[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73234-73244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33236]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-475-826]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-To-Length Carbon-Quality Steel Plate Products from Italy
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 29, 1999.
FOR FURTHER INFORMATION CONTACT: Howard Smith or Maisha Cryor, Office
IV, Group II, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-5193 or (202) 482-5831, respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act (``URAA''). In addition, unless
otherwise indicated, all references are made to the Department's
regulations at 19 CFR Part 351 (1998).
Final Determination
We determine that certain cut-to-length carbon-quality steel plate
products (``CTL plate'') from Italy are being, or are likely to be,
sold in the United States at less than fair value (``LTFV''), as
provided in section 733 of the Act. The estimated margins of sales at
LTFV are shown in the ``Suspension of Liquidation'' section of this
notice.
Case History
Since the preliminary determination in this investigation
(Preliminary Determination of Sales at Less Than Fair Value: Certain
Cut-To-Length Carbon-Quality Steel Plate Products From Italy, 64 FR
41213 (July 29, 1999) (``Preliminary Determination'')), the following
events have occurred:
On July 28, 1999, ILVA S.p.A, (``ILVA'') alleged that the
Department of Commerce (``the Department'') made a ministerial error in
the preliminary determination because it incorrectly
[[Page 73235]]
excluded from its analysis all of ILVA's U.S. sales that were entered
under a temporary importation bond and subsequently re-exported to a
country that is a party to the North American Free Trade Agreement
(``NAFTA''). We disagreed with ILVA's allegation because our decision
to exclude these sales was intentional and, thus, could not be
considered a ministerial error (for further discussion of the
ministerial error, see the Memorandum from Howard Smith to Holly Kuga
dated August 17, 1999, on file in the Central Records Unit (``CRU'') in
room B-099 of the main Department of Commerce building, under the
appropriate case number). However, as noted in comment 6 of the
comments below, for the final determination we have included these
sales in our analysis.
In September 1999, the Department conducted sales and cost
verifications of Palini & Bertoli S.p.A (``Palini'') and ILVA, the two
respondents in the instant investigation. At verification, both
respondents submitted corrections to the data used in the preliminary
determination. These corrections are reflected in the data used in the
final determination. A list of the corrections can be found in the
public versions of the Department's verification reports which are on
file in the CRU in room B-099 of the main Department of Commerce
building, under the appropriate case number. For ILVA, see the
memoranda from Howard Smith and James Nunno to The File dated October
29, 1999 regarding the sales and cost verifications. For Palini, see
the memoranda from Maisha Cryor and Zev Primor to The File dated
October 29, 1999 regarding the sales and cost verifications.
The petitioners (i.e., Bethlehem Steel Corporation, U.S. Steel
Group, a unit of USX Corporation, Gulf States Steel, Inc., IPSCO Steel
Inc., and United States Steelworkers of America) and the respondents
submitted case briefs on November 5, 1999, and rebuttal briefs on
November 12, 1999. On November 10, 1999, the petitioners, the only
party to the proceeding to request a hearing, withdrew their request
for a hearing. Therefore, we did not hold a public hearing.
Scope of Investigation
The products covered by the scope of this investigation are certain
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or
actual thickness of not less than 4 mm, which are cut-to-length (not in
coils) and without patterns in relief), of iron or non-alloy-quality
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual
thickness of 4.75 mm or more and of a width which exceeds 150 mm and
measures at least twice the thickness, and which are cut-to-length (not
in coils). Steel products to be included in this scope are of
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is
achieved subsequent to the rolling process (i.e., products which have
been ``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum. Steel products to be included in
this scope, regardless of Harmonized Tariff Schedule of the United
States (HTSUS) definitions, are products in which: (1) Iron
predominates, by weight, over each of the other contained elements, (2)
the carbon content is two percent or less, by weight, and (3) none of
the elements listed below is equal to or exceeds the quantity, by
weight, respectively indicated: 1.80 percent of manganese, or 1.50
percent of silicon, or 1.00 percent of copper, or 0.50 percent of
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent
zirconium. All products that meet the written physical description, and
in which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
The merchandise subject to these investigations is classified in
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.
Period of Investigation
The period of investigation (POI) is January 1, 1998, through
December 31, 1998.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by the respondents covered by the description in the
``Scope of Investigation'' section, above, and sold in Italy during the
POI to be foreign like products for purposes of determining appropriate
product comparisons to U.S. sales. We compared U.S. sales to sales made
in the home market, where appropriate. Where there were no sales of
identical merchandise in the home market made in the ordinary course of
trade to compare to U.S. sales, we compared U.S. sales to sales of the
most similar foreign like product made in the ordinary course of trade.
In making the product comparisons, we matched foreign like products
based on the physical characteristics reported by the respondents in
the following order of importance (which are identified in Appendix V
of the Department's March 1999 questionnaire): painting, quality, grade
specification, heat treatment, nominal thickness, nominal width,
patterns in relief, and descaling.
Because neither Palini nor ILVA had sales of non-prime merchandise
in the United States during the POI, we did not use home market sales
of non-prime merchandise in our product comparisons (see, e.g., Final
Determination of Sales at Less Than Fair Value: Stainless Steel Wire
Rod from Sweden 63 FR 40449, 40450, (July 29, 1998) (``SSWR'')).
[[Page 73236]]
Changes From the Department's Preliminary Determination
Except where noted in the comments below, we reached our final
determination using the same methodology as that used in the
preliminary determination. However, we made certain adjustments to the
reported data based on our verification findings. Specifically, with
respect to ILVA's sales data, we recalculated home market credit
expenses, temporary importation bond's (``TIB'') and indirect selling
expenses, and reclassified as entries under TIB certain U.S. sales
which ILVA had incorrectly reported as having been entered for
consumption. In addition, we revised the international freight expense
reported for one U.S. sale. With respect to ILVA's cost data, we
recalculated general and administrative expenses and revised the cost
of iron pellets included in the reported costs. For Palini, we
recalculated home market credit expenses, inventory carrying costs,
home market warranty expense and indirect selling expenses and
reclassified warranty expenses as direct selling expenses for sales in
the home and U.S. markets. In addition, we revised the quantity and
commission reported for one U.S. sale. With respect to Palini's cost
data, we recalculated general and administrative expenses and
recalculated the value of scrap and scale. For details regarding these
adjustments, see the company-specific memoranda to The File dated
December 13, 1999 regarding the calculations for the final
determination.
