67 FR 6490, February 12, 2002
                                                            A-201-822
                                           ARP: 01/04/1999-06/30/2000
                                                      Public Document
                                                    IA/Group III: DLS

MEMORANDUM TO: Faryar Shirzad 
               Assistant Secretary 
                 for Import Administration

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

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

Summary 

We have analyzed the case and rebuttal briefs of the interested parties
in the 1999-2000 administrative review of the antidumping duty order on
stainless steel sheet and strip in coils (S4) from Mexico (A-201-822). As
a result of our analysis, we have made changes, including corrections to
certain programming and ministerial errors, in the margin calculations. We
recommend that you approve the positions that we have developed in the
"Discussion of the Issues" section of this memorandum. Below is the
complete list of the issues in this administrative review on which we
received comments and rebuttal comments from parties:

Adjustments to Normal Value

  Comment 1. Indirect Selling Expenses Incurred in the Home Market 
  Comment 2: Circumstances of Sale Adjustment to Normal Value
  Comment 3: Imputed Credit on Home Market Sales Denominated in U.S.
Dollars 

Adjustments to United States Price

  Comment 4: U.S. Packing Costs
  Comment 5: Duty Drawback
  Comment 6: Date of Payment for Certain Ken-Mac Resales
  
Cost of Production 

  Comment 7: Major Input Rule
  Comment 8: Fixed Overhead Expenses 
  Comment 9: General & Administrative Expenses
  Comment 10: Interest Expenses

Home Market Downstream Sales 

  Comment 11: Use of Sales by Mexinox Trading in the Calculation of Normal
              Value

Level of Trade 

  Comment 12: Classification of Certain U.S. Sales as Export Price or
              Constructed Export Price 
  Comment 13: Constructed Export Price Offset

Margin Calculations

  Comment 14: Zeroing Negative Dumping Margins

Assessment Rates

  Comment 15: Assessment Rate Methodology

Ministerial Errors 

  Comment 16: Weight Bases Used to Calculate the Difference-in-Merchandise
              Adjustment
  Comment 17: Weight Bases Used to Calculate Extended Entered Values for
              Ken-Mac Metals, Inc. (Ken-Mac) and Copper & Brass Sales, 
              Inc. (CBS)
  Comment 18: Weight Conversion Factor
  Comment 19: Application of Corrections from the Ken-Mac Sales
              Verification to CBS' Resales
  Comment 20: Application of Neutral Facts Available to Ken-Mac's 
              "Unattributable" Sales
  Comment 21: Model Match Formatting Errors 

Background

On August 8, 2001, we published in the Federal Register the preliminary
results of the administrative review of stainless steel sheet and strip in
coils from Mexico for the period January 4, 1999 through June 30, 2000.
See Stainless Steel Sheet and Strip in Coils from Mexico; Preliminary
Results of Antidumping Duty Administrative Review, 65 FR 66711
(Preliminary Results). 

This review covers one manufacturer/exporter of stainless steel sheet and
strip in coils, Mexinox S.A. de C.V. (Mexinox). We invited parties to
comment on our preliminary results of review. We received case briefs from
Mexinox and from Allegheny Ludlum Corporation, Armco Inc., J&L Specialty
Steel, Inc., Washington Steel Division of Bethelehem Steel Corporation,
United Steelworkers of America, AFL-CIO/CLC, Butler Armco Independent
Union, Zanesville Armco Independent Organization, Inc. (collectively,
petitioners) on September 24, 2001, and rebuttal briefs from both parties
on October 9, 2001. At the request of respondents, we held a public
hearing on October 17, 2001.

Discussion of the Issues

Adjustments to Normal Value

Comment 1: Indirect Selling Expenses Incurred in the Home Market 

Petitioners state Mexinox's indirect selling expenses (ISEs) include
freight expenses, even though these expenses have been reported separately
in the freight expense fields. Petitioners contend that including these
freight expenses in ISEs represents double counting to the extent these
ISEs are deducted from home market selling price (e.g., as a constructed
export price (CEP) offset). Similarly, petitioners assert, this double
counting understates profit. Therefore, petitioners argue freight charges
must be deducted from Mexinox's reported home market ISEs.

Asserting petitioners have completely misunderstood the facts, Mexinox
states the Department can ignore petitioners' request. As verified by the
Department, Mexinox argues, its reported home market ISE ratios already
exclude freight expenses. Mexinox claims Attachment B-19 of its November
20, 2000 questionnaire response and the revised ISE expense calculation
worksheet verified by the Department both make this clear. Mexinox refers
to the Department's August 23, 2001 Sales Verification Report (Sales
Verification Report) at 16, in which the Department noted Mexinox made an
adjustment to home market ISEs for freight. Therefore, Mexinox submits, no
adjustment to its reported ISEs is necessary.

Department's Position: We agree with Mexinox. As the record demonstrates,
we verified that Mexinox excluded freight expenses incurred in the home
market from its calculation of U.S. ISEs (DINDIRSU) and home market ISEs
(INDIRSH). See the Sales Verification Report at 16 and Sales Verification
Exhibit 14 at S-432 and S-433, respectively. Therefore, we have not
adjusted Mexinox's calculation of INDIRSH and DINDIRSU for these final
results.

Comment 2: Circumstances of Sale Adjustment to Normal Value

Mexinox states that in accordance with section 773(a)(7)(B) of the Tariff
Act of 1930, as amended (the Tariff Act), the Department granted a CEP
offset to normal value (NV) in the preliminary results. Mexinox notes,
however, that the Department limited the amount of the CEP offset to the
amount of ISEs and inventory carrying costs (ICCs) deducted from CEP. 
Although the "CEP offset cap" is permitted by the statute, Mexinox
contends, it precludes the Department from making a fair comparison
between U.S. price and NV. Mexinox asserts both U.S. and international law
require a fair comparison between U.S. price and NV, citing Smith-Corona
Group v. United States, 713 F.2d 1568, 1578 (Fed. Cir. 1983), cert.
denied, 465 U.S. 1022 (1984); Consumer Prod. Div., SCM Corp. v. Silver
Reed America, Inc., 753 F.2d 1033, 1039-40 (Fed. Cir. 1985); and the World
Trade Organization (WTO) Antidumping Agreement at Article 2.4.
Nevertheless, Mexinox argues, the Department can still account for the
differences affecting price comparability by making an additional
adjustment for ISEs and ICCs beyond the amount of the CEP offset. Mexinox
claims such a circumstances of sale adjustment is lawful under section
773(a)(6)(B)(iii) of the Tariff Act, and requests that the Department make
this necessary and appropriate adjustment for these final results.

Mexinox holds that Article 2.4 of the WTO Antidumping Agreement mandates
that "[d]ue allowance shall be made in each case, on its merits, for
differences which affect price comparability, including differences in
conditions and terms of sale, taxation, levels of trade, quantities,
physical characteristics, and any other differences which are also
demonstrated to affect price comparability" (emphasis added by
respondents). Regarding CEP sales, Mexinox notes, Article 2.4 specifically
provides that if "price comparability has been affected, the authorities
shall establish the normal value at a level of trade equivalent to the
level of trade of the constructed export price, or shall make due
allowance as warranted under this paragraph."  Mexinox maintains the WTO
Antidumping Agreement does not put a cap on the amount of the adjustments
that must be made to NV to make it comparable to CEP. Thus, Mexinox
contends the Antidumping Agreement establishes that the Department must
adjust for all LOT-related differences between home market and U.S. market
sales that affect comparability. 

While the CEP offset cap appears to prevent the Department from making a
fair comparison, Mexinox argues, the Department can adhere to the
Antidumping Agreement and simultaneously conduct a "fair comparison" under
U.S. law by allowing an additional adjustment for all ISEs and ICCs above
the CEP offset cap. Mexinox states that pursuant to section
773(a)(6)(B)(iii) of the Tariff Act, NV "shall be . . . increased or
decreased by the amount of any difference (or lack thereof) between export
price or constructed export price and [NV] (other than a difference for
which allowance is otherwise provided under this section) that is
established to the satisfaction of the administering authority to be
wholly or partly due to . . . differences in the circumstances of sale." 

Mexinox asserts this approach is upheld by the Department's practice and
Court of International Trade (CIT) case law. Mexinox cites The Budd Co.,
Wheel & Brake Div. v. United States, 14 CIT 595, 746 F. Supp. 1093, 1100
(1990) (Budd Co.), in which the Department granted a circumstances of sale
adjustment to NV to account for distortions caused by hyperinflation in
the Brazilian economy between the date of sale and date of shipment. 
According to Mexinox, the petitioners in that case argued the Department
had subverted the applicable currency conversion regulations. Upon appeal,
Mexinox contends, the CIT not only sustained the Department's use of the
circumstances of sale adjustment as a valid display of discretion, but
also stated that "... to the extent the circumstance of sale adjustment
conflicted with the currency conversion regulations, it was appropriate
for Commerce to choose to effectuate the primary statutory purpose in
favor of fair determinations based on contemporaneous comparisons."
Respondent's Case Brief at 27, citing Budd Co. at 1100. Although this
decision was handed down prior to implementation of the Uruguay Round
Agreements Act (URAA), Mexinox notes, the continuity in the statute
regarding circumstances of sale adjustments renders it applicable to the
instant review. Mexinox also cites Viraj Group, Ltd. v. United States,
Slip Op. 01-104, 2001 WL 929756, *6 (CIT 2001), in which the CIT referred
to Budd Co. as an example of the discretion available to the Department.
According to Mexinox, the CIT remanded this case to the Department because
its mechanical application of the exchange rate methodology was contrary
to the goal of the antidumping laws to calculate as accurate a margin as
possible. Mexinox holds these cases clearly show that, even under U.S.
law, "it is the Department's first and most important obligation to
establish comparability between the U.S. price and NV." Respondent's Case
Brief at 27.  Citing Budd Co. at 1001, Mexinox claims that the Department
argued it was not required to limit circumstances of sale adjustments to
direct expenses, stating "...we are not precluded from using this
provision to achieve a result that reflects economic reality and is
consistent with the basis purpose of the Act. . . .to fairly compare
foreign market value and United States price on an equivalent basis." 

Petitioners respond that an adjustment to NV for home market ISEs and
ICCs above the CEP offset cap would be inappropriate for two reasons.
First, petitioners argue, Mexinox should not be allowed to make a claim
for such an adjustment at this stage in the review period. Since there is
a cap on the amount of indirect selling expenses that can be deducted from
NV, petitioners state, the Department places less focus on "potentially
inflated indirect selling expenses that a respondent has reported."
Petitioners' Rebuttal Brief at 13. Petitioners contend Mexinox should have
made a request for this adjustment in its initial questionnaire response,
in order to give the Department an opportunity to ask supplemental
questions and verify the provided information. Petitioners assert that at
this juncture in the review period, a respondent should not be allowed to
raise a significant new argument involving reliance on flimsy factual
information (i.e., the reported ICCs for home market sales).

Second, petitioners maintain, Mexinox incorrectly presumes there can be
selling expense differences between home market sales and purported export
price (EP) sales that are recognized as being at the same level of trade
(LOT). Petitioners contend Mexinox's argument for a circumstances of sale
adjustment on ISEs is akin to a back-door request for a LOT adjustment.
Petitioners argue Mexinox has not shown that it is entitled to a LOT
adjustment and therefore should not be allowed to achieve the same result
using a different avenue.

Department's Position: We disagree with Mexinox that we should make an
additional circumstances of sale adjustment to account for the amount of
ISEs and ICCs beyond the CEP offset cap. Section 351.410 of the
Department's regulations provides clarification regarding the granting of
circumstance of sale adjustments to NV. Specifically, section 351.410(b)
states:

With the exception of the allowance described in paragraph (e) of this
section concerning commissions paid only in one market, the Secretary will
make circumstances of sale adjustments under section 773(a)(6)(C)(iii) of
the Act only for direct selling expenses and assumed expenses. 

As defined in section 351.410(c) of the Department's regulations, direct
selling expenses consist of expenses "such as commissions, credit
expenses, guarantees, and warranties, that result from, and bear a direct
relationship to, the particular sale in question." Section 351.410(d), in
turn, defines assumed expenses as "selling expenses that are assumed by
the seller on behalf of the buyer, such as advertising expenses." The
Department treats all other selling expenses as indirect expenses unless
the respondent establishes that the expense in question is direct in
nature. See, e.g., RHP Bearings v. United States, 875 F. Supp. 854, 859
(CIT 1995). ISEs and ICCs are, by their very nature, indirect expenses;
they are incurred regardless of whether the respondent makes a sale. 

Section 351.410 of the Department's regulations makes clear when the
Department will grant a circumstance of sale adjustment. Since ISEs and
ICCs are not direct expenses or assumed expenses, the Department cannot
make a circumstance of sale adjustment to NV for these expenses. It bears
noting that the Department may deduct a portion of these expenses from NV
if we determine, in accordance with section 351.412(f) of our regulations,
that a CEP offset is warranted. Therefore, we have not made an additional
circumstance of sale adjustment to our calculation of NV for these final
results. 

Comment 3: Imputed Credit on Home Market Sales Denominated in U.S. Dollars 

Referring to Mexinox's November 20, 2000 questionnaire response at B-20,
petitioners note Mexinox reported that "while most [home market] sales are
invoiced and paid in pesos some invoices were issued in U.S. dollars." In
addition, petitioners state, Mexinox reported that its customers have the
option of paying in dollars or the peso equivalent "using the exchange
rate on the date of payment." Petitioners' Case Brief, citing Mexinox's
March 2, 2001 supplemental questionnaire response at 20. Petitioners
assert that for home market sales priced in U.S. dollars, the Department
should recalculate credit based on a U.S.-dollar interest rate. Since the
customer's debt was in dollars, and conversion from dollars to pesos may
not occur until the date of payment, petitioners argue, Mexinox did not
really offer credit in pesos. Similarly, petitioners contend that even if
a customer decided to pay in pesos, "the real currency of the transaction
was U.S. dollars by virtue of the required payment-date exchange rate."
Petitioners' Case Brief at 25. 

Petitioners cite Final Determination of Sales at Less Than Fair Value:
Oil Country Tubular Goods from Austria, 60 FR 33551, 33555 (June 28, 1995)
(OCTG from Austria), in which the Department determined that "when sales
are made in, and future payments are expected in, a given currency, the
measure of the company's extension of credit should be based on an
interest rate tied to the currency in which its receivables are
denominated. Only then does establishing a measure of imputed credit
recognize both the time value of money and the effect of currency
fluctuations on repatriating revenue." Petitioners also refer to similar
determinations made in Final Determination of Sales at Less Than Fair
Value: Large Newspaper Printing Presses and Components Thereof, Whether
Assembled or Unassembled, from Japan, 61 FR 38139, 38161 (July 23, 1996)
and Certain Cut-to-Length Carbon Steel Plate from Sweden; Final Results of
Antidumping Duty Administrative Review, 61 FR 15772, 15780 (April 9, 1996).

Based on the foregoing, for home market sales denominated in U.S.
dollars, petitioners hold the Department must recalculate Mexinox's credit
expenses to reflect the U.S. dollar interest rate. Pointing to business
proprietary information contained in Cost Verification Exhibit 8 at 12,
27, 42, and 76, petitioners suggest the Department use the rates therein
to measure Mexinox's U.S.-dollar opportunity cost for these sales. 

According to Mexinox, petitioners incorrectly argue that the interest
rate used to calculate imputed credit is determined by the currency of the
original invoice. Rather, Mexinox argues, the interest rate is determined
by the currency in which the receivable is denominated. Mexinox claims
this was the situation in each of the cases cited by petitioners. For
instance, Mexinox states, in OCTG from Austria the Department determined
that "when sales are made in, and future payments are expected in, a given
currency, the measure of the company's extension of credit should be based
on an interest rate tied to the currency in which its receivables are
denominated." Respondent's Rebuttal Brief at 36, quoting OCTG from Austria
at 33555. In the instant review, Mexinox claims, all of its home market
sales, whether invoiced in dollars or pesos, are reflected by a
corresponding peso-denominated receivable. Mexinox states the Department
confirmed this during verification. In addition, referring to its November
20, 2000 section B questionnaire response and its March 5, 2001
supplemental questionnaire response, Mexinox contends that under Mexican
law customers must always have the option to pay in pesos, regardless of
whether the invoice was denominated in dollars or pesos. Mexinox contends
that since its receivables are denominated in pesos, and since under
Mexican law there can be no expectation of receiving payment in U.S.
dollars, imputed credit for home market sales invoiced in dollars should
be computed using a short-term interest rate denominated in pesos. 

However, Mexinox asserts, even if the Department finds that a U.S.-dollar
interest rate should be applied to home market transactions invoiced in
U.S. dollars, the Department should not apply a dollar-denominated
interest rate to sales that were paid in pesos. Mexinox states that such
sales consist of a pesos receivable as well as a payment in pesos, and
therefore have been transacted in pesos. Mexinox notes these sales can be
identified as those in which the field CURENC1H is coded "USD" and
CURENC2H is not coded "USD."

Lastly, Mexinox argues that if the Department decides to apply a dollar-
denominated interest rate to any of its home market sales, the Department
should use the short-term interest rate that represents Mexinox's actual
dollar-based borrowings, not the hypothetical interest rate suggested by
petitioners. Citing LMI-La Metallie Industriale S.p.A. v. United States,
912 F.2d 455, 460-61 (Fed. Cir. 1990), Mexinox holds that the Department's
practice in this area makes clear that the interest rate used to calculate
imputed credit expenses must reflect "usual and reasonable commercial
behavior." Mexinox argues that both the Federal Circuit's findings and the
Department's findings in Notice of Final Determination of Sales at Less
Than Fair Value: Certain Steel Concrete Reinforcing Bars from Turkey, 62
FR 9737 (March 4, 1997) (Concrete Reinforcing Bars from Turkey) infer that
actual borrowings must be used, not hypothetical rates. Mexinox argues
none of the exceptions set forth in Concrete Reinforcing Bars from Turkey
apply in the instant review. Mexinox claims it had actual short-term
borrowings from unaffiliated parties in U.S. dollars, which the Department
verified. Referring to the Sales Verification Report at page 28 and
Exhibit 25, Mexinox states the Department found no discrepancies in the
calculation of the short-term interest rate or Mexinox's reported credit
expenses. Therefore, if the Department determines a dollar-denominated
interest rate should be applied to its home market transactions, Mexinox
contends the Department must use the verified interest rate used to
calculate U.S. credit expenses.

Department's Position: We agree with petitioners in part. It bears noting
that while we based the calculation of credit expenses on the currency of
the respondent's receivables in OCTG from Austria, we have further
considered our policy since that decision. The Department's normal policy
is to base our calculation of credit expenses upon "a short-term interest
rate tied to the same currency as the sale." See Import Administration
Policy Bulletin 98.2, "Imputed Credit Expenses and Interest Rates"
(February 23, 1998). See also Comment 11 in the Issues and Decision
Memorandum accompanying Certain Preserved Mushrooms from Indonesia: Notice
of Final Results of Antidumping Duty Administrative Review, 66 FR 36754
(July 13, 2001). Accordingly, for these final results we have assigned a
U.S.-based interest rate to those home market sales invoiced in U.S.
dollars, and a Mexican-based interest rate to those home market sales
denominated in pesos. However, we disagree with petitioners that we should
use a U.S. dollar interest rate based on proprietary information included
in Cost Verification Exhibit 8. The interest rates referenced therein do
not relate to the opportunity cost of selling the foreign like product but
rather relate to internal transfer prices calculated by Mexinox USA for
purposes of invoicing Mexinox for hotband imports. See the Department's
August 22, 2001 Cost Verification Report (Cost Verification Report) at 13.
Therefore, in order to recalculate credit expenses for home market sales
invoiced in U.S. dollars, we have used the verified rate that Mexinox
calculated to report credit expenses for its U.S. sales. 

