64 FR 30790, June 8, 1999

DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-822]

Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Sheet and Strip in Coils From Mexico

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

EFFECTIVE DATE: June 7, 1999.

FOR FURTHER INFORMATION CONTACT: Fred Baker or Martin Odenyo, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC
20230; telephone: (202) 482-2924 or (202) 482-5254, respectively.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
to the regulations codified at 19 CFR part 351 (1998).

Final Determination

    We determine that stainless steel sheet and strip in coils (SSSS)
from Mexico are being, or is likely to be, sold in the United States at
less than fair value (LTFV), as provided in section 735 of the Act. The
estimated margins of sales at LTFV are shown in the ``Suspension of
Liquidation'' section of this notice.

[[Page 30791]]

Case History

    We published in the Federal Register the preliminary determination
in this investigation on January 4, 1999. See Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination: Stainless Steel Sheet and Strip in Coils from
Mexico, 64 FR 125 (January 4, 1999) (Preliminary Determination). Since
publication of the Preliminary Determination the following events have
occurred:
    We received an allegation of ministerial errors from Allegheny
Ludlum Corporation, J&L Specialty Steel, Inc., Washington Steel
Division of Bethlehem Steel Corporation, the United Steelworkers of
America, and AFL-CIO/CLC (petitioners) on December 28, 1998. We
addressed those allegations in a memorandum to the file dated January
28, 1999.
    On January 6, 1999, we issued a supplemental questionnaire to
Mexinox S.A. de C.V. (Mexinox) regarding its section E (further
manufacturing) response. In response Mexinox made two submissions, one
on January 15, 1999, and the other on January 22, 1999.
    We verified Mexinox's sections A (General Information), B (Home
Market Sales), and C (U.S. Sales) responses in San Luis Potosi, Mexico,
from February 1 through February 5, 1999. See Memorandum to the File;
``Verification of the Information Submitted by Mexinox S.A. de C.V.,''
March 5, 1999 (Mexinox sales verification report). We also verified
Mexinox's section D (cost of production) response in San Luis Potosi
from February 25 through February 29, 1999. See Memorandum to Neal
Halper, Acting Director, Office of Accounting; ``Verification of the
Cost of Production and Constructed Value Data,'' March 22, 1999
(Mexinox cost verification report). Public versions of these and all
other Departmental memoranda referred to herein are on file in room B-
099 of the main Commerce building.
    From February 24, 1999 through February 26, 1999, we verified the
sales response of a U.S. entity we have determined to be affiliated
with Mexinox (Reseller). See Memorandum to the File; ``Verification of
the Information Submitted by Reseller;'' March 15, 1999 (Reseller sales
verification report). We verified the section E (further manufacturing)
response of Reseller from March 2, 1999 through March 4, 1999. See
Memorandum to Neal Halper, Acting Director, Office of Accounting;
``Verification of the Cost of Further Manufacturing,'' March 18, 1999
(Reseller cost verification report).
    On January 22, 1999, and February 2, 1999, Mexinox and petitioners,
respectively, requested a public hearing on this investigation. We
received case briefs from petitioners and Mexinox on March 29, 1999; we
received rebuttal briefs from petitioners and Mexinox on April 5, 1999.
On April 14 and 15, 1999, petitioners and Mexinox, respectively,
withdrew their requests for a hearing.

Scope of the Investigation

    We have made minor corrections to the scope language excluding
certain stainless steel foil for automotive catalytic converters and
certain specialty stainless steel products in response to comments by
interested parties.
    For purposes of this investigation, the products covered are
certain stainless steel sheet and strip in coils. Stainless steel is an
alloy steel containing, by weight, 1.2 percent or less of carbon and
10.5 percent or more of chromium, with or without other elements. The
subject sheet and strip is a flat-rolled product in coils that is
greater than 9.5 mm in width and less than 4.75 mm in thickness, and
that is annealed or otherwise heat treated and pickled or otherwise
descaled. The subject sheet and strip may also be further processed
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that
it maintains the specific dimensions of sheet and strip following such
processing.
    The merchandise subject to this investigation is classified in the
Harmonized Tariff Schedule of the United States (HTS) at subheadings:
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80,
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05,
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36,
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05,
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36,
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05,
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35,
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10,
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05,
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80,
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60,
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60,
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80.
Although the HTS subheadings are provided for convenience and Customs
purposes, the Department's written description of the merchandise under
investigation is dispositive.
    Excluded from the scope of this investigation are the following:
(1) Sheet and strip that is not annealed or otherwise heat treated and
pickled or otherwise descaled; (2) sheet and strip that is cut to
length; (3) plate (i.e., flat-rolled stainless steel products of a
thickness of 4.75 mm or more); (4) flat wire (i.e., cold-rolled
sections, with a prepared edge, rectangular in shape, of a width of not
more than 9.5 mm); and (5) razor blade steel. Razor blade steel is a
flat rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5
percent chromium, and certified at the time of entry to be used in the
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional
U.S. Note'' 1(d).
    In response to comments by interested parties, the Department has
determined that certain specialty stainless steel products are also
excluded from the scope of this investigation. These excluded products
are described below.
    Flapper valve steel is defined as stainless steel strip in coils
containing, by weight, between 0.37 and 0.43 percent carbon, between
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent
manganese. This steel also contains, by weight, phosphorus of 0.025
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur
of 0.020 percent or less. The product is manufactured by means of
vacuum arc remelting, with inclusion controls for sulphide of no more
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper
valve steel has a tensile strength of between 210 and 300 ksi, yield
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a
hardness (Hv) of between 460 and 590. Flapper valve steel is most
commonly used to produce specialty flapper valves for compressors.
    Also excluded is a product referred to as suspension foil, a
specialty steel product used in the manufacture of suspension
assemblies for computer disk drives. Suspension foil is described as
302/304 grade or 202 grade stainless steel of a thickness between 14
and 127 microns, with a thickness tolerance of plus-or-minus 2.01
microns, and surface glossiness of 200 to 700 percent Gs.

[[Page 30792]]

Suspension foil must be supplied in coil widths of not more than 407
mm, and with a mass of 225 kg or less. Roll marks may only be visible
on one side, with no scratches of measurable depth. The material must
exhibit residual stresses of 2 mm maximum deflection, and flatness of
1.6 mm over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is
also excluded from the scope of this investigation. This stainless
steel strip in coils is a specialty foil with a thickness of between 20
and 110 microns used to produce a metallic substrate with a honeycomb
structure for use in automotive catalytic converters. The steel
contains, by weight, carbon of no more than 0.030 percent, silicon of
no more than 1.0 percent, manganese of no more than 1.0 percent,
chromium of between 19 and 22 percent, aluminum of no less than 5.0
percent, phosphorus of no more than 0.045 percent, sulfur of no more
than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05
percent, and total rare earth elements of more than 0.06 percent, with
the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also
excluded from the scope of this investigation. This ductile stainless
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10
percent cobalt, with the remainder of iron, in widths 228.6 mm or less,
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic
remanence between 9,000 and 12,000 gauss, and a coercivity of between
50 and 300 oersteds. This product is most commonly used in electronic
sensors and is currently available under proprietary trade names such
as ``Arnokrome III.'' <SUP>1</SUP>
---------------------------------------------------------------------------

    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
---------------------------------------------------------------------------

    Certain electrical resistance alloy steel is also excluded from the
scope of this investigation. This product is defined as a non-magnetic
stainless steel manufactured to American Society of Testing and
Materials (ASTM) specification B344 and containing, by weight, 36
percent nickel, 18 percent chromium, and 46 percent iron, and is most
notable for its resistance to high temperature corrosion. It has a
melting point of 1390 degrees Celsius and displays a creep rupture
limit of 4 kilograms per square millimeter at 1000 degrees Celsius.
This steel is most commonly used in the production of heating ribbons
for circuit breakers and industrial furnaces, and in rheostats for
railway locomotives. The product is currently available under
proprietary trade names such as ``Gilphy 36.'' <SUP>2</SUP>
---------------------------------------------------------------------------

    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Certain martensitic precipitation-hardenable stainless steel is
also excluded from the scope of this investigation. This high-strength,
ductile stainless steel product is designated under the Unified
Numbering System (UNS) as S45500-grade steel, and contains, by weight,
11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,
manganese, silicon and molybdenum each comprise, by weight, 0.05
percent or less, with phosphorus and sulfur each comprising, by weight,
0.03 percent or less. This steel has copper, niobium, and titanium
added to achieve aging, and will exhibit yield strengths as high as
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after
aging, with elongation percentages of 3 percent or less in 50 mm. It is
generally provided in thicknesses between 0.635 and 0.787 mm, and in
widths of 25.4 mm. This product is most commonly used in the
manufacture of television tubes and is currently available under
proprietary trade names such as ``Durphynox 17.'' <SUP>3</SUP>
---------------------------------------------------------------------------

    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Finally, three specialty stainless steels typically used in certain
industrial blades and surgical and medical instruments are also
excluded from the scope of this investigation. These include stainless
steel strip in coils used in the production of textile cutting tools
(e.g., carpet knives).<SUP>4</SUP> This steel is similar to AISI grade
420, but containing, by weight, 0.5 to 0.7 percent of molybdenum. The
steel also contains, by weight, carbon of between 1.0 and 1.1 percent,
sulfur of 0.020 percent or less, and includes between 0.20 and 0.30
percent copper and between 0.20 and 0.50 percent cobalt. This steel is
sold under proprietary names such as ``GIN4 Mo.'' The second excluded
stainless steel strip in coils is similar to AISI 420-J2 and contains,
by weight, carbon of between 0.62 and 0.70 percent, silicon of between
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent,
phosphorus of no more than 0.025 percent and sulfur of no more than
0.020 percent. This steel has a carbide density on average of 100
carbide particles per 100 square microns. An example of this product is
``GIN5'' steel. The third specialty steel has a chemical composition
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,
molybdenum of between 1.15 and 1.35 percent, but lower manganese of
between 0.20 and 0.80 percent, phosphorus of no more than 0.025
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no
more than 0.020 percent. This product is supplied with a hardness of
more than Hv 500 guaranteed after customer processing, and is supplied
as, for example, ``GIN6''.<SUP>5</SUP>
---------------------------------------------------------------------------

    \4\ This list of uses is illustrative and provided for
descriptive purposes only.
    \5\ ``GIN4 HI-C'', ``GIN5'' and ``GIN6'' are the proprietary
grades of Hitachi Metals America, Ltd.
---------------------------------------------------------------------------

Period of Investigation

    The period of investigation (POI) is April 1, 1997 through March
31, 1998.

Fair Value Comparisons

    To determine whether sales of SSSS from Mexico to the United States
were made at LTFV, we compared the export price (EP) or constructed
export price (CEP) to the normal value (NV), as described in the
``Export Price and Constructed Export Price'' and ``Normal Value''
sections of this notice, below. In accordance with section
777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs and
CEPs for comparison to weighted-average NVs or constructed values
(CVs).

Transactions Investigated

    For its home market and U.S. sales, Mexinox reported the date of
invoice as the date of sale, in keeping with the Department's stated
preference for using the invoice date as the date of sale. See 19 CFR
351.401(i). As explained in response to comment 12 (below), for this
final determination we have continued to rely upon Mexinox's invoice
dates in the home and U.S. markets as the date of sale. However, should
this investigation result in an antidumping duty order, we intend to
scrutinize further this issue in any subsequent segment of this
proceeding involving Mexinox.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all
products produced by the respondent covered by the description in the
``Scope of the Investigation'' section, above, and sold in the home
market during the POI, to be foreign like products for purposes of
determining appropriate product comparisons to U.S. sales. Where there
were no sales of identical merchandise in the home market to compare to
U.S. sales, we compared U.S. sales to the next most similar foreign
like product on the basis of the characteristics and reporting
instructions listed in Appendix V of the Department's August 3, 1998
antidumping questionnaire.

[[Page 30793]]

Level of Trade

    In our Preliminary Determination, we agreed with Mexinox that one
level of trade (LOT) existed for Mexinox in the home market.
Furthermore, we agreed with Mexinox that its U.S. EP and CEP sales
constituted two distinct LOTs, and that a CEP offset to NV was
warranted when comparing CEP to NV or CV. In their comments on the
Preliminary Determination, petitioners challenged our LOT
determination. However, based on our analysis of petitioners' comments
and Mexinox's rebuttal comments, we have not changed our Preliminary
Determination with respect to LOT. See comment 9 (below).

Export Price and Constructed Export Price

    In the Preliminary Determination, we used Mexinox's reported EP/CEP
classification of its U.S. sales. In their comments on the Preliminary
Determination, petitioners challenged our acceptance of Mexinox's EP/
CEP classification. However, based on our analysis of petitioners'
comments and Mexinox's rebuttal comments, we have not changed our
preliminary determination with respect to EP/CEP classification. See
comment 8 (below).
    We calculated EP and CEP using the same methods employed in the
Preliminary Determination except as noted below in the ``Department's
Position'' portions of the ``Comments,'' section of this notice and in
the Final Determination Analysis Memorandum from Fred Baker to John
Kugelman, dated May 19, 1999.

Normal Value

Home Market Viability

    As discussed in the Preliminary Determination, in order to
determine whether the home market was viable for purposes of
calculating NV (i.e., the aggregate volume of home market sales of the
foreign like product was equal to or greater than five percent of the
aggregate volume of U.S. sales), we compared the respondent's volume of
home market sales of the foreign like product to the volume of U.S.
sales of the subject merchandise, in accordance with section
773(a)(1)(B) of the Act. As Mexinox's aggregate volume of home market
sales of the foreign like product was greater than five percent of its
aggregate volume of U.S. sales of the subject merchandise, we
determined that the home market was viable. Therefore, we based NV on
home market sales in the usual commercial quantities and in the
ordinary course of trade.

Cost of Production Analysis

    In response to a timely allegation filed by petitioners, we
conducted an investigation to determine whether Mexinox made sales of
the foreign like product during the POI at prices below its cost of
production (COP). In accordance with section 773(b)(3) of the Act, we
calculated the weighted-average COP based on the sum of Mexinox's cost
of materials, fabrication, general expenses, and packing costs. We
relied on respondent's COP and CV amounts except in the following
instances:
    a. We made adjustments to the cost of inputs received from
affiliates in accordance with sections 773(f)(2) and (3) of the Act.
    b. We revised the reported general and administrative expense to
include the accrued sludge clean-up for 1997 and to exclude expenses
incurred on behalf of subsidiaries.
    c. We recalculated Mexinox's general and administrative expense
ratio based on the total cost of manufacturing.
    d. We revised the reported net financing expense ratio to exclude
unsubstantiated foreign exchange gains.
    We compared the weighted-average COP for Mexinox to home market
sales prices of the foreign like product, as required under section
773(b) of the Act. In determining whether to disregard home market
sales made at prices less than the COP, we examined whether such sales
were made (i) in substantial quantities within an extended period of
time and (ii) at prices which permitted recovery of all costs within a
reasonable period of time. On a product-specific basis, we compared COP
to home market prices, less any applicable movement charges, early
payment and other discounts, and direct and indirect selling expenses.
    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than
twenty percent of a respondent's sales of a given product were at
prices less than the COP, we do not disregard any below-cost sales of
that product because we determined that the below-cost sales were not
made in substantial quantities. Where twenty percent or more of a
respondent's sales of a given product during the POI were at prices
less than the COP, we determined such sales to have been made in
substantial quantities, in accordance with sections 773(b)(2)(C)(i) and
773(b)(2)(B) of the Act. Because we used POI average costs, in such
cases, pursuant to section 773(b)(2)(D) of the Act, we also determined
that such sales were not made at prices which would permit recovery of
all costs within a reasonable period of time. Therefore, we disregarded
the below-cost sales. Where all sales of a specific product were at
prices below the COP, we disregard all sales of that product. When
there were no home market sales of identical or similar merchandise to
match to U.S. sales, we compared the U.S. sales to CV in accordance
with section 773(a)(4) of the Act.
    Our cost test for Mexinox revealed that for certain products less
than twenty percent of Mexinox's home market sales were at prices below
Mexinox's COP. Therefore, we retained all sales of those products in
our analysis. For other products, more than twenty percent of Mexinox's
sales were at prices below COP. In such cases we disregarded the sales
that failed the cost test, while retaining the remaining sales for our
analysis. See Final Determination Analysis Memorandum dated May 19,
1999.

Price-to-Price Comparisons

    For those products with home market sales that passed the cost
test, we based NV on Mexinox's sales to unaffiliated home market
customers and to affiliated home market customers who passed the
Department's arms-length test. (For an explanation of the arms-length
test, see the Preliminary Determination, 64 FR at 129.) We made
adjustments, where appropriate, for physical differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.
Where appropriate, we deducted from NV the amount of indirect selling
expenses capped by the amount of the U.S. commissions. We made a CEP
offset due to differences in LOT (see ``Level of Trade'' section
(above) and comment 9 (below)). We continued to make circumstance-of-
sale (COS) adjustments in accordance with section 773(a)(6)(c)(iii) of
the Act.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Act, we based NV on CV
if we were unable to find a home market match of identical or similar
merchandise. We calculated CV based on the costs of materials and
fabrication employed in producing the subject merchandise, SG&A, and
profit. See section 773(e)(1) of the Act. In accordance with section
773(e)(2)(A) of the Act, we based SG&A and profit on the amounts
incurred and realized by the respondent in connection with the
production and sale of the foreign like product in the ordinary course
of trade for consumption in Mexico. We calculated the cost of
materials, fabrication, and general expenses using the method described
in the ``Cost of Production Analysis'' section (above).

[[Page 30794]]

For selling expenses, we used the weighted-average home market selling
expenses. Where appropriate, we made adjustments to CV in accordance
with section 773(a)(8) of the Act. We also made COS adjustments by
deducting home market direct selling expenses from CV and adding U.S.
direct selling expenses.

Facts Available

    Section 776(a) of the Act provides that if an interested party
withholds information that has been requested by the Department, fails
to provide such information in a timely manner or in the form or manner
requested, significantly impedes a proceeding, or provides information
which cannot be verified, the Department shall use, subject to sections
782(d) and (e), the facts otherwise available in reaching the
applicable determination. See, e.g., Roller Chain, Other Than Bicycle
Chain, From Japan; Final Results and Partial Rescission of Antidumping
Duty Administrative Review, 63 FR 63671, 63673 (November 16, 1998). In
this investigation the Department has determined, for the reasons
stated in detail below, that one of Mexinox's U.S. affiliates submitted
information that could not be verified. Therefore, pursuant to section
776(a) of the Act, we have determined that the use of the facts
otherwise available is necessary in this instance.
    However, the statute requires that certain conditions be met before
the Department may resort properly to the facts available. Where the
Department determines that a response to a request for information does
not comply with the request, section 782(d) of the Act provides that
the Department will so inform the party submitting the response and
will, to the extent practicable, provide that party the opportunity to
remedy or explain the deficiency. If the party fails to remedy the
deficiency within the applicable time limits, the Department may,
subject to section 782(e), disregard all or part of the original and
subsequent responses, as appropriate. Briefly, section 782(e) provides
that the Department ``shall not decline to consider information that is
submitted by an interested party and is necessary to the determination
but does not meet all the applicable requirements established by [the
Department]'' if the information is timely, can be verified, is not so
incomplete that it cannot be used, and if the interested party acted to
the best of its ability in providing the information. Where all of
these conditions are met, and the Department can use the information
without undue difficulties, the statute requires it to do so.
    Finally, in selecting from among the facts otherwise available,
section 776(b) of the Act permits the use of an adverse inference if
the Department also finds that an interested party failed to cooperate
by not acting to the best of its ability to comply with the requests
for information. Adverse inferences are appropriate ``to ensure that
the party does not obtain a more favorable result by failing to
cooperate than if it had cooperated fully.'' The Statement of
Administrative Action (SAA) reprinted in H.R. Doc. 103-316 at 870
(1994). Furthermore, ``an affirmative finding of bad faith on the part
of the respondent is not required before the Department may make an
adverse inference.'' Antidumping Duties; Countervailing Duties; Final
Rule, 62 FR 27296, 27340 (May 19, 1997) (Final Rules). The statute
continues by noting that in selecting from among the facts available
the Department may, subject to the corroboration requirements of
section 776(c), rely upon information drawn from the petition, a final
determination in the investigation, any previous administrative review
conducted under section 751 (or section 753 for countervailing duty
cases), or any other information on the record.
    As explained in the Department's response to Comment 6 (below), we
have determined that we must resort to the facts available with respect
to the sales and further-manufacturing data submitted by the Reseller.
At verification, we discovered numerous and systemic errors in the data
used by the Reseller to report its costs of further manufacturing of
subject merchandise. These errors included, inter alia, the failure to
match properly input coils and output finished products, the allocation
of processing costs to sales which had undergone no further processing
whatever, and cases where the quantities of output goods exceeded the
inputs. The vast majority of the subject merchandise sold through the
Reseller was first further processed by this company; therefore, the
deficiencies in its data affect a corresponding percentage of the
Reseller's submitted sales data. Furthermore, the mis-allocations not
only affected the Reseller's reported sales which had been subject to
further processing, but tainted the non-further-processed portion of
its database as well. In addition, the Reseller failed to identify the
producer of a significant portion of its sales in the United States,
and failed to report physical criteria vital to our model matching for
certain other transactions. As the breadth and depth of the
discrepancies leave us with no confidence in the underlying further-
processing data submitted by the Reseller, we have determined that
these data cannot serve adequately in the calculation of Mexinox's
overall weighted-average margin. Further, the record indicates that the
Reseller could readily have discovered and corrected the majority of
these errors prior to submitting its data to the Department and, at the
latest, prior to verification. See comment 6 (below). Accordingly, as
provided in section 776(b) of the Act, we find that the Reseller has
failed to cooperate by not acting to the best of its ability in
responding to the Department's requests for information. Therefore, we
have relied upon adverse facts available for the entirety of the data
submitted by the Reseller. As facts available we have assigned the
highest non-aberrational margin calculated for this final determination
to the weighted-average unit value for sales reported by the Reseller.
To determine the highest non-aberrational margin we examined the
frequency distribution of the margins calculated from Mexinox's
reported data. We found that roughly ten percent of Mexinox's
transactions fell within a range of 40 to 49 percent; we selected the
highest of these as reflecting the highest non-aberrational margin. We
then multiplied the resulting unit margin by the total quantity
attributed to resales of subject merchandise by the Reseller. See also
the Final Determination Analysis Memorandum, dated May 19, 1999. This
total quantity includes the material affirmatively verified as being of
Mexinox origin, as well as a portion of the merchandise of unidentified
origin allocated to Mexinox. To apportion the unidentified sales among
the investigations of stainless sheet in coil from Germany, Italy, and
Mexico (see Comment 7, below) we have adjusted the quantity for each of
the unidentified sales on a pro rata basis, using the verified
percentages of the Reseller's merchandise supplied by each of the three
respondent mills. We then applied the facts-available margin to these
unidentified sales transactions as explained above.

