66 FR 49618, September 28, 2001
                                                            A-583-835
                                                        Investigation
                                                      PUBLIC DOCUMENT
                                        Enforcement III/Office 8: PMT

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary
                 for Import Administration

FROM:          Joseph A. Spetrini
               Deputy Assistant Secretary
               Enforcement Group III

SUBJECT: Issues and Decision Memo for the Antidumping Investigation of
Certain Hot-Rolled Carbon Steel Flat Products from Taiwan - October 1,
1999 through September 30, 2000

Summary

We have analyzed the case briefs and rebuttal briefs of interested
parties in the antidumping duty investigation of certain hot-rolled carbon
steel flat products from Taiwan. We recommend that you approve the
positions we have developed in the Discussion of the Issues section of
this memorandum. Below is the complete list of issues in this
investigation for which we received comments and rebuttal comments by
parties:

1. Collapsing of China Steel and Yieh Loong 
2. Affiliation 
3. Time to Respond to Request for Information 
4. Application of Facts Available & Adverse Facts Available 

Background

On May 3, 2001, the Department of Commerce (the Department) published its
Notice of Preliminary Determination of Sales at Less Than Fair Value:
Certain Hot-Rolled Carbon Steel Flat Products from Taiwan, 66 FR 22204
(May 3, 2001) (Preliminary Determination). The period of investigation
(POI) is October 1, 1999 through September 30, 2000. There are three
respondents in this investigation, China Steel Corporation (China Steel),
Yieh Loong Enterprise Co., Ltd. (Yieh Loong), and An Feng Steel Co., Ltd.
(An Feng). 

As stated in the Preliminary Determination, An Feng did not answer the
Department's January 4, 2001 antidumping duty questionnaire. With respect
to China Steel and Yieh Loong, the Department determined that these
affiliated companies should be collapsed for purposes of an antidumping
analysis, pursuant to 19 CFR 351.401(f)(2) of the Department's
regulations. See Memorandum to Joseph A. Spetrini, "Affiliation Issue
regarding China Steel ... and Yieh Loong ... ," dated April 19, 2001
(Affiliation Memorandum). We also determined that this collapsed entity
did not act to the best of its ability in responding to the Department's
requests for information. Accordingly, we assigned all three companies a
margin of 29.14 percent as adverse facts available. We invited parties to
comment on our Preliminary Determination. China Steel and Yieh Loong
submitted joint case briefs and rebuttal briefs (the collapsed entity is
hereafter referred to as China Steel/Yieh Loong). Gallatin Steel Company,
IPSCO Steel Inc., Nucor Corporation, Steel Dynamics, Inc., Weirton Steel
Corporation, and Independent Steelworkers Union also filed a case brief.
These parties, along with Bethlehem Steel Corp., LTV Steel Company, Inc.,
National Steel Corp., and U.S. Steel LLC, filed rebuttal briefs. (1)

Discussion of the Issues

Comment 1: Collapsing of China Steel and Yieh Loong

In determining whether or not to collapse two or more affiliated parties,
one of the criteria examined is whether or not there is a significant
potential for one company to manipulate the price or production decisions
of the other. See 19 CFR 351.401(f)(1). Section 351.401(f)(2) adds that in
identifying a significant potential for the manipulation of price or
production, the factors the Department may consider include:

     (i) The level of common ownership;

     (ii) The extent to which managerial employees or board 
     members of one firm sit on the board of directors of an 
     affiliated firm; and

     (iii) Whether operations are intertwined, such as through 
     the sharing of sales information, involvement in production
     and pricing decisions, the sharing of facilities or employees,
     or significant transactions between the affiliated producers.

China Steel/Yieh Loong contends that the two companies should not be
collapsed. Both companies assert that China Steel only has a minority
interest in Yieh Loong, which is insufficient to allow China Steel to
exert control over Yieh Loong's production and pricing decisions. China
Steel and Yieh Loong maintain that the presence of China Steel's chairman

and vice-president on Yieh Loong's Board of Directors does not indicate
any potential for price or production manipulation. China Steel/Yieh Loong
further argues that the chairman and vice-president of China Steel serving
on Yieh Loong's Board of Directors does not indicate any potential for
price or production manipulation because these individuals are not
employed by Yieh Loong and are not involved in Yieh Loong's daily business
operations. China Steel/Yieh Loong insists the primary responsibilities of
the board members are to attend meetings of Yieh Loong's Board and make
suggestions for shareholder meetings. In addition, China Steel/Yieh Loong
states, China Steel did not share senior management employees, as claimed
in the Affiliation Memorandum. These five managers, the firm contends,
resigned from China Steel and its subsidiaries before taking up employment
with Yieh Loong. See China Steel/Yieh Loong's Case Brief at 13 and 14.

