and are satisfied that
there are no additional unreported U.S. sales.
The Department's practice is to accept new information during
verification only when that information constitutes minor corrections
to information already on the record, or when that information
corroborates, supports, or clarifies information already on the record.
We agree with KSC that these disclosed sales constitute minor
corrections to information already on the record. Therefore, we
included the information we accepted at verification concerning these
three sales in our margin analysis for the final determination.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1)(B) of the Act, we are
directing the Customs Service to continue to suspend liquidation of all
entries of subject merchandise from Japan that were entered, or
withdrawn from warehouse, for consumption on or after April 30, 1999
(90 days prior to the date of publication of the Preliminary
Determination in the Federal Register) for Kobe, Nippon, NKK, and
Sumitomo, which received the petition rate of 59.12 as adverse facts
available. In addition, we will continue to suspend liquidation of all
entries of subject merchandise from Japan that were entered, or
withdrawn from warehouse, for consumption on or after July 29, 1999
(the date of publication of the Department's preliminary determination)
for KSC and those companies which received the ``all others'' rate. We
shall refund cash deposits and release bonds for KSC and ``all others''
companies for the period between April 30, 1999 and July 29, 1999
(i.e., the critical circumstances period). The Customs Service shall
continue to require a cash deposit or posting of a bond equal to the
estimated amount by which the NV exceeds the U.S. price as shown below.
These suspension of liquidation instructions will remain in effect
until further notice. The weighted-average dumping margins are as
follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/Manufacturer margin
percentage
------------------------------------------------------------------------
Kawasaki Steel Corporation................................. 10.78
Kobe Steel, Ltd............................................ 59.12
Nippon Steel Corporation................................... 59.12
NKK Corporation............................................ 59.12
Sumitomo Metal Industries, Ltd............................. 59.12
All Others................................................. 10.78
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (``ITC'') of our determination. Because
our final determination is affirmative, the ITC will, within 45 days,
determine whether these imports are materially injuring, or threatening
material injury to, the U.S. industry. If the ITC determines that
material injury, or threat of material injury does not exist, the
proceeding will be terminated and all securities posted will be
refunded or canceled. If the ITC determines that such injury does
exist, the Department will issue an antidumping duty order directing
Customs officials to assess antidumping duties on all imports of the
subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the effective date of the suspension of
liquidation.
This determination is issued and published in accordance with
sections 735(d) and 777(i)(1) of the Act.
Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33235 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P