67 FR 6685, February 13, 2002
                                                            A-580-829
                                                       POR: 1999-2000
                                                      Public Document
                                                       GII/O4: AGA/KG

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary
                 for Import Administration

FROM:          Bernard T. Carreau
               Deputy Assistant Secretary
                 for Import Administration
                 Group II


DATE: February 6, 2002

SUBJECT: Issues and Decision Memorandum for the Final Results of the
Antidumping Duty Administrative Review of Stainless Steel Wire Rod (SSWR)
from Korea.


Summary

We have analyzed the comments in the case and rebuttal briefs submitted
by interested parties in the antidumping duty administrative review of
SSWR from Korea. Below is a complete list of issues in this investigation
for which we received comments from the parties. As a result of our
analysis, we have made changes in the preliminary margin calculations. We
recommend that you approve the positions we have developed in the
Discussion of Issues section of this memorandum.

In Section I, we identify the issues in this review for which we received
comments from the interested parties. Section II sets out the scope, or
product coverage, of this review. Section III identifies the changes made
in the margin calculation since the preliminary results. Section IV
analyzes the comments of the interested parties. Finally, we recommend
approval of the Department's positions developed for each of the issues. 

Background

On October 9, 2002, the Department of Commerce (the Department) published
its preliminary determination in the antidumping duty administrative
review of SSWR from Korea. See 66 FR 51385.

The period of review (POR) is September 1, 1999 through August 31, 2000.
The respondents in this review are Changwon Specialty Steel Co., Ltd.
(Changwon) and Dongbang Specialty Steel Co., Ltd. (Dongbang)
(collectively, respondents).

We invited all parties to comment on the preliminary determination.
Respondents submitted a case brief on December 5, 2001 and the petitioners
(i.e., Carpenter Technology Corp., Empire Specialty Steel, and the United
Steel Workers of America, AFL-CIO/CLC), submitted a rebuttal brief on
December 12, 2001.

I. List of Issues

1.  Affiliation Between the Respondents and Their Customers Through a
    Principal/Agent Relationship 

2.  Deferred Foreign Exchange Losses 

3.  Deferred Foreign Exchange Losses of Dongbang Transport 

4.  Calculation of General and Administrative (G&A) Expenses: 

    4A. Gains and Losses on Certain Monetary Instruments

    4B. Items Relating to the Disposition of Fixed Assets
 
    4C. Gain and Losses on Futures and Gain on Redemption of Corporate Bond

    4D. Casualty Insurance Refund

    4E. Down Payment for Other Products 

5.  Conversion of Values in the Constructed Export Price (CEP) Profit
    Calculation 

6.  Calculation of Foreign Market Unit Price in U.S. Dollars 

7.  Model Match Calculations in the Margin Program 

8.  Variable Cost of Manufacturing (VCOMs) and Total Cost of Manufacturing
    (TCOMs) Adjustments 

9.  Correction of Errors Noted in Changwon's Cost of Production
Verification
    Report 

10. New Information in the Respondents' Case Brief 


II. Scope

For purposes of this review, SSWR comprises products that are hot-rolled
or hot-rolled annealed and/or pickled and/or descaled rounds, squares,
octagons, hexagons or other shapes, in coils, that may also be coated with
a lubricant containing copper, lime or oxalate. SSWR is made of alloy
steels containing, by weight, 1.2 percent or less of carbon and 10.5
percent or more of chromium, with or without other elements. These
products are manufactured only by hot-rolling or hot-rolling annealing,
and/or pickling and/or descaling, are normally sold in coiled form, and
are of solid cross-section. The majority of SSWR sold in the United States
is round in cross-sectional shape, annealed and pickled, and later cold-
finished into stainless steel wire or small-diameter bar. The most common
size for such products is 5.5 millimeters or 0.217 inches in diameter,
which represents the smallest size that normally is produced on a rolling
mill and is the size that most wire-drawing machines are set up to draw.
The range of SSWR sizes normally sold in the United States is between 0.20
inches and 1.312 inches in diameter. 

Two stainless steel grades are excluded from the scope of the review.
SF20T and K-M35FL are excluded. The chemical makeup for the excluded
grades is as follows:

SF20T

Carbon       0.05 max      Chromium          19.00/21.00
Manganese    2.00 max      Molybdenum        1.50/2.50
Phosphorous  0.05 max      Lead-added        (0.10/0.30)
Sulfur       0.15 max      Tellurium-added   (0.03 min)
Silicon      1.00 max

K-M35FL

Carbon       0.015 max     Nickel            0.30 max
Silicon      0.70/1.00     Chromium          12.50/14.00
Manganese    0.40 max      Lead              0.10/0.30
Phosphorous  0.04 max      Aluminum          0.20/0.35
Sulfur       0.03 max 


The products subject to this review are currently classifiable under
subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and
7221.00.0075 of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheadings are provided for convenience and
customs purposes, the written description of the scope of this review is
dispositive.

III. Changes in the Margin Calculation Since the Preliminary Results

1.  We included an amortized portion of the deferred foreign exchange
losses
    of Pohang Iron and Steel Co., Ltd. (POSCO) and Dongbang Transport
    Logistics Co., Ltd. that these two companies wrote off in 1999 to
retained
    earnings in the calculation of the respondents' financial expense. See
    Comments 2 and 3. 

2.  We included POSCO's consolidated gain on valuation on certain short-
term
    financial instruments in the calculation of the respondents' financial
    expense. See Comment 4A. 

3.  We included a gain on the disposition of fixed assets in POSCO's G&A
    calculation. See Comment 4B. 

4.  We included a casualty insurance refund in Changwon's G&A calculations.
    See Comment 4D. 

5.  We corrected currency conversion errors in the CEP profit calculation.
    See Comment 5. 

6.  We corrected the calculation of foreign market unit price in U.S.
    dollars. See Comment 6. 

7.  We included missing instructions to identify the identical grades for
    certain grades in model matching. See Comment 7. 

8.  We applied the VCOMs and TCOMs from the annual cost database to the
    margin calculations. See Comment 8. 

9. In the preliminary results, we inadvertently applied the Korean won
   exchange rate to the variable "DINVCARU," which was reported in U.S.
   dollars. For the final results, we used the variable "DINVCARU" in our
   calculations as it was reported in U.S. dollars. See Final Calculation
   Memorandum.


For further details of our calculations, see Final Calculation Memorandum
dated February 6, 2002.