Interested Party Comments
ILVA
Comment 1: Failure to Identify Overrun Sales in the Home Market
The petitioners contend that ILVA's failure to identify all overrun
sales in the home market may understate the actual dumping margin
because the margin will be calculated based on comparisons of lower-
priced overrun sales in the home market to non-overrun sales in the
United States. In its response to section B of the Department's
questionnaire, ILVA noted that it reported as overrun sales those
overrun quantities which it sold as secondary merchandise. However, the
petitioners point out that ILVA failed to report as overrun sales those
overrun quantities that were sold as prime merchandise to either the
customer who placed the order or another customer. In addition,
according to the petitioners, ILVA acknowledged that in instances where
the original customer agreed to purchase the overrun merchandise, the
price may or may not differ from the original price negotiated with the
customer. Because ILVA failed to comply with the Department's
questionnaire instruction to identify all overrun sales during the POI,
the petitioners urge the Department to apply partial facts available in
the final determination. As facts become available, the petitioners
request that the Department treat as overrun sales all sales where the
gross unit price is equal to or less than the maximum gross unit price
of sales that ILVA identified as overrun sales.
ILVA claims that it properly reported as overrun sales those
overrun quantities that were sold as prime merchandise to someone other
than the customer who ordered the merchandise. However, ILVA notes that
it could not report as overruns the excess prime merchandise that was
sold with the order that generated the excess because its record
keeping system does not separately identify such sales as overruns.
According to ILVA, the record evidence (i.e., the verification results
and home market sales file) supports its claim that it properly
reported prime merchandise overruns that were sold to someone other
than the customer who ordered the merchandise. Moreover, ILVA claims
that the data on the record show that the prime merchandise sales
identified as overruns were made within the ordinary course of trade
and, thus, should be included in the Department's analysis.
Specifically, ILVA compared the price, quantity, sales terms, and
product specifications of prime merchandise overrun and non-overrun
sales in the home market and submitted statistics 1 which
demonstrate, according to ILVA, that its sales of prime merchandise
identified as overruns did not involve unusual product specifications
or unusual sales terms (i.e. aberrational prices, unusual quantities,
unusual delivery terms). Regarding prime merchandise overruns that ILVA
sold with the order that generated them, ILVA maintains that the prices
for these sales are arm's-length prices and that the sales are
commercially indistinguishable from, and included as part of, other
sales of prime merchandise. Since there is no evidence that any of
ILVA's sales of prime merchandise, which may or may not contain overrun
quantities, are outside the normal course of trade and, thus, would
distort the margin calculation, ILVA submits that these sales should be
used in the Department's analysis. Finally, ILVA asserts that the use
of facts available is unsupported and unfair given that it reported
overruns, where possible, and that the overruns not identified as such
were part of commercial sales made within the ordinary course of trade.
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\1\ These statistics, which are proprietary, can be found on
page 5 of ILVA's November 12, 1999 case brief.
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DOC Position:
We agree with ILVA. The relevant provisions of section 776 of
the Act state that if--
(1) necessary information is not available on the record, or
(2) an interested party or any other person--
(A) withholds information that has been requested by the
administering authority or the Commission under this title * * * the
administering authority and the Commission shall, subject to section
782(d), use the facts otherwise available in reaching the applicable
determination under this title.
ILVA reported overrun sales of prime merchandise where it could
identify such sales in its records. However, ILVA's record keeping
system does not identify as overruns the overrun quantities that were
sold with the order that generated them. By not reporting such sales as
overruns, ILVA did not withhold information from the Department because
such information was not available. Moreover, the overrun information
is unnecessary in the instant investigation since there is no evidence
on the record that ILVA's failure to identify all overrun sales
distorts the Department's margin calculation. Under such circumstances,
the facts available remedy suggested by the petitioners is not
warranted (see Olympic Adhesives v. United States, 899 F.2d 1565 (Fed.
Cir. 1990); see also Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada, 61
FR 13815, 13830-31 (March 28, 1996)). To avoid distortion, the
Department will exclude from its analysis sales that are outside the
ordinary course of trade. Section 351.102 of the Department's
regulations notes that sales outside the ordinary course of trade might
include:
Sales or transactions involving off-quality merchandise or
merchandise produced according to unusual product specifications,
merchandise sold at aberrational prices or with abnormally high
profits, merchandise sold pursuant to unusual terms of sale, or
merchandise sold to an affiliated party at a non-arm's length price.
The petitioners provided no evidence that any of ILVA's sales,
including overrun sales of prime merchandise that may not have been
included as overruns, were outside the ordinary course of trade.
Therefore, with respect
[[Page 73237]]
to these overruns, we have accepted the information as reported.
Comment 2: Market Warehousing Expense
ILVA reported separate weighted-average warehousing expenses for
direct sales and sales through resellers. The petitioners urge the
Department to reject the warehousing expense reported for sales through
resellers because it is not clear from the record that the sales for
which the expense was reported are reseller sales. According to the
petitioners, the sales file shows that the sales for which ILVA
reported the reseller warehousing expense are sales from stock to the
customer. If these were reseller sales, the petitioners contend that
the file should indicate that the sale was through a service center to
the customer, not from stock to the customer. Because of this
contradiction, the petitioners request that the Department reject the
reported reseller warehousing expense.
ILVA claims that the petitioners are mistaken because it only
reported reseller warehousing expense for those sales that were
identified as reseller sales in the home market sales file.
Furthermore, ILVA claims that such sales were from the stock of the
reseller and, thus, identifying a sale as being from stock and made by
a reseller is not a contradiction. Finally, ILVA notes that contrary to
the petitioners' suggestion, the reseller sales in question should not
have been classified as sales through service centers because ILVA's
resellers are not service centers.
DOC Position: We agree with ILVA. ILVA only reported reseller
warehousing expense for those sales that were identified as reseller
sales in the home market sales file. Moreover, the fact that ILVA's
home market sales file identifies the resellers' sales as being from
stock is consistent with information on the record indicating that the
resellers sold merchandise from their warehouses. Thus, we have
accepted the reseller warehousing expense as reported.
Comment 3: Correcting Data Files in Accordance With Verification
Findings
The petitioners request that the Department adjust the reported
general and administrative expense ratio and the reported cutting costs
in accordance with its verification findings. Also, the petitioners
request that the Department recalculate home market credit expense
using the correct interest rate identified at verification. ILVA agrees
with the petitioners.
DOC Position: We agree with both parties. We adjusted the reported
costs and general and administrative expense ratio as appropriate. In
addition, for the final determination we recalculated home market
credit expense.
Comment 4: Failure To Establish the Market Price of Electricity
The petitioners claim that ILVA was unable to demonstrate that the
price it paid to purchase electricity from an affiliated party is an
arm's-length price. In addition, the petitioners assert that ILVA did
not demonstrate that the affiliated party's price is greater than the
cost of production since it did not provide documentation to support
the affiliate's reported cost of producing electricity. Therefore, as
facts available, the petitioners request that the Department base the
electricity cost used in the final determination on the greatest
electricity price reported in Appendix D-6(d) of ILVA's June 29, 1999
supplemental questionnaire response.