China Steel/Yieh Loong claims its business operations, e.g., sales,
marketing, production, and finances, are independent of each other. The
limited transactions that occur between the companies, China Steel/Yieh
Loong contends, are at arm's length. China Steel/Yieh Loong claims Yieh
Loong's purchases of subject merchandise from China Steel during the POI
constituted two percent of Yieh Loong's fully utilized hot-rolled
production capacity. See id. at 15. The bulk of this merchandise, China
Steel/Yieh Loong asserts, was consumed in the production of non-subject
merchandise, such as cold-rolled coils and pipe. 

Finally, China Steel/Yieh Loong argues that there is no potential for
manipulation of price or production. The company asserts that China Steel
and Yieh Loong have never passed or diverted any purchase orders between
the two companies either before or after the two became affiliated. The
firm insists Yieh Loong's prices are consistently lower than China
Steel's, making any such diversion unpalatable for one firm or the other
(i.e., the price would be unacceptably high or low, as the case may be).
Id. at 16.

Petitioners contend that the Department properly collapsed China Steel
and Yieh Loong into a single entity because they met the criteria pursuant
to the Department's regulations. Petitioners assert that the two companies
are clearly affiliated, as China Steel directly and indirectly owns a
substantial percentage of Yieh Loong. Petitioner I Rebuttal at 5. Citing
respondent's claim that "[s]taffing by former employees is insufficient to
support a finding of affiliation, much less collapsing," petitioners
counter that these former employees were not clerical employees. These
former China Steel employees, petitioners assert, transferred to Yieh
Loong to become President, Vice-President of Marketing Department, Vice-
President of Production Department, Assistant Vice-President of
Administration Department, and Deputy Manager of Finance Department. These
members of senior management and common board members, petitioners
conclude, are strong evidence of interlocking management. Id. at 6.

Petitioners assert that common board members need not engage in day-to-
day management of operational functions to control the business practices
of the companies. The strategic decisions of the company are established
by the Board of Directors, not the President. Due to the interlocking
board members, petitioners claim, China Steel and Yieh Loong have access
to each other's production and pricing decisions. To support this claim,
petitioners cite "Collapsing Analysis Memorandum in Certain Welded Large
Diameter Line Pipe (Line Pipe)" from Mexico (June 20, 2001). According to
petitioners, in the Line Pipe case the Department found cross-ownership
and directorial privileges would afford either company access to
information regarding the other's production and pricing decisions. Id. at
7. Petitioners maintain that the Department's objective in collapsing
foreign producers is to prevent the possibility of shifting production of
subject merchandise to a producer with the more advantageous dumping
margin. 

Department's Position: 

The Department disagrees with respondents' argument that it wrongly
collapsed China Steel and Yieh Loong. In order to collapse two entities
under the Department's regulations, past manipulation of price or
production need not have occurred. Rather, the regulation requires that we
find a significant potential for manipulation. The regulation clearly
defines the criteria for collapsing in section 351.401(f)(1) and (2), and
we outlined in detail the decision to collapse the two entities in a
memorandum dated April 19, 2001. See Affiliation Memorandum. China Steel's
ownership in Yieh Loong is the largest of all shareholders. The chairman
and vice-president of China Steel sit on Yieh Loong's three-person Board.
The Department's regulations do not require that these board members must
oversee daily operations in order to make a collapsing determination;
their mere presence is sufficient to indicate the potential for
manipulation. The third criterion outlined by the Department's regulation
as stated above is met by China Steel's significant transactions with Yieh
Loong. Id. at 4. The Department's February 27, 2001 supplemental
questionnaire queried China Steel specifically in regard to a statement
pertaining to Yieh Loong in its 1999 financial statement. China Steel's
March 20, 2001 response at 4 and 5 stated that, "[China Steel] has gained
the management and operation right for [Yieh Loong]." China Steel's own
admission establishes that the two entities are closely intertwined.
Accordingly, in this final determination we have continued to treat China
Steel and Yieh Loong as a single entity. 

Comment 2: Affiliation

China Steel/Yieh Loong maintains that the two companies are not
affiliated with home market resellers Yieh Hsing, Yieh Phui, and
Persistence Hi-Tech, contrary to the conclusion reached in the
Department's April 19, 2001 Memorandum to the File (Reseller Memorandum).
This memorandum noted that Yieh Loong's chairman was also the chairman of
Yieh Hsing, Yieh Phui and Persistence Hi-Tech. The Department's
interpretation of section 771(33) of the Tariff Act is incorrect,
according to respondents. Citing the language of section 771(33)(B), China
Steel/Yieh Loong asserts that "any officer or director of an organization
and such organization," cannot be read to mean that if, as here, one
individual is a director in two corporations, those two corporations are
affiliated. Characterizing the chairman's role as "largely symbolic,"
China Steel/Yieh Loong states this individual has neither the time nor the
ability to direct the day-to-day operations of these companies. 