IV. Analysis of Comments

Comment 1: Affiliation Between the Respondents and Their Customers
Through a Principal/Agent Relationship

The petitioners contend that Changwon and Dongbang are affiliated with
their trading company customers in the respondents' U.S. sales
transactions through a principal/agent relationship under section
771(33)(G) of the Tariff Act of 1930, as amended (the Act). The
petitioners claim that the respondents (and the U.S. importers of their
sales) are attempting to limit their liability for antidumping duties by
"interposing" a trading company in the chain of sale as the first
unaffiliated customer in the United States. The petitioners allege that,
in fact, the trading companies act as no more than sales agents for the
exporters, and merely serve to "shield the price paid by the actual
customer from scrutiny under the antidumping laws." The petitioners
characterize this distribution "strategy" as a "new twist" on the "scheme"
in which respondents interposed a U.S. affiliated sales organization into
the distribution chain in order to prevent sales from becoming CEP sales.
The petitioners note that this previous "scheme" was undone by the Court
of Appeals for the Federal Circuit in A.K. Steel Corp. et al. v. United
States, Slip. Op. 99-1296, (Fed. Cir. Sept. 12, 2000), ("AK Steel"), which
mandated that such sales should be treated as CEP sales.

The petitioners note that the Department, in Notice of Final
Determination of Sales at Less than Fair Value: Engineered Process Gas
Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether
Complete or Incomplete, from Japan, 62 FR 24394, 24403 (May 5, 1997)
(Turbo-Compressors from Japan), set out criteria for determining a
principal/agent relationship within a sales transaction, namely (1) the
foreign producer's role in negotiating price and other terms of sale; (2)
the extent of the foreign producer's interaction with the U.S. customer;
(3) whether the agent/reseller maintains inventory; (4) whether the
agent/reseller takes title to the merchandise and bears the risk of loss;
and (5) whether the agent/reseller further processes or otherwise adds
value to the merchandise. The petitioners point out that, in Turbo-
Compressors from Japan, the Department determined that a principal and
agent are affiliated within the meaning of section 771(33) of the Act. The
petitioners argue that, based on the criteria for a principal/agent
relationship discussed in Turbo-Compressors from Japan, the respondents
(i.e., both Changwon and Dongbang) have a principal/agent relationship
with their U.S. trading company customers, and are therefore affiliated
with these customers. 

For Changwon, the petitioners claim that Changwon's submitted sales
documents for a sale to one party establish that this sale was actually to
a third party, made through the first party acting as a sales agent. The
petitioners state that the proprietary documents from Changwon, as well as
the proprietary documents from Changwon's affiliated parties involved in
Changwon's U.S. sales (POSCO Steel Sales & Service Co., Ltd. (POSTEEL) and
Pohang Steel America Corporation (POSAM)), (1) provide evidence of this
principal-agent relationship. The petitioners state that the sales
documents specifically show that (1) Changwon was involved in negotiating
the terms of sale with the ultimate customer; and that (2) the reported
customer did not (a) have any substantive role in the sale, (b) maintain
inventory, (c) take title to the merchandise, (d) bear the risk of loss
for this sale, or (e) further process or otherwise add value to the
merchandise. The petitioners claim that the only "commercially reasonable"
explanation for the role of the reported customer in the sale is that this
party acted as an agent of Changwon in this sale.

The petitioners further claim that sales documents obtained at
verification from Changwon demonstrate that all of Changwon's trading
company sales were made using the trading company as an agent in the same
manner as described above. The petitioners argue that while Changwon may
have communicated through the trading company "agents," if Changwon
controls the ultimate price and terms of sale, the trading company still
remains "only an instrument" of Changwon. The petitioners contend that the
fact that one party bought Changwon's merchandise through more than one
"agent" does not necessarily mean, as the Department assumed, that this
party chose to work only through trading companies. See Memorandum dated
October 1, 2001 on Whether Changwon and Dongbang are Affiliated With
Certain U.S. Customers Under Section 771(33) of the Act, as Amended by the
Uruguay Round Agreements Act, (Affiliation Memo) at 6. Rather, the
petitioners argue that this indicates that Changwon is directing end user
sales through its affiliated agents for tactical reasons concerning
antidumping liability.


The petitioners note that, in general, Changwon can direct all contacts
to be through the agent and yet control the process. The petitioners also
state that there is no evidence, no definitive proof, and/or many
unanswered questions concerning many of the factors that the Department
used in its affiliation analysis, including whether the agents/resellers
deal in the goods of other suppliers; maintain inventory; bear the risk of
loss; or must account to Changwon for their profits or losses. The
petitioners contend that proprietary evidence indicates that the (ultimate
end user) customer chooses to deal with Changwon, the producer, and does
not make its purchasing decision based on the reputation of the agent. The
petitioners further argue that in back-to-back transactions, like those
performed by the agents, there is no risk to the agent. The petitioners
conclude that Changwon controls the commercial sales of its exports
through its agents in the United States, and Changwon and its agents
should be treated as affiliated parties under section 771(33)(G) of the
Act.

In a similar manner, the petitioners claim that Dongbang's submitted
sales documents for a sale to one party establish that this sale was
actually to a third party. The petitioners argue that the criteria for a
principal/agent relationship exist in this case because the first party,
the reported customer, among other things, (1) did not maintain inventory,
(2) did not take title to the merchandise, (3) did not bear the risk of
loss, and (4) did not further process or add value to the merchandise. The
petitioners further argue that record evidence (including proprietary
evidence) demonstrates the existence of a principal/agent relationship
between Dongbang and most of its other reported customers. Among these
factors, the petitioners state that the record demonstrates that the
ultimate end user customers knew that they were dealing with Dongbang;
Dongbang controls the prices charged by the trading company customers; and
that Dongbang does not need further accountability from its "agents." The
petitioner concludes that Dongbang's "sales agents" are not buying from
Dongbang as independent actors, but are acting as an instrument of
Dongbang.

The petitioners contend that the Department's conclusion in Stainless
Steel Wire Rod From the Republic of Korea: Preliminary Results of
Antidumping Duty Administrative Review, 66 FR 51385, 51387 (October 9,
2001) (Preliminary Results) that the respondents do not have a
principal/agent relationship with their trading company "partners" is not
supported by record evidence. The petitioners state that the Department's
conclusion that Changwon and Dongbang did not market directly to the
ultimate U.S. customers is incorrect because Changwon and Dongbang
effectively control prices and other terms of sale with the ultimate
customer of the trading company. The petitioners also contest the
Department's statement that 'trading company customers take title to the
inventory and bear risk of loss.' See Id. The petitioners state that
taking title in a back-to-back transaction, which is the same type of
transaction that Changwon employed with POSAM and POSTEEL, is not enough
to transform an agent into an "independent actor." Furthermore, the
petitioners state that there is no evidence of whether marketing is done
by Changwon, Dongbang, or the trading companies to the ultimate customer.

