[Federal Register Volume 62, Number 207 (Monday, October 27, 1997)]
[Notices]
[Pages 55574-55589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28408]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-809]


Final Results of Antidumping Duty Administrative Review and 
Partial Termination of Administrative Review: Circular Welded Non-Alloy 
Steel Pipe From the Republic of Korea

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

ACTION: Final Results of Antidumping Duty Administrative Review and 
Partial Termination of Administrative Review: Circular Welded Non-Alloy 
Steel Pipe From the Republic of Korea.

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SUMMARY: On July 9, 1997, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on circular welded non-alloy steel pipe from the 
Republic of Korea. The review covers the following seven manufacturers/
exporters: Dongbu Steel Co., Ltd. (Dongbu), Korea Iron Steel Company 
(KISCO), Korea Steel Pipe Co., Ltd. (KSP), Pusan Steel Pipe Co., Ltd. 
(PSP), Dongkuk Steel Mill Co., Ltd. (DSM), Dong-Il Steel Mfg. Co., Ltd. 
(Dong-Il), and Union Steel Co., Ltd. (Union). The period of review 
(POR) is April 28, 1992, through October 31, 1993. We are also 
terminating the review for one company, Hyundai Pipe Co., Ltd., because 
the sole request for review of

[[Page 55575]]

this company has been withdrawn in a timely manner.
    Based on our analysis of the comments received, we have made 
changes, including corrections of certain inadvertent programming and 
clerical errors, to the margin calculations. Therefore, the final 
results differ from the preliminary results. We have listed the final 
weighted-average dumping margins for the reviewed firms below in the 
section entitled ``Final Results of the Review.''

EFFECTIVE DATE: October 27, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Panfeld, Mark Ross, Thomas 
Schauer, or Richard Rimlinger, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
4733.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Tariff Act), are references to the provisions in 
effect as of December 31, 1994. In addition, unless otherwise 
indicated, all citations to the Commerce Department's regulations are 
to the regulations as codified at 19 CFR part 353 (1997).

Background

    On July 9, 1997, the Department published in the Federal Register 
the preliminary results of its administrative review of the antidumping 
duty order on circular welded non-alloy steel pipe from the Republic of 
Korea (62 FR 36761). We gave interested parties an opportunity to 
comment on our preliminary results. No interested party requested a 
hearing.
    We are terminating the review with respect to Hyundai Pipe Co., 
Ltd. On March 16, 1994, the petitioners withdrew their request for 
review. No other interested party requested a review of this firm.

Scope of Review

    The merchandise subject to this review is circular welded non-alloy 
steel pipe and tube, of circular cross-section, not more than 406.4mm 
(16 inches) in outside diameter, regardless of wall thickness, surface 
finish (black, galvanized, or painted), or end finish (plain end, 
beveled end, threaded, or threaded and coupled). These pipes and tubes 
are generally known as standard pipes and tubes and are intended for 
the low-pressure conveyance of water, steam, natural gas, air, and 
other liquids and gases in plumbing and heating systems, air-
conditioning units, automatic sprinkler systems, and other related 
uses. Standard pipe may also be used for light load-bearing 
applications, such as for fence tubing, and as structural pipe tubing 
used for framing and as support members for reconstruction or load-
bearing purposes in the construction, shipbuilding, trucking, farm 
equipment, and other related industries. Unfinished conduit pipe is 
also included in this order.
    All carbon-steel pipes and tubes within the physical description 
outlined above are included within the scope of this review except line 
pipe, oil-country tubular goods, boiler tubing, mechanical tubing, pipe 
and tube hollows for redraws, finished scaffolding, and finished 
conduit. In accordance with the Department's Final Negative 
Determination of Scope Inquiry on Certain Circular Welded Non-Alloy 
Steel Pipe and Tube from Brazil, the Republic of Korea, Mexico, and 
Venezuela (61 FR 11608, March 21, 1996), pipe certified to the API 5L 
line-pipe specification and pipe certified to both the API 5L line-pipe 
specifications and the less-stringent ASTM A-53 standard-pipe 
specifications, which falls within the physical parameters as outlined 
above, and entered as line pipe of a kind used for oil and gas 
pipelines is outside of the scope of the antidumping duty order.
    Imports of these products are currently classifiable under the 
following Harmonized Tariff Schedule (HTS) subheadings: 7306.30.10.00, 
7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 
7306.30.50.85, and 7306.30.50.90. Although the HTS subheadings are 
provided for convenience and customs purposes, our written description 
of the scope of this proceeding is dispositive.

Non-Shippers

    DSM and Dong-Il responded that they had no shipments of the subject 
merchandise during the POR. We confirmed this information for both 
companies with the U.S. Customs Service. Therefore, we have terminated 
the review with respect to these companies.

Sales Below Cost in the Home Market

    The Department performed a test to determine whether respondents 
sold pipe in the home market at prices below the cost of production 
(see Preliminary Results of Antidumping Duty Administrative Review; 
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 62 FR 
36761, 36763 (July 9, 1997) (Korean Pipe Preliminary Results)). As a 
result of that test, the Department disregarded sales below cost for 
Dongbu, KSP, PSP, and Union in its analysis for these final results.

Analysis of Comments Received

A. General Issues

    Comment 1: Petitioners allege that the Department deducted home 
market commissions twice from home market price in calculating foreign 
market value.
    PSP, KSP, and Dongbu assert that because they reported no 
commissions this issue is moot.
    Department's Position: We agree with petitioners that we 
inadvertently deducted commissions twice from the home market price in 
the preliminary results. We changed the final results computer programs 
to correct this error. However, because no respondents reported home 
market commissions, this change does not affect the calculation of the 
dumping margins.
    Comment 2: The petitioners contend that, in the less-than-fair-
value (LTFV) investigation, the Department recognized that the 
conversion factors the respondents used to translate actual to 
theoretical weight were flawed due to wall build-up in the production 
process (citing Final Determination of Sales at Less than Fair Value; 
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 57 FR 
42942, 42945 (September 17, 1992) (Korean Pipe LTFV Final)). The 
petitioners contend that the Department used the conversion factors in 
the LTFV investigation because it could not find evidence that the wall 
build-up resulted in understated costs. In the instant review, the 
petitioners again argue that the Department should deny an adjustment 
to cost of production/constructed value (COP/CV) based on differences 
between actual and theoretical weight because (1) the respondents have 
not demonstrated the accuracy of this adjustment and (2) the conversion 
factors are not consistent with sales data in each response.
    The petitioners maintain that the Department attempted to resolve 
this matter by requesting sample cost calculations on a length basis. 
However, the petitioners contend that the respondents have frustrated 
this review by reporting a calculated pipe length based on a 
theoretical-weight factor rather than on actual length. Petitioners 
further contend that, due to the spot-check nature of verifications, it 
is unlikely that the Department would find systematic understatement of 
costs. Contrary to the Department's statements in its notice of 
preliminary results that it has not found understated costs at

[[Page 55576]]

verification, the petitioners point to proprietary information the 
Department collected at verification that they contend proves that wall 
build-up does occur and, therefore, argue that the Department should 
not accept respondents' adjustment.
    In addition, the petitioners contend that the data are inconsistent 
and unreliable. The petitioners assert that they conducted an analysis 
of the two weight bases (standard actual and theoretical) which 
respondents (other than KISCO) used to report home market sales and 
costs. According to petitioners, they used the standard actual weight, 
theoretical weight and reported length for each sale to calculate a 
conversion factor in their analysis. Petitioners conclude from their 
analysis of the data that the reported conversion factor differs from 
the calculated conversion factor for a significant number of sales and 
models. Moreover, the conversion factors respondents used to convert 
weight for COP and CV calculations differed from those conversion 
factors they used to report sales on a model-specific basis and, 
according to petitioners, the range of differences is great. Finally, 
petitioners note that some reported conversion factors used for both 
sales and costs fall outside industry specifications and, therefore, 
are inaccurate. Thus, notwithstanding their argument that respondents' 
failed to meet their burden of proof, petitioners conclude that the 
Department cannot rely on respondents' data.
    The petitioners argue that it is the Department's long-standing 
practice that a party requesting an adjustment must prove its 
entitlement. Asserting that respondents have failed to properly justify 
this adjustment and have failed to respond properly to the Department's 
requests for information, petitioners contend that the Department 
should deny the adjustment as best information available (BIA) under 
section 776(c) of the Tariff Act.
    KISCO, Union, Dongbu, PSP, and KSP disagree with the petitioners. 
Union maintains that the Department correctly converted its 
calculations to a theoretical basis. The other respondents claim that 
the Department should perform the same conversion in calculating CV 
and, in the case of Dongbu, KSP, and PSP, in performing the sales-
below-cost test by using costs converted to a theoretical-weight basis. 
Respondents argue that the Department should use theoretical costs 
since the Department will compare these costs to sales reported on a 
theoretical-weight basis.
    Respondents disagree with the petitioners' conclusion that the 
Department should not convert actual-weight-basis costs because 
respondents have failed to justify this adjustment. Respondents argue 
that they record U.S. sales, home market sales, and production costs on 
different quantitative bases. Respondents point to a March 18, 1994, 
letter to interested parties from the Division Director of the 
Department's Office of Antidumping Compliance that instructed 
respondents to report sales and costs on a theoretical-weight basis. 
Respondents argue that the theoretical-weight conversion factor is not 
an adjustment per se. Rather, they contend, it is merely an attempt to 
express production costs, U.S. sales, and home market sales on a 
consistent basis so that the Department can make an apples-to-apples 
comparison. Therefore, respondents assert, the burden of proof normally 
associated with, for example, a circumstance-of-sale adjustment is not 
applicable.
    Dongbu, PSP, and KSP disagree with the petitioners' conclusion that 
their data are inaccurate. Respondents argue that the Department has 
verified that the record-keeping and methodologies respondents have 
used in recording and reporting costs were accurate and that 
petitioners have failed to point out any verification results that show 
otherwise. Moreover, respondents claim that the petitioners' analysis 
of conversion factors used in the sales and cost databases is flawed. 
Respondents maintain that, while they have reported the sales data on a 
standard-actual-weight basis, they have reported the costs on an 
actual-weight basis. Furthermore, respondents note that standard-actual 
weight varies from actual weight when input coil thicknesses vary and 
that the record demonstrates this fact. Moreover, respondents contend 
that the record does not support petitioners' assumption that 
respondents reported costs on a standard-actual-weight basis. 
Therefore, respondents conclude, any analysis of these two types of 
conversion factors would likely yield differences.
    KISCO states that, although the petitioners characterize this as an 
issue common to all respondents, they failed to identify any errors in 
KISCO's reporting methodologies.
    Department's Position: We disagree with the petitioners in part. 
The use of theoretical-weight-based sales prices and costs is not a 
price or cost adjustment per se but a conversion to a different basis 
that allows an apples-to-apples comparison. While respondents kept and 
reported their COP on an actual-weight basis, respondents made and 
reported their U.S. sales on a theoretical-weight basis. Therefore, a 
conversion is necessary to make equitable comparisons.
    While petitioners contend that the conversion factors respondents 
used to translate actual weight to theoretical weight were flawed due 
to wall build-up in the production process, we have verified the cost 
data KSP, PSP, and Union submitted. We found that, with some minor 
exceptions we noted in the respective verification reports, these 
respondents' costs and conversion factors were reported properly. Our 
verifications generally demonstrated that these respondents captured 
and properly assigned all costs to the subject merchandise produced 
during the POR. Wall build-up would only have significance if 
respondents first calculated a per-metric-ton or per-kilogram cost for 
the steel inputs and then applied those costs to a theoretical or 
standard-actual weight of the pipe. In this instance, respondents 
assigned the cost of one entire coil input to all of the merchandise 
produced from that input, which is generally one type of pipe. Thus, 
because all costs were captured and because the methodologies 
respondents used to assign costs are consistent with the methodologies 
they used to record production (i.e., actual weight), the possibility 
that wall buildup may occur is inconsequential. Finally, with the 
exception of the aberrant conversion factors noted below, we found at 
verification that respondents calculated the reported conversion 
factors properly by dividing the total actual weight of production of 
each model by the theoretical weight of that production.
    We also agree with respondents that certain differences among the 
weight-conversion factors result when different coil-input thicknesses 
are used to make the same product. This is acceptable within industry 
standards so long as the ultimate product meets specification 
tolerances. Moreover, the petitioners' analysis is flawed because it 
compares standard-actual weight to theoretical weight. Respondents 
provided the conversion factors to convert their reported actual-
weight-basis costs to theoretical weight (the basis of the United 
States prices (USPs)). The standard-actual weights that petitioners use 
in their analysis are not the actual weight but rather the standard 
weight respondents used in Korea, much as theoretical weight is a 
standard weight used in the United States. Therefore, some weight-
conversion disparities are not unusual on a sale-by-sale or sale-to-

