[Federal Register Volume 62, Number 224 (Thursday, November 20, 1997)]
[Notices]
[Pages 61964-61998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30393]



[[Page 61964]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-849]


Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate From the People's Republic of China

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

ACTION: Notice of final determination of sales at less than fair value.

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EFFECTIVE DATE: November 20, 1997.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski, Doreen Chen, Gregory 
Weber, N. Gerard Zapiain or Stephen Jacques, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-1385, (202) 482-0413, (202) 482-1102, (202) 482-
1395 or (202) 482-1391, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Rounds Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations codified at 19 CFR Part 353 (April 1, 1996).

Final Determination

    We determine that certain cut-to-length carbon steel plate from the 
People's Republic of China (``PRC'') is being, or is likely to be, sold 
in the United States at less than fair value (``LTFV''), as provided in 
section 733 of the Act. The estimated margins are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    The petitioners in this investigation are Geneva Steel Company and 
Gulf States Steel Company.
    The respondents which are PRC firms unless otherwise indicated:
    (1) China Metallurgical Import & Export Liaoning Company 
(``Liaoning''), an exporter of subject merchandise; Wuyang Iron and 
Steel Company (``Wuyang''), which produced the merchandise sold by 
Liaoning;
    (2) Anshan Iron and Steel Complex (``AISCO''), a producer of 
subject merchandise; Angang International Trade Corporation (``Anshan 
International''), a wholly-owned AISCO subsidiary in China which 
exported subject merchandise made by AISCO, and Sincerely Asia, Limited 
(``SAL'') a partially-owned Hong Kong affiliate of AISCO involved in 
sales of subject merchandise to the United States (collectively, 
``Anshan'');
    (3) Baoshan Iron & Steel Corporation (``Bao''), a producer of 
subject merchandise; Bao Steel International Trade Corporation (``Bao 
Steel ITC''), a wholly-owned subsidiary of Bao responsible for selling 
Bao material domestically and abroad; and Bao Steel Metals Trading 
Corporation (``B. M. International''), a partially-owned U.S. 
subsidiary involved in U.S. sales, (collectively ``Baoshan'');
    (4) Wuhan Iron & Steel Company (``Wuhan'') a producer of subject 
merchandise; International Economic and Trading Corporation (``IETC''), 
a wholly-owned subsidiary responsible for exporting Wuhan merchandise; 
Cheerwu Trader Ltd. (``Cheerwu'') a partially-owned Hong Kong affiliate 
of Wuhan involved in sales of subject merchandise to the United States 
(collectively ``WISCO'');
    (5) Shanghai Pudong Iron and Steel Company (``Shanghai Pudong'') a 
producer and exporter of subject merchandise. During the investigation, 
we also requested information from and conducted verification of 
Shanghai No.1, a non-exporting producer of subject merchandise which 
Shanghai Pudong had earlier indicated shared a common trustee, Shanghai 
Metallurgical Holding (Group) Co. (``Shanghai Metallurgical'').
    We consider Liaoning, Anshan, Baoshan, WISCO and Shanghai Pudong to 
be sellers of the subject merchandise during the POI.
    Since the preliminary determination in this investigation 
(Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate from the People's Republic of China, 
62 FR at 31972 (June 11, 1997)), the following events have occurred:
    From June through July 1997, we verified the questionnaire 
responses of the respondents. Pursuant to section 782(d) of the Act, 
the Department rejected certain portions of submissions submitted by 
Anshan, Baoshan and WISCO one week prior to verification. On August 5, 
1997 we issued our verification reports.
    At the request of the Department, interested parties submitted 
additional information on surrogate values on August 5, 1997, for 
consideration in the final determination.
    The petitioners and all of the respondents submitted case briefs on 
August 29, 1997, and rebuttal briefs on September 9, 1997. The 
Department held a public hearing for this investigation on September 
16, 1997 at the requests of respondents and petitioners.
    On October 24, 1997, the Department entered into an Agreement with 
the Government of the PRC suspending this investigation. Pursuant to 
Section 734(g) of the Act, petitioners, Liaoning and Wuyang have 
requested that this investigation be continued. If the ITC's final 
determination is negative, the Agreement shall have no force or effect 
and the investigation shall be terminated. See Section 734(f)(3)(A) of 
the Act. If, on the other hand, the Commission's determination is 
affirmative, the Agreement shall remain in force but the Department 
shall not issue an Antidumping duty order so long as (1) the Agreement 
remains in force, (2) the Agreement continues to meet the requirements 
of subsection (d) and (l) of the Act, and the parties to the Agreement 
carry out their obligations under the Agreement in accordance with its 
terms. See Section 734(f)(3)(B) of the Act.

Scope of the Investigation

    The products covered by this investigation are hot-rolled iron and 
non-alloy steel universal mill plates (i.e., flat-rolled products 
rolled on four faces or in a closed box pass, of a width exceeding 150 
mm but not exceeding 1250 mm and of a thickness of not less than 4 mm, 
not in coils and without patterns in relief), of rectangular shape, 
neither clad, plated nor coated with metal, whether or not painted, 
varnished, or coated with plastics or other nonmetallic substances; and 
certain iron and non-alloy steel flat-rolled products not in coils, of 
rectangular shape, hot-rolled, neither clad, plated, nor coated with 
metal, whether or not painted, varnished, or coated with plastics or 
other nonmetallic substances, 4.75 mm or more in thickness and of a 
width which exceeds 150 mm and measures at least twice the thickness. 
Included as subject merchandise in this petition are flat-rolled 
products of nonrectangular cross-section where such cross-section is 
achieved subsequent to the rolling process (i.e., products which have 
been ``worked after rolling'')--for example, products which have been 
bevelled or rounded at the edges. This merchandise is currently 
classified in the Harmonized Tariff Schedule of the United States (HTS) 
under item numbers 7208.40.3030, 7208.40.3060,

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7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 
7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 
7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000. 
Although the HTS subheadings are provided for convenience and customs 
purposes, our written description of the scope of this investigation is 
dispositive.

Period of Investigation

    The period of investigation (POI) is April 1, 1996, through 
September 30, 1996.

Separate Rates

    All of the respondents have requested separate, company-specific 
rates. In their questionnaire responses, respondents state that they 
are independent legal entities. Of the five respondents, Anshan, 
Baoshan, Liaoning and WISCO have reported that they are collectively-
owned enterprises, registered as being ``owned by all the people.'' 
Shanghai Pudong and Shanghai No. 1 are ``owned by all the people'; 
Shanghai Pudong has also stated that these two firms are owned by 
Shanghai Metallurgical, which is in turn is also owned by ``all the 
people.'' Shanghai Pudong stated that it does not have any corporate 
relationship with any level of the PRC Government.
    As stated in the Final Determination of Sales at Less than Fair 
Value: Silicon Carbide from the People's Republic of China, 59 FR at 
22585, 22586 (May 2, 1994) (``Silicon Carbide'') and in the Final 
Determination of Sales at Less Than Fair Value: Furfuryl Alcohol from 
the People's Republic of China, 60 FR at 22544 (May 8, 1995) 
(``Furfuryl Alcohol''), ownership of a company by ``all the people'' 
does not require the application of a single rate. Accordingly, each of 
these respondents is eligible for consideration for a separate rate.
    To establish whether a firm is sufficiently independent to be 
entitled to a separate rate, the Department analyzes each exporting 
entity under the test established in the Final Determination of Sales 
at Less Than Fair Value: Sparklers from the People's Republic of China, 
56 FR. at 20588 (May 6, 1991) (``Sparklers'') and amplified in Silicon 
Carbide. Under the separate rates criteria, the Department assigns 
separate rates in nonmarket-economy cases only if an exporter can 
affirmatively demonstrate the absence of both (1) de jure and (2) de 
facto governmental control over export activities. See Silicon Carbide 
and Furfuryl Alcohol.
1. Absence of De Jure Control
    The respondents have placed on the administrative record a number 
of documents to demonstrate absence of de jure control. Respondents 
submitted the ``Law of the PRC on Industrial Enterprises Owned By the 
Whole People,'' adopted on April 13, 1988 (the Industrial Enterprises 
Law). The Department has previously determined that this Civil Law does 
not confer de jure independence on the branches of government-owned and 
controlled enterprises. See Sigma Corp v. United States, 890 F. Supp. 
1077, 1080 (CIT 1995). However, the Industrial Enterprises Law has been 
analyzed by the Department in past cases and has been found to 
sufficiently establish an absence of de jure control of companies 
``owned by the whole people,'' such as those participating in this 
case. (See e.g., Notice of Preliminary Determination of Sales at Less 
Than Fair Value and Postponement of Final Determination: Certain 
Partial-Extension Steel Drawer Slides with Rollers from the People's 
Republic of China, 60 FR at 14725, 14727 (June 5, 1995) (``Drawer 
Slides''); Notice of Preliminary Determination of Sales at Less Than 
Fair Value: Honey from the People's Republic of China, 60 FR at 14725, 
14727 (March 20, 1995); and Furfuryl Alcohol. The Industrial 
Enterprises Law provides that enterprises owned by ``the whole people'' 
shall make their own management decisions, be responsible for their own 
profits and losses, choose their own suppliers, and purchase their own 
goods and materials. The Regulations of the People's Republic of China 
for Controlling the Registration of Enterprises as Legal Persons (Legal 
Persons Regulations), issued on July 13, 1988 by the State 
Administration for Industry and Commerce of the PRC, provide that, to 
qualify as legal persons, companies must have the ``ability to bear 
civil liability independently'' and the right to control and manage 
their business. These regulations also state that, as an independent 
legal entity, a company is responsible for its own profits and losses. 
See Notice of Final Determination of Sales at Less Than Fair Value: 
Manganese Metal from the People's Republic of China, 60 FR at 56046 
(November 6, 1995).
    In sum, in prior cases, the Department has analyzed the Chinese 
laws and regulations on the record in this case, and found that they 
establish an absence of de jure control for the types of companies 
seeking separate rates in this investigation. We have no new 
information in these proceedings which would cause us to reconsider 
this determination.
2. Absence of De Facto Control
    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental control of 
its export functions: (1) whether the export prices are set by or are 
subject to the approval of a governmental authority; (2) whether the 
respondent has authority to negotiate and sign contracts and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of management; and (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses. See, e.g., Silicon Carbide and Furfuryl Alcohol. 
These factors are not necessarily exhaustive and other relevant indicia 
of government control may be considered.
    Respondents have asserted, and we verified, the following: (1) they 
establish their own export prices independently of the government and 
without the approval of a government authority; (2) they negotiate 
contracts, without guidance from any governmental entities or 
organizations; (3) they make their own personnel decisions including 
the selection of management; and (4) they retain the proceeds of their 
export sales, use profits according to their business needs, and have 
the authority to obtain loans. In addition, respondents' questionnaire 
responses indicate that company-specific pricing during the POI does 
not suggest coordination among exporters. During the verification 
proceedings, Department officials viewed such evidence as sales 
documents, company correspondence, and bank statements. This 
information supports a finding that there is a de facto absence of 
government control of the export functions of these companies. 
Consequently, we have determined that the five responding exporters 
have met the criteria for the application of separate rates. We 
determine, as facts available, that non-responsive exporters have not 
met the criteria for application of separate rates. See also Comments 1 
and 55.

China-Wide Rate

    The petition filed on November 5, 1996 identified 28 PRC steel 
producers with the capacity to produce cut-to-length carbon steel plate 
during the POI. We received adequate responses from the five 
respondents identified above. We received certification of non-

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 shipment with respect to seven companies from the China Chamber of 
Commerce for Metals and Chemicals (CCCMC) in a letter dated January 22, 
1997. Additionally, we received a letter from one respondent factory 
indicating shipments through parties which have not responded to the 
questionnaire. See Non-Responsive Exporters section above. All other 
companies did not respond to our questionnaire. Further, U.S. import 
statistics indicate that the total quantity and value of U.S. imports 
of cut-to-length carbon steel plate from the PRC during the POI is 
greater that the total quantity and value of plate reported by all PRC 
companies that submitted questionnaire responses. Given these 
discrepancies, we conclude that not all exporters of PRC plate 
responded to our questionnaire. Accordingly, we are applying a single 
antidumping rate--the China-wide rate--to all exporters in the PRC 
other than those receiving an individual rate, based on our presumption 
that those respondents who failed to respond constitute a single 
enterprise under common control by the PRC government. See, e.g., Final 
Determination of Sales at Less Than Fair Value: Bicycles From the 
People's Republic of China, 61 FR at 19026 (April 30, 1996) (Bicycles).
Facts Available
    This China-wide antidumping rate is based on facts available. 
Section 776(a)(2) of the Act provides that ``if an interested party or 
any other person--(A) withholds information that has been requested by 
the administering authority; (B) fails to provide such information by 
the deadlines for the submission of the information or in the form and 
manner requested, subject to subsections (c)(1) and (e) of section 782; 
(C) significantly impedes a proceeding under this title; or (D) 
provides such information but the information cannot be verified as 
provided in section 782(i), the administering authority * * * shall, 
subject to section 782(d), use the facts otherwise available in 
reaching the applicable determination under this title.''
    In addition, section 776(b) of the Act provides that, if the 
Department finds that an interested party ``has failed to cooperate by 
not acting to the best of its ability to comply with a request for 
information,'' the Department may use information that is adverse to 
the interests of that party as the facts otherwise available. The 
statute also provides that such an adverse inference may be based on 
secondary information, including information drawn from the petition.
    As discussed above, all PRC exporters that do not qualify for a 
separate rate are treated as a single enterprise. Because some 
exporters of the single enterprise failed to respond to the 
Department's requests for information, that single enterprise is 
considered to be uncooperative. Accordingly, consistent with section 
776(b)(1) of the Act, we have applied, as total adverse facts 
available, the highest margin calculated for a respondent in this 
proceeding. Based on our comparison of the calculated margins for the 
other respondents in this proceeding to the margins in the petition, we 
have concluded that the highest calculated margin is the most 
appropriate record information on which to form the basis for dumping 
calculations in this investigation since this rate is higher than the 
highest rate in the petition. Accordingly, the Department has based the 
China-wide rate on information from respondents. In this case, the 
highest calculated margin is 128.59 percent.

Fair Value Comparisons

    To determine if the cut-to-length plate from the PRC sold to the 
United States by the PRC exporters receiving separate rates was sold at 
less than fair value, we compared the ``United States Price'' (USP) to 
NV, as specified in the ``United States Price'' and ``Normal Value'' 
sections of this notice.

United States Price

Export Price

    We based USP on export price (EP) in accordance with section 772(a) 
of the Act, because the subject merchandise was sold to unrelated 
purchasers in the United States prior to importation and because 
constructed export price methodology was not otherwise indicated. In 
accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-
wide weighted-average export prices (EPs) to NV based on the factors of 
production. See Company Specific Calculation Memoranda, October 24, 
1997.
    For those exporters that responded to the Department's 
questionnaire, we calculated EP based on prices to unaffiliated 
purchasers in the United States. We made deductions, where appropriate, 
for foreign inland freight, ocean freight, marine insurance, and 
foreign brokerage. See ``Factor Valuations'' section of this notice.

Normal Value

A. Factors of Production

    Because the Department has determined that China is a non-market 
economy (``NME'') country, we calculated NV based on factors of 
production reported by respondents in accordance with section 773(c) of 
the Act. Where an input was sourced from a market economy and paid for 
in market economy currency, we used the actual price paid for the input 
to calculate the NV in accordance with our practice. See Lasko Metal 
Products v. United States (``Lasko''), 437 F. 3d 1442, 1443 (Fed. Cir. 
1994). We valued the remaining factors using publicly available 
information from India where possible. Where appropriate Indian values 
were not available, we for the most part used publicly available 
information from Indonesia. In one case, when no appropriate value was 
available from a country at the same level of development, we used a 
U.S. value. See Comment 19 (slag).

B. Factor Valuations

    The selection of the surrogate values was based on the quality and 
contemporaneity of the data. Where possible, we attempted to value 
material inputs on the basis of tax-exclusive domestic prices. Where we 
were not able to rely on domestic prices, we used import prices to 
value factors. To the extent possible, we removed from the import data 
import prices from countries which the Department has previously 
determined to be NMEs. As appropriate, we converted import prices for 
inputs to delivered prices. For those values not contemporaneous with 
the POI, we adjusted for inflation using wholesale price indices (WPI), 
or consumer price indices (CPI) published in the International Monetary 
Fund's International Financial Statistics. For a complete analysis of 
our selection of surrogate values, see each company's Factors Valuation 
Memorandum dated October 24, 1997. We have made the following changes 
to surrogate valuation since the preliminary determination:
    To value coal, we used import prices for the months contemporaneous 
with the POI for which such data were available from the Monthly 
Statistics of the Foreign Trade of India (Monthly Statistics). We also 
valued coal as two separate categories: coking coal and other coal. See 
Comment 16.
    To value iron ore, for the final determination, we have, to the 
extent possible, treated different types of iron ore as separate 
factors of production (i.e., we treated the different types of iron ore 
as separate inputs with separate surrogate values). When a producer has 
purchased any type of iron ore from one or more market economy 
suppliers, we have relied, to the fullest extent possible, on the 
market economy purchase prices which were verified by

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the Department. When a given producer sourced a particular type of iron 
ore only locally, or imported only an insignificant percentage of that 
type or iron ore, we valued that type of iron ore for that producer 
based on Indian Monthly Statistics. See Comment 16.
    To value steel scrap, we used import prices for the months 
contemporaneous with the POI for which such data were available from 
the Monthly Statistics. See Comment 17.
    To value iron scrap, fluorite/fluospar, ferromanganese, magnesium 
ore, aluminum and coke, we used Indian import values for the months 
contemporaneous with the POI for which such data were available from 
the Monthly Statistics. See Comment 18.
    To value scale, we used the United States market price for slag, 
which is a similar product. See Comment 19.
    To value dolomite, we used import prices for ``agglomerated 
dolomite'' from the Monthly Statistics. See Comment 15.
    To value stones, we used data from the ``Stone, Sand and Gravel'' 
SITC 273 category from the United Nations Commodity Trade Statistics. 
See Comment 20.
    To value silicon manganese, we used import prices from the Monthly 
Statistics. See Comment 21.
    To value barge rates, we used a simple average of the rates used in 
the preliminary determination and river rates from the Inland Waterways 
Authority of India (part of the Ministry of Surface Transportation of 
the Government of India) submitted by respondents. See Comment 25.
    To value factory overhead, SG&A and profit for all respondents and 
firms, we calculated a simple average using the financial reports of 
the TATA Iron and Steel Company (``TATA'') and the Steel Authority of 
India Limited (``SAIL''). See Comment 3.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures including 
examination of relevant accounting and production records and original 
source documents provided by the respondents.

Critical Circumstances

    Section 735(a)(3) of the Act provides that, in a final 
determination, the Department will determine whether: (A)(i) there is a 
history of dumping and material injury by reason of dumped imports in 
the United States or elsewhere of the subject merchandise, or (ii) the 
person by whom, or for whose account, the merchandise was imported knew 
or should have known that the exporter was selling the subject 
merchandise at less than its fair value and that there would be 
material injury by reason of such sales, and (B) there have been 
massive imports of the subject merchandise over a relatively short 
period.

1. Importer Knowledge of Dumping

    In determining whether there is a reasonable basis to believe or 
suspect that an importer knew or should have known that the exporter 
was selling the plate at less than fair value, the Department normally 
considers margins of 15 percent or more sufficient to impute knowledge 
of dumping for constructed export price (CEP) sales, and margins of 25 
percent or more for export price (EP) sales. See, e.g., Preliminary 
Critical Circumstances Determination: Honey from the People's Republic 
of China (PRC), 60 FR at 29824 (June 6, 1995) (``Preliminary Honey'') 
and Notice of Final Determination of Sales at Less Than Fair Value: 
Brake Drums and Rotors from the People's Republic of China, 62 FR 9160 
(Feb. 28, 1997) (``Brake Drums and Rotors'') .
    Since the company specific margins for EP sales in our final 
determination for carbon steel plate are equal to or greater than 25 
percent for Anshan, Baoshan, Shanghai Pudong and WISCO, we have imputed 
knowledge of dumping to importers of subject merchandise from these 
exporters. We found that Liaoning had margins below 25 percent. Because 
we found these margins to be below 25 percent, we do not impute 
knowledge of dumping to importers of subject merchandise reported by 
Liaoning. Therefore for Liaoning, we find that critical circumstances 
do not exist with respect to the subject merchandise.

2. Importer Knowledge of Material Injury

    Pursuant to the URAA, and in conformance with the WTO Antidumping 
Agreement, the statute now includes a provision requiring the 
Department, when relying upon section 735(a)(3)(A)(ii), to determine 
whether the importer knew or should have known that there would be 
material injury by reason of the less than fair value sales. In this 
respect, the preliminary finding of the International Trade Commission 
(ITC) is instructive, especially because the general public, including 
importers, is deemed to have notice of that finding as published in the 
Federal Register. If the ITC finds a reasonable indication of present 
material injury to the relevant U.S. industry, the Department will 
determine that a reasonable basis exists to impute importer knowledge 
that there would be material injury by reason of dumped imports during 
the critical circumstances period--the 90-day period beginning with the 
initiation of the investigation. See 19 CFR 351.16(g). If, as in this 
case, the ITC preliminarily finds threat of material injury (see Cut-
to-Length Carbon Steel Plate from China, Russia, South Africa, and 
Ukraine, U.S. International Trade Commission, December 1996), the 
Department will also consider the extent of the increase in the volume 
of imports of the subject merchandise during the critical circumstances 
period and the magnitude of the margins in determining whether a 
reasonable basis exists to impute knowledge that material injury was 
likely. As noted below, the extent of the import increase is nearly 
double that needed to find ``massive imports.'' Despite the fact that 
the ITC found only threat of injury, we find that the sheer volume of 
imports entering the U.S. from the PRC would have alerted importers to 
the fact that the U.S. industry would be injured by these dumped 
imports.

3. Massive Imports

    When examining the volume and value of trade flow data, the 
Department typically compares the export volume for equal periods 
immediately preceding and following the filing of the petition. 
Pursuant to 19 CFR 353.16(f)(2), unless the imports in the comparison 
period have increased by at least 15 percent over the imports during 
the base period, we will not consider the imports to have been 
``massive.'' In order to determine whether there have been massive 
imports of cut-to-length plate, we compared imports in the three months 
following the initiation of the investigation with imports in the three 
months preceding initiation.
    In this case, imports of Chinese plate increased 29 percent in the 
three months following the initiation of the investigation when 
compared to the three months preceding initiation, or nearly two times 
the level of increase needed to find ``massive imports'' during the 
same period.

4. China-Wide Entity Results

    With respect to companies subject to the China-wide rate (i.e., 
companies which did not respond to the Department's questionnaire), we 
are imputing importer knowledge of dumping based on the China-wide 
dumping rate which is greater than 25 percent. As noted above, we have 
also determined that importers knew or

[[Page 61968]]

should have known that there would be material injury to the U.S. 
industry due to dumping by the China-wide entity based on the ITC's 
preliminary determination and the fact that imports in the comparison 
period are nearly twice the level for finding ``massive imports.'' In 
the absence of shipment data for the China-wide entity, we have 
determined based on the facts available, and making the adverse 
inference permitted under section 776(b) of the Act because this entity 
did not provide an adequate response to our questionnaire, that there 
were massive imports of certain cut-to-length carbon steel plate by 
companies that did not respond to the Department's questionnaire. 
Therefore, we determine that critical circumstances exist with regard 
to these companies.

5. Cooperating Respondents Results

    Based on the ITC's preliminary determination of threat of injury, 
the massive increases in imports noted above, and the margins greater 
than 25 percent for Anshan, Baoshan, Shanghai Pudong and WISCO, the 
Department determines that critical circumstances exist for Anshan, 
Baoshan, Shanghai Pudong and WISCO. Because we found margins to be 
below 25 percent, we do not impute importer knowledge of dumping for 
Liaoning. Therefore for Liaoning, we find that critical circumstances 
do not exist with respect to the subject merchandise.