ILVA maintains that the petitioners' claim is without merit because
it did, in fact, demonstrate that it paid a market price for
electricity and that the price was greater than the affiliate's cost of
producing electricity. During the POI, ILVA purchased electricity from
both an affiliated and an unaffiliated party. According to ILVA, the
disparity in the quantities of electricity purchased from these two
parties precludes one from comparing the parties' prices in order to
determine whether the affiliated party price is a market price. ILVA
notes that it was unable to obtain actual electricity prices that the
unaffiliated supplier charged other parties. Likewise, ILVA notes that,
for reasons which are proprietary, it was unable to provide electricity
prices that the affiliated supplier charged other parties. Thus, in
order to provide the Department with a price comparison, ILVA compared
the affiliated party price to a constructed unaffiliated party price.
Specifically, ILVA used electricity rates published by the unaffiliated
party to construct a weighted-average unit price that the party would
have charged ILVA if all purchased electricity had been supplied by the
unaffiliated party. ILVA points out that during the verification
Department officials examined the calculation of the constructed
unaffiliated party price and found no indication that the constructed
price was based on inaccurate or incomplete information. Moreover, ILVA
notes that the constructed price is based on publicly available
information and, thus, it is reliable. Furthermore, ILVA submits that
the constructed unaffiliated party price overstates the actual price
that ILVA would pay for electricity since it is based on published
rates that do not take into account the discounts that large consumers
of electricity, such as ILVA, are able to negotiate. Finally, ILVA
states that during the verification Department officials examined
source documents supporting the affiliate's cost of producing
electricity and found nothing to suggest that the documents were
unreliable. For the foregoing reasons, ILVA urges the Department to
accept the reported electricity costs.
DOC Position: We agree with ILVA. Although ILVA was unable to
provide evidence of market prices based on actual transactions between
unaffiliated parties, in response to the Department's request for a
market price, ILVA used electricity rates published by its unaffiliated
supplier to construct a weighted-average market price between
unaffiliated parties. At verification, we examined the information used
to construct that price and found no discrepancies. Moreover, at
verification, we accepted the consumption and rate data provided by
ILVA's affiliated electricity supplier, which demonstrated that the
prices it charged ILVA are greater than its cost of production.
Therefore, we have determined that the use of facts available to value
electricity is unwarranted for the final determination.
Comment 5: Failure To Establish the Market Price of Iron Pellets
In the preliminary determination, the Department found that ILVA
failed to establish that the price it paid to purchase iron pellets
from an affiliated party was a market price. Therefore, in reaching its
preliminary determination, the Department valued iron pellets using the
weighted-average Italian import values of iron ore as provided by the
petitioners in their July 8, 1999 submission.
ILVA contends that the Department should not rely on the values
submitted by the petitioners for two reasons. First, the value that the
petitioners submitted is for iron ore and iron ore concentrates while
ILVA only purchased iron pellets. Thus, the value that the petitioners
submitted is for a basket of products that is overly broad. Second, it
is important to identify the iron content of products before comparing
their prices; however, there is no mention of iron content in the
information submitted by the petitioners. Therefore, ILVA calls on the
Department to reject the petitioners price data, which ILVA
characterizes as general and incomplete, and to value iron pellets
using verified information.
The petitioners urge the Department to continue to value iron
pellets using the Italian import price for iron ores and
[[Page 73238]]
concentrates for three reasons. First, ILVA failed to demonstrate that
the Italian import value of iron ores and concentrates is
unrepresentative of the costs incurred by ILVA for iron pellets.
Second, ILVA submitted the ``verified'' information regarding the
market price of iron pellets at verification which is after the
regulatory deadline for submitting factual information. The petitioners
note that section 351.301(b)(1) of the Department's regulations
provides that in an antidumping duty investigation, factual information
is due no later than:
Seven days before the date on which the verification of any
person is scheduled to commence, except that factual information
requested by the verifying officials from a person normally will be
due no later than seven days after the date on which the
verification of that person is completed.
The petitioners assert that there is no evidence on the record that
the Department requested this information from ILVA. Therefore, the
petitioners maintain that the ``verified'' information is untimely and
should be rejected. Finally, the petitioners point out that the
``verified'' information consists of a constructed market price for
iron pellets which is based, in part, on costs incurred by a Dutch
producer and, thus, this information is not representative of the price
ILVA would have actually paid to purchase iron pellets from its
suppliers. For the foregoing reasons, the petitioners request that the
Department reject the ``verified'' information and continue to value
iron pellets using the Italian import value used in the preliminary
determination.
DOC Position: We agree with ILVA. During the POI, ILVA purchased
iron pellets from an affiliated supplier and a supplier which it
identified as an unaffiliated party. In order to demonstrate that the
affiliated party price for iron pellets is a market price, ILVA
compared the prices that it paid its two suppliers for iron pellets.
However, we preliminarily determined that ILVA and the supplier whom
ILVA identified as an unaffiliated party are, in fact, affiliated
pursuant to section 771(33)(F) of the Act. Thus, as noted above, for
the preliminary determination we disregarded the prices that ILVA paid
for iron pellets and valued the pellets using, as fact available, the
price supplied by the petitioners. However, in making that decision, we
stated in the preliminary notice that we were going to disregard the
transactions whereby ILVA purchased iron pellets unless ILVA could
demonstrate that such transactions reflect a market value. In keeping
with this position, our verification outline requested ILVA to provide
information regarding its claim that it bought iron pellets from
affiliated parties at world market prices. ILVA provided both a
constructed market price for iron pellets and an actual iron pellet
price that one of its suppliers charged certain other customers during
1998. We have accepted this information because (1) during the
verification ILVA provided this information in response to our request
and, thus, the information is timely according to section 351.301(b)(1)
of the Department's regulations; and (2) there is no information on the
record to indicate that the actual price that ILVA's supplier charged
certain other customers during 1998 is not representative of a market
price for iron pellets. Therefore, for the final determination, we used
the information obtained at verification to value iron pellets in
accordance with section 773(f)(3) of the Act.
Comment 6: Treatment of U.S. Sales Entered Under Temporary Importation
Bond
ILVA alleges that the Department should not have excluded from its
preliminary analysis its sales of merchandise which entered the United
States under TIB and was subsequently re-exported to
Canada.2 ILVA has taken this position because it believes
that the U.S. law implementing the NAFTA requires the Department to
assess antidumping and countervailing duties on such entries. Based on
article 303(3) of the NAFTA, ILVA contends that merchandise which
enters the United States under a TIB and is subsequently re-exported to
another NAFTA party is considered ``entered for consumption'' and is
therefore subject to all applicable customs duties. Article 303(3)
states:
\2\ However, ILVA requests that the Department continue to
exclude from its analysis of all ILVA's TIB entries that were re-
exported to non-NAFTA parties.
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Where a good is imported into the territory of a Party pursuant
to a duty deferral program and is subsequently exported to the
territory of another Party, or is used as a material in the
production of another good that is subsequently exported to the
territory of another Party, or is substituted by an identical or
similar good used as a material in the production of another good
that is subsequently exported to the territory of another Party, the
Party from whose territory the good is exported: (a) shall assess
the customs duties as if the exported good had been withdrawn for
domestic consumption * * *.
