67 FR 6495, February 12, 2002
                                                            A-588-845
                                               ADR: 01/04/99-06/30/00
                                                      Public Document
                                                        III / 9 / JHC
February 4, 2002

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary 
                 for Import Administration

FROM:          Joseph A. Spetrini
               Deputy Assistant Secretary
                 for Import Administration, Group III

SUBJECT: Issues and Decision Memorandum for the 1999-2000 Antidumping
Duty Administrative Review of Stainless Steel Sheet and Strip in Coils
from Japan


SUMMARY: 

We have analyzed the comments and briefs of interested parties in the
antidumping duty administrative review of stainless steel sheet and strip
in coils ("SSSS") from Japan. As a result of our analysis, we have made
changes from the Notice of Preliminary Results of Antidumping Duty
Administrative Review: Stainless Steel Sheet and Strip in Coils from
Japan, 66 FR 41543 (August 8, 2001) ("Preliminary Results"). The specific
programming changes can be found in our Analysis Memorandum for Kawasaki
Steel Corporation: Final Results in the 1999-2000 Antidumping Duty
Administrative Review of Stainless Steel Sheet and Strip in Coils from
Japan (February 4, 2002) ("Final Analysis Memo"). We recommend that you
approve the positions developed in the "Discussion of the Issues" sections
of this Issues and Decision Memorandum. Below is the complete list of the
issues in this administrative review:

General Issues:

Comment 1: Negative Dumping Margins
Comment 2: Currency Conversion of Advertising Expenses
Comment 3: Choice of Home Market CONNUM
Comment 4: Home Market Sales Reporting Period
Comment 5: Grade Codes
Comment 6: Downstream Sales
Comment 7: Coil Reporting Errors
Comment 8: Post-Shipment Revisions
Comment 9: U.S. Market Database


DISCUSSION OF THE ISSUES:

Comment 1: Negative Dumping Margins

Respondent Kawasaki Steel Corporation ("Kawasaki") argues that the
Department violates the World Trade Organization's ("WTO") Antidumping
Agreement by adjusting negative margins on home market sales to zero as
part of its margin calculation analysis. Kawasaki argues that keeping the
positive margins and discounting the negative margins is data manipulation
to create a final positive margin that should otherwise be zero percent.
Kawasaki notes the WTO Antidumping Agreement requires a fair comparison
between the home market normal value price and the U.S. export price when
calculating the margin, citing Article 2.4 and paragraph 2.4.2. Kawasaki
relies on a decision by a WTO Panel, later affirmed by the Appellate Body,
that the European Communities acted inconsistently with the WTO
Antidumping Agreement by using a methodology that included zeroing
negative price differences. See European Communities - Anti-Dumping Duties
on Imports of Cotton-Type Bed Linen from India, WT/DS141/R, para. 6.116
(October 30, 2000) ("Bed Linen Panel Decision"); WT/DS141/AB/R (March 1,
2001) ("Bed Linen Appellate Body Decision") ("collectively, Bed Linen
Decision").

Kawasaki points out that the Appellate Body report states the "United
States supports the methodology of the European Communities for
calculating the overall margin of dumping." Kawasaki asserts that the
methodology used by the Department "mirrors" the methodology of the
European Communities and, in light of the Bed Linen decisions, the
Department should "abandon its violative zeroing practices." Kawasaki
disagrees with the Department's rejection of such an argument, wherein the
Department stated that the "Bed Linens Panel and Appellate Decisions
concerned a dispute between the European Union and India. We have no WTO
obligations to act." See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan, Sweden,
and the United Kingdom; Final Results of Antidumping Duty Administrative
Reviews and Revocation of Orders in Part, 66 FR 36551 (July 12, 2001) and
accompanying Decision Memo at Comment 38; see also Certain Preserved
Mushrooms from India: Final Results of Antidumping Duty Administrative
Review, 66 FR 42507 (August 13, 2001) and accompanying Decision Memo at
Comment 16 ("Preserved Mushrooms from India").

Kawasaki argues that the Bed Linen ruling is directly applicable to the
United States, even though the Department was not a named party in the
dispute, as Congress intended U.S. trade law to be consistent with WTO
rulings by enacting the Uruguay Round Agreements Act ("URAA").
Additionally, Kawasaki argues that the U.S. antidumping statue does not
provide for the Department's methodology of zeroing out negative margins.
Kawasaki points out that "dumping margin" is defined as "the amount by
which the normal value exceeds the export price or constructed export
price of the subject merchandise" (section 771(35)A of the Act; 19 U.S.C.
 1677(35)(A)), and the "weighted average dumping margin" is defined as
"the percentage determined by dividing the aggregate dumping margins
determined for a specific exporter or producer by the aggregate export
prices and constructed export prices of such exporter or producer," citing
section 771(35)(B) of the Act (19 U.S.C.  1677(35)(B)). Kawasaki argues
that by zeroing out negative margins, the Department is not following the
mandate that margin calculations be made in the aggregate.