Index of Interested Party Comments

a. General Comments

1  Separate Rates
2  Reporting of Sales
3  Financial Data from Indian Annual Reports
4  Offset Interest Expense by Short-term Income
5  Exclusion of Packing and Other Expenses from SG&A
6  Exclusion of Taxes from SG&A and overhead
7  Adjustment of Overhead Rate
8  Energy Adjustment
9  Credit for By-Products
10  Treatment of Gases
11  Valuation of Self-Produced Inputs
12  Domestic Inland Freight Expenses
13  Regression-Based Analysis
14  Labor Factors
15  Valuation of Limestone, Dolomite and Quicklime
16  Basket Categories--Coal and Iron Ore
17  Steel Scrap, Pig Iron Valuation
18  Valuation of Iron Scrap, Fluorite/Fluorspar, Coke, Aluminum, 
Magnesium
19  Scale and Slag
20  Stones
21  Silicon Manganese
22  Electricity
23  Nominal vs. Actual Thickness
24  Alloy/Non-Alloy Steel Issue
25  River Freight
26  Ocean Freight Rates
27  Brokerage and Handling
28  Rejection of Untimely Factual Information
29  Methodology Used for Selection of Surrogate Values
30  Ministerial Error--Freight for Purchases of Certain Inputs

b. Anshan Specific Comments

31  Valuation of Certain Inputs
32  Valuation of Ocean Freight for Input(s) imported from Market 
Economy Suppliers
33  Factors for Sintering Plant
34  Anshan's Reporting Methodology
35  Freight Amount on SAL Invoices
36  Labor Plate Mill, Roughing Mill, Other Sintering Mill
37  Material Inputs at No. 2 Steelmaking Plant
38  By-Product Credits
39  Credit For By-Products Produced in Coke Plant
40  Raw Materials for Sintering Shop
41  Moisture Content of a Certain Factor
42  Ministerial Errors

c. Baoshan Specific Comments

43  Product Specificity
44  Further Processing of By-Products
45  Inconsistencies discovered at Verification
46  Freight Reporting
47  Valuation of Certain Input
48  Packing

d. Liaoning/Wuyang Specific Comments

49  Verification of Wuyang's Labor Allocations
50  Wuyang's Standard Raw Material Consumption Rates
51  Reliability of Labor Allocations
52  Treatment of Heavy Oil, Oxygen and Coal Gas
53  Transportation from Factory to Port

e. Shanghai Pudong Specific Comments

54  Facts Available
55  Shanghai Pudong and Shanghai No. 1
56  Unreported Consumption of Input
57  Transportation Charges for Certain Inputs
58  Unreported Inputs from Unaffiliated Company
59  Gas Inputs
60  Adjustment of Labor Inputs
61  Assignment of Appropriate Surrogate Values
62  Ministerial Errors

f. WISCO Specific Comments

63  Facts Available
64  By-Product Credits
65  Facts Available for a Certain Input
66  Financial Records
67  Product Specificity
68  Adjustment of Labor Inputs
69  Ministerial Error-River Freight

Interested Party Comments

Comment 1: Separate Rates

    Petitioners contend that the Department's preliminary decision to 
assign separate rates to the five respondents who submitted 
questionnaire responses in this case--Anshan, Baoshan, Liaoning, WISCO 
and Shanghai Pudong--cannot be sustained in the final determination. 
Petitioners note that under the Department's policy, exporters in non-
market economies are entitled to separate, company-specific margins 
only when they can demonstrate an absence of government control over 
export activities, both in law and in fact. Final Determination of 
Sales at Less Than Fair Value: Sparklers from the People's Republic of 
China, 56 FR 20,588 (May 6, 1991) (``Sparklers''); Silicon Carbide. 
They assert that none of the PRC respondents has met this burden of 
proof, whether with respect to de jure or de facto control. Petitioners 
claim that the PRC government controls the steel industry.
    Petitioners also claim that respondents did not fully cooperate 
with the Department. They note that Baoshan only submitted certain 
``excerpts'' from its annual report to the Department at verification. 
In addition, they contend that Anshan did not provide certain reports 
and financial statements. Petitioners argue that this information would 
likely demonstrate that respondents are not entitled to a separate 
rate.
    Respondents argue that petitioners' arguments regarding separate 
rates are factually and legally flawed and must be rejected.
    Respondents note that in the preliminary determination, the 
Department determined, respondents were not subject to de jure or de 
facto government control. They assert that petitioners do not provide 
any valid arguments or evidence that would justify a reconsideration of 
this determination. Respondents also note the Department verified the 
accuracy of this information. Accordingly, they assert that the 
Department should affirm its finding of an absence of de jure and de 
facto control in the final determination and should continue to 
calculate a separate rate for each respondent in the final 
determination.
    Department's Position: We agree with respondents. The Department's 
NME separate rates policy is based upon a rebuttable presumption that 
NME entities operate under government control and do not merit separate 
rates. This presumption can be overcome by a respondent's affirmative 
showing that it operates without de jure or de facto government 
control.
    We found that the respondents have met their affirmative 
evidentiary burden with respect to the Department's criterion of de 
jure control, because they have provided copies of business licences 
and the applicable government

[[Page 61969]]

statute granting them the right to operate as independent companies.
    We found that the respondents met the evidentiary burden with 
respect to de facto control as well. During verification, the 
Department examined the issue and found that information provided by 
respondents supported the contention that there is a de facto absence 
of government control of the export functions of the respondents. See 
Separate Rates Memorandum, October 24, 1997. Consequently, we have 
determined that the respondents have met the criteria for the 
application of separate rates.
    We also disagree with petitioners' assertion that Baoshan failed to 
provide a complete annual report at verification. The Department 
examined the entire annual report at verification and included in the 
verification exhibits those segments applicable to the investigation. 
We also disagree with petitioners that Anshan did not cooperate 
regarding submission of certain documents; the Department never 
requested the documents petitioners claim Anshan refused to provide.

Comment 2: Reporting of Sales

    Petitioners contend that the respondents do not appear to have 
reported all of their sales for export to the United States. They state 
that a review of the quantity and value of subject merchandise reported 
by the respondents during the six-month POI shows that sales of the 
subject merchandise were under-reported as compared to U.S. import 
statistics. Petitioners contend that should the Department find that 
any respondent that has failed to cooperate by not reporting sales of 
the subject merchandise for export in its questionnaire response should 
be deemed a non-responsive exporter and denied eligibility for 
consideration for a separate rate.
    Respondents contend that as part of its investigation in this case, 
the Department has conducted a thorough examination of the sales made 
during the period of investigation by each of the respondents involved 
in this proceeding. Respondents assert that the Department's 
examination confirmed that the respondents have reported all of their 
sales properly.
    Department's Position: We agree with respondents. The Department 
conducted verification of the sales quantity and value totals submitted 
by each of the respondents in the questionnaire responses and we found 
that all respondents properly reported sales during the POI.

Comment 3: Financial Data From Annual Reports of Indian Steel Companies

    Petitioners argue that the Department should use financial data 
from annual reports of major steel producers in the principal surrogate 
country to calculate factor values for profit, SG&A and overhead. 
Petitioners claim that representative data that most accurately reflect 
the current earnings and expenditures of Indian cut-to-length plate 
(``CTLP'') producers can be found in recent annual reports of the two 
largest Indian steel plate producers: the TATA Iron and Steel Company 
(``TATA'') and the Steel Authority of India Limited (``SAIL''). 
Petitioners state that these reports closely correlate with the POI and 
the industry being investigated. Petitioners note that the Department 
used a very similar methodology in its selection of surrogate values in 
the concurrent investigation of imports of CTLP from the Ukraine. 
Petitioners state that, in its preliminary determination for both 
Azovstal and Ilyich, the Department calculated COM, SG&A, profit and 
overhead by averaging data from the annual reports of two companies in 
Brazil, the principal surrogate country in that case. See Preliminary 
Determination of Sales at less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from the Ukraine, 62 FR at 31957, June 11, 1997.
    In contrast, petitioners claim the most recent data published in 
the Reserve Bank of India Bulletin (dated April 1995) are for 1992-
1993. They argue there is no indication that any of this combined data 
is audited or follows Indian generally accepted accounting principles 
(GAAP). Finally, they state that the Reserve Bank data used in the 
preliminary determination are not specific to steel production and 
include an unknown number of other manufacturing and chemical 
companies.
    Respondents agree that the use of information from Indian steel 
producers may be preferable to the rates obtained from the Reserve Bank 
of India Bulletin. However, respondents disagree with petitioners' 
suggestion that the Department should limit its analysis to SAIL and 
TATA when there is information on the record for six such companies: 
(1) TATA; (2) SAIL; (3) Pennar Steels, Inc. (``Pennar''); (4) Nippon 
Denro Ispat Ltd. (``Nippon Denro''); (5) Visvesvaraya Iron & Steel Ltd. 
(``Visvesvaraya''); and (6) Lloyds Metals and Engineers, Ltd. 
(``Lloyds''). Respondents agree that the Department's goal in selecting 
expense rates should be to use representative data that most accurately 
reflect the current earnings and expenditures of Indian cut-to-length 
plate producers. Respondents claim that ignoring two-thirds of the data 
that is on the record would be clearly inconsistent with the 
Department's goal of obtaining representative data--and would violate 
the Department's fundamental obligation to calculate dumping margins as 
fairly and accurately as possible. Respondents also dispute 
petitioners' claim that there is insufficient detail in SAIL's annual 
report to calculate an overhead rate.
    Liaoning and Wuyang argue that the Department should calculate 
surrogate overhead costs, SG&A expenses, and profit using the actual 
data contained in the annual financial reports of the six Indian 
producers of flat-rolled steel products that are on the record in this 
investigation. They argue that the data contained in these six annual 
reports are more appropriate for calculating overhead, profit and SG&A 
ratios than the information from the Reserve Bank of India Bulletin 
used in the preliminary determination because the annual report 
financial information is specific to India's steel industry. They state 
that using factory-specific information also would be consistent with 
the approach taken by Commerce in a number of other investigations. See 
Brake Drums and Rotors, 62 FR 9160; Melamine Institutional Dinnerware 
Products From the People's Republic of China, 62 FR 1708 (January 13, 
1997); Tapered Roller Bearings and Parts Thereof, Finished or 
Unfinished, from the Hungarian People's Republic, 52 FR 17428 (May 8, 
1987); Bicycles, 61 FR 19026.
    Liaoning and Wuyang also argue that the financial experience of 
these companies represents a broad spectrum of India's flat-rolled 
steel industry, and an analysis that omits certain companies (or uses 
only the large or only the small companies) would result in overhead, 
profit and SG&A ratios that are not representative of either India's or 
China's steel industry. For example, not all of the PRC respondents are 
large-scale producers like the Indian producers SAIL and TATA. Wuyang, 
in particular, is a small steel mill, whose annual sales are only ten 
percent of those of TATA, and whose size (in number of employees) is 
far more similar to Visvesvaraya or Nippon Denro. Moreover, they argue 
that Wuyang does not have a blast furnace or basic oxygen furnace. 
Wuyang's steelmaking relies entirely on electric arc furnaces, and 
Wuyang's overhead, profit and SG&A ratios are much more likely to be 
similar to those of Lloyds or Pennar than those of SAIL or TATA. They 
state that only an analysis that

[[Page 61970]]

includes all the Indian steel producers will result in surrogate 
overhead, profit and SG&A ratios that are equally representative of the 
surrogate experience.
    Liaoning and Wuyang argue that, in calculating the ratios, Commerce 
should not calculate weighted-average ratios for the Indian steel 
producers. Rather, Commerce should calculate overall ratios using a 
straight average of the data contained in the six companies' financial 
statements. See Bicycles from China, 61 FR at 19039 (when using the 
Indian producers' annual reports to derive overhead, profit and SG&A, 
Commerce calculated ``a simple average of the financial statements 
consistent with [its] normal practice'').
    Petitioners argue the Department should not rely on the data from 
Pennar, Nippon Denro, Visvesvaraya or Lloyds Metals at all, but instead 
use data from SAIL and TATA only. Petitioners state that the 
Department's preference is to derive its calculation of NME financial 
ratios from firms that are significant producers of merchandise that is 
identical or most similar to that produced by the respondents under 
investigation. See Melamine Institutional Dinnerware Products from the 
People's Republic of China, 62 FR 1708, 1712 (January 13, 1997); Brake 
Drums and Brake Rotors from the People's Republic of China, 62 FR 9160, 
9167 (Feb. 28, 1997) (Final Determination) (financial data of two 
companies not used because there was no information indicating their 
production of subject merchandise during the POI); Polyvinyl Alcohol 
from the People's Republic of China, 61 FR 14057 at 14061 (March 29, 
1996) (Final Determination) (``the Department seeks to base surrogate 
values on the industry experience closest to the product under 
investigation'') . Petitioners claim that TATA and SAIL are companies 
that produce cut-to-length carbon steel plate. By contrast, petitioners 
claim Pennar Steels, Nippon Denro, Visvesvaraya, and Lloyds Metals do 
not produce subject merchandise. Therefore, petitioners argue that, 
because reliable financial data is available from Indian carbon steel 
plate producers, consistent with its standard practice, the Department 
should not rely on the data of other companies that do not produce 
subject merchandise.
    Department's Position: We agree with petitioners. It is the 
Department's preference to base SG&A and profit ratios on data from 
actual producers of subject merchandise in the surrogate country. See 
Brake Drums and Rotors, 62 FR at 9168. Of the six companies whose 
annual reports were submitted on the record, only SAIL and TATA 
actually produce cut-to-length carbon steel plate. In addition, SAIL 
and TATA are the only two companies whose annual reports reflect the 
costs of producing steel and hot-rolled coils. This is relevant as all 
five Chinese respondents produce coils and steel that are manufactured 
into plate. The Department is not using the annual report of 
Visvesvaraya because it is a subsidiary of SAIL and, therefore, all its 
financial information is already incorporated into SAIL's annual 
report. In addition, Visvesvaraya produced alloy and specialty steel, 
not cut-to-length plate. The Department is not using Pennar's annual 
report because Pennar buys hot-rolled coils and processes the coils 
into cold-rolled strips. Thus, Pennar produces neither steel nor cut-
to-length plate. The Department is not using the annual report of 
Lloyd's Metals or Nippon because both produce sponge iron and send the 
iron to an affiliate where it is processed into hot-rolled coils (the 
affiliates' costs are not incorporated into the annual reports). The 
coils are then sent back to Lloyd's and Nippon, where they are 
processed into cold-rolled products. Thus, like Pennar, neither Lloyd's 
Metal nor Nippon produces steel or cut-to-length plate.
    In contrast, the annual reports of both SAIL and TATA list plate as 
products. In addition, Iron and Steel Works of the World, 12th edition 
lists both companies as producers of plate. There does appear to be a 
slight discrepancy in regard to TATA. Page 49 of TATA's annual report 
indicates that TATA has not produced any ``plate'' since 1993. However, 
the physical characteristics of the ``plate'' category for the 
production statistics are unclear. It is possible that products that 
the Department considers plate could be included in the category 
``sheets''. Furthermore, TATA's annual report shows significant 
production of both steel and hot-rolled coils.
    Consequently, for the final determination, we have calculated 
overhead, SG&A, and profit surrogate values by using a simple average 
of relevant data from the annual reports of TATA and SAIL.

Comment 4: Interest Expenses Offset for Short-Term Income

    Liaoning and Wuyang argue that Commerce should, when possible, 
offset the interest and financial expenses of Indian steel producers 
with their corresponding operating income. That is, when calculating 
SG&A, Commerce should offset interest expenses by the amount of short-
term interest income. See Brake Drums and Rotors, 62 FR at 9168 
(Department reduced interest expenses by amounts for interest income 
and also allocated a portion of ``other income'' as short-term interest 
income for those companies that did not specify a breakdown of their 
non-operating income); see also Frozen Concentrated Orange Juice from 
Brazil; Final Results of Antidumping Duty Administrative Review, 55 FR 
26721, Comment 8 (June 29, 1990). Liaoning and Wuyang state that merely 
adding financial expenses to SG&A without reducing those amounts by any 
corresponding operating income would overstate actual net financial 
expenses. They claim that offsetting financial expenses against 
financial gains reflects more accurately the Indian producers' actual 
financial cost of doing business.
    Petitioners argue that Liaoning is incorrect in arguing that the 
Department should, when possible, offset interest and financial 
expenses of Indian steel producers with their corresponding operating 
income. Petitioners argue that neither Brake Drums and Rotors nor 
Frozen Concentrated Orange Juice from Brazil supports offsetting 
financial expenses by operating income other than short-term interest 
earned. Petitioners state that in Brake Drums and Rotors, where the 
respondents made the same claim based on the Orange Juice 
determination, the Department offset interest expenses by the amount of 
short-term interest income. Petitioners cite Brake Drums and Rotors, in 
which the Department ``disagree{d} that operating income * * * should 
be in the offset.'' 62 FR at 9168. Petitioners claim that although the 
Department did offset the interest expense of certain producers by a 
portion of their ``other income'' or ``miscellaneous receipts,'' this 
was done merely as a means of allocating short-term interest costs for 
those producers whose financial statements did not specify a breakdown 
of non-operating income. Petitioners argue that interest and financial 
expenses may be reduced by amounts for interest income only if the 
surrogate producers' financial reports note that the income was short-
term in nature.
    Department's Position: We agree with petitioners. The Department 
will offset interest expense by short-term interest income only where 
it is clear from the financial statements that the interest income was 
indeed short-term in nature. See Brake Drums at Rotors, 62 FR at 9168. 
For the annual report of SAIL, the Department considered the following 
items of the line item ``Interest Earned'' (page 31 of SAIL's annual 
report) as short-term interest income: (1) loans and advances to other 
companies, (2) loans

[[Page 61971]]

and advances to customers, (3) loans and advances to employees, and (4) 
term deposits. Therefore, we offset SAIL's interest expense by these 
amounts for the final determination. For the annual report of TATA, we 
found that the interest expense reported (page 24 of TATA's annual 
report) was already net of all short-term interest income. Therefore, 
for the final determination, we did not further offset the interest 
expense.

Comment 5: Exclusion of Packing and Other Expenses From SG&A Expenses

    Liaoning and Wuyang also argue that, when calculating SG&A, 
Commerce should exclude all expenses incurred by Indian steel producers 
that relate to packing, as well as all other direct selling expenses. 
They state that since packing and direct selling expenses are 
separately accounted for in the Department's dumping calculation, these 
expenses must be excluded to avoid double-counting. They argue that 
Commerce should ensure that packing and other direct selling expenses 
are not double-counted by excluding the categories ``other expenses'' 
and ``miscellaneous expenses'' in the Indian financials from the 
surrogate SG&A values. They cite the Preliminary Determination of Sales 
at Less Than Fair Value; Brake Drums and Rotors from China, 61 FR 
53190. In that case, there was no indication from an Indian producer's 
financial statement used to calculate SG&A as to which line item 
expenses included a specific amount for packing expenses. Commerce 
considered packing expenses to be included in the line item labeled 
``miscellaneous expenses'' since ``there appears to be no other entry 
under which such an expense could be included.'' Commerce therefore 
removed the amount for ``miscellaneous expenses'' from the SG&A 
calculation. See Factor Valuation Memorandum, Attachment 9, Shivaji 
Analysis, at 2. Similarly, because there was no indication from the 
financial statement of another producer as to which line item expenses 
included a specific amount for packing expenses, Commerce considered 
this expense to be included in the line item labeled ``other 
expenses,'' and removed the amount for ``other expenses'' from the SG&A 
calculation. Id., Rico Analysis, at 2. Liaoning and Wuyang argue that 
in this investigation, where the Indian steel producers' financial 
statements do not indicate what amounts are related to packing, 
Commerce similarly should remove ``other expenses'' or ``miscellaneous 
expenses'' from the calculation of SG&A in order to avoid including an 
expense that is already deducted from U.S. price.
    Liaoning and Wuyang also argue that Commerce should exclude from 
the calculation of SG&A all direct selling expenses incurred by the 
Indian steel producers that normally are deducted from export price and 
constructed export price transactions when calculating net U.S. price. 
They state that direct selling expenses, such as commissions, 
discounts, bank charges, royalties, etc., should not be included in 
normal value as part of the surrogate SG&A ratio because they are 
deducted from U.S. price. They claim that Commerce cannot make a fair 
comparison of normal value to export price and constructed export price 
if it includes direct selling expenses in SG&A in the normal value 
calculation, but deducts such expenses from EP and CEP. See Torrington 
Co. v. United States, 66 F.3d 1347, 1352 (Fed. Cir. 1995) (the 
antidumping statute requires an ``apples to apples'' comparison). They 
argue that to ensure a fair comparison, Commerce therefore should 
calculate an amount for SG&A that is net of all direct selling 
expenses.
    Petitioners argue there is no basis for Liaoning's claim that costs 
related to packing would be included in either a ``miscellaneous 
expense'' of ``other expense'' category. To the contrary, petitioners 
argue that most steel companies pack their merchandise at the 
production site; thus, the labor and materials associated with packing, 
if there are any, will be included in cost of manufacturing, not in 
SG&A. Petitioners argue that for those companies that pack merchandise 
at a separate facility and assign the costs to SG&A, packing is usually 
specified as a discrete item.
    Petitioners argue that even if some companies were to include 
packing in a miscellaneous or catch-all expense category, it is clear 
the packing would be just one of numerous expenses. Petitioners claim 
it would therefore be inappropriate--indeed distortive--to deduct the 
entire amount of the reported miscellaneous or other expense, as 
respondents suggests.
    Petitioners suggest that respondents' reliance on the preliminary 
determination in Brake Drums and Rotors is misplaced. Petitioners claim 
for its preliminary determination, the Department removed the amount 
for ``other expenses'' for the Indian producer RICO to account for 
packing expenses. Brake Drums and Rotors, 61 FR 53190 at 53197 (October 
10, 1996). Petitioners state that in the final determination, however, 
the Department reversed itself. Petitioners state that the Department 
expressly included RICO's ``other expenses'' in its SG&A calculations.
    Petitioners argue that the Department should reject respondents' 
argument that all direct selling expenses should be excluded from its 
surrogate SG&A calculation. Petitioners argue that the purpose of the 
calculation of the SG&A of the Indian producer is to determine the 
ratio of selling, general and administrative expense to the cost of 
manufacture. Petitioners argue that all expenses incident to selling, 
general and administrative functions of the company should be part of 
the SG&A calculation.
    Even if the Department should decide to exclude direct selling 
expenses, petitioners argue, respondents' classification of such 
expense is overly broad. Petitioners argue that there is no evidence 
that the suggested exclusions were directly related to specific sales. 
Petitioners argue that because the Department has no information on the 
specific amount of direct selling expenses incurred by surrogate 
country producers, the Department should decline to make an item-by-
item evaluation of the Indian companies' SG&A components. See 
Oscillating Fans and Ceiling Fans from the People's Republic of China 
(``Oscillating Fans''), 56 FR 55271 at 55276 (Oct. 25, 1991) (Final 
Determination); Tapered Roller Bearings and Parts Thereof, Finished or 
Unfinished, from the Socialist Republic of Romania, 52 FR 17433, 17436 
(May 8, 1987) (Final Determination). Petitioners argue that since there 
is no indication whether (or how much of) such purported expenses are 
directly related to specific sales, the Department should reject 
respondents' claim that ``direct selling'' expenses should be excluded 
from the surrogate SG&A ratios.
    Department's Position: We agree with respondents that packing 
expenses should be excluded from the SG&A surrogate value to the extent 
possible. However, we disagree that all ``other expenses'' and 
``miscellaneous expense'' categories should be excluded to prevent 
double-counting from occurring. If there is a line in an Indian 
producer's financial statement for packing expenses, then the 
Department should not include it in SG&A. However, for both SAIL and 
TATA there is no specific line item limited to packing expenses. As 
petitioners state, it would be unreasonable and distortive for the 
Department to exclude all ``other'' or ``miscellaneous'' expenses just 
because they might contain packing expenses. These categories are 
undoubtedly made up of many expenses and may not include packing 
expenses

[[Page 61972]]

at all. It is possible, as petitioners suggest, that these companies 
included packing expenses in their raw material costs.
    We note that the fact pattern in this investigation differs from 
Brake Drums and Rotors. We found that the ``other'' and 
``miscellaneous'' categories listed in SAIL's and TATA's annual reports 
are too large to throw out simply because they might contain packing. 
Our examination of TATA's other expenses (page 26 of TATA's annual 
report) shows that it includes items such as provision for 
proportionate premium on redemption of non-convertible debentures, 
expenses of issue of rights shares, loss on discarded assets, provision 
for diminution in value of investments and exchange differences. We 
find that there is no indication that the other expenses category 
includes packing. Our examination of SAIL's annual report indicates 
that there is no explanation of the miscellaneous category other than 
that it includes a donation (page 36 of SAIL's annual report).
    In regard to direct selling expenses, we agree in part with 
respondents. We note that in this investigation, all U.S. sales were EP 
sales. Therefore, we have not included, in our calculation of SG&A and 
overhead, items for which we made adjustments to U.S. price (i.e., 
movement expenses). However, we do not agree with respondents that 
items such as commissions, export sales expenses, insurance, and 
royalties should be excluded from our calculation of SG&A and overhead. 
All of these factors contribute to the SG&A and overhead ratios of 
Indian steel producers; therefore these items (i.e., commissions, 
export sales expenses, insurance, and royalties) have been included in 
our SG&A calculations for the final determination. However, we have not 
included, in our calculations of SG&A and overhead values, items for 
which we made adjustments to U.S. price. To the extent possible, we 
only deducted from U.S. price such items such as movement expenses. For 
all five respondents, we deducted brokerage and handling from U.S. 
price. In addition, we deducted from U.S. price, insurance related to 
export sales for two respondents.
    Respondents claim we should exclude commissions, export sales 
expense, insurance, and royalty and ``cess'' as direct selling expenses 
for SAIL. Likewise, they claim we should exclude royalty, insurance 
charges, and commission/discounts as direct selling expenses for TATA. 
We disagree with respondents' arguments. Because we did not exclude 
such expenses from U.S. price, we are including them in SG&A.

Comment 6: Exclusion of Taxes From Overhead and SG&A

    Liaoning and Wuyang also argue that the Department should not 
include in its calculation of the overhead and SG&A ratios the expenses 
incurred by Indian producers of steel that relate to taxes paid to 
governmental authorities. They state that, in past cases, the 
Department's practice has been to construct a value for the subject 
merchandise as if it were manufactured by a producer in the surrogate 
country for export. Pencils from the People's Republic of China, 59 FR 
at 55625 (Nov. 8, 1994). Hence, they argue, in constructing values 
based on Indian domestic prices, the Department must eliminate excise 
duties, levies, and sales taxes from those prices, as these items are 
rebated upon export from India. See Brake Drums and Rotors, 62 FR at 
9163. In addition, they state that the Department has expressed a clear 
preference for PAI that is tax exclusive. See Disposable Lighters from 
the PRC, 59 FR at 64191, 64914 (Dec. 13, 1994); Sebacic Acid from the 
PRC, 59 FR at 28053 (May 31, 1994). Therefore, they argue Commerce 
should remove from the surrogate overhead and SG&A calculation any 
excise duty listed in the financial reports. Brake Drums and Rotors, 62 
FR at 9164.
    Department's Position: We agree in part with respondents. We have 
deducted all excise duties from our calculation of SG&A. However, we 
have not excluded the line ``rates and taxes'' from our calculations. 
These taxes represent the taxes and licenses, property taxes and other 
miscellaneous taxes that Indian steel producers incur in the normal 
course of business and, thus, should be a part of our SG&A surrogate 
value.