Moreover, ILVA notes that Congress implemented NAFTA article 303 by
amending the Tariff Act of 1930 as follows:
[N]o merchandise that is subject to NAFTA drawback * * * that is
manufactured or otherwise changed in condition shall be exported to
a NAFTA country * * * without an assessment of a duty on the
merchandise in its condition and quantity, and at its weight, at the
time of its exportation * * * and the payment of the assessed duty
before the 61st day after the date of exportation of the article. *
* *.
North American Free Trade Agreement Implementation Act,
Sec. 203(b)(5)(B), codified at 19 U.S.C. Sec. 81c(a). Furthermore, ILVA
notes that 19 U.S.C. Sec. 333, which defines certain imported goods
that are not subject to 19 U.S.C. Sec. 81c(a), states that:
Nothing in this section [concerning goods subject to NAFTA duty
deferral and drawback] or the amendments made by it shall be
considered to authorize the refund, waiver, or reduction of
countervailing duties or antidumping duties imposed on an imported
good.
Based on these provisions, ILVA asserts that the Department has a
statutory mandate to assess antidumping and countervailing duties on
goods entered under a TIB and then re-exported to Canada.
Additionally, ILVA points out that in Oil Country Tubular Goods
From Japan: Preliminary Results and Recission in Part of Antidumping
Duty Administrative Review, 64 FR 48589 (September 7, 1999) (OCTG from
Japan) the Department commented on goods which were imported under TIBs
and re-exported to Canada stating that ``the TIB status of such entries
does not necessarily insulate [them] from the assessment of antidumping
duties'' (OCTG from Japan, 64 FR at 48591). However, ILVA also notes
that in OCTG from Japan, the Department concluded from article 1901.3
of the NAFTA that ``if it is possible to read the NAFTA rules in a
manner consistent with the law and practice discussed above [the
antidumping law and Departmental practice regarding TIB entries], the
entries in question [TIB entries re-exported to Canada] should not be
subject to antidumping duties'' (OCTG from Japan, 64 FR at 48591).
Article 1901.3 provides that:
No provision of any other Chapter of this Agreement shall be
construed as imposing obligations on a Party with respect to the
Party's antidumping law or countervailing duty law.
ILVA makes the following points regarding the Departments comments
in OCTG from Japan. First, ILVA maintains that the Department must base
its opinion on this issue on U.S.
[[Page 73239]]
law, not the NAFTA. According to ILVA, the plain language of 19 U.S.C.
Secs. 81c(a) and 333 unambiguously requires the Department to assess
antidumping duties on ILVA's TIB entries that were re-exported to a
NAFTA party (``NAFTA TIB entries''). While ILVA acknowledges that the
Department may be correct when it observed in OCTG From Japan that the
NAFTA ``does not compel the assessment of antidumping or countervailing
duties that would not otherwise be applied under a party's domestic
law,'' ILVA notes that in implementing the provisions of the NAFTA,
Congress has required the Department to assess antidumping and
countervailing duties on NAFTA TIB entries. Specifically, ILVA points
out that the House Report on the NAFTA Implementation Act explains that
Congress implemented article 303(3) of the NAFTA because it believed it
``critical to ensure'' that the NAFTA member countries do not become an
``export platform'' for materials produced in other regions of the
world (see H.R. Rep. No. 103-361 (I), at 39-40 (1993), reprinted in
1993 U.S.C.C.A.N 2552, 2589-2590). According to ILVA, were the
Department to adopt a practice of excluding NAFTA TIB entries, the
Department's actions would contravene the expressly stated intent of
Congress. Finally, ILVA observes that the Department's analysis in OCTG
From Japan strongly suggests that it may exclude NAFTA TIB entries
based on the fact that they are not entries for consumption. However,
ILVA maintains that in implementing the NAFTA, Congress simply directed
the Department to assess antidumping and countervailing duties on NAFTA
TIB entries without defining such entries as being for consumption.
Therefore, whether or not the entries are for consumption is immaterial
in deciding whether to assess antidumping and countervailing duties on
NAFTA TIB entries.
Additionally, ILVA notes that the Court of International Trade
(``CIT'') has treated the Department's normal practice concerning TIBs
as applying equally to countervailing and antidumping duties.
Therefore, ILVA submits that if the Department were to continue to
exclude ILVA's NAFTA TIB entries from its analysis in the antidumping
duty investigation, it must also do so in the countervailing duty
investigation. Nevertheless, ILVA contends that unless advised to the
contrary, the U.S. Customs Service (``Customs'') will collect
antidumping and countervailing duties on ILVA's NAFTA TIB entries.
Therefore, if the Department continues to exclude ILVA's NAFTA TIB
entries from its analysis, ILVA requests that the Department instruct
Customs to liquidate without liability for countervailing or
antidumping duties, all TIB entries by ILVA that are subsequently re-
exported to a NAFTA country.
The petitioners assert that the NAFTA and U.S. law are clear on
this issue--the TIB entries in question are excluded from dumping
margin calculations, but not exempted from the assessment (i.e.,
collection) of antidumping and countervailing duties.3
According to the petitioners, ILVA's reliance on article 303(3) of the
NAFTA and 19 U.S.C. sections 81c(a) and 333 is misplaced. The
petitioners contend these provisions do not address the NAFTA's effect
on U.S. antidumping and countervailing law; rather they deal with duty
drawback and deferral programs and the collection of customs duties by
Customs. The petitioners hold that Customs statutes, regulations,
rulings and practices are not binding on the Department and,
accordingly, ILVA's reliance on such is not determinative. On the other
hand, the petitioners claim that article 1901.3 of the NAFTA is an
explicit statement by the parties to the agreement that the agreement
does not control the application of each parties antidumping and
countervailing law. In addition, the petitioners disagree with ILVA's
position that ``U.S. law and not the wording of the NAFTA should
control the Department's conduct in this matter.'' On the contrary, the
petitioners believe that both the U.S. laws necessary to implement the
NAFTA and the NAFTA itself are dispositive of U.S. obligations under
the agreement. If this were not the case, the petitioners argue that
all of the NAFTA provisions not specifically addressed in the U.S.
statute implementing NAFTA would have no effect, leaving the United
States in the position of having not adopted the NAFTA in its entirety.