[[Page 55577]]

 cost basis. However, we have conducted our own analysis of the 
reported conversion factors and agree with the petitioners that certain 
individual factors are aberrational.
    Using the maximum industry-standard tolerance of wall thickness, we 
calculated the minimum conversion factor allowable in various grades of 
standard pipe. We found that respondents reported model-specific 
conversion factors that fall below this minimum. For more information, 
see the final results analysis memoranda, dated October 2, 1997. 
Because it is impossible to produce a pipe that is within the industry-
standard tolerances yet has a conversion factor below this minimum, we 
consider certain reported conversion factors to be aberrational and 
unverifiable under 19 CFR 353.37(a)(2). As such, we have disregarded 
these aberrational factors and applied BIA in accordance with section 
776(c) of the Tariff Act. As BIA, we examined the conversion factors 
each respondent reported for the 1992 and/or 1993 costs for the same 
model. If these factors were both below the minimum, as BIA we used the 
minimum possible conversion factor. If one factor was below and the 
other factor was above the minimum, as BIA we used the higher of the 
two.
    Comment 3: Petitioners contend that, except for Union, all 
respondents paid duties on an actual-weight basis while they received 
duty drawback on a theoretical-weight basis. Petitioners assert that 
the duty drawback respondents received per unit of pipe therefore 
exceeds the duties they paid on the inputs for the pipe because the 
theoretical weight is greater than the actual weight. Citing section 
772(d)(1)(B) of the Tariff Act, petitioners state the Department is to 
increase the USP on each sale by ``the amount of import duties imposed 
by the country of exportation which have been rebated'' on each of 
those sales. Citing Avestra Sheffield Inc. et. al. v. United States, 17 
CIT 1212, 1216 (1993) (Avestra Sheffield), petitioners continue that 
the Department is not required to accept the full amount of the duty 
drawback respondents claimed (as it does not reflect the actual duties 
paid) even if it finds the two conditions of the duty-drawback test 
enumerated in Far East Machinery Co. v. United States, 699 F. Supp. 
309, 312 (1988) (Far East Machinery) have been met (test set forth 
below). Thus, to ensure that the duty drawback reflects the duties paid 
on materials actually incorporated into the exported product, 
petitioners insist that the Department limit respondents' reported duty 
drawback by the amount of actual duties paid.
    Dongbu, KSP, and PSP contend that the Department's long-standing 
practice has been to grant a full duty-drawback adjustment when (1) the 
import duty and the pertinent rebate are directly linked to, and 
dependent upon, one another, and (2) the company claiming the 
adjustment can demonstrate that there were sufficient imports of raw 
materials to account for the duty drawback received on the exports of 
the manufactured product (citing Far East Machinery at 311). Dongbu, 
KSP, and PSP assert that they met both required conditions and are 
therefore entitled to their full duty-drawback claim.
    Dongbu, KSP, and PSP further contend that, by arguing that 
respondents receive more duty drawback than duties paid, the 
petitioners are making a claim of subsidy. Citing Far East Machinery, 
respondents contend that the Department cannot address subsidy 
allegations in an antidumping proceeding.
    Finally, Dongbu, KSP, and PSP argue that the petitioners are 
requesting a level of precision required neither by common sense nor by 
law and that only a reasonable, not an absolute, standard of precision 
is required. Respondents contend that the petitioners' reliance on 
Avestra Sheffield is misplaced because, respondents assert, that case 
required only that the foreign producer demonstrate that it has 
imported a sufficient amount of raw materials to account for the 
drawback received upon exportation to satisfy the second condition.
    KISCO argues that petitioners did not identify any evidence in the 
record that supports this assertion with respect to its duty-drawback 
claim. KISCO further contends that the Department's verification 
directly contradicts the petitioners' assertion, in which the 
Department determined that KISCO paid the duties for which KISCO 
received duty drawback and that KISCO accurately quantified duty 
drawback in its response.
    Department's Position: We agree with petitioners in part. Section 
772(d)(1)(B) of the Tariff Act directs us to add to USP ``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 the exportation 
of the subject merchandise to the United States' (emphasis provided). 
Thus, the plain language of the statute directs us to add to USP the 
amount of import duties paid and rebated. That is, we are not to add 
the rebate but rather the duties that have been rebated. Therefore, if 
the rebate received is greater than the duties paid, we are to increase 
USP only by the amount of the actual duties paid.
    While it is true that the Court of Appeals for the Federal Circuit 
(CAFC) ruled in Far East Machinery that, if petitioners ``are arguing 
impliedly that the * * * export rebate system * * * results in 
excessive rebates because of lack of adequate controls, such an 
allegation is properly made in the context of a countervailing duty 
case, not the present antidumping suit,'' the CAFC continued in its 
decision to state ``[n]onetheless, ITA is not limited to accepting the 
full value of the ``rebate'' as an adjustment * * * even if there is 
some linkage and even if the requisite import duties were paid on 
suitable goods. That is, in deciding what the proper adjustment should 
be when the linkage is broad-based ITA may make its own determination 
as to how much of the rebate reflects actual cost elements of the 
product under investigation, that is, how much actually represents 
drawback.'' See Far East Machinery at 313-14. Thus, even if a 
respondent meets both parts of the duty-drawback test set forth in Far 
East Machinery, which all respondents in this case did, we are only 
required to adjust the USP for the amount of drawback applicable to the 
inputs actually used, whereas respondents received revenue pursuant to 
a drawback claim based on theoretical weight, which, because it exceeds 
the actual weight of the merchandise, includes an amount of drawback 
not attributable to the actual input or duties paid on that input. The 
second part of the test entitles respondents to a ``duty drawback 
adjustment to U.S. price [up to] the amount of import duty actually 
paid.'' See Far East Machinery at 312.
    We examined the record and determined that petitioners' comment 
applies only to duty drawback received under the ``fixed-rate'' duty 
drawback provision and not an ``individual-transaction'' duty-drawback 
provision. We found that, when respondents received duty drawback under 
the individual-transaction duty-drawback provision, companies received 
duty drawback based on the duties actually paid on the input of the 
exported product. In the fixed-rate duty-drawback provision of Korean 
law, companies merely needed to demonstrate that they had sufficient 
imports of the input to cover the exports of the finished merchandise 
and that they paid duties on the imports of the input. Respondents were 
not required to demonstrate to the Korean government that the amount of 
the drawback claim did not exceed the amount of duties paid. We also 
found that companies

[[Page 55578]]

receiving duty drawback under the fixed-rate provision paid duties on 
the basis of the actual weight of inputs imported but received drawback 
on the basis of the theoretical weight of merchandise exported to the 
United States. Because theoretical weight is generally greater than 
actual weight, fixed-rate drawback calculated on a theoretical-weight 
basis is greater than that calculated on an actual-weight basis. 
Therefore, we conclude that the reported duty drawback of respondents 
who received the drawback under the fixed-rate provision exceeds the 
duties actually paid. Furthermore, we note that respondents did not 
dispute the fact that they received duty drawback in excess of the 
duties they paid on imports but, rather, disputed whether this fact is 
relevant.
    We also disagree with respondents' argument that the petitioners 
are requesting a level of precision that neither common sense nor law 
requires. While it is true that we require a reasonable, rather than an 
absolute, standard of precision, the result in this case is a 
reasonable and logical one, as has also been demonstrated by the 
interpretation of this provision of the Tariff Act by the Court of 
International Trade (CIT) in various cases. See Far East Machinery, 
Avesta Sheffield, and Carlisle Tire & Rubber Co. v. United States, 657 
F. Supp. 1287 (March 16, 1987).
    Finally, we agree with KISCO that it did not receive duty drawback 
in the manner that petitioners describe. KISCO received duty drawback 
under the individual-transaction provision. Thus, the petitioners' 
comment is not applicable to KISCO.
    Accordingly, where respondents reported that they received duty 
drawback under the fixed-rate provision, we adjusted the drawback claim 
to reflect the amount of duty drawback actually paid by multiplying the 
reported duty drawback by the factor converting theoretical weight to 
actual weight. Because KSP and PSP received drawback under the fixed-
rate provision for the entire POR, we made this adjustment for all 
sales. See KSP's April 7, 1994, submission at page 55 and PSP's April 
11, 1994, submission at page 64. Because Dongbu received drawback under 
the fixed-rate provision prior to April 1993, we made this adjustment 
for all of Dongbu's sales made prior to April 1993 and have not 
adjusted the drawback that Dongbu reported for sales made as of April 
1993. See verification report for Dongbu dated March 18, 1997, at page 
8. Because KISCO and Union did not receive duty drawback under the 
fixed-rate provision, no adjustment to these companies' reported duty 
drawback was necessary.
    Comment 4: The petitioners argue that the Department should treat 
indirect purchase price (IPP) sales which Union, KISCO, PSP, KSP, and 
Dongbu made as exporter's sales price (ESP) sales. The petitioners 
assert that the Department uses four criteria to test when a sale can 
be classified as purchase price: (1) The sale transaction must occur 
prior to importation; (2) the merchandise in question is shipped 
directly from the manufacturer to the unrelated buyer without being 
introduced into the inventory of the related selling agent; (3) the 
transaction represents a customary commercial channel for sales of this 
merchandise between the parties involved; and (4) the related agent in 
the United States acts only as a processor of sales-related 
documentation and a communication link with the unrelated U.S. buyer. 
Petitioners assert that respondents have not met two of these criteria 
and, therefore, their sales to U.S. affiliates do not qualify as 
purchase price transactions.
    First, the petitioners contend that, generally, the U.S. 
subsidiaries of the respondents take title to the merchandise in Korea 
through a bill of lading and relinquish title when the merchandise 
clears the U.S. Customs Service. Thus, the petitioners argue, the 
merchandise enters the affiliate's inventory and, therefore, the 
transactions do not meet the second criterion.
    Second, the petitioners allege that the affiliates act as more than 
just a processor of documents. With slight variations in each company's 
factual situation, petitioners argue generally that the affiliates 
purchase the merchandise from the manufacturers and obtain a letter of 
credit to pay the manufacturers. Thus, the petitioners conclude, the 
affiliates incur carrying costs until they receive payment from the 
U.S. customers. Petitioners also contend that the affiliates incur the 
obligation to pay U.S. Customs duties, marine insurance, and U.S. 
brokerage and handling expenses and they carry accounts receivables on 
their books until their U.S. customers settle their accounts. 
Therefore, the petitioners contend, the affiliates incur the risk of 
extending credit to their U.S. customers and bear the expenses of 
carrying accounts receivables. The petitioners argue that these 
circumstances lead to the conclusion that the affiliates perform 
substantive functions beyond the simple ``processing of documents'' 
criteria outlined in the Department's purchase price test.
    Dongbu, Union, PSP, and KSP argue that the sales-related activities 
mentioned by the petitioners, such as incurring expenses, taking 
physical and legal ownership, and obtaining and extending credit, ring 
hollow when compared with the record evidence and Departmental and 
judicial precedents. Moreover, the respondents argue that the 
petitioners fail to provide a citation to support their position that 
carrying merchandise in a merchandise-in-transit account equals 
physical possession or holding merchandise in inventory.
    Respondents, citing Certain Corrosion-Resistant Carbon Steel Flat 
Products from Korea; Final Results of Antidumping Duty Administrative 
Reviews (Carbon Steel from Korea), 61 FR 18547, 18562 (April 26, 1996), 
argue that, even assuming that legal control of the merchandise 
temporarily passes to the U.S. affiliate to facilitate transportation, 
this constitutes a routine selling function because the sale occurs 
prior to importation, thus satisfying one of the Department's four 
factors to meet purchase price status. Respondents also argue that the 
factual situation regarding the relationships and selling activities of 
the respondents' affiliates are nearly identical to those in Certain 
Cold-Rolled and Corrosion Resistant Carbon Steel Flat Products from 
Korea; Final Results of Antidumping Duty Administrative Reviews (Carbon 
Steel from Korea II), 62 FR 18404, 18423 (April 15, 1997), and in fact 
involved two of the same companies. In that case, respondents contend, 
the Department classified these sales as purchase price sales.
    Respondents also refer to recent judicial precedents on this 
subject. For example, respondents point out that the CIT has upheld the 
classification of sales as purchase price sales in circumstances where 
the related U.S. company undertook activities similar to, or even more 
extensive than, those in this instance (citing, e.g., Outokumpu Copper 
Rolled Products v. United States, 829 F. Supp. 1371, 1379-1380 (CIT 
1993), E.I. du Pont de Nemours & Co., Inc. v. United States, 841 F. 
Supp. 1237, 1248-50 (CIT 1993), and Zenith Electronics Corp. v. United 
States, Consol. Ct. No. 88-07-00488, Slip Op. 94-146 (CIT) (Zenith)).
    KISCO asserts that the record does not support petitioners' points. 
KISCO claims that the Department's verification report confirms that 
KISCO's exported merchandise is shipped directly to the unrelated U.S. 
customer without entering the inventory of its U.S. affiliate, Dongkuk 
International Inc. (DKA). Moreover, KISCO claims that DKA is merely a 
processor of sales documents. KISCO