Comment 7: Adjustment of Surrogate Overhead Rate

    Respondents state that in the preliminary determination, the 
Department adjusted the surrogate overhead rate for all Chinese 
respondents who reported any workers as performing overhead or SG&A 
functions that were not specifically tied to the production of subject 
merchandise. Respondents argue that this adjustment was unnecessary 
because (1) the surrogate overhead rate used by the Department in the 
preliminary determination included overhead and SG&A labor and (2) the 
Chinese respondents in this investigation properly allocated labor 
between direct labor, indirect labor, factory overhead labor, and SG&A 
labor.
    Respondents argue that the labor adjustment made in the preliminary 
determination arbitrarily and unfairly reclassified all workers working 
in plants involved in the production of subject merchandise as direct 
production workers, regardless of the tasks performed. Respondents 
claim this unfairly penalized Chinese respondents for following normal 
Departmental practice and excluding hours worked by overhead and SG&A 
workers from the hours reported for production of subject merchandise. 
Respondents argue that as a matter of principle and established 
practice, the Department recognizes (1) that some functions performed 
by workers are properly classifiable as factory overhead or SG&A 
functions and (2) that the Department's normal value calculations in 
non-market economy cases should include only workers involved in the 
production of subject merchandise--workers performing overhead and SG&A 
tasks are not to be included. See Carbon Steel Butt-Weld Pipe Fittings 
from the People's Republic of China, 57 FR at 21058, 21064 (May 18, 
1992) (direct labor hours for factory level administrators and workshop 
level supervisors found to be factory overhead and SG&A, respectively); 
Furfuryl Alcohol, 60 FR at 22544, 22548 (``Since our surrogate value 
for factory overhead includes indirect labor and it is the Department's 
practice to only include the production labor related to the subject 
merchandise, we have revised our final calculations on labor to avoid 
double counting labor.''). Respondents argue that the reason overhead 
workers and SG&A workers should not be included in the Department's 
calculations is that the costs of such workers are already reflected in 
the surrogate overhead and SG&A rates applied by the Department to the 
direct production costs incurred by the non-market economy producers.
    Respondents claim that they undertook an analysis of the workers 
employed in the facilities involved in the production of subject 
merchandise and attempted to classify workers in a manner consistent 
with the Department's request for information and the Department's 
practice. Respondents state that in the questionnaires issued by the 
Department in this investigation, the Department required Chinese 
respondents to report labor hours for ``direct, skilled workers,'' 
``direct, unskilled workers,'' and ``indirect workers''--yet never 
provided specific (or even illustrative) instructions regarding how 
such workers should be

[[Page 61973]]

identified. They also claim the Department never provided any guidance 
regarding how ``indirect'' workers were to be distinguished from 
``factory overhead'' workers or SG&A workers. Respondents state that 
they disclosed in their responses the rules applied by each respondent 
for classifying workers, as well as a substantial amount of information 
regarding the tasks performed by workers in the production facilities. 
Respondents argue that, under these classification methodologies, the 
dominant characteristic of workers classified as ``factory overhead'' 
workers is that these workers were responsible for the maintenance of 
the facilities. They also argue the dominant characteristic of SG&A 
workers is that they performed relatively high-level, supervisory or 
administrative functions within the facilities and were not physically 
involved in the production process.
    Respondents claim that neither the Department nor the petitioners 
have objected to the classification methodologies used by the Chinese 
respondents to distinguish between direct, indirect, factory overhead, 
and SG&A workers. They also claim that neither the Department nor the 
petitioners have proposed any modifications or alternatives to the 
methodologies used by the respondents to classify labor. Respondents 
claim that, in light of these circumstances, it is fair to conclude 
that the rules used by the respondents to classify labor are 
reasonable. Respondents claim, in other words, that they were correct 
in classifying maintenance workers as factory overhead workers and in 
classifying supervisors and administrators as SG&A workers and in 
excluding such workers from their reported labor hours, (i.e., labor 
outside SG&A and overhead Therefore, respondents argue that any re-
classification of workers is unnecessary.
    In addition, respondents argue that the Indian surrogate values for 
factory overhead and SG&A rate reflect the labor cost of maintenance 
and administration. Accordingly, they claim there is no reasonable 
justification for ``adjusting'' (i.e., inflating) such rates to account 
for maintenance workers and administrative personnel--since such an 
adjustment would double-count labor expenses.
    Liaoning and Wuyang reiterate that the Department should not, in 
the final determination, make an adjustment to increase the surrogate 
overhead value for Wuyang to account for labor resources dedicated to 
overhead. They state that in its reported production expense factors, 
Wuyang excluded from its ``labor'' calculation certain workers because 
of the Department's policy for calculating overhead and SG&A in non-
market economy investigations. They argue that these workers can be 
divided into three categories according to the relationship of their 
activities to the subject merchandise: (1) activities entirely 
unrelated to steel plate, in particular the activities of the 
automation research and development division, which performs research 
and development related to the company's consulting services in the 
field of industrial automation; (2) activities generally related to all 
products and services (for example, the personnel department); and (3) 
activities generally related to steelmaking, in particular the 
activities of the steel research and development division. They argue 
with respect to category (3), to Liaoning and Wuyang's knowledge the 
Department has never included R&D in the factors of production because 
doing so would almost certainly double-count R&D included in the 
surrogate values for factory overhead and SG&A. See, e.g., Oscillating 
Fans, 56 FR at 55271 (Commerce Department agreed with Respondent that 
product development and manufacturing liaison costs are not direct 
manufacturing costs to be included in the factors of production and 
that these costs are properly valued using surrogate country data for 
factory overhead). They state that because surrogate overhead and SG&A 
values already include R&D expenses, the overhead value would double-
count R&D if the Department were to include Wuyang's R&D labor in the 
factors of production. They also argue that the Department has 
established an explicit policy in NME cases of not adjusting the 
surrogate values for R&D expenses under any circumstances. In Chrome-
Plated Lug Nuts from China, for example, a respondent requested the 
Department to exclude R&D expenses from the surrogate value for factory 
overhead on the ground that the respondent did not actually incur R&D 
expenses. They claim that the Department refused to exclude the R&D, 
citing the Department's policy not to make an ``item-by-item evaluation 
of overhead components.'' 61 FR at 58514, 58517 (November 15, 1996), 
citing Pure Magnesium and Alloy Magnesium from the Russian Federation, 
60 FR 16440 (March 30, 1995) and Tapered Roller Bearings from Hungary, 
52 FR at 17428 (May 8, 1987). They state that the Department reiterated 
this policy in Heavy Forged Hand Tools from China, 61 FR 46443 
(September 3, 1996), when the Department refused to deduct R&D expenses 
from surrogate overhead values based on data published in the April 
1995 Bulletin of the Reserve Bank of India, the same source upon which 
petitioners relied in their petition to calculate factory overhead.
    Liaoning and Wuyang conclude that given the nature of the overhead 
and SG&A activities described above and the Department's established 
policy in NME cases, Commerce should not reallocate any of Wuyang's 
overhead labor to the labor valued directly based on factors of 
production. In the alternative, they argue that if Commerce does adjust 
the surrogate overhead value to account for ``additional labor,'' 
however, then Commerce also should (1) make all necessary corresponding 
adjustments to Wuyang's energy consumption factors, because Wuyang 
allocated its energy consumption based on its reported labor hours; and 
(2) exclude ``other manufacturing expenses,'' ``other expenses,'' and 
``miscellaneous expenses'' from the surrogate overhead and SG&A values 
to avoid double counting labor expenses.
    Petitioners state that this issue is not relevant to the final 
determination unless the Department again chooses to rely on a source 
for the surrogate value for overhead that does not include labor, such 
as the Bulletin of the Reserve Bank of India data. However if this is 
the case, petitioners argue the Department should make an adjustment 
along the same lines as the one made in the preliminary determination 
because the Department's methodology is sound.
    Petitioners claim that respondents' criticism of the Department's 
approach rests on several false premises: (a) that the values from the 
Reserve Bank of India Bulletin already included labor; (b) that 
overhead and SG&A workers are not to be included in the Department's 
calculations; (c) that the Department's labor adjustment to overhead 
arbitrarily and unfairly reclassified all workers working in plants 
involved in the production of subject merchandise as direct production 
workers, regardless of the tasks performed; and (d) that the Department 
would have acted differently had it understood that not all respondents 
had allocated a majority of their workers to overhead and SG&A.
    Petitioners also argue that normal value in NME cases always 
includes a component for overhead and SG&A. Petitioners state that 
respondents do not seem to disagree in principle with the notion that 
the labor associated with overhead belongs in the surrogate value for 
overhead. Petitioners argue that it then becomes a factual question of

[[Page 61974]]

whether such labor is, or is not, included in the surrogate data. 
Petitioners argue that labor is not included in the surrogate overhead 
value calculated from the Reserve Bank of India Bulletin.
    Finally, petitioners argue, respondents are wrong in focusing on 
the Department's statement in the preliminary determination that 
respondents allocated a majority of the labor employed in their 
facilities to overhead and selling and general administrative tasks. 
Petitioners argue it is plain from the preliminary calculation 
memoranda that the Department's decision to adjust overhead for labor 
was not dependent on a respondent allocating a ``majority'' of its 
workers to overhead and SG&A.
    Petitioners argue that respondents have presented no cognizable 
basis for challenging the Department's practice of adjusting the 
surrogate overhead value for labor where such value does not already 
include overhead labor. Petitioners state that if, in the final 
determination, the Department uses a surrogate overhead value other 
than the value derived from the Reserve Bank of India Bulletin, and if 
that alternative value likewise does not include all overhead labor, a 
similar adjustment should be made.
    Department's Position: Because the Department is now using a simple 
average of the annual reports of SAIL and TATA, rather than the Reserve 
Bank of India Bulletin, to calculate our surrogate overhead and SG&A 
values the question of whether or not the data in that publication 
included overhead labor is now moot. We agree with petitioners that to 
the extent that our new surrogates do not include overhead or SG&A 
labor, adjustments to these values are appropriate.
    SAIL's annual report explicitly states that ``employee remuneration 
and benefits'' are not included in the overhead category ``repairs and 
maintenance.'' Nor is there any indication that ``employee remuneration 
and benefits'' would be included in the following overhead categories: 
``stores and spares,'' ``joint plant committee,'' ``insurance,'' 
``rent,'' ``royalty and cess,'' ``cash discount,'' ``conversion 
charges,'' or ``water charges.'' However, ``handling expenses,'' which 
is broken down into handling of raw materials, finished goods, and 
scrap recovery, would appear to consist entirely of overhead labor. In 
addition, there are SG&A categories that appear to account for SG&A 
labor, such as, ``directors fee,'' ``remuneration to auditors,'' ``cost 
audit fee,'' and ``miscellaneous.'' It is also likely that the 
following SG&A categories contain some labor: ``export sales expense,'' 
``security expenses,'' ``traveling expenses,'' ``training expenses.'' 
Therefore it appears that the surrogate overhead and SG&A values 
calculated from SAIL's annual report contain overhead and SG&A labor.
    TATA's annual report also explicitly states that overhead items 
``stores consumed,'' ``repairs to buildings,'' ``repairs to 
machinery,'' and ``relining expenses'' exclude amounts charged to wages 
and salaries. There is no indication that the other overhead 
categories, ``rents,'' ``royalty,'' ``insurance charges,'' ``joint 
plant committee funds,'' ``conversion charges,'' and ``depreciation'' 
include overhead labor. TATA's material handling charges appear to be 
included with freight charges in the category ``freight and handling 
charges'' which we allocated to COM as they are part of TATA's cost. We 
have no way of determining how much of this figure should be allocated 
to handling charges, and thus, to overhead. Therefore, we are including 
the entire amount in COM. With regards to SG&A labor, the annual report 
indicates that managerial remuneration is included in the SG&A category 
``other expenses.'' Therefore, it appears that the surrogate overhead 
and SG&A values calculated from TATA's annual report contain SG&A 
labor, however, it is inconclusive whether or not it contains overhead 
labor.
    As stated above, the Department's surrogate SG&A and overhead 
values are based on a simple average of the values calculated from the 
annual reports of TATA and SAIL. Therefore, since both the annual 
reports clearly contain SG&A labor, it is not necessary for the 
Department to make an adjustment to our SG&A surrogate value to account 
for SG&A labor.
    As mentioned above, the overhead surrogate value calculated from 
SAIL's annual report does contain overhead labor, however it is 
inconclusive whether the overhead surrogate value calculated from 
TATA's annual report contains overhead labor. Therefore, our simple 
average of the two contains some overhead labor but it is not clear 
whether it contains sufficient overhead labor. To ensure that no double 
counting occurs, the Department is faced with the options of (1) 
excluding from its calculation of overhead all SAIL and TATA income 
statement line items that might include overhead labor and making a 
similar overhead adjustment as in the preliminary determination (in the 
preliminary determination, the Department adjusted the overhead 
surrogate value using ratios developed from respondents reported 
overhead and direct workers), or (2) leaving the overhead surrogate as 
calculated and not making the overhead labor adjustment. The Department 
considers it more reasonable to leave the overhead surrogate as 
calculated. The Department fears that excluding all categories that 
might include overhead labor would unfairly exclude many costs that 
should be included in our overhead surrogate. Therefore, given the 
Department's new surrogate values for SG&A and overhead, we did not 
make any adjustments for overhead or SG&A labor in the final 
determination.

Comment 8: Overhead Energy Adjustment

    Respondents argue that the Department's overhead energy adjustment 
was unnecessary and improper in the context of this investigation, 
because (1) virtually all energy used by the Chinese respondents is 
already included in the Department's normal value calculation, and (2) 
the calculation used by the Department bears no relationship to any 
reasonable ``overhead energy'' costs incurred in the production of 
subject merchandise. Respondents state that the only energy inputs 
treated as overhead by the Department were water, compressed or forced 
air, and steam. Respondents claim that each of the overhead energy 
items is relatively inexpensive so the overall cost of ``overhead 
energy'' is negligible. They argue no adjustment is necessary in the 
final determination.
    Respondents argue that the adjustment used by the Department in the 
preliminary determination was arbitrary and improper. They claim the 
costs calculated using this methodology bear no relationship to any 
reasonable cost of overhead energy. They contend that the purpose of 
the overhead energy adjustment made in the preliminary determination 
was to include a portion of overhead that was apparently missing from 
our selected surrogate. The Reserve Bank of India Bulletin overhead 
data does not contain any items that would lead the Department to 
believe that overhead energy was accounted for. They claim there is no 
reasonable basis to believe the adjustment used by the Department would 
provide a reasonable estimate of the costs of providing water, steam, 
and compressed air to the steel production facilities of the Chinese 
respondents and therefore should not be used in the final 
determination.
    Petitioners argue that, had the Department not made some kind of 
adjustment for the omission of power and fuel from the overhead 
calculation, it would have improperly ignored respondents' overhead 
energy costs.

[[Page 61975]]

Petitioners argue there is no support on the record for respondents' 
belated claim that these costs are ``negligible'', because they have 
not been reported. Petitioners state that the point of the adjustment 
is to develop a reasonable estimate of the overhead energy costs of 
producers of plate in the surrogate country. Petitioners do agree that 
the methodology used by the Department is arbitrary, but the solution 
proposed by respondents (i.e., ignoring the issue altogether) is not 
adequate. Instead, petitioners claim if the Department continues to use 
data from the Reserve Bank of India Bulletin for overhead, the energy 
adjustment should be accomplished by other means. Because the record 
data from Indian sources does not allow the Department to precisely 
distinguish overhead energy from direct energy inputs used in the steel 
industry, petitioners argue the Department should develop a ratio from 
the cost accounting data provided by Geneva Steel in the petition. 
Consistent with the usual cost accounting practices of the steel 
industry, petitioners argue the petition separately sets forth direct 
energy inputs and overhead energy consumption. From this information, 
petitioners suggest the Department can determine the ratio of Geneva's 
overhead energy costs to direct energy costs. Petitioners argue that 
the surrogate value for overhead should be increased by an amount equal 
to the above ratio times the individual respondent's total surrogate 
costs for direct inputs of fuels, utilities, and gases.
    Petitioners point out that, like the adjustment to overhead for 
additional labor, the overhead energy adjustment is largely a function 
of the Department's choice of the source for the overhead surrogate 
value. Petitioners argue that regardless of the Department's choice of 
overhead surrogate value in the final determination, it should 
carefully examine whether overhead energy is included; if it is not, 
the Department should make an overhead energy adjustment similar to the 
one just described.
    Department's Position: We agree with petitioners that this issue is 
tied to the Department's choice of the source for the overhead 
surrogate value. As discussed above, we have chosen a simple average of 
the annual reports of SAIL and TATA as the source for the overhead 
surrogate value. We then examined whether overhead energy was included 
in the overhead values reported in those reports. Using a methodology 
similar to that used in the preliminary determination, we excluded the 
categories ``power and fuel,'' ``fuel oil consumed,'' and ``purchase of 
power'' from our value for overhead since we are valuing these items as 
direct inputs. For SAIL, we included in our overhead calculation the 
item ``water charges'' since the Department normally treats water as an 
overhead expense. In addition, we consider it likely that additional 
overhead energy is included in the overhead item ``stores and spares.'' 
We allocated the item ``stores and spares'' to overhead. For TATA, 
there is no item that is entirely comprised of overhead energy. 
However, we consider it likely that some overhead energy is included in 
the overhead item ``stores and spares.''
    As with our calculation of overhead labor described in Comment 7, 
the simple average of SAIL's and TATA's calculated overhead values 
contains some overhead energy but it is not clear whether it contains 
sufficient overhead energy. To ensure that no double counting occurs, 
the Department is faced with the options of (1) excluding from its 
calculation of overhead all SAIL and TATA income statement line items 
that might contain overhead energy and making an appropriate overhead 
energy adjustment, or (2) leaving the surrogate overhead value as 
calculated and not making an adjustment for overhead energy. The 
Department considers it more reasonable to leave the overhead surrogate 
as calculated. As with labor, the Department fears that excluding all 
categories that might include overhead energy would unfairly exclude 
many costs that should be included in our overhead surrogate. 
Therefore, given the Department's new surrogate value for overhead, we 
did not make any adjustment for overhead energy in the final 
determination.

Comment 9: Credit for By-Products

    Respondents argue the Department must credit respondents' cost of 
manufacture for by-products before applying the factory overhead rate 
in the final determination. They argue that in the preliminary 
determination, the Department treated costs and credits asymmetrically 
by deducting by-products from the cost of manufacture after applying 
the factory overhead rate and without including factory overhead in its 
calculations of by-product credits.
    Department's Position: We agree with respondents. In calculating 
the cost of manufacture, the Department uses a net material amount that 
we derive by deducting the by-products from gross materials. Therefore, 
we credit by-products before we calculate the cost of manufacture and 
overhead.

Comment 10: Treatment of Gases

    Respondents argue that the Department should treat industrial gases 
as overhead for the final results. Respondents argue that, in deciding 
whether to treat industrial gases as overhead or direct material 
inputs, the fundamental issue is how such materials are treated by 
Indian steel producers. Respondents state that if the standard practice 
for Indian firms is to treat industrial gases as overhead, then those 
values must already be included in the surrogate value for factory 
overhead that the Department is using. Respondents claim that, if this 
is the case, including industrial gases as a direct input as well as in 
overhead would result in double-counting.
    Respondents argue that a review of the financial information of 
Indian steel producers on the record reveals that the standard practice 
for Indian steel companies is to include industrial gases as part of 
factory overhead. Respondents claim that none of the annual reports of 
Indian steel companies provided in this investigation treated 
industrial gases as either a material input or an energy source. Thus, 
respondents argue, including the cost of those gases as a direct input 
in the final calculations would double-count those costs.
    Petitioners argue that industrial gases used in iron and steel 
making should be treated as direct energy inputs, and not as overhead. 
Petitioners state that unless a gas is used specifically for overhead 
energy (e.g., to heat a facility) it should not be characterized as 
overhead. Petitioners argue that gases such as oxygen are important 
inputs in the steel making process, serving both as refining agents and 
as an energy source. Petitioners argue that valuing these gases as 
direct inputs would not result in double-counting as respondents claim. 
Petitioners state that worksheets provided by the Department in its 
Factor Valuation Memorandum show that these energy inputs are not 
included in factory overhead (Commerce specifically excluded ``power 
and fuel'' expenses before it calculated the overhead rate for the 
preliminary determination). Accordingly, petitioners argue there is no 
double counting.
    Petitioners argue that the respondents' contention that the 
standard practice for Indian steel companies is to include these energy 
inputs as part of factory overhead is incorrect. Petitioners claim that 
respondents' statement that ``none of the annual reports * * * treated 
industrial gases as either a material input or an energy source'' is 
incorrect. Petitioners argue that the listing for

[[Page 61976]]

``Others'' in the power and fuel cost of SAIL most likely includes 
industrial gases. Petitioners argue that neither SAIL's annual report 
nor TATA's provides any information which supports respondents' 
contention that industrial gas inputs should be included in factory 
overhead.
    Petitioners state that Indian accounting practices actually require 
that energy inputs be treated as direct inputs. They argue that in 
Brake Drums and Rotors, the Department found that, under Indian GAAP, 
inputs may be treated as factory overhead only if they are not consumed 
in the production process. See 62 FR at 9160, 9169 (citing the 
Compendium of Statements and Standards published by the Institute of 
Chartered Accountants of India). Petitioners argue that in this case 
there can be no dispute that these energy inputs are consumed in the 
production process. Accordingly, petitioners argue that respondents' 
arguments regarding the inclusion of energy inputs in factory overhead 
should be rejected.
    Department's Position: We agree with petitioners. There is no 
indication in the annual reports of SAIL and TATA that they treat 
industrial gases as overhead energy costs. We have therefore valued 
these gases as direct inputs and excluded the line items ``power and 
fuel,'' ``fuel oil consumed,'' and ``purchase of power'' from our 
overhead calculations to ensure that no double counting of these costs 
occurs.

Comment 11: Valuation of Self-Produced Inputs

    Respondents argue the Department's primary goal and responsibility 
in selecting surrogate values in investigations involving producers in 
a non-market economy (NME) is to determine--as accurately, fairly, and 
predictably as possible--the costs that would have been incurred in 
producing the subject merchandise if the costs of such production had 
been determined by market forces. See Oscillating Fans, 56 FR at 55271, 
55275, cited with approval in Lasko, 43 F.3d at 1442. To do so, the 
Department requires respondents to report the actual inputs they use in 
the production of the subject merchandise, and then values those inputs 
at the price for those inputs in a comparable market economy. In this 
case, the Department is calculating a normal value for steel plate 
based on the actual inputs used by the Chinese producers to manufacture 
steel plate and the values for those inputs primarily in India.
    Respondents claim that the same rationale that leads the Department 
to calculate normal value for steel plate based on the actual factors 
of production also requires that it use a similar methodology for self-
produced inputs (such as oxygen, nitrogen, argon and similar gases) `` 
at least when the necessary information is available on the record. In 
this case, respondents argue the Department does have verified 
information on the actual inputs used to produce the oxygen, nitrogen, 
argon and similar gases that are used in steel plate production by 
Anshan, Baoshan, Shanghai Pudong and WISCO. Respondents argue the 
Department should therefore calculate the value for those gases based 
on the actual inputs.
    Respondents state that in the preliminary determination, the 
Department ignored the actual inputs used to make these gases, and 
instead valued these gases based on price quotations for such gases in 
India. Respondents claim such an approach would be appropriate only if 
the Department were to assume that it is more accurate to use the 
prices in India for those gases than to build up the values for those 
gases from the actual inputs used to produce them. Respondents claim 
that assumption is flatly inconsistent with the entire methodology used 
in non-market-economy cases, and cannot be correct. Respondents argue 
that, if previous assumption were correct, then it would follow that 
Commerce should value steel plate based on price quotations from Indian 
suppliers rather than to build up a normal value based on the actual 
factors of production used in manufacturing steel plate.
    Petitioners argue that the values assigned to industrial gases used 
by respondents should be based on Indian surrogate values and not 
respondents' factors of production for these gases. Petitioners claim 
that the respondents' factors of production cannot be used by the 
Department because they are inherently unreliable. Petitioners argue 
that it is only where the Department can determine that a non-market 
economy producer's input prices are reliable that accuracy, fairness 
and predictability are enhanced by using those input prices. See 
Oscillating Fans, 56 FR at 55271 and 55274-75.
    Petitioners claim that respondents used the Department's August 18, 
1997 request for spreadsheets used in calculating the factors of 
production as a chance to cure existing deficits in the record 
regarding respondents' industrial gas production by submitting complete 
factor of production data for ``certain'' gases. Petitioners claim it 
would be unfair for the Department to use this mostly unverified data 
to calculate factors of production for industrial gases because 
petitioners have not been afforded the opportunity to comment on these 
data and the Department did not have ample opportunity to consider 
whether to verify the data pertaining to industrial gases.
    Petitioners argue that respondents did not, as they contend, submit 
complete factor information for the industrial gases used in the 
steelmaking processes in their questionnaires or supplemental 
questionnaires. Petitioners claim that the cites to questionnaire and 
supplemental questionnaire responses did not adequately identify the 
data necessary to sustain respondents' contention that they produce all 
of the industrial gases they use. Petitioners also argue that the 
Department's findings at verification regarding gas usage and 
production by respondents further calls into question the reliability 
of respondents' industrial gas production factor information. In 
addition, petitioners argue that respondents have not put any 
information on the record regarding the ownership of their gas plants. 
For these reasons, petitioners argue that the respondents' factors of 
production for these gases are unreliable and should not be used for 
the final determination.
    Department's Position: We agree that, for some respondents, the 
value of the subject merchandise in this case is more accurately 
measured if the self-produced gases are valued based on the actual 
inputs used to make these gases.
    In NME cases, the Department selects the surrogate values that 
reflect best the costs that would have been incurred in producing the 
subject merchandise if the costs of such production had been determined 
by market forces. It is the Department's practice to collect data on 
all direct inputs actually used to produce the subject merchandise, 
including any indirect inputs used in the in-house production of any 
direct input.
    To accurately value all direct and indirect inputs, the Department 
requires sufficient time to analyze usage rates and select appropriate 
surrogate values. It is also important that interested parties have the 
opportunity to comment on the reported usage rate and surrogate value 
proposed by the Department. For these reasons, it is important that the 
Department receives the respondents in a timely manner. In the instant 
case, although WISCO claimed that the inputs for the production of this 
gas were reported in its April 14, 1997 submission, the actual 
information was not submitted until seven days before the verification. 
The later submission was untimely because the Department had 
specifically

[[Page 61977]]

requested that information and provided a deadline which was more than 
two months earlier. The fact that this information was verified does 
not commit the Department to consider it timely in its final 
determination.
    Similarly, Baoshan's April 14, 1997 supplemental response claimed 
to have reported the inputs used in self-producing a certain gas, but 
the actual data were absent from the specified appendix. Baoshan claims 
that data on this gas and its material inputs can be found in a 
different appendix and this information was verified. However, that 
appendix responds to the Department's question on energy consumption 
and contained a Baoshan Energy Department report for only the month of 
July. Furthermore, no labor factors involved in the self-production of 
oxygen are included on the worksheet. The Energy Department report was 
later verified for the integrity of the reported energy consumption 
rather than for production of this gas. Not until Baoshan's August 21, 
1997 submission, which reached the Department after verification, did 
Baoshan provide, in a usable format, the complete factors for the gas 
it self-produces.
    The Department is rejecting WISCO and Baoshan's production data for 
their self-produced gases due to untimeliness and lack of consistency. 
For WISCO and Baoshan, therefore, we are continuing to use the Indian 
surrogate values that were used for the preliminary determination for 
their self-produced gases.
    Anshan reported gases which were self-produced and their production 
inputs. Shanghai Pudong reported three factors as being as self-
produced and provided their inputs. For these two respondents, the 
Department used their reported production inputs for valuing the 
factors for producing the subject merchandise.
    We disagree with the petitioner's claim that the verification of 
the self-produced gases showed them to be unreliable for Anshan and 
Shanghai Pudong. These data were submitted on the record in a timely 
fashion and were verified. The verification report contains no mention 
of discrepancies in these data.