Adjustments to United States Price

Comment 4: U.S. Packing Costs

Petitioners note Mexinox's "monthly packing expenses were allocated to
monthly packed production based on the dimensions, product type, and basic
type of packing." Petitioners' Case Brief at 23, citing Mexinox's November
11, 2000 questionnaire response at B-41. According to petitioners,
products with the same packing type codes should have the same or similar
packing costs reported for both the home and U.S. markets. Citing
proprietary information, petitioners contend a comparison of the reported
packing costs shows there is not uniformity between the costs reported for
the home and U.S. markets. Petitioners argue that differences in package
weights do not explain the discrepancies between the amount of packing
expenses reported in the home and U.S. markets. Therefore, to avoid an
inappropriate allocation of costs, petitioners urge the Department to
revise the packing costs reported in Mexinox's U.S. sales listing so that
they are equivalent to the unit values reported in the home market for
comparable packing types. 

Mexinox claims petitioners' argument does not contain any specific
discussion of the methodologies used to report packing expenses. Moreover,
Mexinox argues, petitioners fail to point to any specific reporting
errors. Mexinox asserts petitioners have just ignored its packing expense
calculations and conveyed their disagreement with the results. Mexinox
contends that during the sales verification the Department traced
Mexinox's reported home market and U.S. market packing expenses to its
books and records and found no discrepancies. In addition, Mexinox argues,
during the cost verification the Department reconciled the total amount of
reported packing expenses and thoroughly examined the conversion cost
elements without discrepancy.

Mexinox asserts petitioners' observations regarding differences in
average home market and U.S. market packing costs do not even remotely
point to a discrepancy in the underlying data. As noted by petitioners,
Mexinox argues, unit packing costs are highly dependent upon individual
package weights. Mexinox states that while per-package costs are similar,
as a matter of mathematical certainty heavier packages have relatively
lower per-unit costs than smaller packages. Referring to its October 6,
2000 section A questionnaire response at 37 - 38, Mexinox maintains that
since average per-package weights for home market sales are lower than the
averages for U.S. sales, it is not surprising that the average packing
expenses reported for home market sales are higher than the average
reported for U.S. sales. 

In conclusion, Mexinox contends that it reported packing expenses using
reasonable methodologies that were identical for both markets, and that
the Department successfully verified its reported packing expense data.
Therefore, Mexinox urges the Department to accept its data as reported and
to dismiss petitioners' request to revise Mexinox's U.S. packing expense
data.

Department's Position: We disagree with petitioners that we should adjust
the per-unit packing costs reported for Mexinox's U.S. sales. First,
petitioners have not pointed to any errors in Mexinox's reporting
methodology, which we examined at verification. We also examined Mexinox's
calculation of per-unit packing costs for the pre-selected and surprise
transactions we traced at verification, and noted no discrepancies.
Further, petitioners' argument is based solely on a comparison of per-unit
costs for certain packing types. While there is a difference between the
average per-unit packing costs reported for home market sales and the
average per-unit costs reported for U.S. market transactions, we have
examined the data on the record and have found that average per-package
(i.e., per-coil) costs are similar in the two markets. In addition, the
record demonstrates that the average weight of coils sold in the home
market is greater than the average weight of coils sold in the United
States. Thus, it follows that average per-unit packing costs in the U.S.
market are lower. Based on the foregoing, we have accepted Mexinox's per-
unit packing costs as reported and have made no adjustments for these
final results. 

Comment 5: Duty Drawback

Petitioners argue the Department granted Mexinox an upward adjustment to
EP and CEP sales for duty drawback, even though Mexinox did not show
whether it had added the full amount of unpaid duty to its reported
production costs. Specifically, petitioners state, the Department's traces
of material purchases to inventory values at verification did not
establish whether Mexinox included duties in its production costs.
Petitioners point to the Cost Verification Report, which discussed the
trace of an invoice from Mexinox USA to Mexinox for grade 304 hotband.
Based on the Department's discussion therein and information in Mexinox's
November 20, 2000 questionnaire response, petitioners hold that Mexinox's
reported costs do not include any of the alleged duty payable on imported
hotbands. Petitioners argue Mexinox cannot report duty drawback on U.S.
sales if it did not pay the import duty and did not include it in its
reported costs. However, petitioners assert, if the Department accepts
Mexinox's duty drawback claim, it should increase Mexinox's reported
material costs by 3.8 percent to include the 3 percent ad valorem duty
plus the 0.8 percent general duty.

Mexinox responds that petitioners fail to cite to any law, regulations,
or examples of Department practice advocating their position. Citing
section 772(c)(1)(B) of the statute, Mexinox asserts the Department grants
duty drawback adjustments under two circumstances: (1) when duties on raw
materials are paid at the time of importation and are later rebated upon
exportation of the subject merchandise (rebate system); and (2) when
import duties are not collected at the time of importation and are paid
only if the finished goods are sold in the home market (duty suspension
system). Mexinox states that while the Department may encounter duty
suspension systems less frequently than rebate systems, duty suspension
systems are no less valid under the statute. 

Referring to the Sales Verification Report, Mexinox states it
participates in a duty suspension program called "Programas de Importacin
Temporal Para Producir Artculos de Exportacon" ("PITEX") under which raw
materials are temporarily imported duty free. Mexinox notes that upon
exportation of the finished goods, the temporary suspension of duties
becomes permanent; duties are paid only if finished goods are sold in the
home market. 

Mexinox argues the two types of drawback systems lead to different
requirements for duty drawback adjustments under the Department's
established practice. Citing Final Results of Antidumping Duty
Administrative Review and Partial Termination of Administrative Review:
Circular Welded Non-Alloy Steel Pipe from Korea, 62 FR 55574, 55577
(October 27, 1997), Mexinox holds that a respondent with a rebate system
must show it paid sufficient duties to account for the claimed drawback
amounts. For a duty suspension program, however, Mexinox claims this
requirement is not relevant since duty suspension programs are not based
on a rebate of previously paid duties. In Carbon Steel Wire Rope from
Mexico; Final Results of Antidumping Duty Administrative Review, 63 FR
46753 (September 2, 1998) (Steel Wire Rope from Mexico), Mexinox states,
the respondent made a claim under the PITEX program. Citing Steel Wire
Rope from Mexico at 46756, Mexinox contends that the Department found duty
drawback adjustments are appropriate for duty suspension programs where:
(1) "import duties were not collected by reason of exportation of the
subject merchandise to the United States"; and (2) "the imported raw
materials are sufficient to account for the duty drawback received on the
exports of the manufactured products." According to Mexinox, the
Department made the same determination in Silicon Metal from Brazil; Final
Results of Antidumping Duty Administrative Review and Determination Not to
Revoke in Part, 62 FR 1970, 1976 (January 14, 1997) (Silicon Metal from
Brazil) and Extruded Rubber Thread from Malaysia; Final Results of
Antidumping Duty Administrative Review, 62 FR 33588, 33589 (June 20, 1997).

Mexinox maintains that it meets both prongs of this test. As the CIT has
noted, Mexinox states, the first prong "analyzes the foreign government's
export rebate program." Respondent's Rebuttal Brief at 21, quoting Laclede
Steel v. United States, 18 CIT 965, 1994 WL 591949, *5-8. Mexinox argues
the PITEX program at issue here is identical to that examined in Steel
Wire Rope from Mexico. Referring to the Sales Verification Report, Mexinox
contends the Department thoroughly examined the Mexican statute and
regulations related to the PITEX program and confirmed that Mexinox was
authorized to import raw materials duty free under this program during the
relevant period. With respect to the second prong, Mexinox claims it is
beyond dispute that it imported a sufficient amount of raw materials to
account for the drawback amounts claimed, stating the Department verified
that all (100 percent) of its raw materials are imported. 

Mexinox asserts that the Department's decision to grant a duty drawback
adjustment does not depend on whether import duties were paid or included
in the reported costs. Nonetheless, Mexinox claims, its reported costs do
include import duties. In making this assertion, Mexinox points to the
expense labeled "RM regularization custom fees" on page 13 of Cost
Verification Exhibit 6. 

In conclusion, Mexinox argues that petitioners have not pointed to, and
the Department has not found, any error or distortion in the way in which
the amount of Mexinox's duty drawback adjustment was computed. Therefore,
Mexinox urges the Department to continue granting Mexinox's reported duty
drawback adjustment.

Department's Position: We disagree with petitioners. Section 772(c)(1)(B)
of the Tariff Act explicitly provides for a duty drawback adjustment for
import duties "imposed by the country of exportation which have been
rebated, or which have not been collected, by reason of the exportation of
the subject product to the United States." In accordance with this
provision, the Department will grant a duty drawback adjustment if we
determine that: 1) import duties and rebates are directly linked to and
are dependent upon one another; and 2) the company claiming the adjustment
can demonstrate that there are sufficient imports of raw materials to
account for the duty drawback received on the exports of the manufactured
product. See, e.g., Notice of Final Determination of Sales at Less Than
Fair Value: Stainless Steel Sheet and Strip in Coils From Taiwan, 64 FR
30592, 30613 (June 8, 1999). However, the Department has never established
a prerequisite that import duties must actually be paid and subsequently
rebated in order for there to be the necessary link justifying an
adjustment to the U.S. starting price. For those duty drawback programs in
which import duties are not collected, the Department first examines
whether import duties were actually not collected by reason of the
exportation of the subject merchandise to the United States. This type of
program clearly falls within the express language of section 772(c)(1)(B)
of the Tariff Act as one in which duties "...have not been collected, by
reason of the exportation of the subject product to the United States." 

Under the PITEX program, Mexinox does not pay duties on imported hotband
and subsequently receive a rebate of duties upon exportation. Rather,
under this program the Mexican government suspends the collection of
duties from Mexinox on imports of hotband contingent upon the exportation
of the materials within the requisite amount of time. The Department has
reviewed this type of program before; see, e.g., Steel Wire Rope from
Mexico (import duties not collected under the PITEX program) and Silicon
Metal from Brazil at 1976 (Brazilian government suspended the payment of
taxes and import duties ordinarily due upon importation).

During verification we reviewed the law governing the PITEX program as
well as the decree authorizing Mexinox to import raw materials duty free
under this program. See the Sales Verification Report at 26. Thus, we
determine Mexinox has met the first requirement of the Department's test
for receiving a duty drawback adjustment. At verification we also
confirmed that all of the hotband used by Mexinox to produce subject
merchandise was imported. Since we are satisfied Mexinox had sufficient
imports of raw materials to account for its exports of stainless steel
sheet and strip in coils to the United States, we find Mexinox has met the
second requirement. Therefore, we have continued to accept Mexinox's
reported duty drawback adjustment for these final results. 

Petitioners have also asserted that Mexinox's reported production costs
do not include import duties. However, the record shows that duties paid
during the POR have been included in Mexinox's total raw materials cost.
See Cost Verification Exhibit 6 at 13. Mexinox's total raw materials cost,
in turn, was verified as part of its cost of manufacturing reconciliation,
with which we found no discrepancies. Therefore, for these final results
we have not found it necessary to adjust Mexinox's reported cost of
production since it includes import duties.

Comment 6: Date of Payment for Certain Ken-Mac Resales

Mexinox notes that some Ken-Mac sales were listed as unpaid as of the
date of its last data submission. For the preliminary results, Mexinox
states, the Department calculated imputed credit expenses for these
transactions by setting the payment date equal to the deadline for the
preliminary results. Mexinox contends that the use of this date is unfair
because it penalizes Mexinox for its inability to update payment dates due
to the deadlines imposed by this review. Mexinox proposes that the only
fair and logical cut-off date for determining payment dates for sales that
were unpaid is to use the last date on which the respondent could have
provide updated payment information. Mexinox states that this date would
be May 4, 2001, the date on which it made its last data submission
regarding Ken-Mac sales. Stating that the Department only accepts new
information at verification under limited circumstances, Mexinox claims
that under no circumstances should the Department use a payment data later
than the last day of the Ken-Mac sales verification (June 7, 2001).
Alternatively, Mexinox suggests, the Department could apply the average
credit period for all other sales to these unpaid sales.

Petitioners assert that using the date of Mexinox's latest questionnaire
response or the last day of verification as the payment date for unpaid
sales would be an inappropriate application of facts available.
Petitioners state the Department has employed various methodologies in the
past to determine payment dates for unpaid sales. For instance,
petitioners contend, it has used the date of the final determination or
final results of review, referring to Final Determination of Sales at Less
Than Fair Value: Stainless Steel Wire Rods From France, 58 FR 68865
(December 29, 1993). Petitioners hold the facts in this case support this
approach. 

Petitioners argue that the sales in question are extraordinary in that
they were made on or before June 30, 2000, the last date of the POR, and
remained unpaid as of July 31, 2001, the deadline for the preliminary
results. Thus, petitioners claim, the credit period for these sales was at
least 13 months. Although Mexinox could have presented payment date
information up until the last date of the Mexinox sales verification (June
23, 2001), petitioners assert, it did not do so. Contrary to Mexinox's
suggestion that such corrections would not have been allowed, petitioners
argue these are the types of minor updates expected at verification.

Petitioners state the Department should not assume that Ken-Mac received
full payment for these sales after the Department's sales verification
ended. Instead, petitioners hold, the Department should deduce that these
were problem sales and likely remained unpaid. Petitioners note that in an
antidumping investigation, the credit period for unpaid sales may span
only a few months from the end of the period of investigation to the date
of preliminary determination; such a credit period may be consistent with
commercial reality and thus require a different methodology. Petitioners
submit that the Department should determine that the sales at issue likely
remained unpaid as of the date of the final results, and use that date to
calculate imputed credit costs.

Department's Position: We agree with Mexinox that we should use the
average credit period for all Ken-Mac sales with reported payment dates to
calculate imputed credit expenses for those sales which were unpaid. The
Department does not find it appropriate to take into account the failure
of the U.S. customer to make payments for the sales at issue. Therefore,
for these final results, we have used the average payment experience for
all other U.S. sales made by Ken-Mac as the facts available for the sales
at issue. For information regarding the calculation of the average credit
period, see the Department's Final Analysis Memorandum, dated February 4,
2002. This methodology is in keeping with that used in Notice of Amendment
of Final Determinations of Sales at Less Than Fair Value: Stainless Steel
Plate in Coils From the Republic of Korea; and Stainless Steel Sheet and
Strip in Coils From the Republic of Korea, 66 FR 45279 (August 28, 2001). 

Cost of Production

Comment 7: Major Input Rule

Petitioners note that hotbands are the primary raw material used by re-
rollers like Mexinox who produce sheet and strip in coils. Pursuant to
section 351.407(b) of the Department's regulations, petitioners state that
where an affiliate supplies major inputs and the producer records transfer
prices in its cost accounts, the Department's policy is to adjust recorded
costs by the highest of transfer price, market price, or cost of
production (COP). 

Petitioners argue that the Department has not applied the major inputs
analysis to Mexinox's reported material costs. Even using Mexinox's market
price and COP data, petitioners claim, Mexinox's recorded costs (based on
transfer prices) are understated because Mexinox's reported costs simply
reflect what it recorded. Petitioners contend that for certain grades of
hotband purchased by Mexinox, the Department should make an upward
adjustment to the recorded costs (the average prices for all purchases)
based on Mexinox's month-by-month analysis of transfer prices, market
prices, and affiliated suppliers' COP.

Petitioners assert, however, that Mexinox's submitted market prices are
deeply flawed. First, petitioners argue that as the only re-roller (and
thus the only purchaser of hotbands) in Mexico, Mexinox has monopsony
control over the prices at which hotbands are sold in that country.
Petitioners assert all suppliers of hotband to the Mexican market must
negotiate prices with Mexinox and for that reason, the Department should
examine carefully the market prices provided by Mexinox. Citing
proprietary information, petitioners also argue Mexinox's purchases from a
certain unaffiliated supplier are suspect since this supplier has
demonstrated unfair pricing practices in the United States. On this point,
petitioners maintain the Department must reject Mexinox's reported market
prices since they do not represent legitimate market prices. Finally,
petitioners contend that Mexinox's relationship with a certain
unaffiliated supplier, along with its domination of the Mexican market,
"support a conclusion that Mexinox controls [certain unaffiliated] hotband
suppliers in the Mexican market, and that these companies have a
relationship very much akin to affiliation." Petitioners' Case Brief at
28. 

Because of the foregoing reasons, petitioners suggest Mexinox's reported
market prices cannot be used "... as benchmarks for testing the legitimacy
of affiliate-supplied hotband products... ." Id. at 29. Citing their March
30, 2001 letter to the Department, petitioners hold that with world prices
prevailing on stainless steel products, there is no reason prices in
Mexico should differ from prices in other countries. Petitioners assert
that while it may not be practical to find alternative market benchmarks
for each grade of hotband purchased by Mexinox, they propose the
Department make an adjustment based on legitimate market prices for grades
304 and 430.

According to petitioners, neither the Tariff Act nor the Department's
regulations require that the Department automatically accept a
respondent's reported market prices. Pursuant to section 351.407(b) of the
Department's regulations, petitioners hold, the Department normally uses
the higher of transfer price, market price, or the affiliate's COP to
value a major input, and defines market price as "the amount usually
reflected in sales of the major input in the market under consideration."
Petitioners claim the word "normally" indicates that Department is not
required to rely on a respondent's reported market prices in all
instances. In the instant review, petitioners argue, there is no "usual"
market price because there are no hotband suppliers based in Mexico;
furthermore, as the only buyer in that market, Mexinox controls the market
and can extort its suppliers to charge below-market prices. In other
antidumping proceedings, petitioners contend, the Department may seek
"alternative information as a 'reality check' for its traditional
valuation methods." Id. at 30. For example, petitioners note, the
Department uses factors of production from a surrogate country to compute
NV in non-market economy cases. Petitioners state that while the
Department relies on price information from a previously-determined
surrogate country in these instances, it often cross-checks these prices
with values from other countries or world indices, and may even use the
alternative values if they are more reliable. In stating this, petitioners
refer to Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People's Republic of China; Final Results of 1998-
1999 Administrative Review, Partial Recission of Review, and Determination
Not to Revoke Order in Part, 66 FR 1953 (January 10, 2001) and the
accompanying decision memorandum and to Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, from the People's Republic of China;
Final Results of 1996-1997 Antidumping Duty Administrative Review and New
Shipper Review and Determination Not to Revoke Order in Part, 63 FR 63842
(November 17, 1998). Petitioners also cite Notice of Preliminary
Affirmative Countervailing Duty Determination, Preliminary Affirmative
Critical Circumstances Determination, and Alignment of Final
Countervailing Duty Determination with Final Antidumping Duty
Determination: Certain Softwood Lumber Products from Canada, 66 FR 43186,
43194 (August 17, 2001), in which the Department used U.S. tree-harvesting
rates to determine whether government-controlled rates in Canada reflected
market prices. 

Petitioners state that differences in U.S. and Canadian tree-harvesting
rates show distortion because of government involvement in the lumber
industry. In the same manner, petitioners contend, differences in U.S. and
Mexican hotband prices "reflect the distortion in market prices inherent
in Mexinox's dominant position as Mexico's only hotband consumer."
Petitioners' Case Brief at 31. Therefore, petitioners urge the Department
to revise Mexinox's major inputs analysis using the market prices
contained in their March 30, 2001 letter or, alternatively, information
from another publicly available source. Referencing business proprietary
information in Cost Verification Exhibit 10, petitioners explain that
adjusting for the higher of COP, transfer price, or market price results
in a specific adjustment that can be applied to material costs for grade
304 and 430 blackband. However, claiming that market prices were
significantly higher than what Mexinox reported, petitioners also proffer
alternative adjustments for grades 304 and 430 blackband based on the
alternative market price data in their March 30, 2001 letter. In
conclusion, petitioners contend the Department should consider these
alternative market prices in order to adjust the cost of grade 304 and 430
S4 products, and also that it should consider adjusting the cost of all S4
products based on the adjustments calculated for grades 304 and 430. 