The petitioners further dispute how the Department distinguishes this
case from Turbo-Compressors from Japan. The petitioners state that "the
issue is not the number of agents or the number of customers but the
actions of those agents and customers." The petitioners also contend that,
just because of the complexity and variety of the facts in this case, one
cannot assume that no principal/agent relationship exists between
Changwon, Dongbang, and their trading company "agents." The petitioners
claim that the fact pattern in this case is the "natural extension of the
back-to-back indirect Export Price (EP) sale scheme that was in place"
prior to the A.K. Steel decision. The petitioners assert that the
Department must consider the functionality of the relationships in the
sale, and "not allow form to supplant substance" in determining the
ultimate customer. The petitioners further maintain that the
principal/agent affiliation relationships at issue require the 'more
sophisticated analysis that better reflects the realities of the
marketplace' called for by the Statement of Administrative Action (SAA)
accompanying the URAA, H.R. Doc. No. 103-316 at 838 (1994), and through
this analysis, the Department should find that Changwon and Dongbang are
affiliated with their trading company customers through a principal/agent
relationship under Section 771(33) of the Act.

The petitioners further contend that, since the transactions reported to
the trading companies are transfer prices to an agent, and do not
represent the transaction between the exporter and the first unaffiliated
U.S. customer, the Department should conclude that the respondents have
failed to cooperate within the meaning of section 782(e)(4) of the Act.
Moreover, the petitioners stress that the Department should therefore
assign total adverse facts available to the respondents.

The respondents argue that the Department properly concluded that
Changwon's and Dongbang's trading company customers are not affiliated
with the respondents. The respondents contend that the petitioners are
"knowingly and intentionally attempting to mislead" the Department by
suggesting that Changwon and Dongbang are selling to trading companies in
response to the AK Steel decision. The respondents point out that all the
sales in the present proceeding took place before the AK Steel decision.
The respondents also point out that the respondents had U.S. sales to
unaffiliated trading companies in the investigation stage of this
proceeding. See Notice of Final Determination of Sales at Less Than Fair
Value: Stainless Steel Wire Rod from Korea, 63 FR 40404 (July 29, 1998).
The respondents further note that the Department, in numerous cases,
including in the investigation of SSWR from Korea, has consistently
determined that in U.S. sales transactions involving unaffiliated trading
companies, the unaffiliated trading company is the U.S. customer. See Id.

The respondents further argue that, based on the Department's practice
regarding principal/agent relationships, including Turbo-Compressors from
Japan, the facts confirm that Changwon and Dongbang are not affiliated
with their U.S. customers, and do not in any way control their
unaffiliated trading company customers. The respondents note that, in
Turbo-Compressors from Japan, the Department based its affiliation and
control finding, in part, on the fact that the respondent had direct
contacts with the ultimate end-user, including joint marketing efforts
with the trading company, prior to the sale. The respondents contend that,
in the present case, as the Department confirmed in the Preliminary
Results, 66 FR at 51387, they did not engage in any such marketing
efforts. The respondents also note that, as the Department verified, they:
1). do not directly engage in any sales negotiations or marketing efforts
targeting the ultimate end user; 2). do not have any exclusive sales
arrangements with any of their unaffiliated trading company customers; and
3). issue their invoices to the unaffiliated trading company, thereby
passing title and risk of loss to the trading company. 

The respondents also contend that the petitioners' suggestion that the
respondents were involved in negotiations with the ultimate end-user is
based on "pure speculation." In reference to the sales documents submitted
by Changwon discussed by the petitioners, the respondents state that these
documents mention the trading company's customer only for reference
purposes. The respondents explain that foreign producers, in transactions
involving trading companies, are made aware of the ultimate end users
because the subject merchandise is "generally" shipped directly to the
ultimate end user, at the trading companies' request, in order to minimize
freight costs. The respondents also explain that a trading company may
have more than one customer, and foreign producers reference the ultimate
end-user in documents in order to distinguish between the different end
users and delivery locations. The respondents note that other documents
not referenced by the petitioner, including the order confirmation,
commercial invoice, and proof of payment, list the trading company and
legally establish the trading company customer as the customer.

In reference to the sales documents submitted by Dongbang, the
respondents state that the documents at issue indicate that Dongbang and
the unaffiliated trading company were the legal parties to the
transaction. Furthermore, the respondents contend that no evidence exists
of any sales negotiations between Dongbang and the end user identified in
these documents. The respondents point out that Dongbang is made aware of
the ultimate end user because the merchandise is shipped directly to the
ultimate end user. The respondents also state this factual scenario is
similar to that in Electrolytic Manganese Dioxide from Japan: Final
Results of Antidumping Duty Administrative Review, 58 FR 28551, 28555 (May
14, 1993) (EMD from Japan), where the Department determined that the
respondent, which shipped the merchandise directly to the end user, was
not affiliated with the trading company customer based on a
principal/agent relationship.

The respondents also point out two further similarities between the
present case and EMD from Japan. First, they note that, in EMD from Japan,
58 FR at 28555, the Department found that the fact that a reseller does
not maintain inventory and does not further process the merchandise in
question does not mean that a principal/agent relationship exists. The
respondents emphasize that, in the present case, these factors also do not
lead to the conclusion that Changwon and Dongbang control their trading
company customers. They also state that some of the respondents' trading
company customers actually maintained inventory and/or further processed
the subject merchandise.

Second, the respondents state that, in EMD from Japan, 58 FR at 28555,
the Department based its finding of unaffiliation primarily on the fact
that title and risk of loss for non-payment by the ultimate end user
passed from the respondent to the trading company. The respondents point
out that, in the present case, they invoiced the unaffiliated trading
companies, and the unaffiliated trading companies therefore take title to
the merchandise and bear the risk of loss for non-payment by the ultimate
end users. The respondents note that the Department confirmed during
verification that the transfer of title and risk of loss to the trading
companies, in order to avoid the credit risk of selling to small- and
medium-sized companies, were two of the primary reasons for the
respondents selling to unaffiliated trading companies. The respondents
conclude that the Department should continue to find that Changwon and
Dongbang are not affiliated with their trading company customers.

The Department's Position: We agree with the respondents that Changwon
and Dongbang are not affiliated with their trading company customers
through a principal/agent relationship. Under section 771(33)(G) of the
Act, principals and agents are affiliated because, "by definition, a
principal controls its agent." See Turbo-Compressors from Japan, 62 FR at
24403. In determining whether a principal/agent relationship exists, the
Department first examines whether an explicit agreement exists from the
alleged principal, authorizing the agent to act on its behalf in a
specified context. This agreement must not only state that such a
relationship exists, but the alleged agent must expressly consent to such
representation on behalf of the principal. However, the Department also
recognizes that while agency relationships are "frequently established by
a written contract, this is not essential." See Id. at 24402-24403
(expressing the principal/agent test); see also Stainless Steel Sheet and
Strip in Coils From Taiwan: Preliminary Results and Partial Rescission of
Antidumping Duty Administrative Review, 66 FR 41509, 41512 (August 8,
2001). In the absence of an agency contract, "the analysis of whether a
relationship constitutes an agency is case-specific and can be quite
complex; there is no bright line test." See Turbo-Compressors from Japan,
62 FR at 24403. The Department's examination of allegations of an agency
relationship has focused on a range of criteria, including (but not
limited to) the following: (1) the foreign producer's role in negotiating
price and other terms of sale; (2) the extent of the foreign producer's
interaction with the U.S. customer; (3) whether the agent/reseller
maintains inventory; (4) whether the agent/reseller takes title to the
merchandise and bears the risk of loss; and (5) whether the agent/reseller
further processes or otherwise adds value to the merchandise. Id.