Comment 12: Domestic Inland Freight Expenses

    Liaoning and Wuyang maintain that if the Department uses Indian 
Monthly Statistics to derive surrogate values for raw material inputs, 
it should not add to these costs an extra amount for domestic inland 
freight expenses. Respondent argues that in Sigma Corporation v. the 
United States, 117 F.3d 1401 (Fed. Cir. July 7, 1997) (``Sigma''), the 
U.S. Court of Appeals for the Federal Circuit (``CAFC'') ruled that to 
do so would overstate the value of the freight component of normal 
value. In making its decision, they argue, the Court determined that 
the Department's methodology of adding a constructive freight charge on 
top of the import prices double counted a substantial component of the 
total freight expense. These respondents conclude that the Court's 
holding in Sigma is applicable to this case, and if the Department uses 
Indian Monthly Statistics to derive surrogate values for raw material 
inputs, it should not add a constructive freight charge on top of these 
prices for the shipment of such raw materials from Chinese suppliers to 
the respondents in this investigation.
    Petitioners argue that, in Sigma, the CAFC did not preclude the 
Department from making an adjustment to account for domestic freight. 
Petitioners argue that, to the contrary, the Court expressly determined 
that the Department must devise an appropriate methodology to account 
for the freight component without double counting. Petitioners add that 
it is obvious that, depending on distances and modes of transportation, 
the domestic freight expense to transport an input from a supplier in 
China to the producer of the subject merchandise can be considerably 
greater than the freight included in the Indian Monthly Statistics. 
Petitioners maintains that, as the Sigma Court recognized, the 
Department had a statutory duty to select a methodology that produces 
``reasonably accurately estimates of the true value of the factors of 
production.'' Petitioners conclude that this includes a proper 
accounting of the domestic inland freight and that, accordingly, the 
Department should devise an appropriate methodology to account for the 
freight charges from the Chinese suppliers of the input to Wuyang's 
factory without double counting.
    Department's Position: We agree with petitioners and, in part, with 
respondents. The CAFC's decision in Sigma requires that we revise our 
calculation of source-to-factory surrogate freight for those material 
inputs that are valued on CIF import values in the surrogate country. 
The Sigma decision states that the Department should not use a 
methodology that assumes import prices do not have freight included and 
thus values the freight cost based on the full distance from domestic 
supplier to producer in all cases. Accordingly, as in the Notice of 
Final Determination of Sales at Less Than Fair Value: Collated Roofing 
Nails from the People's Republic of China, 62 FR at 51410 (October 1, 
1997) (``Nails''), we have added to CIF surrogate values from India a 
surrogate freight cost using the shorter of the reported distances from 
either the closest PRC port of export to the factory, or from the 
domestic supplier to the factory. Where the same input is sourced by 
the same producer from more than one source, we used the shorter of the 
reported distances for each supplier.

Comment 13: Regression Based Analysis

    Some respondents argue that the Department should use its 
regression-based analysis to value labor. Respondents argue that the 
Department's current policy, as stated in its revised regulations, is 
to use a regression-based wage rate, in order to achieve a fairer, more 
accurate, and more predictable result. Respondents state that as the 
Department explained in the commentary accompanying its revised 
regulations: ``[B]y combining data from more than one country, the 
regression-based approach will yield a more accurate result. It also is 
fairer, because the valuation of labor will not vary depending on which 
country the Department selects as the economically comparable surrogate 
economy. Finally, the results of the regression analysis are available 
to all parties, thus making the labor value in all NME cases entirely 
predictable.'' See Antidumping Duties, Countervailing Duties, 62 FR 
27296, 27367 (May 19, 1997) (final rule).
    Respondents argue that the Department has stated that these revised 
regulations ``serve as a restatement of the Department's interpretation 
of the requirements of the [Tariff] Act as amended by the URAA,'' even 
in cases which are not directly governed by the new regulations. See 19 
CFR Sec. 351.701. Thus, respondents argue the new wage rate methodology 
set forth in the revised regulations (and in the Department's June 2, 
1997, Policy Memorandum) should be applied in this case.
    Petitioners argue the Department should reject the suggestion that 
labor inputs should be valued using the new regression-based 
methodology described in the Final Rule. Petitioners claim that: (1) 
unless the regression model is limited to data from surrogate countries 
that are at a level of economic development similar to China's, the new 
labor valuation methodology set forth in 19 CFR Sec. 351.701(c)(3) is 
contrary to section 773(c)(4) of the Act, 19 U.S.C. 1677b(c)(4), (2) it 
fails to account adequately for labor costs other than wages, (3) by 
its own terms, the new regulation does not apply to this investigation, 
(4) it has not been the

[[Page 61978]]

Department's practice to use the regression methodology in NME cases 
initiated prior to the effective date of the new regulations; and (5) 
the new regression model has not yet been published in accordance with 
the requirements of the Administrative Procedure Act.
    Petitioners also urge the Department not to use the labor cost 
methodology used in the preliminary determination. Petitioners state 
that, in the preliminary determination, the Department applied a single 
labor rate for the three levels of labor (skilled, unskilled and 
indirect) that all respondents used in calculating their labor factors. 
They state that in this case, the Department used data from the 
Ministry of Labour, Government of India Annual Report 1994-95 which 
contains 1990-91 data for the average labor cost in rupees per man-day 
worked for the ``Basic Metals and Alloys Industries.'' Petitioners 
argue that the labor data found in the Report and used by the 
Department in its preliminary determination are aberrational. First, 
they note that these data are approximately six years old. Second, they 
point out that the Report does not provide any information as to which 
industry sectors or companies are included in the category ``Basic 
Metal and Alloys Industries.'' Third, they argue that the methodology 
used by companies or industry associations to obtain the data submitted 
to the Ministry of Labour and compiled for its Report is unknown. As a 
result of the above, petitioners argue that it is not clear whether the 
labor rate provided in the Report closely reflects the average labor 
rate paid by a large integrated steel producer in India.
    Instead of the regression-based model described in its new 
regulations or the approach used in the preliminary determination, 
petitioners argue that the Department should instead use a labor 
surrogate value methodology based on data provided in TATA and SAIL's 
1995-1996 Annual Reports to calculate a surrogate labor value. 
Petitioners claim that a labor factor value based on the actual wages 
paid to the employees of a large integrated steel producer in the 
surrogate country is a more accurate means of calculating the labor 
value than either of the two approaches previously described. 
Furthermore, petitioners argue that use of a labor value calculated 
from SAIL and TATA financial information would be consistent with the 
use of COM, SG&A and profit values derived from annual reports of these 
companies.
    Liaoning and Wuyang argue that, as a surrogate value for labor, 
Commerce should use the average labor cost per man-day worked for the 
Basic Metal and Alloys Industries as reported in the Ministry of Labour 
Government of India Annual Report 1994-95, which Commerce used in the 
preliminary determination. They claim Commerce should not calculate the 
surrogate labor value using data contained in the financial statements 
of Indian producers of steel as recommended by petitioners because such 
a methodology is both unreasonable and unreliable.
    First, they argue that the salary and wage data listed in the 
Indian financial statements include high remuneration for company 
management personnel and other salaried workers, rather than being 
specific to line production workers, which is the group for which a 
surrogate labor valuation is sought. They claim the calculation of any 
surrogate labor rate based on such figures therefore would grossly 
inflate the Indian labor rate for production workers in the steel 
industry.
    Second, they argue that any relationship between the annual 
expenditure of a company for wages, salaries, etc. and the absolute 
number of employees of any given day during the year is entirely 
speculative. They state that the Indian steel producer financial 
statements on the record provide information regarding yearly employee 
remuneration and benefit amounts, but none of the financial statements 
provides specific information regarding (1) the number of labor hours 
worked at each company during the year, (2) the number of different 
employees paid during the year, (3) whether such employees worked 
overtime, and (4) whether such employees were paid an additional amount 
for overtime worked.
    Finally, they argue that the record evidence provides no support 
whatsoever for petitioners' assertion that the employee remuneration 
paid by SAIL in 1995-96 corresponds only to the 187,504 persons 
reported as employees on March 31, 1996. They state that the data 
provided by petitioners vis-a-vis TATA are even more tenuous, since 
there is no support for their assumption that the total number of 
employees reported in the 1997 Iron and Steel Works of the World 
publication is accurate or even related to TATA's 1995-96 fiscal year. 
These questions, they argue, render unusable petitioners' suppositions 
as to the number of workers employed by each company, and the possible 
number of hours worked each day by company employees.
    In comparison, Liaoning and Wuyang argue that the Report used by 
Commerce in the preliminary determination includes figures that are 
representative of the entire Indian steel industry, including both 
large companies and small, and provides labor cost data specific to 
production line workers. In addition, they state that, as noted in the 
Commerce Department's factor valuation memoranda, the labor rate 
provided in the Report is inclusive of wages and salaries, all types of 
bonuses, money value of benefits in kind, old age benefits, maternity 
benefits, social security charges, family pension, retirement benefits, 
and other group benefits. They argue that unlike the unsubstantiated 
figures calculated by petitioners, the Ministry of Labour values are 
not distorted by conjecture regarding such factors as the number of 
employees, man days worked, the inclusion of overtime hours. Therefore, 
they claim Commerce should continue to value labor in the final 
determination using the average labor cost per man-day worked for the 
Basic Metal and Alloys Industries from the Report, which Commerce did 
in the preliminary determination.
    Department's Position: We agree with Liaoning and Wuyang. Because 
the regulations applicable to this investigation do not dictate a 
particular approach to selecting surrogate value for labor, the 
Department has the discretion in choosing a method of valuing labor. 
However, it has not been our practice to use the regression-based labor 
rate developed in the new regulations initiated prior to issuing these 
new regulations. Because we have not elected to use the regression 
analysis approach, we need not address all of the arguments concerning 
this methodology. We also disagree with petitioners' proposal to use 
the financial statements of SAIL and TATA. These statements include 
high wages for company management personnel and other salaried workers, 
and thus are not specific to direct and other production labor. Also, 
the financial statements only report aggregate labor costs and do not 
provide information regarding the number of labor hours and thus we 
could not determine a labor rate for these companies.

Comment 14: Labor Factors

    Anshan, Baoshan, Shanghai Pudong and WISCO state that, throughout 
this investigation, petitioners have contended that the data on labor 
usage submitted by the Chinese respondents must be compared to 
information in PaineWebber's World Steel Dynamics. Respondents state 
that petitioners claim that any differences between information 
reported by the respondents and the information contained in World 
Steel Dynamics is to be treated as

[[Page 61979]]

evidence that the Chinese respondents are reporting their information 
inaccurately is without merit. Anshan, Baoshan, Shanghai Pudong and 
WISCO state that the labor hours reported are the result of a detailed 
analysis of the companies' labor forces, based on the Department's 
reporting requirements. Anshan, Baoshan, Shanghai Pudong and WISCO 
argue the source documents and methodology used to derive these figures 
were examined in detail by the Department during verification, and no 
significant discrepancies were found. Therefore, they argue, these data 
have been shown to be reliable.
    By contrast, respondents argue, the source of the information in 
World Steel Dynamics is unknown, the methodology used by World Steel 
Dynamics to derive that information is not explained, and the figures 
reported in World Steel Dynamics have not been verified. Respondents 
claim that, in these circumstances, the labor usage figures reported in 
World Steel Dynamics have no probative value at all. Respondents argue 
that data from this service certainly do not provide a reasonable basis 
for disregarding the verified information reported by respondents.
    Department's Position: We agree with respondents. We verified all 
of the respondents' reported labor factors and we noted no major 
discrepancies. In light of these facts, we have no reason to believe 
that the labor factors they provided in their questionnaire have been 
misreported.

Comment 15: Valuation of Limestone, Dolomite and Quicklime

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that, in the final 
determination, the Department should value limestone and dolomite based 
on domestic Indian prices, rather than on Indian Monthly Statistics. 
Respondents argue that domestic Indian prices for limestone and 
dolomite are preferable because (1) it is Department policy to use 
domestic, tax-exclusive prices where possible; (2) due to the low 
market value of limestone, limestone is ordinarily obtained 
domestically; and (3) import values used for limestone and dolomite are 
aberrational when compared to the domestic prices submitted for these 
values. Respondents claim that the Department incorrectly used, as the 
surrogate value for dolomite, price information for ``calcined'' 
dolomite, although the dolomite inputs used by respondents are 
``uncalcined.'' Furthermore, the value for quicklime, respondents 
contend, should be the same as the value for limestone because the two 
products are comparable. They contend that petitioners' argument (see 
below) is internally inconsistent and should therefore be disregarded.
    Liaoning and Wuyang argue that the Department should base the 
surrogate values for these raw material inputs on data contained in the 
financial statements of Indian producers. See Brake Drums and Rotors, 
62 FR at 91631 (Feb. 28, 1997). They state that, following its normal 
practice, Commerce should derive tax-exclusive surrogate values by 
deducting from the raw material costs all excise taxes, central sales 
taxes, and state sales taxes. See Public Version of the Factor 
Valuation Memorandum from Brake Drums and Rotors, at 2 (Feb. 21, 1997) 
(Commerce ``adjusted the domestic average value to exclude the excise 
and sales tax'' and ``accepted the four-percent sales tax as a 
conservative estimate of Indian state sales tax and have deducted 
amounts for sales taxes'' at that rate). They argue a simple average 
tax-exclusive surrogate value should be calculated for materials for 
which data exists from more than one company.
    In their case brief, petitioners maintain that the import values 
used in the preliminary determination are accurate surrogate values for 
limestone and dolomite sourced domestically by some of the respondents, 
because certain other Chinese steel producers imported limestone and 
dolomite for use in the production process. Petitioners agree with 
respondents that it is the responsibility of the Department to find 
surrogate values which reasonably reflect the economic conditions faced 
by Chinese producers of cut-to-length carbon steel plate. See 
Oscillating Fans, 56 FR at 55271, 55275. Therefore, petitioners contend 
that it is reasonable for the Department to use surrogate import raw 
material input sources when Chinese producers also import the same.
    However, in their rebuttal brief, petitioners urge the Department 
to use adverse facts available in valuing limestone, claiming that 
respondents failed to provide complete and truthful answers to the 
Department's questionnaires with regard to the source of supply for 
these inputs. Should the Department agree to apply adverse facts 
available, petitioners suggest that it rely on the data of an Indian 
producer of subject merchandise, SAIL, because this data constitutes 
both the highest value on the record, as well as the most reliable and 
appropriate surrogate value under the Department's precedent.
    Petitioners urge the Department to value dolomite with the same 
value that it assigned to limestone. Petitioners argue that 
respondents' claim that the proper surrogate value for dolomite is for 
``uncalcined'' dolomite is without merit, because there is no evidence 
provided by the respondents or otherwise that their dolomite inputs are 
uncalcined. In addition, petitioners refute respondents' claim that 
dolomite and limestone should be valued as ``crushed stones'' 
(Respondents PAI Memorandum, August 5, 1997). According to petitioners, 
evidence on the record shows that crushed stones are not pure enough 
for use in metallurgy.
    For quicklime, petitioners argue that the Department should 
separately value limestone and quicklime, as was done in the 
preliminary investigation . However, they maintain that should the 
Department decide to value the two products with the same surrogate 
value, the Department should use SAIL's value for limestone and 
quicklime.
    Department's Position: We agree with the petitioners in part. The 
surrogate value for limestone in the preliminary determination was 
based on the Indian import price. We find that this value is the most 
representative of the prices for limestone during the POI because the 
domestic prices submitted by respondents appear to be significantly 
lower than both the Monthly Statistics and data from Indian steel 
producers that was submitted by petitioners. In addition, because we 
are unfamiliar with India 1995: A Reference Annual, we hesitate to give 
it greater weight as a source for limestone value than we give to the 
Monthly Statistics, which we have frequently used for valuation 
purposes and have no reason to believe is not reliable with respect to 
this input. We also agree with petitioners that some companies import 
limestone and that this provides support for the use of appropriate 
import data to value limestone. For the final determination, we are 
relying on the same surrogate value used in the preliminary 
determination. We reject petitioners' argument that we should apply 
adverse facts available for limestone based on what petitioners believe 
to be uncooperative behavior on the part of one company, because there 
is no evidence on the record to support their assertion that one 
company did not act to the best of its ability to provide certain 
information concerning limestone to the Department.
    We agree with respondents that limestone and quicklime are 
comparable products, based on our review of the Monthly Statistics. 
However, we have decided that the difference between them is too 
significant to value quicklime based on the surrogate for limestone. We 
therefore agree with

[[Page 61980]]

petitioners that we should value the two products based on their 
individual values as reported in Monthly Statistics.
    With respect to dolomite, we agree that limestone and dolomite, 
though separate products, are of comparable value. We have determined 
that the Monthly Statistics upon which we relied in the preliminary 
determination are obviously aberrational because the value from the 
source which we used in the preliminary determination (a value for 
``calcinated'' dolomite) is approximately ten times the value of 
limestone. In contrast, based on our examination of Indian steel 
producers' data, we find that the value of the dolomite they use (which 
is not identified as either ``calcinated'' or nor ``calcinated'') is 
generally significantly lower than that of the limestone they use. 
Therefore, for the final determination, we determined that the value 
for ``agglomerated'' dolomite in the Indian Monthly Statistics is 
comparable to that for limestone in the same source. Therefore, we are 
using the Monthly Statistics value for ``agglomerated'' dolomite to 
value dolomite in the final determination.

Comment 16: Basket Categories--Coal and Iron Ore

    Anshan, Baoshan, Shanghai Pudong and WISCO contend that the 
Department's decision to use a single surrogate value for all coal and 
iron ore inputs in the preliminary determination was faulty and suggest 
that the Department instead assign different values for each kind of 
coal and iron ore input used in the production process.
    For coal, they argue that the Department's practice has 
traditionally been to base its surrogate values on the prices in the 
surrogate country for materials which most closely reflect the specific 
grade and chemical composition of the type of input used by the NME 
producer. See Certain Helical Spring Lock Washers from the People's 
Republic of China, 61 FR 41994, 41996-97 (August 13, 1996) (``Helical 
Spring Lock Washers''), and Heavy Forged Hand Tools from the People's 
Republic of China, 62 FR 11813, 11815 (March 13, 1997). Therefore, they 
contend that the Department should separately value the different kinds 
of coal used in the production process. Respondents also contend that 
coal should be valued and based on Indian, not Indonesian, values.
    For iron ore, Anshan, Baoshan, Shanghai Pudong and WISCO assert 
that the Department should value different forms of this input based on 
the market prices paid for such ores. These market economy purchase 
prices and quantities, they maintain, were verified by the Department. 
Similarly, they urge the Department to calculate freight rates for the 
delivery of iron ore purchased from market economy suppliers using the 
actual rates paid by the Chinese respondents for such shipments during 
the POI. For domestically purchased iron ore, Anshan, Baoshan, Shanghai 
Pudong and WISCO suggest that the Department value all iron ore using 
one Indian domestic price from India 1995: A Reference Manual. They 
also maintain that, in valuing freight for domestic iron ore purchases, 
the Department should average the distances from each company's iron 
ore suppliers and apply surrogate freight rates to this average 
distance.
    Petitioners maintain that it was appropriate to assign a single 
surrogate value for all coal used, because respondents reported various 
kinds of coal in a confusing manner. In addition, they assert that the 
value used in the preliminary determination is accurate and reasonable. 
Petitioners contend, however, that should the Department decide to 
value different kinds of coal separately, it should rely on surrogate 
values obtained from annual reports of certain Indian producers of 
subject merchandise.
    With respect to iron ore, petitioners assert that domestically 
purchased iron ore could not be significantly cheaper than other forms 
purchased from market economy suppliers due to the fact that the 
imported iron ore is in the form of concentrate, which requires further 
processing before it can be used. As a result, they urge the Department 
to maintain the methodology it used in the preliminary determination.
    Department's Position: COAL: We agree with respondents that the 
Department should value coal based on the surrogate country values for 
types of coal which most closely reflect the specific grades and 
chemical composition of coal types used by the Chinese producers. We 
have valued coking coal and other coal separately, relying on Indian 
Monthly Statistics to formulate appropriate surrogate values. We did 
not value thermal coal separately because the information submitted by 
respondents comes from countries not normally used as surrogates and we 
were unable to independently find values for this type of coal. For all 
coal other than coking coal, we based our surrogate value on the 
classifications ``other,'' ``anthracite'' and ``steam coal,'' which we 
averaged. We used Indian Monthly Statistics because we determined that 
the data were more appropriate and more specific than the data from the 
Indian steel producers.
    Iron Ore: With respect to iron ore, we note that it has been the 
Department's position in the past that when a significant portion of an 
input used by a given producer is purchased from market economy 
suppliers, the Department relies entirely on the market economy 
purchase prices in valuing that input for that producer. Our 
methodology in the preliminary determination was to aggregate all iron 
ore whether sourced domestically or from market economy suppliers into 
a single basket which we valued at international prices from market 
economy suppliers. However, for the final determination, we have, to 
the extent possible, treated different types of iron ore as separate 
factors of production (i.e., we have valued different types of iron ore 
as separate inputs). When a producer has purchased any type of iron ore 
from one or more market economy suppliers, we have relied to the 
fullest extent possible on the market economy purchase prices which 
were verified by the Department. When a given producer sourced a 
particular type of iron ore only locally, or imported only an 
insignificant percentage of that type of iron ore, we valued that type 
of iron ore for that producer based on Indian Monthly Statistics.
    Freight For Coal and Iron Ore: Where we relied on the market 
economy purchase prices to value the input, we also relied, for freight 
cost from the market economy suppliers to the Chinese port, on the 
market economy freight rates which the Department verified. For Chinese 
inland freight on market economy purchased imports and for domestically 
sourced inputs, we relied on the Chinese domestic freight factors, 
valued using Indian surrogate data. We have not based domestic freight 
costs on an average of the distance between all suppliers and the 
relevant producers because a supplier-by-supplier calculation provides 
a more accurate estimate of the costs of a producer that sources 
different amounts of an input from multiple suppliers in different 
locations. See Comment 12 regarding the Department's current freight 
methodology.