Kawasaki notes that zeroing out negative margins is not an express
statutory creation in U.S. law which would prevail over a WTO obligation,
citing Hyundai Elecs. Co., Ltd. v. United States, 53 F. Supp. 2d 1334,
1344 (Ct. Int'l Trade 1999) in support. In Hyundai, the Court stated that
it had to consider whether a Departmental revocation practice was
consistent with the WTO's Antidumping Agreement, as Congress did not
expressly provide for it in the regulations. Similarly, Kawasaki argues
the Department must determine whether its zeroing out methodology is
consistent with the WTO's Antidumping Agreement; Kawasaki argues the
methodology "plainly offends" the agreement and is counter to
Congressional intent. Kawasaki further argues that the recent WTO
Appellate Body decision in United States - Anti-Dumping Measures on
Certain Hot-Rolled Steel Products from Japan (Appellate Body Report in
HRS, VI. 7) adopts the Bed Linen determination, wherein the Appellate Body
stated the "margin reflects a comparison that is based upon examination of
all the relevant home market and export market transactions." Kawasaki
emphasizes the "all" in the determination, and reasons this determination
is tantamount to an affirmation by the Appellate Body that the Bed Linen
zeroing precedent is applicable to the U.S. antidumping law practices.
Kawasaki argues that to make a fair assessment, and to be in compliance
with the WTO's Antidumping Agreement, the Department should recalculate
the dumping margin without zeroing out negative margins.

Petitioners Allegheny Ludlum, AK Steel Corporation, J & L Specialty
Steel, Inc., North American Stainless, United Steelworkers of America, AFL-
CIO/CLC, Butler Armco Independent Union, and Zanesville Armco Independent
Organization, Inc. (hereinafter collectively "Petitioners") state that
zeroing out negative margins is longstanding Departmental practice, and
argue the Department explicitly found Bed Linen does not apply to U.S.
proceedings, citing Preserved Mushrooms from India, 66 FR 42507 and the
accompanying Decision Memo at Comment 16.

Department Position:

We agree with Petitioners. As we have discussed in prior cases, our
methodology is consistent with our statutory obligations under the Act.
See, e.g., Certain Hot-Rolled Carbon Steel Flat Products from The
Netherlands, 66 FR 50408 (October 3, 2001) (final determination), and
accompanying Issues and Decision Memorandum, at Comment 1. Sales that did
not fall below normal value are included in the weighted-average margin
calculation as sales with no dumping margin. The value of such sales is
included in the denominator of the weighted-average margin along with the
value of dumped sales. We do not, however, allow sales that did not fall
below normal value to cancel out dumping found on other sales. 

The Act requires that the Department employ this methodology. As pointed
out by Kawasaki, section 771(35)(A) of the Act defines "dumping margin" as
"the amount by which the normal value exceeds the export price or
constructed export price of the subject merchandise." Section 771(35)(B)
of the Act defines "weighted-average dumping margin" as "the percentage
determined by dividing the aggregate dumping margins determined for a
specific exporter or producer by the aggregate export prices and
constructed export prices of such exporter or producer." These sections,
taken together, direct the Department to aggregate all individual dumping
margins, each of which is determined by the amount by which normal value
exceeds export price or constructed export price, and to divide this
amount by the value of all sales. The directive to determine the
"aggregate dumping margins" in section 771(35)(B) of the Act makes clear
that the singular "dumping margin" in section 771(35)(A) of the Act
applies on a comparison-specific level, and does not itself apply on an
aggregate basis. At no stage in this process is the amount by which export
price or constructed export price exceeds normal value on sales that did
not fall below normal value permitted to cancel out the dumping margins
found on other sales. This does not mean, however, that sales that did not
fall below normal value are ignored in calculating the weighted-average
rate. It is important to note that the weighted-average margin will
reflect any "non-dumped" merchandise examined during the investigation;
the value of such sales is included in the denominator of the dumping
rate, while no dumping amount for "non-dumped" merchandise is included in
the numerator. Thus, a greater amount of "non-dumped" merchandise results
in a lower weighted-average margin. 

This is, furthermore, a reasonable means of establishing duty deposits in
investigations, and assessing duties in reviews. In an investigation such
as the present case, the deposit rate calculated must reflect the fact
that the U.S. Customs Service is not in a position to know which entries
of merchandise entered after the imposition of a dumping order are dumped
and which are not. By spreading the estimated liability for dumped sales
across all investigated sales, the weighted-average dumping margin allows
the U.S. Customs Service to apply this rate to all merchandise entered
after an order goes into effect. 

Finally, the Bed Linen decisions concerned a dispute between the European
Union and India. We have no WTO obligation to act based on these
decisions. See also Preserved Mushrooms from India, 66 FR 42507.
Accordingly, we are continuing to apply our margin calculation methodology
pursuant to Department practice.


Comment 2: Currency Conversion of Advertising Expenses

Kawasaki argues the Department should have converted the reported
Japanese advertising expense amounts from Japanese yen to U.S. dollars
when calculating the U.S. direct selling expenses in the margin
calculation.

Petitioners submitted no comment on this issue.

Department Position:

We agree with Kawasaki. Accordingly, we have converted Japanese
advertising expense amounts from Japanese yen to U.S. dollars for purposes
of these final results.