Thus, the petitioners contend that ILVA cannot argue that article
1901.3 of the NAFTA is without effect. Moreover, the petitioners
maintain that sections 81c(a) and 333 of the statute implementing the
NAFTA were included so as to preclude any conflict between the NAFTA
and the customs statutes in existence prior to implementation of the
NAFTA. According to the petitioners, the absence of specific
antidumping and countervailing duty provisions in the statute
implementing the NAFTA is proof that, consistent with article 1901.3 of
the NAFTA, the current U.S. law and practice controls the treatment of
TIB entries for purposes of calculating dumping margins (i.e.,
excluding such entries from the margin calculation). Moreover, the
petitioners state that in OCTG From Japan, the Department noted that
``the parties [to NAFTA] made clear that NAFTA did not require any
changes in antidumping duty law or practice'' (OCTG From Japan, 64 FR
at 48590-91). Thus, the petitioners hold that the Department's
exclusion of NAFTA TIB entries from its analysis in the preliminary
determination is appropriate because it is consistent with existing law
and Departmental practice which has been upheld by the CIT (see
Titanium Metals Corp. v. United States, 901 F. Supp. 362, 367 (Ct.
Int'l Trade 1995)). Nevertheless, the petitioners note that sections
81c(a) and 333 of the statute implementing the NAFTA and Article 303(3)
of the NAFTA compel Customs to collect antidumping and countervailing
duties on ILVA's NAFTA TIB entries as though the entries were withdrawn
for domestic consumption. The petitioners note that this position is
consistent with the Department's analysis in OCTG From Japan. Although
the implementation of the NAFTA may lead to differing results in the
manner in which the Department and Customs treat NAFTA TIB entries, the
petitioners assert that the pertinent articles of the NAFTA and the
U.S. customs law are unequivocal--NAFTA TIB entries must be excluded
from dumping margin calculations, but not exempted from the assessment
(i.e., collection) of antidumping and countervailing duties.
---------------------------------------------------------------------------
\3\ The petitioners note that they assume that ILVA is referring
to the Department's margin calculations when it used the term
``assess'' in its arguments. According to the petitioners, to do
otherwise would render ILVA's arguments wholly inconsistent.
---------------------------------------------------------------------------
DOC Position: Article 303 of the NAFTA addresses duty drawback and
duty deferral programs, including TIB. In particular, Article 303(3)
provides that merchandise entered into the United States under a TIB
and subsequently re-exported to another NAFTA party shall be considered
to be entered for consumption and shall be subject to all relevant
customs duties. No party in this case disputes the requirement,
established by Article 303, that the Department assess antidumping
duties on subject merchandise entered under a TIB and re-exported to
another NAFTA party. Rather, the petitioners contend that while the
Department is required to assess antidumping duties on NAFTA TIB
entries, it should nonetheless exclude from the calculation of the
dumping margin those U.S. sales that entered under a TIB and
[[Page 73240]]
were subsequently re-exported to a NAFTA party. The petitioners'
positions are incongruous.
In accordance with section 733(d)(2) of the Act, the Department can
only assess antidumping duties on subject merchandise entered for
consumption in the United States. See Titanium Metals Corp. v. United
States, 901 F. Supp. 362 (CIT 1995). Normally, TIB entries are not
entered for consumption, and the Department therefore does not assess
antidumping or countervailing duties on TIB entries. Consistent with
its treatment on assessment of duties, the Department's practice is to
exclude those sales that entered under a TIB from its margin
calculation because there will be no assessment of antidumping duties
on such entries. See e.g., Titanium Sponge From the Republic of
Kazakhstan; Notice of Preliminary Results of Antidumping Duty
Administrative Review, 64 FR 48793, 48794 (September 8, 1999). By
contrast, where, as here, the Department will assess antidumping duties
on entries, there is no basis to exclude the relevant sales from the
margin calculation. Accordingly, we have included in the margin
calculation of all ILVA's U.S. sales to unaffiliated parties that were
entered for consumption under Article 303(3) of the NAFTA.
Comment 7: Collapsing Affiliates and Application of the Major Input
Rule
During the POI, ILVA produced slabs which it sold to its wholly
owned subsidiary, ILVA Lamiere e Tubi S.p.A. (``ILT''). ILT rolled the
slabs into quarto plate and sold the plate to ILVA. During the POI, ILT
only sold plate to ILVA (i.e., ILT did not sell plate to any one else),
which resold the plate to affiliated and unaffiliated customers in the
U.S. and home markets. Prior to the preliminary determination, the
petitioners argued that the Department should value the slabs that ILVA
sold to ILT in accordance with the major input rule of section
773(f)(3) of the Act. ILVA argued that the Department should collapse
ILT and ILVA and, in doing so, not apply the major input rule. In the
preliminary determination, the Department did not treat ILT as a
producer of the merchandise under investigation because it only
supplied one service, namely rolling, in a larger production process
wherein ILVA supplied all of the other material inputs and services
required to produce plate. The Department determined that there was not
a significant potential for price manipulation and, thus, no basis for
collapsing ILT and ILVA. Since the Department did not collapse ILT with
the producer ILVA, it used the major input rule to value ILT's rolling
service. For the final determination, both the petitioners and ILVA
contend that the Department erred by not treating ILT as a producer of
the merchandise under investigation.4 However, the parties
differ as to whether the major input rule should be applied.
---------------------------------------------------------------------------
\4\ Although the petitioners maintain that ILT is a producer,
they did not address the issue of whether the Department should
collapse ILT with ILVA.
---------------------------------------------------------------------------
According to the petitioners, the record demonstrates that ILT is a
supplier and seller of plate and, thus, the Department should apply the
major input rule to ILT's purchases of slab from ILVA irrespective of
whether it collapses ILT with ILVA. The petitioners note that ILVA
reported, and the Department verified, that ILT purchased slabs from
ILVA, rolled the slabs into plates, and sold the plates to ILVA. Thus,
according to the petitioners, ``there is no tolling arrangement between
ILVA and ILT.'' The petitioners submit that transactions between
affiliated parties should be valued under the major input rule and,
thus, they urge the Department to apply this rule in the instant
situation. According to the petitioners, the decision to collapse
entities is a sales, not a cost, issue and, therefore, it should have
no bearing on the application of the major input rule. Specifically,
the petitioners maintain that the purpose behind collapsing is 1) to
ensure that all sales of a producer or reseller are reviewed; 2) to
ensure that antidumping margins are calculated as accurately as
possible; and, 3) to prevent evasion of antidumping duty orders by the
establishment of alternate sales channels (see Queen's Flowers de
Colombia et al. v. United States, 981 F. Supp. 617, 622 (CIT 1997).
Thus, the petitioners contend that the decision to collapse entities is
made in the limited context of ensuring that the Department has
included all of a respondent's U.S. sales in its margin calculation.
Hence, the petitioners assert that collapsing should not affect the
application of the major input rule. Because ILVA failed to provide a
market price for slabs, as required by the Department for application
of the major input rule, the petitioners request that as facts
available, the Department value ILVA's slabs using the market price
that the petitioners provided in their July 8, 1999 submission.