In the preliminary results, we found that, based on the totality of the
circumstances, Changwon's and Dongbang's trading company customers are
independent, unaffiliated resellers, and that a principal/agent
relationship does not exist between Changwon, Dongbang, and their
respective trading company customers. See Preliminary Results, 66 FR at
51837 and Affiliation Memo. We based our finding on the record evidence
that indicates that Changwon and Dongbang negotiated the terms of sales,
and set the prices with their trading company customers; did not market
to, and except in very limited instances, did not directly interact with
the trading companies' end user customers; and invoiced the trading
company customers, who take title to the merchandise and bear the risk of
loss. See Id. Since none of these facts has changed since the Preliminary
Results, we continue to find that a principal/agent relationship does not
exist in this case between the respondents and their trading company
customers. 

We do not find persuasive the petitioners' arguments concerning the
existence of a principal/agent relationship between Changwon, Dongbang,
and their trading company customers. We do not believe, in this case, that
the fact that, in many transactions, trading company customers disclosed
the names of ultimate end users to Changwon and Dongbang, or the fact that
the ultimate end users may have known that they were purchasing
merchandise produced by Changwon or Dongbang, provides a basis to conclude
that Changwon and Dongbang exercised any control over their trading
company customers. We also find no evidence supporting the petitioners'
conclusions that Changwon and Dongbang effectively control prices and
other terms of sale with the ultimate customers of the trading companies.
As we explained in the Affiliation Memo, the voluminous amount of sales
correspondence on the record between Changwon, Dongbang, and their trading
company customers (see, e.g., Changwon Korean sales verification Exhibits
11 to 18, Changwon U.S. verification Exhibit 8, and Dongbang sales
verification Exhibits 8 to 11) demonstrate that Changwon and Dongbang
communicated with, and set the terms of sale with, their trading company
customers, and not with the ultimate end users; and invoiced their trading
company customers, and not the ultimate end users, thereby passing title
and risk of loss to the trading company customers. See Affiliation Memo at
5 to 9. The sales correspondence on the record also shows that the trading
company customers, in some instances, deal in the goods of other
suppliers, and may maintain inventory and further process the merchandise.
See Id. Moreover, the record evidence indicates that prices are not
imposed by the respondents on their trading company customers, but are the
subject of negotiation between the respondents and these trading
companies. See Changwon U.S. sales verification Exhibit 8. Based on the
totality of these circumstances, we continue to find that Changwon's and
Dongbang's trading company customers are independent resellers; a
principal/agent relationship does not exist between Changwon, Dongbang,
and their respective trading company customers; that Changwon and Dongbang
do not control their trading company customers; and that Changwon and
Dongbang are not affiliated with these customers under section 771(G) of
the Act.

Comment 2: Deferred Foreign Exchange Losses 

The respondents argue that, in the preliminary results, the Department
erred by adjusting the reported financial expense to include amounts
related to exchange rate losses recognized by the companies as adjustments
to shareholders equity. The respondents state that for Changwon's parent
company, POSCO, the exchange losses at issue resulted from fluctuations in
the Korean won-dollar exchange rate in prior periods. Specifically, the
won-dollar exchange rate devalued very suddenly in December 1997. Further,
the respondents state that Korean capital markets are not well developed,
and as a result, companies such as POSCO generally carry a significant
portion of their debt in foreign currencies. The respondents also state
that POSCO wrote off the outstanding balance of the exchange rate losses
stemming from the 1997 currency devaluation against the asset revaluation
reserve, which was appropriate and consistent with longstanding Korean and
international accounting practices in matching income and expenses.

The respondents also state that the statute directs the Department to use
the respondents' normal books and records if such records are maintained
in accordance with the exporting country's generally accepted accounting
principles (GAAP) if those records reasonably reflect the cost of
producing the merchandise. The respondents note that since their books and
records are maintained in accordance with Korean GAAP and the treatment of
these exchange gains and losses are appropriate, the Department should
eliminate this adjustment to the companies' reported financial expense in
its final results.

The respondents state that, in Final Determination of Sales at Less Than
Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7039 (February 6,
1995) and in Final Results of Antidumping Duty Administrative Review:
Dynamic Random Access Memory Semiconductors of one Megabit or Above from
Korea, 66 FR 52097 (October 12, 2001) and accompanying Decision Memo at
Comment 1, the Department included the foreign exchange losses in
financial expense. The respondents note, that in these cases, the
Department stated that the foreign exchange losses represent an increase
in the actual amount of cash needed by the respondents to retire their
foreign currency denominated loan balances. The respondents contend that
the same reasoning should not be applied in this case, because POSCO did
not write-off against retained earnings any amounts that represented an
increase in the actual amount of cash needed to service its foreign
currency denominated loans during the POR. Rather, the write off
represented the remaining balance of exchange losses associated with
foreign currency loans outstanding in December 1997. The respondents state
that the write-off is strictly an accounting adjustment relating to prior
periods and is completely unrelated to manufacturing or other operational
activities during the POR. The respondents claim that the Department
should disregard these deferred exchange losses in its analysis.

The respondents further point out that if the Department determines it
necessary to include foreign exchange losses in financial expense, the
Department should follow its normal practice. Specifically the respondents
state that '{i}t is the Department's normal practice to amortize the net
exchange gains and losses incurred on debt over the maturities of the debt
and include only the current portion of the net gain or loss in the cost
of production and constructed value'. See Final Determination of Sales at
Not Less than Fair Value: Expandable Polystyrene Resins from the Republic
of Korea, 65 FR 69284 (November 16, 2000) and accompanying Decision Memo
at Comment 10. The respondents note that the Department has consistently
amortized exchange losses, even where the companies have reported exchange
gains or losses in the income statement in one period and the same
exchange gains or losses in the balance sheet in a subsequent period. The
respondents point out that in Final Results of Antidumping Duty
Administrative Review: Dynamic Random Access Memory Semiconductors of One
Megabit or Above from Korea, 65 FR 68976 (November 15, 2000), and
accompanying Decision Memo at Comment 3, when the respondents amortized
their exchange losses one year, but recategorized the exchange losses to
the balance sheet in the next year, the Department continued to include an
amortized portion of the exchange losses in the respondents' COP.