Comment 3: Choice of Home Market CONNUM

Kawasaki states that CONNUMH is the control number for the products sold
by Kawasaki and its affiliate Kawasho Corporation ("Kawasho") during the
period of review ("POR"), while CONNUM2H is the control number for the
mother coil prior to further processing by an affiliated processor which
Kawasho bought back and sold to an unaffiliated party. Kawasaki argues the
Department incorrectly used CONNUM2H instead of CONNUMH when matching home
market sales to U.S. sales.

Petitioners argue Kawasaki fails to offer any support for and is mistaken
in its allegation. Petitioners point out that after introducing Kawasaki's
home market sales database in the programming, CONNUM2H was not among the
variables kept in the preliminary programs (i.e. CONNUM2H did not appear
in the"keep" statement), which precluded the variable from being used in
the margin calculation. Kawasaki argues that the Department consistently
used the variable CONNUMH in the programming, citing to the specific lines
in the program where CONNUMH appears. As a result, Kawasaki argues, the
preliminary programs correctly use CONNUMH, contrary to Kawasaki's
allegation.

Department Position:

We agree with Petitioners. The Department did not use CONNUM2H in any of
the programming for the preliminary results. It is clear on its face, from
a review of the preliminary programming, that CONNUM2H appears nowhere in
the arm's length program, model match program, or margin calculation
program. The programming specifically instructs, through "keep"
statements, that CONNUMH should be used. See arm's length test program at
line 83; model match program at line 874; and margin calculation program
at line 2390 (July 31, 2001). Accordingly, as the Department used the
correct control number in the programming, we are not making any changes
to the final programming on this issue.



Comment 4: Home Market Sales Reporting Period

Petitioners argue the Department clearly requires the total quantity and
value of the merchandise under review for the POR to be reported, but that
Kawasaki failed to report its home market sales for the last month of the
POR. Petitioners note that if Kawasaki wishes to be exempt from reporting
certain sales, it must obtain approval from the Department at the outset
of the proceeding, as it did when it requested limiting its reporting of
home market sales to those with certain physical characteristics. See
Letter from Kawasaki to Import Administration (September 20, 2000).
Petitioners dismiss Kawasaki's argument that it did not need the
Department's approval, as it reported over 12 months of sales in its home
market database. Petitioners point out that this first administrative
review covers 18 months and is not a regular administrative review of 12
months. Petitioners argue that an incomplete home market sales database
could adversely affect the accuracy of the Department's sales-below cost
test. Petitioners observe that if low-priced sales are in the portion of
the POR that goes unreported, below-cost sales in certain product control
numbers that might have surpassed the 20% threshold would be incorrectly
retained in the pool of comparison sales used as the basis for normal
value. Petitioners argue Kawasaki repeatedly ignored the Department's
questionnaire and supplemental questionnaire instructions to report its
sales data for the entire POR, despite its awareness that the Department
historically applies adverse facts available for withholding relevant
data. As a result, Petitioners argue Kawasaki failed to cooperate with the
Department to the best of its ability; thus, the Department should resort
to total adverse facts otherwise available and apply the rate calculated
in the original investigation. At a minimum, Petitioners argue, the
Department should apply partial facts available, as the normal value
calculation is unreliable due to the missing data. Petitioners suggest
basing normal value on home market sales of identical grade merchandise
with the highest selling prices (net of movement and packing expenses, and
other allowable adjustments), and they provide a sample normal value
calculation methodology. Petitioners argue that because the Department
cannot determine the actual degree of below-cost sales made by Kawasaki
during the POR due to Kawasaki reporting incomplete home market sales
data, using the highest-priced home market sales as partial facts
available is warranted.

Kawasaki asserts that it did not wrongfully fail to report June 2000
sales. Kawasaki argues it followed the Department's explicit instructions,
citing to the Departmental questionnaire which states "{r}eport all sales
of the foreign like product during the three months preceding the earliest
month of U.S. sales, all months from the earliest to the latest month of
U.S. sales, and the two months after the latest month of U.S. sales. If
this is less than twelve months in total, please contact the official in
charge immediately." See Department's Antidumping Duty Questionnaire, at B-
1 (September 8, 2000). Kawasaki notes that its U.S. sales were made in
April 1999 and March 2000, thus the two months after the latest month of
U.S. sales is May 2000, up through which Kawasaki reported its sales.
Kawasaki reasons that under the questionnaire's clear directive, it was
not required to "contact the official in charge" prior to reporting its
sales based on a 17-month reporting period, as this period was not less
than twelve months total. Kawasaki dismisses Petitioners' argument that
the failure to report June 2000 could improperly include below-cost sales
in the pool of comparison sales as an extremely remote possibility.
Kawasaki notes the Department has previously allowed limited reporting of
as little as six months of a twelve-month period of review. See e.g. Fifth
Administrative Review of Certain Corrosion-Resistant Carbon Steel Flat
Products from Japan, 65 FR 8935 (February 23, 2000) (final admin. review).
Kawasaki also presumes the language of the questionnaire indicates the
Department is less concerned about the possibility of below-cost test
distortions where over 12 months of data is reported, as a majority of the
relevant sales data will be provided. In this instance, Kawasaki argues,
the Department has data that covers 17/18, or 94% of the POR, thus there
is "little chance" the remaining data would push particular products below
cost. As a result, Kawasaki states the Department should reject the
Petitioners' request for application of adverse facts available for the
June 2000 data.