ILVA agrees that ILT and ILVA are both producers of the merchandise
under investigation, but also contends that they satisfy the regulatory
criteria for collapsing. Consequently, ILVA contends that the
Department should collapse these two entities and not apply the major
input rule. ILVA notes that during the POI, it produced CTL plate from
plate in coil while ILT, a separate affiliated legal entity, produced
another type of CTL plate, referred to as quarto plate. Based on the
independent legal status of ILT, along with the fact that legal title
belongs to ILT until ILT sells the plate to ILVA, ILVA maintains that
the Department must find that ILT is a producer of plate and not merely
a subcontractor as the Department held in its preliminary
determination. ILVA believes that the Department's decision not to
treat ILT as a producer of plate is wrong for the following reasons.
First, ILVA reiterates that ILT cannot be considered a subcontractor
because it acquires ownership of the subject merchandise. Second, ILVA
argues that even if the Department considers ILT to be a
``subcontractor,'' the Department's regulations preclude it from
finding that ILT is not a producer. Specifically, ILVA notes that 19
CFR 351.401(h) states the following:
(h) Treatment of subcontractors (``tolling'' operations). The
Secretary will not consider a toller or subcontractor to be a
manufacturer or producer where the toller or subcontractor does not
acquire ownership, and does not control the relevant sale of the
subject merchandise or foreign like product.
Since ILT acquires ownership of the subject merchandise and both
elements of 19 CFR 351.401(h) must be satisfied before a company, even
if deemed a subcontractor, cannot be treated as a producer, ILVA claims
that the Department must determine that ILVA is a producer.
Third, ILVA alleges that the Department reached its preliminary
determination on this matter by improperly focusing on the operational
relationship between ILVA and ILT rather than the legal relationship.
Again, ILVA notes that the legal relationship involves ILT purchasing
slabs from ILVA, holding title to those slabs, using the slabs to
produce plates, and selling the plates, for which ILT also holds title,
to ILVA. According to ILVA, finding that an entity is not a producer
based on an ``operational reality test'' would not withstand judicial
scrutiny because it conflicts with the Department's practice of
focusing only on legal relationships when employing the major input
rule. Specifically, ILVA notes that the Department consistently looks
to the legal status of the responding parties rather than their
operational relationship in determining whether the ``transactions
disregarded'' and ``major input rules'' of the Act are applicable. ILVA
contends that the Department
[[Page 73241]]
would be hard-pressed to explain to a Court why it looks at the
operational relationship between parties to determine whether an entity
is a producer but refuses to look at the operational relationship when
employing the major input rule. ILVA adds that this is especially so
since the logical consequence of being treated as a ``subcontractor''
based on the ``operational reality test'' leads to the application of
the major input rule.
Fourth, ILVA notes that its relationship with ILT is identical to
the relationship that existed between two affiliated in the antidumping
duty investigation of stainless steel wire rod from Sweden and yet, in
that investigation, the Department found that both the affiliates were
producers (see Notice of Final Determination of Sales at Less Than fair
Value: Stainless Steel Wire Rod From Sweden, 63 FR 40449 (July 29,
1998) (``SSWR From Sweden'')). ILVA and ILT operate under an agreement
whereby, in general, ILT must purchase from ILVA all of the slabs that
it uses to produce plates and it must sell the plates that it produces
only to ILVA. According to ILVA, its relationship with ILT is identical
to the relationship between Fagersta and Sandvik, the two affiliates in
SSWR From Sweden, because Sandvik, a producer of stainless steel wire
rod (``SSWR'') operated under an exclusive purchase and supply
agreement with Fagersta whereby Fagersta was ``required to purchase
only from Sandvik the billets that it processes into SSWR for sale to
Sandvik'' (see SSWR From Sweden, 63 FR at 40454). Unlike the
Department's finding in the instant investigation, in SSWR From Sweden,
the Department found that Fagersta was a producer. Moreover, ILVA
points out that the Department's preliminary analysis on this issue,
which seems to focus on the commercial relationship between ILVA and
ILT as described in their exclusive supply and purchase agreement, is
flawed because it does not consider certain provisions in the agreement
that indicate that ILT is a separate entity that is operationally
independent from ILVA. Finally, ILVA argues that the fact that ILT did
not export subject merchandise to the United States does not prohibit
the Department from treating ILT as a producer and collapsing the two
entities. ILVA notes that in Certain Fresh Cut Flowers From Colombia;
Preliminary Results of Antidumping Duty Changed Circumstances Review,
63 FR 25447, 25448 (May 8, 1998) (Certain Fresh Cut Flowers From
Colombia), the Department collapsed a potential exporter that was not
even producing subject merchandise during the period of review because
the company had the capability of producing subject merchandise. For
the foregoing reasons, ILVA urges the Department to treat ILT as a
producer.5
---------------------------------------------------------------------------
\5\ ILVA also contends that the Department's decision not to
collapse ILT because ILT is not a producer nullifies the
``significant potential for manipulation'' provision of the
regulations. According to ILVA, ``the fact that the Department
determined that ILT is not a producer because of the exclusive
supply arrangement with ILVA is simply not dispositive of whether
the Department should collapse ILVA.'' ILVA contends that its
agreement with ILT could change whereupon ILT would sell subject
merchandise and ``this is exactly the situation that the
Department's collapsing regulation is intended to address.''
---------------------------------------------------------------------------
Furthermore, ILVA contends that as producers, ILT and ILVA satisfy
all of the regulatory criteria for collapsing. ILVA states that
pursuant 19 CFR. 351.401(f), the Department will collapse two producers
where the Department finds; 1) the producers are affiliated under
section 771(33) of the Act; 2) the producers have production facilities
for similar or identical products that would not require substantial
retooling in order to restructure manufacturing priorities; and 3)
there is a significant potential for the manipulation of price or
production. ILVA believes that it meets all of the above criteria for
the following reasons. First, ILVA notes that it owns 100 percent of
ILT and, thus, ILVA and ILT are affiliated according to section 771
(33)(e) of the Act which states that an organization and any person
owning 5 percent or more of the organization are affiliated. Second,
ILVA maintains that it produces plates that are the same or similar to
the plates produced by ILT. In fact, ILVA notes that using the
Department's model-matching characteristics, there are some control
numbers that include both ILVA and ILT produced plates. Hence, ILVA
concludes that it meets the second of the Department's requirements for
collapsing. Lastly, ILVA argues that in the instant situation, there is
a significant potential for the manipulation of prices or production.
According to ILVA, in order to determine whether a significant
potential for manipulation exists, the Department considers; 1) the
level of common ownership between the affiliates, 2) the extent to
which managerial employees or board members of one firm sit on the
board of directors of an affiliated firm; and 3) whether the operations
of the affiliated firms are intertwined. ILVA believes that it meets
each of these criteria because it owns 100 percent of ILT, certain
members of its board of directors are also on the board of directors of
ILT, and it shares information concerning sales, production and pricing
with ILT. Moreover, ILVA contends that given its exclusive purchase and
supply agreement with ILT, the two companies intimately coordinate
production activities and, thus, their operations are intertwined. ILVA
notes that the Department found the exclusive purchase and supply
agreement in SSWR From Sweden to be a significant factor in its
determination to collapse Sandvik and Fagersta. Additionally, ILVA
maintains that in the preliminary determination, the Department did not
collapse ILVA and ILT because it did not consider ILT to be a producer.