Affiliation

    As explained in the Preliminary Determination and immediately
below, we find that for purposes of this investigation Mexinox is
affiliated with Thyssen Stahl and Thyssen AG (Thyssen) and, through
them, their affiliated sellers and steel service centers in the United
States. The Act defines ``affiliated persons'' at section 771(33).
Included within that definition

[[Page 30795]]

are the following persons: family members, any organization and its
officers or directors, partners, and employer and employee. See section
771(33)(A) through (D) of the Act. The statute also considers as
affiliated persons:

    (E) Any person directly or indirectly owning, controlling, or
holding with power to vote, 5 percent or more of the outstanding
voting stock or shares of any organization and such organization.
    (F) Two or more persons directly or indirectly controlling,
controlled by, or under common control with, any person.
    (G) Any person who controls any other person and such person.

See section 771(33)(E) through (G) of the Act.
    ``Control'' is defined as one person being ``legally or
operationally in a position to exercise restraint or direction over the
other person.'' The SAA at 870 explained that including control in an
analysis of affiliated parties ``permit[s] a more sophisticated
analysis which better reflects the realities of the market place.'' The
SAA continues, ``[t]he traditional focus on control through stock
ownership fails to address adequately modern business arrangements,
which often find one firm `operationally in a position to exercise
restraint or direction' over another even in the absence of an equity
relationship.'' Id. at 838.
    Finally, as the Department noted in its ``Explanation to the Final
Rules'' (i.e., its regulations), ``section 771(33), which refers to a
person being `in a position to exercise restraint or direction,'
properly focuses the Department on the ability to exercise `control'
rather than the actuality of control over specific decisions.'' Final
Rules, 62 FR at 27348. Thus, the statute does not require that we find
the actual exercise of control by one person over the other in order to
find the parties affiliated; rather, the potential to exercise control
is sufficient for such a finding.
    In this final determination, we continue to find that Mexinox is
affiliated with Thyssen Stahl and Thyssen because Thyssen Stahl
indirectly owns and controls, through Krupp Thyssen Stahl (KTS),
thirty-six percent of Mexinox's outstanding stock. Thyssen, which
wholly owns Thyssen Stahl, likewise indirectly owns and controls
thirty-six percent of Mexinox. See Preliminary Determination, 64 FR at
126 and Memorandum to Joseph Spetrini, Mexinox Affiliation, December
17, 1998 (Affiliation Memo).
    In addition, we continue to find that Mexinox is affiliated with
Thyssen's U.S. sales affiliates because the nature and quality of
corporate contact establish this affiliation by virtue of Thyssen's
common control of its affiliates and of KTS. The record demonstrates
that Thyssen, as the majority equity holder in, and ultimate parent of,
its various affiliates, is in a position to exercise direction and
restraint over the affiliates' production and pricing. As we stated in
the Preliminary Determination, ``Thyssen's substantial equity ownership
in Mexinox and Thyssen's other affiliates, in conjunction with the
`totality of other evidence of control' requires a finding that these
companies are under the common control of Thyssen.'' Id. For a full
discussion of Mexinox's affiliations see Comment 2 (below) and the
Affiliation Memo.

Currency Conversion

    We made currency conversions into U.S. dollars in accordance with
section 773A(a) of the Act based on the exchange rates in effect on the
dates of the U.S. sales, as certified by the Federal Reserve Bank.

Analysis of Interested Party Comments

Issues Relating to Sales

Comment 1: Affiliation

    Mexinox argues that the Department erred in finding that it is
affiliated with the Reseller, and in thus including the Mexinox-sourced
U.S. sales by the Reseller in the margin calculation. It argues that
under section 771(33) of the Act, the Department can find affiliation
between Mexinox and the Reseller only if it finds either:
    1. A direct relationship between Mexinox and the Reseller whereby
one company:
    a. Directly or indirectly owns, controls, or holds the power to
vote five percent or more of the other company's outstanding voting
shares (subsection (E)); or,
    b. Otherwise controls the other company (subsection (G)); or
    2. An indirect relationship between Mexinox and Reseller whereby
the two companies directly or indirectly control, are controlled by, or
are under common control with another party (subsection (F)).
    Regarding a possible direct relationship between Mexinox and the
Reseller, Mexinox argues that the facts do not support such a finding
because neither company directly or indirectly owns, controls, or holds
the power to vote five percent or more of the other company's
outstanding voting shares, and there is no direct bilateral
relationship that allows one company to control the other. It states
that while the Reseller's parent company, Thyssen AG (Thyssen), does
indirectly own more than five percent of Mexinox through its ownership
of Thyssen Stahl AG (Thyssen Stahl) (which, jointly with Fried. Krupp
AG Hoesch-Krupp (Krupp), owns the entity Krupp Thyssen Stainless (KTS),
Mexinox's immediate parent), the relationship that must be examined is
that between Mexinox and the Reseller, and not that between Mexinox and
Thyssen. The corporate relationships at issue in this investigation,
Mexinox argues, are similar to those that existed in Certain Cold-
Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea;
Final Results of Antidumping Duty Administrative Review, 62 FR 18404
(April 15, 1997) (Steel from Korea). There respondent POSCO
participated in a joint venture (the entity POCOS) involving DSM, a
parent company of respondent Union. The Department concluded that
despite the existence of the joint venture, POSCO and Union were not
affiliated because (1) the two companies were separate operational
entities with no overlapping stock ownership, and (2) nothing in the
record indicated that either Union or POSCO was in a position to
control, either legally or operationally, the other party. Mexinox
argues that for the same reasons the Department must reach a similar
conclusion here if it focuses on Mexinox and the Reseller, the entities
at issue, rather than on Mexinox and Thyssen.
    Given the absence of a direct relationship between the parties at
issue, Mexinox argues, Mexinox and the Reseller cannot be deemed
affiliated unless, in accordance with subsection (F) of section 771(33)
of the Act, they directly or indirectly control a third party, or are
themselves controlled by, or under common control with, another party.
Since neither Mexinox nor the Reseller control Thyssen, Mexinox states,
and the three companies are not under the common control of another
party, Mexinox cannot be deemed affiliated with the Reseller unless
Thyssen also directly or indirectly controls Mexinox. Mexinox argues
that despite the Department's preliminary determination, such is not
the case. It cites Steel from Korea to demonstrate that the Department
has held that the participation of two companies in a joint venture
(such as is the case here with Thyssen and Krupp, which jointly own
KTS, Mexinox's immediate parent) does not mean that the companies'
respective subsidiaries are affiliated with each other. As explained
above, in Steel from Korea, POSCO and DSM jointly owned the entity
POCOS, and

[[Page 30796]]

DSM independently owned and controlled a subsidiary, Union, which had
no operational or legal connection to POCOS. In response to
petitioners' argument that POSCO and Union were affiliated, the
Department stated, ``POSCO affiliation with DSM (through POCOS) and DSM
control over Union do not add up to POSCO control of Union. The
affiliation standard set forth in subsection (F) is thus not
satisfied.'' See Steel from Korea, 62 FR at 18417. Using the same
reasoning, Mexinox argues, the Department cannot find affiliation
between Mexinox and the Reseller simply because Krupp and Thyssen
jointly own KTS.
    Furthermore, Mexinox argues that in making its determination that
Thyssen has the ability to control Mexinox and the Reseller (explained
in a December 17, 1998 memorandum to Joseph Spetrini, available in the
public file (Affiliation Memo)), the Department failed to consider both
the applicable law and certain factual data indicating that no such
control exists. 19 CFR Sec. 351.102(b)(1998) states that:

    In determining whether control over another person exists, * * *
the Secretary will consider the following factors, among others:
corporate or family groupings; franchise or joint venture
agreements; debt financing; and close supplier relationships. The
Secretary will not find that control exists on the basis of these
factors unless the relationship has the potential to impact
decisions concerning the production, pricing, or cost of the subject
merchandise or foreign like product * * *

Furthermore, in the preamble to the final rules adopting this
definition the Department stated that ``we will consider the full range
of criteria identified in the SAA (Statement of Administrative Action),
at 838, in determining whether control exists.'' See Final Rules, 62 FR
at 27998. Moreover, Mexinox argues, the SAA admonishes that the
determination of whether control exists must ``reflect the realities of
the marketplace.'' See SAA at 838.
    Given these legal criteria, Mexinox argues, the Department's
determination was flawed because it is Krupp, and not Thyssen, that
controls the operations of KTS and Mexinox, including Mexinox's
production, pricing, and cost decisions. Thyssen, Mexinox states, does
not have the ``potential to impact'' such decisions. This ``marketplace
reality'' is reflected in both a June 5, 1995 Krupp/Thyssen Stahl
shareholders agreement and in the circumstances surrounding KTS's and
Mexinox's operations. By its terms, this shareholders agreement,
Mexinox argues, ensures that Thyssen does not have the ability to
control KTS's operational decisions, and that the ability to make such
decisions rests solely with Krupp. In the Affiliation Memo, Mexinox
argues, the Department virtually ignored the provisions establishing
Krupp's direct control over KTS, and focused instead on certain
provisions that in principle allow Thyssen Stahl to exercise a degree
of influence over KTS in certain limited circumstances. For example:

    <bullet> The Department is correct that Thyssen was involved in
defining the underlying purpose of the joint venture prior to the
establishment of KTS, but the shareholders agreement in no way suggests
that Thyssen enjoyed ongoing operational control over KTS during the
POI. All joint venture partners enjoy freedom to contract at the outset
of a project. In this case, Mexinox states, in consideration for giving
up control over its stainless steel assets to Krupp through KTS,
Thyssen gained Krupp's management expertise and experience in stainless
steel manufacturing. From that point forward, Mexinox states, Thyssen
by agreement became a passive partner in the management of KTS.
    <bullet> The Department concluded from the shareholder's agreement
that Thyssen Stahl retained ``the ability to affect KTS's stainless
steel production and sales.'' However, Mexinox argues, the ability to
affect a party is not tantamount to the ability to control the party. A
finding of affiliation requires a showing of operational control, and
not the ability to affect another.
    <bullet> The Department, in stating that Thyssen Stahl's 40 percent
holding in KTS is ``sufficient to block (i.e., restrain) certain KTS
activities,'' shows that it is focusing on issues relating to the
corporate structure of KTS (e.g., decision-making powers), rather than
the operational matters that should be examined in an affiliation
analysis (e.g., the ability of one party to influence the production,
sales, or transfer pricing of the other).
    <bullet> The Department's affiliation memo states that under the
shareholders agreement specific powers and authority are accorded
directly to Thyssen as part of the agreement. This statement, Mexinox
argues, is a broad overstatement. The plain language of the
shareholders agreement establishes a dominant role for Krupp in the
formation and operation of the KTS management team and sharply limits
Thyssen's operational powers and authority as a party to the agreement.
    Other examples Mexinox gives are not susceptible to public summary,
and are discussed in its March 29, 1999 case brief at pages 16-18.
    For these reasons, Mexinox argues that the Department should
disregard the Reseller sales data and should instead calculate a margin
based on the arm's-length sales to the Reseller.
    Petitioners argue that the Department correctly determined that
Mexinox and the Reseller are affiliated. First, they argue that Thyssen
does not need to be a majority shareholder in a company for the
Department to determine that control exists. As support for this
proposition, they cite Plate from Brazil in which the Department
stated,

The legislative history of the URAA make it clear that the statute
does not require majority ownership for a finding of control. Even a
minority shareholder interest, examined within the totality of other
evidence of control, can be a factor that we consider in determining
whether one party is in a position to control another.

    See Cut-to-Length Carbon Steel Plate from Brazil; Final Results of
Antidumping Duty Administrative Review, 62 FR 18486, 18490 (April 15,
1997) (Plate from Brazil).
    Furthermore, petitioners argue that contrary to Mexinox's
arguments, evidence of actual control is not required under the statute
to make a finding of control. Control is defined in terms of the
ability to control, that is, having the power to restrain or direct
another company's commercial activities. This does not require that the
one company be in a position to exert absolute control over the other,
either directly or indirectly. It is sufficient if the company merely
has ``the potential to impact decisions concerning the production,
pricing, or cost of the subject merchandise or foreign like product.''
See 19 CFR Sec. 351.102(b). Petitioners argue that the substantial
shareholdings in Mexinox through KTS by Thyssen Stahl (and, by
extension, its parent Thyssen) are only one important indicator of
Thyssen's control over Mexinox. Another is that Mexinox is publicly
described and well-known as a member of both the Krupp and Thyssen
Groups. Still another is that the record clearly demonstrates that the
two industrial groups have had a high--and increasing--degree of
cooperation and coordination.
    Furthermore, petitioners argue that the fact that the shareholder's
agreement nominally gives Krupp (rather than Thyssen) ``full
operational and industrial control over KTS'' is not dispositive. The
preamble to the Department's regulations makes clear, they argue, that
the test is not whether a company has the ``enforceable ability to
compel or restrain commercial actions,'' but whether one firm is ``in a
position to exercise restraint or

[[Page 30797]]

direction'' (regardless of whether such control is actually exercised).
See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296,
27298 (May 19, 1997). Moreover, they state, the terms ``restraint and
direction'' are not synonymous with ``absolute control,'' but rather
are more suggestive of substantial ``influence'' over the other party's
commercial decisions.
    Moreover, petitioners argue, the question is not which joint
venture partner is dominant under the shareholders agreement or how
disputes among the KTS directors are to be resolved under the
agreement. They argue that the very nature of a joint venture is to
operate a business for mutual benefit and with a least a large degree
of consensus, whatever the relative equity interests of the parties.
Clearly, Thyssen is participating in KTS because it hopes to benefit
from the venture. It is extremely unrealistic to believe that Thyssen
would take a forty percent stake in KTS and not expect that venture to
be responsive to Thyssen's own commercial interests to at least some
extent.
    Furthermore, petitioners argue that the recent full merger of Krupp
and Thyssen confirms the closely allied interests of the two firms.
While Krupp and Thyssen formally remained separate companies during the
POI, their formal merger agreement in September 1998 only confirmed
what was obviously a longstanding strategic alliance between the two
firms, reflected most prominently in KTS. Between the KTS joint venture
and the ongoing merger discussions between them, petitioners state,
Thyssen and Krupp can reasonably be regarded as part of a single
corporate grouping during the POI.
    Petitioners also argue that Mexinox's reliance on Steel from Korea
is misplaced. The issue here is not, as in Steel from Korea, whether
two parties who control a third party are themselves affiliated, but
whether a person jointly controlled by two parties is affiliated with
those parties' subsidiaries.
    Based on the foregoing analysis, petitioners argue that Mexinox is
affiliated with Thyssen and that Thyssen has the ability to exercise
restraint over Mexinox within the meaning of 19 USC Sec. 1677(33) of
the Act. Moreover, given that Thyssen is affiliated with its
subsidiaries and thus has the ability to control those subsidiaries,
they argue that Mexinox is affiliated as well with the Thyssen
subsidiaries under the combined provisions of 19 USC Secs. 1677(33)(F)
and (G) of the Act.
    Department's Position: We disagree with Mexinox. As stated in our
Preliminary Determination and Affiliation Memo, we have determined that
Mexinox is affiliated with Thyssen Stahl and Thyssen. Section
771(33)(E) of the Act provides that the Department shall consider
companies to be affiliated where one company owns, controls, or holds,
with the power to vote, five percent or more of the outstanding shares
of voting stock or shares of any other company. Where the Department
has determined that a company directly or indirectly holds a five
percent or more equity interest in another company, the Department has
deemed these companies to be affiliated.
    We examined the record evidence to evaluate the nature of Mexinox's
relationship with Thyssen Stahl and Thyssen and have determined that
Mexinox is affiliated with Thyssen and Thyssen Stahl. Thyssen Stahl
indirectly owns and controls, through KTS, thirty-six percent of
Mexinox's outstanding stock. Thus, Thyssen, which wholly owns Thyssen
Stahl, likewise indirectly owns and controls thirty-six percent of
Mexinox. Mexinox's Section A questionnaire response (p. A-12) dated
September 8, 1998 (section A response), states that Mexinox is ninety-
percent owned by KTS. The supporting exhibits to this submission
confirm Thyssen Stahl's interest in KTS and KTS's ninety-percent
shareholder interest in Mexinox. In a submission dated December 9,
1998, the petitioners placed on the record publicly available data that
confirmed not only the foregoing shareholding interests, but also
confirmed that Thyssen Stahl is a wholly-owned subsidiary of Thyssen.
Consequently, Thyssen, through Thyssen Stahl and KTS, indirectly owns a
thirty-six percent interest in Mexinox. Therefore, Mexinox as a
subsidiary of the joint venture entity KTS, is affiliated with the
joint venturer Thyssen Stahl and its parent company Thyssen pursuant to
section 771(33)(E) of the Act. See Steel Wire Rod From Sweden; Notice
of Final Determination of Sales at Less Than Fair Value, 63 FR 40449,
40453 (July 29, 1998) (Rod from Sweden).
    In addition, we have determined that Mexinox is affiliated with
Thyssen and its U.S. affiliates. Section 771(33)(F) of the Act provides
that the Department shall consider companies to be affiliated where two
or more companies are under the common control of a third company. The
statute defines control as being in a position legally or operationally
to exercise restraint or direction over the other entity. Actual
exercise of control is not required by the statute. In this
investigation the nature and quality of corporate contact necessitate a
finding of affiliation by virtue of Thyssen's common control of its
affiliates and of KTS. See Preliminary Determination 64 FR at 126 and
the Affiliation Memo. Such a finding is consistent with the
Department's determinations in Plate from Brazil (64 FR at 18490) and
Rod from Sweden (63 FR at 40452).
    We also agree with petitioners that record evidence show that
Thyssen, as the majority equity holder and ultimate parent company of
its various affiliates, is in a position to exercise direction and
restraint over the Thyssen affiliates' production and pricing. See
Preliminary Determination 64 FR at 126 and the Affiliation Memo.
Thyssen also holds indirectly a substantial equity interest in Mexinox,
plays a significant role in Mexinox's operations and management, and
thus enjoys several avenues for exercising direction and restraint over
Mexinox's production, pricing and other business activities (see
Affiliation Memo). In sum, Thyssen's substantial equity ownership in
Mexinox and Thyssen's other affiliates, in conjunction with the
``totality of other evidence of control,'' requires a finding that
these companies are under the common control of Thyssen. Therefore, as
in the Preliminary Determination, we continue to find that Mexinox is
affiliated with Thyssen and Thyssen's U.S. subsidiaries, including the
Reseller.

Comment 2: Overreporting of Sales

    Mexinox states that the Reseller over-reported resales of material
purchased from Mexinox by including transactions that it subsequently
traced to purchases of non-subject cut-to-length sheet. Mexinox argues
that since this merchandise is not covered by the scope of the
investigation, these non-subject sales should be excluded from the
Reseller's sales database.
    Additionally, Mexinox separately listed at verification another
much smaller number of transactions where the material sold by the
Reseller was linked to non-subject cut-to-length metal purchased from
Mexinox, but where the U.S. Reseller performed additional processing.
Mexinox requests that this data set of non-subject merchandise also be
excluded from the margin calculations for the final determination.
    Department's Position: We agree with Mexinox that information on
the record indicates that the Reseller reported some sales that are not
subject to the investigation. See the March 15, 1999 Reseller sales
verification report, p. 4. In our calculation of facts available for
the Reseller's sales in this final

[[Page 30798]]

determination, we have excluded the overreported volume of sales from
the calculation.