[[Page 55579]]

concludes that sending invoices, receiving payment, and arranging for 
U.S. Customs Service clearance are precisely the types of activities 
routinely performed by U.S. affiliates in IPP situations.
    Department's Position: We disagree with petitioners that we should 
treat the sales made through the U.S. affiliates and claimed as IPP 
sales as ESP sales. Whenever companies make sales prior to the date of 
importation through an affiliated sales entity in the United States, we 
classify these sales as purchase price sales if the following 
considerations apply: (1) The manufacturer shipped the subject 
merchandise directly to an unrelated buyer without the merchandise 
being introduced into the inventory of the related shipping agent; (2) 
direct shipment from the manufacturer to the unrelated buyer is the 
customary channel of the sales transaction between the parties 
involved; and (3) the related selling agent in the United States acts 
only as a processor of sales-related documentation and a communication 
link with the unrelated U.S. buyer. See, e.g., Final Determination of 
Sales at Less than Fair Value; Certain Stainless Steel Wire Rods from 
France, 58 FR 68865, 68868 (December 29, 1993), and Granular 
Polytetrafluoroethylene Resin from Japan; Final Results of Antidumping 
Duty Administrative Review, 58 FR 50343, 50344 (September 27, 1993).
    The Department first developed this test in response to the CIT's 
decision in PQ Corporation v. United States, 652 F. Supp. 724, 733-35 
(CIT 1987). The test is used to classify transactions involving 
exporters and their U.S. affiliates, and the Department has routinely 
applied this test in its determinations. See, e.g., Zenith. 
    Petitioners do not dispute that the companies made the sales prior 
to exportation. Nor do the petitioners dispute that this is a customary 
channel of distribution. Therefore, the precondition that these sales 
are made prior to importation and one of the three considerations for 
classifying the sales as purchase price sales are not at issue. Thus, 
we must only determine whether respondents shipped the merchandise 
directly to the unaffiliated U.S. customer without entering merchandise 
into the affiliate's inventory and whether the affiliate acted as more 
than a processor of documents and a communications link.
    We agree with respondents that the merchandise does not enter the 
inventory of the U.S. affiliate. The terms of sale for these 
transactions are ex-dock, duty-paid. In these circumstances, 
respondents transfer the merchandise to the unaffiliated U.S. customer 
immediately after clearing U.S. Customs. Although the affiliate may 
temporarily take title to the merchandise, this amounts to a simple 
accounting entry. The existence of a ``merchandise-in-transit'' account 
in the affiliates'' accounting records does not indicate that the 
merchandise enters the affiliates' inventory.
    We also agree with respondents that neither the nature nor the 
scope of their affiliates' selling activities in the United States 
exceed those types of activities that one would expect an exporter to 
undertake in connection with IPP sales. Based on the respondents' 
narrative explanation of the sales process and our verification of the 
U.S. sales, we conclude that the respondents' U.S. affiliates did not 
control the sales-negotiation process or perform other significant 
selling functions; rather, they acted as a communication link passing 
on the sales documents from the parent to the U.S. unaffiliated 
customer. The types of activities which the petitioners allege 
constitute an active role do not constitute substantial selling 
activities. The U.S. affiliate's role is to function as a processor of 
paperwork, not perform significant selling functions. See Carbon Steel 
from Korea. Therefore, as in many similar instances, we consider these 
sales to be purchase price transactions.
    Comment 5: Petitioners allege that respondents in this proceeding 
directly paid or reimbursed antidumping duties within the meaning of 
Sec. 353.26 (a) of the Department's regulations. To account for 
reimbursement, petitioners assert that, in calculating assessment and 
duty deposit rates for the final results, the Department must deduct 
from USP the amount of antidumping duties determined to be due on sales 
made through respondents' affiliated importers.
    In support of their reimbursement allegations, petitioners cite to 
sales-process and terms-of-sale descriptions on the record in this 
review. Petitioners assert that these descriptions imply that 
respondents control both the prices their affiliated importers paid and 
the prices their affiliated importers charge to unrelated U.S. 
customers. Petitioners contend that this price control and the 
existence of ``duty paid'' terms of sale allow the affiliated importers 
to compensate for the duties by charging higher prices and, therefore, 
constitute evidence of reimbursement of antidumping in accordance with 
Sec. 353.26(a)(1)(ii) of the Department's regulations.
    Petitioners make additional claims in support of the reimbursement 
allegations against PSP, KSP, and Union. For PSP, petitioners claim 
that a ``contingent liability for antidumping duty deposits'' listed on 
the company's 1992 financial statement is evidence of reimbursement. 
Petitioners acknowledge that the charge was reversed in the subsequent 
year but contend that PSP did not conclusively establish that it did 
not continue to be liable for the antidumping duties. For KSP, 
petitioners assert that, because its affiliated importer went bankrupt, 
KSP will bear any duties the affiliate owes above the amount of 
antidumping duty deposited. Petitioners contend that this would 
constitute direct payment of antidumping duties in accordance with 
Sec. 353.26(a)(1)(i) of the Department's regulations.
    Petitioners also contend that the Department should collapse KSP 
and PSP with their affiliated importers in accordance with certain 
collapsing factors outlined by the Department in Certain Cold-Rolled 
Carbon Steel Flat Products From Korea; Preliminary Results of 
Antidumping Duty Administrative Review, 60 FR 65284 (December 19, 1995) 
(Steel from Korea 1993/94 Review Preliminary Results). Citing to record 
evidence, petitioners contend that two of the collapsing factors 
outlined by the Department in Steel from Korea 1993/94 Review 
Preliminary Results apply to PSP and KSP and their affiliated importers 
in this review. According to petitioners, the two collapsing factors 
are (1) the level of common ownership and (2) intertwined company 
operations (e.g., sharing of sales information, involvement in 
production and pricing decisions, sharing of facilities or employees, 
and transactions between companies). Petitioners assert that, once the 
Department collapses the parties, it must make a finding of 
reimbursement, reasoning that in a collapsing situation payment of 
antidumping duties by the affiliated importer are essentially the same 
as payment by respondents.
    As additional support for a finding of reimbursement against Union, 
petitioners claim that in examining this respondent in the LTFV 
investigation of another proceeding the Department found that Union's 
affiliated importer's role in paying antidumping duty deposits is a 
relocation of routine selling functions from Korea to the United 
States. Petitioners claim that such a scenario amounts to 
reimbursement.
    Petitioners conclude with a suggestion of how the Department should 
apply the reimbursement regulation after making a determination of 
reimbursement under Sec. 353.26(a) of the Department's regulations. 
Citing

[[Page 55580]]