However, as noted above, ILVA believes that ILT is a producer and
argues that the petitioners agree with that conclusion. Thus, ILVA
contends that it should be collapsed with ILT.
If the Department collapses ILVA and ILT, ILVA maintains that
precedent requires the Department to disregard the major input rule. AK
Steel Corp. v. United States, 34 F. Supp.2d 756 (CIT 1998); see Certain
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from
Korea: Final Results of Antidumping Duty Administrative Reviews, 63 FR
13170, 13185 (March 18, 1998); see also Certain Cut-to-Length Carbon
Steel Plate from Brazil: Final Results of Antidumping Duty
Administrative Review, 63 FR 12744, 12749-50 (March 16, 1998) In fact,
ILVA notes that the Department was very specific on this point in SSWR
From Sweden where it stated that ``because we have collapsed Fagersta,
Sandvik, and Kanthal, we find that the major input rule does not apply
in this instance and have used Sandvik's billet costs as the basis for
COP'' (see SSWR From Sweden, 63 FR at 40454). Given the Department's
precedents, ILVA urges the Department to collapse ILVA and ILT and to
disregard the major input rule.
DOC Position: We disagree with both parties. The two issues at hand
are whether to collapse ILVA and ILT and whether to apply the major
input rule. With respect to collapsing, section 351.401(f) of the
Department's regulations describes the circumstances whereby the
Department will treat two or more affiliated producers as a single
entity (i.e., collapse the parties). As in the preliminary
determination, we do not consider ILT to be a producer because the
terms of its exclusive supply and purchase agreement with ILVA require
ILT to sell to ILVA all of the plate that it rolls in its facility. In
arguing that ILT is a producer, the petitioners focused on the fact
that
[[Page 73242]]
actual sales of slabs and plates took place between ILVA and ILT and,
thus, according to the petitioners, ``there is no tolling arrangement
between ILVA and ILT.'' ILVA also focused on the legal form of the
transactions between ILVA and ILT, noting that ``based on the
independent legal status of ILT, along with the fact that legal title
[to the plates] belongs to ILT until ILT sells the merchandise to ILVA,
the Department must determine that ILT is a producer.'' However, the
transfer of legal title is not the only factor that the Department
considers when deciding whether an entity that is involved in
manufacturing subject merchandise or foreign like product is a producer
(see Notice of Final Determination of Sales of Less Than Fair value:
Dynamic random Access Memory Semiconductors of One Megabit and Above,
64 FR 56308, 56318 (October 19, 1999 (``DRAMs'' From Taiwan)).
Significantly, section 351.401(h) of the Department's regulations notes
that a subcontractor will not be considered to be a producer where the
subcontractor ``does not acquire ownership and does not control the
pertinent sale of the subject merchandise or foreign like product.''
This provision indicates that ownership of the produced merchandise and
control of the relevant sale of such merchandise are important
considerations in identifying the producer. Contrary to ILVA's claim,
however, it does not require the Department to consider an entity to be
a producer where one of the two conditions is not satisfied. Moreover,
the Department has discretion in both selecting the factors that it
considers in order to identify a producer and in determining the
importance of those factors. In this case, we find that control of the
relevant sale, i.e., the sale of subject merchandise or foreign like
product to unaffiliated parties, is a particularly important
characteristic for the producer to possess. Under the terms of the
exclusive supply and purchase agreement, ILT does not sell plates to
unaffiliated parties and, thus, does not control the relevant sale
(i.e., the sale to an unaffiliated party). Rather, ILVA controls the
first sale of the plates to unaffiliated parties. In essence, ILT only
performs a rolling service for ILVA, obtaining slab from ILVA and
returning the finished plate to ILVA. Thus, we do not consider ILT to
be a producer of subject merchandise. Therefore, because ILT is not a
producer, it is not appropriate to collapse ILVA and ILT into one
entity under 19 CFR 351.401(f) for purposes of this final
determination. Furthermore, there is no other basis on which to
collapse ILVA and ILT.
The cases cited by ILVA as support for treating ILT as a producer
differ from the instant case with respect to control of the relevant
sale. In those cases, there is no indication that the parties which the
Department treated as producers were contractually precluded from
selling subject merchandise or foreign like product to unaffiliated
customers. In fact, in SSWR From Sweden, each of the parties which the
Department identified as producers and subsequently collapsed sold
subject merchandise to the United States during the POI. In the
preliminary results of the changed circumstances review in Certain
Fresh Cut Flowers From Colombia, the Department collapsed Flores El
Talle S.A. (``Flores''), the party that requested the review, with the
Flores Colombianas Group (``the Group''), and found that the revocation
of the antidumping order with respect to the Group also applied to
Flores. In that case the Department noted that Flores' shipments would
not be subject to suspension of liquidation if it were collapsed with
the Group. Thus, unlike ILT, Flores, although not currently producing
the subject merchandise due to soil infestation, was a producer of
subject merchandise in a position to sell subject merchandise and
foreign like product to unaffiliated customers once it resumed
production. Thus, the fact that the Department treated Flores as a
producer is not inconsistent with the Department's treatment of ILT in
the instant case.
Furthermore, we do not find that the provisions which ILVA pointed
to in the exclusive supply and purchase agreement sufficiently mitigate
the restrictions that the agreement places on ILT's ability to sell
plates. The agreement is clear that in the ordinary course of business,
control of the relevant sale belongs to ILVA, and, in fact, during the
POI, it was ILVA, not ILT, that sold plates to unaffiliated parties.
Finally, we disagree with ILVA's contention that the Department's
decision not to collapse ILVA and ILT nullifies the ``significant
potential for manipulation'' provision of section 351.401(f) of the
Department's regulations. As the Department has noted, it ``does not
collapse affiliated companies for margin-calculation purposes unless
both companies produce or sell the subject merchandise since the
Department collapses affiliated companies only where the potential for
price manipulation exists'' (see Notice of Final Results and Partial
Recission of Antidumping Duty Administrative Review: Certain Pasta From
Italy, 64 FR 6615, 6628 (February 10, 1999)). Thus, rather than
nullifying the ``significant potential for manipulation'' provision, in
making our decision we have specifically considered whether such
potential exists by examining the role that ILVA and ILT played in
manufacturing and selling the merchandise under investigation.
Moreover, the fact that ILVA and ILT can alter their agreement and
change the role that each plays in manufacturing and selling the
merchandise under investigation has not escaped our attention. Should
we issue an order with respect to ILVA, we intend to revisit this issue
if the relationship between ILVA and ILT should change in any future
administrative review.