Comment 3: Downstream U.S. Sales

    Mexinox argues that the Department erred in the Preliminary
Determination by including in its calculations a set of sales made by a
downstream reseller of the Reseller, and by applying a facts available
rate to these sales that was aberrational. The Reseller resold a small
amount of merchandise to another reseller of the Thyssen Group of
companies in the United States (Reseller II) on the last day of the
POI, and the first of this material was resold by U.S. Reseller II
after the POI. Mexinox argues that since the first sale to an
unaffiliated party occurred outside of the POI, none of these sales
should be included in the investigation. The respondent further argues
that it put forth its best effort to provide information about the
Reseller to the Department, and objects to the Department's decision to
resort to adverse facts available. Specifically, Mexinox disagrees with
the Department's decision to apply a facts available rate derived from
a sale of non-prime material. Finally, Mexinox believes that the
Department made a clerical error in applying facts available that
resulted in an overstatement of the margin for the sales at issue.
    Petitioners state that there is no basis for the respondent's
objection to the Department's selection of facts available. They argue
that it is not appropriate to assume that sales to which facts
available are being applied are prime merchandise. They also restate
that the respondent's non-prime designations were found to be
completely unreliable at verification, and that the Department should
continue to apply the highest transaction margin where it determines
that facts available is appropriate for a quantity of U.S. sales.
    Department's Position: We agree with Mexinox that because the sales
were sold to the first unaffiliated buyer in the United States after
the end of the POI, they should not be included in the analysis for
this determination. In our calculation of facts available for the
Reseller's sales in this final determination, we have excluded the
downstream volume of sales from the calculation.

Comment 4: Early Payment Discounts

    Mexinox contends that the Department should apply neutral, rather
than adverse, facts available to the early payment discounts given by
the Reseller that the Department discovered (after publication of the
Preliminary Determination) at the Reseller verification. It states that
the discounts were not identified prior to verification as a result of
a misunderstanding on the part of company personnel. Furthermore, it
argues that its volume of discounts was very small, and the Reseller
would have gained no possible advantage by intentionally not reporting
them. For these reasons, Mexinox argues, the Department should apply
neutral facts available. It suggests applying a rate to all U.S. sales
based on the value of early payment discounts as a share of total sales
revenue.
    Petitioners state that should the Department decide to use the
Reseller's sales listings, it would be appropriate for the Department
to attribute to each U.S. sale the maximum early payment discount
offered. Petitioners argue that because the respondent failed to report
these discounts on a sale-specific basis, the impact of this adjustment
is not negligible, but rather unknown. They argue further that the
respondent's explanation of why the adjustment was unreported is
irrelevant, and that the overall volume of omissions throughout the
investigation process should compel the Department to apply facts
available to the entire quantity of the Reseller's sales listing.
However, petitioners argue that if the Department decides to use the
Reseller's sales listing, it should attribute to each U.S. sale the
maximum early payment discount offered.
    Department's Position: Because we have applied facts available to
the Reseller's sales, this issue is moot.

Comment 5: Prime Merchandise

    Mexinox disputes the Reseller sales verification report's
determination that some of the material shipped as non-prime
merchandise was prime merchandise. Mexinox claims that of the six non-
prime transactions reviewed during verification, three had physical
defects, one was mis-reported, and two involved obsolete products which
remained in inventory for two years due to unusual product
characteristics. Mexinox cites the existence of a Department memorandum
which supports the definition of secondary merchandise as ``generally
steel which has suffered some defect during the production process* *
*'' (emphasis added). However, Mexinox argues that there are other
circumstances, such as sales of obsolete inventory, `side strands,'
`pup coils,' and the like which also call for non-prime designation of
the material. In support of this argument, the respondent emphasizes
that these sales were designated non-prime in the ordinary course of
business before commencement of antidumping proceedings. Mexinox cites
the existence of U.S. steel industry price lists which confirm that
non-prime designations are not limited to products with surface damage
or chemistries out of tolerance, but rather include products with
unusual characteristics which make it impossible for the producer to
sell the product as prime grade and at prime grade prices. Therefore,
Mexinox argues, the Department should not presume that only products
with specific physical damage or chemical irregularities are
legitimately classified as secondary.
    Petitioners object to Mexinox's method of identifying non-prime
merchandise, stating that the method used has one implication when used
throughout the industry but a very different (and inappropriate)
implication in the context of an antidumping analysis. Petitioners do
not dispute the contention that for certain reasons an industry may on
occasion designate a non-defective product as non-prime. However, they
argue that for antidumping purposes, only verifiably defective
merchandise can be considered non-prime. Petitioners state that only
through this approach to classifying prime vs. non-prime merchandise
can the Department verify the bona fide nature of such categories.
Petitioners state that at a minimum, the Department should apply
adverse facts available to the quantity of Reseller sales reported as
non-prime (with the exception, perhaps, of the three sales that were
found at verification to be correctly so designated). Petitioners
further argue that the Department should state in its final
determination that in any administrative review proceedings, only
products with objective physical defects will be treated as non-prime.
    Department's Position: Because we have applied facts available to
the Reseller's sales, this issue is moot.

Comment 6: Use of Facts Available for Reseller Based on Failure of
Verification

    Mexinox reiterates its position regarding its affiliation with the
Reseller, but insists that if the Department uses the Reseller's data
in determining the final dumping margin, it use neutral facts available
as a result of any unforeseen errors or omissions in the data. Mexinox
claims that the use of adverse facts available would be inconsistent
with Departmental policy, because (1) Mexinox acted to the best of its
ability to respond to the Department's request for information, and (2)
any deficiencies in the data provided by the Reseller are due to

[[Page 30799]]

circumstances beyond Mexinox's control because it is unaffiliated with
the Reseller, and had no operational control over the Reseller. With
respect to the latter point, Mexinox argues that the Department has in
the past declined to use adverse facts available in cases where the
respondent's inability to obtain the requested data is due to its lack
of operational control over the reseller. In one instance where it did
otherwise, the CIT reversed and remanded the Department's final
determination applying adverse facts available to certain unreported
downstream sales by secondary steel centers in which the respondent
owned a minority interest. See Usinor Sacilor v. United States, 872
F.Supp. 1000 (Ct. Int'l Trade 1994) (Usinor).
    Petitioners argue Mexinox has failed to make a case that the use of
neutral facts available is appropriate in this case. They argue that
particularly in light of Mexinox's affiliation with Thyssen and the
Reseller (an indirect subsidiary of Thyssen), the Reseller's lack of
cooperation should be imputed to Mexinox, and adverse facts available
applied to the Reseller's response. Regarding Mexinox's argument that
it cooperated to the best of its ability, petitioners state that the
exceptional number and range of instances in which Mexinox has given
incomplete and inaccurate data to the Department do not present the
picture of a company that was truly intent on assisting the Department
in the investigation. Had Mexinox straightforwardly wanted to give its
unqualified cooperation to the Department, petitioners argue, Mexinox
would have come forth with all of the Reseller's sales and would not
have compiled such a spotty and unreliable record. Based on the record,
they state, it is not reasonable to say that Mexinox has cooperated to
the best of its ability, and adverse facts available are therefore
appropriate.
    Regarding Mexinox's argument that it had no operational control
over Reseller, petitioners argue that allowing a respondent
automatically to escape adverse facts available on the ground that the
respondent cannot secure information from another party is not an axiom
that the Department should embrace. The fact that necessary information
lies with even an unrelated third party is not a bar to application of
adverse facts available. See Helmerich & Payne, Inc. v. United States,
24 F.Supp. 2d 304, 308-309 n.6 (Ct. Int'l Trade 1998) (the Department
may apply adverse facts available in its discretion even when the
requested information is controlled by an uncooperative unrelated
company); Asociacion Colombiana de Exportadores de Flores v. United
States, 6 F.Supp. 2d 865, 887-88 (Ct. Int'l Trade 1998); Transacom,
Inc. v. United States, 5 F.Supp. 2d 984, 990-91 (Ct. Int'l Trade 1998).
Ultimately, therefore, whether or not the Department should resort to
adverse facts available, petitioners argue, is a decision the
Department has to make after having scrutinized the particular facts of
a given case, including whether the respondent has cooperated to the
best of its ability with the Department.
    Furthermore, petitioners argue that the holding in Usinor has no
application here. First, the operative facts of Usinor were very
different from those here. In the proceeding that gave rise to Usinor
there was obviously an active discussion of limiting reporting
requirements. By contrast, Mexinox did not even attempt to engage in a
dialogue about reporting requirements, instead unilaterally conferring
permission for limited reporting upon itself. Moreover, the limited
reporting in question for Usinor dealt with 180,000 invoices that would
have had to be manually traced to the supplier--a hundred-fold more
than were at stake in Mexinox's situation. Finally, the question in
Usinor--whether the respondent has operational control over its
affiliated reseller--is clearly moot in this case because Mexinox's
affiliated reseller did in fact respond to the Department's
questionnaire in the instant proceeding (albeit incompletely).
    Moreover, petitioners argue that Mexinox's arguments are misplaced.
The question at hand, they state, is not Mexinox's direct control over
the Reseller, but Thyssen's control over both Mexinox and the Reseller,
its indirect wholly-owned subsidiary. Had there been the will by
Mexinox to be responsive, the means were at hand for it to secure the
data through the intervention of Thyssen.
    Further, petitioners argue that the verification uncovered numerous
significant errors that degrade the integrity of the sales listing, and
that therefore adverse facts available is warranted. First, the
Reseller never reported that it had granted early payment discounts on
sales to U.S. customers. The Department discovered the existence of
these discounts at the verification. (Petitioners also argue that if
the Department does not apply facts available to all of the Reseller's
U.S. sales, it should at least apply facts available to the early
payment discounts.)
    Second, petitioners state that the Reseller improperly applied
prime and non-prime designations to its reported sales. They state that
the record does not support the Reseller's contention that it does not
warrant non-prime merchandise. Furthermore, they argue, the
verification report indicates that the Reseller acknowledged at the
verification that some of the material it sells as non-prime actually
has no physical defects. This admission is borne out, petitioners
state, by the Department's attempt to verify the non-prime designation
reported for specific sales. Of the six reported non-prime merchandise
sales the Department examined at verification, only two actually
consisted of defective merchandise. See Reseller sales verification
report at 7. The danger presented by accepting without penalty what is
at best a subjective designation by the Reseller is that it invites
manipulation. Respondents will be free to label as non-prime any low-
priced sales that they would like to have matched to lower priced sales
in the home market, thereby limiting the Department's ability to detect
and quantify dumping that is actually occurring.
    Third, petitioners argue that there were numerous other errors in
the sample sales selected for verification. These included:
    <bullet> Misreported commission amounts;
    <bullet>  Misreported grades;
    <bullet> Unreported further manufacturing charges;
    <bullet> Misreported payment dates;
    <bullet> Overstated gross prices;
    <bullet> Misreported freight;
    <bullet> Misreported quantities; and
    <bullet> Misreported interest rates.

Petitioners argue that none of the four Mexinox observations examined
by the Department came up ``clean.'' Even the overall quantity and
value of sales reported to the Department could not be reconciled.
    Furthermore, petitioners argue that the reported further
manufacturing costs were also inaccurate. Based on the cost
verification report, they state that:
    <bullet> The cost allocation method (based on standard ``quantity
extras'') proved to be flawed;
    <bullet> Data underlying product-specific yield ratios proved to be
nonsensical in that output exceeded input;
    <bullet> The overall reporting of finished goods was grossly
overstated;
    <bullet> costs of certain processes went unallocated; and
    <bullet> Neither the outside processing costs nor the basis upon
which the Reseller allocated these costs to subject merchandise could
be substantiated.
    Petitioners argue that because of the last-mentioned point, if the
Department decides not to use facts available for the

[[Page 30800]]

Reseller's entire sales database, it should at least use adverse facts
available for the value-added adjustment.
    Mexinox argues that the Reseller did not fail verification.
Although the Department did identify some errors at verification, they
were isolated and did not undermine the basic integrity of the data.
    Regarding early payment discounts, Mexinox states that the failure
to report this adjustment was caused by a misunderstanding on the part
of Reseller officials, and was an isolated and discrete error that had
no bearing on the accuracy or completeness of other portions of the
reported data. Mexinox acknowledges that some form of partial facts
available may be appropriate to fill in the gap in the data, but states
it would be inappropriate and unfair to apply punitive adverse facts
available.
    Regarding the designation of prime and non-prime merchandise,
Mexinox admits that the Reseller does sell a small amount of material
as second grade that does not have physical or chemical defects, but
states that that material does contain other physical features
rendering it unfit for sale as a prime product (e.g., unusual sizes,
weights, and dimensions). Such non-standard material has lower value
and more limited marketability because the material is either
unsuitable for normal uses (such as where the coil is too small to be
efficiently run through machinery) or must be further worked to become
usable (such as where the material must be further slit, or cut to a
standard size). Because of its limited commercial value, such material
must be sold in the ordinary course of trade as non-prime products. The
practice that the Reseller follows in this regard, Mexinox states, is
no different from that followed by petitioner J&L Specialty Steel which
publishes a price list for ``secondary'' products including prices for
``sidestrands'' and ``excess prime.'' Furthermore, Mexinox argues that
if the Department were to follow the narrow definition of ``non-prime''
advocated by petitioners it would be ignoring real physical differences
in the material that limit its marketability and justify downgrading
the material as non-prime. The Department would err by unjustifiably
ignoring an established industry-wide practice followed by petitioners
themselves. Finally, Mexinox argues that petitioners' objection that
the designation of quality under these circumstances is subjective and
therefore not to be trusted makes no sense in the context of this
investigation. The Reseller's coding of non-prime products occurred
before the filing of the antidumping petition and was carried out in
the ordinary course of business. Therefore, Mexinox argues, whatever
concerns petitioners may have about ``manipulation'' of quality
designations to affect dumping comparisons in the future do not apply
to this investigation.
    Regarding the numerous miscellaneous errors that petitioners cite,
Mexinox states that though the Department did identify some small
errors in the Reseller data during verification, the errors were not
nearly as widespread or serious as petitioners would wish them to
appear. Mexinox points out as a preliminary matter that the
verification report indicates that some of the sales selected for
tracing were selected because they had anomalous features. Thus,
Mexinox argues, these sales transactions cannot be considered
representative of the entire sales database. Furthermore, Mexinox
states that the petitioners' summary of the other errors allegedly
discovered in the Mexinox sample sales includes inaccuracies and
exaggeration. For example:
    <bullet> The ``misreported interest rates'' which petitioners cite
actually refers to a first-day clerical correction, rather than an
error discovered at verification.
    <bullet> There were no unreported further manufacturing charges.
The verification report clearly notes that a further manufacturing cost
was reported for the transaction at issue.
    <bullet> No freight was found to be misreported. The invoice
presumably referred to by the petitioners was a transaction where the
computer system did not include a standard freight amount. Rather than
report zero freight for this transaction, the Reseller conservatively
reported an average freight amount.
    <bullet> The ``misreported payment dates'' and ``misreported
commission amounts'' actually were not separate errors but instead were
one isolated error in the reporting of payment date for a particular
invoice which also affected the commission amount for that sale.
    Mexinox also disputes petitioners' statement that the ``overall
quantity and value of sales reported to the Department could not be
reconciled.'' Mexinox, assuming that petitioners are referring to the
tiny difference between the quantity and value in the reporting
database and the data contained in the company's invoice history file,
states that the Reseller fully reconciled these amounts. The Reseller
sales verification report states, ``Reseller was able to produce a list
of all the invoices that account for these differences. It is contained
in verification exhibit 16.'' See Reseller sales verification report at
3.
    Furthermore, Mexinox disputes petitioners' claims with respect to
the cost verification. It disputes petitioners' claim that the cost
allocation method used to report further manufacturing costs was found
to be flawed. Mexinox acknowledges that a discrete error in the
programming logic was identified at the verification, but states that
the effect of that error was very limited and Mexinox was able to
account for and list all of the transactions affected.
    With respect to yield calculations, Mexinox states that there was
no discrepancy in the quantity of finished goods used in the
calculation as erroneously implied in the Reseller cost verification
report. The Department perceived there to be a discrepancy only because
the verifiers were comparing an incorrect figure submitted in the
initial Section E response to the correct figure timely placed on the
record before verification.
    Also contrary to petitioners claims, Mexinox argues, there is no
finding in the Department's verification reports that ``costs for
certain processes went unallocated.'' The closest thing to such a
finding is the Department's observation that the computer program did
not directly assign a standard cost for re-spinning processing.
However, the costs of respinning were fully absorbed in the reported
further-manufacturing expenses through the application of the variance.
Thus, no processing costs remained unallocated.
    Finally, regarding the calculation of outside processing costs,
Mexinox argues that it employed the best possible means of allocating
outside processing costs for the combined processors given limitations
in the available data. Similarly, although there may have been
differences due to timing between the figures reported in the
management reports used to report outside processing costs and the
amounts booked, those differences were small and were not clearly
biased in either direction. The Reseller's reporting method therefore,
Mexinox states, was both reasonable and accurate.
    Based on the above information, Mexinox argues that, contrary to
petitioners' claims, the limited errors identified in the Reseller's
data do not come close to justifying the rejection of the entire
database in favor of facts available. Furthermore, even if the
Department deems it necessary to apply partial facts available with
respect to sales transactions identified as having errors, the
Department may not lawfully

[[Page 30801]]

apply an adverse inference with respect to those transactions absent a
finding that the Reseller failed to act to the best of its ability. It
argues that the conditions for the application of adverse facts
available are not present here because it is clear that both Mexinox
and the Reseller acted to the best of their abilities. Moreover,
Mexinox argues, it is critically important for the Department to
remember that the Reseller's data were compiled and presented by the
Reseller, and not Mexinox (which, it states, has no operational control
over the Reseller). Therefore, applying adverse facts available in this
case would not further the Department's goal of encouraging future
compliance because Mexinox simply lacks the ability to respond any more
completely than it already has.
    Department's Position: We agree with petitioners that, pursuant to
section 776(a) of the Act, total facts available are warranted with
regard to sales through Mexinox's affiliated further manufacturer. In
the instant case, the use of total facts available for the Reseller
portion of Mexinox's section C response is warranted because the method
and computer programming used by the Reseller to identify its products'
physical characteristics and to match each of these products with its
associated costs were found at verification to be accomplishing neither
end consistently or accurately. Moreover, both the frequency of the
errors and the absence on the record of information necessary to
correct certain of these errors serve to undermine the overall
credibility of the further-manufacturing response as a whole, thus
compelling the Department to rely upon total facts available for the
Reseller's database. Reliance upon total facts available is required
for all further manufactured sales because the submitted data do not
permit calculation of the adjustments required under section 772(d)(2)
of the Act for ``the cost of any further manufacture or assembly
(including additional material and labor) * * *''.
    We also find, as explained below, that the use of an adverse
inference is appropriate in this case because the record established
that the Reseller failed to cooperate with the Department by not acting
to the best of its ability in responding to our requests for
information. The manifest and manifold errors in the Reseller's
response evidence a failure to conduct even rudimentary checks for the
accuracy of the reported further-processing data. Indeed, a reasonable
check by company officials could have shown that (i) products that
underwent no further processing were being assigned further-processing
costs, (ii) further-processed products were not being assigned their
appropriate processing costs, (iii) coils passing through certain
processes were not being allocated any cost for the process, and (iv)
the output width of slit coils generated by a given master coil
exceeded the original width of that input coil.
    While the Department frequently corrects reported costs or adjusts
incorrect data with facts otherwise available in order to complete an
investigation, it does so only when it is able reasonably to do so
using information on the record, and when its knowledge of the
company's records and the reasonableness and accuracy of the reporting
method serve to establish the integrity of the underlying data. In this
case, correction of the specific flawed data is not a viable option
because of the high percentage of errors found through our testing
(nearly 40 percent of the items tested were found to be in error). In
addition, some of these errors cannot be corrected using information on
the record. More importantly, the fundamental nature of these errors
raises concerns as to the validity not only of the data subjected to
direct testing, but of the remainder of the response as well.
    The Department's antidumping questionnaire put interested parties
on notice that all information submitted in this investigation would be
subject to verification, as required by section 782(i) of the Act, and,
further, that pursuant to section 776 of the Act the Department may
proceed on the basis of the facts otherwise available if all or any
portion of the submitted information could not be verified. In
addition, in letters dated February 17 and 23, 1999, the Department
provided the Reseller with the sales and cost verification agendas it
intended to follow, both of which repeated the warning that any failure
to verify information could result in the application of facts
available. The cost verification agenda identified nine transactions
that the Department intended to test. The Reseller had a full week to
gather supporting documentation for these nine transactions and to test
for itself the accuracy of the further manufacturing data. Clearly, the
Reseller did not avail itself of these opportunities, since our testing
at verification revealed that costs for three of the nine selected
transactions contained fundamental and significant errors. See Reseller
cost verification report at 14 through 17. When the Department then
selected nine additional transactions for review, four of these were
also found to reflect significant errors. These included allocating
processing costs to non-processed material (id. at 15), mis-allocating
quantity surcharges (id.), and, more troubling, reporting finished
weights which exceeded the weight of the input material (``[t]his is
impossible and for this reason we could not verify the amount of
processing for this observation.'' Id.).
    The first step identified in the Department's verification agendas
calls for the respondent, at the outset of verification, to present any
errors or corrections found during its preparation for the
verification. As we stated above, none of the errors discussed here
were presented by the Reseller at the outset of verification; many of
them were manifestly apparent and the Reseller was obligated to notify
the Department of these problems prior to verification.
    We disagree with Mexinox's assertion that the numerous errors
identified by the Department affect only a small number of products out
of the possible universe of transactions and that the effect of the
errors is minuscule. As mentioned above, the Reseller created a
computer program to respond to the Department's questionnaire which
sought to match an input coil to each output coil sold and to assign a
cost for each processing step through which the finished coil
supposedly passed. When we tested this computer program at verification
to assess its accuracy and reliability, we found that seven of eighteen
tested transactions contained errors in either the allocation of
processing costs or in the matching of input coils to output coils. In
two of these cases, the Reseller had assigned processing costs to
products which had, in fact, undergone no processing whatever. We note
that this discrepancy arose from the input coils and output coils
identified by the Reseller's own computer program. In another
transaction, the combined widths of the finished products were greater
than the original width of the input coil as identified by the system,
an obvious physical impossibility that should have been identified by
the Reseller as an error. The nature of these errors raises serious
doubts as to the accuracy of the overall program used to match input
master coils to output slit coils as sold. It also serves to undercut
Mexinox's assertions that it acted to the best of its ability in
compiling this portion of its section C response. Further, several of
these errors served to understate the costs of further processing by
shifting portions of these costs to non-further-processed merchandise.
Since these errors affect the entire population of products sold (i.e.,
both processed and