Comment 17: Valuation of Steel Scrap and Pig Iron

    Anshan, Baoshan, Shanghai Pudong, and WISCO argue that the 
Department should value steel scrap and pig iron based on domestic 
price information from India from the Economic Times because the prices 
reported in the Economic Times represents prevailing prices in the 
Indian market which are preferable to import prices in the

[[Page 61981]]

Department's hierarchy of surrogate value sources, and the prices 
reported in the Economic Times are contemporaneous with the POI.
    Liaoning and Wuyang argue that the Department should base the 
surrogate values for steel scrap and pig iron inputs on data contained 
in the financial statements of Indian producers, citing Brake Drums and 
Rotors, 62 FR at 9163. They state that, following its normal practice, 
Commerce should derive tax-exclusive surrogate values by deducting from 
the raw material costs all excise taxes, central sales taxes, and state 
sales taxes. See Factor Valuation Memorandum from Brake Drums and 
Rotors, at 2 (Feb. 21, 1997), which Liaoning and Wuyang have placed on 
the record of this investigation (Commerce ``adjusted the domestic 
average value to exclude the excise and sales tax'' and ``accepted the 
four-percent sales tax as a conservative estimate of Indian state sales 
tax and have deducted amounts for sales taxes'' at that rate). Liaoning 
and Wuyang argue that a simple average tax-exclusive surrogate value 
should be calculated for materials for which data exists from more than 
one company. See Factor Valuation Memorandum from Brake Drums and 
Rotors, at 4.
    Petitioners contend that the Department should value steel scrap 
and pig iron based on U.N. Trade Commodity Statistics, or else continue 
to use the value used in the preliminary determination, which is based 
on Indonesian import data. They maintain that values that the four 
respondents submitted from the Economic Times represent a snapshot of 
prices that do not represent prevailing prices throughout the entire 
period of investigation.
    Department's Position: For steel scrap, we are using 
contemporaneous import data from Indian Monthly Statistics. For pig 
iron, we were unable to use the Indian Monthly Statistics as we 
determined that the import price was aberrational because the Indian 
data was based on a very small quantity and was almost two times the 
price of the Indonesian pig iron. Consequently, we are continuing to 
use prices from Indonesian import statistics that we used in the 
preliminary determination. We did not use the data submitted by either 
petitioners or respondents for either pig iron and steel scrap because 
we found that these values were aberrational compared to the Indonesian 
import statistics. We did not use the values from the Economic Times 
because we determine that the information in the Economic Times 
submitted by respondents and in the U.N. Trade Commodity Statistics 
submitted by petitioners was aberrational. More detail on this issue 
may be found in the business proprietary version of the Concurrence 
Memorandum.

Comment 18: Valuation of Iron Scrap, Fluorite/Fluorspar, Coke, 
Aluminum, Magnesium Ore, Ferrosilicon, Ferromanganese and Magnesium Ore

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that the 
Department should value iron scrap, fluorite/fluorspar, coke, aluminum, 
magnesium ore, ferrosilicon, ferromanganese, and magnesium ore based on 
Indian Monthly Statistics that correspond to the investigation period. 
In the preliminary determination, the Department valued some of these 
inputs based on import statistics which pre-dated the period of 
investigation. These respondents argue that petitioners' suggestion 
that the Department value some of these inputs based on data from 1994 
U.N. Trade Commodity Trade Statistics should be ignored, respondents 
argue because it is not contemporaneous and less specific to the inputs 
in question.
    Liaoning and Wuyang argue that the Department should base the 
surrogate values for these inputs on data contained in the financial 
statements of Indian steel producers. See Brake Drums and Rotors, 62 FR 
at 9163. They state that, following its normal practice, Commerce 
should derive tax-exclusive surrogate values by deducting from the raw 
material costs all excise taxes, central sales taxes, and state sales 
taxes, citing to Factor Valuation Memorandum from Brake Drums and 
Rotors, at 2 (Feb. 21, 1997) which they have added to the record of 
this case. They argue a simple average tax-exclusive surrogate value 
should be calculated for materials for which data exists from more than 
one company. See Factor Valuation Memorandum from Brake Drums and 
Rotors, at 4.
    Petitioners urge the Department to either value these inputs based 
on the 1994 U.N. Commodity Trade Statistics, and argue that these 
statistics, although less contemporaneous, are more reliable.
    Department's Position: We agree with the four respondents. To the 
extent possible, we have relied on contemporaneous data, as the 
Department normally prefers to use prices that are representative of 
prices in effect during the POI. For iron scrap, we used the same 
Indian Monthly Statistics value as we did in the preliminary 
determination because this is the most contemporaneous value on the 
record. For ferrosilicon, flourite/fluorspar, ferromanganese, magnesium 
ore, aluminum, and coke, we have adopted the values from the Indian 
Monthly Statistics for April through July of 1996, as submitted by the 
respondents as these values are more contemporaneous with the POI than 
the similar values used in the preliminary determination. We have 
rejected Liaoning and Wuyang's argument that we should value these 
factors based on Indian domestic data because we have found appropriate 
surrogate values that represent a larger sample of prices from Indian 
Monthly Statistics.

Comment 19: Scale and Slag

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that the 
Department appropriately valued slag at the low U.S. market price of 
$6.91 per metric ton and that the Department should continue to value 
slag in the same manner for the final determination. Anshan, Baoshan, 
Shanghai Pudong and WISCO additionally contend, however, that the 
Indian import price of $483.91 per metric ton for scale is aberrational 
high and that the Department should apply the same surrogate value for 
scale as it applies to slag. Furthermore, these respondents argue that, 
because both slag and scale are self-generated by-products of the 
steelmaking process, the Department should not apply any freight 
expense to the surrogate prices for slag and scale in the final 
determination.
    Petitioners agree that slag is essentially a mineral waste and has 
a relative low value. Scale, on the other hand, they argue, is 
processed steel, consisting of cuttings from actual steel slabs. Scale, 
reason petitioners, thus has a far greater value as an input in 
steelmaking than does slag. Petitioners continue that there is nothing 
on the record to substantiate respondents' claim that the Indian price 
for scale is ``aberrational.'' Petitioners conclude that the Indian 
price the Department adopted in the preliminary determination is 
reliable and should be used for the final determination.
    Department's Position: We agree with respondents in part. Scale is 
of little value in the steelmaking process. Because slag and scale are 
very similar, the Department used the same value for scale and slag 
($6.91 per metric ton) in its final determination. Furthermore, we 
agree with respondent that a freight expense should not be added to the 
surrogate prices for slag and scale when no freight is incurred in 
China on these inputs, because they are self-generated.

[[Page 61982]]

Comment 20: Stones

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that, to the 
extent that surrogate values for some types of ``stones'' have already 
been submitted on the record (e.g., manganese, quicklime, limestone and 
dolomite), the Department should use that information for surrogate 
values for these inputs. To value types of stones for which no specific 
surrogate value has been provided to the Department (e.g., serpentine, 
calcium carbon trioxide (CaCO<INF>3</INF>), silicon sand/silicon 
dioxide), the Department should use the surrogate value for ``stone, 
sand and gravel'' proposed by the petitioners in their August 5, 1997 
submission at Exhibit A--that is, $25.21 per metric ton.
    Petitioners state that, with respect to silicon, the Department has 
already found an appropriate surrogate value. Petitioners contend that 
respondents have conceded that the category ``stones'' contains 
unreported ``silicon sand'' and silicon dioxide in unknown quantities. 
Therefore, petitioners state that the Department should use the value 
for silicon as facts available in valuing ``stones'' for which no 
specific surrogate value has been provided. In addition, regarding 
calcium carbonate (CaC<INF>2</INF>) rocks, petitioners argue that the 
Department should recalculate consumption for each company.
    Department's Position: We agree with respondents that the 
Department should use appropriate and specific surrogate values for all 
types of ``stones.'' For the final determination, for Baoshan, 
Liaoning, Shanghai Pudong and WISCO, we have obtained appropriate 
separate values for all types of stones which were separately reported. 
For Anshan, we have obtained a value from the U.N. Trade Commodity 
Statistics for ``stones, sand and gravel'' and are valuing stones for 
which we do not have a surrogate value using this data. We disagree 
with petitioners' assertion that we should use silicon as facts 
available for silicon sand. Based on our understanding of the steel 
industry, silicon sand is more comparable to generic sand than it is to 
silicon, which is a comparatively expensive commodity.

Comment 21: Silicon Manganese

    Respondents note that, in the preliminary determination, the 
Department valued silicon manganese at $578.68 per metric ton, based on 
information contained in the 1995-96 annual report of SAIL. Respondents 
argue that, if the Department continues to use this source in the final 
determination, the value should be adjusted not only for inflation, but 
also to remove Indian taxes reflected in the reported number.
    Petitioners counter that nothing in the record supports 
respondents' claim that taxes are included in the surrogate value used 
by the Department for silicon manganese (based on SAIL data). Even if 
taxes were included, furthermore, there is no record information that 
would allow for a determination of the amount of taxes paid. 
Accordingly, petitioners contend that the SAIL data must be used as 
reported.
    Department's Position: Although we consider the value for silicon 
manganese we used in the preliminary determination appropriate for use 
in our final determination calculations, we have located a more 
contemporaneous Indian Monthly Statistic for the period April 1996 
through July 1996 which we believe to be more accurate and 
representative of a larger sample of the commodity. For the final 
determination, we are relying on this import price to value silicon 
manganese.

Comment 22: Electricity

    Anshan, Baoshan, Shanghai Pudong and WISCO contend that, in the 
preliminary determination, the Department valued electricity at $0.06 
per kilowatt hour, based on data reported in the July 1995 publication 
Current Energy Scene in India, published by the Center for Monitoring 
Indian Economy. These respondents contend that the Department should 
continue to use this value in the final determination.
    Petitioners state that respondents' suggested rate for electricity 
reflects the simple average of the Indian state electricity rates for 
the ``large industry'' category as of January 1, 1995, adjusted to the 
POI. See Shanghai Pudong Factor Valuation Memorandum, June 3, 1997, at 
4-5. Petitioners maintain that, in its final determination, the 
Department should use the electricity rates reported by Indian flat-
rolled steel producers in their annual reports for the fiscal year 
ending March 1996. These reported rates are preferable, argue 
petitioners, because they are more contemporaneous with the POI and are 
specific to large steel manufacturers. See Polyvinyl Alcohol from the 
People's Republic of China, 61 FR 14057 at 14061 (March 29, 1996) 
(Final Determination). Petitioners calculate the weighted average 
electricity rate for Pennar Steels Ltd., Nippon Denro Ispat Ltd., 
Visvesveraya Iron & Steel Ltd., SAIL, and Tata Steel Ltd., at $0.0648 
per kilowatt hour.
    Department's Position: We agree with respondents. We consider the 
rate for electricity we used in the preliminary determination 
appropriate for use in our final determination calculations as it is 
publicly available and nothing on the record suggests that this value 
is aberrational.

Comment 23: Scope Issue

    Petitioners argue that the scope should be clarified to state that 
it covers plate 4.75 mm in thickness or more, in nominal or actual 
thickness. They state that, due to thickness tolerances in the various 
common plate specifications, foreign producers may sell plate as \3/16\ 
inch (4.75 mm) plate at thickness less than \3/16\ inch and remain 
within the specification.
    Petitioners allege that there is a significant U.S. market for \3/
16\-inch (4.75 mm) plate. They also argue that they always intended 
that the scope of the investigation would cover product of 4.75 mm in 
actual or nominal thickness because any plate within the tolerance for 
4.75 mm nominal thickness plate will compete directly with any other 
plate within the tolerance. The customer knows that all plates within 
the tolerance meet the performance standards of the specification.
    Petitioners argue that actual and nominal thickness products are 
produced on the same equipment, marketed in the same way to the same 
customers and generally priced identically. They allege that failure to 
include plate with a nominal thickness of at least 4.75 mm but an 
actual thickness of less than 4.75 mm would seriously undermine the 
scope of the investigation by allowing products that are considered 
identical in the market to be treated differently under the scope.
    Anshan, Baoshan, Shanghai Pudong and WISCO point out that 
petitioners' request to change the scope was submitted more than five 
months after the filing of the petition. They argue that petitioners' 
proposal to change the scope so late in the proceeding is contrary to 
the requirements of the law. Respondents note that the statute does not 
permit the Department to amend the scope of the petition so late in 
this investigation.
    Department's Position: We disagree with petitioners and have 
decided not to change the scope of products under investigation. For a 
more complete discussion of this issue, See Memorandum on Scope of 
Investigations on Carbon Steel Plate from Joseph Spetrini to Robert S. 
LaRussa.

Comment 24: Alloy/Non-Alloy Steel Issue

    Petitioners allege that foreign producers are beginning to slightly 
vary

[[Page 61983]]

the alloy content of their carbon plate in order to technically remove 
the product from the non-alloy steel tariff subcategories in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') and place 
the products within the ``other alloy steel'' HTSUS subcategories 
without changing the specification, grade, physical characteristics or 
applications of the CTLP. Petitioners contend that such low-alloy 
plates should be covered by the scope.
    Petitioners argue that products classified as alloy steel under the 
HTS, but ordered and produced to ``carbon'' steel specifications, 
should be included within the scope of the investigation. They argue 
that the alloys being added to these products are not changing the 
performance characteristics of plate, and the alloy-added carbon 
products and other carbon products are the functional equivalents of 
one another. Petitioners further contend that the products are produced 
by the same manufacturers on the same equipment, are sold to the same 
customers for the same uses, and have nearly identical costs.
    Petitioners assert that where the added alloy does not change the 
performance characteristics of the plate or affect the product's 
classification within the industry specification, the product should 
remain within the scope of the investigation. They argue that the 
addition of alloys that do not change the performance characteristics 
or specifications of the product will not change the purchasers' 
perception of the value, function or use of the product. Petitioners 
conclude by stating that the failure to include such completely 
substitutable products within the scope would undermine the efficacy of 
any order.
    Anshan, Baoshan, Shanghai Pudong and WISCO again argue that 
petitioners' request to change the scope was untimely submitted and 
should be rejected by the Department, as it is contrary to the 
requirements of the law. Moreover, respondents contend that Department 
and classification practice demonstrate that carbon steel does not 
include products with alloying agents such as boron. Finally, 
respondents assert that the statute does not permit the Department to 
amend the scope of the petition proposed in the manner proposed by 
petitioners so late in this investigation.
    Department's Position: We disagree with petitioners and have 
decided not to change the scope of products under investigation. For a 
more complete discussion of this issue, See Memorandum on Scope of 
Investigations on Carbon Steel Plate from Joseph Spetrini to Robert S. 
LaRussa.

Comment 25: River Freight

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that, in the final 
determination, the Department should not value river freight costs for 
purchases of materials (and for the shipments of finished products by 
the Chinese producers) using the surrogate value relied upon for the 
preliminary determination, which was based on a 1993 embassy cable 
regarding river barge rates in India originally submitted for Helical 
Spring Lock Washers, 61 FR at 41994. In particular, Anshan, Baoshan, 
Shanghai Pudong and WISCO argue that this source should not be used in 
the final determination because (1) the rates do not in any way reflect 
the costs of shipping raw materials and merchandise on the Yangtze 
River on which their steel mill and export facilities are located, and 
(2) the rates do not even accurately reflect the costs of river 
shipping in India.
    Respondents argue that the Department must, to the extent possible, 
select surrogate values for river rates which accurately and fairly 
reflect the costs of the shipping raw materials and steel products on 
the Yangtze River. Respondents maintain that the use of Indian river 
barge rates to establish surrogate values for Chinese shipments of raw 
materials and final steel products on the Yangtze River is 
inappropriate because there are no rivers in India that are comparable 
to the Yangtze River and river shipping rates are heavily dependent on 
the types of rivers used for shipping and the types of products being 
shipped.
    As an alternative to the Indian barge rates in the 1993 cable, 
respondents urge that the Department use published Mississippi River 
shipping rates as surrogate values for the cost of shipping on the 
Yangtze River because, they claim, the Mississippi River is a ``working 
river'' that is comparable in size to the Yangtze River.
    If the Department continues to use Indian shipping rates to value 
shipping on the Yangtze river, respondents recommend that the 
Department use current, actual shipping rates rather than the 1993 
quotation used in the preliminary determination. Respondents argue that 
the 1996-97 rates collected and reported by the Ministry of Surface 
Transport of the Government of India, which they have submitted, are 
preferable because they are less aberrational, more contemporaneous, 
and based on a broader range or merchandise than the rates used in the 
preliminary determination, which do not identify the product for which 
these rates were quoted.
    Petitioners argue that the data on river freight supplied by the 
respondents are unreliable; therefore, they urge, the Department should 
continue to use the same values as in the preliminary determination. 
Petitioners argue that respondents' claim that Indian rivers are 
generally not accessible to large vessels is baseless, stating that CIA 
reports indicate that a large percentage of inland waterways in India 
are navigable.
    Petitioners object to the use of U.S. freight rates as surrogate 
values, arguing that the Department must calculate normal value based 
on, ``to the extent possible, the prices or costs of factors of 
production in one or more market economy countries that are * * * at a 
level of economic development comparable to that of the nonmarket 
economy country * * *.'' 19 U.S.C. 1677b(c)(4). Petitioners contend 
that United States is not an appropriate surrogate country because it 
is at a different level of economic development than the People's 
Republic of China and not one of the five countries identified by the 
Department as potentially suitable surrogates. See Memorandum to E. 
Yang from D. Mueller, January 29, 1997 (``DOC Surrogate Selection 
Memo'').
    Further, petitioners assert that the information on Indian river 
freight rates supplied by respondents is questionable with respect to 
its meaning, origin and reliability. Petitioners argue that respondents 
have not provided any credible evidence that the rates used by the 
Department in the preliminary determination are ``aberrational.''
    Department's Position: We agree with both respondents and 
petitioners in part. For the final determination, we have decided to 
base the river rates freight on a simple average of the rates used in 
the preliminary determination and information submitted by respondents. 
We note that the river rates we used in the preliminary determination 
were significantly higher than rates for other forms of transportation. 
For example, to ship merchandise 1100 km. by river using the rates used 
in the preliminary determination would cost $68 per ton, whereas to 
ship the same distance by train would only cost approximately $15 per 
ton. We note that a respondent would usually use, in the normal course 
of business, the most cost effective and efficient mode of 
transportation. However, respondents did not ship by train. It is our 
own practice to value the factors of production actually used by 
respondents. Consequently, we have concluded that to only use the 
surrogate

[[Page 61984]]

value we used in the preliminary results would be inappropriate.
    Respondents also submitted river rates from the Inland Waterways 
Authority of India, which is part of the Ministry of Surface 
Transportation of the Government of India. We disagree with 
petitioners' argument that the Department should reject this 
information because respondents used a consultant in obtaining this 
information. While it is true that a consultant was involved in 
obtaining this information, the fact remains that the source of the 
data is the Indian Government. In addition, we can find no evidence to 
support the conclusion that the river rates presented in that document 
are unreliable or distortive. The rates represent a wide variety of 
rivers, products and distances in India, including river rates to and 
from Calcutta, which is a major port. At the same time, we hesitate to 
use only the river rate information obtained by respondents for the 
final determination. As no evidence on the record indicates what 
instructions were given to the consultant or what questions the 
consultant asked the Indian Waterways Authority to obtain the data.
    We also disagree with respondents' contention that we should use 
rates from the Mississippi River for the final determination. First, 
the United States is not one of the selected surrogate countries that 
the Department normally uses. The Department also searched for 
alternative sources of information from other surrogate countries. In 
particular, we attempted to obtain river rate information from Egypt 
(the Nile river) and Pakistan (the Indus river). However, we were 
unable to obtain publicly available information for river rates from 
these countries. Second, all rivers are to some degree unique, and the 
Department's ability to address the quantity and the types of 
differences noted by respondents is limited. Thus, it is not our 
practice to find a surrogate value for freight over a particular route, 
but rather to ascertain a reasonable value for river freight.

Comment 26: Ocean Freight Rates

    Respondents argue that the Department should apply product- and 
port-specific ocean freight rates. Respondents maintain that, in the 
preliminary determination, the Department improperly applied the ocean 
freight rates for shipping steel plate to other types of products, 
which would necessarily have different shipping rates. Respondents urge 
that the Department should value raw materials purchased from market-
economy suppliers using sale-specific shipping cost information from 
market economy ocean freight providers. Respondents recommend that 
product-and port-specific ocean-shipping rates published in Shipping 
Intelligence Weekly be used to value ocean freight shipments in the 
final determination.
    Petitioners argue that the Department should continue using the 
ocean freight rates from U.S. import statistic reports (IM-145 reports) 
used in the preliminary determination. Petitioners assert that the 
Department should not value raw materials purchased from market-economy 
suppliers using sale-specific shipping cost information from market 
economy shippers unless there is sufficient evidence that the specific 
respondent purchased the input from a market economy supplier in market 
economy currency. Further, petitioners argue that the surrogate values 
based on shipping rates reported from Shipping Intelligence Weekly 
submitted by respondents are inadequate for several reasons. First, 
petitioners note that rates reported from the Shipping Intelligence 
Weekly are not actual freight rates paid by customers, but instead are 
described as ``average earnings.'' Second, petitioners contend that 
respondents chose rates for the most efficient type of vessel for their 
surrogate value. Third, petitioners note that information from Shipping 
Intelligence Weekly was not accompanied by the certification of 
accuracy as required by 19 CFR Sec. 353.31(i). Petitioners urge the 
Department to continue using import data in the preliminary 
determination, since the import data is representative of a large 
sample of shipments and relate specifically to the chosen surrogate 
country.
    Department's Position: We agree with petitioners that rates 
reported from Shipping Intelligence Weekly are not actual freight rates 
paid by customers, but instead are described as ``average earnings.'' 
Second, we agree that respondents appear to have provided rate data for 
the most efficient type of vessel, rather than the actual freight rates 
paid by customers. Consequently, we find that the value reported in the 
Shipping Intelligence Weekly are not appropriate for use as surrogate 
values for ocean freight. For the final determination, therefore, we 
have continued to use the IM-145 ocean rates used in the preliminary 
determination.

Comment 27: Brokerage and Handling

    Anshan, Baoshan, Shanghai Pudong and WISCO argue that the surrogate 
value for brokerage and handling charges used in the preliminary 
determination is aberrational. This value was based on ranged, public 
information from 1991-92 that was originally submitted in the 
Department's investigation of Sulphur Vat Dyes from India, 38 FR at 
11835, 11841. These respondents recommend that the Department use, 
instead, as a surrogate value for brokerage and handling, prices they 
have submitted which are reported by Amrok Shipping Private Ltd. , a 
shipper from India.
    Liaoning and Wuyang argue that the Department should use a 
brokerage and handling value contained in the public version of the 
response of Isibars Limited in the antidumping review of Stainless 
Steel Wire Rod from India, which they have added to the record of this 
case to value foreign brokerage. They maintain that the value for 
brokerage and handling used in the preliminary determination is 
inappropriate because that value is for a product unrelated to the 
subject merchandise of this investigation. Liaoning and Wuyang contend 
that the brokerage and handling value from 1995-96 Stainless Steel Wire 
Rod from India is preferable because it is specific to steel, more 
contemporaneous, and more reliable, since it has been verified by the 
Department.
    Petitioners argue that the Department should continue to use the 
surrogate value for brokerage and handling used in the preliminary 
determination. Petitioners find it significant that this surrogate 
value for foreign brokerage and handling was used by the Department in 
two other final investigations. Petitioners argue that information 
provided by the four respondents is an anecdotal and selective 
commentary by a private shipping company that may have been paid to act 
as a consultant by the respondents. Petitioners urge that the 
Department reject the information provided by the four respondents on 
the basis that it is likely to be biased and unreliable.
    Department's Position: We agree with Liaoning and Wuyang. In the 
preliminary determination, we used brokerage and handling rates as 
reported in ranged, public information from 1991-92 that was originally 
submitted in the Department's investigation of Sulphur Vat Dyes. We are 
unfamiliar with the Amrok Shipping brokerage and handling information 
submitted by Anshan, Baoshan, Shanghai Pudong and WISCO and do not know 
what questions the four respondents asked to obtain the brokerage and 
handling rates. The brokerage and handling rates submitted constitute 
an individual's estimate and were not specific concerning certain 
charges. In addition, we have no background information on the period

[[Page 61985]]

of time applicable to the brokerage and handling values submitted by 
these respondents. Since the brokerage and handling rates in used in 
the Stainless Steel Wire Rod are more contemporaneous than the 
information used in the preliminary determination, specific to steel 
and verified by the Department, we have used those rates for the final 
determination.