The respondents note that the Department has the information necessary to
include only the amortized portion of foreign exchange losses in the
respondents' financial expense ratios. Specifically, for POSCO, the
average remaining life of the liabilities was listed in Changwon's June
15, 2001 supplemental questionnaire response, and for Dongbang Transport,
the remaining period of the "account payable" was listed in Dongbang's
June 15, 2001 supplemental questionnaire response.

The petitioners contend that the Department should continue to include in
the financial expense calculation the deferred foreign exchange gains and
losses. According to petitioners, Korean GAAP's treatment of foreign
exchange gains and losses mandate the inclusion of these gains and losses
in the financial expense. The petitioners disagree with the respondents'
argument that the foreign exchange losses do not represent an actual out-
of-pocket expense. The petitioners further point out that whether or not
these losses directly affected the respondents' cash flow is not of
concern, because the respondents rely on accrual basis rather than a cash
basis of the accounting. Moreover, they contend that these unamortized
losses represent an expense to the company under Korean GAAP and should be
considered as an expense in this proceeding. The petitioners argue that it
does not matter that respondents decided to recognize the foreign exchange
losses directly to equity, instead of recognizing losses in the profit and
loss statement. The petitioners point out that the Department has found in
two recent proceedings that the recording of expenses in equity does not
change the nature of the expense, and included expenses directly recorded
to equity as normal expenses. In Preliminary Results of Antidumping
Administrative Review: Stainless Steel Plate in Coils from the Republic of
Korea, 66 FR 30699, 30701 (June 7, 2001) and in Preliminary Results and
Partial Rescission of Antidumping Administrative Review: Stainless Steel
Sheet and Strip in Coils from the Republic of Korea, 66 FR 41530, 41534
(August 8, 2001), the Department found that the 1999 foreign exchange
losses directly recorded to equity should be properly included in the
financial expenses, in full.

The petitioners contend that the Department should reject the
respondents' suggestion that if the Department decides to include the
foreign exchange losses in financial expense, the Department should
amortize the losses over the average life of liabilities. The petitioners
argue that the Department should reject this suggestion because the
respondents failed to identify the portion of the exchange losses related
to debt that was extinguished during the POR. Therefore, the petitioners
conclude, that the Department should include the full amount of recognized
foreign exchange losses in the financial expense calculation.

The Department's Position: We disagree with the petitioners that the full
amount of deferred foreign exchange losses should be included in the
financial expense. Prior to 1999, POSCO and Dongbang's parent company,
Dongbang Transport, capitalized their foreign exchange losses to be
amortized over time. In 1999, the unamortized losses still remained on the
company's books, and POSCO and Dongbang Transport, according to changes in
Korean GAAP, moved these losses directly to retained earnings, without
affecting the profit and loss statement. See, e.g., POSCO's consolidated
financial statements in Exhibit 10 of Changwon's December 11, 2000
response. We also note that, while this may be appropriate for Korean
accounting purposes, for antidumping purposes this new practice fails to
reasonably reflect the cost of producing the subject merchandise, as the
respondents' new accounting treatment of these losses does not change the
fact that these losses represent an additional cost of financing to the
company. Therefore, for the final results, we have included an amortized
portion of the losses in the respondents' COP. We note that our position
is consistent with our practice for POSCO in Final Results of Antidumping
Administrative Review: Stainless Steel Plate in Coils from the Republic of
Korea, 66 FR 64107 (December 11, 2001) and accompanying Decision Memo at
Comment 15.

We disagree with the petitioners that the full amount of deferred foreign
exchange losses should be included in the financial expense because the
respondents failed to identify the portion of the foreign exchange losses
related to debt that was extinguished during the POR. In fact, the
respondents provided the information regarding foreign exchange losses
incurred in 1999 (see financial expense calculation table in Exhibit D-14
of Changwon's December 20, 2001 submission), and the Department included
this portion of foreign exchange translation losses in its COP calculation.

Comment 3: Deferred Foreign Exchange Losses of Dongbang Transport

The respondents further state that the Department erroneously adjusted
the financial expense ratio to include exchange losses reflected in
Dongbang Transport's consolidated financial statement which were expensed
to shareholders' equity. The respondents assert that the exchange losses
at issue related to Dongbang Transport's accounts payable associated with
the purchase of an asset and are unrelated to debt. The respondents point
out that exchange gains and losses on accounts payable are not included in
financial expense, but rather are included in a company's G&A expense
ratio at an unconsolidated level, rather than the consolidated level. See
Final Results of Antidumping Administrative Review: Certain Steel Concrete
Reinforcing Bars from Turkey, 66 FR 56274 (November 7, 2001) and
accompanying Decision Memo at Comment 27; and Final Results of Antidumping
Administrative Review: Certain Preserved Mushrooms from Indonesia, 66 FR
36754 (July 13, 2001) (Review of Mushrooms from Indonesia) and
accompanying Decision Memo at Comment 4.

The respondents further assert that these gains and losses were not
reflected in Dongbang's G&A expense, because Dongbang did not incur this
exchange loss. Rather, the expense related to Dongbang Transport's
accounts payable on acquisition of an asset, and thus, the loss was
attributable to Dongbang Transport's own operations. According to the
respondents, because the exchange losses incurred by Dongbang Transport
associated with accounts payable are related only to Dongbang Transport's
general operations and not to Dongbang's general operation, the Department
should eliminate the adjustment to reported financial expense in
accordance with its stated practice.

The petitioners disagree with the respondents' statement that the
Department should reverse its preliminary decision and exclude foreign
exchange losses that were incurred by Dongbang Transport on a purchase of
an asset, from the financial expense calculation. The petitioners further
disagree with the respondents that foreign exchange losses are associated
with accounts payable. The petitioners assert that, in reality, the
foreign exchange losses arose from Dongbang Transport's debt. The
petitioners further note that according to the respondents, the remaining
life of the loan associated with the purchase of an asset is more than one
year. The petitioners contend that this long-term loan is not by
definition an "accounts payable;" rather, accounts payable are defined as
"current liabilities" that have a life of one year or less. As support for
these contentions the petitioners cite Intermediate Accounting, Jan R.
Williams, Keith G Stanga, William W. Holder, 1984, at 594. They note that,
by definition a long-term loan taken out to purchase an asset is not an
accounts payable. The petitioners conclude that since the Department's
normal practice is to include all monetary charges related to loans in the
financial expense calculation, for the final results of this review the
Department should find that the foreign exchange losses that were incurred
by Dongbang Transport on the purchase of an asset should be included in
the financial expense calculation

The Department's Position: We agree with the petitioners' argument that
the Department should include the foreign exchange losses that were
incurred by Dongbang Transport on the purchase of an asset in the
financial expense calculation. By the definition "accounts payable is a
liability account used for short-term liabilities or charge accounts
usually due within 30 days." See College Accounting, Douglas J. McQuary,
Patricia A. Bille, 1993, at 14. Since Dongbang Transport's financial
arrangements at issue for the purchase of the asset have a length of more
than one year, the Department considers these financial arrangements a
long-term debt. As a result, the foreign exchange losses on this debt
represent a cost of financing to the company. Therefore, the Department
continues to include the foreign exchange losses of Dongbang Transport in
the financial expense calculation, as explained above in Comment 2.