China Steel/Yieh Loong also contends that Yieh Loong's equity ownership
position in its customers, and vice versa, is under three percent.
Therefore, China Steel/Yieh Loong concludes, the threshold five percent
ownership level required to find companies affiliated under section
771(33)(F) of the Tariff Act is not met. Moreover, respondents argue that
under Taiwanese accounting rules, "related party," the term used in the
firms' financial statement to describe their ties to the resellers,
connotes a different meaning than entailed in the antidumping law. China
Steel/Yieh Loong's Rebuttal Brief at 11. The respondents also takes issue
with the Department's use of these three parties' cooperation with the
Department as evidence of their affiliation with Yieh Loong. By ignoring
other possible reasons for an unaffiliated company to cooperate with Yieh
Loong's investigation, such as a desire to assist a valued supplier, China
Steel/Yieh Loong accuses the Department of adopting a "'no good deed goes
unpunished' approach." Id. at 12.

Disputing the third indicium of affiliation cited in the Reseller
Memorandum, China Steel/Yieh Loong further insists that the manner in
which a company is characterized in a financial statement is not
dispositive of the issue of affiliation under the antidumping law. To
support this claim, respondents cite Certain Welded Stainless Steel Pipe
from Taiwan, 62 FR 37543, 37548 (1997) and Certain Welded Stainless Steel
Pipe from Taiwan, 64 FR 33243, 33247 (1999). Rather, China Steel/Yieh
Loong asserts, the Department is obligated to conduct an independent
analysis of affiliation within the context of U.S. dumping law. Id.
Finally, even if Yieh Phui, Yieh Hsing, and Persistence Hi-Tech are
affiliated with Yieh Loong, China Steel/Yieh Loong argues, this does not,
in turn, mean these parties are affiliated with China Steel. The
collapsing of China Steel and Yieh Loong does not, the company maintains,
mean ipso facto that China Steel is affiliated with these parties.
According to China Steel/Yieh Loong, the Department must find affiliation
between China Steel and Yieh Phui, Yieh Hsing and Persistence Hi-Tech. 

Petitioners assert that Yieh Loong's chairman need not control the daily
operations of the reseller affiliates to have sufficient influence over
the resellers' policies to support a finding of affiliation. Petitioner I
Rebuttal Brief at 3. Petitioners insist that China Steel/Yieh Loong has
not demonstrated that having Yieh Loong's chairman on the resellers'
boards does not result in influence sufficient to support an affiliation
finding. Rather, petitioners argue that "companies with common board
members are by definition related parties." Id., quoting China Steel/Yieh
Loong's Case Brief at 12. 

In response to China Steel/Yieh Loong's claim that three percent equity
ownership does not meet the Tariff Act's requirement of five percent,
petitioners assert that the statute requires an affirmative affiliation
finding where the five percent threshold is met. However, this does not
mean the statute precludes a finding of affiliation where the degree of
equity ownership is below this level. Id. at 4. Finally, petitioners
conclude that China Steel need not be directly affiliated with Yieh Phui,
Yieh Hsing, and Persistence Hi-Tech to classify these resellers as
affiliates. Petitioners assert "collapsed companies are a single entity
and inherently have the same affiliated parties." Id.

Department's Position:

We agree with petitioners. Collapsed companies constitute a single entity
and therefore affiliates of either company are affiliates of the collapsed
entity. Section 771(33) of the Tariff Act considers the following persons
or parties to be affiliated:

  (A) Members of a family;

  (B) Any officer or director of an organization and such organization;

  (C) Partners;

  (D) Employer and employee;

  (E) Any person directly or indirectly owning, controlling, or holding
      with power to vote, five percent or more of the outstanding voting 
      stock or shares of any organization and such organization;

  (F) Two or more persons directly or indirectly controlling, controlled
      by, or under common control with, any persons; 
 
  (G) Any person who controls any other person and such other person.

The Department acknowledges that in the Preliminary Determination, it
incorrectly cited section 771(33)(B) of the Tariff Act as the basis for
its affiliation decision. The correct citation is section 771(33)(F) and
(G) of the Tariff Act. The statute defines control as being in a position
legally or operationally to exercise restraint or direction over the other
entity. Actual exercise of control is not required by the statute. The
Department finds that China Steel/Yieh Loong is affiliated with Yieh
Hsing, Yieh Phui and Persistence Hi-Tech for the reasons detailed below. 

The Department specifically asked China Steel/Yieh Loong in its January
4, 2001 questionnaire who its affiliates are. In its February 2, 2001
section A response Yieh Loong states that it is affiliated with several
companies, including Yieh Hsing, Yieh Phui and Persistence Hi-Tech. Yieh
Loong stated that where there is no equity ownership, under Taiwanese law
the companies are still considered affiliates due to a common chairman.
China Steel/Yieh Loong's Case Brief at 12. All four entities have a common
chairman and Yieh Loong, Yieh Hsing, and Yieh Phui have minority ownership
in each other. (For a detailed discussion of affiliated resellers see
Reseller Memorandum.) 