Color Television Receivers from the Republic of Korea; Final Results of 
Antidumping Duty Administrative Review, 61 FR 4408, 4411 (February 6, 
1996) (Korean TVS), petitioners claim that in practice the Department 
has not always applied the adjustment for reimbursement in accordance 
with Sec. 353.26(a) of the Department's regulations. In calculating 
assessment and duty deposit rates for the final results of this 
administrative review, petitioners request that the Department deduct 
from USP the amount of antidumping duties determined to be due on sales 
through respondents' affiliated importers.
    Respondents claim that petitioners failed to cite any specific 
evidence to show that foreign producers have determined to pay the 
dumping duties of their affiliated importers or that the importers will 
avoid such payment. Respondents rely on Torrington Co. v. United 
States, 881 F. Supp. 622, 631-32 (CIT 1995), as support for the premise 
that affirmative evidence of record is required to establish 
reimbursement. Respondents assert that a mere allegation does not rise 
to the enumerated standard and note that they are not aware of any 
Departmental findings of reimbursement absent specific evidence of 
payment of duties (or agreement to pay) on behalf of the importer.
    Regarding petitioners' assertion that foreign producers reimbursed 
affiliated importers for antidumping duties by manipulating the prices 
charged, respondents contend that the Department has consistently 
recognized that the existence of such pricing is not evidence of 
reimbursement, even in situations where the transfer prices between the 
affiliated parties are so low that they are below cost. Among other 
court decisions, respondents cite Torrington Co. v. United States, 960 
F. Supp. 339, 342 (CIT 1997), and INA Walzlager Schaeffler KG v. United 
States, 957 F. Supp. 251, 269-270 (CIT 1997), in support of this 
argument.
    Next, respondents address petitioners' assertion that the 
Department should find reimbursement by collapsing the foreign 
producers with their affiliated importers. Respondents claim that 
collapsing is irrelevant to the issue of reimbursement. Citing Certain 
Circular Welded Non-Alloy Steel Pipe from Mexico; Final Results of 
Antidumping Duty Administrative Review, 62 FR 37014, 37023 (July 10, 
1997) (Pipe from Mexico), and Brass Sheet and Strip from Sweden; Final 
Results of Antidumping Duty Administrative Reviews, 57 FR 2706, 2708 
(January 23, 1992), respondents request that the Department continue 
its practice of treating the foreign producers and their affiliated 
importers as separate entities for purposes of examining reimbursement.
    KSP contends that, contrary to petitioners' claim, the bankruptcy 
of its affiliated importer does not constitute evidence of 
reimbursement. KSP notes that the affiliated importer is the importer 
of record and paid the estimated antidumping deposit for entries 
subject to review and asserts that, if additional duties are due, U.S. 
Customs will request payment from the affiliated importer. KSP claims 
that it is uncertain whether it is under any legal obligation to pay 
assessments for its affiliated importer and contends that petitioners' 
claims to the contrary are pure conjecture.
    PSP contends that the antidumping duties listed as contingent 
liabilities on its 1992 financial statements do not support a finding 
of reimbursement. Citing to the Department's Cost Verification Report, 
PSP notes that it mistakenly listed the contingent liability on the 
1992 financial statements and that it corrected the error in the 
subsequent year. Since the contingent liability was reversed, PSP 
contends that there is nothing on the record showing that it is liable 
for the payment of antidumping duties.
    Department's Position: We agree with respondents. Section 353.26 of 
our regulations requires that, in calculating USP, we deduct the amount 
of any antidumping duty that the producer or exporter directly paid on 
behalf of or reimbursed to the importer. The court has ruled that this 
regulation requires ``evidence beyond mere allegation that the foreign 
manufacturer either paid the antidumping duty on behalf of the U.S. 
importer, or reimbursed the U.S. importer for its payment of the 
antidumping duty.'' Federal-Mogul Corp., 918 F. Supp. at 393 (citing 
Torrington Co. v. United States, 881 F. Supp. 622, 631 (CIT 1995)). In 
Korean TVs, the Department specifically stated that it would not 
presume reimbursement between affiliated parties absent specific 
evidence that the exporter will pay or reimburse the antidumping duties 
due. During this review, the Department found neither evidence of an 
agreement between respondents and their affiliated importers for 
reimbursement of antidumping duties nor evidence of actual 
reimbursement of these duties between the two affiliated parties.
    Petitioners are correct that PSP had a contingent liability for 
antidumping duties on its 1992 financial statement. However, we found 
no evidence that this account was in any way related to the 
reimbursement of antidumping duties. Furthermore, as noted by 
respondents, we verified that the entry was an error and that the 
company corrected the mistake by reversing the entry in the subsequent 
year.
    We have disregarded the allegation of reimbursement based on the 
claim that KSP will pay duties owed above the amount posted by its 
bankrupt affiliated importer. First, based upon these final results, 
KSP's duty assessments will be significantly lower than the amount 
deposited. Even if the assessment had been higher in the final results, 
our regulations characterize reimbursement as duties ``paid directly on 
behalf of the importer.'' We have found no legal authority that would 
substantiate petitioners' claim that the U.S. Customs Service can 
pursue the foreign parent for the satisfaction of the bankrupt 
importer's antidumping duties. Furthermore, petitioners have not cited 
to a specific example in which the U.S. Customs Service was authorized 
or obligated to collect duties from the foreign parent of an importer. 
There is no evidence on the record indicating that the foreign parent 
is legally obligated to take on the bankrupt importer's duty 
liabilities. Thus, the petitioners' claim that reimbursement occurs 
under the current facts has no merit.
    Respondents are also correct in stating that collapsing them with 
their affiliated importers for the purposes of reimbursement, as 
petitioners advocate, is contrary to our practice. As we have noted 
before, while we sometimes treat affiliated parties as a single entity 
for purposes of the margin calculation, we treat such parties as 
separate entities when examining the question of reimbursement. See, 
e.g., Pipe from Mexico at 37023.
    For the forgoing reasons, we do not find reimbursement of 
antidumping duties within the meaning of Sec. 353.26(a) of our 
regulations. However, as a further measure to account for 
reimbursement, Sec. 353.26(b) of our regulations requires that 
importers provide the U.S. Customs Service a certificate of non-
reimbursement before liquidation of entries. If they do not file that 
certificate, we will presume that reimbursement took place and instruct 
the U.S. Customs Service to double the antidumping duties due.
    Comment 6: Petitioners note that the Department found at the cost 
verifications of KSP and PSP that these companies had calculated their 
selling, general and administrative expense (SG&A) factors and interest 
expense factors using a cost-of-goods-sold denominator that includes 
packing

[[Page 55581]]

expenses. They further note that the cost of manufacturing (COM) 
respondents used to calculate SG&A and interest expenses does not 
include packing. Petitioners contend that KSP and PSP have therefore 
understated their SG&A and interest expenses, and they assert that both 
Dongbu and Union duplicated this inconsistency. Petitioners argue that 
the Department should recalculate SG&A and interest expense by 
multiplying the factor by the sum of reported home market packing 
expenses and the submitted COM.
    KSP, PSP, Dongbu, and Union argue that an adjustment to the 
reported expense is not warranted. Respondents assert that they 
followed the Department's standard practice, which, according to 
respondents, is to calculate these factors by dividing the expenses by 
the cost of goods sold from the financial statements. Respondents also 
allege that the Department never informed them that it required a 
change to the methodology, and they claim that they only learned of 
this possible change upon receiving the verification reports. 
Therefore, respondents contend, there is no compelling reason to adjust 
the data when complete data may or may not be available to make the 
adjustment. They also contend that if the Department adjusted these 
factors it would be a minimal adjustment.
    Department's Position: We agree with petitioners. While we 
typically prefer that respondents calculate the SG&A and interest 
expense factors using data contained in the financial statements, they 
should have calculated the factor on the same cost basis as the COM to 
which they applied the factor. As noted by petitioners, respondents' 
methodology for calculating the factors understates the reported SG&A 
and interest expenses. To correct this problem, we have added packing 
expenses to the reported COM for all companies to recalculate SG&A and 
interest expenses. This ensures that the factors, and the COM to which 
we apply them, are comparable and corrects the under-reporting of SG&A 
and interest expenses.
    Comment 7: KSP, PSP, Dongbu, and Union assert that the Department 
inadvertently double-counted selling expenses in the cost test. 
Respondents note that the Department deducted selling expenses from the 
home market prices it used in the cost test but then included the 
expenses in the COP it used in the cost test. Respondents contend that 
this error can be corrected by not including selling expenses in the 
COP used in the cost test.
    Department's Position: We agree with respondents that we made an 
error with regard to the home market selling expenses in the cost test. 
We did not, however, correct the error as respondents suggested but, 
rather, corrected the error by not deducting selling expenses from the 
home market prices we used in the cost test. Our correction effectively 
achieves the same result as the correction respondents suggest by 
ensuring that we have included and excluded the same expenses in the 
prices to which we compare the COP.
    Comment 8: Respondents claim that the preliminary results of review 
contained the wrong scope description. Respondents assert that the 
scope the Department used contains a substantive error in that it 
includes mechanical tubing, a product that neither the International 
Trade Commission's affirmative injury determination nor the scope of 
the antidumping duty order covers. Respondents request that, in the 
final results of review, the Department publish the scope language set 
forth in the antidumping duty order.
    Petitioners agree that the Department should modify the scope 
description it published in the preliminary results to exclude 
mechanical tubing but contend that the scope description requires only 
a minor modification to achieve this. Petitioners also assert that the 
scope description should state clearly that standard pipe with 
mechanical type applications, such as fence tubing, is included in the 
order.
    Department's Position: We agree with respondents and petitioners 
that the scope description we published in the preliminary results was 
incorrect. For the final results, we have adopted respondents' 
suggestion and revised the scope description so that it is consistent 
with the one published in the notice of antidumping duty order. See 
Notice of Antidumping Duty Orders; Certain Circular Welded Non-Alloy 
Steel Pipe from Brazil, the Republic of Korea (Korea), Mexico, and 
Venezuela, and Amendment to Final Determination of Sales at Less Than 
Fair Value; Certain Circular Welded Non-Alloy Steel Pipe from Korea, 57 
FR 49453, 49454 (November 2, 1992). We did not adopt the petitioners' 
suggestion for correcting the error since the scope description 
published in the notice of antidumping duty order states clearly that 
standard pipe used for light load-bearing applications, such as fence 
tubing, is included in the antidumping duty order.
    Comment 9: PSP and KSP contend that the Department miscalculated 
their ESP assessment rates by dividing total ESP dumping duties due by 
the entered value of all entries of subject merchandise made by their 
affiliated importers during the POR. Respondents contend that this 
methodology is distortive since the total quantity and entered value of 
all POR subject merchandise entries of their affiliated importers are 
different from the total quantity and entered value of subject sales 
used to determine the dumping duties due on ESP transactions. Citing 
Color Picture Tubes from Japan; Final Results of Antidumping Duty 
Administrative Review, 62 FR 34201, 34211 (June 25, 1997) (CPTs from 
Japan), respondents note that the Department's practice for the 
calculation of ESP assessment rates is to divide the total dumping 
duties due for ESP sales by the total entered value of the same ESP 
sales. To correct the error in the ESP assessment-rate calculation 
respondents suggest that the Department calculate an average entered 
value based on the total price and quantity of all POR subject entries 
made by their affiliated importers, multiply the average entered value 
by the quantity of reported ESP sales, and use the resulting total 
entered value for ESP sales as the denominator in the calculation of an 
ESP assessment rate.
    Department's Position: In most cases, we calculate assessment rates 
on ESP sales by dividing the total dumping margins for the reviewed 
sales by the total entered value of those reviewed sales for each 
importer. See, e.g., Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Singapore, Sweden, and the United Kingdom; Final Results of Antidumping 
Duty Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 66472, 66475 (December 17, 1996), and CPTs from Japan at 
34211. In our questionnaire, we asked respondents to report the entered 
value of subject merchandise for their ESP sales. In response to our 
request, PSP and KSP explained that they could not provide this 
information since they were unable to tie entries to sales. As an 
alternative reporting methodology, respondents gave us the total 
quantity and value of all POR subject entries of their affiliated 
importers. In the preliminary results, we used this information to 
calculate assessment rates for ESP transactions. However, we have 
reconsidered our use of this data in calculating assessment rates for 
the final results.
    For situations where the respondent does not know the entered value 
of the merchandise for ESP sales, it has been our practice to calculate 
either an approximate entered value or an average per-unit dollar 
amount of antidumping duty based on all sales examined during