Comment 4: Calculation of G&A Expenses

The respondents generally argue that the Department incorrectly adjusted
Changwon's and POSCO's reported G&A expenses to include certain non-
operating items. They contend that, for certain of these items, the
Department incorrectly determined that these items do not relate to the
companies' manufacturing activities. Moreover, the respondents, citing to
several cases, including Certain Cut-to-Length Carbon-Quality Steel Plate
from the Republic of Korea, 64 FR 73196, 73209 (December 29, 1999), and
Polyethylene Terephthalate Film, Sheet and Strip from the Republic of
Korea, 66 FR 57417 (November 15, 2001) (PET Film from Korea), and
accompanying Decision Memo at Comment 1, contend that the Department
normally examines whether the items in question relate to the companies'
general or overall operations, not whether they specifically relate to
manufacturing operations. The respondents emphasize that every one of the
items at issue, as discussed specifically below, relates to the companies'
general operations, and were properly reported as part of the G&A expense
calculations.

4A. Gains and Losses on Certain Monetary Instruments

The respondents argue that the Department improperly eliminated from the
G&A calculations gains and losses on certain monetary instruments from
Changwon's G&A calculation. They state that they explained at verification
that these monetary instruments are short-term monetary assets. The
respondents contend that these instruments are used to manage the
companies' debt, and contend that these instruments are a type of activity
that the Department specifically includes in its analysis through the
financial expense. The respondents, citing to PET Film from Korea,
Decision Memo at Comment 1, also state that the Department has included
offsets relating to the valuation of monetary instruments in its
calculation of G&A in prior cases.

The petitioners claim that nothing exists in the verification report or
exhibits to support the respondents' statement that these monetary
instruments are short-term in nature. The petitioners claim that, without
evidence to support respondents' statement at issue, the Department should
follow its preliminary decision and exclude these gains and losses from
G&A.

The Department's Position: We agree, in part, with the respondents. After
further review of Changwon sales verification exhibit 4 and Changwon cost
verification exhibit 20, we have determined that the financial instruments
at issue have a term of less than one year, and therefore are short-term
in nature. As the respondents note, the Department includes interest
expense, and short-term interest income related to short-term financial
assets, in its calculation of financial expense. See, e.g., Final Results
of Antidumping Duty Administrative Review and Determination Not to Revoke
in Part: Silicon Metal From Brazil, 66 FR 11256 (February 23, 2001)
(Silicon Metal from Brazil), and accompanying Decision Memo at Comment 8.
Although, as the respondents point out, the income and expenses related to
Changwon's short-term financial instruments at issue are more
appropriately included in the financial expense calculation, the
Department calculates financial expense for COP and CV purposes based on
the borrowing costs incurred at the consolidated group level. See, e.g.,
Silicon Metal from Brazil, Decision Memo at Comment 6. In the present
case, we are calculating financial expense, in part, based on the 1999
consolidated financial statement of Changwon's parent company, POSCO.
Since the short-term financial instruments at issue relate to Changwon's
financial statement, and not POSCO's consolidated financial statement, we
have not included the reported income and expense related to these
instruments, as recorded on Changwon's financial statement, in our
calculations.

However, since Changwon's financial statement, including the items at
issue, is consolidated in POSCO's consolidated financial statement, we
reviewed POSCO's 1999 consolidated financial statement for appropriate
consolidated income and expense items related to these short-term
financial instruments to use in the calculation of the respondents'
financial expense. We found that note 4 of POSCO's 1999 consolidated
financial statement, (2) which is the parallel section to the section of
Changwon's 1999 financial statement where Changwon records the financial
instruments at issue, (3) records a gain on valuation of the financial
instrument at issue. We therefore included this short-term interest income
from POSCO's 1999 consolidated financial statement, which relates to a
short-term financial instrument, in the financial expense calculation for
the final results. (4)

4B. Items Relating to the Disposition of Fixed Assets

The respondents argue that the Department incorrectly excluded from
Changwon's and POSCO's G&A calculations (5) items relating to the
disposition of fixed assets, specifically, for Changwon, an extraordinary
gain on received assets, and for POSCO, a gain on disposition of fixed
assets. The respondents contend that the Department's analysis that these
gains do not relate to the companies' manufacturing operations is
inconsistent with the fact that the Department has included depreciation
on these assets in the companies' respective costs of production. The
respondents further contend that, for POSCO, the Department inconsistently
included the loss on disposition of fixed assets, but excluded the gain on
the same type of assets.

The respondents note that the adjustment to POSCO's G&A expense conflicts
with the Department's treatment of income from the sale of fixed assets in
past cases, including

Steel Concrete Reinforcing Bars from the Republic of Korea, 66 FR 33526
(June 22, 2001) (Rebar from Korea), and accompanying Decision Memo at
Comment 7; Review of Mushrooms from Indonesia, Decision Memo at Comment 4;
and Stainless Steel Bar from Japan, 65 FR 13717 (March 14, 2000), and
accompanying Decision Memo at Comment 9 (quoting U.S. Steel v. United
States, 998 F. Supp. 1151, 1151 (CIT 1998)). The respondents also note
that the Department, in Structural Steel Beams from Korea, 65 FR 41437
(July 5, 2000), and accompanying Decision Memo at Comment 27, recognized
that it is appropriate to include offsets even where the reported costs
include amounts related to items provided for free.

The petitioners support the Department's exclusion of Changwon's
extraordinary gain on received assets. The petitioners generally state,
citing Dynamic Random Access Memory Semiconductors of One Megabit and
Above from Taiwan, 64 FR 56308, 56323 (October 19, 1999), that the
Department evaluates whether to include an item in the G&A calculation by
reviewing the nature of a G&A activity and the relationship between this
activity and the general operations of the company. The petitioners also
note that where the activity is relatively small in relation to the
company's primary activities, the Department has included the occasional
miscellaneous gain or loss in G&A expense; but where the activity becomes
significant enough to constitute a separate business activity, the
Department treats it as separate business activity, and will not allow the
gain to be offset in the G&A expense. See Certain Cut-to-Length Carbon-
Quality Steel Plate Products from Korea, 64 R 73196, 72210 (December 19,
1999). In relation to the issue at hand, the petitioners contend that the
acquisition of free assets is not the routine acquisition of fixed assets,
and the Department should continue to disallow this gain.