Comment 28: Rejection of Untimely Factual Information

    The four respondents argue that the Department should not reject 
factual information submitted within the deadlines established by its 
regulations. Thus, respondents urge the Department to reconsider and 
reverse its earlier decision to reject submissions from Anshan, Baoshan 
and WISCO. Respondents maintain that the information at issue was 
submitted within the deadlines pursuant to the Department's 
regulations, which allow for the submission of factual information in 
an antidumping investigation up to one week prior to the start of 
verification, in accordance with 19 CFR Sec. 353.31(a). Respondents 
maintain that the Department, in rejecting certain portions of the 
respondents' submission, misapplied the provision of 19 CFR 
Sec. 353.31(b)(2), which states that, '' in no event will the Secretary 
consider unsolicited questionnaire responses submitted after the date 
of publication of the Secretary's preliminary determination.'' Citing 
to the preamble of the relevant regulations, respondents argue that 
this provision applies only to questionnaire responses received from 
voluntary respondents and not to those from mandatory respondents. See 
Antidumping Duties, 54 FR at 12742, 12759-60 (Mar. 28, 1989) (final 
rule).
    Further, respondents maintain that, in accordance with the 
provisions of its regulations, the Department has in the past allowed 
respondents to supplement their previous questionnaire responses prior 
to verification. See Certain Iron Construction Casting from the 
People's Republic of China, 50 FR at 43594 (Oct. 28, 1985); Polyvinyl 
Alcohol from the People's Republic of China, 60 FR at 32757 (June 17, 
1997); Collated Roofing Nails from the People's Republic of China, 62 
FR at 25895 (May 12, 1997) (preliminary determination). Moreover, 
respondents argue that the Department had sufficient time to analyze 
and verify the additional information submitted, and that the rejection 
of this information would unfairly penalize respondents for providing 
information that they claim the Department had not requested be 
provided in a questionnaire with an earlier due date.
    For Anshan, the rejected information consisted of freight 
information for certain inputs. Anshan argues that this freight 
information should be accepted because Commerce had not requested this 
information in its supplemental questionnaires and thus this 
information was not untimely provided.
    For Baoshan Steel, the Department had requested information on 
distances from suppliers for all inputs in its supplemental 
questionnaire, and Baoshan Steel neglected to include information on 
the distance for one category of inputs. Baoshan Steel submitted the 
omitted information one week prior to the start of verification.
    For WISCO, the information rejected by the Department consisted of 
the factors of production for producing oxygen and similar gases. 
Respondents argue that the Department, in the supplemental 
questionnaire, gave WISCO the option of either providing these factors 
of production or explaining why these factors of production should not 
be used. Respondents allege that, due to an inadvertent error, the 
factor information they intended to provide was omitted from the 
supplemental questionnaire. Respondents submitted this information one 
week prior to verification.
    Petitioners argue that respondents' challenge to the Department's 
decision to reject their untimely submission of information requested 
in the Department's questionnaires is both misleading and without 
merit. Petitioners refer to 19 CFR Sec. 353.32(b), which provides that, 
in the Secretary's written request to an interested party for a 
response to a questionnaire, the Secretary will specify the time limit 
for response. 'The Secretary will return to the submitter, with written 
reasons for return of the document, any untimely or unsolicited 
questionnaire responses rejected by the Department.'' 19 CFR 
Sec. 353.31(b)(2). Petitioners maintain that the respondents' 
submissions were properly rejected by the Department in accordance with 
section 353.31(b)(2) because (1) the information that respondents claim 
was improperly rejected by the Department consists of information 
provided in response to supplemental questionnaires and (2) the 
information was submitted after the deadline for questionnaire 
responses. Petitioners add that, although the Department has allowed 
respondents to supplement their previous questionnaire responses even 
later than seven days prior to verification in past cases, regulations 
should still be enforced under the present circumstances. Petitioners 
also maintain that respondents have not adequately demonstrated that 
they were not given ample notice and opportunity to file said 
information in a timely fashion. With respect to Anshan, petitioners 
argue that Anshan's freight information was not submitted within the 
deadlines established by the Department's regulations. With respect to 
Baoshan, petitioners argue that the rejected information was requested 
both in the Department's December 19, 1996 and again in the 
Department's March 13, 1997 questionnaire. Petitioners argue that 
Baoshan had ample notice and opportunity to comply with the 
Department's requests and that, as noted in the Department's letter of 
June 16, 1997, there is no reason to believe that this information was 
'inadvertently omitted.'' See letter from Edward C. Yang to Shearman & 
Sterling, June 16, 1997. With respect to WISCO, petitioners argue that 
the Department correctly rejected WISCO's submission of factors of 
production for oxygen and similar gases, because respondents failed to 
provide this information, which was requested by the Department in its 
questionnaire of March 12, 1997, in its April 14, 1997 supplemental 
questionnaire response. Petitioners argue that, in response to the 
Department's supplemental questionnaire, WISCO neither provided factors 
of production for oxygen and similar gases nor explained why it was 
inappropriate to revise its calculations to account for the production 
of oxygen and similar gases.
    Department's Position: We agree with Anshan, but not with Baoshan 
and WISCO. For Anshan, we have reconsidered our prior decision to 
reject information on freight distances for certain inputs. Because, in 
its March 12, 1997 supplemental questionnaire, the Department did not 
specifically request that Anshan provide information concerning the 
means of transportation or distances for certain material inputs 
obtained from domestic sources, this information did not constitute an 
out-of-time reply to a questionnaire, and because the information was 
otherwise timely provided, we should reject this information. 
Therefore, for the final determination, we have accepted Anshan's 
information on distances between its plant and the sources of certain 
inputs, and have used this information in calculating freight expenses 
for those inputs.
    With regard to Baoshan, the Department has determined, that it 
correctly rejected the information submitted by Baoshan on June 10, 
1997 with respect to the shipping distances

[[Page 61986]]

for one category of input. Baoshan stated in that submission, which was 
received one week prior to verification, that they omitted such 
information in the supplemental questionnaire responses due to an 
alleged oversight. Because the Department specifically requested this 
information in its March 12, 1997 supplemental questionnaire to 
Baoshan, which required a complete response by April 14, 1997, Baoshan 
had ample notice and opportunity to comply with the Department's 
requests for this information. Therefore, we did not use the rejected 
information for the final determination.
    For WISCO, the Department has determined that it correctly rejected 
information on factors of production for oxygen and similar gases. The 
Department requested this information in a supplemental questionnaire 
on March 12, 1997. WISCO has stated that it inadvertently omitted the 
information from its April 14, 1997 response due to a mis-communication 
and finally submitted the data in its June 10, 1997 submission. Since 
WISCO had ample notice and opportunity to comply with the Department's 
requests, we have not used the untimely submitted information on 
factors of production for oxygen and similar gases for the final 
determination.
    Although the legislative history of the regulation cited by the 
four respondents indicates that, in ``unusual circumstances,'' the 
Department may retain and consider ``unsolicited questionnaire 
responses'' (i.e., initial responses from voluntary respondents), this 
provision does not revoke the rules of timeliness even for such 
respondents. Further, respondents' reliance on this passage is 
inapposite, because they are mandatory, not voluntary, respondents and 
the data at issue were ``untimely'' provided (based on the time limit 
specified by Commerce for response to the questionnaire), not 
``unsolicited.'' See 54 FR at 12759-60, 12781.

Comment 29: General Issues Regarding Selection of Surrogate Values

    Anshan, Baoshan, Liaoning and WISCO argue that the Department 
should revise the methodology used to select surrogate values for 
material inputs. Respondents argue that, in the preliminary 
determination, the Department departed from its established ``rules'' 
for selecting surrogate values, which were developed to ensure 
``accuracy, fairness and predictability.'' Oscillating Fans, 56 FR at 
55271, 55275, cited with approval in Lasko, 43 F.3d 1442.
    These respondents claim that the Department made certain 
``methodological errors'' in selecting the surrogate values used in the 
preliminary determination, and urge the following principles should 
guide the Department's selection of surrogate values. First, these 
respondents maintain that the Department should use surrogate values 
that conform to the specific materials used in production. Respondents 
argue that by assigning values from `basket' categories to certain 
inputs which they reported at a more specific level, the Department 
departed from its established practice to base its surrogate values on 
the prices in the surrogate country for materials which most closely 
reflect the specific grade and chemical composition of the type of 
input used by the NME producer, whenever possible. See Lock Washers, 61 
FR at 41994, 41996-97. Anshan, Baoshan, Shanghai Pudong and WISCO argue 
that the Department's reasoning for using ``basket'' categories for 
surrogate values is incorrect. For example, they contend that publicly 
available published information on domestic prices in India for each of 
the types of coal used by the Chinese respondents was available and 
provided in their March 4 and August 5, 1997 submissions, despite the 
Department's statement in the preliminary determination that the use of 
these ``basket'' categories was necessary because the Department did 
not have publicly available published information on the specific 
prices for specific inputs within the basket categories. Preliminary 
Determination, 62 FR at 31976. In addition, respondents note that each 
of them provided information on actual prices paid for each type of 
iron ore purchased from market economy suppliers in both the 
questionnaire and supplemental questionnaire responses.
    Second, the four respondents maintain that the Department departed 
from its established practice of selecting, where possible, sources 
which provide domestic, tax-exclusive prices. See Brake Drums and 
Rotors, 62 FR at 9160, 9163. Instead, respondents maintain that the 
Department used import data to value a number of inputs for which 
publicly available published information on domestic prices was already 
on the record. Respondents argue that the Department should use 
domestic, tax-exclusive prices in preference to import values.
    Third, they maintain, when the Department does use import data, it 
should, in accordance with its established practice, use the available 
import data that is most contemporaneous with the investigation period. 
Respondents argue that, in the final determination, when the Department 
uses import data, it should use Indian import data for the 
investigation period which have become available since the publication 
of the preliminary determination and have been submitted for the record 
of this investigation.
    Fourth, they insist that the Department should not use surrogate 
values that are aberrational. See Sulfanilic Acid from the Republic of 
Hungary, 57 FR at 48203, 48206 (Oct. 22, 1992). These respondents 
contend that a number of surrogate values used in the preliminary 
determination were aberrational, resulting in the distortion of the 
results of the Department's preliminary calculations. They urge the 
Department to carefully review the surrogate values used in the final 
determination to avoid similar distortions. In addition, respondents 
advise that where the values obtained from the primary surrogate are 
aberrational or otherwise unreasonable, the Department should use 
sources other than the designated ``primary'' surrogate for surrogate 
values. Heavy Forged Hand Tools from the People's Republic of China, 60 
FR at 49251, 49253 (Sept. 22, 1995).
    Fifth, respondents argue that the Department should properly 
inflate any surrogate values that are not contemporaneous with the 
investigation period. In order to do so, respondents maintain that the 
Department should correct certain clerical errors involving both the 
selection of the appropriate data from the International Financial 
Statistics publication and the decision as to whether to use wholesale 
price index (WPI) or Consumer Price Index (CPI) inflators for certain 
surrogate values.
    Petitioners argue that the Department properly selected surrogate 
values for material inputs in its preliminary investigation in 
accordance with previous practices and regulations. Petitioners refer 
to Section 773(c)(1) of the Act, which states that for the purposes of 
determining normal value in a non-market economy, ``the valuation of 
the factors of production shall be based on the best available 
information regarding the values of such factors.'' 19 U.S. C. 
1677b(c)(1). Petitioners assert that the statute does not require 
Commerce to follow any single approach in evaluating data. Olympia 
Industrial, Inc. v. United States, Slip Op. 97-44 (Ct. Int'l Trade 
1997).
    Petitioners state the following with regard to the ``established 
rules'' governing the Department's approach in selecting surrogate 
values: the

[[Page 61987]]

Department has stated that its objective in selecting surrogate values 
in a non-market economy investigation is to value the inputs at prices 
that most closely reflect the type of product used by producers in the 
country under investigation. See Helical Spring Lock Washers, 61 FR at 
11813, 11815 (March 13, 1997); the Department's clear preference is to 
use published information that is most closely concurrent to the 
specific period of investigation (POI) or period of review (POR). See 
Drawer Slides, 60 FR at 54472, 54476 (October 24, 1995); the Department 
has a longstanding practice of relying, to the extent possible on 
publicly available information. See Sebacic Acid From the People's 
Republic of China, 62 FR at 10530, 10534 (March 7, 1997); it is the 
Department's practice, in selecting the ``best available data,'' to use 
data from a variety of sources and to use different sources to value 
different factors. Sulfanilic Acid from the People's Republic of China, 
61 FR at 53703, 53704 (October 15, 1996).
    Petitioners argue that in the preliminary determination, the 
Department clearly states that it maintained a preference for using 
publicly available tax-exclusive domestic prices and indicated that the 
Department evaluated a number of possible sources before choosing the 
most appropriate and reliable prices.
    Petitioners rebut respondents' claim that the Department departed 
from its practice of using, whenever possible, surrogate values that 
conform to the specific materials used in production. Petitioners argue 
that it was appropriate for the Department to create a ``basket'' 
category and assign a single surrogate value for coal for all 
respondents, given that labels provided by respondents for forms of 
coal inputs and their respective uses were confusing and unclear.
    Petitioners argue that the Department did not depart from its 
practice of using domestic, tax-exclusive prices in preference to 
import values. Petitioners maintain that the Department's stated 
preference for domestic, tax-exclusive prices is conditioned upon the 
finding of reliable publicly available information. In the present 
case, petitioners assert that the Department were unable to locate 
reliable domestic value at the time of the preliminary determination. 
Petitioners argue that the Department should use the same sources and 
values for inputs as it did in the preliminary investigation except 
where amended by material input suggestions made by petitioners in 
their August 5, 1997 PAI submission and their briefs.
    Petitioners argue that the Department should use available import 
data most contemporaneous with the investigation period if they are 
otherwise reliable. See Helical Spring Lock Washers, 61 FR at 41994, 
41996-7.
    Petitioners argue that respondents' claims that certain surrogate 
values are aberrational are unwarranted.
    Petitioners agree with respondents that the Department should 
properly inflate any surrogate values that are not contemporaneous with 
the period of investigation. Petitioners recommend that the Department 
use the wholesale price index (WPI) to derive inflators regardless of 
whether the associated values were reported in Rupees or U.S. dollars. 
However, petitioners object to the use of United States producer price 
index (PPI) for inflating dollar-denominated prices, which was used in 
the preliminary determination. Petitioners argue that since the 
inflation adjustments are intended to reflect price trends in the 
surrogate country and not monetary trends in United States, the 
Department should use inflation indices for the surrogate country, 
rather than those for the United States. See e.g. Circular Welded Non-
Alloy Steel Pipe from Romania, 61 FR at 24274.
    Department's Position: Both respondents and petitioners are correct 
in stating that certain general principles have guided the Department's 
practice in selecting surrogate values. We agree that surrogate values 
should be products which are as similar as possible to the input for 
which a surrogate value is needed. Likewise, we normally prefer a fully 
reliable domestic, tax-exclusive price to an equally reliable import 
price. We also prefer data (import and domestic) that are more 
contemporaneous to the POI/ POR to data that are less contemporaneous, 
and will normally update a value if more data covering additional 
months within the POI/POR become available to us between the 
preliminary and the final determination.
    When we must use data that are not contemporaneous to the POI or 
POR, we agree that it should be indexed forward using an appropriate 
index. We also agree that the Department should not use values which it 
has found to be ``aberrational,'' and that when the values obtained for 
the primary surrogate are aberrational, the Department should seek 
appropriate values in other economies, preferably in those at a similar 
level of economic development. We also have a long-standing practice of 
preferring publicly available information to other types of 
information.
    It is important to emphasize, however, that our overarching mandate 
is to select the ``best'' available data (see 19 U.S.C. 1677b(c)(1)), 
which involves weighing all of the relevant characteristics of the 
data, rather than relying solely on one or two absolute ``rules.'' 
Thus, for example, the most specific data may not be the most 
contemporaneous, the most reliable, or from the selected surrogate 
country. There is no set hierarchy for applying the above-stated 
principles, nor will parties always agree as to the reliability of 
certain data or the relevance of certain facts or assertions. Thus, the 
Department must weigh available information with respect to each input 
value and make a product-specific and case-specific decision as to what 
the ``best'' surrogate value is for each input. This we have done, to 
the best of our ability, in this case.
    Concerning petitioners' comments regarding the proper inflation of 
any surrogate values that are not contemporaneous with the POI, we note 
that the Department agrees with their assertion that we should use WPI 
for those Indian values denominated in Rupees. However, we disagree 
with their objection to the use of PPI for inflating dollar-denominated 
prices, which was the methodology the Department used in the 
preliminary determination. We have determined that it is a reasonable 
methodology to use a U.S. index for those values denominated in U.S. 
dollars, because price indices in the United States would directly 
impact those prices denominated in the U.S. dollars.

Comment 30: Ministerial Error--Freight for Purchases of Certain Inputs

    Petitioners argue that the Department should change the freight 
charges for purchases of certain inputs which travel by two modes of 
transportation for Baoshan, Shanghai Pudong and WISCO. Petitioners 
allege that, in the preliminary determination, the Department 
incorrectly weight-averaged the costs associated with the modes of 
transportation.
    Respondents did not comment on this issue.
    Department's Position: We agree with petitioners with respect to 
Baoshan and WISCO. For these companies, we have corrected the error for 
the final determination. However, we disagree with petitioners 
concerning Shanghai Pudong as we determine that this error is not 
applicable to Shanghai Pudong. Because this issue involves business 
proprietary information, please see Concurrence Memorandum for more 
information.

[[Page 61988]]

Company-Specific Comments

1. Anshan

Comment 31: Valuation of Certain Inputs
    Anshan argues that the Department should revise the surrogate 
values for certain inputs (the identity of which constitutes business 
proprietary information) to reflect the translation corrections 
provided to the Department in its June 19, 1997 submission. Anshan 
asserts that the translation corrections accurately describe the value 
of the grades of the inputs at issue and that the Department confirmed 
their accuracy during verification.
    Petitioners argue that the Department should not revise surrogate 
valuations to reflect the translation corrections contained in 
respondent's June 19, 1997 submission because the translation 
corrections constitute untimely and unsolicited information, and 
therefore should be rejected. If the Department accepts Anshan's 
representations, petitioners recommend that the Department continue to 
use the same value for the inputs as was used in the preliminary 
determination and make adjustments as necessary, according to their 
chemical descriptions. Petitioners refute respondents' claims that the 
results of verification sufficiently confirmed the accuracy of the 
translations. In addition, petitioners argue that the record 
information relating to the inputs (the identity of which constitutes 
business proprietary information) suggests that chemical content for 
certain inputs claimed by respondent are not accurate.
    Department's Position: We agree with Anshan. We agree that the 
corrections concerning this input that Anshan submitted to the 
Department on June 19, 1997 (prior to the beginning of verification) 
were timely. Therefore, we disagree with petitioners' contention that 
the information was untimely and should be rejected. As we indicated in 
our verification report for Anshan, we found at verification that there 
were translation problems concerning both the exact name of the input 
and its chemical identity. However, we examined supporting 
documentation which indicated and confirmed the chemical composition of 
the input.
Comment 32: Valuation of Ocean Freight for Input(s) Imported From 
Market Economy Suppliers
    Anshan argues that the Department should calculate ocean freight 
charges for its purchases of a certain input based on the actual 
shipping costs incurred.
    Petitioners disagree, claiming that the documentation provided by 
Anshan did not demonstrate the payment was made in market economy 
currency. Accordingly, petitioners urge the Department to reject the 
freight rates proposed by Anshan.
    Department's Position: We agree with Anshan that we should value 
ocean freight charges incurred in shipping market economy inputs based 
on the actual shipping costs incurred. This is consistent with the 
Department's practice of using the actual prices paid for inputs which 
were purchased from market economy suppliers and paid for in market 
economy currency. See 19 CFR 351.408(1). We also disagree with 
petitioners' contention that the documentation provided by Anshan did 
not demonstrate the payment for the input was in market economy 
currency. We note that Anshan included copies of invoices and bank 
statements denominated in U.S. dollars in their June 19, 1997 
submission.
Comment 33: Factors for Sintering Plant
    Petitioners argue that the Department should use facts available 
for material, energy, and labor factors for the material preparation 
workshop in Anshan's sintering plant. Petitioners argue that the 
verification reports state that Anshan failed to report these factors 
for the material preparation workshop in the general sintering plant. 
With respect to the labor component, petitioners recommend that the 
Department should use labor figures from the firing shop and the 
mineral concentration shop. For the omitted energy component of this 
workshop, petitioners urge that the Department should use the highest 
reported energy consumption (in terms of electricity, natural gas, and 
each other reported energy factor, per metric ton of plate) for any 
other shop.
    Anshan objects to petitioners' claim that it failed to report 
factors of production for the general sintering plant. Anshan argues 
that omission of these factors from its response stems from a 
misunderstanding during verification about the functions of the 
materials preparation workshop. Anshan explained that market economy 
input is processed prior to importation, and does not require further 
processing by the material preparation workshop. Therefore, the 
inclusion of the factors for the materials preparation department in 
Anshan's factors of production would result in double-counting.
    Department's Position: We agree with Anshan. As the market economy 
input is processed prior to importation, and does not require further 
processing by the material preparation workshop, we would be double-
counting if we included in our calculation of normal value the factors 
of production for the material workshop.
Comment 34: Anshan's Reporting Methodology
    Petitioners argue that Anshan's margin must be based entirely on 
facts available because its reporting methodology does not provide an 
adequate factual basis for a final determination. Petitioners contend 
that Anshan's questionnaire responses do not contain information with 
sufficient product-specificity because, they claim, Anshan's reporting 
methodology both lacks a meaningful product code system and fails to 
account for cost variations between products of different widths. 
Petitioners also identify as another anomaly in factor reporting the 
lack of CONNUM-specific electricity factors. If the Department chooses 
to accept Anshan's reporting methodology, petitioners request that any 
final calculations based thereon must take into account the errors, 
omissions and inconsistencies discovered at verification.
    Anshan, citing Steel Plate from Korea, 58 FR at 37176, 37190 (July 
9, 1993), argues that petitioners' challenge to Anshan's reporting 
methodology is unsubstantiated and should be disregarded. Anshan argues 
its records do not allow for the calculation of width-specific factors 
of production. Anshan contends its reporting methodology does 
sufficiently identify the source of production for plates of differing 
widths.
    Further, Anshan charges that petitioners have provided no basis for 
rejecting the verified methodology used by Anshan to identify the 
source of the slabs for each type of plate. Anshan argues that it 
provided a detailed description of the methodology, along with 
supporting documentation which can trace the source of production of 
slabs and ingots. Anshan argues, further, that which items the 
Department examines at verification is something to be decided not by 
petitioners but by the Department. The Department, they note, does not 
have to examine every single issue at verification, as long as it is 
satisfied, that, on the whole, the verification indicates that the 
response was accurate. See Silicon Metal from Argentina, 58 FR at 
65336, 65340 (Dec. 14, 1993).
    Department's Position: We agree with Anshan. During verification, 
we noted that Anshan's reporting methodology was not based on width-
specific data. Since Anshan did not use a width-specific methodology in 
the normal

[[Page 61989]]

course of business, it would be inappropriate to use facts available 
because they reported data based on their usual system rather than a 
width-specific system, unless the system normally used is found to be 
distortive to the margin calculation. The Department has determined 
that Anshan reported its factor data using a non-distortive methodology 
that provided information of sufficient product specificity to support 
a final determination.
Comment 35: Freight Amounts on SAL Invoices
    Petitioners argue that freight charges reported for U.S. sales 
should be the freight costs paid by the customer, rather than the 
freight costs incurred by Anshan's affiliate, Sincerely Asia Limited 
(SAL).
    Anshan argues that sections 772(a) and (c) of the Tariff Act 
requires that freight costs incurred by the Anshan's affiliate, rather 
than the customer, should be deducted from export price.
    Department's Position: We disagree with petitioners. Section 
772(c)(2)(A) calls for the export price to be reduced by 'the amount, 
if any, included in such price (emphasis added), attributable to * * * 
expenses * * * incident to bringing the subject merchandise from the 
original place of shipment in the exporting country to the place of 
delivery in the United States.'' Because freight costs paid by the 
unrelated customer should not be 'included in'' the export price, there 
is no reason to deduct these from export price.
    Comment 36: Labor for Plate Mill, Roughing Mill; Other Sintering 
Labor and Iron Making
    Plate Mill: Petitioners argue that respondent should revise labor 
factors for plate mill labor to reflect the results of verification.
    Anshan agrees that plate mill labor figures should be revised, 
based on their August 21, 1997 submission, which reflects the number of 
workers verified by the Department.
    Roughing Mill: Petitioners argue that Anshan's labor database for 
the roughing mill should be rejected because labor figures for that 
facility could not be verified. Petitioners argue that certain labor 
for this facility identified by respondents as ``unrelated'' labor 
should be attributed to subject merchandise. For labor factors for the 
roughing mill, petitioners urge the Department to use as facts 
available the highest per-ton labor rate of any other Anshan shop 
involved in the production of subject merchandise.
    Anshan states that roughing mill labor figures should be revised, 
based on their August 21, 1997 submission, which reflects the number of 
workers verified by the Department.
    Other Sintering Labor: Petitioners argue that the Department should 
revise other sintering plant labor according to discoveries made at 
verification, and that the Department should assign sintering plant 
maintenance to the production of subject merchandise rather than 
overhead.
    Anshan argues that it is not necessary to reclassify any of 
Anshan's workers. Respondent maintains that Anshan properly identified 
all of its labor expenses at each relevant production facility, and 
classified its workers according to the Department's questionnaire 
instructions; Anshan states, moreover, that the Department verified its 
reporting methodology.
    Iron-Making: Petitioners argue that certain workers that Anshan 
identified as ``unrelated workers'' in the iron-making plant must be 
included in labor costs of producing subject merchandise.
    Anshan argues that the Department examined its classification of 
workers at verification and noted the Department found no discrepancy 
in this regard.
    Department's Position: We agree with both respondents and 
petitioners in part. Anshan provided a detailed description of the 
functions and job positions for all workers both directly and 
indirectly involved in the production of subject merchandise. In 
addition, we verified labor categories at verification.
    For the plate mill, we agree with petitioners and Anshan, and have 
used revised plate mill figures that were based on the results of 
verification.
    For the roughing mill, we found at verification that we were unable 
to verify the labor calculations submitted in the June 19, 1997 
submission, as we could not tie these calculations to supporting 
summary worksheets examined at verification. Consequently, for the 
final determination, we have used the highest per-ton labor rate for a 
mill contained in Anshan's August 21, 1997 submission concerning labor 
calculations as facts available.
    For other sintering labor, we have revised our calculations for the 
final determination to reflect the results of verification in this 
category. We disagree with petitioners that we should reclassify 
sintering plant maintenance to the production of subject merchandise 
rather than overhead. We examined the labor classifications at 
verification and found no evidence that Anshan improperly classified 
sintering plant maintenance workers.
    Likewise, for iron-making, we examined Anshan's classification of 
workers at verification and found no evidence that these workers were 
improperly classified.
Comment 37: Material Inputs at No. 2 Steelmaking Plant
    Petitioners argue that the Department should use facts available 
for certain ``auxiliary materials'' used at the No. 2 Steelmaking plant 
that were not reported to the Department, but discovered at 
verification. Petitioners urge that the Department use the highest 
consumption rate reported for the material (or similar material) by 
Anshan or any other respondent at any stage of production.
    Anshan disagrees, arguing that the auxiliary materials not included 
in the reported factors for the No. 2 Steelmaking plant were either 
refractory materials used in the repair and maintenance of equipment or 
were used only for the production of non-subject merchandise. Anshan 
argues that the refractory materials should be considered overhead 
materials whose costs need not be reported individually because 
overhead materials are included in the surrogate value for overhead and 
thus do not require separate factor valuation.
    As for other unreported material inputs, Anshan maintains that they 
were excluded because they were not used in the production of subject 
merchandise sold by Anshan in the United States during the 
investigation period.
    Department's Position: We agree, in part, with both Anshan and 
petitioners. We agree with Anshan that some of their ``auxiliary 
materials'' are properly classified as refractory materials, and thus 
are part of overhead.
    However, for certain other inputs, we agree with petitioners. There 
is no evidence on the record to confirm the accuracy of Anshan's 
contention that the five unreported inputs other than refractory 
materials were used only for the production of non-subject merchandise. 
We were unable to find supporting documentation either in the 
verification report, verification exhibits or questionnaire responses 
to confirm that these inputs were only used for the production of non-
subject merchandise. Consequently, since Anshan did not report these 
factors, we have applied facts available for these certain inputs used 
in the Number 2 Steelmaking plant for the final determination.
    We have information on consumption levels from Anshan concerning 
only one of the five unreported inputs. Consequently, as facts 
available, for three unreported inputs for which we have no information 
concerning