Mexinox asserts that petitioners' argument regarding the validity of its
reported market prices are ridiculous and totally contradicted by the
facts. Addressing petitioners' allegation that Mexinox exercises monopsony
control over hotband prices in Mexico, Mexinox responds that even if this
were true, it is unclear why this invalidates the use of its reported
market prices. Citing the preamble to the Department's regulations at
27362, Mexinox states market prices are compared with affiliated party
prices in order to determine whether the affiliated party sales have been
made at arm's length. While a monopsony, duopoly, monopoly, or other
market structure may indicate the relative bargaining strength of the
parties, Mexinox argues, "it does not in any way call into question the
lack of affiliation between the parties or the arm's-length nature of the
price itself." Respondent's Rebuttal Brief at 40-41. Mexinox states that
as noted in the preamble, that parties are unaffiliated ensures that
prices are at arm's-length. 

According to Mexinox, monopsony refers to a situation in which there
exists a single buyer for multiple sellers in the same market. Mexinox
claims petitioners' argument is factually incorrect because there is no
evidence that this market situation exists in Mexico with respect to
hotband. Mexinox holds that while it is the only re-roller of hotband in
Mexico, petitioners have not pointed to any evidence showing that Mexinox
is the only hotband purchaser in Mexico. Mexinox notes that hotband can be
used for purposes other than re-rolling, such as the production of tubular
goods. Further, even if it were the sole purchaser of hotband in Mexico,
Mexinox argues, there are no hotband suppliers in Mexico. Asserting it
buys hotband on the world market, Mexinox contends that if the Department
includes market structure and bargaining positions in the major inputs
analysis, it must realize that as a purchaser on the world market Mexinox
does not exercise monopsony power. Thus, Mexinox argues, petitioners'
argument, even if it had legal relevance, fails on factual grounds.

Mexinox contends petitioners' second argument - that Mexinox's purchases
from a certain unaffiliated supplier are suspect since this supplier
allegedly sells other products at less than fair value in the United
States - also lacks merit. Mexinox maintains that this suppliers's selling
practices in the United States are legally and factually irrelevant to the
evaluation of its selling prices in the Mexican market. Mexinox argues
there is no basis for the Department to reject a producer's sales prices
in one market simply because that producer was found to be dumping in
another country based on an investigation period that is now several years
old. Mexinox claims petitioners have not pointed to any evidence showing
that this particular unaffiliated supplier is dumping in the Mexican
market. If petitioners can support their claim, Mexinox holds, they have
the option of filing a third country dumping petition in accordance with
section 783 of the Tariff Act; however, since they have not done so, the
Department should disregard petitioners' claim.

Referring to the argument that Mexinox is "affiliated" with a certain
unaffiliated supplier of hotband, Mexinox states petitioners have based
this argument on one fact pre-dating the POR and another fact post-dating
the POR. Even if the first fact is true, Mexinox argues, it cannot be
considered sufficient to establish affiliation. Regarding the second fact,
Mexinox claims it is not relevant to the Department's analysis because:
(1) it constitutes new factual information that cannot be considered
pursuant to section 351.301(b)(2) of the Department's regulations; and (2)
it pertains to events uncertain to occur, and if they do occur it would be
outside the current POR. Further, Mexinox claims, even if the second fact
was timely and current, it also would be insufficient to establish
affiliation. Mexinox asserts petitioners' argument is baseless, as
evidenced by "their inability to characterize the relationship as anything
more than 'akin to' affiliation rather than actually consisting [of]
affiliation within the meaning of the U.S. dumping laws." Respondent's
Rebuttal Brief at 43. Mexinox holds that since there is no legal or
factual basis for finding affiliation with this particular unaffiliated
supplier, its sales to Mexinox have been made at arm's length. 

Maintaining petitioners' arguments are either legally irrelevant,
factually incorrect, unsupported, or all of the above, Mexinox states
there is no basis for disregarding its reported market prices from the
major inputs analysis. However, Mexinox argues, even if there were a basis
for disregarding its reported market prices, there is no basis on which to
resort to alternative market benchmarks. In the absence of market prices
based on actual purchases, Mexinox claims, the Department has a clear and
established practice of basing the major inputs analysis on the higher of
transfer price or COP. Mexinox cites several cases in which market prices
were not available and thus were handled by the Department in this manner,
such as Notice of Final Determination of Sales at Less Than Fair Value;
Stainless Steel Sheet and Strip in Coils from the United Kingdom, 64 FR
30688 (June 8, 1999) (S4 from the United Kingdom); Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, from Japan, and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components Thereof,
from Japan; Final Results of Antidumping Duty Administrative Reviews; 66
FR 15078 (March 15, 2001) (Tapered Roller Bearings from Japan); and
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof from France, Germany, Italy, Japan, Romania, Sweden, and the
United Kingdom; Final Results of Antidumping Duty Administrative Reviews,
64 FR 35590 (July 1, 1999). Mexinox contends petitioners have only offered
analogies based on an antidumping case involving a non-market economy (and
thus the selection of surrogate prices) and a preliminary countervailing
duty determination. Mexinox argues that since Mexico is not a non-market
economy, and since this case does not involve allegations of government
subsidies, petitioners' analogies demonstrate the weakness of their
overall argument. Therefore, Mexinox holds, if the Department disallows
its reported market prices, then it must conduct the major inputs analysis
by comparing transfer prices to COP.

Finally, Mexinox argues that in the event the Department rejects its
reported market prices and attempts to develop a surrogate market price in
its place, the alternative proffered by petitioners is not viable. First,
Mexinox states, petitioners have offered little or no information about
these prices, such as the reason it chose this supplier as representative,
or the circumstances of sale. Second, stating petitioners have not
provided any corroborating information such as calculation worksheets,
invoices, accounting records, etc., Mexinox argues neither it nor the
Department has any basis on which to determine whether those prices are
valid. 

In conclusion, Mexinox argues, although it purchased hotband from a
certain unaffiliated supplier during the POR, it is not affiliated with
that supplier. Thus, Mexinox contends these sales were made at arm's-
length prices. Therefore, Mexinox urges the Department to reject
petitioners' arguments and make no adjustments for the major inputs
analysis.

Department's Position: We agree with petitioners that we should apply the
major inputs analysis to Mexinox's reported material costs for the final
results of this review. Section 351.407(b) of the Department's regulations
states that for purposes of section 773(f)(3) of the Tariff Act, the
Department will determine the value of a major input purchased from an
affiliated person based on the higher of: 1) the price paid by the
exporter or producer to the affiliated person for the major input; 2) the
amount usually reflected in sales of the major input in the market under
consideration; or 3) the cost to the affiliated person of producing the
major input. We have relied on this methodology in other cases; see, e.g.,
Final Determination of Sales at Less Than Fair Value: Stainless Steel
Round Wire from Taiwan, 64 FR 17336, 17337 (April 9, 1999), Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from
France, et.al.; Final Results of Antidumping Duty Administrative Reviews
and Revocation of Orders in Part, 66 FR 36551 (July 12, 2001) (AFBs 2001),
and Tapered Roller Bearings from Japan. Moreover, the CIT has upheld our
application of this regulation. See Mannesmann v. United States, 77 F.
Supp. 2d 1302 (CIT 1999), and American Silicon Technology v. United
States, 110 F. Supp. 2d 992 (CIT 2000).

However, we disagree with petitioners that we should disregard Mexinox's
reported market costs in applying the major inputs rule. Section
351.407(b)(2) defines market price as "[t]he amount usually reflected in
sales of the major input in the market under consideration." The fact that
Mexinox may be the only purchaser of hotbands in Mexico is irrelevant to
this analysis, since this provision does not specify that we must consider
the structure of the market under consideration. Petitioners also have
alleged that Mexinox's hotband purchases from a certain unaffiliated
supplier cannot be relied upon since this supplier has engaged in unfair
pricing practices in the United States. Whatever the facts may be
regarding this supplier's pricing practices in the United States, we note
they are irrelevant to the facts of this case. Regarding petitioners'
argument that Mexinox's relationship with a certain unaffiliated supplier
is "akin to affiliation," we have fully examined Mexinox's financial
statements and other information on the record and have determined Mexinox
is not affiliated with this supplier. See, e.g., Mexinox's October 6, 2000
questionnaire response at Attachment A-11-A-1. Finally, we also disagree
with the contention we should use surrogate values in place of Mexinox's
reported market costs. In cases where market prices are not available, the
Department simply bases the major inputs analysis on the higher of
transfer price or COP. See, e.g., S4 from the United Kingdom at 30708-9.
Thus, had we found it necessary to disregard Mexinox's reported market
costs, we would have relied upon the higher of the affiliated party's COP
or the transfer price to perform the major inputs analysis. 

As noted above, we have applied the major inputs analysis to Mexinox's
reported costs for these final results. Given that we have not found any
reason to disregard Mexinox's reported market costs, we have based the
major inputs analysis on the highest of transfer price, market price, or
COP. As a result of our analysis, we have adjusted Mexinox's reported
materials costs for all S4 products (i.e., all grades). For a detailed
discussion of our analysis, see the Department's Final Analysis
Memorandum, dated February 4, 2001. 

Comment 8: Fixed Overhead Expenses 

Petitioners note the total fixed overhead (depreciation) reported by
Mexinox in its cost database represents a certain percentage of the
reported total cost of manufacture. Petitioners argue, however, that
Mexinox's 1999 audited financial statement shows the ratio of depreciation
of certain assets to the adjusted cost of goods sold is greater.
Therefore, petitioners assert the Department should apply a correction
factor to Mexinox's reported fixed overhead costs in order to correct this
understatement.

Mexinox claims petitioners' argument is based on its audited financial
statements for 1999. Therefore, Mexinox contends, petitioners have
calculated a fixed overhead ratio using data for calendar year 1999 rather
than data for the 18-month POR. Mexinox holds the only relevant
depreciation ratio is the one calculated for the 18-month period, which is
the one the Department requested and verified without discrepancy.
Therefore, Mexinox maintains the Department should not make the adjustment
proposed by petitioners.

Department's Position: We disagree with petitioners that the Department
should apply a correction factor to Mexinox's reported fixed overhead
costs, which consist solely of depreciation. First, we examined Mexinox's
calculation of fixed overhead at verification and accepted its calculation
of this ratio. Moreover, the correction factor proposed by petitioners is
based on two ratios that measure depreciation expenses over two different
periods of time. Specifically, the ratio of depreciation to cost of goods
sold ("Ratio 1") is based on Mexinox's 1999 audited financial statement,
i.e., a 12-month period, while the ratio of total fixed overhead to total
cost of manufacturing ("Ratio 2") is based on the entire 18-month POR. To
calculate Ratio 2, petitioners summed the weighted fixed overhead and
total cost of manufacture reported for each control number (CONNUM) in
Mexinox's cost database (represented by the variables FIXOH and TOTCOM,
respectively). Because Mexinox calculated the cost of manufacture for each
CONNUM based on the 18-month POR, it is not possible to adjust Ratio 2 to
determine what the cost of depreciation would be for the fiscal year.
Therefore, we have made no changes to Mexinox's reported fixed overhead
costs for these final results.

Comment 9: General & Administrative Expenses 

Petitioners contend the numerator of Mexinox's reported general &
administrative (G&A) ratio should be increased to include expenses
incurred by Mexinox on behalf of Mexinox Trading, expenses related to
certain investment activities, and a third category of expenses not
subject to public disclosure, because all of these expenses support
Mexinox's production.

In addition, petitioners claim the numerator of Mexinox's G&A ratio
should be amended to account for expenses incurred on behalf of Mexinox by
its parent companies. According to petitioners, it appears Mexinox's
payments to Krupp Thyssen Stainless AG (KTS), its immediate parent, equal
a percentage of 1999 cost of goods sold that bears no relationship to the
actual expenses incurred on behalf of Mexinox by its affiliates. Further,
petitioners argue, the record shows the contribution of Mexinox's parent
entities was much greater than the amount paid to KTS. 

Citing Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products from Canada, 58 FR 37099, 37114 (July 9,
1993), petitioners assert it is customary for the Department to allocate a
portion of a parent company's G&A expenses to subsidiaries, and to
allocate all parent company expenses to subsidiaries where the parent has
no operations of its own. Petitioners note that the parent of Mexinox's
immediate parent, KTS, is Thyssen Krupp Steel AG (TKS), whose parent in
turn is Thyssen Krupp AG. Petitioners argue that at each level, the
parent's contribution to subsidiaries' G&A is equivalent to the
unconsolidated parent G&A expenses divided by consolidated sales (unless
the parent has significant operations of its own, in which case one can
assume only a portion of the parent's G&A is on behalf of subsidiaries). 

Referring to KTS's 1999 financial statement at 5-10 and 10-22,
petitioners argue it is clear KTS contributed G&A-related services to
Mexinox and also that KTS has limited unconsolidated operations. See
Attachment A-11-L of Mexinox's October 10, 2000 questionnaire response.
Therefore, petitioners claim, it is appropriate to allocate unconsolidated
G&A over total consolidated sales. Citing KTS's financial statement,
petitioners argue that KTS's contribution to its subsidiaries was
equivalent to 4.8 percent of sales value (unconsolidated 1998-1999 G&A
("other operating") expense of DM 24.9 million divided by consolidated
sales of DM 521.4 million). Similarly, citing TKS's 1999 financial report,
petitioners argue that TKS's contribution to its subsidiaries equaled 10.6
percent of the consolidated cost of sales, (1) or 265.1 in "other
operating" plus 615.0 in "general administrative" expenses divided by
cost of sales of 8,319.2 million. See Attachment A-11-K of Mexinox's
October 10, 2000 questionnaire response. Finally, referring to Thyssen
Krupp AG's 1999 financial report, petitioners use the same methodology to
argue that a certain percentage of selling expenses incurred by Thyssen
Krupp AG is attributable to its subsidiaries' operations. See Attachment A-
11-J of Mexinox's October 10, 2000 questionnaire response. Thus,
petitioners urge the Department to apply to appropriate percentages to
increase Mexinox's reported G&A to account for its parents' contributions
to Mexinox's operations. 

Regarding the expenses incurred by Mexinox on behalf of Mexinox Trading,
Mexinox argues that there is no basis for including them in G&A because
they are selling expenses, not general expenses. Citing the Notice of
Final Determination of Sales at Less Than Fair Value: Stainless Steel
Sheet and Strip in Coils from Mexico, 64 FR 30790, 30818 (June 8, 1999)
(S4 from Mexico Final Determination), Mexinox states the Department
rejected petitioners' claim regarding these expenses in the original
investigation, and states petitioners have not explained why the
Department should reach a different conclusion in the instant review. 

Mexinox claims the expenses related to certain investment activities
should not be included in G&A because they are unrelated to the production
of subject merchandise or Mexinox's general operations. Mexinox then cites
Note 8 to its 1999 audited financial statements, which is not subject to
public disclosure. Citing Notice of Final Determination of Sales at Less
Than Fair Value: Fresh Atlantic Salmon from Chile, 63 FR 31411 (June 9,
1998) (Fresh Atlantic Salmon from Chile), Mexinox argues the Department
has an established practice of excluding gains and losses from investment
activities from G&A. Since the amount in question represents a loss
related to investment activities that are not related to the production of
subject merchandise, Mexinox holds, the Department should not include
these expenses in G&A. 

With respect to third category of expenses mentioned by petitioners,
Mexinox argues this item does not represent expenses. Mexinox cites Note
14 of its 1999 audited financial statement and claims that this item is
not an expense incurred in connection with the production of subject
merchandise or other company operations. Rather, Mexinox contends, this
item is akin to dividend distributions or income tax payments, neither of
which are included in COP or constructed value (CV). Mexinox holds the
Department's practice concerning dividends and tax payments is to exclude
them from the cost calculation because such payments pertain to the level
of income earned by a corporation, not the expenses themselves. Based on
the foregoing, Mexinox asserts this item should not be included in G&A.

Finally, Mexinox asserts that, like the original investigation, its
reported G&A expenses included an amount representing fees paid to KTS for
corporate services rendered on Mexinox's behalf. Mexinox states the
Department examined these fees in detail at the cost verification,
referring to the Cost Verification Report at 23 and Cost Verification
Exhibit 15. Arguing that these fees do in fact cover the actual expenses
incurred by Mexinox's parents on behalf of Mexinox, Mexinox contends
petitioners have not pointed to any evidence showing this was not the case
during the POR. Mexinox claims that for each service performed on behalf
of a subsidiary, the subsidiary compensates the immediate parent through
payment of a corporate fee. Mexinox argues the amount of such a payment is
part of the subsidiary's total expenses, which are charged to the
subsidiary's own subsidiaries if any services are provided on their
behalf. Therefore, Mexinox holds, the corporate fees paid to KTS fully
represent any expenses incurred by Mexinox's parent companies at each
level. 

Mexinox recounts that ThyssenKrupp AG, its ultimate parent, is a holding
company with no operations of its own. Mexinox states that any expenses
incurred by ThyssenKrupp AG are passed on to its subsidiaries. Pointing to
ThyssenKrupp AG's unconsolidated financial statement, Mexinox notes
ThyssenKrupp AG had total operating expenses of 295.1 million and total
operating income of 527.7 million in 1998-1999. Stating the record
demonstrates ThyssenKrupp AG charged its affiliates more operating
expenses than were actually incurred on their behalf, Mexinox maintains
the Department does not need to make an adjustment to G&A with respect to
ThyssenKrupp AG. 

Mexinox argues that as shown in ThyssenKrupp AG's financial statement,
ThyssenKrupp AG was paid by subsidiary TKS for expenses incurred on its
behalf. Mexinox states petitioners have not cited any contradictory
evidence. Mexinox contends that TKS's consolidated expenses, which were
the focus of petitioners' comments, reflect the expenses incurred by all
of the companies in the TKS group, including Mexinox. Therefore, Mexinox
argues, any adjustment for consolidated expenses at the TKS level would
double-count Mexinox's expenses and include expenses unrelated to the
production of subject merchandise.

Mexinox notes that one of TKS's subsidiaries is KTS, who paid TKS for
expenses incurred on its behalf. Mexinox states that KTS, in turn, charged
its own subsidiaries - one of which is Mexinox - for expenses incurred on
their behalf. Respondent's Rebuttal Brief at 53. Mexinox argues the record
shows Mexinox paid KTS enough to cover its collective parents' expenses
incurred on its behalf. Referring to KTS's financial statements, Mexinox
contends its unconsolidated operating expenses for 1998-1999 equaled DM
24.9 million. Therefore, Mexinox claims, KTS's charges of DM 49.0 million
to affiliates fully covered these expenses and included a profit as well.

Based on the foregoing, Mexinox asserts there is no reason to adjust its
reported G&A expenses to account for any parent company expenses. 

Department's Position: We agree with petitioners in part. With respect to
expenses incurred by Mexinox on behalf of Mexinox Trading, we have
examined the record and have determined that these should be included in
the numerator of Mexinox's G&A ratio. Our findings at verification
demonstrate that the amount in question represented G&A expenses, not
selling expenses as asserted by Mexinox. See the Cost Verification Report
at 22 and Cost Verification Exhibit 15. 

Regarding the expenses related to investment activities that petitioners
claim should be included in the G&A ratio, we disagree with petitioners.
The Department does not include gains or losses pertaining to investment
activities in G&A expenses, as these are not related to production
activities. See, e.g., Fresh Atlantic Salmon From Chile at 31436.

We agree with petitioners that the third category of expenses (which
Mexinox states are "akin to dividend distributions or income tax
payments") should be included in G&A. The Department has an established
practice of including this type of expense in the calculation of COP and
CV. See, e.g., Notice of Final Determination of Sales at Less Than Fair
Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from
Brazil, 65 FR 5554, 5581 (February 4, 2000). Because this item is a cost
of labor and it is an expense recognized within the POR, it should be
included in Mexinox's G&A expenses. 