[[Page 30802]]

unprocessed products), it is not possible for the Department to isolate
the problems and adjust for the errors accordingly.
    The program also failed to assign properly certain finishing costs.
Certain coils with a pre-buff finish applied to the underside had no
finishing costs reported for the additional processing. Finally, other
transactions contained errors in the application of surcharges for
processing small quantity orders. In the samples tested, the Reseller
had reported quantity extra charges in excess of what should have been
reported. This error led to an understating of the variance between the
costs as allocated for purposes of the response and the costs as
maintained in the Reseller's financial accounting system. Once again,
both errors reduced the costs allocated to further processed products,
thus creating further doubts as to the accuracy of the underlying
reporting method.
    We also find unpersuasive Mexinox's suggestion that because the
Reseller had to develop the computer program as a result of the
Department's highly detailed questionnaire it should therefore be held
blameless for any errors arising from its implementation of its chosen
computer logic. We must stress that every respondent in every
antidumping investigation is faced with the question of how best to
sort and retrieve the sales and cost data as maintained in its normal
course of business to respond to our questionnaire. This necessarily
entails the winnowing of its larger universe of sales to capture only
that merchandise subject to our investigation, and the further creation
of unique data fields to reflect the specific model-match criteria and
the applicable expense adjustments set forth in the questionnaire.
Finally, the resulting database must be refined to present the
transaction-specific information on sales and adjustments in the
precise formats required by the Department. That the Reseller, like
virtually all respondents in antidumping proceedings, chose to rely
upon a computer program as the easiest means to accomplish this end is
unremarkable and in no way mitigates the failings found in this case.
We note further that Mexinox itself largely succeeded in supplying data
relating to sales, expenses, and COP in compliance with equally
detailed reporting requirements. The surfeit of errors in the
Reseller's data was not the result of any unduly burdensome reporting
requirements imposed by the Department; rather, these shortcomings
resulted in their entirety from the Reseller's reliance on faulty
computer programming and data which the Reseller apparently failed to
review prior to verification.
    Finally, we disagree with Mexinox's assertion that it was able to
quantify the extent of the cost errors on the final day of
verification. First, we note that the Reseller made no attempt to
explain or quantify two of the errors discovered by the Department, the
allocation of processing costs to unprocessed material and the
misreporting of the small-quantity surcharge. More importantly, due to
the volume of information that must be verified in a limited amount of
time, the Department does not look at every transaction, but rather
samples and tests the information provided by respondents. See, e.g.,
Bomont Industries v. United States, 733 F. Supp. 1507, 1508 (CIT 1990)
([v]erification is like an audit, the purpose of which is to test
information provided by a party for accuracy and completeness.'') and
Monsanto Company v. United States, 698 F. Supp. 275, 281
(``[v]erification is a spot check and is not intended to be an
exhaustive examination of a respondent's business.''). It has been the
Department's longstanding practice that if no errors are identified in
the sampled transactions, the untested data are deemed reliable.
However, if errors are identified in the sample transactions, the
untested data are presumed to be similarly tainted. This is especially
so if, as here, the errors prove to be systemic in nature. The fact
remains unchallenged that for two days of a scheduled three-day
verification we tested a number of further-manufactured transactions to
assess the reliability of the Reseller's method for reporting costs and
discovered numerous errors. The Reseller claimed on the last day of
verification that it had reviewed its further-manufacturing data and
isolated the magnitude of these errors. However, Mexinox's assertion in
its case brief that the Reseller succeeded in identifying all of the
errors is an unsubstantiated ipse dixit which could not be verified in
the time remaining. The only way to test this eleventh-hour claim would
have been to re-verify the entire further-manufacturing database.
Moreover, the proper time for the Reseller to check the accuracy of its
reported data was before these data were submitted, or, at the latest,
prior to the start of the verification. We presented Mexinox and the
Reseller with the cost verification agenda one week in advance
precisely to allow them to prepare properly for verification. Had the
Reseller reviewed the accuracy of the computer program used to report
its further manufacturing costs prior to verification, it could have
identified the errors and presented them to the Department on the first
day of verification. We consider it inappropriate for respondents to
expect the Department to retest the entire further manufacturing
database on the last day of verification after the Department uncovers
numerous errors as a result of its routine testing. Furthermore, the
requirements of section 782(d) that the Department provide a respondent
the opportunity to remedy such errors is inapplicable. Rather, as we
stated in Certain Cut-to-Length Carbon Steel Plate from Sweden,

[w]e believe [respondent] SSAB has misconstrued the notice
provisions of section 782(d) of the [Tariff] Act. Specifically, we
find SSAB's arguments that the Department was required to notify it
and provide an opportunity to remedy its verification failure are
unsupported. The provisions of section 782(d) apply to instances
where ``a response to a request for information'' does not comply
with the request. Thus, after reviewing a questionnaire response,
the Department will provide a respondent with notices of
deficiencies in that response. However, after the Department's
verifiers find that a response cannot be verified, the statute does
not require, nor even suggest, that the Department provide the
respondent with an opportunity to submit another response.

Certain Cut-to-Length Carbon Steel Plate from Sweden, 62 FR 18396,
18401 (April 15, 1997).
    Finally, we reject Mexinox's arguments with respect to the
propriety of drawing an adverse inference with respect to a respondent
over whom they allegedly had no operational control. Mexinox goes to
great pains to assert that it never had control over the data submitted
by the Reseller; therefore, any lack of cooperation evinced by Reseller
cannot be imputed to Mexinox. See, e.g., Mexinox's case brief at 5.
Mexinox presents the issue as one in which Mexinox was at the mercy of
recalcitrant parties, only some of whom could be persuaded to
participate in the investigation: ``It is critically important in this
regard for the Department to remember that the U.S. Reseller's data was
compiled and presented by the U.S. Reseller--without the involvement of
Mexinox or any other respondent in these proceedings. Mexinox has not
even seen--let alone reviewed or prepared--the challenged data, and was
therefore not in a position to affect what or how that information is
compiled or presented.'' (Emphasis in original). See Mexinox's rebuttal
brief at 25. However, Mexinox's protestations that its officials did
not have the opportunity to review the Reseller's submitted data for
accuracy beg the point. The Department has never suggested that Mexinox
was

[[Page 30803]]

in a position to compel a reluctant Reseller to provide its sales and
cost data to Mexinox; rather, the thrust of our affiliation
determination has consistently been that Thyssen, not Mexinox, was in a
position to direct its U.S. affiliates to provide complete and timely
responses to the Department. For reasons beyond the Department's ken,
the Reseller chose to submit responses under the guise of a cooperative
respondent while withholding crucial information to make its responses
usable for purposes of establishing statutory U.S. price.
    We note that throughout this investigation Mexinox has been
represented by legal counsel who certified each of Mexinox's (and the
Reseller's) submissions of fact in this case, claiming the counsel had
read the submission and had ``no reason to believe [it] contains any
material misrepresentation or omission of fact.'' See 19 CFR
351.303(g). Similarly, on January 15, 1999, the Reseller certified that
the responsible company official had read its submission and that the
information therein was, to the best of the official's knowledge,
complete and accurate. See, e.g., Mexinox's January 15, 1999 section E
supplemental response. Finally, throughout the preparation for the
Reseller verifications and the verifications themselves, counsel were
present at all times in the conference room. The Reseller was also
assisted by economic consultants retained by Mexinox specifically for
purposes of preparing responses in this antidumping investigation. The
fact remains that despite its disagreement with the Department's
decision on affiliation, Thyssen succeeded in persuading the Reseller
to submit a response; from that moment forward, it was incumbent upon
the Reseller to submit complete and accurate responses to our
questionnaires. It was the further responsibility of Mexinox's legal
representatives, acting throughout this proceeding on Mexinox's behalf,
to ensure that the data it helped prepare were reliable. Finally, the
record does not reflect that after Mexinox was directed to submit the
Reseller's sales and cost information it had trouble securing the
Reseller's cooperation (aside from Mexinox's stated objections for the
Department's legal reasoning). Had it been a case of Mexinox painfully
and laboriously extracting each datum from a recalcitrant unaffiliated
party, one would expect the record to reflect this in, for example,
written pleas of an inability to submit the requested data, or appeals
for modifications to reporting requirements in response to limited
available data. Instead, there is silence on this point. Mexinox
proceeded throughout the investigation as though the Reseller's full
cooperation was a given, once the Department had notified Mexinox that
the further-processed sales would be required for our analysis.
    Therefore, we find the record clearly indicates that Mexinox had
the resources to secure the necessary level of cooperation from the
Reseller. The record also indicates that the Reseller failed to
cooperate by not acting to the best of its ability in compiling its
further-manufacturing response. Moreover, because the information
possessed by the Reseller is essential to the dumping determination,
the use of adverse facts available is appropriate regardless of
Mexinox's involvement in providing the information. See, e.g., Notice
of Final Determination of Sales at Less Than Fair Value: Hot-Rolled
Flat-Rolled Carbon Quality Steel Products from Japan, 64 FR 24329,
24367 (May 6, 1999). Therefore, consistent with section 776(b) of the
Act, we have drawn an adverse inference in selecting among the facts
available for use in lieu of the Reseller's unverifiable data. As
adverse facts available, we have assigned the highest non-aberrational
margin calculated on Mexinox's properly reported U.S. sales. See the
Final Determination Analysis Memorandum, dated May 19, 1999.

Comment 7: U.S. Sales of Unidentified Origin

    Petitioners argue that if the Department does not apply facts
available to the Reseller's U.S. sales based on the results of
verification, it should apply facts available to the Reseller's U.S.
sales because Mexinox intentionally withheld until January 7, 1999 (six
months after receiving the August 3, 1998 antidumping questionnaire and
on the eve of verification) the existence of 2,000 (public version
figure) U.S. sales made by the Reseller. These were sales of
merchandise for which the Reseller claims it was unable to identify the
supplier. Petitioners argue that Mexinox's failure to report these
sales earlier than January 7, 1999 clearly demonstrates that Mexinox
did not act to the best of its ability to provide information in a
timely manner. Mexinox's tardiness in reporting these sales,
petitioners argue, is all the more serious in light of the high volume
they constitute as a percentage of Mexinox's reported total U.S. sales
quantity. The Department should reject Mexinox's attempt to downplay
the importance of these sales. Petitioners argue that the Department
should reject as implausible Mexinox's claim that it could not identify
the supplier of the merchandise. They argue that it is impossible that
a supplier of stainless steel sheet and strip products in the United
States would be unable to determine the origin of input coils in the
event of a product liability claim or a tax audit. Moreover,
petitioners argue, the listing was and remains irreparably incomplete
in that Mexinox has continued to withhold the identity of the suppliers
(despite the fact that the Department found at verification that
suppliers could have been identified for several sales reported as
``unidentified vendor'') and failed to provide important product
characteristics for numerous sales. For all of these reasons,
petitioners argue, the use of facts available is justified under
section 776(a) of the Act which provides that if an interested party
withholds information that has been requested, fails to provide such
information in a timely manner or in the form or manner requested,
significantly impedes a proceeding under the antidumping statute, or
provides information which cannot be verified, the Department shall
use, subject to section 782(d) and (e), facts otherwise available in
reaching the applicable determination. In the alternative, petitioners
argue that adverse facts available should at least be applied to the
sales of unknown origin.
    Mexinox argues that petitioners' insinuation that Mexinox
deliberately conspired to withhold information from the Department
related to the unattributed sales is nonsense. It states that it could
not have engaged in such a conspiracy because it had no direct
involvement in the preparation of the Reseller's data, and had
absolutely no knowledge of the content of the data.
    Mexinox also argues that petitioners are incorrect in
characterizing the information as untimely. It states that the
Department did not request the information in the August 3, 1998
questionnaire, as petitioners suggest, but in an October 29, 1998
supplemental questionnaire. Furthermore, they argue, under section
351.301(b)(1) of the regulations, a respondent may submit factual
information at any time up to seven days before verification. Moreover,
Mexinox argues, petitioners cannot credibly claim that they were
prejudiced by the timing of the submission, as evidenced by their
multiple submissions commenting on the sales.
    Mexinox also contests petitioners' claim that it is implausible
that the Reseller could not trace the origin of the material. It states
that this issue was examined by the verifiers at both the

[[Page 30804]]

sales and cost verifications, and that the verification reports
conclusively confirm that the Reseller's computer system could only
trace the origin of the material as far back as its re-booking into
inventory following transfer from another Reseller location. Because
the rebooking identified the Reseller itself as the vendor in these
circumstances, there was no computerized link available to the original
supplier of the material. This, Mexinox argues, is indicated in the
clearest terms in the Reseller cost verification report which states,
``The system traces vendors from purchase orders (``P.O.s''). Transfers
between warehouses have their own P.O.s, therefore, the Company is
unable to identify their original source through the system.'' Given
the nature of the Reseller's computer system, Mexinox argues,
petitioners' suggestion that the Reseller should have manually traced
the origin of all of these transactions is absurd. Such tracing, though
physically possible, would have required searching by hand through
multiple layers of internal paper transactions, inventory records, and
sales records. While the Reseller can, and occasionally does, do this
on an ad hoc basis to investigate individual claims, repeating that
effort for every invoice and line item in the body of untraceable sales
would have imposed an impossible burden.
    Finally, Mexinox takes issue with petitioners' charge that Mexinox
is attempting to downplay the magnitude of the unattributed
transactions. Mexinox states that the petitioners are exaggerating the
magnitude of the sales by attributing 100 percent of the unattributed
sales to Mexinox.
    Department's Position: We agree, in part, with petitioners and with
Mexinox. In its January 7, 1999 supplemental response, Mexinox reported
a large quantity of sales by the Reseller which lacked any information
identifying the supplying manufacturer. As noted, Mexinox claimed that
it had no immediate computer link to trace the origin of coils which
had been transferred between the Reseller's different warehouses. Thus,
it had included this unidentified mass of sales in each of the sales
databases filed on the records of the investigations of stainless sheet
in coils from Germany, Mexico, and Italy.
    As explained in response to comment 6 (above), we have determined
that the errors affecting the Reseller's reported sales and cost data,
including its failure to identify properly the supplier of a major
portion of its sales, render these data unreliable in their entirety
for purposes of our margin calculations. However, this conclusion does
not dispose of the issue of the proper treatment of these unidentified
transactions. For a significant portion of the Reseller's U.S.
transactions during the POI the manufacturer is simply unknown. The
absence of the supplying mill for this body of sales affects not only
this investigation, but also those involving stainless steel sheet in
coils from Germany and Italy. Furthermore, the absence of this
elementary and critical information forecloses any attempt by the
Department to apportion these sales accurately between merchandise
which is subject to one of the three ongoing investigations and that
which is properly considered non-subject merchandise because it was
obtained from either a domestic or other foreign mill. Thus, this gap
in the record is one of overarching importance, impinging upon our
ability to calculate accurately the margins in three separate
antidumping duty investigations.
    We cannot accede to Mexinox's suggestion that we exclude the
unidentified transactions entirely from our calculations. While we are
not able to state with precision which of these transactions represent
subject stainless sheet in coils from Mexico, Mexinox has conceded that
some are properly subject to this investigation (as, indeed, some are
subject to the concurrent investigations involving Germany and Italy).
The Act and the implementing regulations do envision a number of
scenarios where the Department may disregard transactions in its
analysis (sample transactions or sales of obsolete merchandise, for
example, or when sampling transactions pursuant to section 777A of the
Act). However, these exceptions all involve an independent analysis by
the Department of the facts surrounding the proposed exclusions and its
reasoned explanation on the basis of the record that the transactions
at issue are either unnecessary or inappropriate for inclusion in our
calculations. There are no provisions allowing the Department simply to
ignore a significant portion of U.S. sales based on a reseller's
putative inability to identify the affiliated respondent manufacturer.
    As for this claimed inability, Mexinox attempts to present as the
Department's own conclusions what were, in fact, its reporting of
Reseller explanation claims at verification. Thus, the Reseller sales
verification report noted that ``Reseller explained that if material
from its warehouse is sold to another location * * * the [receiving]
warehouse subsequently will enter the merchandise into its own
inventory by recording itself as the supplier.'' See Reseller sales
verification report at 6. However, as we note on the previous page,
``Reseller clarified that the original supplier's identification is
traceable, but is not vital to its own needs.'' Id. at 5. Further, we
found at verification that, notwithstanding the Reseller's
protestations, in many cases it was possible through a rudimentary
search of the Reseller's existing computerized records to identify the
supplier. As petitioners note, of seven ``unidentified supplier''
transactions sampled at verification, we were able to trace immediately
the outside supplier for three of these using nothing more than a
personal computer in the Reseller's offices. See Reseller sales
verification report at 10.
    Section 776(b) of the Act specifies that if the Department
concludes that an interested party failed to act to the best of its
ability to comply with a request for information, the Department ``may
make an inference that is adverse to the interests of that party in
selecting among the facts otherwise available.'' As noted above, we
have determined that the use of facts available is appropriate for the
sales and further-manufacturing data submitted by the Reseller. As for
the unidentified body of sales, the Department also finds that the
available computer records would allow the Reseller to trace with
facility the supplier for nearly half of the sample transactions
selected at verification. Had the Reseller made full use of its
readily-available computer data, the effort required to identify the
manufacturer for the remaining transactions would have been
substantially less, thus largely attenuating the ``enormous amount of
work'' involved in manual tracing ``* * * through several layers of
internal paper transactions, inventory records, and sales records.''
Mexinox's Rebuttal Brief at 12. Accordingly, we find that the Reseller
did not act to the best of its ability in compiling information
essential to our analysis, such as the identity of the supplying mill,
and thus the use of adverse facts available is appropriate.
    In selecting the appropriate facts available, we find that there is
no record support for Mexinox's proposal that we allocate a portion of
the unidentified-supplier sales to Mexinox based on the percentage of
the Reseller's sales that is known to have been supplied by Mexinox;
this approach would still result in the Department's disregarding over
half of the unidentified-supplier transactions without any
justification in the record. First, since by Mexinox's own admission
some portion of the unidentified sales were supplied by Mexinox, the
resulting percentage of merchandise identified as being of

[[Page 30805]]

Mexican origin is understated. In addition, we have no means of
conducting an independent evaluation of this large body of sales to
determine whether the patterns found for the identified universe of
transactions would hold true for merchandise which, obviously, moved in
different channels of distribution (e.g., through its transfer between
or among the Reseller's locations). Thus, for purposes of this final
determination we have adopted a variant of Mexinox's proposal. As an
adverse inference, we are treating all of the unidentified merchandise
as having originated with one of the three respondent firms in the
concurrent investigations, rather than assuming that some of it may
have originated from a producer other than AST, KTN, or Mexinox. To
apportion the unidentified sales among the three investigations we have
adjusted the quantity for each of the unidentified sales on a pro rata
basis, using the verified percentages of the Reseller's merchandise
supplied by each of the three respondents' mills. We have then applied
a facts-available margin to these transactions, as explained above in
response to Comment 6.

Comment 8: Classification of U.S. Sales as EP or CEP

    Petitioners argue that the Department should consider all of
Mexinox's U.S. sales involving Mexinox USA as CEP sales, rather than EP
sales. Mexinox reported two types of EP sales: Direct shipments (i.e.,
sales of merchandise produced to the customer's order and shipped
through Mexinox USA's Brownsville, Texas, facility directly to the
unaffiliated U.S. customer without remaining in Mexinox USA's warehouse
for longer than four days) and San Luis Potosi (SLP) stock sales (i.e.,
sales of merchandise sold out of finished goods inventory held at the
SLP factory and shipped through Mexinox USA's Brownsville, Texas,
facility directly to the unaffiliated U.S. customer without remaining
in Mexinox USA's warehouse for longer than four days). The record
shows, petitioners state, that Mexinox's reported EP sales are
virtually indistinguishable from its reported CEP sales.
    Petitioners state that in evaluating sales made prior to
importation, it is the Department's practice to evaluate:
    1. Whether the merchandise is shipped directly to the unaffiliated
buyer without being introduced into the physical inventory of the
selling agent;
    2. Whether direct shipment to the unaffiliated buyer is the
customary channel for sales of subject merchandise between the parties
involved; and
    3. Whether the selling agent in the United States acts only as a
processor of sales-related documentation and a communication link with
the unaffiliated U.S. buyer.
    Petitioners argue that Mexinox's reported EP sales clearly meet the
first of these criteria because Mexinox freely acknowledges that for
direct shipments, the merchandise ``must pass through Mexinox USA's
distribution facility in Brownsville (Texas) so that it can be
transferred from the Mexican carrier to a U.S. carrier for further
shipment.'' See Mexinox's section A response at A-16 (n.5). The same is
true for Mexinox's sales of stock held in SLP. See section A response
at A-17 (n.7). Thus, petitioners state, the first criterion is clearly
met because the criterion contemplates only whether merchandise enters
the affiliates' inventory, and not the length of time in inventory.
    Petitioners argue that the second criterion is met inasmuch as
there is no reason to conclude that shipment through Mexinox USA's
Brownsville warehouse is anything but the customary channel of
distribution for Mexinox's reported EP sales.
    With respect to the third criterion, petitioners begin by stating
that the Department has amplified its policy of evaluating the level of
involvement of U.S. subsidiaries by determining that sales are
appropriately classified as CEP sales where the U.S. subsidiary: (1)
Was the importer of record and took title to the merchandise; (2)
financed the relevant sales transactions; (3) arranged and paid for
further processing; and (4) assumed the seller's risk. See Certain Cold
Rolled and Corrosion Resistant Carbon Steel Flat Products from Korea;
Preliminary Results of Antidumping Duty Administrative Reviews, 61 FR
51882, 51885 (October 4, 1996) (Steel from Korea Preliminary Results).
These facts are significant, petitioners state, because for all of
Mexinox's reported EP sales Mexinox USA:

    <bullet> Was the importer of record;
    <bullet> Took title to the merchandise;
    <bullet> Warehoused the merchandise after importation;
    <bullet> Invoiced the U.S. customer; and
    <bullet> Collected payment.