[[Page 61990]]

consumption levels for either the exact input or an input was 
substantially the same, we applied the consumption rate of the non-
reported input for which we have information. We determined that a 
fourth unreported input was substantially the same as a reported input, 
and used the consumption value for the reported input. To value each of 
the five inputs, we used the surrogate value from the Monthly 
Statistics either for the input in question or if no such value was 
available, for a similar input. Because some of the information 
associated with this issue is business proprietary, please see the 
Concurrence Memorandum of October 24, 1997.
Comment 38: By-Product Credits
    Petitioners maintain that energy used for additional processing in 
by-product production should be deducted from the by-product credit. 
Petitioners maintain that if the respondent is receiving a credit for a 
processed by-product, the energy used for additional processing must be 
reported so that its value can be deducted from the credit.
    Anshan argues that if energy is deducted from the by-product 
credit, respondent should still receive a credit for its by-product 
production.
    Department's Position: We agree with both petitioners and 
respondents. Because additional energy costs are incurred in processing 
the by-product, energy costs should be deducted from the by-product 
credits. Therefore, we will deduct energy used for additional 
processing from the by-product credit. See Comment 44.
Comment 39: Credit for a By-Product Produced in Coke Plant
    Petitioners argue that Anshan should receive no credit for a by-
product which was discovered at verification to have been misreported. 
If the Department grants a credit for the by-product at issue, 
petitioners urge that the surrogate value for the by-product be based 
on the correction made at verification. If the by-product undergoes 
additional processing, petitioners argue that the by-product credit 
must be reduced by the value of such additional processing.
    Anshan objects to petitioners' claim that the Department should 
deny it a credit for the by-product at issue. Anshan argues that the 
Department verified the amount of this by-product generated at the coke 
plant; thus, Anshan is entitled to a credit for its production of this 
by-product.
    Department's Position: We agree with Anshan. We have revised the 
by-product credit for the input which was correctly reported at 
verification.
Comment 40: Raw Materials for Sintering Shop
    Petitioners argue that the Department should use facts available 
for certain raw material inputs in the sintering shop because Anshan 
failed to provide the Department with understandable, usable data with 
regard to these raw materials. Petitioners note that Anshan 
misidentified one gas input used by the sintering plant; therefore, 
petitioners urge that facts available should be used with regard to 
this gas input.
    Anshan argues that although there was some confusion at 
verification regarding the correct translation of the input names, 
there is no justification for using facts available. Anshan notes that 
both petitioners and respondent appear to agree concerning the type of 
materials in question. Consequently, Anshan argues that these materials 
are already included in overhead and to include them again as raw 
materials would result in double counting.
    Department's Position: We disagree with petitioners that the 
Department should use facts available for these raw materials. While it 
was true that we encountered difficulties at verification concerning 
the proper translation of these items, we were able to examine 
supporting documentation concerning the input. Consequently, we 
disagree with petitioners' assertion that Anshan did not provide 
understandable, usable data with regard to these raw materials. Because 
the details of this issue are business proprietary, please see the 
Concurrence Memorandum for a more complete discussion of this issue.
Comment 41: Moisture Content of a Certain Factor
    Petitioners allege that it was inappropriate for Anshan to strip 
out moisture content of a certain input. Petitioners urge the 
Department to inflate the value to obtain a weight based equivalent to 
the weight basis used for the matching surrogate value.
    Anshan argues that it would be improper and highly distortive for 
the Department to inflate the reported factor in the manner proposed by 
petitioners.
    Department's Position: We agree with respondent. As the details 
underlying this comment are business proprietary, please see the 
Concurrence Memorandum.
Comment 42: Ministerial Errors
    Petitioners argue that the Department should correct certain 
ministerial errors in its preliminary determination as to Anshan 
pertaining to ocean freight, transportation surrogate values, and 
foreign inland freight.
    First, with respect to ocean freight, petitioners note that a 
ministerial error in the SAS program inadvertently truncated a data 
field used in the calculations of the actual ocean freight rate paid on 
an invoice-specific basis for a market economy carrier. Petitioners 
also note that the SAS program failed to deduct freight charges for 
certain invoices.
    Second, with respect to transportation surrogate values for foreign 
inland freight, petitioners note that the inflator the Department used 
to develop the transportation surrogate value is incorrect. According 
to petitioners, the truck transportation rate for Anshan should be 
changed from $0.02km/MT to the $0.03/km/MT, which is the value cited in 
the cable that is the source of the surrogate value, and which is the 
value used for the other respondents.
    Third, with respect to foreign inland freight, petitioners claim 
that the Department inadvertently applied the surrogate freight rate 
for truck to certain foreign inland freight factors for which the 
proper transportation freight rate should be that for train.
    Fourth, with respect to the freight expense incurred for fuel oil, 
petitioners argue that the freight charge for fuel oil which is brought 
to Anshan by truck should be revised from $0.20/MT to $0.03/km/MT, to 
conform with the value cited in the cable which is the source of the 
surrogate value used.
    Anshan had no comment with respect to the alleged ministerial 
errors identified by petitioners.
    Department's Position: We agree with petitioners as to all of the 
above ministerial errors and have made appropriate corrections for the 
final determination.

2. BAOSHAN

Comment 43: Product Specificity
    Petitioners argue that Baoshan's margin must be based on facts 
available because its reporting methodology, even if faithfully 
followed, does not provide an adequate factual basis for a final 
determination. Petitioners claim that the information reported by 
Baoshan, even if verified, does not provide an adequate basis for 
calculation of a dumping margin, largely because of a lack of product 
specificity. They argue that verification of an inadequate database 
does not transform it into an adequate database.
    Petitioners argue that Baoshan's factor information cannot be used 
because it is not product-specific. Petitioners claim that Baoshan's 
cost models and reporting of U.S. sales do not make distinctions on a 
proper basis.

[[Page 61991]]

Petitioners claim that verification did not resolve these problems; 
instead, it only confirmed that Baoshan applied a flawed methodology. 
Petitioners argue that Baoshan's margin in the final determination 
should be based on neutral facts available. For a more detailed 
discussion of this issue, please see Baoshan's Factor Value Memorandum.
    Baoshan argues that the information it reported was as product 
specific as possible. Moreover, Baoshan argues that this information 
was fully disclosed in Baoshan's February 14 and April 14, 1997 
submissions as well as during verification. Baoshan states that the 
Department never asked it to revise its calculations to make them more 
product-specific than its records allowed. Accordingly, Baoshan argues, 
there is no basis for rejecting the information it has submitted.
    Department's Position: We agree with Baoshan. The Department 
verified that Baoshan reported its factors of production in a manner as 
product-specific as possible. The Department has determined that using 
a database that conforms to Baoshan's records kept in the normal course 
of business is a more reasonable reporting methodology and produces 
less distortive results than would follow from the use of a constructed 
reporting methodology that deviates from Baoshan's records.
Comment 44: Further Processing of By-Products
    Petitioners state that, in the verification report for Baoshan, the 
Department notes that one of the reported by-products was further 
refined to produce two other by-products. Petitioners argue that, as 
with all other by-products resulting from all other processes 
(regardless of the respondent involved), the Department must ensure 
that any surrogate value given as a credit for any by-product actually 
matches the by-product of the plate production process, rather than 
some further refined product. Petitioners claim that if the Department 
cannot match the actual by-product of the plate production process, but 
can only find a surrogate value for the further-processed material, 
then that surrogate value must be offset by the value of further 
processing. Petitioners argue that where the respondent has not 
provided sufficient information to calculate the offset in such 
circumstances, the by-product credit should be denied.
    Baoshan did not comment on this issue.
    Department's Position: We agree with petitioners. As the Department 
noted in its verification report for Baoshan, one of its by-products 
was further refined to produce two other by-products. The Department 
also noted that Baoshan did not report the factors involved in the 
further refinement. It is the Department's policy to only grant by-
product credits for by-products actually produced directly as a result 
of the production process. A respondent must report the factors 
associated with the further refining of a by-product if it wishes to 
receive a credit for the further refined product. Because Baoshan 
failed to report these factors, therefore, we are only granting a 
credit for the one by-product directly produced in the production 
process.
Comment 45: Inconsistencies Discovered at Verification
    Petitioners argue that the Department should correct all 
inconsistencies discovered at verification. Petitioners state that 
proper surrogate values should be matched to each input, in the 
proportions indicated in the verification report. Petitioners argue 
that, where the record does not contain a suitable surrogate value, the 
Department should use, as facts available, the most costly material for 
each respective process on the record.
    Baoshan agrees that all data discovered at verification to be 
incorrect should be corrected for the final results. However, Baoshan 
disagrees with petitioners' suggestion that the Department must assign 
adverse facts available to value the factors affected by these changes. 
Baoshan claims that the Department has a statutory obligation to 
calculate margins as accurately and fairly as possible. Accordingly, 
Baoshan states, regardless of when the factors information was 
reported, the Department should assign representative surrogate values.
    Department's Position: We agree with Baoshan. It is the 
Department's policy to assign surrogate values that most closely match 
the reported factor. We have surrogate values for all the inputs 
referenced by this comment. Consequently, there is no need for the 
Department to use facts available for these factors for the final 
determination. Because this comment involves business proprietary 
information, please see the Concurrence Memorandum for a more complete 
explanation.
Comment 46: Freight Reporting
    Petitioners argue that the Department found numerous discrepancies 
in the freight information supplied by Baoshan; therefore, Baoshan's 
reporting of freight factors is unreliable. Petitioners argue that, as 
facts available, the Department should use the distance to the most 
distant supplier for all freight factors. However, petitioners state if 
the Department does not use facts available for all freight, then it 
must correct certain ministerial errors relating to freight charges in 
the preliminary determination. Petitioners allege ministerial errors 
concerning two factors and the highest calculated freight rate.
    Baoshan argues that petitioners misconstrued the Department's 
verification report. Baoshan argues that the report discusses the 
proper methodology for calculating freight distances for Baoshan's 
suppliers of one input. Baoshan claims that, at verification, the 
Department confirmed that its suppliers each supplied varying 
quantities of an input during the investigation period--not identical 
quantities as the Department had presumed in making the freight 
calculation in the preliminary determination. Baoshan claims that the 
Department's narrative in its verification report merely reiterates the 
information that was previously submitted. Baoshan argues that this is 
not a reason for calculating the freight costs for this input based on 
facts available.
    Baoshan argues that, contrary to petitioners' allegation, Baoshan 
did provide distances and transportation mode for the input at issue. 
Baoshan claims the accuracy of this information was confirmed by the 
Department during verification. Accordingly, Baoshan argues, the 
Department should use this information for the final determination.
    Finally, Baoshan claims that petitioners' explanation of the 
Department's ministerial errors with respect to freight does not 
provide the correct calculation of these values. Baoshan argues that 
the calculation which they submitted in their rebuttal brief should be 
used.
    Department's Position: We agree in part with Baoshan. While there 
were errors discovered in Baoshan's reported freight factors, the 
errors were not significant enough to render the information 
unreliable. We have corrected all of the discovered inconsistencies for 
this final determination. We disagree, however, that the Department 
verified that Baoshan received different quantities of one input from 
different suppliers. Because proprietary information is involved, 
please see Analysis Memorandum for Baoshan for further discussion of 
this issue. Because we were unable to rely on Baoshan's freight factor 
data for one input (for reasons discussed in the Analysis

[[Page 61992]]

Memorandum), we have used facts available for freight distances in 
connection with that factor. As facts available, we will continue to 
use the same methodology used in the preliminary determination and take 
a simple average of all of Baoshan's suppliers of this input.
Comment 47: Valuation of a Certain Input
    Baoshan argues that a certain input, the identity of which is 
business proprietary information, should be valued based on the input-
specific surrogate value information that has already been submitted on 
the record.
    Department's Position: We agree with Baoshan. Because of the 
proprietary nature of this issue, see the Concurrence Memorandum.
Comment 48: Packing
    Baoshan argues that the Department's preliminary calculation of the 
cost of packing for Bao Steel's exports contain three errors. (1) The 
preliminary determination, Baoshan claims, incorrectly calculated 
packing costs based on reported information for loading materials. (2) 
The Department's preliminary packing cost calculations used an invented 
``estimate'' of the weight of each piece of packing material used by 
Bao Steel. (3) In the preliminary determination, the Department added 
an amount for freight costs to the surrogate value for the packing 
materials used by Baoshan.
    Department's Position: We agree in part with Baoshan. At 
verification, the Department was able to ascertain the actual weight of 
Baoshan's packing materials. Thus, in the final determination, we have 
used this value instead of the estimated weight used in the preliminary 
determination. In addition, we will not add freight to the surrogate 
value for the materials used for packing because the materials are 
self-produced. We disagree however, with Baoshan's claim that the 
Department used information reported for loading materials instead of 
that reported for packing materials. We used packing labor information 
from Exhibit D-6 of Baoshan's February 19, 1997 response. Thus, we used 
the same packing labor information for the final determination.

3. Liaoning/(Wuyang)

Comment 49: Verification of Labor Allocations
    Petitioners assert that the document examined at verification 
``Corporate Announcement of Organizational Structure'' was not 
collected as a verification exhibit and does not in itself attest to 
the accuracy of Wuyang's labor allocations. Petitioners allege that no 
attempt was made to verify Wuyang's labor allocations by examining 
company attendance records, payroll ledgers or other employment 
records. Thus, according to petitioners, those allocations have not 
been verified and cannot be considered reliable.
    Department's Position: We disagree with petitioners. Wuyang's 
verification report states that, in order to tie together the A-36 
allocation calculation for labor, the Department examined the original 
Ingot-Casting Cost Statement, the Finished Goods Inventory Ledger of 
the Steelmaking Plant, and the Production Accumulation Report of the 
Production Office. For steelmaking, the Department tied original 
payroll records to the total number of employees reported to the 
Department. The Department tied the total payroll expenses for these 
same employees to the August and June 1996 payroll ledgers. The 
Department noted no discrepancies. Thus, petitioners are in error when 
they state that the Department did not examine employment records and 
that therefore Wuyang's labor allocations were not verified. 
Furthermore, the Department is not required to collect particular 
documents as exhibits to attest that items have been verified to its 
satisfaction.
Comment 50: Standard Raw Material Factor Consumption Rates
    Petitioners argue that Wuyang's raw material consumption rates 
ignore differences in chemical composition for different products. In 
addition, petitioners maintain that there is no supporting 
documentation to substantiate Wuyang's assertion that the material 
input factors reported are the quantities required to produce a ton of 
finished product sold on a theoretical weight basis. Petitioners claim 
that Wuyang's reported factor values are unreliable and unverified and 
that it failed to act to the best of its ability. Petitioners conclude 
that the Department should decline to consider Wuyang's raw material 
factor information and apply facts available.
    Liaoning and Wuyang counter petitioners' claim by stating that they 
fail to recognize that Wuyang's carbon steel plate is produced using 
scrap steel and that although Wuyang's steel scrap factor inputs are, 
in fact, identical for each grade of subject merchandise that the 
company produces, the types of scrap steel used in production differ in 
chemistry for different grades of merchandise. Liaoning and Wuyang 
argue that Wuyang's reported material inputs thus account for the 
differences in inputs required to produce different products and 
reflect the actual material inputs for each product sold. Liaoning and 
Wuyang conclude that Wuyang has provided the Department with complete 
and accurate information, which has been verified without discrepancy. 
With respect to production on a theoretical weight basis, Wuyang 
explains that it has allocated actual consumption to theoretical 
production in a manner similar to the manner the way in which a company 
uses a standard cost system to allocate actual costs.
    Department's Position: We agree with Liaoning and Wuyang. The 
verification report does not note any discrepancies between what it 
encountered at verification and what Wuyang reported. With respect to 
the petitioners' criticism as to Wuyang's use of theoretical weights, 
we note that Wuyang reported the actual amounts of material inputs 
required to produce one theoretical ton of finished product. 
Consequently, for the final determination, there was no need for the 
Department to make any adjustment to factor or sales amounts due to 
Wuyang's use of theoretical weight.
Comment 51: Reliability of Labor Allocations
    Petitioners state that Wuyang's reported labor input rates are 
understated and must be rejected. Petitioners conclude that the 
Department must base the final results for Liaoning and Wuyang on the 
adverse best information available pursuant to 19 U.S.C. Sec. 1677e(b) 
and (c). Failing that, the Department must revise Wuyang's data. In 
addition, petitioners argue that respondent made a clerical error in 
its labor hour calculations.
    Department's Position: We agree with petitioners that Wuyang's 
reported labor input rates are understated, and we have therefore 
recalculated those rates. We also agree that there was a clerical error 
in the labor hours calculation, and have corrected that error for the 
final determination. Because this issue involves business proprietary 
information, please see the Concurrence Memorandum for a further 
discussion of this issue.
Comment 52: Treatment of Heavy Oil, Oxygen and Coal Gas
    Petitioners, citing Sebacic Acid from the People's Republic of 
China, 62 FR at 10530 (March 7, 1997), state that, consistent with past 
practice, heavy oil, oxygen, and coal gas should be treated as direct 
energy inputs rather than as overhead expenses. Petitioners add that

[[Page 61993]]

Wuyang has never provided evidence that heavy oil was not a fuel and 
that at no time has Wuyang explained how heavy oil was used in the 
production process.
    Liaoning and Wuyang have expressed opposition to the Department's 
inclusion of heavy oil in energy costs. See Wuyang's submission of June 
16, 1997. Liaoning and Wuyang state that in the event that the 
Department disagrees with Wuyang and includes heavy oil in energy 
costs, the Department should use the revised factor the Department 
verified. Liaoning and Wuyang add that the Department used facts 
available to determine Chinese inland freight for heavy oil. If the 
Department were to value heavy oil as a factor of production rather 
than including it in overhead, and thus were to require data for 
calculating freight, the Department should use the freight distance 
reported in its June 16, 1997 submission according to Liaoning and 
Wuyang.
    Department's Position: We agree in part with both petitioners and 
respondents. At the preliminary determination we included electricity 
and coal gas as direct materials as well as heavy oil with freight 
added (see calculation memorandum from case analysts to the file, June 
3, 1997). At verification, the Department learned that Wuyang had 
mistranslated the measure for heavy oil as kilograms when it should 
have been represented in jin, a Chinese unit of measure equivalent to 
half a kilogram. See Memorandum to Edward Yang, Director, Office of AD/
CVD Enforcement Office 9, from Elizabeth Patience and Doreen Chen, 
Analysts, August 5, 1997. However, neither at verification nor at any 
other time did Wuyang provide evidence that heavy oil was not a fuel or 
explain how it was used in the production process. We therefore: (1) 
Used the revised usage factor for heavy oil described in the 
verification report, (2) included electricity, coal gas and heavy oil 
as direct energy inputs and (3) used the freight distance Wuyang 
reported in its June 16, 1997 submission.
Comment 53: Transportation From Factory to Port
    Petitioners maintain that Wuyang knew that the subject merchandise 
it sold to Liaoning was destined for resale in the United States, and 
Liaoning never took physical possession of the subject merchandise. 
Accordingly, the surrogate value of the cost of transporting the 
subject merchandise from the factory to the port of exportation should 
be deducted from the U.S. price, conclude petitioners, in accordance 
with the practice described in Brake Drums and Rotors, 62 FR at 9160, 
9170.
    Liaoning and Wuyang state that foreign inland freight should not be 
deducted from Liaoning's export prices because this expense was not 
incurred by Liaoning, but rather was incurred by its unaffiliated 
supplier. They further argue that, at verification, the Department 
ascertained that Wuyang's factory price included delivery of the 
merchandise to the seaport where it was shipped to the United States by 
Liaoning. Respondent argues that in Titanium Sponge From the Russian 
Federation: Final Results of Antidumping Duty Administrative Review, 61 
FR at 58525 (November 15, 1996) (``Titanium Sponge''), the Department 
determined that ``when a reseller, not the producer, is considered the 
exporter, the ``original place of shipment'' is the point from which 
the reseller shipped the merchandise.'' Respondent concludes that 
Liaoning's acquisition price thus included all inland freight expenses, 
and the cost of transporting the subject merchandise from the factory 
to the PRC seaport should hence be treated as a component of Wuyang's 
total costs instead of a deduction from the price to the U.S. customer.
    Department's Position: We agree with petitioners. In Brake Drums 
and Rotors we explained that it is the Department's ``normal 
methodology to strip all movement charges, including all foreign inland 
freight, from the U.S. price being compared to the NME normal value 
based on factors of production.'' While it is true that in Titanium 
Sponge the Department did not deduct factory-to-port movement charges 
from the U.S. starting price, and instead included ``in normal value an 
amount for the inland freight,'' the circumstances in that case were 
different from those in the current investigation. Specifically, in 
Titanium Sponge, (1) the subject merchandise produced in an NME country 
was sold to an exporter located in a market economy without knowledge 
on the part of the producer that the United States was the ultimate 
destination for the merchandise, and (2) the exporter took physical 
possession of the subject merchandise. Liaoning is not located in a 
market economy; therefore the actual price it paid to Wuyang, which 
also is not a market economy firm, is not relevant. (Furthermore, 
Liaoning's supplemental section B questionnaire response states that 
``Liaoning does not hold any inventory of the subject merchandise prior 
to export''). The expense incurred to transport the steel to the port 
is part of the cost of the U.S. sale and the factory was the original 
place of shipment for the sale. Thus the Department has continued to 
deduct the surrogate value of the cost of transporting the subject 
merchandise from the factory to the port of exportation from the U.S. 
price in its final determination calculations.