Finally, we agree with the respondent that the proper amount of its
parent company's G&A expenses have been included in the G&A expense rate
calculation. Our practice is to calculate general expenses based on the
company's normal books and records. Mexinox has included in its G&A
expense calculation the total amount charged by its parent company, KTS,
and recorded in

its audited financial statements. Thus, we see no reason in this case for
the Department to abandon its practice of including the G&A expenses
presented on the audited financial statements of the respondent that
already includes a portion of the parent company G&A expenses. Therefore,
for these final results we have not amended the G&A ratio to include
expenses incurred by each of Mexinox's parent companies.

Therefore, for these final results, we have corrected Mexinox's G&A ratio
to include certain expenses incurred by Mexinox on behalf of Mexinox
Trading and the expenses "akin to dividend distributions or income tax
payments." See the Department's Final Analysis Memorandum, dated February
4, 2001 for our recalculation of G&A expenses. 

Comment 10: Interest Expenses

Petitioners note Mexinox reported a POR financial expense of 1.34
percent, which represents the financial expenses of its ultimate parent,
Thyssen Krupp AG. If this ratio is used, petitioners argue, it should be
applied on a packing-inclusive basis since packing expenses were included
in the ratio's denominator. Petitioners claim, however, that this ratio is
not the most appropriate measure of Mexinox's consolidated financial
expense.

Citing Attachments A-11-E and J of Mexinox's October 10, 2000
questionnaire response, petitioners state Mexinox's 1999 sales represent a
small portion of Thyssen Krupp AG's consolidated sales of $30 billion.
Petitioners note that Thyssen Krupp AG, a German-based entity with
worldwide operations, deals with automotive products, production systems,
components, materials services, facilities services, real estate, and
engineering. Petitioners claim it is not appropriate to base the financial
expenses of a Mexican stainless steel facility on the consolidated
financial expenses of an entity with such diverse operations.

Petitioners state that KTS, Mexinox's immediate parent, incurred net
financing expenses of DM40.1 million on consolidated sales of DM 521.4
million. Id. at Attachment A-11-L. Thus, petitioners hold, KTS' net
interest expense likely benefitted Mexinox and its affiliates through
investment and R&D activities. Since KTS focuses on stainless operations
and is responsible for "coordinating functions for the companies under its
control," petitioners assert the Department should base Mexinox's
financial expenses on those of its immediate parent, not on those of its
ultimate parent. Petitioners state the flow of major inputs, for example,
among AST, KTN, and Mexinox demonstrates significant coordination and
planning among the KTS subsidiaries. 

Noting that the Department generally bases financial expenses on the
highest level of consolidation, petitioners argue that the CIT has found
that an "immediate parent... would be much more likely to have and
exercise direct control over the subsidiary," quoting American Silicon
Technologies v. United States, 1999 WL 354415 at 8, Slip Op. 99-34 (CIT
1999) (American Silicon). According to petitioners, in American Silicon
the case was remanded to the Department in order to base the respondent's
financial expenses on those of its immediate parent, since the
respondent's ultimate parent's financial statements did not represent the
costs associated with producing and selling subject merchandise. Since KTS
is most closely involved in the coordination, R&D, and investment of
Thyssen Krupp AG's worldwide stainless steel operations, petitioners urge
the Department to apply KTS's financial expenses of 7.7 percent (DM 40.1
million divided by DM 521.4 million) rather than the financial expenses of
Thyssen Krupp AG. In conclusion, petitioners note, this ratio is expressed
as a percentage of sales, and is therefore conservative, because KTS's
financial statement does not reflect the consolidated cost of sales.

Mexinox contends that it reported a financial expense ratio based on the
highest level of consolidation. Respondent's Rebuttal Brief at 54. Mexinox
states this was the methodology accepted by the Department in the original
investigation. Id. Mexinox claims petitioners' argument - that financial
expenses should be based in this case on the lowest level of consolidation
- is incorrect because the Department's practice is to compute interest
expenses at the highest level of consolidation available.

In S4 from the United Kingdom, Mexinox contends, the respondent disagreed
with using interest expenses at the highest consolidated level on the
grounds that the immediate parent had its own borrowings and was not
financed by the ultimate parent. Respondent's Rebuttal Brief at 54, citing
S4 from the United Kingdom at 30688. Mexinox argues that the petitioners
in S4 from the United Kingdom claimed the Department's normal methodology
is to compute financial expenses at the highest consolidated level of
affiliation, and that the Department agreed with petitioners. Id. at 54-
55, citing S4 from the United Kingdom at 30709-10. 

Mexinox contends petitioners incorrectly relied on American Silicon,
arguing that the CIT did not overrule the Department's practice of basing
financial expenses on the highest level of consolidation. Mexinox claims
that American Silicon did not create a requirement for the Department to
consider whether an intermediate company might exercise more control over
a subsidiary than the ultimate parent. As explained by the Federal
Circuit, Mexinox argues, American Silicon relied instead "on the absence
in that particular case of any inter-company financial dealings within the
group under consideration" in calculating financial expenses. Respondent's
Rebuttal Brief at 56 (emphasis in original), citing E.I. DuPont de Nemours
& Co. v. United States, 2001 WL 120076 at *3 (Fed. Cir. Feb. 12, 2001).
Mexinox states evidence before the International Trade Commission with
respect to Mexinox and Mexinox USA shows this is not the case here.
Mexinox argues that American Silicon, to the degree it has any bearing on
this case, supports the Department's practice. 

Mexinox argues that the facts of this review do not require a departure
from the Department's well-founded practice for computing net interest
expenses. Thus, Mexinox urges the Department to reject petitioners'
proposal to do otherwise. 

Department's Position: We disagree with petitioners that we should
calculate financial expenses based on the expenses of Mexinox's immediate
parent, KTS. The Department's established policy is to calculate financial
expenses for COP and CV purposes based on the borrowing costs incurred at
the consolidated group level. This practice recognizes two facts: (1) the
fungible nature of money within a consolidated group of companies; and (2)
that the controlling entity within a consolidated group has the power to
determine the capital structure (i.e., the debt and equity) of each member
company within its group. See, e.g., Final Results of Antidumping Duty
Administrative Review: Silicon Metal from Brazil, 65 FR 7497, 7500
(February 15, 2000) and S4 from the United Kingdom at 30709-10. Therefore,
we have continued to base financial expenses on Thyssen Krupp AG's cost of
borrowing since Thyssen Krupp AG is Mexinox's ultimate parent.

With respect to including packing costs in the numerator of the financial
expense ratio, we disagree with petitioners. The record does not contain
any information that would require us to make such an adjustment, nor does
it demonstrate that packing costs have been included in Thyssen Krupp AG's
cost of sales. Therefore, we have not amended the financial expense ratio
for these final results. 

Home Market Downstream Sales

Comment 11: Use of Sales by Mexinox Trading in the Calculation of Normal
Value

Petitioners state that during the early stages of this review, they urged
the Department to require that Mexinox provide data on home market
downstream sales made by its affiliated reseller, Mexinox Trading.
Although the Department solicited these data, petitioners note, it did not
use them in making its preliminary determination. Petitioners cite the
Preliminary Results at 41526, in which the Department stated it found no
reason to use these downstream sales data because "the additional
information provided by Mexinox" as well as its "findings at verification"
enabled the Department to conclude that "Mexinox and Mexinox Trading are
functioning as separate and distinct entities." 

When the Department solicited Mexinox Trading's downstream sales,
petitioners note, it indicated in a March 23, 2001 memorandum that there
was "currently insufficient evidence on the record to establish whether
Mexinox Trading is indeed functioning as a distinct entity in Mexinox's
home market distribution of stainless steel sheet and strip in coils."
According to petitioners, Mexinox had already reported in its submissions
of March 9 and 19, 2001 that Mexinox Trading was a "legally distinct and
fully-functioning retail company, with its own employees, facilities, and
operations." Nonetheless, petitioners claim, the additional information
furnished by Mexinox in its April 16 and May 25, 2001 supplemental
questionnaire responses failed to establish that Mexinox and Mexinox
Trading were not closely linked. For instance, petitioners point to
Mexinox's April 16, 2001 submission at 3 and 11, in which the respondent
indicated Mexinox Trading's headquarters are located in the same building
as Mexinox's administrative facilities; Mexinox Trading has some employees
on site at Mexinox's manufacturing facility; and Mexinox uses Mexinox
Trading's seven remote warehouses in connection with its own home market
sales. Petitioners argue the Department has not identified the "additional
information" nor the "findings at verification" backing its conclusion
that Mexinox and Mexinox Trading are operating as "separate and distinct
entities." Petitioners contend that since the Department's Sales
Verification Report does not specifically discuss this issue, the
Department should use Mexinox Trading's downstream sales to calculate NV. 

Petitioners hold the Department must reconsider its practice of sometimes
excusing respondents from reporting downstream sales data and not using
them to compute NV. Since affiliated parties act in the interest of the
whole group and not as competitors, petitioners assert affiliated party
transactions should be regarded with skepticism. In the context of an
administrative review requested by a respondent, petitioners maintain,
prices between the respondent and affiliated parties are subject to
manipulation. Petitioners argue that the Department's current conflicting
policies on downstream sales reporting appear "to have resulted from a
blurring, over time, of the considerations that arise from the two types
of affiliated party sales: sales to affiliated consumers vs. sales to
affiliated resellers." Petitioners' Case Brief at 18 (emphasis in
original). Petitioners assert that sales to affiliated consumers never
result in an arm's-length sale, because the merchandise is used in
production; they also assert there is a legitimate reason for transferring
the input from the producer to an affiliated consumer. On the other hand,
petitioners aver, sales to affiliated resellers result in a downstream
sale to unaffiliated customers and therefore can be manipulated. Thus,
petitioners hold, one must ask whether an affiliated reseller exists for
legitimate market reasons or to circumvent the reporting of downstream
sales. 

Citing the Department's antidumping questionnaire at G-5-6, petitioners
argue the instructions regarding downstream sales reporting are completely
clear and have been part of the standard language for many years.
Acknowledging that the instructions permit respondents to be excused at
times from reporting a small volume of downstream sales, petitioners note
such exclusions could enable a respondent to manipulate sales. Id. at 19
n.7. Petitioners claim such exclusions could have a huge impact on the
calculation of NV, and therefore, as a policy matter, the Department
should always utilize the final, arm's-length sale in the chain of
distribution. Petitioners note the Department maintains this policy with
respect to sales made in the United States. 

In stating that the statute prohibits affiliated reseller transfer
prices, petitioners refer to section 773(a)(1)(B)(i) of the Tariff Act,
which requires that NV be based on "the price at which the foreign like
product is first sold ... for consumption in the exporting country...."
Since sales to an affiliated reseller are not for consumption, petitioners
argue, these sales cannot be excluded pursuant to section 773(a)(1)(B)(i).
Petitioners also point to section 773(a)(2) of the Tariff Act, which
mandates that the Department reject "fictitious" sales. Petitioners
contend transfer prices created by a respondent are "fictitious" since a
real price does exist - that charged to unaffiliated customers. 

Petitioners assert that "[t]he potential for this kind of abuse can be
seen in the unusual agreement between Mexinox and Mexinox Trading with
respect to servicing of certain home market customers." Petitioners' Case
Brief at 20. Petitioners argue this agreement went into effect after the
filing of the original antidumping petition and categorized certain home
market customers as Mexinox customers. Referring to the Sales Verification
Report at 13, petitioners contend certain customers were treated as
Mexinox customers even though "virtually all aspects of sales and
distribution operations were handled by Mexinox Trading using their
facilities." Id. Petitioners cite business proprietary information
contained in this agreement, which appears at Attachment B-43 of Mexinox's
March 5, 2001 supplemental questionnaire response. According to
petitioners, the Department can interpret this agreement either as (1)
proof that Mexinox manipulated the antidumping analysis by reclassifying
certain Mexinox Trading customers as Mexinox customers, or (2) proof of
Mexinox Trading's integration into Mexinox's sales operations. Petitioners
claim Mexinox Trading fails the arm's-length test if sales to the
customers in question are recategorized as sales from Mexinox to Mexinox
Trading, rather than sales from Mexinox to those customers.

Referring to the Department's August 23, 2001 Sales Verification Report
at 13, petitioners contend Mexinox's explanation of why Mexinox Trading
did not sell directly to the customers in question makes no sense. Since
the agreement between Mexinox and Mexinox Trading calls for Mexinox
Trading to perform certain functions, petitioners assert "Mexinox Trading
is obviously well-equipped to handle the needs of these large customers;
if it were not, the agreement would not have been struck." Petitioners'
Case Brief at 22. Petitioners contend Mexinox may have formulated this
agreement to manipulate the results of the antidumping analysis.
Petitioners maintain that there is no reason for certain customers to be
considered customers of Mexinox while other such customers are considered
Mexinox Trading customers. Citing the Sales Verification Report at 6 and
business proprietary data related to the 10 highest-volume control numbers
sold in the United States, petitioners claim the explanation that Mexinox
Trading generally sold in smaller volumes than Mexinox is misleading.
Further, petitioners assert, the record shows that merchandise sold by
Mexinox Trading was not for "dairy trucks" or "taco stands" but instead
for customers buying in commercial quantities. Id. at 22 n.6, citing the
Department's Sales Verification Report at 6. 

Based on the foregoing, petitioners urge the Department to reclassify
sales to the customers in question as sales by Mexinox to Mexinox Trading
for purposes of the arm's-length test and margin calculation program. As
an alternative, petitioners request that the Department consider the
agreement between Mexinox and Mexinox Trading to be "a clear attempt at
manipulation by Mexinox and simply ignore transfer prices among the two
companies." Petitioners' Case Brief at 23. In conclusion, petitioners
state the record clearly demonstrates that Mexinox Trading's downstream
sales should be used for these final results.

In its rebuttal, Mexinox states that during the POR it sold a small
quantity of subject merchandise to Mexinox Trading. In accordance with
section 351.403(d) of the Department's regulations, Mexinox contends it is
authorized to exclude these sales from the dumping analysis because they
account for less than five percent of total home market sales and pass the
Department's 99.5 percent arm's-length test. 

Throughout the course of this proceeding, Mexinox argues, petitioners
have tried relentlessly to create issues concerning Mexinox Trading where
none exist. Mexinox comments that petitioners have suggested Mexinox has
been untruthful in its responses regarding Mexinox Trading, has
manipulated the dumping margin, and has concocted some of the data
examined by the Department. Referring to the S4 from Mexico Final
Determination at 30811, Mexinox states that in petitioners' view,
downstream sales should always be reported, regardless of the
circumstances. However, Mexinox declares, the Department rejected this
argument as contrary to Department policy and regulations. 

Based on a single erroneous sentence in Mexinox Tradings's financial
statements, Mexinox argues, petitioners suggested Mexinox Trading has no
employees, and that it was a "paper" company set up to hide Mexinox's high-
priced sales from the Department. Mexinox states it quickly responded to
these allegations in several letters to the Department, explaining that
the sentence in the financial statement was poorly worded and that Mexinox
Trading in reality has its own employees and separate operations. Mexinox
states that in response to the Department's supplemental questionnaires
focusing on Mexinox Trading, it supplied corroborating information.
Mexinox holds that the Department spent nearly two days verifying this
information; referring to the Sales Verification Report, Mexinox contends
the Department did not find any discrepancies. Mexinox also quotes the
Preliminary Results at 41526, which stated that "[b]ased on the additional
information provided by Mexinox as well as our findings at verification,
we find that Mexinox and Mexinox Trading are functioning as separate and
distinct entities." Mexinox claims the Department made this statement
based on its own direct observations of Mexinox Trading's warehouse, sales
process, and books and records. Mexinox contends petitioners have now
shifted their arguments by claiming certain of Mexinox's reported own
direct sales were actually Mexinox Trading transactions, whereas before
they argued that Mexinox was hiding sales by claiming they were Mexinox
Trading sales.

With respect to petitioners' allegation that Mexinox and Mexinox Trading
are not operating as "separate and distinct entities," Mexinox maintains
the Department has examined this issue thoroughly through its supplemental
questionnaires and at verification. For instance, Mexinox argues that at
verification the Department examined how Mexinox and Mexinox Trading are
staffed and organized and how inventory is stored and handled. Citing
Sales Verification Exhibit 34 at S-935, Mexinox asserts the Department
confirmed that Mexinox Trading:

- has its own management;

- files its own audited financial statements;

- files its own corporate income tax returns;

- operates its own independent warehousing facilities;

- maintains its own administrative staff, sales force, and warehousing
  employees;

- pays salaries and benefits for its own separate employees in full;

- pays value-added taxes on all purchases from Mexinox;

- pays utilities and other expenses in its own name;

- develops and maintains its own customer base;

- communicates with customers and negotiates prices;

- issues its own price lists under its own name;

- invoices customers;

- arranges and pays for shipment and other logistics; and

- collects payments from customers.

Mexinox argues this listing is only a partial summary of the evidence the
Department relied upon to validate Mexinox Trading's independent
operations. Citing the Sales Verification Report at 32, Mexinox contends
the Department found "no discrepancies" with this listing. Mexinox asserts
the record establishes that Mexinox and Mexinox Trading are "legally and
operationally distinct entities." Mexinox maintains the only legitimate
question raised by petitioners, therefore, was whether Mexinox Trading has
its own employees; however, Mexinox holds that the Department put this
issue to rest at verification. 

Regarding downstream sales reporting, Mexinox urges the Department to
reject the petitioners'argument that downstream sales should be reported
in all instances. Mexinox avers that in keeping with section 351.403(d) of
its regulations, the Department's established policy is "to exclude
downstream sales reporting under the circumstances as they exist in this
case (i.e., sales below five percent and/or sales are demonstrably at
arm's-length prices." Respondent's Rebuttal Brief at 26. Mexinox argues
petitioners raised the same argument during the original investigation, at
which time the Department determined that "'the appropriate context for
the petitioners' comment is the rulemaking process.'" Id., quoting the S4
from Mexico Final Determination at 30810. Mexinox states the rulemaking
process related to this issue was completed over four years ago, when the
Department considered arguments for a change in policy but in the end
codified the existing practice related to downstream sales reporting.
Mexinox argues the Department should not have to substantiate its decision
and current regulations in each segment of this proceeding.

Mexinox asserts it did not concoct the prices charged to Mexinox Trading
and stated that its sales to Mexinox Trading were made on the same basis
as sales to other unaffiliated retail distributors. As shown on the
record, Mexinox contends, the price lists periodically issued to all
retail distributors also apply to Mexinox Trading. Thus, Mexinox argues,
the prices charged to Mexinox Trading pass the arm's-length test, which
shows these prices are not merely "'a number written on a piece of
paper.'" Respondent's Rebuttal Brief at 29, quoting Petitioners' Case
Brief at 18. Mexinox cites the preamble to the Department's regulations,
which states that:

  The purpose of the arm's-length test is to eliminate prices that are
  distorted. We test sales between two affiliated parties to determine if
  prices may have been manipulated to lower normal value. We do not
consider
  home market prices to affiliates at prices above the threshold to have
  been depressed due to affiliation. Therefore, the Department should treat
  such sales in the same manner as sales to unaffiliated customers.

Antidumping Duties; Countervailing Duties, 62 FR 27296, 27356 (May 19,
1997). 

Mexinox asserts that since its sales prices to Mexinox Trading pass the
arm's-length test, these prices are free of the kind of manipulation
claimed by petitioners.