For direct sales, petitioners state, Mexinox USA also negotiates
directly with U.S. customers and takes purchase orders. Furthermore,
petitioners argue that even though Mexinox USA did not report any
further processing after its importation of the subject merchandise,
Mexinox USA was responsible for other post-importation services such as
arranging customs clearance and U.S. freight, and it also assumed the
financial risk associated with its U.S. sales. For all of these reasons
petitioners conclude that it is evident that Mexinox USA is not merely
a ``paper processor,'' but that it handles almost every aspect of
making U.S. sales, and meets the criteria set forth in Steel from Korea
with respect to its level of involvement in direct and SLP stock sales.
    Moreover, petitioners claim that contrary to Mexinox's statement
that price terms are ultimately set by management in Mexico, there is
no evidence that Mexinox USA's invoice prices reflect prices initially
approved by Mexinox. Even if the Department is convinced that Mexico
sets U.S. prices, petitioners argue, the Department must also consider
other forms of the affiliate's involvement, such as contact with the
U.S. customer, contacting the factory to arrange production and
shipment, and issuing the final invoice to, and collecting payment
from, the customer.
    Petitioners also argue that as a general guideline the Department
should take the mere involvement of a U.S.-based subsidiary,
particularly one comprised of a large staff that includes an active
sales force, and billing and accounting staff, as a strong indication
that the activity of the U.S. sales force must be significant.
Otherwise a respondent would simply conduct operations from its home
market. The degree of significance is determined by the per-unit amount
of the indirect selling expenses. For example, a true paper-processing
subsidiary would have an inexpensive office and a small, clerical staff
with little more than telephone and facsimile equipment in order to
communicate with the home office.
    Therefore, petitioners argue, because of Mexinox USA's extensive
involvement in the selling process, the Department should deduct the
indirect selling and operating costs of Mexinox USA from the starting
prices for all U.S. sales involving Mexinox USA. In the alternative,
petitioners state that if the Department determines that Mexinox USA's
role in the direct and SLP sales does not cross the CEP threshold, the
Department must recalculate the reported indirect selling expense ratio
to allocate it only to CEP sales (and not EP sales) by Mexinox USA.
    Mexinox argues that the Department correctly determined that its
direct shipment and SLP stock sales were EP sales. It bases this
argument on the analysis of the three criteria identified by
petitioners (cited above) that the Department uses in evaluating sales
made prior to importation. Regarding the first criterion, Mexinox
states that petitioners are factually incorrect in

[[Page 30806]]

saying that the direct shipment and SLP stock sale material enters
Mexinox USA's inventory. It states that the Department verified through
sample sales transactions the period of time between shipment to
Brownsville and further shipment from Brownsville, and confirmed in
each case that the period was less than four days. Mexinox also takes
issue with petitioners' reading of the term ``whether'' as used in
conjunction with the inventory prong of the Department's test for EP
treatment. Petitioners' interpretation, Mexinox states, would mean that
merchandise had been inventoried if it was physically on the premises
of an affiliate for any length of time, presumably even for one minute.
To be in an entity's inventory, Mexinox states, means the product must
not merely be physically present on the premises, but must instead be
considered part of the stock of the affiliate. As support for this
distinction, Mexinox cites Steel from Korea, in which the Department
said, ``While in some cases certain merchandise sold by [the foreign
producer] was entered into [the U.S. affiliate's] inventory, this
merchandise was sold prior to the importation of the merchandise, but
not from [the U.S. affiliate's] inventory.'' See Steel from Korea, 62
FR at 18439. This same distinction, Mexinox states, can be made with
respect to Mexinox's sales at issue, where the material is not being
sold out of Mexinox USA's general inventory, but rather directly from
Mexinox's factory in SLP.
    Mexinox also argues that petitioners' interpretation of what
constitutes inventory also ignores the reasons why the material was
brought to Mexinox USA's distribution facility in the first place. It
cites a portion of its October 28, 1998 supplemental questionnaire
response in which it says that it had no choice:

    All shipments from Mexinox's factory in Mexico must stop in
Brownsville for at least some period of time to allow for transfer
to a US truck. This is because the United States, contrary to its
obligations under the North American Free Trade Agreement, refuses
to allow Mexican trucks access to US border states. Therefore
uninterrupted shipment of the material from Mexico to the US
customer is a practical impossibility and an incidental stop-over in
Brownsville is unavoidably part of the direct shipment process.

See Mexinox's October 28, 1998 submission at 6-7. Mexinox argues that
the brief period (no longer than four days) during which direct
shipment or SLP stock material may have been held in the Brownsville
distribution facility did not transform the material into inventory as
petitioners would have the Department believe.
    Regarding the second criterion, Mexinox agrees with petitioners
that shipment through Mexinox USA's Brownsville warehouse is the
customary channel of distribution for Mexinox's direct and SLP stock
sales.
    Regarding the third criterion, Mexinox does not dispute that
Mexinox USA performs the selling activities that petitioners cite (with
the exception of warehousing), but insists that these selling
activities are consistent with EP treatment. It states that the Court
of International Trade (CIT) has on many occasions upheld EP (formerly
purchase price (PP)) classification where the U.S. affiliate engaged in
activities that were at least equal to or exceeded those alleged to be
conducted by Mexinox USA:
    <bullet> PP classification was upheld where the U.S. affiliate
first shipped merchandise to independent warehouses whose cost was
borne by the U.S. affiliate, the U.S. affiliate was the importer of
record, the U.S. affiliate paid estimated antidumping duties on the
merchandise, the U.S. affiliate retained title prior to sale to the
unrelated U.S. party, and the U.S. affiliate received commissions for
its role in the transactions. Outokumpu Copper Rolled Products v.
United States, 829 F. Supp. 1371, 1379-80 (Ct. Int'l. Trade 1993),
appeal after remand dismissed, 850 F. Supp. 16 (Ct. Intl. Trade 1994).
    <bullet> PP classification was upheld where the U.S. affiliate
received purchase orders and invoiced the related customer, the U.S.
affiliate was invoiced for and directly paid the shipping company for
movement charges, the U.S. affiliate occasionally warehoused, at its
own expense, and the U.S. affiliate received a substantial mark-up over
the price at which it purchased from the exporter. E.I. DuPont de
Nemours & Co. v. United States, 841 F. Supp. 1237, 1248-50 (Ct. Int'l.
Trade 1993).
    <bullet> PP classification was upheld where the U.S. affiliate
invoiced customers, collected payments, acted as the importer of
record, paid customs duties, and may have taken title to the goods when
they arrived in the United States. Zenith Electronics Corp. v. United
States, 18 CIT 870, 873-74 (Ct. Intl. Trade 1994).
    <bullet> PP classification was upheld where the U.S. affiliate
processed the purchase order, performed invoicing, collected payments,
arranged U.S. transportation, and served as the importer of record.
Independent Radionic Workers v. United States, CIT Slip Op. No. 94-45
(Ct. Int'l Trade 1995).
    Furthermore, Mexinox argues that while these cases all pre-date the
URAA, the SAA states that ``no change is intended in the circumstances
under which export price versus constructed export price are used.''
See SAA at 152-53.
    Mexinox also disagrees with petitioners that Mexinox USA's selling
activity in connection with these transactions ``meets the criteria set
forth in Steel from Korea.'' It argues that the preliminary
determination notice in that case classified as CEP only a sub-category
of the respondent's sales ``where the merchandise was further processed
by an outside contractor in the United States.'' See Steel from Korea
Preliminary Results, 61 FR at 51885. Furthermore, in the final results
in that case, the Department refused to extend CEP treatment to any of
the other transactions, even though the U.S. affiliate's activities
went beyond what petitioners would presumably deem acceptable for EP
treatment. The Department stated:

    ``UA's (U.S. affiliate's) role, for example, in extending credit
to U.S. customers, processing of certain warranty claims, limited
advertising, processing of import documents, and payment of cash
deposits on antidumping and countervailing duties, appears to be
consistent with purchase-price classification. These selling
services as an agent on behalf of the foreign producer are thus a
relocation of routine selling functions from Korea to the United
States. In other words, we determine that UA's selling functions are
of a kind that would normally be undertaken by the exporter in
connection with these sales.''

See Steel from Korea, 62 FR at 18439. Mexinox states that with the
exception of a set of sales identified on the first day of verification
(which Mexinox admits are CEP), no products were further-processed in
the United States. Thus, Mexinox argues, Mexinox USA's activities do
not meet the criteria laid out in Steel from Korea.
    Mexinox also disputes petitioners' contention that there is no
evidence that price terms for U.S. sales are set by management in
Mexico. It cites the sales verification report, which states, ``In both
markets the final price paid is the ``price in effect,'' at the time of
shipment. The ``price in effect'' is a customer-specific price
determined by the commercial director based on prevailing market
prices, and is negotiated with each customer.'' See Mexinox sales
verification report at 6. Mexinox states that the commercial director
referred to is a Mexinox official located in SLP. Mexinox also contests
petitioners' attempt to downplay the significance of who sets the
price,

[[Page 30807]]

stating that it is a very important factor, and in some cases has even
been a decisive factor.
    Mexinox also urges the Department to reject petitioners' argument
that sales should be classified as CEP based on ``mere involvement'' of
a U.S. affiliate in the U.S. sales process. It states that following
this very restrictive approach would conflict directly with the
Department's three-part test which it has consistently applied, with
express judicial sanction, since 1987.
    Finally, Mexinox disagrees with petitioners' argument that Mexinox
USA's indirect selling expenses should be allocated solely to the
reported CEP sales rather than to all U.S. sales handled by Mexinox
USA. It states that Mexinox USA's indirect selling expenses relate to
the affiliate's overall sales operations, and therefore cover expenses
incurred by Mexinox USA in connection with both CEP and EP sales.
Mexinox states that by allocating the indirect selling expenses only to
CEP sales, as petitioners propose, the Department would overstate
indirect selling expenses.
    Department's Position: We disagree with petitioners that Mexinox's
reported EP sales should be reclassified as CEP sales. We find that
Mexinox's reported EP sales pass the Department's three-prong test for
evaluating sales made through affiliates prior to importation.
Regarding the first criterion, we agree with Mexinox that the
circumstances under which the imported merchandise passes through
Mexinox USA's facility en route to the ultimate customer justify a
determination that the merchandise did not enter Mexinox USA's
inventory within the meaning of the Department's three-prong test. As
Mexinox points out, the Department in Steel from Korea drew a
distinction between (1) merchandise sold prior to U.S. entry that
subsequently entered the inventory of the U.S. affiliate and (2 )
merchandise sold from the U.S. affiliate's inventory. We stated,
``While in some cases certain merchandise sold by [the foreign
producer] was entered into [the U.S. affiliate's] inventory, this
merchandise was sold prior to the importation of the merchandise, but
not from [the U.S. affiliate's] inventory.'' See Steel from Korea, 62
FR at 18439. Where, as here, the merchandise (sold prior to
importation) was situated at Mexinox USA's facility for the period of
no more than four days and only for the necessary purpose of
transferring to other trucks, we determine that the merchandise was not
sold from the inventory of the U.S. affiliate.
    Regarding the second criterion, no party has disputed that this
channel was Mexinox's customary channel of distribution for its U.S.
sales.
    Regarding the third criterion, we agree with Mexinox that Mexinox
USA's selling activities are comparable to those that have been upheld
by the courts as consistent with EP treatment. Therefore, Mexinox USA's
performance of these activities do not compel CEP classification for
the sales at issue. Furthermore, our verification uncovered no evidence
that conflicts with Mexinox's claims that the sales were made in
Mexico, and petitioners have cited to none. Moreover, we agree with
Mexinox that the facts of Steel from Korea differ from those present
here in that in Steel from Korea the affiliate arranged for further
manufacturing, whereas here no further manufacturing is performed for
the sales at issue. For these reasons we have not reclassified
Mexinox's EP sales in this final determination.
    Finally, we disagree with petitioners that all of Mexinox USA's
reported indirect selling expenses should be attributed to CEP sales.
Although we have determined that the direct sales and SLP stock sales
are appropriately classified as EP sales, they do pass through Mexinox
USA's facility and Mexinox USA performs some selling activities in
connection with them. Therefore, it is appropriate that we allocate a
proportionate share of indirect selling expenses to them.

Comment 9: Level of Trade

    Petitioners argue that the Department erred in its Preliminary
Determination with respect to level of trade (LOT). In the Preliminary
Determination, the Department determined that there was one LOT in the
home market, that there were two LOTs in the U.S. market (corresponding
to the EP and CEP sales channels), and that Mexinox's sales to its home
market customers were at a LOT that was different and at a more
advanced stage of distribution than were its sales to its affiliated
customers in the United States (i.e., Mexinox USA, the Reseller, and
the Krupp affiliate). Based on these determinations, it made a CEP
offset for Mexinox's CEP sales in accordance with section 773(a)(7)(B)
of the Act. Petitioners argue that there is only one LOT in the United
States, and that it is more advanced than the home market LOT. Thus,
they argue, no CEP offset is warranted. Furthermore, they argue that
the Department should find that the sales to the Reseller and the Krupp
affiliate are at the same LOT as Mexinox's EP sales because Mexinox did
not even attempt to distinguish them as separate LOTs as it did for its
CEP sales to Mexinox USA.
    Petitioners argue first that the list of selling activities Mexinox
submitted to support its LOT adjustment claim exaggerates and distorts
the activities, resulting in the creation of different LOTs where none
exist. Specifically, they argue that Mexinox's list of seventeen
selling activities should be condensed into a list of only seven
activities. They argue:
    1. The first four activities on Mexinox's list (pre-sales technical
assistance, sample analysis, prototypes and trial lots, and continuous
technical assistance) really are only one activity, technical
assistance.
    2. The next two activities (negotiating prices and processing
customer orders) are really not properly included in the analysis
because anyone selling a product performs these activities for all
customers, regardless of market or affiliation.
    3. The next two activities (inventory maintenance and just-in-time
delivery) are both essentially the same service.
    4. Two other activities (arranging freight services and shipment of
small packages) should also be considered the same activity.
    5. The next two activities (making sales calls and traveling
internationally) are the same activity.
    6. The ``further processing'' activity is a manufacturing activity
and thus not properly included as a selling activity. Moreover, to the
extent that it entails cutting to length, such activity is not even
related to the sale of subject merchandise.
    7. The credit and collection activity is an activity that companies
selling products routinely engage in with respect to most, if not all,
customers and thus is not properly included in an LOT analysis.
    8. The last three activities (accepting currency risk, warranting
merchandise, and accepting low-volume orders) can be considered
distinct selling activities.
    Thus, the list of selling activities, as condensed by petitioners,
amounts to:

    1. Technical service.
    2. Inventory maintenance.
    3. Freight services.
    4. Sales calls.
    5. Currency risks.
    6. Warranties.
    7. Low-volume orders.

    With regard to technical service, petitioners argue that although
Mexinox purports to provide lower levels of technical service for most
U.S. channels, the nature of manufacturing the subject merchandise
requires uniformly high quality levels. Furthermore, petitioners state
that evidence on the record (not susceptible to public summary)
demonstrates that Mexinox affords

[[Page 30808]]

technical services directly or indirectly to both domestic and U.S.
customers.
    With respect to inventory maintenance and freight services,
petitioners argue that evidence on the record (not susceptible to
public summary) demonstrates that these activities are equally
pertinent to both EP sales and Mexinox's CEP sales to Mexinox USA.
    With respect to sales calls, petitioners point out that Mexinox has
stated that ``this selling activity does not apply to the CEP
transaction between Mexinox and Mexinox USA.'' See section A response
at attachment A-4. Petitioners argue that the Department should not
accept a representation that Mexinox does not need to be in contact
with Mexinox USA because it is not plausible that Mexinox does not make
telephonic and personal sales calls to Mexinox USA as it would with any
other large customer.
    With respect to currency risks (a selling activity Mexinox
associates only with home market sales, and not U.S. sales),
petitioners argue that currency risk is normally associated with export
sales, and not home market sales. Further more, during the POI the peso
was remarkably steady. Thus, petitioners state, if this activity is a
factor at all, it should be attributed to EP and CEP sales, but not to
home market sales.
    Finally, with respect to warranty claims, petitioners argue that
there is evidence on the record that Mexinox, not Mexinox USA, handles
warranty claims. Furthermore, they argue that examination of Mexinox
USA's itemization of selling expenses reflects nothing that would
indicate that it handles this activity.
    Based on the above analysis, petitioners conclude that Mexinox
clearly engages in the same type of selling activities in its dealings
with Mexinox USA as it does with home market and U.S. EP customers. The
only selling activity that petitioners recognize as being different
between the U.S. and home markets is the acceptance of low-volume
orders in the home market.
    Moreover, petitioners argue that the Department's preliminary
determination with respect to this issue yields the implausible
conclusion that every transaction between Mexinox and a customer in
North America was at the same LOT except for Mexinox's transactions
with its affiliated reseller. It is inconsistent for the Department to
find that, on the one hand, sales to home market customers and EP sales
to U.S. customers are at the same LOT but, on the other hand, that the
EP sales that the Department has constructed using its CEP sales method
(i.e., the sales between Mexinox and Mexinox USA) are not at the same
LOT as the ``regular'' EP sales. The construction of hypothetical EP
prices to Mexinox USA should, petitioners believe, make the CEP and EP
transactions comparable and representative of the same LOT.
    Finally, petitioners argue that, in the alternative, if the
Department continues to grant a CEP offset, it should correct the
offset calculation which, they allege, contains three errors. First,
petitioners claim that in calculating indirect selling expenses
incurred in the United States, the Department incorrectly included
expenses that Mexinox incurred in the home market. Second, the CEP
offset should be the lesser of either: (1) The sum of home market
indirect selling expenses (excluding inventory carrying costs (ICC))
and home market commissions or (2) U.S. ICC and indirect selling
expenses. In the Department's calculation, the offset was the lesser of
either (1) the sum of home market indirect selling expenses (excluding
ICC) and home market commissions or (2) the sum of home market and U.S.
ICC and home market and U.S. indirect selling expenses. Finally,
petitioners argue, the Department failed to ensure that the combined
amount of the deduction for the CEP offset and deductions for the
commission offset do not exceed total U.S. incurred indirect selling
expenses (including ICC).
    Mexinox argues that the Department was correct in its LOT
determination and in granting a CEP offset to NV for the CEP LOT. It
argues first that the petitioners' arguments are useless to the
Department because their analysis focuses on the differences between EP
and CEP LOTs, rather than the CEP LOT versus the home market LOT. It
argues that it is this difference between the CEP LOT and the home
market LOT that ultimately justifies the granting of a CEP offset.
    Mexinox next argues that its home market sales are at a more
advanced stage in marketing than its U.S. sales. Its argument centers
on the central role that service centers play in its U.S. chain of
distribution both for EP and CEP sales, as distinguished from its home
market chain of distribution in which Mexinox sells to no service
centers. The reason service centers are important, Mexinox argues, is
that they function by acting as intermediaries between the mills and
the larger community of specialized end users. To do so, Mexinox
states, service centers tend to purchase large master coils from the
mills and then further process the material to make it possible for end
users to use them. Service centers also generally provide their
customers with a package of individualized selling services (e.g.,
just-in-time deliveries and other forms of inventory maintenance,
technical advice, and flexible credit terms) that the foreign producer
would otherwise be required to provide. Thus, selling to U.S. service
centers allows Mexinox to concentrate on the production and sale of
larger, higher-yield coils in standard grades, surface finishes, and
dimensions, while the service center focuses on the next level of
distribution to end-users. The sales to service centers encompass a
smaller scope and intensity of selling activities precisely because the
service center takes over the role of providing the specialized selling
services that are requested by end users, such as flexible credit
terms, pre-sale and post-sale technical advice, further processing,
just-in-time delivery, and other specialized inventory requirements.
    Furthermore, Mexinox argues that the Department has in the past
recognized that sales to service centers represent a different and less
advanced stage in the marketing process than sales to customers further
downstream. Thus, in the preliminary determination of SSSS from the
United Kingdom the Department explained that, ``Normally, stages of
marketing focus on whether sales are to service centers or end-users,
in some instances taking into account whether or not sales are made
through intermediate parties.'' See SSSS from United Kingdom,
Preliminary Determination of Sales at Less Than Fair Value, 64 FR 85
(January 4, 1999). Similarly, in Cold-Rolled Carbon Steel Flat Products
from the Netherlands the Department determined that home market sales
to service centers and sales to end users constituted entirely
different LOTs. See Cold-Rolled Carbon Steel Flat Products from the
Netherlands; Final Results of Administrative Review, 63 FR 13204 (March
18, 1998). Mexinox acknowledges that the details of these cases may
differ from the present investigation, but states that the observations
the Department made are all generally consistent with the circumstances
relating to Mexinox's sales in the U.S. and Mexican markets. The
essential characteristic of Mexinox's sales, it states, is that it
sells directly to service centers in the U.S. market and acts as a
service center in the home market.
    Next, Mexinox argues that it performs far fewer selling functions
in its CEP sales than it does in the home market where it acts as a
service center. It states