Because we have not collapsed ILVA and ILT and we treated ILVA as
the producer, we have continued to apply the major input rule to value
the rolling services provided by ILT. In the absence of a market price
or a transfer price for rolling slabs, as in the preliminary
determination, we constructed a transfer price by increasing the
reported rolling costs for quarto plate by ILT's G&A expenses and
profit.
Palini
Comment 1: Classification of Warranty Expenses
The petitioners contend that Palini improperly classified as
indirect selling expenses the U.S. credit notes issued by Palini
pursuant to warranty claims made by U.S. customers. The petitioners
argue, citing Zenith Electronics Corporation v. United States, that the
Department's regulations allow for the classification of warranty
expenses as indirect selling expenses only where the warranty expenses
relate to non-variable costs. 77 F.3d 426, 433-34 (Fed. Cir. 1996). In
contrast, in this case, the petitioners assert that Palini's warranty
expenses are variable expenses, because the credit notes were issued
for defective and non-conforming merchandise and therefore directly
relate to specific sales. Therefore, the petitioners request that, for
the final results, the Department treat Palini's warranty expenses as
direct selling expenses.
Palini claims that it properly reported its warranty expenses as
indirect selling expenses. Palini contends that, according to Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan,
and Tapered Roller Bearings, Four Inches or Less in Outside Diameter,
and Components Thereof, From Japan (TRB's from Japan), the Department
recognizes that
[[Page 73243]]
period of review (``POR'') warranty expenses cannot always be linked to
POR sales, because the expenses may result from sales that occurred
before the POR. 62 FR 11825 (March 13, 1997). Therefore, Palini asserts
that its reported warranty expenses must be allocated because the
expenses cannot be reported on a transaction-specific basis. Id.
Further, in accordance with TRB's from Japan, Palini contends that
warranty expenses may be classified as indirect selling expenses, when
the expenses cannot be reported on a transaction-specific basis.
Therefore, for the final results, Palini requests that, because it
issued credit notes on a customer-specific basis, as opposed to a
transaction-specific basis, the Department should treat its warranty
expenses as indirect selling expenses. However, Palini notes, if the
Department were to reclassify the company's U.S. warranty expenses as
direct selling expenses, it should similarly treat its home market
warranty expenses, because the expenses are incurred in the same manner
in both markets.
DOC Position: We agree with the petitioners and have treated
Palini's warranty expenses as a direct expense in both the U.S. and
home markets. Section 351.410 of the Department's regulations states
that direct selling expenses are expenses, such as warranties, that
result from, and bear a direct relationship to, the particular sale in
question. In this case, Palini stated, at verification, that it issued
credit notes for customer claims concerning defective or non-conforming
merchandise. Thus, these expenses arise directly from the sales of
subject merchandise and, consequently, pursuant to section 351.410 of
the Department's regulations, we find that Palini's issuance of credit
notes relates directly to specific sales.6
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\6\ We note, as stated in the Antidumping Manual, Chapter 8,
page 17, and in accordance with Department practice, that
``warranties are included even though the expense can not be tied to
a particular sale because of the lapse of time between sale and
expense. Yet it is inescapable that had there been no sales, there
would have been no warranty expense.''
---------------------------------------------------------------------------
However, we agree with Palini that to the extent we reclassify its
warranty expenses as direct selling expenses in the U.S. market, we
should also do so in the home market because evidence on the record
indicates that such expenses were incurred in the same manner in both
markets. Therefore, for these final results, we have determined that
Palini's warranty expenses should be treated as direct selling expenses
for both the home and U.S. markets.
Comment 2: Minor Corrections
The petitioners contend that Palini's submission of its revised
U.S. warranty expense, presented as a minor correction at the beginning
of verification, should not be accepted as such by the Department. The
petitioners argue that the amount of the reduction from the reported
value to the value presented at verification, was such a substantial
change that it should be rejected by the Department as an untimely
submission of new factual information.
In response, Palini asserts that its revision to U.S. warranty
expenses was properly submitted as part of the minor corrections
presented at the beginning of verification, pursuant to Department
practice, and should be accepted as such by the Department.
DOC Position: We agree with Palini. During our verification of
Palini, we examined and traced selected credit notes to Palini's
financial records and completed an overall financial reconciliation,
which substantiated the validity of Palini's U.S. warranty expense
revision. Following Department practice, because the corrections are
limited to U.S. warranty expenses and were verified to our
satisfaction, we accepted these corrections for purposes of the final
results.
Comment 3: Early Payment Discounts
The petitioners argue that Palini did not substantiate its claim
that all customers who were offered an early payment discount actually
made an early payment. The petitioners assert that pursuant to section
351.308 of the regulations, the Department should disallow all home
market early payment discounts as facts available because Palini failed
to provide information that distinguished between sales where the
discount was granted and sales where the discount was not granted.
Palini argues that its reported early payment discounts were
properly treated as a price adjustment in the preliminary
determination. Palini states the Department affirmatively verified that
when an early payment discount is granted, the amount of the discount
is indicated in the invoice price. Therefore, Palini argues that the
Department should not apply facts available to its early payment
discount, but should treat it as a price adjustment to NV in the final
results.
DOC Position: We agree with Palini. During our home market
verification of Palini, we conducted thorough sales traces which
included ensuring the accuracy of Palini's early payment discounts
through an examination of the reported gross unit price and the invoice
price. We found no discrepancies. Furthermore, we were satisfied that
for those sales transactions reviewed at verification, which included
early payment discounts, the customer did utilize the early payment
option whenever offered by Palini. Therefore, for these final results,
we have continued to allow an adjustment to NV for Palini's reported
early payment discounts.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1)(B) of the Act, we are
directing the Customs Service to continue to suspend liquidation of all
entries of subject merchandise from Italy that were entered, or
withdrawn from warehouse, for consumption on or after July 29, 1999
(the date of publication of the Preliminary Determination in the
Federal Register). The Customs Service shall continue to require a cash
deposit or posting of a bond equal to the estimated amount by which the
normal value exceeds the U.S. price as shown below. These suspension of
liquidation instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-average margin
Exporter/Manufacturer percentage
------------------------------------------------------------------------
Palini B Bertoli S.p.A.................... 8.97
Ilva S.p.A................................ de minimis
All others................................ 8.97
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (``ITC'') of our determination. Because
our final determination is affirmative, the ITC will, within 45 days,
determine whether these imports are materially injuring, or threatening
material injury to, the U.S. industry. If the ITC determines that
material injury, or threat of material injury does not exist, the
proceeding will be terminated and all securities posted will be
refunded or canceled. If the ITC determines that such injury does
exist, the Department will issue an antidumping duty order directing
Customs officials to assess antidumping duties on all imports of the
subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the effective date of the suspension of
liquidation.
This determination is issued and published in accordance with
sections 735(d) and 777(i)(1) of the Act.
[[Page 73244]]
Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33236 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-D