[[Page 55582]]

the POR. See Antifriction Bearings (Other Than Tapered Roller Bearings) 
and Parts Thereof from the Federal Republic of Germany; Final Results 
of Antidumping Duty Administrative Review, 56 FR 31692, 31694 (July 11, 
1991). For the final results of this administrative review, we have 
adopted the latter approach for all transactions subject to review 
(i.e., ESP, direct purchase price, and IPP) because this is a more 
precise calculation under the circumstances. We calculated a per-unit 
dollar amount of antidumping duty by dividing the total antidumping 
duties due for each importer/customer by the corresponding number of 
units we used to determine the duties due. We will direct Customs to 
assess the resulting per-ton dollar amount against each ton of 
merchandise on each of the importers'/customers' subject entries during 
the review period. This addresses respondents' concerns about the fact 
that the entered values do not correspond to the total entered value of 
sales we used to determine the dumping duties due.
    Comment 10: Dongbu, PSP, KSP, and Union contend that the model-
match hierarchy the Department used in the preliminary results 
improperly places wall thickness above surface finish (black or 
galvanized). Respondents argue that the Department's hierarchy defies 
commercial reality in that it assumes that a customer who is unable to 
obtain galvanized pipe of a particular wall thickness would find a 
black pipe of the same wall thickness to be more similar than a 
galvanized pipe of a different wall thickness. Respondents reason that 
a customer will only incur the significant additional costs associated 
with galvanized pipe if there is a sufficient need for the corrosion 
resistance afforded by the galvanization.
    Department's Position: We disagree with respondents' contention 
that surface finish should be placed above wall thickness in the model-
match hierarchy. We acknowledge that galvanization plays a significant 
role in the matching hierarchy, but we do not agree that it is more 
important than a dimensional characteristic such as wall thickness. 
After grade and nominal pipe size, wall thickness is the next most 
important criterion in the model match. Wall thickness is a significant 
factor of compatibility in pipe applications, especially when dealing 
with pipe of a small diameter. For the merchandise subject to this 
review, we consider surface finish to be less important than the 
dimensional characteristics because users of this merchandise can 
freely interchange black and galvanized products if the dimensional 
characteristics are the same. The significant difference between 
galvanized and black pipe is that the galvanized pipe will last longer 
in a corrosive environment.
    In this administrative review, the matching hierarchy we applied is 
consistent with the one we applied in the LTFV investigation. See 
Korean Pipe LTFV Final at 42944. While the hierarchy the Department 
used in the LTFV investigation is not binding, respondents have not 
provided sufficient facts to warrant a change. Thus, lacking a 
compelling reason, we have not changed the matching criteria for the 
final results. Furthermore, with respect to our ranking of wall 
thickness above surface finish, adopting this position is in the 
interest of maintaining a stable and predictable approach to the 
antidumping duty margin calculations and is consistent with our 
position on the matching hierarchy for other proceedings involving 
steel pipe. See, e.g., Appendix VI of the March 22, 1996, questionnaire 
for the 1994/1995 administrative review of the antidumping duty order 
on circular welded non-alloy steel pipe and tube from Mexico or 
Appendix V of the questionnaire for the 1995/1996 administrative review 
of the antidumping duty order on certain welded carbon standard steel 
pipes and tubes from India.

B. Company-Specific Issues

KSP
    Comment 1: Petitioners argue that the Department should ensure that 
in KSP's post-verification submission KSP made all corrections the 
Department identified in KSP's sales and cost verification reports.
    KSP contends that it made all such corrections.
    Department's Position: We have reviewed the revised computer tape 
submission which we requested that KSP submit and are satisfied that 
KSP made all the corrections we identified in our sales and cost 
verification reports regarding KSP.
    Comment 2: Petitioners assert that the Department should reject 
KSP's U.S. and home market sales response because the information it 
reported, according to petitioners, is unreliable. Petitioners note 
that the Department found the following problems: the date of shipment 
for one U.S. sale and the date of payment for a number of U.S. sales 
were incorrect; KSP was unable to produce invoices for some 
transactions through KSP's U.S. affiliate; KSP could not produce its 
affiliate's bank statements demonstrating payment. Petitioners further 
observe that KSP's failure to report its home market sales net of 
returns and inclusion of returned goods in the home market sales 
database may cause distortion. For these reasons, petitioners contend 
that the Department should reject KSP's United States and home market 
sales responses and calculate KSP's margin using BIA.
    KSP argues that the petitioners ignored a significant body of 
evidence on the record that confirms the accuracy of KSP's responses 
and relied on isolated issues that arose during the sales verification. 
With regard to the U.S. sales data to which petitioners refer, KSP 
contends that, while it was unable to present the documents the 
Department prefers to examine for some sales, the Department was able 
to verify the information using alternative methodologies. KSP also 
argues that petitioners exaggerate and highlight minor differences on 
reported sales dates and payment dates. With regard to the home market 
sales data to which petitioners refer, KSP argues that its methodology 
is reasonable and the effect that returned goods have on weighted-
average prices would be inconsequential, given the relatively small 
quantity of returned goods to home market sales and the stability of 
home market prices during the POR. KSP concludes that, because it 
cooperated with all of the Department's requests for information and 
because its submissions were successfully verified, the application of 
BIA to KSP's U.S. sales would be inappropriate.
    Department's Position: We agree with respondents. With regard to 
the dates of shipment and payment, we found that, of the discrepancies 
noted by petitioners, all, with one exception, would have been 
disadvantageous to KSP had we not found the discrepancies and allowed 
KSP to correct them. With regard to the fact that KSP was unable to 
produce certain documents we requested, we note that KSP was able to 
present other documentation that supported the data it reported in its 
response. We are reviewing a POR that ended in 1993. KSP's U.S. 
affiliate filed for bankruptcy proceedings in 1993 and no longer 
operates. It is appropriate to recognize the lapse of time since the 
POR ended and the fact that the U.S. affiliate is no longer in 
operation. In our view, KSP cooperated to the best of its ability, 
considering the circumstances. Due to the fact that we were able to tie 
the reported information back to other documentation and that, in our 
view, the errors to which petitioners refer are not nearly as grave as 
petitioners assert, we are satisfied with the accuracy of KSP's U.S. 
sales database.

[[Page 55583]]

    With regard to home market sales returns, it is impossible to 
determine from the record whether any distortion exists or what effect 
this hypothetical distortion, if it exists, may have on the margin. As 
KSP notes, the quantity of returned goods was very small in proportion 
to the volume of home market sales, which would suggest that any 
distortion that may exist would have, at best, a minuscule effect on 
the margin. Therefore, we have used KSP's home market sales database 
because there is no record evidence that KSP's reporting methodology is 
distortive. To simply reject KSP's entire home market sales response 
because KSP was not able to match returns to sales would be, in our 
view, unwarranted and punitive, given the cooperation that KSP 
provided.
    Comment 3: Petitioners argue that KSP's interest expense must be 
recalculated to exclude certain offsets for interest income because KSP 
could not demonstrate that the underlying investments were short-term 
in nature at verification.
    KSP does not object to a modification of its interest expense 
factor to account for income that was not proven to be associated with 
short-term investments as long as the adjustment is limited to that 
income alone.
    Department's Position: We agree with petitioners. Short-term-
interest expense may only be offset by short-term-interest income. 
Because KSP could not demonstrate that the underlying investments were 
short-term in nature at verification, we have disallowed these items of 
interest income as an offset to interest expense and recalculated KSP's 
interest-expense factor accordingly.
    Comment 4: KSP asserts that the Department improperly treated the 
schedule of ASTM pipe, i.e., the wall thickness, as a grade 
specification in applying the model-match hierarchy. KSP asserts that 
the schedule of ASTM pipe represents wall thickness and argues that, 
since wall thickness is a distinct characteristic under the 
Department's physical-characteristics hierarchy, it should be 
disregarded in matching pipe by grade specification.
    Department's Position: We agree with KSP. We have corrected this 
error for the final results.
    Comment 5: KSP argues that the Department should disregard level of 
trade in making model matches for KSP because there is no evidence on 
the record indicating any correlation between prices or expenses and 
levels of trade in the home market in the case of KSP. KSP further 
notes that this issue was the subject of litigation in the LTFV 
investigation, where the CIT remanded the issue to the Department to 
conduct a correlation test to determine whether any correlation between 
prices or expenses and levels of trade existed. According to KSP, the 
Department found, after conducting this test, that no such correlation 
existed and recalculated KSP's margin without regard to level of trade. 
KSP also submitted an analysis of prices and selling expenses based on 
the home market sales data it previously submitted to demonstrate that 
there was no correlation in the current POR.
    Petitioners contend that the Department should reject KSP's level-
of-trade analysis because it is untimely and flawed, stating that its 
test data cannot be verified or carefully analyzed. Petitioners also 
contend that KSP's assertion that the results of the LTFV investigation 
compel the same result in this review is incorrect and assert that the 
Department's policy is to treat discernable levels of trade as separate 
unless a party provides evidence that there is not a significant 
correlation between prices and selling expenses on the one hand and 
levels of trade on the other.
    Petitioners argue that the analysis KSP submitted in its case brief 
is flawed with regard to unit prices because it compares aggregate 
prices rather than monthly prices and, therefore, may be subject to 
other market factors, distorting the analysis. Petitioners further 
argue that the analysis is flawed with regard to selling expenses 
because the selling expenses KSP uses in its analysis were all 
allocated proportionally to all sales in the response regardless of 
level of trade.
    Department's Position: We agree with petitioners in part and with 
KSP in part. Because petitioners are correct in arguing that each 
review stands alone, whatever factual pattern may have existed during 
the LTFV investigation does not pertain to our findings in this review. 
Therefore, to be consistent with the past practice of this case, we 
conducted a correlation test to determine whether there is a 
significant correlation between prices and levels of trade. In this 
test we compared home market prices net of movement and packing 
expenses by level of trade. We found that there is no significant 
correlation between prices and level of trade for KSP. For a more 
detailed discussion of our finding, see KSP's Final Results Analysis 
Memorandum, dated October 2, 1997. Furthermore, while it is true that 
we cannot conduct a study of the correlation of selling expenses 
because KSP allocated its indirect selling expenses proportionally to 
all sales, a study of selling expenses is moot because there is a lack 
of correlation between prices. Therefore, we conclude that matching 
KSP's sales by level of trade in this review is not appropriate and 
have modified KSP's margin calculation accordingly.
PSP
    Comment 1: Petitioners argue that the Department should use BIA to 
calculate foreign inland freight, foreign brokerage, and wharfage on 
PSP's direct purchase price sales for which it did not report an 
adjustment before verification. Petitioners note that the Department 
found at verification that PSP failed to report these per-unit 
adjustments for many direct purchase price sales and corrected the 
error by providing average amounts based on purchase price sales on 
which it had previously reported the transaction-specific amounts. 
Petitioners contend that since PSP did not provide the information in a 
timely fashion the Department should reject the average adjustments and 
instead apply BIA. Petitioners suggest that the Department use as BIA 
the highest amount for any sale on which PSP reported adjustments on a 
transaction-specific basis.
    PSP claims that the use of average amounts instead of transaction-
specific amounts is reasonable and non-distortive because the 
differences between the average amounts and the amounts reported are 
insignificant. PSP contends that BIA is inappropriate since there is no 
evidence that it meant to exclude the transaction-specific adjustments 
or attempted to manipulate the data through the reporting of averages. 
PSP concludes that manipulation is not possible when the missing 
figures represent three minor adjustments on a relatively small number 
of sales and that the three charges are exactly the type of charges 
that are often reported as averages. PSP asserts, therefore, that the 
application of BIA would be inappropriate.
    Department's Position: We have disregarded PSP's claim that the use 
of average amounts instead of transaction-specific amounts for the 
movement adjustments is reasonable and non-distortive because the 
company's claims are unsubstantiated and, despite its ability to 
provide actual transaction-specific expenses, PSP did not do so.
    For the final results, we have disregarded the weighted-average 
per-unit adjustments PSP provided at verification. Instead, we made the 
adjustment based on partial BIA. Section 776(c) of the Tariff Act 
requires that we use BIA ``whenever a party or any other person refuses 
or is unable to produce information requested in a