The petitioners also state that Changwon's accounting treatment of the
donated assets is "wrong." Citing to accounting authorities, including
Intermediate Accounting, Jan R. Williams, Keith G. Stanga, William W.
Holder, 1984, at 594, and APB Opinion No. 29, the petitioners state that,
under U.S. GAAP, donated assets do not generate a gain at the time of
donation. The petitioners therefore urge the Department to reject the
respondents' argument because Changwon's treatment of the donated asset is
not in accordance with U.S. GAAP and distorts the transaction. 

The petitioners did not comment on the Department's treatment of POSCO's
gain on disposition of fixed assets.

The Department's Position: We agree with the respondents, in part, and
with the petitioners, in part. First, we agree with the respondents that
we should include POSCO's gain and loss on the disposition of fixed assets
in POSCO's G&A calculation. It is the Department's practice to include
gains or losses on the routine sale of fixed assets in the G&A
calculation. See Rebar from Korea, Decision Memo at Comment 7. Since we
have no evidence that the sale of fixed assets at issue were not routine,
we have included both POSCO's gains and losses on the disposition of fixed
assets in POSCO's G&A calculation.

Second, we agree with the petitioners that the Department should continue
to exclude Changwon's extraordinary gain on received assets from
Changwon's G&A calculation. While Changwon may have recorded this
transaction as an extraordinary gain to income in its normal books and
records, we consider it more appropriately treated as an increase in
equity because the transaction is an increase in the company's capital
rather than income. See, e.g., Structural Steel Beams from Korea, Decision
Memo at Comment 27. Therefore, we disallowed the extraordinary gain on
received assets from the calculation of Changwon's G&A expenses for
purposes of the final results. 

4C. Gain and Losses on Futures and Gain on Redemption of Corporate Bond

The respondents argue that the Department incorrectly eliminated from
POSCO's G&A calculation gains and losses on futures and the gain on
redemption of a corporate bond. They contend that these items, similar to
the gains and losses on the monetary instruments at issue under item A
above, relate to the management of debt. They specifically state that the
gains and losses on futures are related to POSCO's interest expense ratio
swaps, which POSCO used to hedge its risks and manage its interest
expenses. The respondents also state that the gain on redemption of the
corporate bond was the discount revenue derived from POSCO's payment of a
corporate bond earlier than the expiration date.

The respondents note that the Department has included the total interest
expenses in its calculations and recognized that activities relating to
managing debt relate to the companies total operations. They further note
that the interest income generated from the activities at issue is also
logically related to the company's manufacturing operations, and should be
included in the G&A calculation.

The petitioners state that none of these items should be included in the
G&A calculation. Citing to Final Results of Antidumping Duty
Administrative Review and Partial Termination of Administrative Review:
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 62 FR
55574, 55583 (October 27, 1997), the petitioners contend that the
Department will only allow an offset of interest income if respondents can
demonstrate that the underlying investment is short-term. The petitioners
state that, based on the respondents' statements in their case brief,
including a statement that Korean companies 'typically' hold a high
portion of their debt in the form of long-term debt, that the Department
should reasonably assume that the derivatives (i.e., futures and swaps)
used to manage the interest expenses are tied to long-term instruments.

With regard to the gain on redemption of a corporate bond, the
petitioners state that corporate bonds are investments, and are not
considered by the Department in its dumping analysis.

The Department's Position: All of the items at issue here relate to the
management of debt, and therefore, like the financial instruments in item
A above, are more appropriately included in the respondents' financial
expense calculation. POSCO's reported G&A expenses, including the items at
issue, were based on POSCO's 1999 unconsolidated financial statement.
Since we are calculating the respondents' financial expense, in part, on
POSCO's 1999 consolidated financial statement, we are not including these
items, as recorded on POSCO's unconsolidated financial statement, in our
calculations. 

However, since POSCO's unconsolidated financial statement (including the
items at issue) is consolidated in POSCO's consolidated financial
statement, we reviewed POSCO's 1999 consolidated financial statement for
similar appropriate items to use in the calculation of the respondents'
financial expense. We also reviewed whether this statement classifies
these items as short- or long-term items. We found that this financial
statement, at note 15, lists maturities of more than one year for POSCO's
swap agreements, and at note 10, lists all of POSCO's bonds as long-term
debts. Since the record indicates that all of POSCO's swap agreements and
bonds are long-term instruments, pursuant to the Department's practice
(see issue A above), we have not included any of the income from these
instruments in our calculations.

4D. Casualty Insurance Refund

The respondents state that the Department also incorrectly excluded a
casualty insurance refund from Changwon's G&A expense calculation. The
respondents, citing to Certain Preserved Mushrooms from Indonesia, 65 FR
72268, 72281 (December 31, 1998) (Mushrooms from Indonesia), contend that
the Department has included offsets where the reported costs include
amounts related to the income or offset item, while, in the present case,
Changwon included the amount of its casualty insurance premium in the
calculation of Changwon's G&A expenses. The respondents conclude that the
Department's position that the refund of the proprietary expense does not
relate to the company's operations is "internally inconsistent," and urge
the Department to consistently include or exclude these items in
Changwon's G&A calculation.

The petitioners state that the Department should continue to exclude this
item because respondents have not demonstrated that it is related to
Changwon's manufacturing operations. The petitioners contend that this
item cannot be linked directly to the operations of the company, and is
simply non-operating income, and as such is not part of the cost of
production.

The Department's Position: We agree with the respondents. Changwon
reported both its insurance expenses, which presumably include casualty
insurance premiums, and the refund that it received on these expenses in
its G&A calculations. The actual amount of insurance expense that Changwon
incurred is the amount of the insurance premiums net of the casualty
insurance refund. Therefore, we have used the actual amount of insurance
expense that Changwon incurred, including the casualty insurance refund,
in Changwon's G&A calculations for the final results.

4E. Down Payment for Other Products

The respondents argue that the Department incorrectly excluded a down
payment for other products from Changwon's G&A calculation. The
respondents state that the Department verified that this item was a
payment Changwon received when a customer defaulted on a contract to
purchase non-prime pipe, and the respondents characterize this payment as
"essentially an insurance payment." The respondents contend that Changwon
incurred and reported the expenses related to this payment in its G&A
expenses. Furthermore, the respondents, citing to several cases, including
Mushrooms from Indonesia, 65 FR 72268, 72281 and Certain Hot-Rolled Carbon
Steel Flat Products from Thailand, 66 FR 49622 (September 28, 2001), and
accompanying Decision Memo at Comment 5, note that the Department has
permitted offsets for insurance claims in past cases after recognizing
that the costs related to these claims have been reflected in the reported
costs. The respondents state that, the Department, consistent with this
practice, should include the "insurance settlement" in Changwon's
calculated G&A expense ratio.