[[Page 30809]]

that petitioners are correct that many of the selling activities that
are associated with Mexinox's U.S. sales (whether EP or CEP) are
carried out by Mexinox USA. However, to construct the CEP LOT, Mexinox
states, all of these selling activities undertaken by Mexinox USA in
the United States must be excluded in accordance with section
772(d)(1)(D) of the Act and 19 CFR Sec. 351.412(c)(ii)(1998). When that
is done, the CEP transactions between Mexinox and Mexinox USA involve
relatively few selling functions at all. Essentially the only selling
activities required in connection with the relevant transactions
between the related parties is a low level of freight and delivery
arrangements (via the same SLP-to-Brownsville trucking route) and order
processing.
    Next, Mexinox discusses its reported selling functions. Regarding
its reported selling activity ``small package size and low volume
orders,'' Mexinox argues that this activity is fundamentally different
in the home and U.S. markets. Because it sells to service centers in
the United States, Mexinox states, it tends to sell larger coils in
standard sizes, grades, and surface finishes which the service centers
then cut. In the home market, Mexinox itself performs the service
center function of cutting and slitting from master coils. Thus, the
coils tend to be smaller. It also tends to sell in smaller lots, thus
increasing the number of transactions and selling services required to
be performed in the home market. Mexinox states that though arguably
not a selling activity itself, average coil size is a compelling
indicator both of the differences in selling functions performed by
Mexinox as a home market service center and the intensity of those
selling functions because many routine selling activities must be
repeated for each transaction and therefore vary roughly in accordance
with the number of transactions involved.
    With respect to further processing, Mexinox disagrees with
petitioners' argument that further processing is a manufacturing
activity and thus not properly included as a selling activity. It
states that the Department has recognized the relevance of further
processing to the LOT analysis in other cases, including the
Preliminary Determination of this case. It argues that further
processing of this kind must be recognized and taken into account as an
integral part of the distinct bundle of selling services offered by
Mexinox in the home market but not the U.S. market.
    With respect to technical services, Mexinox states that it provides
no pre-sale technical analysis, sample analysis, prototypes and trial
lots, or continuous technical service in connection with the CEP
transactions between itself and Mexinox USA. Moreover, even if the
Department were to look further downstream, the level of technical
assistance provided in connection with U.S. sales is lower than in the
home market. This is because service centers tend to buy large master
coils in standard sizes, grades, and surface finishes, often without a
specific end user in mind, thus limiting the need for pre- and post-
sale technical assistance, sample analysis, prototypes, or continuous
technical assistance. Furthermore, when a downstream customer does seek
technical assistance, it naturally turns first to the party that sold
the material to him, which in this case is the service center and not
Mexinox. Mexinox states that the opposite situation exists in the home
market because Mexinox itself serves as the service center.
    With respect to inventory maintenance and just-in-time deliveries,
Mexinox argues that it provides no inventory maintenance or just-in-
time delivery services in connection with the CEP transactions between
itself and Mexinox USA. However, in keeping with its function as a
service center in the home market, it offers a wide variety of
inventory maintenance and just-in-time delivery services for home
market customers.
    With respect to freight and delivery services, Mexinox states that
the intensity of this activity is extremely low in connection with the
CEP sales between itself and Mexinox USA because freight is exclusively
limited to consolidated shipments over a single route between the
factory in SLP and the distribution point in Brownsville, Texas. In
contrast, freight arrangements in the home market involve smaller
volumes and more frequent and varied deliveries from Mexinox's mill in
SLP and from the various remote warehouses located throughout Mexico.
    With respect to the order processing, credit, and collection,
Mexinox states that in connection with the CEP transactions between
Mexinox and Mexinox USA, these activities are essentially automatic and
risk free. Moreover, such order processing essentially involves a
single point of contact for all sales. In contrast, Mexinox argues, the
transactions at issue involve handling a full range of unaffiliated
customers. Furthermore, because individual transaction volumes are
smaller, the level of such activities is much higher on a per-ton basis
in the home market than in the United States.
    With respect to price negotiation and sales calls, Mexinox states
that these activities are logically more frequent in the home market
because of the higher number and smaller per-transaction volume of
sales in the home market.
    With respect to currency risk, Mexinox argues that petitioners have
failed to properly evaluate the currency risk which Mexinox faces in
selling stainless steel in the United States. All home market sales
during the POI were in Mexican pesos. Therefore, because Mexinox
extends credit to its home market customers, Mexinox assumes all
currency risks associated with the peso during the credit period.
Furthermore, Mexinox argues that contrary to the petitioners' comments,
the peso was not remarkably stable during the POI, but instead
depreciated 7.6 percent against the dollar between April 1, 1997 and
March 31, 1998.
    Based on the above analysis, Mexinox states that the CEP LOT
involves fewer and different selling functions and is less advanced
than the home market LOT. Accordingly, the Department is required, if
possible, to make a LOT adjustment when matching CEP to NV. Because
there is only one LOT in the home market and it is therefore not
possible to quantify a LOT adjustment, Mexinox states, the Department
should grant a CEP offset.
    Finally, Mexinox disagrees with petitioners' contention that the
Reseller and the Krupp affiliate should be deemed to be at the same LOT
as EP sales. First, if the Department determines to use the resale
prices from these entities in its analysis, there is no question that
such sales are properly classified as CEP transactions because the
relevant sales were made after importation. Second, because these sales
are CEP transactions, the Department is required to exclude all selling
functions carried out in the United States by both the reseller and
Mexinox USA in determining the constructed LOT for these sales.
Accordingly, under the Department's standard analysis, Mexinox states,
selling functions associated with sales by these resellers and Mexinox
USA must be backed out until all that is left is the bare transaction
made between Mexinox and Mexinox USA. The LOT and the LOT analysis for
these sales is exactly the same as for other CEP transactions, and a
CEP adjustment is also justified for these sales.
    Department's Position: After careful review of the facts on the
record, we have determined not to change our preliminary determination
with respect to LOT. We agree with petitioners that some of the
seventeen selling activities

[[Page 30810]]

that Mexinox reported could legitimately be collapsed, resulting in a
shorter list of activities. Furthermore, some of the reported selling
activities raise questions, and some more strongly support our
determination than others.
    Nevertheless, we find that taken collectively the selling
activities Mexinox reported and the way it performs these activities in
the two markets support a finding that there is one LOT in the home
market and two LOTs in the U.S. market. We also find that the EP and
home market sales channels represent one stage of marketing and the
U.S. CEP channel represents another, and that the home market LOT is
more advanced than the CEP LOT. In its section A response, Mexinox
provided the information that some activities are not performed or are
performed at a low level of intensity with respect to the CEP
transactions between itself and Mexinox USA (e.g., technical services,
inventory maintenance, just-in-time delivery). See Mexinox's section A
response, exhibit A-4 and its April 5, 1999 Rebuttal Brief, attachment
1. Petitioners have put no information on the record to rebut Mexinox's
representations.
    Furthermore, 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 the CEP sales between Mexinox and Mexinox USA, and thus
reflect a more advanced stage of marketing. Moreover, we agree with
Mexinox that the freight and delivery service activity would likely be
more routine in the CEP transactions between Mexinox and Mexinox USA
than between Mexinox and its customers throughout Mexico, and thus also
reflects a less advanced stage of marketing. Similarly, while
petitioners are doubtless correct that Mexinox does make telephone
calls to Mexinox USA, such calls between a parent and its foreign
subsidiary are likely more routine than calls between a parent and its
numerous unaffiliated home market customers. Further, we agree with
Mexinox that the peso did decline by approximately 7.6 percent during
the POI, and that therefore the peso was not, as petitioners have
alleged, ``remarkably steady.'' Thus, Mexinox did incur some currency
risk in the home market during the POI. For these reasons, we determine
that there is no basis in the record for departing from our LOT
determination as set forth in the Preliminary Determination and, thus,
we have not changed it for this final determination.
    Furthermore, we agree with Mexinox that because the sales to the
U.S. Krupp affiliate are CEP transactions sold through Mexinox USA, the
relevant sales transactions we must examine in determining the correct
LOT are those between Mexinox and Mexinox USA. There is therefore no
reason to treat these sales differently than any other of Mexinox's CEP
transactions. Therefore, in our calculations for the final
determination we have continued to make a CEP offset for the sales to
the U.S. Krupp affiliate as well as Mexinox's other CEP sales. With
respect to the Reseller this question is moot because we have used
total facts available.
    Finally, we agree with petitioners that the CEP offset calculation
in the Preliminary Determination should be corrected for the three
stated errors. We have done so in this final determination.

Comment 10: Downstream Home Market Sales

    Petitioners argue that the Department should never exclude from its
analysis sales made through affiliated resellers (downstream sales) in
the home market. (In the Preliminary Determination the Department did
not require Mexinox to report its downstream sales in the home market
because the sales to the affiliated resellers all passed the
Department's arm's-length test.) Such a practice is bad policy,
petitioners argue, because it invites the affiliate to mark up its
resale prices and thereby mask true dumping. Furthermore, they argue
that since the Department's arm's-length test is only applied to those
particular products that were sold to unaffiliated parties, a
respondent may wholly exclude high-priced home market sales from the
Department's dumping analysis by selling them only through an
affiliate. Petitioners stress that even small quantities can have an
enormous impact that is completely disproportionate to their relative
quantity because they may represent the sales that would be matched to
U.S. sales in a LTFV analysis. Additionally, petitioners state that the
existence of potential matches (even identical matches) among sales to
non-affiliates is not necessarily of use because such sales may prove
either unuseable by virtue of being outside the ordinary course of
trade (e.g., below cost) and thus not under consideration in the LTFV
analysis, or otherwise unrepresentative, particularly if they are below
prices that a reseller is charging to its unaffiliated customers. For
these reasons, petitioners argue that the Department should state for
the record that its policy in the future, particularly for any
administrative reviews of any order in this proceeding, will be to
require the reporting of all downstream sales by affiliated home market
customers.
    Mexinox disagrees with the petitioners' argument, but prefaces its
counter-argument by stating that the appropriate forum for the
petitioners' advisory comment is the rule-making process and not an
antidumping investigation. In any event, it argues that for two reasons
the petitioners' proposal cannot be sustained. First, it argues that
the Department does not have the authority to completely ignore section
351.403(d) of the Department's regulations, as petitioners have
recommended, and that even if the Department agreed with the
petitioners, it would be obligated to follow lawful administrative
procedure to formally amend or repeal this section of its regulations.
    Second, Mexinox claims that the Department's downstream sales
reporting requirements, and the arm's-length test in particular,
already deal effectively with petitioners' concerns. It states that if
it were to sell to affiliates at artificially lowered prices in order
to manipulate the dumping margins, those sales would fail the arm's-
length test. Therefore, it argues, even if the petitioners can contrive
an implausible scenario in which the affiliated party purchasing at
arm's length could resell the merchandise at an even higher profit in a
downstream sale, the fact remains that sales to the affiliates that
pass the stringent arm's-length test would be completely reliable for
the purpose of determining NV.
    Department's Position: We agree with Mexinox that the appropriate
context for the petitioners' comment is the rule-making process.
Furthermore, we will not use this final determination to promulgate
announcements on reporting requirements for possible future segments of
this proceeding. Such requirements are determined on a case-by-case
basis based on the facts of each administrative review.
    In the preliminary determination of this investigation we performed
an arm's-length test in accordance with 19 CFR Sec. 351.403(d). We
found that all of Mexinox's home market sales to affiliated resellers
were made at arm's-length prices. See the Department's preliminary
determination analysis memorandum, dated December 17, 1998, p. 12, and
the Preliminary Determination at 129. For this final determination we
performed the same arm's-length test, and found the same results.
Therefore, we have not required Mexinox to report its downstream home
market sales.

[[Page 30811]]

Comment 11: Arm's-Length Test

    Petitioners argue that for this and future proceedings the
Department should permanently revise its arm's-length test by comparing
all prices to affiliates against prices charged to unaffiliated
customers. The Department's current practice, petitioners state, is to
test only prices for which identical products were also sold to
unaffiliated customers, and then to apply the result to all sales to
the affiliate. This ``identicals-only'' arms-length test, petitioners
state, was developed before the Department began running its own model
match concordance program. They argue that in light of the Department's
now longstanding practice of itself determining all product matches for
the antidumping analysis, there is no technical obstacle or policy
reason preventing the Department from applying the same method in the
arm's-length test. In other words, the Department should analyze all
models sold to affiliates, whether or not matched to identical models
sold to unaffiliated parties. Petitioners state that doing so would
reduce the risk of a manipulated arm's-length test result that in turn
would distort the margin analysis.
    Mexinox states that the burden of proof rests with the petitioners
to demonstrate to the Department that the arm's-length test has been
manipulated or is in some way distorting the margin analysis of this
investigation, and that the petitioners have failed in this regard.
Respondent states that where petitioners fail to support assertions
against the arm's-length test, the Department's practice is to maintain
its position and use of the arm's-length test method. See 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 Review and Termination in Part, 63 FR 20585 (April 27,
1998) (Tapered Roller Bearings). Mexinox also states that courts have
consistently supported the Department in its defense of the arm's-
length test. Thus, in Tapered Roller Bearings, when presented with lack
of evidence of any distortion of price comparability, the CIT found the
application of the Department's arm's-length test reasonable. See
Tapered Roller Bearings, 63 FR at 20592. Thus, Mexinox argues that the
Department should decline to consider modifications to the arm's-length
test given that petitioners cannot point to any information on the
record to suggest that the arm's-length test is distortive and
unreasonable.
    Department's Position: We disagree with petitioners. Without a
match of an identical product sold to an unaffiliated party, the
Department has nothing against which to test the sale to the affiliated
party. Thus, to implement the petitioners' suggestion, we would have to
conduct the arms'-length test using similar, rather than identical,
merchandise. Doing so would result in a less accurate measure of the
effect of affiliation on pricing. In the absence of any evidence that
the present arms'-length test is distortive, for our purposes of
determining comparability within the meaning of 19 CFR Sec. 351.403(d),
we would have no reason to implement a new method that could result in
a less accurate result.

Comment 12: Date of Sale

    Petitioners argue that the Department erred in the Preliminary
Determination by using the invoice date, rather than the contract or
change order date, as the date of sale. They argue that although the
regulations state that the Department will normally use the date of
invoice as the date of sale (see 19 CFR Sec. 351.401(i)), the evidence
of record in this case supports the use of the date of order
confirmation or change order as the date of sale. They cite the final
results of review of circular welded non-alloy steel pipe from the
Republic of Korea as support. There, the Department articulated that it
evaluates the correct date of sale selection on a case-by-case basis in
light of all relevant facts. The Department stated, ``* * * while we
agree with the respondents that the Department prefers to use invoice
date as the date of sale, we are mindful that this preference does not
require the use of invoice date if the facts of a case indicate a
different date better reflects the time at which the material terms of
sale were established.'' See Final Results of Antidumping Duty
Administrative Review: Circular Welded Non-Alloy Steel Pipe from the
Republic of Korea, 63 FR 32833 (June 16, 1998) (Pipe from Korea). Based
on the facts of that case, the Department used invoice date as the date
of sale in the home market and contract date as the date of sale in the
U.S. market (except for CEP sales made out of inventory) because:
    1. Sales in the home market were typically out of inventory with
the purchase order/contract, invoice, and shipment dates all occurring
within a relatively short period of time. In contrast, U.S. sales terms
were set on the contract date and any subsequent changes were usually
immaterial in nature or, if material, rarely occurred.
    2. Due to the made-to-order nature of U.S. transactions, there was
a very long period of time between the contract date and the subsequent
shipment and invoicing of the sale.
    3. There was no information on the record indicating that the
material terms of sale changed frequently enough between contract date
and invoice date on U.S. sales to give both buyers and sellers any
expectation that the final terms would differ from those agreed to in
the contract.
    The Department explained:

    As can be seen from the foregoing, ``invoice'' dates in both
markets, while the same in name, are materially quite different for
purposes of determining price discrimination simply because the
sales processes for the two markets are quite different. If we were
to use invoice date as the date of sale for both markets, we would
effectively be comparing home market sales in any given month to
U.S. sales whose material terms were set months earlier--an
inappropriate comparison for purposes of measuring price
discrimination in a market with less than very inelastic demand.

See Pipe from Korea, 63 FR at 32836.
    Petitioners argue that the facts in the instant investigation
parallel the facts in Pipe from Korea, particularly for those sales
Mexinox reported as EP direct sales, in that sales tend to be on a
made-to-order basis, and there can be a long period of time between the
contract date and the date of shipment and invoicing. Moreover, some
changes in quantity are usually envisioned by the sales contract, and
the parties are free to divide orders over more than one shipment;
hence, changes in quantity do not necessarily give rise to changes in
the agreed price (and a new ``sale''). Accordingly, petitioners argue,
the Department should use the date of order confirmation (or the date
of any subsequent change order) as the date of sale.
    Mexinox argues against the use of order date for the date of sale
in both markets, and states that the petitioners ignore factual
information verified by the Department regarding the frequency of
changes in price and quantity between order and invoice date. It cites
Department regulations (19 CFR Sec. 351.401(i)) which support the use
of invoice date as the presumptive date of sale unless the record
evidence demonstrates that the material terms of sale, i.e., price and
quantity, are established on a different date. Furthermore, Mexinox
argues that petitioners have not provided evidence in support of their
position, other than the unsubstantiated claim that the case

[[Page 30812]]

parallels the facts in Pipe from Korea. Mexinox states that these two
antidumping cases differ in the sense that in the present case, the
Department extensively verified that in both markets price and quantity
were subject to change up until the date of invoice and frequently did
change during the POI. Moreover, Mexinox disagrees with petitioners'
comment that ``changes in quantity do not necessarily give rise to
changes in agreed price (and a `new sale'),'' stating that if
petitioners are suggesting that a material change in quantities
exceeding the normal <plus-minus>/-10 percent delivery tolerance does
not change the date of sale, they are arguing for new law. Mexinox
claims that it has submitted documents on the administrative record in
this case pertaining to this issue, and that the minuscule number of
sales in which the order date terms of sale remain intact is
overwhelmed by the large number of verified instances where the final
terms of sale were not established until the invoice date.
    Department's Position: We agree with Mexinox that petitioners have
not provided a compelling reason to deviate from our practice of using
the invoice date as the date of sale, as established by our
regulations. See 19 CFR Sec. 351.401(i). In this investigation there is
evidence on the record that in a significant number of instances there
are changes to the material sales terms of price or quantity between
the order date and the invoice date. See Mexinox's November 17, 1998
submission, p. 5. At the Mexinox sales verification, Mexinox
substantiated this evidence and the Department noted no discrepancies.
See Mexinox sales verification report, p. 6. Thus, in this case, unlike
Pipe from Korea, there is information on the record indicating that
material terms of sale changed frequently enough between contract date
and invoice date on U.S. sales to give both buyers and sellers the
expectation that the final terms might differ from those agreed to in
the contract. For this reason, we will not deviate from the regulatory
presumption that the invoice date is the appropriate date of sale.

Comment 13: New Information Given at Verification

    Petitioners argue that the Department should apply adverse facts
available for a group of U.S. sales Mexinox did not report to the
Department until the verification. Petitioners argue that it is the
Department's longstanding policy not to accept the submission of new
information at verification unless: (1) The need for that information
was not evident previously, (2) that information makes minor
corrections to information already on the record, or (3) that
information corroborates, supports, or clarifies information already on
the record. Because, petitioners argue, no party contends that the need
to report these sales was not evident previously or that the
information was to corroborate information already on the record, the
only question is whether the disclosure of these sales constitutes
minor correction to information already on the record. In petitioners'
view, given the volume of sales at issue, the answer is no.
    Furthermore, petitioners argue that the sheer number of
transactions made it impossible for the Department to be sure that the
information Mexinox provided was complete; thus, including the sales
without penalty would be inappropriate because the information had not
been verified. Additionally, petitioners state, there is an important
principle at stake: Mexinox's failure to include these sales in the
questionnaire response precluded the Department and petitioners from
being able to engage in pre-verification analysis of a complete sales
listing in order to focus efforts on areas of potential concern going
into verification. The Department should send a message that
withholding such information will not be tolerated no matter what the
reason.
    Mexinox disagrees with the petitioners' argument that adverse facts
available should be applied to the unreported sales identified by
Mexinox at verification. Respondent states that there is no basis to
the petitioners' claim because: (1) Staff preparing the data
submissions did not discover the coils at issue here until shortly
before verification; (2) the unreported sales were relatively few and
represented an insignificant proportion of Mexinox's overall sales; (3)
the sales were voluntarily provided by Mexinox on the first day of
verification; (4) the Department has in the past accepted new sales at
verification even where the respondent failed to reveal them
voluntarily at the start of verification (see e.g., Disposable Pocket
Lighters from the People's Republic of China; Final Determination of
Sales at Less Than Fair Value, 60 FR 22359 (May 5, 1995)) (Pocket
Lighters from China). In fact, the Department's 1998 Antidumping Manual
provides for the acceptance of new sales data on a case-by-case basis
(Chapter 13 at 30); and, 5) four of the sales in question were
successfully verified by the Department, contrary to petitioners'
assertion that the information had not been verified.
    Department's Position: We disagree with petitioners that the use of
adverse facts available is warranted. We have no reason to believe that
Mexinox intentionally withheld from the Department the sales at issue
here. Mexinox provided them on the first day of verification and the
volume of sales is very small as a percentage of Mexinox's total U.S.
sales volume. Furthermore, the Department did verify four of the sales.
Moreover, as in Pocket Lighters from China, ``we are satisfied that the
record is now complete and accurate regarding this company's sales of
subject merchandise during the POI.'' See Pocket Lighters from China,
60 FR at 22365. For these reasons, we have determined not to resort to
facts available for these sales, but to treat them the same as
Mexinox's other reported sales.