We also disagree with respondents argument that the chairman of Yieh
Loong does not control company prices or daily operations and that the day-
to-day operations of Yieh Loong are in the hands of its general manager or
president. According to Article 202 of the Taiwan Company Law:

     The transaction of business of the company shall be decided by 
     the board of directors. Unless this Law or the articles of 
     incorporation provide that certain matters shall be resolved
     at the meeting of shareholders, all matters may be decided by
     resolutions of the board of directors.

Article 202 also states that a Taiwanese company's business strategy and
its daily operations shall be decided by the board of directors. See Yieh
Loong's April 23, 2001 supplemental questionnaire response at Exhibit A-
32. It is evident from Article 208 of the Taiwan Company Law that the
chairman of the board of directors has a substantial say in the business
agenda of that company. Id. Article 208 of the Taiwan Company Law states:

     The chairman of the board of directors shall internally preside
     at the meetings of shareholders, meetings of the board of 
     directors, and meetings of the managing directors, and shall
     externally represent the company.

In sum, because Yieh Loong's chairman is also the chairman of Yieh Phui,
Yieh Hsing and Persistence Hi-Tech, and because of the extensive power of
the chairman of the board under Taiwanese law, we find that Yieh Loong
controls Yieh Phui, Yieh Hsing and Persistence Hi-Tech. Moreover, we note
that these companies hold themselves out to the world as affiliated, and
originally reported themselves that way to the Department. Therefore, the
Department continues to maintain that Yieh Loong is affiliated with Yieh
Phui, Yieh Hsing, and Persistence Hi-Tech. Moreover, the Department
continues to conclude that as a collapsed entity, China Steel is
affiliated with Yieh Loong's affiliates and vice-versa. See Notice of
Final Determination of Sales at Less Than Fair Value; Stainless Steel
Sheet and Strip in Coils from Germany, 64 FR 30710 (June 8, 1999). 

Comment 3: Time to Respond to Request for Information

China Steel/Yieh Loong contends that the Department's supplemental
questionnaire (which was due on April 23, 2001) set an unreasonable
deadline which did not provide a meaningful period in which to compile its
response. China Steel/Yieh Loong asserts the Department only granted it
two to four business days to answer the questionnaire and denied any
extension requests. When the company did succeed in developing a complete
response, China Steel/Yieh Loong complains, the Department rejected the
submission as an untimely and unsolicited response. Respondents argue that
in light of the communications between China Steel/Yieh Loong and the
Department, this subsequent rejection of the revised data was also
unreasonable. China Steel/Yieh Loong Case Brief at 3. 

Further, according to China Steel/Yieh Loong, the statute requires the
Department to provide respondents an opportunity to remedy deficient
submissions, if time permits. Claiming the Department in some cases will
continue the questionnaire process up to two months after a 

preliminary decision, China Steel/Yieh Loong insists that ample time
existed for the company to 

remedy any deficiencies and allow the Department to calculate China
Steel/Yieh Loong's dumping margin. Failure to extend the final
determination for this purpose is, the respondents aver, unreasonable. Id.
at 5.

Petitioners insist the Department acted correctly in rejecting China
Steel/Yieh Loong's May 30, 2001 submission. Citing Nippon Steel
Corporation v. United States, 118 F. Supp. 2d 1366, 1377 (Ct. of Int'l.
Trade 2000), petitioners contend the Department has authority both to set
deadlines to "aid the completion of its mission," and to reject untimely
responses in favor of facts available. Petitioner I Case Brief at 3.
Rather, petitioners maintain, the Department has been "generous" in
providing numerous extensions. Petitioner I Rebuttal Brief at 2.
Petitioners state that at the time the Department's April 17 and 18, 2001
supplemental questionnaire was issued, Yieh Loong's cost verification was
scheduled to begin on Monday, April 30, 2001. Petitioner II Rebuttal Brief
at 3. The Department's regulations, petitioners claim, state that the
record in an investigation closes one week before verification is set to
begin. Therefore the record in this investigation closed on April 23,
2001. Petitioners assert the Department's April 17 and 18 questionnaires
"generously [gave] respondents every opportunity to correct the previously
identified problems contained in their submissions." Id. at 4.