Mexinox argues petitioners' theory - that Mexinox created the agreement
with Mexinox Trading after the antidumping petition was filed to
reclassify certain of its customers - is absurd. Mexinox claims it made an
agreement with Mexinox Trading to furnish handling services at certain
remote locations prior to the filing of the antidumping petition. Mexinox
states it reported this arrangement in its section B response during the
original investigation. Referring to the sales made under this
arrangement, Mexinox contends that petitioners are incorrect in claiming
that "'virtually all aspects of sales and distribution operations were
handled by Mexinox Trading using its facilities.'" Respondent's Rebuttal
Brief at 30, quoting Petitioners' Case Brief at 20. Referring to Sales
Verification Exhibit 8, Mexinox asserts the Department verified that
Mexinox, not Mexinox Trading:

- is identified in all documentation as the seller;

- negotiates and sets prices with the customer;

- invoices the customer;

- provides credit and assumes all credit risk;

- handles customer claims;

- retains title to its own inventory, which is segregated from Mexinox
  Trading's in the warehouse;

- assumes all risk of loss while the material is warehoused; and

- pays all transportation and warehousing costs.

Contrary to petitioners' assertions, Mexinox contends that Mexinox
Trading performs just two tasks in conjunction with Mexinox's own sales:
(1) it provides local storage and handling; and (2) it transfers customer
payments to Mexinox. Mexinox claims this does not show that Mexinox
Trading's sales are integrated into its own, nor does it suggest that
Mexinox's customers are Mexinox Trading's customers. 

According to Mexinox, petitioners question why Mexinox and Mexinox
Trading would have different customers and customer bases and, in doing
so, suggest that the distinction between Mexinox and Mexinox Trading is
spurious. Mexinox submits the record makes it clear that Mexinox and
Mexinox Trading have different customer bases because they are different
companies with separate operations. Further, Mexinox claims, it is clear
from the record that the two companies focus on different markets: while
Mexinox concentrates on larger customers throughout Mexico, Mexinox
Trading participates in small-scale local retail operations. Citing the
Sales Verification Report at 32, Mexinox argues the Department found no
discrepancies with Mexinox's questionnaire and supplemental questionnaire
responses with respect to Mexinox Trading. 

Referring to the business proprietary data cited in petitioners' case
brief with respect to the 10 highest-volume control numbers sold in the
United States, Mexinox argues these data uphold its position. Mexinox
claims these data demonstrate that the average quantity sold by Mexinox
per transaction is greater than the average quantity sold by Mexinox
Trading per transaction. To further support its position, Mexinox cites
other record evidence, such as the size of each entity's customer base and
the average number of months in which each entity's customers made
purchases. Finally, Mexinox states, since petitioners have Mexinox's and
Mexinox Trading's customer lists from both the original investigation and
the instant review, they could compare these lists to see if any
reclassification of customers has occurred. However, Mexinox argues, that
because petitioners have not alleged any reclassification of customers
this demonstrates that there are separate customers for Mexinox and
Mexinox Trading.

Based on the foregoing, Mexinox urges the Department to continue
excluding Mexinox Trading's downstream sales from the calculation of NV
for these final results.

Department's Position: We disagree with petitioners' assertion that we
should use Mexinox Trading's downstream sales in calculating NV. Section
351.403(d) of the Department's regulations states that:

If an exporter or producer sold the foreign like product through an
affiliated party, the Secretary may calculate normal value based on the
sale by such affiliated party. However, the Secretary normally will not
calculate normal value based on the sale by an affiliated party if sales
of the foreign like product by an exporter or producer to affiliated
parties account for less than five percent of the total value (or
quantity) of the exporter's or producer's sales of the foreign like
product in the market in question or if sales to the affiliated party are
comparable, as defined in paragraph (c) of this section. 

In accordance with section 351.403(d) of the Department's regulations,
the Department's normal policy is to exclude affiliated party downstream
sales from the calculation of NV if those sales either: (1) account for
less than five percent of the exporter's or producer's home market sales;
or (2) are made at a price comparable to the price at which the exporter
or producer sold the foreign like product to an unaffiliated party. Based
on the information on the record, there is no question that Mexinox
Trading is affiliated with Mexinox under the meaning of section 771(33) of
the statute. Specifically, the record shows that Mexinox Trading is a
wholly-owned subsidiary of Mexinox. (See, e.g., Mexinox's 1999
Unconsolidated Financial Statement at Attachment A-11-A-1 of its October
6, 2000 questionnaire response.) 

In the instant review, the information on the record demonstrates that
the total quantity of Mexinox's sales of foreign like product during the
POR to Mexinox Trading constituted less than five percent of the total
quantity of Mexinox's home market sales of foreign like product. See
Mexinox's May 4, 2001 supplemental questionnaire response at Attachment A-
37 and Mexinox's May 25, 2001 supplemental questionnaire response at
Attachment B-72-A (home market sales data). At verification we examined
the home market quantity and value of sales made by Mexinox during the POR
(as reported in its May 4, 2001 supplemental questionnaire response at
Attachment A-37) and found no discrepancies. See the Department's Sales
Verification Report at pages 8 through 10. In addition, as noted in the
Preliminary Results at 41526, Mexinox's sales to Mexinox Trading pass the
Department's arm's-length test. Therefore, we find no reason to calculate
NV utilizing Mexinox Trading's sales to the unaffiliated customer. This
finding is in keeping with other Department determinations such as Notice
of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Stainless Steel Bar from Germany, 66
FR 40208 (August 2, 2001) (unchanged in the final determination) and
Notice of Preliminary Determination of Sales at Less Than Fair Value: Hot-
Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 64 FR 8291,
8295 (February 19, 1999) (unchanged in the final determination). We
disagree with petitioners' suggestion that, as a matter of policy, the
Department should always use the final, arm's-length sale in the chain of
distribution in calculating NV. Such a requirement would be contrary to
section 351.403(d) of the Department's regulations and the balance of
policy factors the Department considered in promulgating that regulation.
See the discussion regarding downstream sales in Antidumping Duties;
Countervailing Duties, 62 FR 27296, 27356 (May 19, 1997).

We disagree with petitioners' argument that the record fails to
demonstrate that Mexinox and Mexinox Trading are separate entities, and
that the Department should use Mexinox Trading's sales to the unaffiliated
customer in calculating NV. First, we note we found no evidence at
verification that Mexinox was shifting high-priced sales to Mexinox
Trading. Second, while petitioners have noted that Mexinox Trading's
headquarters are located in the same building as Mexinox's administrative
facilities, that Mexinox Trading has some employees on site at Mexinox's
manufacturing facility, and that Mexinox uses Mexinox Trading's seven
remote warehouses in connection with its own home market sales, these
activities do not demonstrate that Mexinox and Mexinox Trading are the
same entity. Rather, as noted in the Preliminary Results at 41526, we find
the record establishes that Mexinox and Mexinox Trading are separate and
distinct entities. 

For example, during verification we examined Mexinox Trading's accounting
records and confirmed that Mexinox Trading has its own audited financials
and trial balance. See Mexinox Trading's 1999 audited financial statement
at Attachment A-11-C of Mexinox's October 6, 2000 questionnaire response
and Sales Verification Exhibit 3 at S-095 through S-148. In addition, we
thoroughly examined Mexinox's claim that Mexinox Trading pays salaries and
benefits to its employees in full, and found no discrepancies while
performing this exercise. See the business proprietary version of the
Sales Verification Report at 16-17 and 36-37; see also Sales Verification
Exhibit 36. As we performed sales traces, we observed that Mexinox Trading
invoices its own customers and collects payments. See Sales Verification
Exhibit 35. Further, we found no evidence that Mexinox Trading's customer
base was not different from Mexinox's.

We also disagree with petitioners' argument that the agreement between
Mexinox and Mexinox Trading shows certain Mexinox customers are in reality
Mexinox Trading customers, or that the agreement is evidence that Mexinox
Trading is integrated into Mexinox. At verification we examined sales that
Mexinox made under this agreement, and found no discrepancies with the
information provided on the record. For instance, Sales Verification
Exhibit 17, which documents one such sale, demonstrates the sale was
invoiced by Mexinox and that it was booked in Mexinox's records.
Therefore, we do not find reason to recategorize certain Mexinox customers
as Mexinox Trading customers, nor do we consider this agreement to be
evidence that Mexinox Trading is integrated into Mexinox.

Further, having established that Mexinox and Mexinox Trading are
operating as separate entities and that no Mexinox customers need to be
reclassified as Mexinox Trading customers, we also conclude that the total
quantity of Mexinox's sales of foreign like product to Mexinox Trading
during the POR constituted less than five percent of the total quantity of
Mexinox's home market sales of foreign like product, and that Mexinox's
sales to Mexinox Trading pass the arm's-length test. Therefore, for these
final results, consistent with section 351.403(d) of the Department's
regulations, we have not included Mexinox Trading's downstream sales in
the calculation of NV. 

Level of Trade (LOT)

Comment 12: Classification of Certain U.S. Sales as Export Price or
            Constructed Export Price Sales

Petitioners note that in the original investigation in this proceeding
and in the preliminary results of the instant review, the Department
accepted Mexinox's classification of its "direct shipments" and "SLP [San
Luis Potosi] stock sales" as EP sales. According to petitioners, only
Mexinox USA's "sales through inventory" were classified properly as CEP
sales. Although the EP classification may have been tenable in the
original investigation, petitioners claim, it is no longer tenable in
light of the U.S. Court of Appeals for the Federal Circuit (Federal
Circuit)'s decision in AK Steel Corp. v. United States, 226 F. 3d 1361
(Fed. Cir. 2000) (AK Steel). Petitioners therefore urge the Department to
correct this error and classify all of Mexinox's U.S. sales as CEP sales
for these final results.

In AK Steel, petitioners state, the Federal Circuit overturned the
Department's use (and the CIT's earlier affirmation) of the three-pronged
test (the so-called "PQ Test") to distinguish EP and CEP transactions.
Petitioners note that in AK Steel, the Korean producer sold steel to an
affiliated Korean exporter, which sold it to a U.S. affiliate, which in
turn sold the steel to unaffiliated U.S. customers. According to
petitioners, most of the steel was shipped by the Korean exporter directly
to the unaffiliated U.S. customer without entering the U.S. affiliate's
inventory. In that case, petitioners note, the Department determined that
the U.S. affiliate acted merely as a "communication link or processor of
documents," thereby satisfying the third prong of the PQ Test and
qualifying the sales as EP sales. 

Petitioners quote the Federal Circuit, which asked in AK Steel "whether a
sale to a U.S. purchaser can be properly classified as a sale by the
producer/exporter, and thus an EP sale, even if the sales contract is
between the U.S. purchaser and a U.S. affiliate of the producer/exporter
and is executed in the United States." AK Steel at 1368. Petitioners note
the Federal Circuit's conclusion that the addition (through the URAA of
1994) of the phrase "outside the United States" to the definition of EP
and "by a seller affiliated with the producer" to the definition of CEP
made "where the sale takes place and whether the foreign producer or
exporter and the U.S. importer are affiliated ... dispositive of the
choice between the two classifications." Id. at 1369. Petitioners cite the
Federal Circuit's decision that "[i]f the contract for sale was between a
U.S. affiliate of a foreign producer or exporter and an unaffiliated U.S.
purchaser, the sale must be classified as a CEP sale." Id. at 1374
(emphasis in original).

Based on the Federal Circuit's decision in AK Steel, petitioners assert,
it is clear that all of Mexinox's U.S. transactions are CEP sales. First,
petitioners note, Mexinox USA was the sole importer of record for all of
Mexinox's U.S. sales, regardless of the channel of distribution. Next,
referring to Mexinox's October 10, 2000 questionnaire response,
petitioners note that it is Mexinox USA to whom customers submit purchase
orders, and it is Mexinox USA who invoices the U.S. customer and collects
payment. Petitioners argue "there is no material difference" between the
sales process used for "direct shipments" and the sales process for "sales
through inventory." Petitioners' Case Brief at 4-5, citing Mexinox's
October 10, 2000 questionnaire response at 40-42. Petitioners contend the
record shows U.S. customers contract with Mexinox USA, not Mexinox, for
both "direct shipments" and "sales through inventory." Similarly,
petitioners maintain, while "SLP stock sales" may require a greater degree
of contact between U.S. customers and Mexinox's staff in SLP, "there can
be no doubt that the party selling the merchandise to the U.S. customer is
Mexinox USA." Id. at 5 (emphasis in original). 

Petitioners claim the record clearly shows that for both 'direct
shipments' and 'SLP stock sales,' Mexinox USA conducts virtually all price
negotiations with the U.S. customer. Further, petitioners assert, Mexinox
has emphasized that its 'direct shipments' and 'SLP stock sales' should be
considered EP sales in part because they remain in Mexinox USA's
warehouses for four days or less prior to delivery to the unaffiliated
U.S. customer. However, petitioners argue, AK Steel clearly establishes
that even export sales shipped directly from the foreign producer to the
unaffiliated U.S. customer can be classified as CEP sales if the sale was
concluded "in the United States" by the foreign producer's U.S. affiliate.
Petitioners argue that Mexinox USA does take possession of all Mexinox
material, even if only for a short time. Thus, petitioners maintain,
"[t]his suggests that the only factor distinguishing Mexinox USA's 'direct
shipments,' 'sales through inventory' and 'SLP stock sales' is, in the
end, the number of days they are held in inventory." Petitioners' Case
Brief at 6. Petitioners submit that a shorter inventory holding period is
not sufficient for categorizing certain sales as EP sales. Based on the
mandate in AK Steel, petitioners affirm, these sales should be regarded as
CEP sales.

Petitioners contend the record shows that all of Mexinox's U.S. sales
were made "in the United States" within the meaning of section 772(b) of
the Tariff Act, as interpreted by AK Steel. Petitioners assert that in
Stainless Steel Sheet and Strip in Coils from Italy: Preliminary Results
of Antidumping Duty Administrative Review, 66 FR 41517, 41520 (August 8,
2001) (S4 from Italy Preliminary Results), the Department determined,
consistent with AK Steel, that the respondent's direct shipment sales
"were made 'in the United States' within the meaning of section 772(b) of
the [Tariff] Act, and thus, should be treated as CEP transactions."
Petitioners urge the Department to apply the same analysis to Mexinox's
U.S. sales, particularly since Mexinox USA actually takes possession of
all Mexinox products before delivery to the unaffiliated U.S. customer.
According to petitioners, Mexinox USA's actual possession of this material
(regardless of logistical factors) only demonstrates further that Mexinox
USA is the entity with whom the U.S. customer contracts. Therefore,
petitioners assert, all of Mexinox's U.S. sales must be categorized as CEP
for these final results.

Mexinox disagrees with petitioners'claim that AK Steel obliges the
Department to deviate from the determination made in the original
investigation and preliminary results of the instant review that its
direct shipments and SLP stock sales constitute EP sales. According to
Mexinox, petitioners are incorrect in interpreting AK Steel as saying
"'new law'" prevents the Department from making the same finding here.
Respondent's Rebuttal Brief at 3. Therefore, Mexinox argues, petitioners
cannot claim that a change in the law mandates a different finding than in
the original investigation. Further, Mexinox notes, there have not been
any factual changes warranting a departure from that finding.

Mexinox states that in the investigation, the Department performed its
analysis using the prevailing standard at the time of the enactment of the
URAA - the PQ Test. Mexinox holds that Congress specifically endorsed and
retained this approach in the accompanying Statement of Administrative
Action (SAA). Mexinox asserts that while Congress noted that the URAA
changed EP/CEP terminology, Congress also noted "no change is intended in
the circumstances under which export price (formerly 'purchase price')
versus constructed export price (formerly 'exporters sales price') are
used." Respondent's Rebuttal Brief at 2, quoting the SAA at 152-53
(emphasis added by respondents). Therefore, Mexinox argues any sale
considered an EP sale prior to the URAA would have to be considered an EP
sale after its enactment. 

Mexinox asserts petitioners incorrectly interpret AK Steel as saying the
change in law regarding EP/CEP classification requires that Mexinox's
sales now be categorized as CEP sales. Mexinox affirms that this approach
was rejected by the SAA, which is binding on the Department and courts
with respect to interpretation and application of the URAA. Mexinox argues
that in making an EP classification, the statute only requires the
Department to consider whether a sale: (1) is transacted outside the
United States and (2) is made by the foreign producer. Maintaining that
the Department has taken both issues into account, Mexinox cites S4 from
Mexico Final Determination at 30807, in which the Department stated that
"verification uncovered no evidence that conflicts with Mexinox's claim
that the sales were made in Mexico, and petitioners have cited to none"
(emphasis added by respondent). Although the Department acknowledged
Mexinox USA played a role in facilitating the transaction, Mexinox holds,
the sale itself occurred outside the United States between Mexinox and the
unaffiliated purchaser. Since the Department made an analogous finding in
the preliminary results and no factual changes have been alleged by
petitioners, Mexinox argues it is not necessary to reevaluate the EP
classification of these sales. Therefore, Mexinox urges the Department to
maintain its classification of Mexinox's direct shipments and SLP stock
sales as EP sales.

Department's Position: We agree with petitioners. As petitioners have
noted, the facts of this case establish that Mexinox's "direct shipments"
and "SLP stock sales" were sold in the United States within the meaning of
AK Steel. Mexinox USA acted as the importer of record, collected purchase
orders, invoiced the customer and collected payment. Following the
criteria set forth in AK Steel, this constitutes a "sale" between Mexinox
USA and its U.S. customer. In AK Steel the Federal Circuit noted:

CEP is the 'price at which the subject merchandise is first sold in the
United States.' ...In contrast, EP is defined as the price at which the
merchandise is first sold 'outside the United States.'....Thus, the
location of the sale appears to be critical to the distinction between the
two categories.

See AK Steel at 1369. (Original emphasis).

The Federal Circuit in AK Steel rejected the "functional approach"
articulated by the PQ test because Congress mandates a strict "structural"
approach based upon whether the transaction occurred in the United States.
Thus, in determining whether transactions are CEP or EP sales, we no
longer consider "function-driven" factors such as whether the merchandise
was shipped directly by Mexinox to the U.S. customer, or whether Mexinox
or Mexinox USA conducted sales negotiations with the customer. Because the
transaction between Mexinox USA and the U.S. customer occurred within the
United States, it qualifies as a CEP sale under the "structural" approach
mandated by AK Steel. As noted by the Federal Circuit:

  Congress chose clear and unambiguous words such as 'affiliated,' 'sold,'
  and 'in' or 'outside' the United States. In no sense did it leave the
  distinguishing factor to the agency to identify. When...the sales at
issue
  took place in the United States between two entities with United States
  addresses, one of which was an affiliate of the producer/exporter, it is
  contrary to the plain meaning of the statute for Commerce to nevertheless
  use the PQ Test to define the sales as effectively occurring outside of
  the United States, and thus EP sales rather than CEP sales.

Id. at 1371. 

Moreover, Mexinox's assertion that Congress "endorsed" the PQ test
through adoption of the SAA is contrary to the result in AK Steel. The
Federal Circuit held that the PQ test "is hardly consistent with the pre-
1994 statute" and that the "distinction based upon location of the sale
was already present, although less complete, in the prior version of the
statute." Id. at 1373. Based upon the foregoing, we conclude the PQ test
was not codified by Congress, and that AK Steel precludes consideration of
the functional factors set forth in the PQ test. We further conclude
Mexinox's U.S. transactions are properly CEP transactions, because Mexinox
sold the merchandise to its U.S. customer within the United States.
Therefore, we have revised our final calculations accordingly.

Comment 13: Constructed Export Price Offset

Petitioners state the Department preliminarily determined that Mexinox's
two reported home market channels of distribution constituted a single
LOT, and that Mexinox's EP sales were made at the same LOT as the home
market LOT. Petitioners also state the Department found that Mexinox's
reported CEP sales (as adjusted) consisted of fewer selling activities
than its home market sales and were made at a less advanced LOT, and
therefore granted a CEP offset in accordance with section 772(d)(1)(D) of
the Tariff Act. Petitioners contend, however, that the record demonstrates
a single LOT exists in both the home and U.S. markets, and that the home
market and U.S. LOTs are comparable. Thus, petitioners argue that neither
a LOT adjustment nor CEP offset should be made to NV for these final
results.