[[Page 55584]]

timely manner and in the form required, or otherwise significantly 
impedes an investigation.'' Despite PSP's claim to the contrary, we 
find there are a significant number of sales on which the firm did not 
provide the transaction-specific movement adjustments. Our examination 
of freight records at verification revealed that PSP could have 
provided transaction-specific amounts instead of averages. Since we are 
not satisfied that PSP reported the adjustments to the best of its 
ability, our application of partial BIA is warranted. In Antifriction 
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From 
France, et al.; Final Results of antidumping Duty Administrative 
Reviews, Partial Termination of Administrative Reviews, and Revocation 
in Part of Antidumping Duty Orders, 60 FR 10900, 10907 (February 28, 
1995), we applied partial BIA in similar situations.
    Thus, for the direct purchase price sales where PSP did not report 
transaction-specific movement adjustments, as partial BIA we applied 
the highest amount for any purchase price sale on which PSP reported 
transaction-specific values for foreign inland freight, foreign 
brokerage, and wharfage. We note that, even in a partial BIA situation, 
BIA is intended to be adverse. This induces respondents to provide 
timely, complete, and accurate information. In this situation, we are 
making an adverse inference that the unreported adjustments would have 
been higher than the weighted-average movement adjustments PSP 
provided.
    Comment 2: Citing PSP's sales verification report, petitioners 
contend that PSP misallocated adjustments for U.S. duties, U.S. 
brokerage, and U.S. handling charges since it incurred the charges 
based on product value but allocated the charges on a theoretical-
weight basis. Petitioners assert that PSP's methodology results in 
distortions where an entry covers merchandise of varying values, i.e., 
allocation by weight disregards the fact that some products are more 
expensive than others and, therefore, a weight-based allocation may 
assign lower charges than required. To correct this problem, the 
petitioners request that the Department multiply the entered value of 
the merchandise by the duty rate to determine U.S. duties and by the ad 
valorem charges for brokerage and handling to determine U.S. brokerage 
and U.S. handling.
    PSP contends that petitioners misunderstand the methodology it used 
to calculate U.S. duties, U.S. brokerage, and U.S. handling and request 
that the Department dismiss the arguments. PSP explains that, for 
situations where an entry covered more than one type of merchandise, it 
employed a two-step allocation process to derive the reported per-
metric-ton movement expenses. PSP explains that in the first step it 
allocated the total charge for an entry (which is based on an ad 
valorem duty rate and total value of all products on the entry) to 
individual products based on the cost-and-freight value of each 
individual product divided by the total value of all products on the 
entry. In the second step, PSP states, it calculated the reported per-
metric-ton expense by dividing the value from the first step by the 
total weight of the individual product. PSP asserts that petitioners 
focused on the second step of the calculation mistakenly in reaching 
their assumption that the allocation methodology is based solely on 
weight and would result in distortions where the entry consists of 
merchandise that varies in value.
    Department's Position: We agree with PSP. The description of the 
allocation methodology that the petitioners cite from our verification 
report only applies to situations where the entry covered a single type 
of merchandise. For entries covering more than one type of merchandise 
PSP employed a two-step allocation process. The first step in the 
allocation process assigns expenses to individual products based on 
value and, by that, avoids the distortions which petitioners allege.
    Comment 3: PSP contends that the Department neglected to add duty 
drawback to its ESP sales.
    Petitioners note that PSP paid the duties on an actual-weight basis 
and received drawback on a theoretical-weight basis. Citing to the 
arguments on this issue elsewhere, petitioners contend that if the 
Department grants PSP a drawback adjustment it must reduce the claimed 
adjustment by the amount of the conversion factor.
    Department Position: We agree with PSP that we neglected to add 
duty drawback to its ESP sales. However, we also agree with petitioners 
that the claimed duty-drawback adjustment must be reduced by the amount 
of the conversion factor before adding the adjustment to USP (see our 
response to Comment 5 in the ``General Issues'' section of this notice 
for a complete summary of the interested parties' arguments and the 
Department's position on adjusting duty drawback). Accordingly, we 
added the duty drawback to USP up to the amount of the actual duty 
paid.
    Comment 4: Petitioners assert that PSP did not follow the 
methodology the Department required for calculating factors to use to 
derive the per-unit general and administrative (G&A) expenses and 
interest expenses reported in the COP and CV datasets. Petitioners 
argue that, because PSP failed to report its data in the manner the 
Department requested, the Department should use the ten-percent 
statutory minimum for SG&A as BIA. Petitioners contend that, if the 
Department does not base PSP's SG&A on BIA, it must recalculate the G&A 
expense and interest expense factors using the methodology the 
Department identified in its November 8, 1996, supplemental 
questionnaire and based on a cost-of-goods-sold denominator that is 
exclusive of packing expenses and all non-operating incomes.
    PSP contends that it calculated the factors for G&A expenses and 
interest expenses properly and requests that the Department use the 
values it reported for the final results. PSP claims that the 
Department's factor-calculation methodology double-counts G&A expenses 
associated with resales by its affiliates because it increases the 
total expense in the numerator to include the additional expenses 
associated with resales by PSP's affiliates but does not 
correspondingly increase the cost of sales in the denominator. PSP also 
asserts that the methodology it utilized is acceptable since it is 
consistent with methodology the Department accepted for POSCO in the 
LTFV investigations involving steel products from Korea. PSP also 
claims that the G&A expense factor is approximately the same regardless 
of the methodology employed.
    Petitioners argue that PSP is incorrect about the Department's 
factor-calculation methodology double-counting G&A expenses associated 
with resales by its affiliates. Petitioners assert that the cost of 
sales in the denominator of the factor calculation does not need to 
include the cost of sales connected with the affiliates' resales of 
PSP's merchandise because PSP bore the cost of the sales, not the 
affiliates. Petitioners also contend that the methodology the 
Department applied to POSCO should be ignored and request that 
Department decide the methodology to apply based on the facts of the 
current review. Finally, petitioners assert that, if the G&A expense 
factors truly are similar regardless of the methodology employed, then 
PSP should have no objection to using the Department's methodology.
    Department's Position: We agree with petitioners in part. As 
petitioners assert, the cost of sales in the denominator of the 
expense-factor calculations does not need to include the cost of sales 
connected with the affiliates' resales of

[[Page 55585]]

PSP merchandise. This is because PSP bore the cost of the sales, not 
the affiliates. Our factor-calculation methodology therefore does not 
result in double-counting but, rather, results in a more reasonable 
estimate of PSP's per-unit G&A expenses and interest expenses for use 
in calculating COP than PSP's methodology. Thus, for the final results, 
we have recalculated the G&A expense and interest expense factors using 
the methodology we required in our November 8, 1996, supplemental 
questionnaire. We also adjusted the numerator in the factor calculation 
to account for the fact that the cost-of-goods-sold denominator 
includes packing expenses. See our response to Comment 6 in the 
``General Issues'' section of this notice for a more detailed 
explanation of this adjustment. Contrary to petitioners' suggestion, we 
did not need to adjust the factor calculations for non-operating income 
since we verified that PSP properly excluded all such income. After 
making these adjustments, PSP's reported SG&A expenses are above the 
ten-percent statutory minimum and, therefore, we used the actual SG&A 
expenses for calculating CV.
Dongbu
    Comment 1: Petitioners contend that the Department's failure to 
verify Dongbu's cost response violates the statute. Citing section 
776(b) of the Tariff Act, petitioners claim that the statute requires 
the Department to verify Dongbu's cost response since it ``relied 
upon'' this information in calculating the margin. Petitioners claim 
that, since significant corrections were either presented to, or found 
by, the Department at the cost verifications of other respondents and 
at the sales verification of Dongbu, it is likely the same would have 
occurred if the Department verified Dongbu's cost submission. Finally, 
the petitioners cite their January 17, 1997, comments on Dongbu's COP 
and CV submission in support that ``good cause'' existed for a 
verification.
    Dongbu asserts that in accordance with section 776(b)(3) of the 
Tariff Act the Department was under no legal obligation to verify any 
part of its submission. Citing Timken Co. v. United States, 852 F. 
Supp. 1122, 1130 (CIT 1994), Dongbu contends that the courts have 
interpreted the statutory provision as not requiring verification of a 
respondent during the first administrative review even if the 
respondent at issue was not subject to the original investigation. 
Dongbu notes that in this review the Department verified its sales data 
and contends that the results of that verification are a sufficient 
basis for concluding that its entire response is accurate and complete. 
Dongbu also contends that the result of its sales verification or cost 
verification of other respondents is irrelevant to a determination of 
whether its cost data are accurate.
    Department's Position: We agree with Dongbu. For an administrative 
review, section 776(b)(3)(B) of the Tariff Act states that we will 
verify all information upon which we rely if ``good cause'' exists or 
we conducted no verification during the two immediately preceding 
reviews. Since this is the first administrative review, the latter 
requirement was not a consideration in deciding whether to verify 
Dongbu's cost data. We did however take into consideration whether 
``good cause'' exists for the verification of this information. We took 
all of the petitioners' comments into consideration and, where we 
decided it was necessary, we requested or made corrections. Given the 
analysis we performed and our time, resources, and other constraints, 
we decided not to verify Dongbu's cost data. Furthermore, contrary to 
petitioners' assertion, we found no discrepancies at Dongbu's sales 
verification or the cost verifications of other respondents that 
suggest Dongbu's cost data is unreliable. Since we are satisfied with 
Dongbu's cost data, we find no ``good cause'' to require a cost 
verification and relied upon Dongbu's information for these final 
results.
    Comment 2: Petitioners assert that the Department should 
recalculate the home market interest rate Dongbu used to impute credit 
expenses for its home market sales in order to account for short-term 
usance loans that relate to production. Petitioners argue that it is 
the Department's policy to treat all short-term loans as fungible for 
the calculation of a weighted-average short-term interest rate. Without 
evidence that the loans were not used to finance sales, petitioners 
contend that the Department must use the usance loans to recalculate 
Dongbu's home market short-term interest rate. However, petitioners 
assert that such a recalculation is not possible because Dongbu did not 
provide accurate information on the usance loans. Therefore, in 
recalculating the home market short-term interest rate for the final 
results, petitioners suggest that as BIA the Department weight-average 
the lowest reported usance-loan interest rate with the home market 
weighted-average short-term interest rate used for the preliminary 
results based on the ratio of Dongbu's usance loans to its total short-
term borrowings.
    Dongbu contends that the Department should not make the change 
petitioners request. Dongbu asserts that the Department verified its 
weighted-average short-term interest rate fully in this review. In 
addition, Dongbu asserts that the Department has accepted its 
methodology in the administrative reviews of the antidumping duty 
orders on cold-rolled and corrosion-resistant steel from Korea. Dongbu 
argues that the Department should not account for the usance loans in 
the calculation of its home market weighted-average short-term interest 
rate because they relate specifically to the financing of raw-material 
purchases. Dongbu also argues that the petitioners' suggestion for 
adjusting the interest rate for usance loans based on BIA is 
unwarranted. Dongbu asserts, however, that if the Department applies 
this methodology, the Department should not use petitioners' data for 
weight-averaging the lowest reported usance loan with the borrowing 
rate used to impute credit expenses for the preliminary results. Dongbu 
contends that petitioners mistakenly weight-averaged the two rates 
using the ratio of the U.S. affiliate's, Dongbu Corporation's, usance 
loans to its total short-term borrowings instead of the ratio 
applicable to Dongbu Steel Co., Ltd. Dongbu therefore requests that if 
the Department weight-averages the two rates to account for usance 
loans it must use Dongbu Steel Co., Ltd.''s borrowing experience as the 
basis of this calculation.
    Department's Position: Dongbu calculated the home market weighted-
average short-term interest rate to measure its cost of extending 
credit on home market sales when it sold merchandise on account. In 
calculating this rate, we agree with petitioners that Dongbu should 
have included its short-term usance loans. As petitioners assert, it is 
the Department's practice to treat short-term loans, or the cost of 
working capital, as fungible. See, e.g., Ferrosilicon From Brazil; 
Notice of Final Results of Antidumping Duty Administrative Review, 62 
FR 43504, 43512 (August 14, 1997) (Department's practice recognizes the 
fungible nature of invested capital resources), and Gray Portland 
Cement and Clinker From Mexico; Final Results of Antidumping Duty 
Administrative Review, 62 FR 17148, 17160 (April 9, 1997) (the 
Department indiscriminately included all interest expenses incurred in 
acquiring debt in the calculation of production costs). While Dongbu 
obtained the usance loans to finance the purchase of raw materials used 
in production, these borrowings may have