The petitioners contend that this item represents non-operating income to
Changwon that is related to non-subject merchandise. The petitioners urge
the Department to continue to exclude this item from the calculation of
Changwon's G&A expense.

The Department's Position: We agree with the petitioners. There is no
evidence on the record that this item is an "insurance settlement."
Rather, the record indicates that it is part of a payment for non-subject
merchandise that Changwon recorded in its miscellaneous income account.
See Changwon's cost verification report at page 19. Since we do not
include payments for non-subject (or subject) merchandise in the G&A
calculations, we have continued to exclude this item from the calculation
of Changwon's G&A expenses.

Comment 5: Conversion of Values in the CEP Profit Calculation

The petitioners note that in the preliminary margin program, the
Department made an inadvertent ministerial error by converting certain
Korean won values in the CEP profit calculation to U.S. dollars. The
petitioners point out that the Department's CEP profit calculation is
based on the home market currency. Thus, for this review, all components
of the CEP profit should be stated in Korean won. The petitioners suggest
that the Department should correct this ministerial error by removing the
exchange rate conversion from the CEP profit calculation in the margin
program.

The respondents did not comment on this issue.

The Department's Position: We agree with the petitioners that we
inadvertently overstated the cost of goods sold and ultimately understated
the amount of CEP profit by incorrectly converting certain variables to
U.S. dollars. We have adjusted the margin program for the final results
accordingly. 

Comment 6: Calculation of Foreign Market Unit Price in U.S. Dollars

The petitioners point out that in its preliminary calculation, the
Department inadvertently miscalculated the foreign market unit price in
U.S. dollars. The petitioners suggest that the Department should add the
difmer adjustment ("DIFMER"), level of trade adjustment ("LOTADJM"), and
U.S. packing expenses ("USPACK") to the home market price ("HMP") to
calculate foreign market unit price in dollars ("FUPDOL").

The respondents disagree with the petitioners' adjustment. The
respondents suggest that the Department should modify the SAS programming
language as follows:

FUPDOL = HMP - (DIFMER + LOTADJMT - USPACK) * USXRATE;

The Department's Position: We partially agree with the petitioners'
clerical error allegation. We reviewed our SAS programming language. The
SAS programming language for the final results has been corrected as
follows:

FUPDOL = HMP - (DIFMER - LOTADJMT - USPACK) * USXRATE;

We continue to subtract DIFMER in the margin program, because in the same
program DIFMER is calculated as the variable cost of the foreign like
product less the variable cost to produce the product sold in the United
States.

Comment 7: Model Match Calculations in the Margin Program

The respondents claim that the Department should correct an error in the
ranking of most similar grades sold in the home market for comparison to
grades sold in the U.S. market for purposes of its model match
calculations in the margin program. The respondents point out that
computer code erroneously omits instructions to identify the identical and
most similar grades for certain grades. In order to correct this error,
the Department should insert the omitted SAS lines to identify the
identical grades for these certain grades.

The petitioners did not comment on this issue.

The Department's Position: We agree with the respondents' clerical error
allegation. The relevant programming error has been corrected for the
final results.

Comment 8: VCOMs and TCOMs Adjustments

The respondents claim that the Department did not adjust the VCOMs and
TCOMs reported on the sales files that were based on semiannual costs.
According to the respondents, the Department should replace those values
with the VCOMs and TCOMs reported in the annual cost file.

The petitioners did not comment on this issue.

The Department's Position: We agree with the respondents' clerical error
allegation and have made the appropriate corrections to the margin program.

Comment 9: Correction of Errors Noted in Changwon's Cost of Production
Verification Report

The petitioners state that the Department should correct unspecified
errors noted in Changwon's cost verification report for the final results.

The respondents did not comment on this issue.

The Department's Position: In the preliminary results, we corrected the
errors noted in Changwon's cost verification report. For example, we
incorporated the correction to POSCO's net account payables from Changwon
cost verification Exhibit 1 in our calculation of POSCO's G&A expenses.
See Attachment 5 to the Preliminary Calculation Memorandum dated October
1, 2001. Since we are unaware of any other errors, and the petitioners did
not specify any errors, we have made no further adjustments to our
calculations for the final results.

Comment 10: New Information in the Respondents' Case Brief

The petitioners argue that the respondents introduced new information
into the record on page 17 of the respondents' case brief. The petitioners
contend that the Department should determine that the submission of this
new information is late pursuant to Section 351.301(b)(2) of the
Department's regulations, and the Department should return this new
information to the respondents pursuant to section 351.302(d) of the
Department's regulations. The petitioners also note that the new claim is
unsupported by record evidence.

The Department's Position: On page 17 of their case brief, the
respondents provide an explanation for a insignificant discrepancy noted
by the Department in Changwon's cost verification report. Neither this
explanation, nor the discrepancy itself, relate in any way to any of the
issues raised by the parties in their case and rebuttal briefs or the
margin calculations. Since the respondents' explanation of this
insignificant discrepancy is irrelevant to the final results, and, in any
case, is unsupported by record evidence, we have not considered the
question of the timeliness of this information. 

Recommendation

Based upon our analysis of the comments received, we recommend adopting
all of the above positions. If these recommendations are 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)




______________________________________________________________________
footnotes:

1. All of Changwon's sales to the United States of subject merchandise
during the POR were sold by Changwon to POSTEEL, and then by POSTEEL to
POSAM, and then finally to a fourth party, whom Changwon reported as the
U.S. customer. For the purposes of this comment, we will refer to
Changwon, POSTEEL, and POSAM collectively as "Changwon." 

2. See Exhibit 10B of Changwon's December 11, 2000 Section A submission. 

3. See Note 6 to the English version of Changwon's 1999 financial
statement in Exhibit 6 of Changwon's December 11, 2000 Section A
submission, and Note 4 in the English translation of the Korean version of
Changwon's 1999 financial statement in Exhibit 6 of Changwon's March 16,
2001 supplemental response. 

4. We also note that POSCO included a similar gain on valuation of
securities from its 1999 unconsolidated financial statement in its
reported G&A expense, and the Department excluded this gain from its
calculations in the preliminary results. Since, as noted above, this gain
relates to an item that is more appropriately included in the calculation
of financial expense (which is based on POSCO's 1999 consolidated
financial statement), we have continued to exclude this unconsolidated
item from the G&A expense calculations for the final results. 

5. We included POSCO's G&A expenses in our calculations as part of
POSCO's cost of production of certain proprietary inputs transferred by
POSCO to Changwon.