Petitioners note Mexinox has identified a total of 16 distinct selling
activities it performs in selling stainless steel sheet and strip in
coils. However, according to petitioners, the process of selling subject
merchandise is actually simple and routine, since this merchandise has a
uniform set of physical characteristics and a well-defined market and
customer base. Referring to the selling activities listed in Attachment A-
34 of Mexinox's April 16, 2001 supplemental questionnaire response,
petitioners maintain "pre-sale technical assistance," "sample analysis,"
"prototypes and trial lots," and "continuous technical service" all
constitute one selling activity: technical assistance. Citing "Issues and
Decision Memorandum for the Final Results in the Antidumping Duty
Administrative Review of Grain-Oriented Electrical Steel from Italy"
(March 6, 2001), petitioners contend "further processing," "low volume
orders," and "shipment of small packages" are not really selling
functions. Referring to that same memorandum, petitioners also argue
"price negotiation/customer communication," "processing of customer
orders," and "credit and collection" are merely subparts of the overall
sales process, as are "sales calls and visits" and "international travel."
Finally, petitioners assert "currency risks" constitute a business risk,
not a selling activity. Thus, petitioners claim, Mexinox's list of 16
selling activities can be reduced to four: "technical assistance,"
"inventory maintenance and just-in-time deliveries," "freight and delivery
arrangement," and "warranty services."

As discussed in comment 12, petitioners assert Mexinox plays a similar
role in all U.S. sales, and for that reason should determine a single LOT
exists in the U.S. market. For instance, petitioners argue, Mexinox
processes orders, reviews and approves prices, arranges freight from
Mexico to the United States, and provides warranties for both Mexinox USA
and the unaffiliated U.S. customer. As in S4 from Italy Preliminary
Results, petitioners contend, the differences in the selling functions
performed by Mexinox (the foreign producer) in each of its reported U.S.
channels of distribution are minor. Also, as discussed in comment 12,
petitioners assert the number of days the merchandise remains in Mexinox
USA's possession cannot be used as a benchmark for finding different LOTs
in the United States.

With respect to Mexinox's claim that its two home market channels of
distribution (i.e., sales to retailers and end-users) constituted a single
LOT, petitioners argue it is hard to understand this claim, since Mexinox
reported that home market sales to end-users required a higher level of
service for several of the 16 selling functions. Petitioners aver that
even when these 16 selling activities are reduced to four, Mexinox's home
market sales to end-users require a greater degree of technical assistance
and warranty service for both direct shipments and sales through
inventory, and a greater degree of inventory maintenance for direct
shipments. However, petitioners state, at the end of the day they do not
question the conclusion that only one LOT exists in the home market. 

Petitioners note that in the preliminary results, the Department
determined Mexinox's claimed EP sales were made at the same LOT as its
home market sales, and that Mexinox's selling activities chart in
Attachment A-34 of its April 16, 2001 supplemental questionnaire response
supported this conclusion. Petitioners argue that since all of Mexinox's
U.S. sales should be classified as CEP sales, all of the selling
activities listed for all three U.S. channels of distribution can only be
viewed as selling activities conducted by Mexinox in connection with CEP
sales. Petitioners note Mexinox deems its U.S. sales activities to be less
intensive since many of Mexinox's U.S. sales are made to service centers
(who perform many of the selling functions themselves). Despite this,
petitioners claim, the Department preliminarily determined "that the
somewhat lower levels of selling activities claimed by Mexinox on its
purported EP sales (U.S. channels 1 and 2) are sufficiently comparable to
those reported for the home market that it is appropriate to find that
there is no difference in LOT." Petitioners' Case Brief at 14. Further,
petitioners contend, since Mexinox has claimed more intensive selling
activities for its reported CEP sales, "the Department can only conclude
that there is a single LOT in the U.S. market, and that LOT is no less
advanced than the home market LOT." Id.

Petitioners maintain that Mexinox's home market sales cannot be
considered more advanced than its purported CEP transactions if all of
Mexinox's U.S. sales are considered to constitute a single LOT.
Petitioners argue that "[v]irtually every selling activity that Mexinox
claims to perform in the home market is also performed in the U.S. market -
if not in connection with Mexinox's CEP sales to Mexinox [USA], then with
respect to its 'direct shipments' and 'SLP stock sales' (which are also
properly classified as CEP)." Id. Citing section 773(a)(7)(B) of the
Tariff Act, petitioners note the CEP offset may only be granted when the
NV LOT is found to constitute a more advanced stage of distribution than
the CEP LOT. In conclusion, petitioners assert, the Department should
determine there is a single LOT in both the U.S. and home markets, that
the home market and U.S. LOTs are equivalent, and that the home market LOT
is not more advanced than the U.S. LOT, and therefore should not allow a
CEP offset.

Mexinox states that in the preliminary results and original
investigation, the Department found Mexinox's CEP LOT to be substantially
different from its home market LOT, and at a less advanced stage in
marketing. On this basis, Mexinox asserts, the Department preliminarily
granted a CEP offset. For the reasons discussed below, Mexinox urges the
Department to reject petitioners' argument that the record does not
support granting a CEP offset, and urges the Department to continue
granting a CEP offset for these final results. 

Mexinox contends it performs each selling activity listed in its section
A questionnaire response. Not only has the Department verified this,
Mexinox claims, but the Department also has deemed these activities to be
relevant to the LOT analysis both in the original investigation and in
earlier cases involving the same selling activities. Respondent's Rebuttal
Brief at 6. According to Mexinox, petitioners claim that "low volume
orders," "shipment of small packages," and "further processing" should not
be considered in the LOT analysis because these simply relate to
differences in quantities sold and product operations. However, Mexinox
argues, in the original investigation the Department determined that
filling low volume orders and shipping small packages was a strong
indication of an advanced stage of marketing. Furthermore, Mexinox
asserts, even petitioners listed "low volume orders" as a selling activity
during the original investigation. With respect to "further processing,"
Mexinox cites Cold-Rolled Carbon Steel Flat Products from the Netherlands:
Final Results of Antidumping Duty Administrative Review, 63 FR 13204
(March 18, 1998) (Cold-Rolled Carbon Steel from the Netherlands). In that
case, Mexinox contends, the Department recognized the respondent provided
little technical assistance to its service center customer because the
service center provided further processing services to its downstream
customers, thereby illustrating that the respondent's sales to the service
center were at a less advanced LOT than its sales to end-users.
Respondent's Rebuttal Brief at 6, citing Cold-Rolled Carbon Steel from the
Netherlands at 13205-07. Mexinox argues that despite designating "currency
risks"as a business risk in their case brief, petitioners listed "currency
risks" as a selling activity during the original investigation. Mexinox
argues that in the final determination the Department found it relevant to
the LOT analysis that Mexinox had incurred currency risks in the home
market. Therefore, Mexinox states, the Department correctly considered
each of these activities in its LOT analysis for the preliminary results. 

With respect to petitioners' suggestion that Mexinox's reported selling
activities be collapsed into four categories, Mexinox claims petitioners'
list has shrunk from seven categories in the original investigation, even
though there have been no factual changes in the selling activities
performed. Citing the S4 from Mexico Final Determination at 30810, Mexinox
argues that even if the Department had accepted petitioners' arguments, it
still would have found both an EP LOT equivalent to the home market LOT
and the CEP LOT less advanced than the home market LOT. 

Mexinox also asserts that the record shows it has satisfied the three
conditions that must be met in order to receive a CEP offset: (1) the home
market and CEP LOT must be different; (2) the home market LOT must be more
advanced than the CEP LOT; and (3) the Department must be unable to make a
LOT adjustment (e.g., because there is only one LOT in the home market).
Mexinox notes that in the original investigation and preliminary results,
Mexinox's sales to retailers and its sales to end-users constituted a
single LOT in the home market. Mexinox states that even though petitioners
appear to be confused by this finding, they do concede there is only one
LOT in the home market. Having met the third condition, Mexinox asserts
the Department has only to consider whether the home market LOT is more
advanced, and involves more extensive selling functions, than the CEP LOT.

Mexinox quotes the Preliminary Results at 41527, in which the Department
stated that, "[i]n the home market, Mexinox provides marketing further
down the chain of distribution by providing certain downstream selling
functions that are normally performed by service centers in the U.S.
market (e.g., technical advice, credit and collection, etc.)." Mexinox
notes this is the same conclusion made by the Department in the original
investigation. Mexinox contends its home market sales are made at a stage
near the end of the chain of distribution. For sales made to both
retailers and end-users, Mexinox states, it provides a wide range of
selling functions including further processing of coils, technical advice,
and credit and collection. On the other hand, Mexinox argues, sales at the
CEP LOT occur at the top of the distribution chain. Mexinox recounts that
in the U.S. market, the distribution chain generally flows from Mexinox,
to Mexinox USA, to a large service center, and finally to an end-user or
smaller retailer or distributor. Mexinox claims that in the U.S. market,
large service centers perform most of the functions that Mexinox itself
performs in the home market. Mexinox argues the transaction from Mexinox
to Mexinox USA consists of very little selling activity because it
transpires prior to distribution to the service center. Referring to the
original investigation and its section A questionnaire response in the
current review, Mexinox contends that the transaction between Mexinox and
Mexinox USA is simply a logistical transfer of merchandise involving basic
selling activities such as trucking and basic order processing. 

Citing business proprietary information, Mexinox argues that a
fundamental difference between the home market and CEP LOTs is the
difference in the size of the coils typically sold in each market. As
shown on the record, Mexinox asserts, it tends to sell in smaller volumes
in the home market. Mexinox contends that certain of its U.S. customers
generally purchase large master coils (coils with individual weights of
8,000 lbs. or above) in standard width ranges (36 or 48 inches) that are
further processed to meet downstream customers' needs. As noted in the
original investigation, Mexinox argues "the much smaller coil sizes and
transaction volumes that predominate in the home market have a significant
and profound effect on Mexinox's per unit selling expenses associated with
home market sales and LOT." Respondent's Rebuttal Brief at 12. Mexinox
then cites the S4 from Mexico Final Determination at 30810, in which the
Department stated:

  because of the smaller lots sold in the home market, we find that the
  home market order processing, price negotiation, and payment collection
  activities would be more expensive on a per-unit basis than for CEP sales
  between Mexinox and Mexinox USA, and thus reflects a less advanced stage
  of marketing. 

Based on the foregoing, Mexinox asserts the record fully demonstrates the
CEP LOT is less advanced than the home market LOT. Since the Department
made the same conclusion in the original investigation and no material
factual changes have occurred, Mexinox maintains, a different conclusion
is not justified here. 

Mexinox also claims that there are dramatic differences between the
selling activities carried out by Mexinox in the home market and CEP LOTs.
Mexinox holds that in the CEP LOT, many of the selling activities related
to U.S. sales, such as internal freight and brokerage arrangements,
customer sales calls, continuous technical advice, invoicing and
collection are performed by Mexinox USA in the United States. As shown in
its section A questionnaire response, Mexinox argues, Mexinox performs few
selling activities related to these sales. Specifically, Mexinox states,
Mexinox does not provide pre-sale technical service, sample analysis,
prototypes or trial lots, continuous technical service, inventory
maintenance or just-in-time delivery, warranty services, or further
processing. Also, Mexinox states, it does not engage in price negotiations
with Mexinox USA, make sales calls, engage in international travel, or
bear currency risks, and rarely does it fill low volume orders or ship
small packages. Thus, Mexinox affirms the only selling activities
consistently undertaken by Mexinox in the CEP LOT are freight and basic
order processing services (such as price approval) required to provide
merchandise to Mexinox USA. Mexinox contrasts this with the home market,
arguing that it engages in every selling activity in the home market LOT.
Mexinox argues those selling activities not performed with respect to the
CEP LOT are performed at a high or medium level of intensity in the home
market; those carried out in both LOTs are assumed at more intense levels
in the home market.

Mexinox states petitioners do not seem to challenge the Department's
determination that the CEP LOT is less advanced and involves less
intensive selling functions than the home market LOT. Instead, Mexinox
holds, petitioners argue that if Mexinox's EP sales are reclassified as
CEP sales, then "'all of the selling activities listed for direct
shipments, SLP stock sales, and sales through inventory {would have to} be
seen as selling activities conducted by Mexinox in connection with U.S.
CEP sales.'" Respondent's Rebuttal Brief at 14, quoting Petitioners' Case
Brief at 13-14. According to Mexinox, petitioners further argue that if
all the selling functions are considered together, then nearly every
selling activity performed in the home market would also be found in the
U.S. market. In response, Mexinox asserts petitioners' argument assumes
that Mexinox's EP sales are properly categorized as CEP sales, which is
not the case. Mexinox also asserts that petitioners' argument rests on the
completely false premise that if its EP sales were reclassified as CEP
sales, then all of the selling functions related to the former EP sales
would be relevant in evaluating the LOT for the CEP sales. Respondent's
Rebuttal Brief at 14-15. Mexinox contends the statute, the SAA, the
Department's regulations and preamble, and agency practice, as upheld by
the CIT and the Federal Circuit, corroborate that this methodology is not
correct. Id. at 15. Referring to the statute at sections 772(b) and
773(a)(1)(B)(i), as well as section 351.412(c)(1)(ii) of the Department's
regulations, Mexinox asserts "it is a settled principle that the analysis
of the LOT for CEP sales must be conducted at the 'constructed level'
after all expenses and selling activities associated with economic
activities occurring in the United States are deducted." Respondent's Case
Brief at 15. Therefore, Mexinox argues, even if EP sales are recategorized
as CEP sales, only the transaction between Mexinox and Mexinox USA and the
selling activities performed in Mexico by Mexinox are properly considered
for CEP offset purposes. In other words, Mexinox claims, all of the
selling activities performed by Mexinox USA in the United States must be
excluded from the LOT analysis.

Mexinox argues that when its direct shipment and SLP stock sales are
adjusted to the "constructed" level, they cannot be distinguished from its
CEP sales. In both cases, Mexinox declares, the sale occurs at the
beginning of the distribution chain at a stage at which mainly master
coils are sold. Maintaining the Department has acknowledged such large
coil, high volume sales result in lower per-unit order processing, price
negotiation, and payment collection costs, Mexinox claims this reflects a
less advanced stage of marketing than in the home market where smaller
volumes are typically sold. Respondent's Rebuttal Brief at 16, citing S4
from Mexico Final Determination at 30810. Further, Mexinox contends, in
both cases Mexinox only performs minimal selling activities such as
arranging trucking across the border and order processing. Mexinox argues
that since these functions are performed with respect to an affiliated
party, they are more routine and less intensive than if they had been
carried out on behalf of Mexinox's unaffiliated customers. Mexinox claims
this establishes evidence that the CEP LOT is less advanced than the home
market LOT. In fact, Mexinox holds that, when its direct shipment and SLP
stock sales are adjusted to the "constructed" level, the only difference
among the three U.S. channels of distribution is that for SLP stock sales,
Mexinox negotiates the final terms of sale whereas for direct shipments
and sales through inventory Mexinox only has final price approval.
Respondent's Rebuttal Brief at 16. Nonetheless, Mexinox argues,
"'substantially all price negotiations with the U.S. customer are
conducted by representatives of Mexinox USA...;'" therefore, they must be
excluded from the LOT analysis pursuant to the statute and Department's
regulations. Id., quoting Petitioners' Case Brief at 5. 

Mexinox argues the rest of the selling activities listed in its section A
questionnaire response with respect to EP sales (i.e., internal freight
and brokerage arrangements, sales calls, continuous technical service,
external invoicing, and payment collection) are conducted by Mexinox USA.
Citing the S4 from Mexico Final Determination at 30805, Mexinox contends
petitioners have noted Mexinox USA's "extensive involvement in the selling
process." In keeping with section 351.412(c)(1)(ii) of the Department's
regulations, Mexinox argues, these selling activities must also be
excluded from the LOT analysis. Mexinox claims the basic selling functions
remaining at this juncture are no more extensive than those in the CEP
LOT. Asserting that the Department found the CEP LOT to be different from
and less advanced than the home market LOT in the original investigation
and preliminary results, Mexinox argues that if the Department
reclassifies direct shipments and SLP stock sales as CEP sales, it should
make the same determination with respect to these sales. 

In conclusion, Mexinox holds that because there is only one home market
LOT, and that LOT is more advanced and involves more selling functions
than the CEP LOT, the Department should continue to grant a CEP offset to
those sales classified as CEP sales.

Department's Position: As noted in comment 12, we agree with petitioners
that AK Steel establishes that Mexinox's U.S. transactions are properly
considered CEP transactions. Having reclassified Mexinox's sales, we agree
with Mexinox that a CEP offset is warranted in this case. As Mexinox
notes, to the extent practicable, we determine NV based on sales in the
comparison market at the same LOT as the EP or CEP transaction pursuant to
section 773(a)(1)(B)(i) of the Tariff Act. The NV LOT is that of the
starting price sales in the comparison market or, when NV is based on CV,
that of the sales from which we derive selling, general and administrative
(SG&A) expenses and profit. For CEP, it is the level of the constructed
sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than CEP, we examine
stages in the marketing process and selling functions along the chain of
distribution between the producer and the unaffiliated customer. If the
comparison market sales are at a different LOT, and the difference affects
price comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison market
sales at the LOT of the export transaction, we make a LOT adjustment under
section 773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV
level is more remote from the factory than the CEP level and there is no
basis for determining whether the differences in the levels between NV and
CEP affect price comparability, we adjust NV under section 773(A)(7)(B) of
the Tariff Act. See, e.g., Certain Carbon Steel Plate from South Africa,
Final Determination of Sales at Less Than Fair Value, 62 FR 61731
(November 19, 1997).

Differences in selling functions exist between sales in the home market
and the sale from Mexinox to Mexinox USA. See, e.g., Attachment A-34 of
Mexinox's April 16, 2001 supplemental questionnaire response. In the home
market, Mexinox provides more intensive selling services than are provided
in the sale from Mexinox to Mexinox USA. Specifically, Mexinox provided a
greater degree of freight and delivery arrangements, order processing,
customer sales contacts, price negotiations, credit and collection
services, inventory maintenance, technical services, and warranty services
on home market sales than on sales made to the CEP LOT. Id. The
differences in selling functions performed by Mexinox for home market and
CEP transactions indicate home market sales involved a more advanced stage
of distribution than CEP sales since Mexinox provided a greater degree of
services on its home market sales then it did on its CEP sales. 

Because we compared these CEP sales to HM sales at a different LOT, we
examined whether a LOT adjustment may be appropriate. As noted in the
Preliminary Results at 41527, Mexinox sold at one LOT in the home market;
therefore, there is no demonstrated pattern of consistent price
differences between LOTs. Further, we do not have the information which
would allow us to examine pricing patterns of Mexinox's sales of other
similar products, and there is no other record evidence on which such an
analysis could be based.

Because the data available do not provide an appropriate basis for making
a LOT adjustment and the LOT in Mexico for Mexinox is at a more advanced
stage than the LOT of its CEP sales, a CEP offset is appropriate in
accordance with section 773(a)(7)(B) of the Tariff Act. In accordance with
section 773(a)(7)(B), we based the CEP offset amount on the amount of home
market indirect selling expenses, and limited the deduction for home
market indirect selling expenses to the amount of indirect selling
expenses deducted from CEP.

Margin Calculations

Comment 14: Zeroing Negative Dumping Margins

Mexinox states that in the preliminary results of this review, the
Department calculated the overall dumping margin by assigning a zero-
percent dumping margin to U.S. sales made at or above the prices charged
in the home market. Mexinox argues this practice, which is referred to as
"zeroing," is unlawful under both U.S. and international law and should
not be adhered to for the final results. Respondent's Case Brief at 20.