Department's Position: 

The Department disagrees with China Steel/ Yieh Loong's claim that April
23, 2001 was an unreasonable deadline for its April 17 and 18, 2001
supplemental questionnaires. As the chronology of events outlined below
demonstrates, the Department afforded China Steel/Yieh Loong ample time to
remedy the deficiencies in their responses. In the Department's
questionnaires of April 17 and 18, 2001, we requested information
previously identified in the Department's original January 4, 2001 and
subsequent questionnaires. In the January 4, 2001 questionnaire at
question 2C, the Department requested a list of all affiliates and a
description of "all aspects of the relationship between your company and
each person you name, and describe each person's role (if any) in the
manufacturing, sale, and/or development of the product under investigation
(including all inputs)." Question 2D of the questionnaire stated:

     If any of the affiliated persons you have identified above are
     in turn affiliated with other persons that are involved in the
     manufacturing, sale, and/or development of the product under 
     investigation (including all inputs), please provide a list of
     those persons and describe the nature of the affiliation (e.g.,
     shared directors or managers, equity ownership, close supplier 
     relationship). Include any such affiliated persons in the chart
     you provide in response to Question 2.c., above. Also describe 
     the nature of each person's involvement with the product under 
     investigation.

China Steel's February 2, 2001 response to those two questions failed to
list Yieh Loong as an affiliate which manufactured, sold, or developed
subject merchandise and did not include Yieh Hsing and Yieh Phui which are
in turn affiliated with Yieh Loong. See China Steel's section A
questionnaire response, February 2, 2001. In the Department's February 27,
2001 supplemental section A questionnaire, China Steel was asked at
question 3 if China Steel and Yieh Loong were indeed affiliates. At
question 4, China Steel was asked to confirm if Yieh Hsing and Yieh Phui
were affiliated with Yieh Loong and if each manufactured, sold, or
developed subject merchandise. On March 20, 2001 China Steel confirmed
that Yieh Loong is an affiliate and that Yieh Phui and Yieh Hsing were
affiliates of Yieh Loong which manufactured, sold or developed subject
merchandise. See China Steel's March 20, 2001 response at 3-6. Similarly,
the Department asked Yieh Loong why it considered Persistence Hi-Tech an
affiliate and it replied that the two companies were considered affiliates
due to a common chairman. See Yieh Loong March 20, 2001 response at 2.

On March 15, 2001 the Department issued to China Steel its supplemental
section B and C questionnaire and specifically requested China Steel to
code sales to Yieh Loong, Yieh Phui, and Yieh Hsing as sales to affiliates
and to report downstream sales along with any resales made by China Steel
Global and China Steel Chemical. In the same supplemental questionnaire,
the Department requested China Steel to remedy missing product
characteristics for a sizeable number of its home market sales. Similarly,
the supplemental questionnaire sent to Yieh Loong requested it to report
all affiliated resellers downstream sales. See the Department's March 15,
2001 supplemental section B and C questionnaire to Yieh Loong.

On April 3, 2001 China Steel submitted its supplemental section B and C
response. From the information provided, the Department concluded that
China Steel did not remedy the deficiencies addressed in the Department's
March 15, 2001 supplemental questionnaire. China Steel did not provide
missing product characteristics, i.e., carbon, quality, yield strength,
thickness, or width. Even though it previously stated in the same
submission that physical characteristics, " can be identified from the
production record, inventory record as well as the product code system."
Quoting China Steel's April 3, 2001 supplemental section B and C response
at answer to question 4. China Steel's affiliated resellers' information
was not complete. The information provided on April 3, 2001 was
inconsistent with the narrative. (For a detailed discussion of the
deficiencies in China Steel/Yieh Loong's submissions see Memorandum to the
File, The Use of Adverse Facts Available, April 23, 2001.) 

The April 17 and 18, 2001 supplemental questionnaires constituted the
Department's third request to China Steel regarding downstream sales and
missing product characteristics. The Department specifically instructed
China Steel to report downstream sales and to include detailed narratives
with source documentation, worksheets, and sample printouts of sales
listings. In addition, the Department instructed China Steel to report all
physical characteristics for its home market sales listing and its
affiliated resellers' sales listing. See the Department's supplemental
questionnaire, April 17 and 18, 2001. Once again, the Department's 

April 17 and 18, 2001 questionnaires requested Yieh Loong to provide
narratives on its affiliated resellers' sales. (This information is
essential to calculating a dumping margin as detailed in the Preliminary
Determination at 66 FR 22207 and 22208.) See Memorandum to the File, The
Use of Adverse Facts Available, April 23, 2001. The Department notified
China Steel/ Yieh Loong early in the proceedings of its deficiencies and
allowed numerous extensions of time to remedy these deficiencies as
requested. China Steel/Yieh Loong's repeated failure to remedy these
deficiencies establish that they significantly impeded the conduct of this
investigation and failed to cooperate to the best of their ability. Id.