Department Position:

We agree with Kawasaki. In our original questionnaire, the Department
requested that the respondent report "all sales of the foreign like
product during the three months preceding the earliest month of U.S.
sales, all months from the earliest to the latest month of U.S. sales, and
the two months after the latest month of U.S. sales. If this is less than
twelve months in total, please contact the official in charge
immediately." See Antidumping Duty Questionnaire at B-1 (September 8,
2000). On November 3, 2000, Kawasaki submitted its Section B and C
response ("Section B/C response"), which the Department noted contained
variables reported or calculated only through May 2000. Accordingly, on
March 2, 2001, the Department requested that Kawasaki resubmit its
databases and confirm that all variables are reported and calculated for
the complete POR, from January 4, 1999 through June 30, 2000. See
Department's Supplemental B/C Questionnaire, question 1 (March 2, 2001).
In response to the supplemental questionnaire, Kawasaki at that time
explained that it made no sales of subject merchandise to the United
States in April 2000 through June 2000. Thus, Kawasaki explained that it
believed reporting a home market sales reporting period of January 1999
through May 2000 was consistent with the Department's instructions in the
original questionnaire. The Department noted in its second supplemental
questionnaire that Kawasaki's "failure to provide the requested
information is at {its} own risk; if it is determined that such
information is necessary for our calculations, the Department may be
required to use adverse facts available." See Department's Second
Supplemental A/D questionnaire, question 9 (June 15, 2001). As a result,
Kawasaki recalculated its expense variables to include June 2000 data in
its databases. However, Kawasaki continued to submit home market sales for
the period January 1999 through May 2000.

After analyzing Kawasaki's questionnaire responses and the submitted
data, it appears that Kawasaki has complied with the Department's
antidumping duty questionnaire instructing the respondent to report all
home market sales from the three months before, to the two months after,
its U.S. sales of subject merchandise. As reported by Kawasaki, its U.S.
sales database consists of sales made only in April 1999 and March 2000.
Accordingly, counting three months back from Kawasaki's earliest U.S.
sales during the POR starts the home market sales reporting period at
January 1999, and counting two months after Kawasaki's latest U.S. sales
ends the home market sales reporting period through May 2000. Review of
the home market database indicates that Kawasaki properly reported its
home market sales for the enumerated home market sales reporting period.
Reporting home market sales for the month of June 2000 is not necessary,
as there is no evidence to indicate that Kawasaki omitted any U.S. or home
market sales from its submitted databases.

While Petitioners assert that Kawasaki should have obtained permission
from the Department to report sales for a period of time shorter than the
POR, Kawasaki correctly notes that the Department's questionnaire
specifically stated that the respondent was to contact the official in
charge if the reporting period "is less than twelve months in total." The
Department did not inform Kawasaki, either during or after issuance of the
questionnaire, that there was any need for Kawasaki to make a separate
request or obtain special permission to report sales for a period of time
shorter than the POR. As the period for which Kawasaki reported its sales
fell during the months of January 1999 through May 2000, seventeen months
total, this period was longer than the twelve months in total requested in
the questionnaire by the Department. Thus, Kawasaki was not remiss in
failing to contact the Department regarding its reporting period.

We do not agree with Petitioners' argument that because the first
administrative review covers a POR of eighteen months, rather than the
typical annual review period of twelve months, Kawasaki attempted "to cut
short of the entire POR for this review based on its reading of the
standard language in part of the Department's questionnaire for a regular
administrative review." We note that the extended period of time typically
used in analyzing the cost of production "means a period that is normally
1 year, but not less than 6 months." See section 773(b)(2)(B) of the Act.
Accordingly, the current home market sales period of seventeen months
reported by Kawasaki falls well within the extended period of time.
Furthermore, we note that our regulations provide that in calculating
normal value if sales are made at less than the cost of production, "{t}he
'extended period of time' under section 773(b)(1)(A) of the Act normally
will coincide with the period in which the sales under consideration for
the determination of normal value were made." See section 351.406 of the
Department's regulations.

Additionally, it should be pointed out that requiring Kawasaki to report
its home market sales for June 2000 would have no effect on the
Department's sales below cost test. Petitioners indicate they are
concerned that there is a possibility, had Kawasaki reported its June 2000
home market sales, that below-cost sales in certain product control
numbers could have surpassed the 20% threshold of the sales below cost
test. As stated before, Kawasaki reported that it only made sales of
subject merchandise in the U.S. during the months of April 1999 and March
2000 in the POR. In analyzing Kawasaki's reported home market database,
there were no below cost sales made in the home market during these
pertinent months of sales. See Final Analysis Memo at Section B. Thus,
even if all of Kawasaki's home market sales in June 2000 were below cost,
there were no sales below cost made in the relevant months of sales for us
to disregard in our calculations.

Accordingly, because Kawasaki followed the sales reporting period as
outlined in our antidumping duty questionnaire, and because there is no
evidence indicating that provision of home market sales information for
the omitted month of June 2000 is necessary for our calculations, we are
not applying facts available for Kawasaki's failure to report such
information.