Mexinox states the WTO Appellate Body ruled in European Communities -
Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India,
WT/DS141/AB/R (March 1, 2001) (Bed Linen from India) that the practice of
zeroing violates the terms of the WTO Antidumping Agreement.  By zeroing,
Mexinox claims, the administering agency arbitrarily presumes "'the
weighted-average export price to be equal to the weighted average normal
value . . . despite the fact that it [is], in reality, higher than the
weighted average normal value.'"  Respondent's Case Brief at 20-21,
quoting Bed Linen from India at 55. Mexinox asserts the Appellate Body
correctly determined that zeroing also violates the "fair comparison"
requirements of Article 2.4. and 2.42 of the Antidumping Agreement in part
by not fully considering "all comparable export transactions" as specified
therein. Id.

Citing AFBs 2001, Mexinox acknowledges that the Department has noted in
recent cases that Bed Linen from India is not technically binding on the
United States since the United States was not a party to that particular
dispute resolution proceeding. Mexinox contends this argument is based
purely on procedural technicalities and does not address "the underlying
substantive issue of whether the practice of zeroing negative margins does
or does not violate the Antidumping Agreement." Respondent's Case Brief at
21. Mexinox states this argument puts forth the position that the
Department should not address this issue until forced to do so through WTO
litigation.

On the contrary, Mexinox maintains, there is nothing in the Bed Linen
from India ruling that does not make it equally applicable to, and
therefore prohibitive of, the Department's practice. Id. In that decision
the Appellate Body interpreted Article 2.4 and 2.4.2 of the Antidumping
Agreement as outright prohibiting an investigating agency from zeroing
negative margins in the calculation of overall dumping margins. With
respect to Bed Linen from India, Mexinox holds there was nothing in the
facts of that case, the legal regimes, or the practice at issue that sets
them apart from those applied by the Department in the preliminary results
of this case. In both cases, Mexinox claims, the investigating agency
computed overall margins by assigning a value of zero to negative margins,
hence violating Articles 2.4 and 2.4.2. Id. at 21-22.

Mexinox argues Bed Linen from India cannot be distinguished from the
instant review based on the fact that the former involved an investigation
while this case concerns an administrative review. Rather, Mexinox claims,
the WTO Antidumping Agreement clearly states the calculation methodologies
specified in Article 2.4 and 2.4.2 also pertain to antidumping reviews,
citing the WTO Antidumping Agreement at Article 9.3. Thus, Mexinox
contends, if zeroing is unlawful under Article 2.4 and 2.4.2 in the
investigation phase, it is also unlawful in the review phase.

Although the Bed Linen from India ruling is a WTO panel decision, Mexinox
argues, it is no less binding on the Department. Mexinox contends that in
keeping with federal statutory interpretation, "absent express
Congressional language to the contrary, statutes must not be interpreted
to conflict with international obligations."  Mexinox Case Brief at 22,
quoting Federal Mogul Corporation v. United States, 63 F. 3d 1572, 1581
(Fed. Cir. 1995) (Federal Mogul v. United States) (citing Alexander Murray
v. Schooner Charming Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804)). As the
Federal Circuit upheld in Federal Mogul v. United States, Mexinox avers,
the various GATT (now WTO) agreements qualify as such "international
obligations." Mexinox claims this is more true now than under the GATT
regimes because the URAA specifically endorsed the WTO Antidumping
Agreement and sought to implement its terms. Thus, Mexinox states,
Congress intended that the WTO Antidumping Agreement be applied to the
extent it was not contrary to existing legislation. 

Mexinox maintains the Department cannot point to any provision of U.S.
law that mandates the Department to assign a value of zero to negative
dumping margins, and states the Department's methodology with respect to
zeroing was developed solely through administrative practice. Mexinox
notes that in the few instances in which the CIT has upheld the practice
of zeroing, it did so solely on the grounds that the Department's approach
was a reasonable or allowable interpretation of U.S. law in the
circumstances of the particular case, referring to Bowe Passat Reinigungs-
Und Waschereitechnik GmbH v. United States, 926 F. Supp. 1138 (CIT 1996)
and Serampore Industries PVT. Ltd. v. United States, 675 F. Supp. 1354
(CIT 1987). In order to avoid a conflict with international obligations,
Mexinox asserts, the Department may not replace negative dumping margins
with zero margins in this or any review. Therefore, for these final
results, Mexinox urges the Department to include negative margins in its
calculation of the overall dumping margin.

Petitioners respond that Mexinox's argument is without merit, asserting
it is well-established that the U.S. antidumping statute governs the
Department's determinations in antidumping proceedings. Petitioners'
Rebuttal Brief at 9-10. Referring to Federal-Mogul Corp. v. United States,
63 F.3d 1572, 1581 (Fed. Cir. 1995) (in which the Federal Circuit cited
Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660,
668 (Fed. Cir. 1992)), petitioners contend that when there is a conflict
between a GATT or WTO obligation and the Tariff Act, the Tariff Act must
prevail. Petitioners hold that this principle is codified in Section 102
of the URAA, which states in part that "[n]o provision of ... the URAA,
nor the application of any such provision to any person or circumstance,
that is inconsistent with any law of the United States shall have effect."
Therefore, petitioners assert, the Department's primary duty is to enforce
the U.S. antidumping statute, not the provisions of the WTO Antidumping
Agreement.

Petitioners state the Department has determined the WTO's ruling in Bed
Linen from India did not pertain to U.S. proceedings, citing Notice of
Final Determination of Sales at Less Than Fair Value: Steel Wire Rope from
India and the People's Republic of China, 66 FR 12759 (February 28, 2001)
and the accompanying Decision Memorandum for India at Comment 8 and
Tapered Roller Bearings from Japan and the accompanying Decision
Memorandum at Issue 9, Comment 1. Petitioners aver that the Department
recently reaffirmed its position after the Appellate Body issued its
decision, referring to Certain Preserved Mushrooms from India: Final
Results of Administrative Review, 66 FR 42507 (August 13, 2001) (Mushrooms
from India) and the accompanying Decision Memorandum at Comment 16.

Contrary to Mexinox's contention, petitioners argue, the Bed Linen from
India decision is irrelevant because it involved the calculation of
dumping margins in the context of an original investigation, not an
administrative review. Petitioners note that while there is considerable
variation in the methodologies used by WTO members to assess duties, the
U.S. practice is to review individual sales already made and determine
whether or not they were made at prices below NV. Petitioners contend that
Article 9.3 of the Antidumping Agreement "cannot reasonably be construed
as proscribing the final assessment in an administrative review of an
antidumping duty on an entry that is exactly equal to the actual
calculated margin of dumping." Petitioners' Rebuttal Brief at 11. 

Petitioners assert that "zeroing" negative margins is an important manner
in which to discourage "targeted dumping." Petitioners state that a
seller's pricing behavior often reflects the specific competitive
conditions faced with respect to individual customers, regions, or time
periods. Petitioners hold that if an exporter dumps only half of its sales
(e.g., in a particular region), the exporter would still be dumping.
According to petitioners, such pricing practices should not be excused
simply because competitive conditions in some regions allow the exporter
to charge prices that are higher than NV in other regions. Thus, it is
logical that the assessment calculation should assign a value of zero to
U.S. sales made at or above NV, not a negative dumping margin. Therefore,
petitioners argue the Department should not abandon its practice of
zeroing negative margins. 

Department's Position: We disagree with Mexinox. As we have discussed in
prior cases, our methodology is consistent with our statutory obligations
under the Tariff Act. See, e.g., Notice of Final Determination of Sales at
Less Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products From
The Netherlands, 66 FR 50408 (October 3, 2001), and accompanying Issues
and Decision Memorandum, at Comment 1. First, sales that did not fall
below normal value are included in the weighted-average margin calculation
as sales with no dumping margin. The value of such sales is included in
the denominator of the weighted-average margin along with the value of
dumped sales. We do not, however, allow sales that did not fall below
normal value to cancel out dumping found on other sales. 

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

This is, furthermore, a reasonable means of establishing duty deposits in
investigations, and assessing duties in reviews. In an administrative
review, the deposit rate calculated must reflect the fact that the Customs
Service is not in a position to know which entries of merchandise entered
after the close of the present review period are dumped and which are not.
By spreading the estimated liability for dumped sales across all reviewed
sales, the weighted-average dumping margin allows the Customs Service to
apply this rate to all merchandise entered after the close of the review
period. 

Finally, the Bed Linen from India Panel and Appellate Body decisions
concerned a dispute between the European Union and India. We have no WTO
obligation to act based on these decisions. See also Mushrooms from India
and the accompanying Decision Memorandum at Comment 16.

Assessment Rates

Comment 15: Assessment Rate Methodology

Mexinox states that for the preliminary results, the Department
calculated the assessment rate based on the ratio of the total amount of
antidumping duties due on POR sales to the total entered value of those
sales. Mexinox asserts, however, that the assessment rate could be
computed more accurately by dividing the dumping duties due by the entered
value of all suspended POR entries. Under this methodology, Mexinox
argues, the Department would collect the exact amount of dumping duties
determined to be due for this review period and would avoid assessing
dumping duties on entries of non-subject merchandise. Mexinox claims this
assessment methodology is easy to implement and is in keeping with the
statute and the Department's practice.

Mexinox notes the amount of antidumping duties due is equal to the total
"potentially uncollected dumping duties" or "TOTPUDD" calculated for in-
scope sales made during the POR. Mexinox holds the assessment rate
calculated for the preliminary results does not collect the exact amount
of duties due since the total entered value of POR entries, to which this
rate is applied, is different from (and greater than) the entered value of
the sales used to compute the amount due. Mexinox illustrates this concept
using business proprietary figures calculated in the preliminary results,
and states this problem can be solved by using the total entered value of
the POR entries as the denominator of the assessment rate. Mexinox claims
equivalence between the assessment rate denominator and the basis for
assessment guarantees that the exact amount of antidumping duties
calculated for this review is collected.

Referring to its illustration, Mexinox maintains the difference in the
assessment denominators is due mainly to timing differences that occur
between the entry and subsequent sale of subject merchandise. Mexinox
argues that for purposes of completeness, it included in its U.S. sales
listing all POR sales of in-scope merchandise under any possible
definition of date of sale (i.e., invoice date, shipment date, or order
date).  Mexinox holds, therefore, that its sales listing includes some
subject merchandise that was entered during the POR and invoiced after the
POR. Since this material was invoiced after the POR, Mexinox asserts, this
material (as well as other material entered during the POR and invoiced
after the POR) will be included in its sales listing for the second
review, at which time the Department will calculate the dumping margin and
amount due on this merchandise. Respondent's Case Brief at 13. 

Mexinox contends the difference in assessment denominators is also due to
the suspension of liquidation of non-subject merchandise. As verified by
the Department, Mexinox argues, two categories of non-subject merchandise
are included among the suspended POR entries: (1) material that was
physically outside the scope of the order (e.g., circles) but was
inadvertently suspended along with imports of subject merchandise; and (2)
material that was physically in-scope when imported but was first sold to
an unaffiliated party (after importation) outside the United States. Id.
Although duties should not be assessed on either category, Mexinox asserts
that because these non-subject entries have been suspended together with
other subject entries, "applying the assessment rate to these entries will
inadvertently result in a collection of dumping duties from them."
Respondent's Case Brief at 13. With respect to merchandise in the second
category, Mexinox argues, the Department's current assessment methodology
is particularly problematic since it often cannot be ascertained until a
later review period whether the material was first sold to a U.S. customer
or to a third country. Mexinox claims its proposed methodology avoids this
problem because it postpones the collection of antidumping duties until
the material has been sold and there is evidence to determine: (a) whether
the entry resulted in a sale subject to review; and (b) the exact amount
of the dumping margin on sales of subject merchandise. On the contrary,
Mexinox holds, the Department's methodology "simply assumes, without
evidence, that this material is subject merchandise and also estimates
(rather than calculates) that the dumping margin that might be incurred on
those transactions is equal to the average amount incurred on sales in a
prior review period." Respondent's Case Brief at 14 (emphasis in
original). 

While the Department may be permitted to make assumptions and estimations
in cases where it is not possible to do otherwise, Mexinox argues, it is
unreasonable for the Department to do so where there exists an alternative
methodology to avoid collecting dumping duties on non-subject material and
to collect the exact amount of duties due. Id. Mexinox asserts the
Department should employ its proposed methodology, which is consistent
with the statute and the Department's practice, to avoid an over-
collection of duties in this case. Mexinox states that at one point the
Department contemplated codifying this methodology in its regulations,
citing Antidumping Duties, 56 FR 63696 (December 5, 1991) (Proposed
Rulemaking). Mexinox notes that the Department referred to this
methodology as "Option 1" and quotes the Proposed Rulemaking at 63698,
which stated: 

  When entry data are available, the Department can derive a percentage
  margin by dividing the calculated dumping duties due (based on sales) by
  the number of units entered and then apply the per-unit margin against
all
  units entered during the review period. Or, the Department can derive a
  percentage margin by dividing the calculated dumping duties due (based on
  sales) by the entered value of the merchandise entered during the POR and
  then instruct Customs to apply this percentage margin against the entered
  Customs value of merchandise entered during the POR. 

Noting the Department did not codify Option 1 and has not always followed
this methodology in subsequent cases, Mexinox contends it is obvious that
the Department did not do so based on "questions of feasibility and other
case-specific facts that are not present here - i.e., it was either not
practicable to do so because the POR entry information necessary to
calculate the assessment figures was not available or verified, or there
was no evidence that applying the alternative assessment rate calculation
methodology would significantly distort the results." Respondent's Case
Brief at 15 (emphasis in original). Mexinox states the only substantive
objective to Option 1 that it is aware of "relates to the impact of review
periods for which no review is requested and where the entries at issue
are therefore automatically liquidated at the original deposit amounts."
Id. n.14. Mexinox refers to Tapered Roller Bearings, Four Inches or Less
in Diameter, and Components Thereof from Japan; Notice of Final Results
and Partial Termination of Antidumping Duty Administrative Reviews, 59 FR
56035 (November 10, 1994) (Tapered Roller Bearings from Japan 1979-86),
stating the Department considered Option 1 to be a permissible alternative
in that case. Mexinox claims the petitioner in that case advocated Option
1 in order to avert a possible under-collection of dumping duties
resulting from the alleged incorrect liquidation of certain POR entries
prior to the completion of the review. Citing Tapered Roller Bearings from
Japan 1979-86 at 56036-37, Mexinox maintains that although the Department
dismissed the use of Option 1 in that case, it did so only on the grounds
of "feasibility," and not principle or accuracy. According to Mexinox, the
Department did not apply Option 1 in that case due to the respondent's
limitations in reporting data and a lack of evidence that the alternative
methodologies, as applied in that case, would result in distorted
assessments. However, Mexinox holds, the Department clearly noted in that
case that technological advances related to electronic databases might
surmount that lack of feasibility.

Stating the circumstances in the instant review are completely different,
Mexinox contends there is no question that it is technologically possible
to apply Option 1 in this case given Mexinox's electronic reporting
capabilities. Respondent's Case Brief at 17. Mexinox claims the Department
has tested and verified the universe of and the total entered value of
suspended POR entries. In addition, Mexinox argues, the Department has the
discretion to confirm the total entered value of the suspended merchandise
with the U.S. Customs Service. Further, Mexinox asserts, by examining
individual transactions at verification, the Department has confirmed that
Mexinox has the ability to link sales to entries with consistency and to
report that information to the Department. 

Based on the foregoing, Mexinox contends it is reasonable for the
Department to employ the Option 1 assessment methodology in this case
because: (1) it is feasible to do so in this and any subsequent reviews;
(2) it results in the collection of the exact amount of duties owed
without resorting to estimates of dumping margins; and (3) it averts the
inadvertent and unlawful assessment of antidumping duties on merchandise
not subject to review and assessment. Mexinox therefore urges the
Department to recalculate the assessment rate for these final results and
institute a consistent and reliable assessment methodology for all future
entries under this order by using the total entered value of all suspended
POR entries in the denominator of the assessment rate. 

In the event the Department continues to use same assessment rate
methodology as used in the preliminary results, Mexinox requests that the
Department add the entered value of the known entries of non-subject
merchandise to the denominator of the assessment rate. Id. at 18. Mexinox
argues that such an adjustment would be consistent with prior Department
practice, referring to Certain Internal-Combustion Industrial Forklift
Trucks from Japan (need full cite), 62 FR 34216 (June 25, 1997)
(Industrial Forklift Trucks from Japan) and Tapered Roller Bearings and
Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components Thereof,
From Japan; Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Finding, 61 FR 57629 (November 7,
1996). In the former case, Mexinox states, the Department determined it
was necessary to include the entered value of the non-subject leased
trucks in the assessment rate denominator. Respondent's Case Brief at 19,
citing Industrial Forklift Trucks from Japan at 34219. 

With respect to the merchandise that is physically outside the scope of
the order (e.g., circles) that was inadvertently suspended with subject
merchandise, Mexinox argues the entered value of this merchandise is known
precisely. Mexinox also argues that the Department verified the entered
value of this merchandise, referring to Sales Verification Exhibit 29.
With respect to in-scope merchandise that was first sold to customers
outside the United States, Mexinox states that at this time it is not
possible to quantify fully the amount of this merchandise since the
disposition of some of these entries will not be determined until the
merchandise is sold in later review periods. Nonetheless, Mexinox claims,
at least a portion of this category of non-subject merchandise can be
identified from the submitted sales listings as those sales where the
field SUBJECTU equals "N2." Therefore, in order to avoid assessing duties
on these confirmed non-subject entries, Mexinox urges the Department to
include the total entered value of these sales in the assessment rate
denominator.

Petitioners respond that Mexinox's criticisms of the assessment rate
methodology used in the preliminarily results are misplaced. Petitioners
assert the Department has correctly calculated the assessment rate by
dividing the total dumping duties due by the entered value of the sales
examined, and also correctly applied that rate to non-reviewed POR entries
that were destined for resale in third-country markets. With respect to
entries of non-subject merchandise whose liquidation has been suspended,
petitioners claim that Mexinox can protest any assessment of antidumping
duties against those entries; therefore, petitioners state, the Department
does not need to amend the assessment rate to address this issue.

Quoting Gray Portland Cement and Clinker from Mexico; Final Results of
Antidumping Duty Administrative Review, 64 FR 13148 (Mar. 17, 1999),
petitioners argue that it is the Department's normal practice to assess
dumping duties "based on the ratio of the total amount of antidumping
duties calculated for the examined sales to the total entered value of
sales examined." Petitioners state this practice, which is codified in
section 351.212(b)(1) of the Department's regulations, was used by the
Department in the preliminary results and should continue to be used for
the final results. Citing Antidumping Duties; Countervailing Duties;
Proposed Rule: Uruguay Round Agreements Act (URAA); Conformance, 61 Fed.
Reg. 7308, 7317 (Feb. 27, 1996), petitioners note the Department's
intention in implementing this regulation. Also, petitioners note, in
Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed. Reg. 27,296
(May 19, 1997) (citing Torrington Co. v. United States, 44 F.3d 1572, 1578
(Fed. Cir. 1995)) (Torrington), the Department stated:

  [T]hat the amount of duties assessed may differ depending on the method
  used is not necessarily grounds to conclude that the assessment rate
  method is distortive, because neither the Act nor the AD Agreement
  specifies whether sales or entries are to be reviewed, nor do they
specify
  how the Department must calculate the amount of duties to be assessed.

Finally, citing Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Components Thereof, from Japan; Final Results of
Antidumping Duty Administrative Reviews and Termination in Part, 63 Fed.
Reg. 20,585, 20,590 (April 27, 1998) and Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy,
Japan, Romania, Singapore, Sweden and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 62 Fed. Reg. 54,043, 54,045 (Oct.
17, 1997), petitioners contend that the Department's practice with respect
to assessment rates is reflected in numerous administrative determinations
and is well-established. 