Comment 14: Classification of Merchandise as ``Non-Prime Merchandise'

    Petitioners argue that the Department should treat all Mexinox's
merchandise as prime unless it has been clearly shown to be defective.
With respect to Mexinox, petitioners argue that Mexinox admitted at
verification that its sidestrand designation (which, they state,
Mexinox apparently equates with non-prime in some cases) had nothing to
do with the physical characteristics of the merchandise, and was a
function of whether the product in question had been made to order (in
which case it was not labeled sidestrand). With respect to the
Reseller, petitioners argue that the Reseller's verification showed
that it designated some material as non-prime that it was simply trying
to move from inventory. As with sidestrand, designating such material
as non-prime is simply, in petitioners' view, a question of semantics
rather than a true indicator of defectiveness. There is no physical
difference, they state, between ``prime merchandise,'' ``seconds,''
``sidestrand,'' and ``non-sidestrand'' (at least the way Mexinox uses
those terms). To allow such arbitrary distinctions into the dumping
analysis, petitioners argue, would open the door for Mexinox to reduce
its duty exposure simply by designating its low-priced U.S. sales as
non-prime. Accordingly, petitioners argue that the Department should
serve notice in its final determination that henceforth sidestrand with
no defects must be considered prime merchandise for matching purposes.
They also argue that to the extent the Department uses the sales by the
Reseller, it should at a minimum reclassify as prime all of the
Reseller's merchandise reported as seconds because verification
revealed that most of the merchandise reported

[[Page 30813]]

as seconds was actually prime merchandise.
    Mexinox disagrees with the petitioners and urges the Department to
accept Mexinox's classification of sidestrands as secondary on the same
basis as any other non-prime sales made by Mexinox. For the record,
Mexinox does not agree that only products with defects in surface
finish or chemistry should be classified as non-prime, citing that it
is industry practice, based on real physical differences in the
material, to classify sidestrands as non-prime material products.
However, Mexinox claims that the petitioners' assertion that the
Department should treat Mexinox's sidestand sales as prime unless the
merchandise has been shown to be defective is a hollow argument since
Mexinox in fact only graded sidestrands as second grade if they were
defective, and that all other sidestrands were graded and sold as prime
grade, as confirmed at verification. Respondent emphasizes that the
non-prime merchandise in every transaction examined by the Department
at verification was shown to have a physical defect.
    Department's Position: With respect to the Reseller, the issue is
moot because, as indicated above, we have applied total facts available
to the Reseller's sales. With respect to Mexinox, we verified Mexinox's
reporting of non-prime merchandise (including some examples of
sidestrand non-prime merchandise) at the sales verification in SLP. We
found no evidence that it misclassified any of its non-prime
merchandise. See the Mexinox sales verification report, p. 8.
Furthermore, petitioners have cited to no evidence that Mexinox
misclassified any of its sidestrand merchandise.

Comment 15: Miscoding of Prime Merchandise

    Petitioners argue the Department should correct the miscoding of
Mexinox's SLP stock sales by assuming that all SLP stock sales were of
prime merchandise.
    Mexinox argues that petitioners cannot provide any evidence to
illustrate why all SLP stock sales should be re-coded as prime
products.
    Department's Position: Evidence on the record indicates that some
SLP stock sales were incorrectly reported as secondary merchandise
rather than prime merchandise. See Mexinox sales verification exhibit
1, p. 1. However, we do not agree with petitioners that there is any
need to assume that all SLP stock sales were prime merchandise.
Instead, we have recoded the SLP stock sales in accordance with
information Mexinox gave on its list of corrections on the first day of
verification. See Mexinox sales verification exhibit 1, p. 1.

Comment 16: Duty Drawback

    Petitioners argue that the Department should disallow Mexinox's
claimed duty drawback adjustment. They base this argument on 19 USC
Sec. 1677a(c)(1)(B) (section 772(c)(1)(B) of the Act) which states that
EP shall be increased by ``the amount of any import duties imposed by
the country of exportation which have been rebated, or which have not
been collected, by reason of exportation of the subject merchandise to
the United States' (emphasis added). In its questionnaire response,
Mexinox reported that ``import duties on hot-rolled stainless steel
into Mexico are 0%.'' See Mexinox's November 17, 1998 submission, p.
114. Petitioners state that the fee that Mexinox allegedly pays is not
a duty, and thus should not be allowed as a drawback adjustment. They
argue that if the Department does grant the adjustment, the reported
adjustment should be corrected to reflect the amount that Mexinox's
cost verification exhibit 16 demonstrates was the actual fee recorded
by Mexinox.
    Mexinox disagrees with the petitioners' assertion that the 0.8
percent fee paid by Mexinox is not a duty, and that the fee should thus
not be allowed as a drawback adjustment under section 772(c)(1)(B) of
the Act. In support of its position, Mexinox states that the U.S.
Customs Service regulations define a duty as ``Customs duties and any
internal revenue taxes which attach upon importation'' (19 CFR
Sec. 101.1 (1998)). Furthermore, the questionnaire issued in this
investigation, in defining what is to be reported as the U.S. customs
duty, specifically includes ``the unit cost of the U.S. customs
processing fee.'' Thus, Mexinox states, it is clearly the Department's
practice to consider ad valorem fees such as these as duties for the
purposes of duty drawback. Indeed, respondent states, the Mexican
processing fee is analogous to the U.S. merchandise processing fee,
which is considered part of U.S. duties. Moreover, Mexinox argues that
the Department should allow its claimed duty drawback adjustment
because such an adjustment is necessary to ensure a fair price
comparison. Because this fee is levied only on home market sales, to
include the fee in home market prices without adding a corresponding
amount to the U.S. price pursuant to section 772 (c)(1)(B) of the Act
would violate the underlying objective of fair comparisons between NV
and U.S. price.
    Finally, Mexinox argues that petitioners erred in insinuating that
Mexinox may have incorrectly overstated its adjustment. It states that
the cost verification exhibit mentioned by the petitioners as
containing an alternate standard processing fee actually relates to
private customs brokers' fees, not the processing fees paid to the
government.
    Department's Position: We agree with Mexinox that the customs
processing fees at issue qualify for a duty drawback adjustment.
Mexinox claimed this adjustment under article 49 of the Mexican Federal
Law of Rights. See Mexinox November 17, 1998 submission, p. 25. That
statute refers to the customs processing fee at issue here as a
``general importation tax.'' See Mexinox sales verification exhibit 36,
p. S3032. As an ``importation tax'' it is an import duty within the
meaning of section 772(c)(1)(B) of the Act. Therefore, in this final
determination, as in the Preliminary Determination, we made a duty
drawback adjustment.
    Regarding the calculation of the adjustment, article 49 of the
Federal Law of Rights indicates that the 0.8 percent rate that Mexinox
used in its computation of the duty drawback adjustment was the correct
rate. See Mexinox sales verification exhibit 36, p. S3032 and Mexinox's
section C response, p. 73. Further, petitioners have cited to no
information on the record to establish that the line item from cost
verification exhibit 16 to which they refer can only be a fee paid to
the government, and not customs brokers' fees as Mexinox asserts. In
the absence of any evidence that Mexinox recorded its customs
processing fees differently in its books than how it reported them to
us in its duty drawback calculation, we have accepted Mexinox's
calculation.

Comment 17: U.S. Brokerage

    Petitioners argue that the Department should correct Mexinox's
reported U.S. brokerage because, due to a rounding error discovered at
verification, Mexinox's reported U.S. brokerage expense is overstated.
See Mexinox sales verification report at 17.
    Department's Position: We agree and have made this correction in
this final determination.

Comment 18: Model Match

    Petitioners argue that the Department should explain for the record
the manner in which grades have been matched (i.e., how the weights
were assigned for the model match program). They state that the
Department's matching should reflect an objective

[[Page 30814]]

selection process that can be applied if different grades become
involved in any administrative review.
    Mexinox agrees that the Department should disclose the manner in
which goods are matched in the model match program.
    Department's Position: We assigned individual weighting factors to
reported grades provided they were recognized American Iron and Steel
Institute (AISI) grades. We also assigned unique factors to reported
proprietary grades or foreign grade specifications if the chemical
content was sufficient to distinguish them from any AISI grade to which
we already had assigned a ranking factor in our matching hierarchy
(e.g., DIN specification 1.4462). Where a proprietary or foreign grade
specification was similar in chemical composition to an AISI grade, we
did not assign a unique weighting factor to that particular grade.
Rather, we assigned it the same weight as the comparable AISI grade. We
also did not assign unique weights to certain ``sub'' grades (e.g.,
304DDQ) because the percentage ranges of chromium, carbon, nickel, and
molybdenum do not differ from the broader AISI grade.
    After deciding which grades to assign unique weighting factors, we
established a linear weighting system designed to search for matches
within the general classes of stainless steel (e.g., the chromium-
nickel series, the straight chromium (hardenable) series, and the
straight chromium (non-hardenable) series). In addition to ensuring
matches within the general classes or families of stainless steel, our
weighting system is designed to match grades in the same family based
on chemical composition. For example, within the chromium-nickel
series, where an identical match is not possible, our preference is to
pair grades containing molybdenum (e.g., 316, 317) with each other
before searching for a grade with no molybdenum (e.g., 302, 304).

Comment 19: Business Proprietary Information

    Petitioners argue that the names of Mexinox's home market and U.S.
affiliated customers should be publicly released or at least be
released under administrative protective order (APO). In the latter
respect, they state, there is no clear and compelling need to withhold
the names of these affiliated parties from APO disclosure. They argue
that the record in this investigation shows that (1) the parties in
question are affiliated distributors and not Mexinox's customers, and
(2) the identities of these parties are not even proprietary, but have
long been in the public domain.
    Petitioners argue that in this investigation Mexinox's home market
and U.S. affiliates do not constitute customers in the true sense of
the word. Instead, they are affiliated distributors or resellers that
form Mexinox's corporate chain of distribution. In contrast, actual
customers are those unaffiliated companies that purchase subject
merchandise. Petitioners argue that this distinction is especially
clear with respect to Mexinox's activities in the United States because
a respondent's affiliated U.S. resellers of merchandise are not
considered bona fide customers of that respondent under the statute.
Thus, whereas companies in the home market that purchase and consume
foreign like product from an affiliated respondent can be treated as
that respondent's customers if the sales are shown to have been at
arm's-length, a respondent's affiliated parties in the United States
are not treated as a respondent's customers, and sales by a respondent
to its U.S. affiliated resellers are not subject to the arm's-length
test. Therefore, petitioners argue, these U.S. affiliates are not
customers for purposes of the statute whose identities can properly be
withheld from disclosure.
    Mexinox argues that the Department has already considered this
issue and issued its determination in a December 4, 1998 letter in
which it asked Mexinox to revise its earlier filings in this proceeding
and to provide codes for all double-bracketed U.S. and home market
customers that were, or were argued to be, affiliated with Mexinox.
Mexinox complied with the Department's request and resubmitted its
questionnaire responses on December 15, 1998, with codes that represent
the identities of the allegedly affiliated customers. Given that the
Act expressly allows respondents to protect customer names under APO
(without regard to whether those customer are affiliated), Mexinox
argues, the December 15, 1998 coded responses reflect a more detailed
response than that to which the petitioners are entitled.
    Furthermore, Mexinox argues that the petitioners' request that the
Department order Mexinox to release the identification of all
affiliated customers is incorrect as a matter of law. Section
777(c)(1)(A) of the Act provides that:

    ``Customer names obtained during any investigation which
requires a determination under section 1671d(b) or 1673d(b) of this
title may not be disclosed by the administering authority under
protective order until either an order is published under section
1671e(a) or 1673e(a) of this title as a result of this investigation
or the investigation is suspended or terminated.''

See 19 U.S.C. Sec. 1677f(c)(1)(A). Mexinox argues that there is no
ambiguity in the language of this prohibition. There is no
qualification, implied or express, of the right to non-disclosure of
the word ``customer.'' Any acquiescence in petitioners'' request for
disclosure of Mexinox's customer names by the Department, Mexinox
argues, would therefore be contrary to the statute.
    Furthermore, Mexinox argues that petitioners' argument that
affiliated distributors are not bona fide customers under the statute
is patent nonsense. Even if the entities at issue were determined to be
affiliated distributors, they are also customers, and as such fall
squarely within the protection of section 777(c)(1)(A) of the Act.
Mexinox states that there is no definitional provision in either the
Act or the Department's regulations that qualifies the common
definition of the word ``customer'' or lends support to petitioners'
claims that affiliated companies are not ``customers'' within the
meaning of the statute.
    Furthermore, Mexinox dismisses petitioners' circular argument that
because the identities of Mexinox's customers are otherwise publicly
known their identities as customers of Mexinox are not protected from
disclosure. It states that it is not the existence of a company that is
a customer that is protected from disclosure under 19 U.S.C.
Sec. 1677f(c)(1)(A) of the Act, but rather the fact that the company in
question was, or is, a customer of Mexinox.
    Finally, Mexinox argues that given the clarity of the law on the
protection of customer names from APO disclosure, petitioners' repeated
attempts to persuade the Department to violate the protection afforded
to Mexinox's customers' identities under the statute approaches an
abuse of the Department's processes. The participation of respondents
in antidumping investigations, Mexinox states, was never intended as a
means for petitioners to gain access to proprietary information to
which they are not entitled. Petitioners' repeated demands that the
Department require Mexinox to disclose its customer names, arguments
that are not accompanied by citations to any legal authority or
justified by any need, are not only baseless, but they have also proven
to be extremely disruptive to the investigation procedure.
    Department's Position: We disagree with petitioners. From the onset
of this investigation, Mexinox has not released

[[Page 30815]]

the names of its affiliates in the U.S. or home markets under APO and,
thus, has double-bracketed the names of its affiliates. On October 13,
1998, petitioners wrote the Department requesting that Mexinox be
required to replace double-bracketed affiliated party names with
affiliate codes that would permit the consistent and reliable tracking
of affiliations throughout the investigation. On November 5, 1998,
respondents in the SSSS from Germany, Italy, and Mexico investigations
submitted a letter to the Department arguing that in accordance with
section 777(c)(1)(A) of the Act, they should not be forced to disclose
their customers to counsel for petitioners. In response, on November
12, 1998, petitioners submitted onto the record of the SSSS from
Germany investigation documentation which it believed supported its
assertions that the respondent had publically released its affiliates'
names which it had double-bracketed for the instant proceeding.
(Petitioners submitted this same document for the record of the SSSS
from Mexico investigation on December 11, 1998.) After a thorough
review of the record, on December 4, 1998, the Department issued a
letter to Mexinox stating that ``* * * we will permit the double
bracketing of all customers in both the home market and U.S. market. We
require however, that you code the affiliated customers in both
markets.'' <SUP>6</SUP> On December 15, 1998, Mexinox submitted such
coding. Further, on March 17, 1999, petitioners placed information on
the record in support of a new argument that the identity of Mexinox's
U.S. affiliates should be treated as public information.
---------------------------------------------------------------------------

    \6\ See Letter from Ann Sebastian, Senior APO Specialist, to
Hogan and Hartson, December 4, 1998.
---------------------------------------------------------------------------

    Section 777(c)(1)(A) of the Act states that ``[c]ustomer names
obtained during any investigation which requires a determination under
section 705(b) or 735(b) may not be disclosed by the administering
authority under protective order until either an order is published
under section 706(a) or 736(a) as a result of an investigation or the
investigation is suspended or terminated.'' See 19 U.S.C.
Sec. 1677f(c)(1)(A). Further, section 351.304(a)(2)(i) of the
Department's regulations states that the Secretary will require that
all business proprietary information presented to, or obtained or
generated by, the Secretary during a segment of a proceeding be
disclosed to authorized applicants, except customer names submitted in
an investigation.
    Based on the statute and our regulations, we have concluded that
Mexinox was entitled to withhold from release the names of its
customers in the U.S. or home market under APO during this proceeding.
We agree with respondent that it is not the company name in the sense
of the company's existence that it is protected under the statute and
the implementing regulation. Rather, it is the relationship of a
respondent to that company as a customer of the respondent that is the
protected information. This is the case regardless of whether the
company in question is a customer in the U.S. market or in the home
market. While petitioners provided voluminous submissions arguing that
Mexinox's affiliates' names had been available publicly during the POI,
due to the sensitive nature of this issue we have determined that the
documentation does not demonstrate that they were indeed customers of
Mexinox. Requiring Mexinox to release publicly such information without
conclusive evidence could cause potential competitive harm to Mexinox.
Further, it is important to note that as stated above, the Department
instituted one of the petitioners' proposed methods by requiring
Mexinox to provide codes for its affiliates which were then made part
of the public record. Therefore, for this final determination we have
not altered our treatment of respondents' customers' names.

Comment 20: Customs Classification

    Petitioners argue that HTS subheading 9802.00.60 should be listed
in the scope of the investigation. They argue that it is the
Department's policy that antidumping duties apply to the full value of
entries under subchapter 9802 of the HTS, covering U.S. goods exported
and returned. To reduce the chance of errors by the U.S. Customs
Service in implementing this policy and to ensure that full duties are
collected, the Department, petitioners argue, should include in the
instructions accompanying any antidumping order in this case clear
statements that (1) subject merchandise may enter the United States
under HTS subheading 9802.00.60 in addition to its regular HTS
subheadings, (2) that such merchandise is covered by the order, and (3)
that the antidumping duty deposit rate is to be applied to the full
value of the merchandise (i.e., including the U.S. value).
    Mexinox opposes petitioners' recommendation for an amendment to the
scope description as described above. Respondent acknowledges that it
is possible for subject merchandise to enter under HTS 9802.00.60, but
argues that such an amendment is more likely to create confusion and
increase the likelihood of errors. Since any metal article from pipe to
hubcaps that otherwise meets the requirements may be imported from
Mexico under HTS 9802.00.60, if the Department includes this
designation in the scope description and issues instructions to the
U.S. Customs Service which include that tariff category, there is a
significant risk that the Customs Service staff will inadvertently
suspend liquidation of a whole range of non-subject articles from
Mexico and disrupt legitimate trade.
    Respondent also questions the need for such instructions when it is
already not disputed that (1) any subject material will be entered
concurrently under one of the previously listed tariff numbers and
therefore will be already appropriately ``flagged'' by Customs, and (2)
the tariff categories in any event are not themselves dispositive--only
the written scope description is.
    Department's Position: We agree with Mexinox that it is not
necessary to amend the scope language on the HTS numbers under which
subject merchandise enters. The U.S. Customs Service is aware through
the identification system already in place that merchandise subject to
antidumping duty orders may be entered under HTS 9802.00.60. It is also
already aware through prior practice that the antidumping duty deposit
rate is to be applied to the full value of the merchandise, including
the U.S. value. As Mexinox has argued, to include petitioners'
recommended language in the scope description and instructions to
Customs could result in suspension of liquidation of non-subject
merchandise. Therefore, we believe it unnecessary to amend the scope.