[[Page 55586]]

relieved Dongbu of the need to borrow money to cover other operating 
costs. Therefore, we are concerned with all of Dongbu's home market 
loans that relate to short-term working capital. Thus, to measure 
Dongbu's cost of extending credit accurately, we must base the 
calculation on Dongbu's overall short-term borrowing experience, which 
includes usance loans.
    For the final results, we recalculated Dongbu's home market 
weighted-average short-term interest rate to account for usance loans 
by applying an adjustment methodology similar to the one petitioners 
suggest. However, due to the reasons explained by Dongbu above, we did 
not use the same data as petitioners for performing this calculation. 
Instead, we took the simple average of the interest rates Dongbu 
reported for usance loans and weight-averaged this rate with the 
reported rate based on the ratio of Dongbu Steel Co., Ltd.'s usance 
loans to its total short-term borrowings. See Dongbu's Final Results 
Analysis Memorandum dated October 2, 1997, for a detailed illustration 
of this calculation. We used the new rate to recalculate imputed credit 
expenses for home market sales for these final results.
    Comment 3: Dongbu contends that the Department made a clerical 
error that resulted in the comparison of home market prices expressed 
on an actual-weight basis to USPs expressed on a theoretical-weight 
basis. Dongbu requests that for the final results the Department use 
home market prices expressed on a theoretical-weight basis.
    Petitioners request that the Department base Dongbu's price 
comparisons on the weight basis on which it made sales in each market. 
Petitioners assert that the home market theoretical-weight-based prices 
Dongbu reported are inaccurate because the conversion factors used to 
derive these prices from actual-weight-based prices are inaccurate and 
unverified. (See Comment 2 of the ``General Issues'' section for 
further details on petitioners' argument.)
    Department Position: We agree with Dongbu. For the final results, 
we corrected the clerical error noted by Dongbu so that the home market 
prices in our price comparisons are expressed on a theoretical-weight 
basis.
    Regarding petitioners' allegation of inaccuracies in the conversion 
factor used to derive home market prices, we find that this assertion 
is misplaced. Dongbu did not use conversion factors to derive the 
theoretical-weight-based prices it reported. To calculate the prices on 
a theoretical-weight basis Dongbu divided the total sales value of a 
transaction (the home market sales occurred on an actual-weight basis) 
by the theoretical weight of the transaction. See Dongbu's December 13, 
1996, supplemental questionnaire response at page 18. Thus, 
petitioners' assertion is incorrect.
Union
    Comment 1: The petitioners argue that the Department should apply 
adverse BIA to Union because the Department could not verify the 
accuracy of Union's COP and CV data, there is insufficient information 
on the record to correct these costs, and Union failed to cooperate to 
the best of its ability. Specifically, petitioners cite to the 
Department's finding at verification that Union's finished-goods 
inventory, which Union used to allocate certain sub-materials costs and 
fabrication costs, was a mixture of theoretical- and actual-weight-
based values. This finding, petitioners allege, is contrary to Union's 
narrative response, citing Union Steel Manufacturing Co., Ltd.'s June 
2, 1997, COP verification report at page 2. Moreover, the petitioners 
allege that Union refused to provide a breakout of the finished-goods 
inventory that would allow the Department to evaluate the extent of the 
inaccuracy.
    For the preliminary results, the petitioners state, the Department 
attempted to correct this inaccuracy by converting the coil-input 
costs, but not the sub-materials costs or the fabrication costs, to a 
theoretical-weight basis. Petitioners allege that this approach is 
inadequate because all costs, which petitioners contend should include 
coil costs, are allocated based on the weights recorded in the 
finished-goods inventory. Therefore, petitioners argue, at a minimum 
the Department should treat coil costs the same as the fabrication and 
sub-materials costs. However, the petitioners also argue that merely 
disallowing the conversion of coil costs to a theoretical-weight basis 
is not enough because the mixed-weight system will skew the difference-
in-merchandise (difmer) calculations.
    Petitioners argue that, for matches of ``similar'' rather than 
``identical'' merchandise, the Department will calculate the difmer on 
a different basis than the U.S. sale if it uses the mixed-weight 
system. Because Union refused to provide a report segregating the 
export and domestic sales quantities, petitioners allege that the 
Department cannot determine how much the difmer adjustment will be 
skewed. For this reason, petitioners contend that the Department cannot 
perform a difmer test nor is there sufficient data on the record to 
correct the amounts.
    In conclusion, the petitioners state that the Department could not 
verify the accuracy of Union's cost data and Union refused to cooperate 
with the Department's request to investigate this error. Union, 
petitioners argue, should not be allowed to manipulate its margin by 
selectively providing information, citing, e.g., Olympic Adhesives Inc. 
v. United States, 899 F. 2d 1565, and Rhone Poulenc, Inc. v. United 
States, 710 F. Supp 341, 346 (CIT 1989), aff'd 899 F. 2d 1185 (CAFC 
1990). For the foregoing reasons, petitioners conclude, the Department 
should base the final results on total and adverse BIA pursuant to 
sections 776(b) and (c) of the Tariff Act.
    Union argues that the petitioners fail to cite any factual evidence 
that the cost-data error extended beyond the types of costs that the 
Department corrected at the preliminary results. Union argues that it 
was fully cooperative with the verification process, it conceded its 
error, and the Department correctly applied BIA to an appropriate part 
of its response. Union asserts that it is a well-established 
Departmental practice to apply a partial BIA only to that part of a 
response that is deemed deficient, citing Ad Hoc Committee of AZ-NM-TX-
FL Producers of Gray Portland Cement v. United States, 865 F. Supp. 857 
(CIT 1994). Moreover, Union contends that the Department does not 
consider the level of cooperation when applying partial BIA, citing 
National Steel Corporation v. United States, 870 F. Supp. 1130, 1135 
(CIT 1994). Thus, Union concludes, there is no factual or legal basis 
for the Department to resort to total BIA.
    Department's Position: We agree with petitioners in part. We have 
reexamined the record and conclude that we should recalculate the 
difmer adjustment in the same manner as Union's other costs for these 
final results. See Union's Final Analysis Memorandum, dated October 2, 
1997. However, we disagree that any additional effort to correct 
Union's data is necessary.
    We disagree with the petitioners' conclusion that Union's response 
is unusable. We verified Union's home market and U.S. sales and found 
Union's reporting to be largely correct. In addition, we verified that 
Union's cost data was essentially correct with respect to hot-coil 
costs and to most other elements included in its COP. We determined 
that any errors we noted in the verification reports were limited, 
correctable, and did not apply to hot-coil costs.
    We agree with the petitioners that information does not exist on 
the record

[[Page 55587]]

to enable us to correct Union's response. We also agree with the 
petitioners that Union was uncooperative regarding our request that 
Union provide a detailed breakout of its finished goods inventory. In 
correcting Union's sub-materials and fabrication costs, we used an 
adverse inference. Although Union could have provided data that would 
have enabled us to calculate a more accurate COP, the data would have 
lowered Union's weighted-average margin because any conversion to a 
theoretical-weight basis would result in a lower per-unit cost. Thus, 
by not converting these costs to a theoretical-weight basis, we applied 
an adverse inference, obviated the need for more accurate data, and 
responded appropriately to Union's limited failure to report accurate 
data.
    Comment 2: The petitioners allege that, for proprietary reasons, 
the Department should consider Union and KISCO to be related firms and 
assign these firms a single weighted-average margin to prevent the 
possibility of manipulation of pricing and production decisions. 
Petitioners argue that, in determining whether to collapse related 
parties, the Department considers the following factors: (1) The level 
of common ownership; (2) the existence of interlocking boards of 
directors; (3) the existence of similar production facilities that 
would not require significant retooling; and (4) closely intertwined 
operations, citing Certain Cold-Rolled Carbon Steel Flat Products from 
Korea, 60 FR 65284 (December 19, 1995). Petitioners allege that these 
conditions have been met.
    Union and KISCO argue that the Department should reject 
petitioners' allegation as untimely and unsubstantial. Both firms note 
that the record facts have been available to petitioners as early as 
April 1994 and that the petitioners have had ample opportunity to raise 
this issue before the Department in a more timely manner. By raising 
this issue at the last possible moment, respondents assert that 
petitioners did not allow the Department sufficient time to focus on 
this issue and to take steps that would allow the Department to 
calculate a meaningful single weighted-average margin. For example, 
Union and KISCO note that, because the Department conducted a sales-
below-cost investigation with respect to Union but not with respect to 
KISCO, the record does not contain KISCO's production-quantity data. 
Thus, both firms argue that the Department will be unable to weight-
average difmer data. Union and KISCO also argue that the control 
numbers for each company are different, thereby forcing the Department 
to make various assumptions and hinder its ability to make correct 
product matches. Union contends that these problems will lead to 
distortive results and that the Department should reject petitioners' 
arguments on this ground alone.
    Notwithstanding these logistical problems, Union argues that the 
facts on the record do not support a finding that Union and KISCO 
should be considered one entity. Union notes that the Department did 
conduct an inquiry into the relationship between Union and KISCO 
through a supplemental questionnaire and verification and that the 
Department did consider factors that it would have analyzed in a 
collapsing decision. However, Union observes, the Department did not 
collapse Union and KISCO in the preliminary results. Union asserts that 
it and KISCO do not have an interlocking board of directors. Moreover, 
Union contends the board members common to KISCO and Union through a 
third party are ``non-standing'' members and, thus, do not participate 
in the day-to-day operation and management of the companies. Union also 
argues that there is no record evidence that the two firms are closely 
intertwined. Union argues that, in the past, the Department has stated 
that this condition is the most important decision in its collapsing 
analysis, citing the January 18, 1994, memorandum from Joseph A. 
Spetrini to Susan G. Esserman on the record for the antidumping duty 
order on certain corrosion-resistant carbon steel flat products from 
Korea. Union indicates that petitioners' only evidence for such a 
conclusion is that Union sold a small amount of subject merchandise to 
KISCO and both companies exported subject merchandise through two 
affiliated parties. In contrast, Union claims that it and KISCO are 
competitors in both the domestic and U.S. markets and operate as 
separate and distinct entities. For the foregoing reasons, Union 
requests that the Department reject the petitioners' allegations as 
untimely and meritless.
    KISCO argues that the petitioners' arguments are misguided and 
should be rejected. KISCO argues that at least two of the Department's 
four collapsing criteria it uses in collapsing decisions have not been 
met by the companies. First, KISCO asserts that there is no evidence 
that the two companies share sales information, make joint production 
or pricing decisions, or share facilities or employees. Second, KISCO 
asserts that there is no interlocking management.
    KISCO also asserts that, by strategically withholding this 
collapsing argument until after the record was closed, KISCO was 
deprived of the opportunity to address these allegations in detail 
during verification or to otherwise develop a factual record that would 
serve to prove to the Department that it acts as an entirely 
independent entity.
    Finally, KISCO notes that, because the Department did not collapse 
the companies at the preliminary results, KISCO will be denied an 
opportunity to comment on the Department's methodology used in 
calculating a consolidated dumping margin. For the reasons listed 
above, KISCO requests that the Department deny the petitioners' request 
to collapse.
    Department's Position: We agree with petitioners. We have examined 
the relationship between Union and KISCO and have determined that there 
is a significant potential for price and cost manipulation. For these 
final results, we have calculated a weighted-average margin for this 
collapsed entity based on the costs and sales of Union and KISCO.
    As we have noted before, ``[i]t is the Department's long-standing 
practice to calculate a separate dumping margin for each manufacturer 
or exporter investigated.'' Final Determinations of Sales at Less than 
Fair Value; Certain Hot-Rolled Carbon Steel Flat Products, Certain 
Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-Resistant 
Carbon Steel Flat Products From Japan, 58 FR 37154, 37159 (July 9, 
1993) (LTFV Japanese Steel Final). Because we calculate margins on a 
company-by-company basis, we must ensure that we review the entire 
producer or reseller, not merely a part of it. We review the entire 
entity due to our concerns regarding price and cost manipulation. 
Because of this concern, we examine the question of whether companies 
``constitute separate manufacturers or exporters for purposes of the 
dumping law.'' Final Determination of Sales at Less than Fair Value; 
Certain Granite Products from Spain, 53 FR 24335, 24337 (June 28, 
1988). Where there is evidence indicating a significant potential for 
the manipulation of price and production, we will ``collapse'' related 
companies; that is, we will treat the companies as one entity for 
purposes of calculating the dumping margin. See Nihon Cement Co., Ltd. 
v. United States, Slip Op. 93-80 (CIT May 25, 1993).
    To determine whether to collapse companies, we make three 
inquiries. First, we examine whether the companies in question are 
related within the meaning of section 771(13) of the Tariff Act. See 
Notice of Final