Petitioners aver that even Mexinox admits its suggested methodology might
permit entries to avoid assessment entirely if a review were not conducted
when the merchandise eventually was sold. Contrary to Mexinox's argument
that "'this circumstance can only occur if both Petitioners and
respondents allow it to occur,'" petitioners contend that current POR
entries would escape assessment completely under Mexinox's methodology in
certain circumstances, irrespective of petitioners' objections.
Petitioners' Rebuttal Brief at 5, quoting Mexinox's Case Brief at 15 n.
14. For instance, petitioners hold, entries from a particular POR sold
after the revocation of an order would not be included in the assessment
rate calculation. Similarly, petitioners maintain, POR entries sold in a
later review period when no entries were made (thus permitting no review
to be requested) would never be factored into any future assessment
calculation under Mexinox's proposed methodology. Therefore, petitioners
argue the Department should "opt for ensuring that all entries for
consumption are assessed with antidumping duties." Id.

Referring to Mexinox's argument that the Department's methodology results
in inappropriately assessing antidumping duties on non-subject entries,
petitioners assert these purportedly non-subject entries constitute only a
small portion of the entries made during the POR but not examined by the
Department. Petitioners aver the Department should not allow this
considerable volume of POR entries to escape assessment at this point by
accepting Mexinox's alternative assessment methodology. 

Regarding Mexinox's contention that the assessment denominator should
include merchandise that is physically out of scope when imported,
petitioners argue the Department does not need to include the value of
this merchandise in the assessment rate denominator. Petitioners assert
that Mexinox does not explain in its case brief how these out-of-scope
products were "'inadvertently suspended.'" Petitioners' Rebuttal Brief at
6, quoting Respondent's Rebuttal Brief at 13. Petitioners submit that
these entries were "inadvertently suspended" as a result of Mexinox USA or
its broker importing subject and non-subject merchandise under a single
consolidated entry summary, referring to Mexinox's November 20, 2000
questionnaire response at pages C-1 and 2 and Attachment C-2. If so,
petitioners maintain, this problem could have been solved by Mexinox USA
filing separate entries for subject and non-subject merchandise contained
in the same import shipment.

More importantly, petitioners hold, Customs likely will not assess
antidumping duties on these out-of-scope products, and if they do, Mexinox
has a clear remedy. Petitioners state the Department's standard
liquidation instructions to Customs apply, by their precise terms, to the
liquidation of entries of subject merchandise. Petitioners argue that
where suspended entries include both subject and non-subject merchandise,
Customs officials would seem to have the discretion, based on Commerce's
instructions, to apply the assessment rate only to that portion of the
total value of the suspended entry that is attributable to subject
merchandise. Petitioners claim this effectively ensures that out-of-scope
merchandise is not assessed incorrectly with antidumping duties. If that
discretion is not utilized or if Customs improperly applies the assessment
rate to the total value of the consolidated entry, petitioners claim, the
importer can protest that action in keeping with 19 U.S.C. section 1514.
Petitioners state the Department need not assume that Customs will make
this error or will not fix such an error when it is brought to its
attention.

With respect to imported material that was physically within the scope of
the order but was first sold to an unaffiliated party (after importation)
outside the United States, petitioners argue this merchandise is properly
subject to the assessment of antidumping duties. Noting Mexinox's claim
the merchandise in this category cannot be fully quantified at this time,
petitioners contend that Mexinox knows the value of a certain portion of
those entries. Based on information on the record, petitioners argue that
the entries described by Mexinox are consumption entries, not entries
imported under temporary importation bond ("TIB") or another device that
treats the entries as outside U.S. customs territory. Citing Grain-
Oriented Electrical Steel from Italy: Final Results of Antidumping Duty
Administrative Review, 66 FR 14887 (March 14, 2001) (Grain-Oriented
Electrical Steel from Italy) and the accompanying Decision Memorandum at 4-
5, petitioners hold that all entries for consumption of subject
merchandise are subject to antidumping duties. Petitioners contend that if
Mexinox shipped in-scope merchandise to the United States and consumption
entries were filed, the merchandise is legally subject to review and to
the assessment of antidumping duties. Petitioners state that while those
entries may not actually be used to establish the CEP if the first
unaffiliated purchaser is located outside the United States, this does not
signify that the original consumption entries themselves are not subject
to assessment of antidumping duties in keeping with the rate established
in that review. 

Therefore, petitioners assert the Department should not increase the
assessment denominator to account for imported material that was
physically within the scope of the order but was first sold to an
unaffiliated party (after importation) outside the United States. 

Department's Position: We agree with petitioners in part. Section
351.212(b)(1) of our regulations establishes that the Department "normally
will calculate the assessment rate [for each importer] by dividing the
dumping margin found on subject merchandise examined by the entered value
of such merchandise for normal customs duty purposes." Calculating
assessment rates by dividing total dumping duties by the total value of
POR entries would complicate continuity from one review period to another,
would be more burdensome to the Department and the U.S. Customs Service,
and could conceivably preclude the Department from collecting antidumping
duties in future reviews should Mexinox have sales but no entries during a
particular review period. Accordingly, in these final results we have
adhered to our established policy and based assessment on the ratio of
total antidumping duties to the entered value of the entries.

As petitioners observe, the Department noted in its notice of proposed
regulations with respect to implementing section 351.212(b)(1): 

  With respect to the use of duty assessment rates, the Department believes
  that, except in unusual situations, we should assess duties on subject
  merchandise entered during the review period. Therefore, paragraph b(1)
  provides that the Department normally will calculate a duty assessment
  rate based on sales reviewed, and will apply those duties to entries made
  during the review period. In all cases, this will result in assessment of
  duties on merchandise entered during the review period. To the extent
  possible, these assessment rates will be specific to each importer,
  because the amount of duties assessed should correspond to the degree of
  dumping reflected in the price paid by each importer. Where possible, we
  will base assessment rates on the entered value of the sales examined in
  the review...

See Antidumping Duties, Countervailing Duties, Proposed Rule: Uruguay
Round Agreement Act (URAA): Conformance, 61 FR 7308, 7317 (February 27,
1996).

Moreover, we noted in the proposed regulations that:

  The Department believes that except in unusual situations, it should not
  abandon the objective of assessing duties on the basis of entries, even
  when it is possible to precisely link sales to entries. In most
  antidumping proceedings, it is necessary to assess duties on the basis of
  entries in order to maintain continuity with periods of no review and to
  avoid the over- or under-collection of duties. Moreover, because we
  typically cannot link sales to entries, we currently have no means of
  collecting precisely an amount of duties equal to the total absolute
  dumping margins calculated for the sales reviewed. This would require
  exact knowledge, for each importer, as to the total quantity or value of
  unliquidated entries during the review period, information that often is
  difficult or impossible to obtain. 

(Id.) 

In issuing its current assessment regulations the Department was aware of
Mexinox's concern that different assessment rates could result depending
upon whether sales or entries were the basis of assessment. The Department
determined that such differences were not normally a sufficient basis for
abandoning our normal assessment methodology. As petitioners have noted,
and as the Federal Circuit sustained in Torrington, neither the Tariff Act
nor the Antidumping Agreement specify whether the Department is to review
sales or entries or how the Department must calculate the amount of duties
to be assessed.

In addition, use of the methodology set forth by Mexinox could
significantly complicate assessment in future reviews of this case. While
Mexinox contends that it or its importers can furnish the Custom values of
all entries suspended during this review period, it is unclear whether
Mexinox or its importers could provide such information in future
proceedings. Also, in cases where sales were made during a period of
review, but the entries associated with those sales entered during a
subsequent period, the Department would have no basis to assess any
dumping duties under Mexinox's proposed methodology. 

We also disagree with Mexinox's contention that modification of the
assessment rate is necessary to account for imports of out-of-scope
merchandise during the POR. We note that the assessment instructions we
will issue to Customs will pertain to "subject merchandise," that is,
merchandise that is within the scope of the order. Customs thereby will
have the discretion to apply assessment instructions only to the portion
of the entry that pertains to subject merchandise. Should Customs
improperly apply our liquidation instructions to out-of-scope merchandise,
the importer's remedy would be to file a protest pursuant to 19 U.S.C.
1514. 

Finally, we agree with Mexinox's assertion that subject merchandise sold
to unaffiliated parties outside the United States is not subject to
antidumping duties. See The Torrington Company v. United States, 82 F.3d
1039 (Fed. Cir. 1996) (where there is no U.S. price for an entry which is
subsequently re-exported, Commerce's decision not to impose antidumping
duties on the entry is consistent with the basic purpose of the
antidumping laws). For assessment purposes, we agree with Mexinox's
suggestion that we should include the entered value of merchandise sold to
unaffiliated parties outside the United States in the denominator used to
determine the assessment rate in order to facilitate the U.S. Customs
Service's collection of antidumping duties on subject merchandise. 

Based upon the foregoing, in these final results we have adhered to our
normal assessment methodology. Consistent with our standard practice, we
will instruct the Customs Service to assess dumping duties based upon the
ratio of the total amount of antidumping duties to the entered value of
the sales reviewed for each importer covered by this review. Additionally,
we have included the entered value of subject merchandise entered for
consumption but sold to unaffiliated parties outside the United States in
the denominator used to determine the assessment rate. 

Ministerial Errors

Comment 16: Weight Bases Used to Calculate the Difference-in-Merchandise
            Adjustment

Mexinox notes that it reported transaction-specific difference-in-
merchandise (difmer) data on the same weight basis as the prices and
adjustments for the transaction. Thus, home market variable cost of
manufacture (VCOMH) was reported on a per metric ton basis, whereas
variable and total cost of manufacture for Mexinox's U.S. sales (VCOMU and
TCOMU, respectively) were reported on a per hundred weight (cwt) basis.
Likewise, Ken-Mac and CBS's VCOMU and TCOMU were reported on a per pound
basis.  Mexinox argues the Department's model matching program failed to
convert the difmer data to a common weight basis before calculating the
DIFMER. As a result, Mexinox claims, the Department's model-matching
program could not identify similar matches within the acceptable 20
percent difmer and instead compared non-identical matches to constructed
value. To correct this error, Mexinox asserts the Department should
convert the variable and total cost fields to a common weight basis.
Therefore, Mexinox urges the Department to convert the U.S. cost data to a
metric ton basis.

Department's Position: We agree with Mexinox that we should convert the
U.S. variable and total cost fields to a metric ton basis to be consistent
with the home market cost data. Therefore, we have corrected our computer
program accordingly for these final results. See the Department's Final
Analysis Memorandum, dated February 4, 2001.

Comment 17: Weight Bases Used to Calculate Extended Entered Values for
Ken-Mac and CBS

Mexinox states it reported entered values for Ken-Mac and CBS in dollars
per pound. However, Mexinox claims, in calculating extended entered value
the Department erroneously multiplied the entered value in pounds by the
quantity expressed in hundred weights (cwt). Since this resulted in
entered values being understated, Mexinox argues, the Department should
convert the quantities reported for Ken-Mac and CBS from hundred weights
to pounds for purposes of reporting extended entered value.

Petitioners respond that the Department should only amend Mexinox's data
if the record shows that the reported data are incorrect. 

Department's Position: We agree with Mexinox. The record shows that
Mexinox reported entered values for sales by Mexinox USA in U.S. dollars
per cwt, while it reported entered values for resales by Ken-Mac and CBS
in U.S. dollars per pound. However, before combining the three datasets in
our preliminary margin calculation program, we inadvertently failed to
convert the entered values reported for Ken-Mac and CBS sales to cwt.
Therefore, we have corrected this error for the final results in order to
calculate extended entered values on a consistent basis. See the
Department's Final Analysis Memorandum, dated February 4, 2001.

Comment 18: Weight Conversion Factor

Mexinox argues the Department made two clerical errors related to the
conversion of Ken-Mac's sales data from an invoiced to actual weight
basis. First, Mexinox states, the Department erroneously multiplied the
reported quantity by the conversion factor instead of dividing. Second,
Mexinox asserts the Department neglected to convert any of the value
fields (e.g., prices, price adjustments, movement expenses, selling
expenses, etc.), and requests that the Department amend this error by
multiplying the value fields by the conversion factor.

Petitioners reply that Mexinox does not cite the record in making its
claim that the Department should divide quantities by the conversion
factor rather than multiplying. Petitioners assert the correct conversion
method is not clear given that actual weights may either be greater than
or less than theoretical weights. Therefore, petitioners argue, the
Department should not make any corrections that are not upheld by the
record.

Department's Position: We agree with Mexinox. We have examined the record
and have determined that it is appropriate to divide (rather than
multiply) the Ken-Mac sales quantity by the weight conversion factor. The
record shows Mexinox calculated the weight conversion factor by dividing
the density of the product based on invoiced weight by the density of the
product based on actual weight. See the Department's August 17, 2001 Sales
Verification Report for Ken-Mac at 9 n.6. Therefore, for these final
results, we have divided by the weight conversion factor in order to
convert Ken-Mac's sales from a theoretical weight basis to an actual
weight basis. 

Regarding the argument that we should apply the weight conversion factor
to the price adjustments and expenses reported for Ken-Mac, we agree with
Mexinox in part. As noted in its questionnaire response, Mexinox reported
each of the expenses incurred in making the sale to Ken-Mac (e.g.,
domestic inland freight incurred in Mexico, Mexican brokerage, packing,
etc.) based on the weighted-average expense incurred on its sales of
subject merchandise to Ken-Mac during the POR. See, e.g., Mexinox's
November 20, 2000 questionnaire response at KMC-25. All of Mexinox USA's
sales of subject merchandise to Ken-Mac during the POR were made on an
actual weight basis. Therefore, it is not necessary to apply the weight
conversion factor to any of the Mexinox-incurred expenses reported in the
Ken-Mac database. 

With respect to the adjustments and expenses incurred by Ken-Mac, we have
determined that we should apply the weight conversion factor to expenses
calculated on a weight basis that could not be determined to be
theoretical or actual. Two expenses incurred by Ken-Mac meet this
condition: freight (KMFRTCU) and warehousing (KMWHSU). Therefore, for
these final results we have applied the weight conversion factor to these
two expenses. We have also applied the weight conversion factor to the Ken-
Mac unit price and to those adjustments and expenses that were calculated
on the basis of the Ken-Mac unit price.

Comment 19. Application of Corrections from the Ken-Mac Sales
Verification to CBS' Resales

Mexinox notes that the Department recalculated Ken-Mac's indirect selling
expenses (KMINDSU) and inventory carrying costs (KMINVCU) based on the
Department's findings at verification.  Mexinox argues that in applying
these corrections to the reported CBS sales data, the Department
mistakenly applied the amended indirect selling expense ratios and
inventory carrying cost ratios to CBS's gross price rather than to the
transfer price from Ken-Mac to CBS. Thus, Mexinox asserts that the
Department has overstated KMINDSU and KMINVCU for CBS transactions.
Although the CBS sales listing does not include data on prices from Ken-
Mac to CBS, Mexinox states, the Department can obtain the same result and
correct this error by adjusting CBS's indirect selling expenses and
inventory carrying expenses by the ratio of the corrected expense factors
to the originally reported expense factors.

Petitioners claim that Mexinox has failed to cite any evidence that
transfer prices were included in the denominator used to compute the
corrected expense ratios. Petitioners state that transfer prices are not
an appropriate basis for any calculation of actual expenses.

Department's Position: We agree with Mexinox in part. Under the Ken-Mac
expense fields (e.g., KMINDSU) in the CBS database, Mexinox reported "the
weighted average of the per unit amounts in the Ken-Mac sales listing for
sales to CBS during the period of review." See Mexinox's November 20, 2000
questionnaire response at CBC-51. The per-unit expenses reported in the
Ken-Mac database reflect the prices charged by Ken-Mac to its customers.
Thus, the weighted-average expense amounts in the CBS database reflect the
transfer price from Ken-Mac to CBS. Therefore, in order to apply the
corrections from the Ken-Mac sales verification to the CBS database, we
should multiply the expense at issue by the ratio of the corrected expense
factor to the originally reported expense factor.

Upon reexamining the record, we found the amount reported under KMINDSU
in the Ken-Mac database already reflects the correct ISE ratio (i.e., the
ratio we verified). Thus, we do not need to correct KMINDSU in our margin
program, and have reversed our recalculation for these final results.
Since KMINDSU was correctly reported in the Ken-Mac database, the weighted-
average amount in the CBS database is also correct. Therefore, we have not
made any changes to the amount reported under KMINDSU in the CBS database. 

However, it is still necessary to correct the amount reported under
KMINVCU in the Ken-Mac database for these final results. Therefore, in
order to correct the amount reported under KMINVCU in the CBS database, we
have multiplied KMINVCU by the ratio of the corrected inventory carrying
days to the originally reported inventory carrying days. We have also
applied the ratio of the average POR Federal Reserve rate used in the
preliminary results to the reported short-term interest rate.

Comment 20: Application of Neutral Facts Available to Ken-Mac's
"Unattributable" Sales

Mexinox states the Department calculated a neutral facts available rate
for the "unattributable" Ken-Mac transactions by multiplying the overall
margin calculated on all other sales/resales of subject merchandise by the
weighted-average price of the unattributable sales. Mexinox notes that the
Department then weighted the result by using a portion of the
"unattributable" database representing the ratio of Ken-Mac's purchases of
stainless steel from Mexinox to Ken-Mac's stainless steel purchases from
all vendors, as reported in Attachment KMC-11 of its March 5, 2001
supplemental response. 

Mexinox argues that this methodology over-allocated the unattributed
sales to Mexinox because the ratio used presupposes that all Ken-Mac
purchases from Mexinox consisted of subject merchandise when, in reality,
a substantial proportion of those purchases consisted of material imported
into the United States in non-subject form (e.g., cut-to-length) or prior
to the suspension of liquidation (i.e., before January 4, 1999). Mexinox
asserts that Attachment KMC-11 shows that a certain percentage of Ken-
Mac's purchases of stainless steel from Mexinox during this period
consisted of merchandise imported in non-subject cut-to-length form.
Mexinox holds that the Department thoroughly tested Ken-Mac's
identification of subject and non-subject merchandise at verification,
thereby validating the accuracy of this figure. Therefore, referring to
its May 4, 2001 Supplemental Response at 14-15, Mexinox clams that in
order to account for purchases of non-subject merchandise, the Department
must make a further adjustment to reflect that portion of total purchases
actually consisting of subject merchandise.

Department's Position: We disagree with Mexinox. At the Ken-Mac sales
verification, we examined Ken-Mac's resales of Mexinox merchandise and
confirmed that it correctly segregated sales of subject merchandise from
non-subject merchandise for reporting purposes. See the Sales Verification
Report at 4. However, despite Mexinox's assertion, we did not test the
proportion of Ken-Mac's purchases of subject and non-subject merchandise
from Mexinox USA (as reported in its March 5, 2001 supplemental
questionnaire response at Attachment KMC-11-C). Therefore, for these final
results we are unable to make the further adjustment proposed by Mexinox,
and have made no changes to our calculation of neutral facts available for
the "unattributable" Ken-Mac transactions.

Comment 21: Model Match Formatting Errors 

Mexinox asserts the Department failed to assign a weight to grade 316 in
its model match program and that matching therefore was not performed
correctly. Also, Mexinox states, the Department's model match program
misformatted the codes identifying non-metallic coating types by omitting
a necessary leading zero.

Department's Position: We agree with Mexinox and have corrected our model
match program accordingly for these final results. 

Recommendation

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

AGREE _______ DISAGREE _______

_____________________________

Faryar Shirzad
Assistant Secretary 
  for Import Administration

_____________________________
Date

_____________________________________________________________
footnote:

1. Petitioners state it is not clear from the record what the
   unconsolidated G&A expense figure was for TKS.