4. Shanghai Pudong

Comment 54: Facts Available
    Petitioners allege that the verification team's investigation of 
Shanghai Pudong revealed that the company had been repeatedly 
misstating and concealing information concerning many critical aspects 
of this investigation. See, e.g., Verification Report at 1-2 (listing 
seven of the items that had been misreported by this respondent). 
Petitioners contend that the consistency and repetition of Shanghai 
Pudong's omissions and misrepresentations suggest that these were not 
innocent mistakes, but calculated to obtain results more favorable to 
Shanghai Pudong, demonstrating its repeated lack of cooperation in 
providing the requested information. Petitioners argue that Shanghai 
Pudong's actions in this regard have prejudiced the petitioners and 
warrant application of adverse facts available.
    Shanghai Pudong argues that petitioners' accusation and request for 
adverse facts available is completely without merit. Shanghai Pudong 
asserts that the only evidence offered by petitioners of the alleged 
omissions were errors corrected by Shanghai Pudong at the start of 
verification. Shanghai Pudong asserts that it went to great lengths to 
ensure that the information provided to the Department was as accurate 
and complete as possible and that the Department verified the responses 
finding only minor errors.
    Department's Position: We disagree with petitioners. The errors 
cited by petitioners were corrected by respondents prior to the start 
of the Department's verification. In addition, the Department examined 
the errors in question and determined that they were not large enough 
or sufficiently different from the previous responses to constitute a 
new questionnaire response. Consequently, the Department determines 
that there is no basis rejecting Shanghai Pudong's entire response for 
the use of total adverse facts available in this situation.
Comment 55: Shanghai Pudong and Shanghai No. 1
    Petitioners contend that Shanghai Pudong and Shanghai No. 1, which 
did not respond to the Department's

[[Page 61994]]

questionnaire, should be collapsed by the Department and treated as a 
single entity because, they allege, both plants are controlled by 
Shanghai Metallurgical. Petitioners contend that Shanghai Metallurgical 
is involved in the business operations of Shanghai Pudong and Shanghai 
No.1. They note that the Department discovered at verification that 
Shanghai Metallurgical appoints the Chairman of the Board of both 
Shanghai Pudong and Shanghai No.1. Additionally, petitioners note that 
all large investments by Shanghai Pudong and Shanghai No. 1 must be 
approved directly by Shanghai Metallurgical. Petitioners claim that 
respondents characterization of Shanghai Pudong and Shanghai No. 1 as 
``competitors'' is simply preposterous. Petitioners note that there is 
an annual meeting between Shanghai Metallurgical, Shanghai Pudong and 
Shanghai No. 1 which includes discussion of business targets, 
investment and productivity. Petitioners state that no such meetings or 
discussions pursuant to such meetings could possibly take place between 
true competitors.
    Petitioners also contend that the production facilities of Shanghai 
Pudong and Shanghai No.1 are not substantially different, thus 
presenting the possibility of manipulation of price or production. 
Therefore, that the two companies should be treated as one entity for 
purposes of calculating an antidumping margin.
    Shanghai Pudong asserts that under the provisions of Section 
771(33) of the Tariff Act, Shanghai Pudong and Shanghai No. 1 are not 
affiliated. It states that the two companies are not siblings, spouses, 
or ancestors/lineal descendants. The two firms, Shanghai Pudong 
contends, are not officers, directors, partners or employers nor do 
they control each other or own stock in one another. Shanghai Pudong 
argues that Shanghai Metallurgical does not exercise control over 
either it or Shanghai No. 1. Accordingly, they argue, this is not a 
case of ``[t]wo or more persons directly or indirectly controlling, 
controlled by, or under common control with, any person'' under the 
terms of Section 1677(33)(f) of the statute. Consequently, Shanghai 
Pudong claims there is no basis for finding that Shanghai Pudong and 
Shanghai No. 1 are affiliated under the statute.
    Shanghai Pudong states that it would also be improper to collapse 
the two companies because of significant differences in their 
production facilities and capabilities.
    Shanghai Pudong further claims that there is no possibility of 
manipulation of price or production by Shanghai Pudong and Shanghai 
No.1. It asserts that the two companies are independent entities that 
do not share any managerial employees or board members. It notes that 
there are no joint ventures between the companies, and claims that they 
do not share marketing information--each company makes independent 
marketing and pricing decisions. They also do not share information 
regarding production or scheduling. Consequently, Shanghai Pudong 
asserts, there is absolutely no evidence of any potential for the 
manipulation of prices or production in the event that Shanghai Pudong 
and Shanghai No. 1 are not collapsed.
    Shanghai Pudong also notes that collapsing it with Shanghai No. 1 
for the purposes of calculating costs would directly contradict the 
Department's past decisions. It claims in the German Large Newspaper 
Printing Press case, the Department acknowledged that the related 
producers of identical subject merchandise satisfied the normal 
criteria for collapsing, but nevertheless refused to collapse the 
companies for the purpose of its cost calculations. See Notice of Final 
Determination of Sales at Less Than Fair Value: Large Newspaper 
Printing Presses from Germany (``LNPPs from Germany''), 61 FR 38166, 
18188 (July 23, 1996). The Department held that the criteria ``relate 
to collapsing companies for sales purposes rather than cost.'' Shanghai 
Pudong claims there is clearly no basis for collapsing it with Shanghai 
No. 1--competitors who do not have any business dealings with one 
another--for the purposes of calculating costs.
    Department's Position: Petitioners claim that the relationship 
which Shanghai Pudong and Shanghai #1 share with Shanghai Metallurgical 
requires that the Department ``collapse'' the two producers based on an 
analysis under the criteria set forth in Nihon Cement. See Nihon Cement 
Co. v. United States, 17 CIT 400 (1993).
    We have construed petitioners' claim as a request to examine 
whether it is appropriate for Shanghai Pudong to be treated a separate 
entity for purposes of assigning a dumping margin.
    The sole reason advanced by petitioners for arguing that Shanghai 
Pudong should not be given a separate rate is that this result is 
precluded by Shanghai Metallurgical's alleged control over Shanghai 
Pudong and Shanghai No. 1.
    In NME cases we only assign separate rates to exporters and 
Shanghai No. 1 did not export to the United States.
    As discussed above in Comment 1, we have determined that Shanghai 
Pudong has met the criteria for separate rates by demonstrating both a 
de facto and a de jure absence of government control over its export 
operations. Shanghai No. 1 has made no such demonstration and therefore 
is not entitled to a separate rate.
    Furthermore, we note that, even if we had conducted a 
``collapsing'' analysis, with respect to Shanghai Pudong and Shanghai 
No.1, the results would have been identical because substantial 
retooling would be required in order for Shanghai Pudong and Shanghai 
No. 1 to restructure manufacturing priorities. Finally, we determine 
that although there is some potential for manipulation of price or 
production, this potential is not ``significant.'' Because business 
proprietary information is associated with these conclusions, please 
see the Concurrence Memorandum for details.
    We also note that Shanghai Pudong incorrectly cites Comment 13 of 
LNPPs from Germany for the proposition that the Department will not 
``collapse'' producing companies whose sales data it is not using. 
Because the comment cited involved a narrow issue of averaging the cost 
of manufacturing the subject merchandise with respect to the respondent 
company and its affiliate, the question of ``collapsing'' (i.e., 
treating two firms as a single respondent) was not raised in that case. 
Therefore, what the Department meant by the last sentence of Comment 13 
in LNPPs from Germany was that the five collapsing criteria cited by 
the LNPPs respondent referred to ``collapsing companies,'' rather than 
to decisions solely involved cost averaging.
Comment 56: Unreported Consumption of an Input
    Petitioners contend that Shanghai Pudong's consumption and 
conversion factors for a certain input are incorrect. Petitioners state 
that information obtained at verification was undocumented and 
inconsistent with information previously submitted by respondent. 
Petitioners note that two of Shanghai Pudong's facilities showed a 
different usage rate per ton of the input. Accordingly, they urge that 
the Department should base valuation of the input on adverse 
information available.
    Shanghai Pudong argues that petitioners' arguments are flawed and 
should be disregarded. It notes that the usage per ton of the input 
varies by facility. In addition, it contends that it did not track the 
usage of the input in the normal course of business. Consequently, at 
the request of the Department, Shanghai Pudong

[[Page 61995]]

calculated a conversion calculation that yielded the values reported to 
the Department.
    Department's Position: We agree with Shanghai Pudong. We reviewed 
this issue at verification and found that the usage rate for the input 
does vary by facility. Consequently, we asked Shanghai Pudong to 
calculate the conversion factor and amount of the material necessary to 
produce the input which we examined at verification. Since Shanghai 
Pudong's methodology was reasonable, we have accepted these values for 
the final determination. Because this issue involves business 
proprietary information, please see the Concurrence Memorandum for a 
more complete explanation.
Comment 57: Transportation Charges for Certain Inputs
    Petitioners contend that the Department should use adverse facts 
available to value transportation charges for a certain input. They 
argue that, at verification, the Department found that Shanghai 
Pudong's reported information for the largest suppliers of this input 
were incorrect. Petitioners argue that, as adverse facts available, the 
Department should calculate freight charges for this input based on the 
longest distance and highest volume reported.
    Petitioners also urge the Department to use adverse facts available 
for the transportation distances for four other inputs. Petitioners 
note that the Department discovered errors at verification with respect 
to these inputs.
    Shanghai Pudong asserts that it attempted to provide support for 
the input at verification but was not allowed to by the Department. 
Shanghai Pudong argues that despite the errors uncovered at 
verification, the information reported was basically accurate and can 
be used for the final determination.
    Concerning the transportation distances for the four other inputs, 
Shanghai Pudong notes that the Department verified the information and 
found only minor errors. Shanghai Pudong claims that the Department 
should follow its established practice and use the verified information 
in the final determination, citing Ferrosilicon from Brazil, 59 FR at 
732, 736 (January 6, 1994) and Sulfur Dyes, 58 FR at 7537, 7543.
    Department's Position: We agree with petitioners in part. We found 
at verification that Shanghai Pudong incorrectly reported its top ten 
suppliers for a certain input. The Department examined Shanghai 
Pudong's documentation and methodology with the assistance of its staff 
and found it to be incorrect. Consequently, for the final 
determination, we calculated the freight distances for this input using 
the longest distance reported for the input.
    However, we disagree with petitioners regarding the transportation 
information supplied for the other four inputs. The Department verified 
this information and found only minor errors. Consequently, we have 
determined that it is not necessary to use facts available for the 
distances for these inputs. Due to the proprietary nature of details 
concerning this issue, see the Concurrence Memorandum.
Comment 58: Unreported Inputs From Unaffiliated Company
    Petitioners contend that, at verification, the Department asked 
for, but was unable to obtain from Shanghai Pudong, certain information 
concerning inputs from an unaffiliated company. They claim that certain 
information was not part of the record and, therefore, the Department 
should base its calculations on adverse facts available.
    Shanghai Pudong argues that the petitioners misrepresent the facts 
regarding the operations of the unaffiliated company. Shanghai Pudong 
contends that there is information on the record concerning certain 
inputs that it was able to obtain from the company. Shanghai Pudong 
states that for one input, it was unable to obtain the information from 
the unaffiliated entity. However, it notes that it attempted to fully 
cooperate with the Department. Further, it claims that petitioners' 
suggestion for using facts available for this situation is 
inappropriate because this is not a situation in which an interested 
party failed to cooperate.
    Department's Position: We agree with respondents. Because of the 
proprietary nature of the details of this issue, see the Concurrence 
Memorandum.
Comment 59: Gas Inputs
    Petitioners contend that Shanghai Pudong misled the Department by 
not correctly reporting gas inputs that were used in a certain 
production facility. Petitioners urge the Department to use adverse 
facts available for these gas inputs.
    Shanghai Pudong argues that petitioners misunderstand the 
production process and have erroneously stated where the inputs are 
generated. Shanghai Pudong claims that the production facility 
accounted for the inputs in question in the ``miscellaneous expenses'' 
category. Shanghai Pudong also notes that, in the normal course of 
business, the facility only consumed trivial amounts of these inputs. 
Consequently, Shanghai Pudong did not track these inputs in its normal 
record keeping system. Therefore, respondents state, there is no need 
to use facts available in this situation.
    Department's Position: We agree with respondent. We found at 
verification that Shanghai Pudong did use small amounts of certain 
inputs in a particular facility and that respondent included these 
inputs in the ``miscellaneous expenses'' of its monthly production 
report.
Comment 60: Adjustment of Labor Inputs
    Petitioners argue that the Department should adjust Shanghai 
Pudong's reported labor inputs upward to account for the cost factors 
associated with transporting slabs between Shanghai Pudong's 
facilities. They contend that, because respondent did not report these 
factors, the Department should use adverse facts available to calculate 
labor costs incurred in the transportation process.
    Shanghai Pudong asserts that the labor used to move materials 
between facilities is properly treated as an overhead expense. They 
further state that they notified the Department that they treated this 
expense as part of overhead in the supplemental questionnaire response. 
Shanghai Pudong further notes that the Department never notified 
Shanghai Pudong that this methodology was incorrect in any way. 
Shanghai Pudong argues that petitioners' arguments for the use of facts 
available are incorrect and should be rejected.
    Department's Position: We agree with Shanghai Pudong that the labor 
used to move materials between facilities is properly treated as 
overhead. We verified and accepted Shanghai Pudong's methodology for 
reporting the workers involved and the unit with which they are 
associated.
Comment 61: Assignment of Appropriate Surrogate Values for a Certain 
Input
    Respondents argue that the Department should assign appropriate 
surrogate values to the two different grades of a certain input used by 
Shanghai Pudong. They maintain that because the Department discussed 
usage of different grades at verification and because these two grades 
vary substantially in market value, the Department should assign 
appropriate surrogate values to each of the grades actually used in the 
production process.
    Petitioners contend that there is no evidence on the record to 
support respondents' proposed methodology of

[[Page 61996]]

valuing the input by grade. According to petitioners, the Department 
never verified the quantity and value of the different grades produced 
or consumed. The new information submitted by respondents should be 
disregarded as it contains unverified information and unexplained 
calculations based on the unverified information. Petitioners suggest 
valuing this input as they suggested in their comment for the relevant 
surrogate values.
    Department's Position: We agree with petitioners that this 
information was new at verification and represents a major change to 
the data which had been previously submitted. It has been the 
Department's practice that if this information constitutes a 
significant change, the Department may not use this information in the 
final determination. Failing to report inputs in a timely manner 
clearly constitutes a major impediment to the investigation. See 19 
U.S.C. 1677e((a)(2)(c)). Moreover, by not reporting certain inputs 
until after the due date for such information, Shanghai Pudong has 
failed to act to the best of its ability to comply with the 
Department's requests for timely submissions of information.
    However, the Department, in keeping with our position in comment 29 
above, agrees that it is our responsibility to value each of the grades 
of the input separately, to the best of our ability. Therefore, we have 
valued the two grades reported before verification separately. We are 
valuing one grade of the input at the market economy price paid by the 
respondent and we are valuing the other grade of the same input with 
Indian Monthly Statistics. See Shanghai Pudong's factor valuation 
memorandum for more information on this issue.
Comment 62: Ministerial Errors
    Petitioners allege that the Department made certain ministerial 
errors in the preliminary determination with respect to Shanghai 
Pudong.
    Factor Costs for Certain Inputs: Petitioners argue that the 
Department should value two inputs based on the production factors 
submitted by Shanghai Pudong rather than Indian surrogate values. 
Respondents agree with petitioners that the Department should use its 
reported factors rather than the values from Indian Monthly Statistics.
    Transportation Surrogate Values: Petitioners allege that the 
Department used an incorrect transportation surrogate value for truck 
freight in the preliminary determination.
    Respondents had no comment on this issue.
    Freight Error: Petitioners contend the Department incorrectly 
calculated the freight charges in the preliminary determination. 
Respondents did not comment on this issue.
    Respondents had no comment on this issue.
    Freight for a Certain Input: Petitioners argue that the Department 
should revise its calculation of the freight charges associated with a 
certain input. Respondents did not comment on this issue.
    Department's Position: (a) Factor costs for certain inputs: We have 
used surrogate values from Indian Monthly Statistics for these inputs. 
(b) Transportation surrogate value: We agree with petitioners and have 
corrected the error for the final determination. (c) Freight error: We 
agree with petitioners and have corrected the error for the final 
determination. (d) Freight for a Certain Input: We agree with 
petitioners that we incorrectly calculated freight for a certain input 
in the preliminary determination. However, the ministerial error 
allegation is irrelevant to the final determination as Shanghai Pudong 
submitted revised transportation distances which correct for this 
error. Because of the proprietary nature of the details of these 
issues, see the Concurrence Memorandum for a more complete discussion.

5. WISCO

Comment 63: Facts Available: Certain Factors
    Petitioners argue that, because certain factor inputs were 
misreported or withheld and only discovered at verification, the 
Department should apply adverse facts available for these inputs. In 
particular, they contend that WISCO did not report the inputs of 
certain factors at particular stages of production. Second, they argue 
that WISCO misreported the amount of by-product electricity generated 
at a certain stage of production. Additionally, they contend that WISCO 
misreported certain by-products. Finally, they argue that WISCO failed 
to report distances for certain material inputs. They contend that this 
misreporting constitutes a significant impediment to this investigation 
and as such, the Department should apply adverse facts available in 
making its final determination. See 19 U.S.C. 1677e ((a)(2)(c)), 19 
U.S.C. 1677e (b), and 19 U.S.C. 1677m(e) (1996).
    WISCO asserts that the errors discovered at verification were minor 
in nature and did not impede the investigation. It contends that the 
Department typically uses information to which minor correction have 
been made in its final determination.
    Department's Position: We agree with WISCO in part. We found that 
five of the six errors that the Department discovered at verification 
were minor in nature and do not justify the use of adverse facts 
available. Our review of these five errors indicates that they were 
caused by oversight or clerical error on the part of WISCO. 
Consequently, we disagree with petitioners' assertion that these errors 
clearly constituted a significant impediment to this investigation or 
that they proved that WISCO failed to act to the best of its ability to 
comply with a request for information. We note that it has been the 
Department's position in the past to accept such changes for the final 
determination of an antidumping investigation. See, e.g., Ferrosilicon 
from Brazil, 59 FR at 736; Sulfur Dyes, 58 FR at 7543.
    However, we agree with petitioners that one of the six errors 
indicated that WISCO did not report the inputs of certain factors at 
particular stages of production. Therefore, for these inputs we have 
applied facts available for the final determination. Because this 
involves proprietary information, please see the Concurrence Memorandum 
for a more complete explanation.
Comment 64: By-Product Credits
    Petitioners contend that the Department should reject WISCO's 
claimed credits for by-products at a the coke-making facility. They 
allege that, at verification, the Department discovered that many of 
the agents used to further process a certain by-product into other by-
products are listed on WISCO's production reports but were not reported 
to the Department. Additionally, they argue that the Department should 
not allow the offset because the claimed by-products require further 
processing. For this reason, they argue that the Department should 
apply facts available and deny any credit for these by-products, 
relying on 19 U.S.C. 1677e(a) and (b).
    Respondents argue that petitioners' arguments appear to be based on 
a basic misunderstanding of WISCO's reporting of factors used and 
products produced at WISCO's coke-making facility. WISCO maintains that 
almost all of the factors used to process the by-products of the coke-
making facility were included in the reported factors of production and 
that the minor reporting errors discovered during verification 
regarding factors used in the coke-

[[Page 61997]]

 making facility consisted of the omission of certain inputs used to 
process a by-product. It contends that it told the Department during 
verification that only a few inputs are consumed during processing. 
Therefore, WISCO argues that the only relevant omissions of factors in 
the particular facility were the quantities of certain inputs used in 
the processing of the by-product. Furthermore, they assert that the 
verification report indicates that these quantities were reported in 
the production records provided to the Department during verification 
and are included in the record in Verification Exhibit W-24. WISCO 
urges the Department to use this verified information to determine the 
quantity of inputs at the facility.
    Department's Position: We agree with petitioners in part. The 
Department noted in its verification report that ``WISCO did not report 
the factors used to further process [the inputs]. In fact, many of the 
agents used to refine [the inputs] are listed on the production 
reports, but were not reported by respondent.'' The Department only 
discovered these factors in examining the production reports at the 
beginning of verification, because WISCO did not submit this 
information prior to verification. It is the Department's general 
policy to only grant by-product credits for by-products actually 
produced directly as a result of the production process. A respondent 
must report the factors associated with the further refining of a by-
product if they wish to receive a credit for the further refined 
product. Even though these factors were in the production reports, 
WISCO failed to report these factors to the Department. Therefore, we 
have denied any credit for these by-products for the final 
determination. Because this issue involves business proprietary 
information, please see the Concurrence Memorandum for more 
information.
Comment 65: Facts Available
    Petitioners contend that market economy purchases of certain inputs 
should be assigned adverse facts available because the company was 
unable, at verification, to provide invoices for the purchases. See 
Persico Pizzamiglio S.A. v. United States, 18 CIT 299, 305 (1994), 19 
U.S.C. 1677m(i), and 19 U.S.C. 1677e (1988). In addition, they argue 
that the domestically purchased input should be assigned facts 
available for this company due to the company's failure to report 
consumption of these inputs until after the questionnaire deadline. As 
facts available, they argue that the Department should assign the 
highest surrogate value on the record to each purchase.
    Respondents maintain that, even though they were unable to provide 
invoices to substantiate their market economy purchases of certain 
inputs, they did provide the Department with copies of the relevant 
contracts, which contained the price and the terms of sale, and Chinese 
Government Customs (CCIB) forms showing the quantities imported. They 
contend that all relevant information regarding WISCO's market economy 
purchases of these inputs were verified by the Department and should be 
used in the final determination.
    Department's Position: We agree with petitioners that we should 
assign adverse facts available to market economy purchases of inputs at 
issue. We found at verification that WISCO was unable to provide 
invoices for the purchases of these inputs. We did examine the terms of 
sale based on the contracts and the CCIB forms. The CCIB forms do not 
include prices, and while the contract show the original arrangements, 
they may not reflect the prices ultimately paid. This is why the 
Department relies on invoices reflecting the amount actually billed and 
the currency in which payment was required. These invoices should be 
available to WISCO, and WISCO's failure to produce them casts doubt on 
its assertion that the contract terms were final. For the final 
determination, we are using, as facts available, a single surrogate 
value from Indian Monthly Statistics for these inputs. Because this 
issue and our calculation of adverse facts available involves business 
proprietary information, please see the Concurrence Memorandum for a 
more complete explanation of the issue and our methodology.
Comment 66: Financial Records
    Petitioners, citing Ansaldo Componenti, S.p.A. v. United States, 
628 F. Supp. 198, 204 (CIT 1986) argue that the Department should apply 
adverse facts available because WISCO failed to provide certain 
financial records requested by the Department in the supplemental 
questionnaire. See also 19 U.S.C. 1677e(a).
    WISCO claims that, although it did decline to submit copies of 
these documents due to legitimate business concerns, this decision did 
not impede the course of the investigation. In addition, WISCO states 
that the Department did not inform it that its response was deficient 
in any way. WISCO maintains that, in non-market economy cases, issues 
regarding the actual profits earned by non-market economy producers and 
regarding its actual non-operating income and expenses are not relevant 
to the investigation. Instead, this information is subsumed in the SG&A 
expense rate and the profit rate that are obtained from a surrogate 
country for use in the Department's normal value calculations. 
Therefore, WISCO argues that adverse facts available is not warranted 
in this case.
    Department's Position: We agree with respondents that, although 
WISCO did not provide the requested financial reports, it did provide a 
sufficient explanation of why this information is considered sensitive. 
We also determined that the information contained in the financial 
reports was not necessary to the investigation and, therefore, WISCO's 
failure to provide it did not impede the course of the investigation. 
Consequently, we disagree with petitioners claim that we should use 
adverse facts available for WISCO based on this issue. Because this 
issue involves business proprietary information, please see the 
Concurrence Memorandum for a more complete explanation.
Comment 67: Product Specificity
    Petitioners contend that the Department should reject WISCO's claim 
that it is unable to report certain input factors based on width and 
other characteristics. They argue that, in fact, other information 
WISCO submitted on the record suggests that WISCO could have reported 
these characteristics. Accordingly, petitioners urge the Department to 
apply adverse facts available.
    WISCO maintains that it properly answered the Department's March 
12, 1997 supplemental questionnaire on this issue and explained therein 
why width cannot be a distinguishing factor for WISCO in the assignment 
of control numbers. The Department, they argue, did not notify WISCO 
that its response was deficient in any way and at verification, the 
Department examined WISCO's production records and verified that its 
descriptions were correct.
    Department's Position: We agree with WISCO that its response to the 
supplemental questionnaire was sufficient to explain why WISCO was 
unable to report input factors based on certain characteristics. At 
verification, we examined WISCO's records and found them to be 
consistent with the response. Therefore, we disagree with petitioners' 
claim that the Department should use facts available for this issue.

[[Page 61998]]

Comment 68: Adjustment of Labor Inputs
    Petitioners argue that the Department should adjust WISCO's 
reported labor inputs upward to account for the significant materials 
handling costs associated with transporting materials and equipment 
between WISCO's facilities. They contend that, because labor may play a 
more significant role in the transportation process than is indicated 
by WISCO's current allocation methodology, the Department, using 
adverse facts available, should calculate labor and other costs 
incurred in the transportation process and use this information to 
adjust upward the labor factor usage rates. See 19 U.S.C. 1677b(c)(3).
    WISCO asserts that the labor used to move materials between 
facilities is properly treated as an overhead expense. It further 
states that the Department verified that the bulk of the materials are 
transported between facilities using conveyor belts and pipelines and, 
therefore, petitioners' assertion that the labor costs associated with 
the transportation of material is significant is factually incorrect. 
Furthermore, WISCO maintains that it has a separate transport unit that 
is responsible for movement of materials and equipment and it is not 
possible to link specific inputs used in the transport unit to the 
production of only subject merchandise. WISCO argues that, even if the 
Department decided to adjust WISCO's labor factors to account for labor 
employed in the internal transport unit, the adjustment suggested by 
petitioners is inappropriate because petitioners suggest that the 
Department base its labor adjustment on the surrogate value for train 
transportation. WISCO argues that there is no explanation for why the 
Department should link a surrogate value for rail freight and labor 
costs associated with internal shipment of materials within WISCO's 
facilities. WISCO argues that petitioners' arguments should be 
rejected.
    Department's Position: We agree with WISCO that the labor used to 
move materials between facilities is properly treated as overhead, 
based on our observations at verification. In addition, we verified and 
accepted WISCO's methodology for reporting workers involved in moving 
material between facilities and the unit with which they are 
associated.
Comment 69: Ministerial Error--River Freight
    Petitioners contend that the Department made a ministerial error in 
valuing river freight in the preliminary determination and should 
correct it in the final determination. WISCO did not comment on this 
issue.
    Department's Position: We agree with petitioners that there was a 
ministerial error in the portion of the SAS program used for valuing 
river freight in the preliminary determination. We have corrected this 
error for the final determination. See Comment 25 above.

Suspension of Liquidation

    On October 24, 1997, the Department signed a suspension agreement 
with the Government of the PRC suspending this investigation. 
Therefore, we are instructing Customs to terminate the suspension of 
liquidation of all entries of cut-to-length carbon steel plate from the 
PRC. Any cash deposits of cut-to-length carbon steel plate from the PRC 
shall be refunded and any bonds shall be released.
    On October 14, 1997, we received a request from petitioners 
requesting that we continue the investigation. We received a separate 
request for continuation from the United Steelworkers of America, an 
interested party under section 771(9)(D) of the Act on October 15, 
1997. Pursuant to these requests, we have continued and completed the 
investigation in accordance with section 734(g) of the Act. We have 
found the following margins of dumping:

------------------------------------------------------------------------
                                                                Margin  
           Weighted-average manufacturer/exporter             (percent) 
------------------------------------------------------------------------
Anshan (AISCO/Anshan International/Sincerely Asia Ltd.)....        30.68
Baoshan (Bao/Baoshan International Trade Corp./Bao Steel                
 Metals Trading Corp.).....................................        34.44
Liaoning...................................................        17.33
Shanghai Pudong............................................        38.16
WISCO (Wuhan/International Economic and Trading Corp./                  
 Cheerwu Trader Ltd.)......................................       128.59
China-wide Rate............................................       128.59
------------------------------------------------------------------------

China-Wide Rate

    The China-wide rate applies to all entries of the subject 
merchandise except for entries from exporters that are identified 
individually above.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine, within 45 days, whether these imports are 
causing material injury, or threat of material injury, to an industry 
in the United States.
    On October 24, 1997, the Department entered into an Agreement with 
the Government of the PRC suspending this investigation. Pursuant to 
Section 734(g) of the Act, petitioners, Liaoning and Wuyang have 
requested that this investigation be continued. If the ITC's final 
determination is negative, the Agreement shall have no force or effect 
and the investigation shall be terminated. See Section 734(f)(3)(A) of 
the Act. If, on the other hand, the Commission's determination is 
affirmative, the Agreement shall remain in force but the Department 
shall not issue an Antidumping duty order so long as (1) the Agreement 
remains in force, (2) the Agreement continues to meet the requirements 
of subsection (d) and (l) of the Act, and the parties to the Agreement 
carry out their obligations under the Agreement in accordance with its 
terms. See Section 734(f)(3)(B) of the Act.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: October 24, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30393 Filed 11-19-97; 8:45 am]
BILLING CODE 3510-DS-P