China Steel/ Yieh Loong cites Ta Chen Stainless Steel Pipe v. United
States, Slip Op. 99-117 at 40 (CIT October 28, 1999) to assert that the
Department is in violation of the statutory requirement to afford
opportunity to remedy deficiencies. However the circumstances of that case
are not analogous to the facts of this investigation. The Department in
that case did not inform the respondent specifically to provide U.S. sales
information for its affiliated resellers. Only upon publication of the
final results of review, on July 8, 1997, was Ta Chen made aware that
additional U.S. sales data were required. Ta Chen was not given the
opportunity to remedy such deficiencies since the submission of factual
information had to be made six months before Ta Chen was informed that the
Department would consider its sales to its affiliates as constructed
export price (CEP) sales. In this investigation the Department
specifically instructed China Steel and Yieh Loong on numerous occasions
to rectify deficiencies in their responses, and to report affiliated re-
sales. Because China Steel/ Yieh Loong had failed to remedy those
deficiencies, the deadline outlined in our April 17 and 18, 2001
supplemental questionnaires was reasonable. 

Comment 4: Application of Facts Available & Adverse Facts Available

China Steel/ Yieh Loong asserts the Department imposed facts available
against it without providing the statutorily-required notice of
deficiencies and an opportunity to remedy the deficiencies in its
response. Respondent maintains the Preliminary Determination collapsed
Yieh Loong with China Steel while specifically indicating that adverse
facts available was imposed against Yieh Loong solely on the basis of
alleged deficiencies in China Steel's response. The Department, the
company further claims, had not advised Yieh Loong that Yieh Loong was
responsible for China Steel's actions until the Preliminary Determination.
Since this determination was announced on April 24, 2001, i.e., one day
after the record in this investigation closed, Yieh Loong did not have any
opportunity to persuade China Steel to comply. China Steel/Yieh Loong's
Case Brief at 8.

Further, China Steel/Yieh Loong avers, were the Department to extend the
deadline for its final determination, as China Steel/Yieh Loong requested,
the Department would have three and a half months to analyze the May 30
and 31, 2001 responses which were ultimately returned. China Steel/Yieh
Loong asserts this would be "far more time" than needed to verify the
response.

In addition, China Steel/ Yieh Loong argues the Department can only apply
adverse facts available against a party which did not act to the best of
its ability, yet the Department did not cite evidence that this was the
case in this investigation. Citing American Silicon Technologies v. 

United States, 110 F. Supp. 2d 992, 1003 (Ct. of Int'l Trade, 2000),
China Steel/Yieh Loong asserts that an alleged lack of information on the
record cannot automatically be equated with a failure to act to the best
of one's abilities. China Steel/Yieh Loong Case Brief at 17. In that case,
the company avers, the Court of International Trade (the Court) was not
persuaded by the Department's claim that the "numerous opportunities"
afforded the respondent was "not probative of [a respondent's] ... ability
to respond." Id., quoting American Silicon Technologies. China Steel/Yieh
Loong asserts they are being penalized improperly for the failure of third
parties - the putatively affiliated resellers - to provide information. In
Usinor Sacilor v. United States, 907 F. Supp 426 (Ct. of Int'l Trade,
1995), respondent claims the Court held that the Department may not apply
adverse facts available where "the missing data [were] beyond the control
of the respondent." Id. According to China Steel/Yieh Loong, the
Department concluded on remand that the respondent did not have control
over the information and, accordingly, did not make an adverse inference
in applying facts available. 

Petitioners argue that respondents' failure to submit complete factual
information in a timely fashion warrants the use of facts available.
Citing section 776(a)(2)(B) of the Tariff Act, petitioners maintain that
when a submission is untimely filed, the Department may use the facts
otherwise available. Petitioner I Case Brief at 3. Petitioners further
assert that the use of adverse facts available is warranted because the
respondents failed to provide adequate responses in this proceeding.
Petitioners assert that the Department has gone out of its way to give
respondents multiple opportunities to correct these deficiencies.
Petitioners note that the Department's April 17 and 18 supplemental
questionnaire constituted the Department's second supplemental
questionnaire. Furthermore, petitioners point to China Steel/Yieh Loong's
longstanding efforts, dating from January 19, 2001, to be excused from
reporting the very home market downstream sales data at issue in this
case. Id. at 5. Finally, petitioners contend that the sales and cost-of-
production data submitted by China Steel/Yieh Loong were so deficient
(i.e., missing product characteristics and downstream sales), that "the
Department could not reasonably calculate a dumping margin." Id.

Petitioners propose using a facts available margin of 43.53 percent, the
highest margin alleged in the petition, as a facts available margin; if
the Department continues to assign a margin based on adverse facts
available, petitioners urge the Department to double that highest figure
and assign a margin of 87.06 percent. Petitioners note that respondents
knew of the 43.53 percent rate at the outset of the investigation. If
these companies' actual margins of dumping were below this figure,
petitioners reason, they would have cooperated fully with the Department.
Therefore, petitioners argue, only a margin higher than that alleged in
the petition would be truly adverse. Petitioner I Rebuttal Brief at 8.
Even if the Department disagrees with this suggestion, petitioners urge
the Department to state affirmatively that the petition margin is the best
facts available margin available. Petitioners suggest doing so will
protect the petition margin as a source of facts available in the event
the use of adverse facts available does not withstand judicial scrutiny.
Id. at 9. 