Comment 5: Grade Codes

Petitioners find fault with Kawasaki's self-selected grade codes for some
home market sales, for which Kawasaki explained there were no Department
equivalents due to differences in their chemical and mechanical
properties. See Kawasaki's Section B response at B-11 (November 3, 2000).
Petitioners note that Kawasaki excluded such sales from its original home
market listing, but reported sales of the separate grades in its revised
home market sales listing. See Kawasaki's revised home market data bases
(March 30, 2001 and July 6, 2001). Petitioners argue that sample mill
certificates indicate the chemical compositions for an alleged new
Kawasaki grade do not differ from an existing Departmental grade. See
Kawasaki's Second Supplemental Response at 23 and Exhibit 15 (July 6,
2001) ("Second Supp. Response"). Petitioners assert that Kawasaki's
explanation that its mill certificates do not reveal actual chemical
composition so as to protect its trade secret (see Kawasaki's letter to
Import Administration, at 4 (July 27, 2001)) is not credible, as Kawasaki
provided technical documentation and catalogues which publicly discuss
chemical compositions. See Kawasaki's Supplemental B and C Response at
Exhibit 3a (March 30, 2001). Petitioners point out that it makes no sense
for Kawasaki to withhold certain information in the mill certificate from
its customer, when such information is available in public documents.
Accordingly, Petitioners argue that grades with essentially the same
chemical compositions should be collapsed into one department grade code.
Petitioners claim similar problems exist with other grade codes and match
variables, which warrants using facts available for Kawasaki's home market
sales.

Kawasaki asserts that Petitioners' claim, that Kawasaki tried to exclude
sales by creating unwarranted separate grade code designations, is
contrary to the facts. Kawasaki reiterates that it created separate grade
codes because there was no Departmental equivalent to account for the
product properties and the additional element of silver. Kawasaki states
it has explained that while the mill certificate does not indicate the
silver content to protect trade secret, it nevertheless indicates the
existence of additional silver through the "AB" in the product code.
Kawasaki notes that the antibacterial features of the products for which
it created separate product codes are evidenced in its submitted technical
documentation and catalogues. See Supp. B/C response, at Exhibit 3.
Although Petitioners view these public documents as nullifying Kawasaki's
claim of trade secret, Kawasaki points out that to the extent it publicly
markets and sells the product, it does not fully describe the silver
content. Kawasaki states that its customers understand its need to protect
its trade secret and thus only require acknowledgment on the mill
certificate that the product is an "AB" product. Kawasaki claims its
practice does not differ from other major steel producers involved in the
development of new products. As a result, Kawasaki argues the Department
should retain Kawasaki's separate grade codes designations.

Department Position:

The Department does not need to decide the issue on grade raised by
Petitioners. We note that even if we were to collapse Kawasaki's grade
into the appropriate Departmental grade (i.e. grade 18), these sales would
not match to Kawasaki's U.S. sales, as either similar or identical sales,
due to differences in gauge. See, e.g. Final Analysis Memo at Section B;
see Model Match Output at 45. As such, these sales of Kawasaki's AB
products would not be used in the Department's margin calculation. Thus,
the Department need not evaluate the issue in this administrative review.
Accordingly, the Department is making no changes to the programming in
relation to this issue.



Comment 6: Downstream Sales

Petitioners assert that Kawasaki has refused to report downstream sales
for all affiliated resellers and processors. Kawasaki stated it is "unable
to report the downstream sales of the affiliates whose sales record system
do not retain essential sale-specific information that would allow sale
information to be systematically gathered and reported." See Second Supp.
Response at 1-2. However, Petitioners reason that Kawasaki has a way to
tie the final sales to unaffiliated customers to the initial sales to
affiliated processors, as it must deal with the final customers' warranty
claims and with later invoicing where negotiations are not complete at the
time of shipment. See Second Supp. Response at 2 (payment terms are later
settled by use of a revised invoice). Petitioners point out that Kawasaki
describes an intricate sales arrangement which includes "transfers between
Kawasaki and its affiliated trading company, the sales and buy back
between the trading company and its affiliated processors, and the final
sales by the trading company to end-user customers, among Kawasaki, the
trading company, the processor and the end-users with respect to its buy-
back transactions." See Petitioners' Case Brief, at 9 (September 24,
2001). Petitioners argue that even if the end-user customers are not
concerned about the product manufacturer, customers must be concerned
about the actual supplier. Petitioners also assert that certain revised
invoices in Kawasaki's home market database call into question Kawasaki's
claim that it cannot link sales. Petitioners support the Department in not
relying on Kawasaki's sales to downstream affiliated customers, but stress
that it is unacceptable for Kawasaki to refuse to provide requested data
when it has the ability to do so. For this reason, Petitioners state that
the Department should not accept Kawasaki's reported home market sales
data.