[[Page 55588]]

Determination of Sales at Less Than Fair Value and Final Negative 
Critical Circumstances Determination; Disposable Pocket Lighters From 
Thailand, 60 FR 14263, 14268 (March 16, 1995) (declining to collapse 
non-related companies). Second, we examine whether the companies in 
question have production facilities similar enough to enable the 
shifting of production from one company to another without significant 
retooling. See Certain Corrosion-Resistant Carbon Steel Flat Products 
and Certain Cut-to-Length Carbon Steel Plate From Canada; Preliminary 
Results of Antidumping Duty Administrative Review, 60 FR 42511 to 42512 
(August 16, 1995) (Steel from Canada 1993/94 Preliminary Results of 
Review). Third, we examine whether other evidence exists indicating a 
significant potential for the manipulation of price or production. The 
types of factors we examine to determine whether there is a significant 
potential for manipulation include the following: (1) The level of 
common ownership; (2) the existence of interlocking officers or 
directors (e.g., whether managerial employees or board members of one 
company sit on the board of directors of the other related parties); 
and (3) the existence of intertwined operations.
    Union and KISCO are related to each other within the meaning of 
section 771(13) of the Tariff Act. See Memorandum from Laurie Parkhill 
to Richard Moreland, dated October 2, 1997 (Collapsing Memorandum). 
Second, the two companies have similar production facilities. These 
companies produce a similar range of pipe sizes in a similar manner 
and, thus, the companies would not need to engage in major retooling to 
shift production. Third, other proprietary evidence indicates that 
there is a significant potential for price or cost manipulation among 
these companies. In general, this additional evidence of intertwined 
operations consists of proprietary information establishing the 
following: (1) The level of common ownership; (2) the existence of 
interlocking directors; (3) the shipment of subject merchandise through 
a common exporter to the United States; (4) a joint U.S. sales effort; 
(5) an intertwined marketing effort; (6) intertwined financial 
operations; and (7) inter-company transactions of the subject 
merchandise. See Collapsing Memorandum.
    Our determination whether to collapse is based on the totality of 
the circumstances. See Steel from Canada 1993/94 Preliminary Results of 
Review at 42512. We do not use bright-line tests in making this 
finding. Rather, we weigh the evidence before us to discern whether the 
companies are, in fact, separate entities or whether they are 
sufficiently intertwined as to properly be treated as a single 
enterprise to prevent evasion of the antidumping order via price, cost, 
or production manipulation. Here we find that such potential for 
manipulation exists for the companies in question. Therefore, have 
collapsed Union and KISCO and treated them as one entity for purposes 
of these final results.
    We disagree with respondents' argument that the petitioners' 
collapsing argument is untimely. In fact, the purpose of releasing 
preliminary results is to invite comment from interested parties (see  
Sec. 353.38(c)(2) of our regulations). Petitioners' argument 
appropriately concerns how we applied the law to the facts of record 
for the preliminary results. We also disagree with respondents that 
they did not have the opportunity to establish a factual record on this 
matter. In January 1997, we issued a supplemental questionnaire to both 
Union and KISCO eliciting the kind of factual information that we 
consider in our collapsing analysis. Respondents were aware at that 
time that the Department was analyzing the affiliations among KISCO, 
Union, DSM, and DKI, and had previously collapsed Union and DKI in 
another proceeding. See Steel from Korea 1993/94 Review Preliminary 
Results at 65284. Respondents were also aware that the Department had 
``collapsed'' DSM's, Union's, and DKI's financial expenses in Steel 
from Korea 1993/94 Review Preliminary Results because it had determined 
that Union, DSM, and DKI were not independent companies. We also 
reviewed the corporate relationships and related-party transactions at 
verification in this administrative review. See Union's verification 
report, dated March 20, 1997, at pages 2-3, and KISCO's verification 
report, dated March 18, 1997, at page 1. Thus, we did not deprive Union 
and KISCO of any opportunity to build a factual record supporting their 
claims of independence. Moreover, both firms had an opportunity to 
rebut petitioners' assertions after the preliminary results of review.
    Respondents point to the logistical difficulties in combining their 
data. We recognize these potential problems and have considered 
respondents' concerns in calculating a single weighted-average margin. 
Specifically, we are not subjecting KISCO's home market sales to a 
below-cost-of-production examination. Instead, we have excluded Union's 
below-cost sales from Union's home market database before combining 
these sales with KISCO's home market sales. In addition, we have 
ignored the different control numbers each firm used. Instead, we have 
created a new and unique set of control numbers based on our model-
matching criteria. In this way, we have avoided any logistical 
difficulties in combining the respondent's data. Therefore, for 
purposes of calculating margins, we have collapsed Union and KISCO and 
will apply the resulting single weighted-average margin to all subject 
merchandise produced by these firms and exported to the United States.
    Comment 3: Petitioners assert that the Department should not allow 
dividend income, rental income, and the reversal allowance for 
investment securities income as offsets to SG&A because Union was not 
able to tie these items to its operations at verification. Petitioners 
further contend that the Department should exclude income for dross and 
scrap sales as offsets to SG&A because Union already accounted for 
these items in its reported COM.
    Department's Position: We agree with the petitioners. However, we 
disallowed these offsets for the preliminary results and, therefore, no 
change is necessary.
KISCO
    Comment 1: KISCO argues that the Department failed to make 
contemporaneous matches. KISCO requests that the Department correct 
this error by adjusting the product-matching concordance section of the 
program so that contemporaneous months are assigned the same value.
    The petitioners agree that the Department should use a consistent 
system for determining dates throughout the margin programs.
    Department's Position: We agree with both parties and have altered 
our program to match contemporaneous sales correctly.
    Comment 2: KISCO argues that the Department did not read the home 
market packing costs from its data tape properly. KISCO requests that 
the Department reload the correct data or adjust the programming to 
account for the incorrect decimal placement.
    The petitioners agree that the Department did not read the home 
market packing data correctly and request that the Department correct 
the error. In addition, petitioners request that the Department confirm 
that it transferred the other data fields correctly.
    Department's Position: We have corrected this data error for the 
final results. We checked to confirm that there were no other errors in 
the reading

[[Page 55589]]

of KISCO's data and found that the variable cost of manufacturing and 
the total cost of manufacturing reported in KISCO's U.S. sales data set 
were also misread. Therefore, we also have corrected these fields for 
the final results.
    Comment 3: KISCO argues that the Department failed to adjust USP 
for the interest revenue it earned as a result of the charges its U.S. 
subsidiary made to late-paying customers. KISCO maintains that it is 
the Department's long-standing practice to offset interest income 
earned on sales of subject merchandise against imputed credit costs in 
calculating the credit expense adjustment to USP.
    Department's Position: We agree with KISCO and have corrected our 
USP calculations to account for interest revenue.

Final Results of Review

    We determine that the following percentage weighted-average margins 
exist for the period April 28, 1992, through October 31, 1993:

------------------------------------------------------------------------
                                                                 Margin 
                           Company                             (percent)
------------------------------------------------------------------------
Dongbu Steel Co., Ltd........................................      1.71 
Korea Iron & Steel Co., Ltd./Union Steel Co., Ltd............      1.53 
Korea Steel Pipe Co., Ltd....................................      3.15 
Pusan Steel Pipe Co., Ltd....................................      6.00 
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. Because the 
inability to link sales with specific entries prevents entry-by-entry 
assessments, we will calculate wherever possible an exporter/importer-
specific assessment value.
    With respect to assessment for ESP, purchase price, and IPP 
transactions, for the reasons explained in the ``General Issues'' 
section of this notice, we calculated a per-unit dollar amount of 
dumping duty by dividing the total dumping duties due for each 
importer/customer by the corresponding number of units used to 
determine the duties due. We will direct Customs to assess the 
resulting per-ton dollar amount against each ton of merchandise on each 
of the importers'/customers' subject entries during the review period.
    Furthermore, the following deposit requirements will be effective 
upon publication of these final results of review for all shipments of 
subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the date of publication, as provided by section 
751(a)(1) of the Tariff Act: (1) The cash deposit rates for the 
reviewed companies will be the rates outlined above; (2) for previously 
investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
period; (3) if the exporter is not a firm covered in this review or the 
original LTFV investigation, but the manufacturer is, the cash deposit 
rate will be the rate established for the most recent period for the 
manufacturer of the merchandise; and (4) the cash deposit rate for all 
other manufacturers or exporters will continue to be 4.80 percent, the 
``All Others'' rate made effective by the amended final determination 
of the LTFV investigation published on November 3, 1995. See Circular 
Welded Non-Alloy Steel Pipe from Korea; Notice of Final Court Decision 
and Amended Final Determination, 60 FR 55833 (November 3, 1995).
    This notice also serves as a reminder to importers of their 
responsibility under Sec. 353.26 of the Department's regulations to 
file a certificate regarding the reimbursement of antidumping duties 
prior to liquidation of the relevant entries during this review period. 
Failure to comply with this requirement could result in the Secretary's 
presumption that reimbursement of antidumping duties occurred and the 
subsequent assessment of double antidumping duties.
    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d) of the Department's 
regulations. Timely written notification of the return/destruction of 
APO materials or conversion to judicial protective order is hereby 
requested. Failure to comply with the regulations and terms of an APO 
is a violation which is subject to sanction.
    This administrative review and this notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 
Sec. 353.22 of the Department's regulations.

    Dated: October 20, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-28408 Filed 10-24-97; 8:45 am]
BILLING CODE 3510-DS-P