Issues Related to Cost

Comment 21: Major Inputs

    The following comments relate to the cost of production of inputs
received from Krupp KTN, Acerinox S.A. (Acerinox), and AST. (Both AST
and KTN cost verification exhibits were submitted to the record for
SSSS from Mexico on May 13, 1999.) Each of these companies provided
black band and white band to Mexinox which is an input used in the
production of subject merchandise. Both petitioners and the respondent
provided comments on the proper treatment of the cost of these inputs.
    (a) Arm's-length transfer prices.
    Mexinox maintains that the transfer prices from affiliated parties
KTN and

[[Page 30816]]

AST represent arm's-length prices and should be accepted by the
Department.
    Petitioners state that the transfer prices from affiliated parties
do not represent arm's-length prices and the Department should apply
its major input rule in valuing the inputs from affiliates.
    Department's Position: We agree with petitioners that the reported
transfer prices for these inputs between Mexinox and its affiliated
suppliers were below market prices. Therefore, in accordance with
section 773(f)(2) of the Act, we have used the higher of transfer price
or market price in valuing these inputs.
    (b) Inputs from Acerinox.
    Petitioners state that Mexinox failed to report the actual COP data
for inputs obtained from its affiliate Acerinox. Therefore, petitioners
claim that the Department should resort to facts available to value
these inputs and apply an adverse inference.
    Mexinox states that it should not be penalized for its inability to
obtain COP data from Acerinox.
    Department's Position: We agree with the petitioners, in part, that
the value of inputs received from Acerinox should be adjusted. While
Mexinox was unable to supply the COP of this input, we do not consider
purchases from Acerinox to be a major input in accordance with section
773(F)(3) of the Act due to the insignificant quantity obtained from
Acerinox. For the final determination we have adjusted Acerinox's
transfer price to reflect the higher market price in accordance with
section 773(f)(2) of the Act.
    (c) Inputs from KTN.
    Petitioners argue that the reported COP for inputs obtained from
KTN could not be substantiated. In calculating the COP of the inputs
obtained from KTN, petitioners argue that the Department should adjust
KTN's financial expense factor to include total foreign exchange losses
and exclude total foreign exchange gains. Regarding G&A included in the
COP of the inputs obtained from KTN, petitioners state that Mexinox has
not supported its position that international project expenses and
year-end adjustment for pensions and social expenses and accruals for
legal liabilities were properly excluded from KTN's G&A expenses.
Petitioners argue that these should be included in KTN's G&A ratio
because these costs are recognized in KTN's financial statements.
    Mexinox argues that the Department should not adjust KTN's
financial expense factor to include foreign exchange losses and exclude
total foreign exchange gains in calculating the COP of the inputs
obtained from KTN. Mexinox states that it was cooperative and acted to
the best of its ability to provide the information requested and that
the Department should not make an adverse inference and exclude the
exchange gains. Regarding G&A included in the COP of the inputs
obtained from KTN, Mexinox argues that no adjustment should be made for
international project expenses because these expenses are not related
to the production and sale of subject merchandise. Mexinox argues that
the accrual of severance payments was made for the anticipated
downsizing of the company, but that these personnel are still employed
and no severance payments have been made. Therefore, it argues, these
expenses should also be excluded from KTN's G&A.
    Additionally, Mexinox argues that its allocation of KTN's G&A (used
in calculating KTN's COP) based on processing costs is correct. It
maintains that the Department's regulations authorize discretion
regarding allocation methods. See, e.g., Notice of Final Determination
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel
Plate From South Africa, 62 FR 61731, 61736 (November 19, 1997).
Mexinox argues that allocating G&A expenses based on total cost of
manufacturing (COM) would overstate the per-ton G&A of control numbers
(CONNUMs) with high COMs. Mexinox argues that the G&A activities
performed by KTN for each category of merchandise is the same for each
ton of steel and do not vary with the steel grade. However, they argue
that it is reasonable to assign a higher G&A cost to a product that
undergoes more processing.
    Department's Position: We agree with the petitioners that the COP
and CV for KTN are incorrect and require adjustment. In calculating the
COP of the inputs received from KTN, we adjusted the submitted input
cost to reflect KTN's adjustments to G&A. With regard to G&A included
in the COP of the major input, we agree with petitioners that the costs
associated with international projects and year-end adjustments should
be included in the G&A because they relate to the operations of the
company as a whole. Since emerging international projects are a normal
part of KTN's business, we have included the related costs in KTN's G&A
expense ratio calculation. Throughout the investigation we received
conflicting reports as to the nature of the year-end adjustments. At
verification we determined that the majority of KTN's year-end
adjustments were for severance accruals. We consider severance costs to
be expenses that relate to the general operation of a company as a
whole and they directly affect the KTN world wide manufacturing scheme.
By setting up a severance accrual, KTN is reasonably certain that it
will make severance payments for workers currently employed by the
company in the near future. These costs were recognized during the
current year and directly relate to the company's current employees.
Accordingly, we consider it appropriate to include these year-end
adjustments in KTN's G&A calculation.
    We disagree with petitioners' assertion regarding the financial
expenses in the COP of the major inputs. Because all three entities are
members of the same consolidated group, Fried. Krupp, we did not
include the financial expenses in the COP of the inputs. If we included
financial expenses in the COP build-up of the input and again in the
COP or CV of the subject merchandise, we would double-count the
financial expenses.
    We agree with petitioners that KTN's G&A expenses should be
allocated as a percentage of the total COM, as opposed to KTN's
assertion that they should be allocated as a percentage of processing
costs. As set forth in the Department's Final Determination: Certain
Carbon and Steel Wire Rod from Canada, 59 FR 18791, 18795 (April 20,
1994) and 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, 38149 (July 23, 1996) our normal
method for allocating G&A expenses is to apply these types of costs as
a percentage of total manufacturing cost (i.e., materials, labor and
overhead). We use this method in recognition of the fact that G&A
expenses consist of a wide range of costs which are indirectly related
to the production process and that any allocation based on a single
factor (e.g., processing costs) is purely speculative. The Department's
normal method for allocating G&A costs based on the total manufacturing
cost takes into account all production factors (i.e., materials, labor,
and overhead) rather than a single arbitrarily chosen factor. By
consistently allocating G&A over the total manufacturing costs, the
Department attempts to minimize discriminatory cost allocations. In
addition, G&A expenses are period costs, not product costs, and, as
such, they should be spread proportionately over all merchandise
produced in the period. By computing G&A based on a percentage of total
manufacturing costs, a product absorbs the same proportional amount

[[Page 30817]]

of G&A expenses relative to its total cost. Therefore, this method
avoids distortions to the price or cost analysis that would result if
lower-cost products are overburdened with a higher percentage of
processing costs.
    (d) Inputs from AST.
    Mexinox argues that the Department's claim that there was a
discrepancy between the variable COM reported by AST for a particular
grade of material (see Mexinox cost verification report, p. 22) is
incorrect. Additionally, Mexinox states that the Department's claim,
that AST's ``variable COM percentage of standard'' and the ``fixed
overhead percentage of DirLab and VOH'' could not be supported (see
Mexinox cost verification report, p. 22), is not valid. Mexinox states
that it provided the support for the information in materials which,
though presented to the Department at the cost verification, were not
taken as exhibits.
    Petitioners argue that the worksheet Mexinox included in its case
brief (which Mexinox claims was presented at the verification)
constitutes new, untimely information in violation of the Department's
regulations, and it should be removed from the record. Moreover, they
argue that the Department must uphold the principle that it, as
arbiter, decides what information is to be included in the record and
what conclusions are to be made following verification.
    Department's Position: We determined that there was no discrepancy
between the variable COM reported by AST at verification and the
January 7, 1999 data submitted by Mexinox. Furthermore, we determined
that the worksheet Mexinox used in support of its position does not
constitute new, untimely information because all of the information
contained in the worksheet can be linked to page S3883 of verification
exhibit 33.
    (e) Equalized costs.
    Petitioners argue that the Department should reject Mexinox's
contention that hot-band prices should be ``equalized'' to account for
alleged differences in market conditions, and should continue to rely
on the per-unit material costs recorded in Mexinox's accounting
records. Petitioners state that Certain Porcelain-on-Steel Cookware
from Mexico: Final Results of Antidumping Duty Administrative Review,
62 FR 42496, 42508 (August 7, 1997), (POS Cookware from Mexico), cited
by Mexinox in support of its position, involved a comparison of the
affiliated supplier's price to the respondents and to unaffiliated
customers. Petitioners argue that in this case Mexinox did not provide
this analysis for KTN, AST, and Acerinox.
    Mexinox argues that if the Department decides to adjust Mexinox's
material costs based on the major input rule, the Department should use
``equalized'' prices. According to Mexinox, using ``equalized'' prices
is consistent with POS Cookware from Mexico.
    Department's Position: We agree with Mexinox that an equalization
adjustment should be applied in order to perform adequately a fair
price comparison. That is, in making the comparison of transfer price
to market price, we adjusted for differences in the specifics of the
transactions between the affiliated and unaffiliated suppliers.
    (f) COP for black band.
    Petitioners argue that Mexinox failed to report the COP for one
grade of black band from KTN.
    Mexinox states that it did not withhold relevant cost information
for one grade of black band. Mexinox states that it did not report this
data because it did not purchase that particular grade of black band
from KTN during the POI.
    Department's Position: We found that Mexinox did not withhold
relevant cost information for one grade of black band as alleged by the
petitioners. Mexinox did not report this data because it did not
purchase that particular grade of black band from affiliates during the
POI.

Comment 22: Consulting Fees

    Petitioners argue that Mexinox should increase its G&A expenses to
include the administrative, consulting, and technical assistance
provided by KTN.
    Mexinox states that the KTN consulting fees are already included in
Mexinox's reported G&A expenses. Accordingly, Mexinox argues that, if
the Department accepts the petitioners' proposal, expenses would be
double-counted.
    Department's Position: We agree with Mexinox that the consulting
fees were included in Mexinox's reported G&A, and as a result no
adjustment is necessary.

Comment 23: Depreciation

    Petitioners argue that Mexinox understated its depreciation
expenses. They state that Mexinox's 1997 financial statement indicates
that Mexinox revised its method of valuing assets and the estimated
useful lives of assets during 1997. As a result, petitioners contend
that the Department should apply the 1996 depreciation amount for the
POI depreciation. Additionally, petitioners argue that if the
Department excludes depreciation attributable to Tuberias ASPE from the
numerator of the depreciation expense rate, the corresponding
``transformation expenses'' must also be removed from the denominator
to ensure that the ratio is correct.
    Mexinox argues that it did not under-report depreciation. It states
that the petitioners were comparing the accumulated depreciation by
year-end 1996 to the depreciation for 1997. Mexinox further argues that
its reported depreciation is slightly overstated because it includes
the depreciation for equipment located at Tuberias ASPE in its total
depreciation amount.
    Department's Position: We agree with Mexinox that its depreciation
was reported correctly.
    Petitioners were comparing the accumulated depreciation amounts,
rather than the depreciation expense for 1996, to the depreciation for
1997. We disagree with petitioners' assessment that Mexinox changed the
useful lives of assets and its method of valuing the assets. The
footnote to the financial statements which petitioners referenced
indicated that Mexican generally accepted accounting principles (GAAP)
changed with respect to the method required to revalue assets to
reflect the effects of inflation. It was not a change in the valuation
of the assets. The change was to allow the application of an index
rather than to require companies to have all assets appraised. We note
that the footnote indicated that the prescribed GAAP method to
determine the useful lives of assets changed as well. However, the
useful life change is a prospective change and does not affect the
useful lives of the assets already in service. Therefore, there is no
need to adjust the reported depreciation.

Comment 24: Sludge Clean-up

    Petitioners argue that reported costs should be increased by the
amount accrued for the clean-up of old sludge. They argue that in its
financial statements Mexinox spreads the cost of the sludge clean-up
over three years, and the fact that the 1997 expense was accrued to
adjust prior years' accruals is no reason to ignore the 1997 expense.
Petitioners therefore contend that the increase in the 1997 accrual
should be included in Mexinox's reported costs. Petitioners argue that
the Department normally includes accrued amounts recognized in the
financial statements in general corporate expenses as it did in the
Final Determination of Sales at Less Than Fair Value: Fresh Atlantic
Salmon From Chile, 63 FR 31411, 31425 (June 9, 1998) (Salmon from
Chile). Petitioners argue that Mexinox did not retroactively charge the
sludge clean-up

[[Page 30818]]

expenses to periods dating back to 1978 but instead recorded a reserve
shown in the 1996 financial statements and subsequent periods.
Therefore, according to the petitioners, the increase to the reserve
account which was recorded during the POI must be included in the G&A
even if Mexinox did not spend the full amount.
    Mexinox claims that there is no basis for an adjustment to the
reported sludge clean-up costs. According to Mexinox, it properly
excluded from the reported costs the increase in the reserve account
shown on the income statement because the amount is a provision and not
a period expense. Mexinox asserts that all clean-up expenses for
current sludge generated were included in the reported costs. It argues
that the increase in the reserve for clean-up is not an expense that
was incurred during the POI, but instead is an accounting provision
booked at the end of 1997 to account for the revised estimate of the
clean-up expenses.
    Department's Position: We agree with petitioners. These expenses
relate to the clean-up of sludge generated from 1978 through the
present time. Mexinox set up a reserve in 1996 to account for the
sludge clean-up. Reserve accounting dictates that amounts expended for
the clean-up are offset to the reserve account but not recognized as an
expense during the year. Periodically, the reserve is replenished with
any increase recognized as an expense on the income statement during
the year. This expense amount is a period cost which is properly
included in G&A expenses.

Comment 25: Inventory Reconciliation

    Petitioners argue that the COM should be adjusted to reflect the
average difference between the reported COM and the value recorded in
Mexinox's inventory system.
    Mexinox argues that the COM should not be adjusted to reflect this
difference. Mexinox argues that comparisons between inventory values
and reported cost are not meaningful because its inventory system is
less product-specific than the reported costs.
    Department's Position: We agree with Mexinox and have not adjusted
the COM for the difference between the reported values and the
inventory value. Values in Mexinox's inventory are less specific than
the amounts reported to the Department. The amounts in the inventory
system are for groups of products while the reported values are
specific to the product characteristics designated by the Department.

Comment 26: Scrap Revenue

    Petitioners state that Mexinox reported material costs net of scrap
revenue and that it is the Department's practice to apply scrap revenue
as an offset to G&A expenses.
    Mexinox states that its scrap revenue was properly applied as an
offset to material costs. Mexinox argues that scrap is generated from
direct materials, a component of COM. Therefore, the revenue generated
should be used to offset COM.
    Department's Position: We agree with Mexinox. Mexinox only included
the scrap generated from the production of subject merchandise as a
reduction of the direct materials costs. This is consistent with the
Department's normal practice. See, e.g., Notice of Final Determination
of Sales at Less Than Fair Value: Collated Roofing Nails From Taiwan,
62 FR 51427, 51431 (October 1, 1997).

Comment 27: Expenses Incurred on Behalf of Subsidiaries

    Mexinox argues that the Department should not include expenses it
incurred on behalf of its subsidiaries in the G&A expense ratio.
According to Mexinox, these expenses are properly classified as selling
expenses because they are the salaries and employee benefits for
personnel that were employed at Mexinox's sales subsidiaries.
    Department's Position: We agree with Mexinox that the expenses
incurred on behalf of the selling subsidiaries should not be included
in the calculation of the G&A expense ratio. In this final
determination we have removed them from the computation of total G&A
expenses.

Comment 28: Financial Expense

    Mexinox states that the Department should allow exchange gains to
offset exchange losses even though it was unable to substantiate the
exchange gains. Mexinox states that if the Department disallows its
exchange gains because Mexinox could not substantiate the amounts on
the submitted schedule, it would amount to the application of adverse
facts available when it was cooperative and acted to the best of its
ability.
    In addition, Mexinox also states that short-term interest income
should be allowed as an offset to financial expenses. Mexinox maintains
that at verification the Department found sufficient evidence to
distinguish between short-term and long-term interest on Fried. Krupp's
1997 consolidated financial statements.
    Petitioners state that since the Department was unable to reconcile
the schedule of foreign exchange gains and losses to the audited
financials of Fried. Krupp it should include total foreign exchange
losses and exclude the total foreign exchange gains in calculating the
net financial expenses.
    Department's Position: We agree with petitioners and Mexinox, in
part. The Department requested in two questionnaires and again at
verification that Mexinox provide information to support the inclusion
of Fried. Krupp's exchange gains and exclusion of its exchange losses
from the interest expense computation. Mexinox, however, failed to
provide any supporting information. Mexinox has the ability and
responsibility to support its claim for the inclusion of these exchange
gains or the exclusion of the exchange losses. Thus, we agree with
petitioners that since Mexinox failed to provide support to justify the
inclusion of Fried. Krupp's exchange rate gains and the exclusion of
its exchange rate losses from the financial expense ratio calculation,
we should include Fried. Krupp's exchange rate losses but exclude its
exchange rate gains from the financial expense ratio calculation. We
have done so in this final determination.
    We agree with Mexinox that, based on our findings at verification,
the interest income used as an offset to financial expenses was
appropriately classified as short-term. Fried. Krupp's 1997
consolidated financial statement does distinguish between interest
earned from long-term financial assets and short-term assets.
Accordingly, we included this interest income earned from short-term
assets, less the amounts relating to trade receivables, as an offset to
financial expenses.

Comment 29: Allocation Base for G&A Expenses

    Mexinox argues that it should be allowed to allocate its G&A based
on processing costs because the regulations allow the Department some
discretion in determining appropriate allocation bases. Mexinox argues
that allocating G&A expenses based on total COM would overstate the
per-ton G&A of CONNUMs with high COMs. Mexinox argues that the G&A
activities performed by Mexinox for each category of merchandise is the
same for each ton of steel and do not vary with the steel grade.
However, it argues that it was reasonable to assign a higher G&A cost
to a product that undergoes more processing.
    Petitioners assert that the Department should follow its normal
practice of allocating G&A expenses on the basis of cost of sales. They
state that while they do not dispute Mexinox's contention

[[Page 30819]]

that regulatory discretion exists in this area, such discretion is
conferred on the Department rather than a respondent.
    Department's Position: We agree with petitioners. The Department's
normal method, as set forth in Large Newspaper Printing Presses and
Components Thereof, Whether Assembled or Unassembled, From Japan; Final
Determination of Sales at Less Than Fair Value, 61 FR 38139, 38150
(July 23, 1996), allocates G&A expenses based on cost of sales. We use
this method in recognition of the fact that the G&A expense category
consists of a wide range of different types of costs which are so
unrelated or indirectly related to the immediate production process
that any allocation based on a single factor (e.g., head counts, fixed
costs, or transformation costs) is purely speculative. The Department's
normal method for allocating G&A costs based on cost of sales takes
into account all production factors. Therefore, for this final
determination we have allocated G&A based on the total manufacturing
costs.

Comment 30: Yield Ratio

    Petitioners argue that Mexinox's U.S. Reseller incorrectly
calculated its scrap yield ratio. The amount of further processed
stainless steel used as the denominator in determining the yield ratio
includes both internally processed and externally processed stainless
steel. Petitioners assert that the numerator of stainless steel scrap
sold appears to relate only to internally processed stainless steel;
thus, the denominator should only include internally processed
stainless steel. This would result in a higher scrap yield ratio to be
applied to internally processed products. Mexinox did not address the
inclusion of externally processed stainless steel in the scrap ratio
denominator.
    Department's Position: Because we have determined it appropriate to
resort to total facts available for sales by the Reseller, this issue
is moot.

Comment 31: Outside Processing Costs

    Petitioners argue that outside processing costs of slitting and
finishing applicable to the Reseller could not be verified. Petitioners
state that the Reseller failed to show that the percentage used to the
allocate costs for processors of all materials reasonably reflects the
true amounts of outside processing. Also, petitioners claim that
because the Department found that the management reports used to
establish the calculated processing costs were understated in
comparison to the financial accounting records, and the invoices
sampled indicated a further understatement of costs, the management
report used for the submission is unreliable and unverifiable.
    Mexinox maintains that the information necessary to directly
identify the specific portion of charges from combined processors that
related to stainless steel alone was not available in the Reseller's
computer system; thus, it is simply not possible to specifically
identify those costs. Additionally, Mexinox argues that the combined
processors at issue represent a small minority of the total outside
processing expenses. Mexinox contends that the method used to allocate
the combined processors was reasonable because it reflected the
Reseller's actual experience with respect to the proportion of
stainless and non-stainless materials taken from its stock that
required further processing. The Reseller claims the financial
accounting system used in the comparison was not available until
January 1998; thus, the management reports used for reporting purposes
were the only available source of information on processor-specific
outside processing costs covering the entire POI. Additionally, the
discrepancies noted by the Department were isolated and would average
out over the entire POI. Furthermore, a sample of only one month is not
reflective of the costs reported for the entire POI.
    Department's Position: Because we have determined it appropriate to
resort to total facts available for sales to the Reseller, this issue
is moot.

Comment 32: Financial Statements

    Petitioners assert that the review of the Reseller's financial
statements by outside auditors showed serious discrepancies. The
outside auditors discovered that cost of sales as recorded by the
reseller were overstated, net SG&A expenses were understated, and
interest expenses were understated.
    Mexinox's affiliate argues that the financial statements prepared
by outside auditors were created to put the Reseller's accounts into a
pre-determined format conforming to the further manufacturer's parent
company for purposes of consolidation. Mexinox states that the
reclassifications had nothing to do with correcting information or
conforming internal statements to GAAP.
    Department's Position: Because we have determined it appropriate to
resort to total facts available for sales to the Reseller, this issue
is moot.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are
directing the U.S. Customs Service to continue to suspend liquidation
of all imports of subject merchandise that are entered, or withdrawn
from warehouse, for consumption on or after January 4, 1999, the date
of publication of the Preliminary Determination in the Federal
Register.
    We will instruct the U.S. Customs Service to require a cash deposit
or the posting of a bond equal to the weighted-average amount by which
the NV exceeds the EP or CEP as indicated below. These suspension-of-
liquidation instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                             Weighted-
                  Exporter/manufacturer                   average margin
                                                           (percentage)
------------------------------------------------------------------------
Mexinox.................................................           30.86
All Others..............................................           30.86
------------------------------------------------------------------------

International Trade Commission Notification

    In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (the Commission) of our determination.
As our final determination is affirmative, the Commission will
determine within 45 days after our final determination whether imports
of stainless steel sheet and strip from Mexico are materially injuring,
or threaten material injury to, the U.S. industry. If the Commission
determines that material injury, or threat thereof, does not exist, the
proceeding will be terminated and all securities posted will be
refunded or canceled. If the Commission determines that such injury
does exist, the Department will issue an antidumping duty order
directing Customs officials to assess antidumping duties on all imports
of the subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the effective date of the suspension of
liquidation.
    This determination is issued and published in accordance with
section 735(d) and 777(i)(1) of the Act.

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13678 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P