Kawasaki argues Petitioners make an unfounded conclusion that Kawasaki is
able to report downstream sales which ignores both Kawasaki's explanations
of its limitations, as well as other reviews in which such explanations
have been verified. Kawasaki repeats that it "can not report 'downstream'
sales to the unaffiliated customer through certain affiliated resellers
and processors in the home market, because the sales record systems of
these affiliates do not permit the systematic linkage of final sales data
with relevant product characteristics. Without such product characteristic
information, Kawasaki cannot create a reportable control number for these
sales." See Kawasaki's Rebuttal Brief, at 8 (September 28, 2001). Kawasaki
asserts that Petitioners' examples of Kawasaki's ability to link sales
information (price renegotiation and warranty claims) involve manual
linkage which, while it may be used in certain sale-specific instances,
Kawasaki's affiliates cannot use to trace each SSSS sale in the POR due to
time constraints and limited resources. Kawasaki asserts that price
renegotiations are upstream negotiations between affiliated parties which
have no bearing on Kawasaki's ability to report the CONNUM of the
reseller/processors' final sale to an unaffiliated customer. Kawasaki
claims that identifying the reseller/processor in a particular transaction
is simpler than reporting the reseller/processor's sale by CONNUM.
Kawasaki explains that while it can identify a reseller/processor, it
cannot report a reseller's/processors' downstream sale without the
electronic link to Kawasaki's mother coil information due to the
reseller's/processor's "unsophisticated" sales records. Kawasaki then
states the manual nature of linking warranty claims was noted in the hot-
rolled flat-rolled carbon-quality steel ("HR Steel") sales verification
earlier this year, wherein the Department observed that to handle warranty
claims more than three months following shipment, the reseller/processor
must look up an inspection report from Kawasaki, which is kept as an image
and not in a database. See Sales Verification of Kawasho Corporation and
{proprietary name} Steel Center, at 9 (August 8, 2001) (A-588-846; ARP:
02/19/1999 - 05/31/2000).

Finally, Kawasaki argues reporting upstream sales in this review is
consistent with Departmental regulations, practice and prior treatment of
Kawasaki's downstream sales. Kawasaki notes that Departmental practice has
been not to require reporting of affiliates' downstream sales where such
reporting would represent a significant or impossible burden or where
there is little utility in reporting the sales relative to the burden of
reporting them, citing Certain Cold-Rolled and Corrosion-Resistant Carbon
Steel Flat Products from Korea, 62 FR 47422, 47424 (September 9, 1997)
(prelim. admin. review). Kawasaki likens its situation to that of the
respondent in Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al., 63 FR 33320, 33341 (June 18, 1998)
(final admin. review), where the Department allowed reporting of upstream
sales to affiliates where the respondent was unable to report downstream
sales because of the affiliates' unsophisticated computer systems.
Kawasaki also stresses that the Department has previously noted the
impossibility of reporting Kawasaki's affiliated processors' downstream
sales. See HR Steel Sales Verification Report, at 31 (March 30, 1999);
Certain Cut-to-Length Carbon Quality Steel Plate Products from Japan, 64
FR 73215, 73224-225 (December 29, 1999) (final determination). Thus,
Kawasaki argues, as the Department actually verified Kawasaki's reporting
limitations in those recent cases, the Department should accept those
limitations in this review, and continue to accept the reporting of the
upstream sales.

Department Position:

We agree with Kawasaki. It appears from Kawasaki's description of its
sales process and downstream sales that the level of record-keeping
maintained by its affiliated resellers and processors is not one which is
conducive to Kawasaki effectively or correctly reporting its downstream
sales in the manner required by the Department. Kawasaki has attested to
the fact that it is unable to report certain downstream sales. E.g.
Section A response at 3-4 (September 29, 2000); Supplemental Section A
response at 1, 6 (February 23, 2001). Petitioners portray Kawasaki as
refusing to report downstream sales for all affiliated resellers and
processors. Kawasaki relies on the fact that verification has been
conducted in other recent Kawasaki cases involving its other steel
products. We note that because the verifications referenced by Kawasaki
were conducted on Kawasaki products other than subject merchandise, we
cannot rely on the findings in those cases concerning Kawasaki's
downstream sales and apply them to this review. Those sales transactions
involved not only different products, but possibly also different levels
of trades, sales and resales activities, and resellers, processors and
affiliates. As the Department did not have the opportunity to verify
Kawasaki's questionnaire responses in this review due to case and time
limitations, we must rely on the information on the record. In this
instance, there is no information on the record which contradicts
Kawasaki's claim that it cannot report its downstream sales. Thus, we must
presume the information reported by Kawasaki was as far downstream as it
had in its ability to report. Furthermore, Kawasaki appears to have
complied with the Department's antidumping duty questions by reporting,
where it was able, downstream sales of those affiliated resellers and
processors for which sales information could be linked. Accordingly, the
Department is not making changes to its analysis on this issue. However,
we note that if Kawasaki's claim of its inability to report downstream
sales is found to be false or incorrect in a future review of subject
merchandise, the Department may resort to adverse facts available for
Kawasaki's non-compliance.



Comment 7: Coil Reporting Errors

Petitioners argue the Department should not use Kawasaki's reported data
because of reporting errors in variable CONNUM2H, where Kawasaki reported
the original control number of the "mother coil" it produces, which is
processed by a Kawasho affiliate for sale to its customers or for sale
back to Kawasho for sale to Kawasho's customers. See Second Supp. Response
at 23. Petitioners point out that none of the processed coils should be
wider than the mother coils after the slitting, shearing or cutting-to-
length processing reported by Kawasaki, as such processing would not
increase the width of the product. Nevertheless, Petitioners note that for
some home market sales, Kawasaki reported a narrower width for the mother
coils than for the processed coils. Petitioners argue that such errors in
reporting affect both the accuracy in product matching and the control
number-specific cost test. Petitioners stress that if this was a mere
reporting error, Kawasaki should have caught and corrected the error much
earlier, given the Department's line of questioning. Petitioners point out
that they raised this issue in a pre-preliminary letter to the Department.
See Petitioners' letter to Import Administration, at 3, 14-15 (July 24,
2001). Petitioners argue that it is notable that while Kawasaki provided a
point-by-point rebuttal on Petitioners' other comments, it provided
absolutely no defense or explanation on this issue.