In their rebuttal comments, petitioners emphasize the Department's
authority to employ facts available is the "sole incentive for a
respondent to cooperate" with the Department. Petitioner II Rebuttal Brief
at 10. Because of the "gross inadequacies" in China Steel/Yieh Loong's
response, petitioners continue, the Department properly decided not to
verify these responses. Petitioners further note that having decided not
to verify, the Department is foreclosed from using the unverified data.
Id. at 11, citing section 782(i)(1) of the Tariff Act. Claiming China
Steel/Yieh Loong i) withheld information requested by the Department; ii)
failed to provide requested data by deadlines established; and iii)
significantly impeded the proceeding, petitioners aver the use of facts
available is clearly warranted. Further, in cases where a respondent fails
to act to the best of its ability, petitioners argue, the Department's
"long-standing practice is to employ total adverse facts available." Id.
at 12. Accusing China Steel/Yieh Loong of responding to the Department's
questions with "circular nonsensical narratives," petitioners insist the
Department should continue to apply adverse facts available for the final
determination. Id.

Department's Position:

Section 776(a) of the Tariff Act provides that if:

   (1) necessary information is not available on the record, or 

   (2) an interested party or any other person; 
      (A) withholds information that has been requested by the 
          administering authority or the Department, 
      (B) fails to provide such information by the deadlines for
          submission of the information or in the form and manner 
          requested, 
      (C) significantly impedes a proceeding under this title, or 
      (D) provides such information but the information cannot 
          be verified, 

the Department is required to use facts otherwise available to make its
determination.

In addition, section 776(b) of the Tariff Act provides that, in selecting
from among the facts available, the Department may employ adverse
inferences against an interested party if that party failed to cooperate
by not acting to the best of its ability to comply with requests for
information. 

As detailed in Time to Respond to Request for Information section above,
the Department repeatedly instructed China Steel/Yieh Loong to remedy
deficient information regarding missing product characteristics and
downstream sales. See Memorandum to the File, The Use of Adverse Facts
Available for China Steel and Yieh Loong, April 23, 2001. The Department's
February 27, 2001 supplemental section A questionnaires specifically
questioned China Steel and Yieh Loong regarding their affiliation with
each other. In their March 20, 2001 supplemental section A response, the
two companies acknowledged an affiliation with each other. They based the
affiliation on China Steel's substantial equity ownership in Yieh Loong
and China Steel's chairman and a senior executive being board members on
Yieh Loong's three-person Board of Directors. See China Steel's and Yieh
Loong's March 20, 2001 supplemental section A response. In the
Department's March 15, 2001 supplemental section B and C questionnaires,
we instructed China Steel and Yieh Loong to report complete and accurate
downstream sales information. We also specifically instructed China Steel
to provide all required physical characteristics. China Steel/Yieh Loong's
April 3, 2001 supplemental section B and C response did not provide the
requested information. Yieh Loong failed to provide a narrative for its
downstream sales. China Steel failed to rectify the missing product
characteristics, which not only affected its home market database but also
whatever affiliated reseller information they were able to provide. Their
downstream sales information was still extremely insufficient. See
Memorandum to the File, The Use of Adverse Facts Available for China Steel
and Yieh Loong, April 23, 2001. Once again, on April 17 and 18, 2001 the
Department gave China Steel/Yieh Loong another opportunity to correct
their deficient information. China Steel/Yieh Loong's submission on April
23, 2001 failed again to rectify the deficiencies the Department outlined
in its memorandum on the use of adverse facts available; the sales listing
submitted on April 23, 2001 contained nearly identical sales information
as the April 3, 2001 submission. Id.

Because respondents failed to remedy these deficiencies despite three
opportunities to do so, the Department informed China Steel/Yieh Loong in
a letter dated May 10, 2001, that the sales and cost verifications were
cancelled. China Steel/Yieh Loong filed additional information on May 30
and 31, 2001, five weeks after the April 23, 2001 deadline. Pursuant to
section 782(f) of the Tariff Act and 19 CFR 351.302(d)(i), the Department
returned the submissions to China Steel/Yieh Loong and did not consider
them part of the record of this investigation. See Department's letter to
Peter Koenig, June 5, 2001. We disagree with China Steel/Yieh Loong's
claim that an extension of the final determination would provide
sufficient time for the Department to use the new information. The May 30
and 31, 2001 submissions, assuming they were essentially complete, would
constitute such a major revision of China Steel/ Yieh Loong's
questionnaire as to qualify as a completely new response. It would involve
significant new subsets of home market sales, and accompanying narrative,
submitted for the first time. The same holds true for the missing model
match data. Even with an extended final determination, the Department
would not be able to properly administer the investigation of this case.
To properly administer the case, the Department must: analyze the new
submissions; allow an opportunity for comments from interested parties;
issue additional supplemental questionnaires; conduct cost and sales
verification of China Steel/Yieh Loong; issue verification reports; and
allow interested parties to comment and request a hearing. Because of the
extreme tardiness of China Steel/Yieh Loong's May 30 and 31, 2001
submissions, we find it significantly impeded the proceeding of this
investigation.