Kawasaki notes that Petitioners' allegations of reporting errors between
the "mother coil" and the processed coil involve only five of the reported
transactions. Kawasaki offers little explanation on the allegation, only
stating that it did not rebut Petitioners' pre-preliminary comments merely
because it "did not believe additional explanation was necessary." See
Kawasaki's Rebuttal Brief, at 13. Kawasaki explains that "observations in
which CONNUMH and CONNUM2H differ represent sales to a certain affiliate
processor where the final sold product has different physical properties
from the 'mother coil' . . . {thus}, it is little surprise that the
CONNUMH field and CONNUM2H field might differ as to their reported
widths." Id. Kawasaki fails to address Petitioners' argument that the
processed coil cannot be smaller than mother coil using the processing
reported by Kawasaki. However, Kawasaki points out that the five sales do
not match to the U.S. sales; thus such sales are not relevant, even if
there were a mistake.

Department Position:

We agree with Kawasaki. Although Kawasaki is correct in stating that the
fields for mother coil and processed coil "might differ as to their
reported widths," this difference should not be reflected by a narrower
mother coil, as pointed out by Petitioners, and Kawasaki does not
adequately explain how the processing done on the mother coil would
increase the width. However, without further verification of Kawasaki's
manufacturing process, we must accept the possibility of an actual
increase in width. In addition, this discrepancy only appears in five home
market sales, in a database consisting of thousands of sales. Furthermore,
the relevant sales do not match to the sales of subject merchandise in the
U.S. during the POR. Thus, these home market sales are not relevant for
the Department's margin calculation purposes. Accordingly, the Department
is making no changes to the programming in relation to this issue.



Comment 8: Post-Shipment Revisions

Petitioners argue the Department should not accept post-shipment
revisions Kawasaki made after the shipment of the merchandise and/or
issuance of the original invoice. Petitioners argue that the documents
Kawasaki presented in response to the Department's questions on the post-
shipment revisions fail to support Kawasaki's explanations for its post-
shipment revisions, as does Kawasaki's submitted data base. Petitioners
also question the rationale behind certain customers receiving both a post-
shipment revision as well as a warranty expense adjustment on certain home
market sales, and state that it appears that Kawasaki double-counted
warranty expenses in such instances. Petitioners argue Kawasaki has
presented no evidence supporting its claim that such post-shipment
revisions are normal practice and assert that such post-shipment revisions
make no business sense. Petitioners maintain that Kawasaki fails to meet
its burden of proof by failing to provide sufficient evidence in support
of its post-shipment revisions, citing 19 C.F.R. 351.401(b)(1), and state
the Department should reject the adjustment for purposes of the final
results of review.

Kawasaki objects to Petitioners' arguments implying that its price
revisions were made only for purposes of this antidumping duty
administrative review. Kawasaki asserts it clearly described, and provided
supporting sales documentation of, its normal practice of post-shipment
adjustments, including documentation of a post-shipment renegotiation
price change made five days after shipment. See Supp. B/C response at
Exhibit 18. Kawasaki also notes it provided documentation showing that a
party may explicitly request post-shipment price negotiations, in the form
of an invoice marked with a "K" indicating a pending price negotiation.
See Second Supp. Response at 21, Exhibit 14(a). Kawasaki states its sales
practice of making post-shipment revisions has been noted, verified and
accepted by the Department in other cases involving Kawasaki, citing HR
Steel, A-588-846, Sales Verification Report (August 8, 2001) at 4-5, 8
(Department traced the original invoice to the cancelled invoice to the
revised invoice); and Antidumping Duty Investigation of Certain Cut-to-
Length Carbon-Quality Steel Products from Japan, A-588-847, Verification
of Sales Responses (October 26, 1998) at 30 (no discrepancies noted
between examined documents and Kawasaki's explanation of order
confirmation and invoice revisions). While Petitioners question Kawasaki's
reasons for adjusting prices, including changes in market price, Kawasaki
dismisses Petitioners' assertion that the sales database indicates no
change in market price, arguing that Petitioners aggregate the prices and
fail to look at the market price of specific product grade codes, and also
fail to take into account transaction-specific factors that drive market
price (e.g. customer history, delivery size, region). Accordingly,
Kawasaki argues the Department should continue to accept Kawasaki's post-
shipment price revisions as it did in the preliminary results.

Department Position:

We agree with Kawasaki. Section 351.401(b) states that for adjustments to
export price, "(1) The interested party that is in possession of the
relevant information has the burden of establishing to the satisfaction of
the Secretary the amount and nature of a particular adjustment; and (2)
The Secretary will not double-count adjustments." Kawasaki provided
support for its post-sale price adjustments in its questionnaire response,
both in the form of a written explanation of its negotiation and sales
revision process and reasons for such revisions, and also in the form of a
copy of a revised invoice. See Second Supplemental Response at 19-22, and
Exhibit 14. There is no evidence on the record to indicate that Kawasaki
has not met its burden of explaining the nature of its post-shipment price
adjustments, nor is there any evidence that Kawasaki's post-shipment price
adjustments are, in effect, double-counting warranty expenses.
Accordingly, the Department is making no changes to the programming in
relation to this issue.



Comment 9: U.S. Market Database

Petitioners question the validity of the U.S. sales database in light of
certain factors, which include: 1) the volume of U.S. sales in the period
of review ("POR") is strikingly different from the volume of U.S. sales in
the original period of investigation ("POI"); 2) the U.S. sales database
consists of only three sales, and Petitioners note that Kawasaki had
several U.S. customers in the original investigation; 3) Kawasaki made
three EP sales to trading companies in the POR, but made CEP sales as well
as EP sales in the POI; and 4) certain other proprietary reasons involving
the U.S. customer base. See Petitioners' Case Brief, at 15. Petitioners
argue that after analysis of the facts and circumstances, the Department
should reject the U.S. sales database as unusable. Petitioners note that a
potential for price manipulation is sufficient reason to reject sales.
Citing Koening & Bauer-Albert Ag v. United States, 15 F. Supp. 2d 834,
840, 22 CIT __ (1998). Petitioners assert that the potential for price
manipulation is significant, given the "highly-contrived U.S. sales
database," and Kawasaki's failure to submit a complete home market
database. Accordingly, Petitioners argue that the Department should apply
adverse facts available in conducting its final margin analysis.

Kawasaki argues Petitioners provide no evidence for rejecting the U.S.
database or that Kawasaki abused the administrative process. Kawasaki
asserts that differences in customers, channels, and volume and value of
sales for the POR from the original POI do not affect the accuracy,
credibility and completeness of the submitted database. Kawasaki notes the
antidumping statute anticipates changes in sales and pricing practices,
citing Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the
United Kingdom, 60 FR 44009 (August 24, 1995) (final admin. results)
("while there is no statutory requirement that a firm must act to
eliminate price discrimination, if it decides to do so, how it does so is
within its own discretion"); see also Certain Corrosion-Resistant Carbon
Steel Flat Products from Japan, 65 FR 8935, 8937-38 (February 23, 2000)
(final admin. results) (U.S. and home market prices may be changed to
eliminate price discrimination). Kawasaki also maintains it has fully
explained and provided supporting documentation for its reported price
adjustments. In addition, Kawasaki challenges Petitioners' argument that
Kawasaki's U.S. customers renders the database unusable, noting the
Department has rejected similar common-customer arguments. See Certain
Corrosion-Resistant Carbon Steel Flat Products from Japan, 64 FR 12951,
12954 (March 16, 1999) (final admin. results) ("CR from Japan") (mere fact
sales were made to same customer in U.S. and home markets was insufficient
to deem calculation based upon such sales inappropriate); Color Television
Receivers, Except for Video Monitors, From Taiwan, 55 FR 47093, 47100
(November 9, 1990) (Department did not ignore third-country sales made to
a purchaser related to the U.S. purchaser). Kawasaki notes that while
there was greater potential for price manipulation in CR from Japan,
because the customer bought identical, matching merchandise in both the
U.S. and home markets, the Department stated "that the customer in
question purchased the identical product in both markets is not, in
itself, unusual, nor suggestive of an intentional evasion or circumvention
of the antidumping duty law. Furthermore, as acknowledged by the
Department in previous cases, it is permissible for a respondent to reduce
or eliminate dumping either by raising its U.S. prices or by lowering its
home market prices of merchandise subject to the order." CR from Japan, 64
FR at 12954. Accordingly, Kawasaki argues the Department should continue
to accept Kawasaki's U.S. database as provided.

Department Position:

We agree with Kawasaki. The antidumping statute was not written with the
expectation that the sales volume and value of subject merchandise would
remain uniform from the investigation to the subsequent antidumping duty
reviews. As pointed out by Kawasaki, the Department has previously
recognized that a firm has discretion in taking action to eliminate price
discrimination. See Certain Hot-Rolled Lead and Bismuth Carbon Steel
Products from the United Kingdom, 60 FR at 44009; Certain Corrosion-
Resistant Carbon Steel Flat Products from Japan, 65 FR at 8937-38. Such
discretion certainly can include sales volume and value. Furthermore,
changing market conditions, customer requirements, and the antidumping
duty imposed certainly would have an effect on changes in sales. Finally,
there is no evidence on the record which appears to indicate that Kawasaki
provided false information to the Department. Accordingly, the Department
is making no changes to the programming in relation this issue.

RECOMMENDATION:

Based on our analysis of the comments received, we recommend adopting the
above changes and positions, and adjusting the programming accordingly. If
accepted, we will publish the final results of review and the final
weighted-average dumping margin for the reviewed firm in the Federal
Register.






AGREE___________ DISAGREE___________





__________________________________________

Faryar Shirzad
Assistant Secretary 
  for Import Administration

__________________________________________
Date