The Department continues to maintain that because of deficiencies in the
record the use of adverse facts available is warranted pursuant to section
776(a) and (b) of the Tariff Act. For example, China Steel/ Yieh Loong
failed to remedy missing product characteristics. The Department requires
the physical characteristics of paint, quality, carbon, yield strength,
thickness, width, cut-to-length versus coiled, tempered rolled, pickled,
edge trim, and patterns in order to match the product appropriately to
products sold in the United States, to ascertain whether the home market
merchandise was sold at prices above the cost of production, and to
calculate a difference-in-merchandise adjustment. See Memorandum to the
File, The Use of Adverse Facts Available for China Steel and Yieh Loong,
April 23, 2001. Respondents' failure to provide this information, again,
precludes the Department from calculating an accurate margin. While China
Steel/Yieh Loong submitted new information on May 30 and 31, 2001, the
information was five weeks past due and consequently rejected as untimely.
Moreover, China Steel/ Yieh Loong's data failed to provide complete and
accurate downstream sales information. Without these data, the information
regarding home market sales is unusable because a significant quantity of
China Steel/Yieh Loong's home market sales were made through affiliates. 

The Department disagrees with petitioners' proposal of using the highest
margin alleged in the petition of 43.53 percent, nor do we agree that the
adverse facts available margin should be 87.06 percent. As stated in
section 776(c) of the Tariff Act:

     When the Department relies on secondary information rather 
     than on information obtained in the course of an investigation
     or review, the Department, as the case may be, shall, to the 
     extent practicable, corroborate that information from independent
     sources that are reasonably at their disposal.

For the Preliminary Determination, the Department corroborated the facts
available rate from the antidumping petition of 29.14 percent. The rate
was based on a margin computation employing constructed value (CV) as the
normal value, for which petitioners used their own cost of manufacturing
(COM) data in the calculation. Petitioners calculated a separate rate for
each of three HTS numbers that cover subject merchandise, employing a
different COM for each HTS number. We used as the facts available rate the
margin for the HTS number that had the highest margin. That HTS number was
7208.27.00.60, a category covering pickled merchandise. The Department
knew of no sources to corroborate the petitioner's reported COM data
except the COM data the respondents submitted in their calculation of CV.
(China Steel/ Yieh Loong provided this data in their April 9, 2001
submission.) The Department maintains that the COM submitted by
respondents is reasonably close to the COM contained in the petition, and
therefore find the COM contained in the petition for HTS 7208.27.00.60 to
be sufficiently corroborated. The Department is able to corroborate the
petition dumping margin of 29.14 percent, however we are unable to
corroborate petitioners' proposed adverse facts available margin of 87.06
percent with information currently submitted by respondents. Moreover, we
believe that the highest petition margin, as recalculated by the
Department, is adverse in that it reasonably insures that the respondent
does not benefit from its own lack of cooperation. See Memorandum to the
File from Fred Baker, Corroboration dated April 23, 2001. Therefore, we
have continued to use as adverse facts available the 29.14 percent rate
used in our preliminary results.

Recommendation

Based on our analysis of the comments received, we recommend adopting all
of the positions set forth above. If these recommendations are accepted,
we will publish the final determination of the antidumping duty
investigation and the final dumping margins for all firms in the Federal
Register.

AGREE____ DISAGREE____

________________________________

Faryar Shirzad
Assistant Secretary
  for Import Administration

_______________________________
Date 

________________________________________________________________________
footnote:

1. Three separate law firms are representing petitioners in the various
investigations of hot-rolled steel. Two of these submitted comments in
these proceedings, Schagrin Associates, and Dewey Ballantine LLP. For
clarity, citations to either case or rebuttal briefs will be preceded by
the submitting party's name (e.g., China Steel/Yieh Loong Case Brief,
Petitioner I Rebuttal Brief, Petitioner II Rebuttal Brief). Schagrin
Associates represents Gallatin Steel Company, IPSO Steel Inc., Nucor
Corporation, Steel Dynamics, Inc., Weirton Steel Corportion, and
Independent Steelworkers Union (collectively Petitioner I). Dewey
Ballantine LLP represents Bethlehem Steel Corp., LTV Steel Company, Inc.,
National Steel Corp., and United States Steel LLC (collectively Petitioner
II).