18476 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

DEPARTMENT OF COMMERCE

International Trade Administration

[A–421–804]

Certain Cold-Rolled Carbon Steel Flat

Products From the Netherlands: Final

Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of

antidumping duty administrative

review.

SUMMARY: On October 4, 1996, the

Department of Commerce (the

Department) published the preliminary

results of the administrative review of

the antidumping duty order on certain

cold-rolled carbon steel flat products

from the Netherlands. This review

covers one manufacturer/exporter of the

subject merchandise to the United

States during the period of review

(POR), August 1, 1994, through July 31,

1995. We gave interested parties an

opportunity to comment on our

preliminary results. Based on our

analysis of the comments received, we

have changed the results from those

presented in the preliminary results of

review.

EFFECTIVE DATE: April 15, 1997.

FOR FURTHER INFORMATION CONTACT:

Helen Kramer or Linda Ludwig,

Enforcement Group III, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue NW., Washington, DC 20230;

telephone: (202) 482–0405 or (202) 482–

3833, respectively.

SUPPLEMENTARY INFORMATION:

Background

On October 4, 1996, the Department

published in the Federal Register (61

FR 51891) the preliminary results of the

administrative review of the

antidumping duty order on certain coldrolled carbon steel flat products from

the Netherlands (58 FR 44172, August

19, 1993). The Department has now

completed this administrative review in

accordance with section 751 of the

Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

Unless otherwise stated, all citations

to the Tariff Act of 1930, as amended

(the Tariff Act) are references to the

provisions effective January 1, 1995, the

effective date of the amendments made

to the Tariff Act by the Uruguay Round

Agreements Act (URAA). In addition,

unless otherwise indicated, all citations

to the Department’s regulations are to

the current regulations, as amended by

the interim regulations published in the

Federal Register on May 11, 1995 (60

FR 25130).

Scope of this Review

The products covered by this review

include cold-rolled (cold-reduced)

carbon steel flat-rolled products, of

rectangular shape, neither clad, plated

nor coated with metal, whether or not

painted, varnished or coated with

plastics or other nonmetallic substances,

in coils (whether or not in successively

superimposed layers) and of a width of

0.5 inch or greater, or in straight lengths

which, if of a thickness less than 4.75

millimeters, are of a width of 0.5 inch

or greater and which measures at least

10 times the thickness or if of a

thickness of 4.75 millimeters or more

are of a width which exceeds 150

millimeters and measures at least twice

the thickness, as currently classifiable in

the Harmonized Tariff Schedule (HTS)

under item numbers 7209.15.0000,

7209.16.0030, 7209.16.0060,

7209.16.0090, 7209.17.0030,

7209.17.0060, 7209.17.0090,

7209.18.1530, 7209.18.1560,

7209.18.2550, 7209.18.6000,

7209.25.0000, 7209.26.0000,

7209.27.0000, 7209.28.0000,

7209.90.0000, 7210.70.3000,

7210.90.9000, 7211.23.1500,

7211.23.2000, 7211.23.3000,

7211.23.4500, 7211.23.6030,

7211.23.6060, 7211.23.6085,

7211.29.2030, 7211.29.2090,

7211.29.4500, 7211.29.6030,

7211.29.6080, 7211.90.0000,

7212.40.1000, 7212.40.5000,

7212.50.0000, 7215.50.0015,

7215.50.0060, 7215.50.0090,

7215.90.5000, 7217.10.1000,

7217.10.2000, 7217.10.3000,

7217.10.7000, 7217.90.1000,

7217.90.5030, 7217.90.5060, and

7217.90.5090. Included in this review

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 beveled or rounded at

the edges. Excluded from this review is

certain shadow mask steel, i.e.,

aluminum-killed, cold-rolled steel coil

that is open-coil annealed, has a carbon

content of less than 0.002 percent, is of

0.003 to 0.012 inch in thickness, 15 to

30 inches in width, and has an ultra flat,

isotropic surface. These HTS item

numbers are provided for convenience

and Customs purposes. The written

description remains dispositive.

The POR is August 1, 1994, through

July 31, 1995. This review covers entries

of certain cold-rolled carbon steel flat

products from the Netherlands by

Hoogovens Staal B.V. (Hoogovens).

Analysis of Comments Received

We gave interested parties an

opportunity to comment on the

preliminary results. We received case

and rebuttal briefs from the respondent

(Hoogovens) and petitioners (Bethlehem

Steel Corporation, U.S. Steel Company

(a Unit of USX Corporation), Inland

Steel Industries, Inc., Geneva Steel, Gulf

States Steel Inc. of Alabama, Sharon

Steel Corporation, and Lukens Steel

Company). A hearing was held on

November 25, 1996, at which the parties

presented their arguments.

Comment 1

Respondent argues that the

Department should not have applied the

reimbursement regulation, 19 CFR

353.26, to more than double Hoogovens’

weighted-average margin in the

preliminary results of review. Because

no duties have been assessed,

reimbursement could not have occurred,

and the Department’s determination is

premature. Hoogovens claims that the

reimbursement regulation may not be

applied prospectively at the time of the

final results, but may only be applied at

the time of liquidation by Customs.

Hoogovens has submitted for the record

evidence demonstrating that it has

revised its agency agreement with

Hoogovens Steel USA, Inc. (HSUSA) to

clarify that no reimbursement will

occur.

Respondent argues that the

Department lacks the statutory authority

to deduct from U.S. price the amounts

of antidumping duties paid or

reimbursed by foreign exporters to

affiliated importers. The Department’s

authority, Hoogovens alleges, does not

extend to situations where transactions

cannot be construed as payments by a

seller to a buyer, and cannot therefore

affect U.S. price. Because there is no

sale between Hoogovens and HSUSA,

an affiliated selling agent which neither

purchases, takes title to nor resells

subject merchandise, transactions

between Hoogovens and HSUSA have

no effect on the price of Hoogovens’

U.S. sales. Respondent cites the CIT’s

decision in Outokumpu Copper Rolled

Products AB v. United States, 829 F.

Supp. 1371 (1993) in support of the

claim that the reimbursement regulation

only applies to transactions between a

seller and a buyer.

Respondent argues that until recently

the Department’s view was that the

reimbursement regulation is limited to
Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices 18477

situations in which the importers or

customers are unaffiliated. Since the

Department ignores transfer prices and

all other financial transactions between

affiliated parties, no adjustments to U.S.

price are ever made as a result of these

transactions. Hoogovens claims that the

reimbursement regulation is therefore

inapplicable in constructed export price

(CEP) situations, citing Antifriction

Bearings (Other than Tapered Roller

Bearings) and Parts thereof from France,

et. al., 58 FR 39729, 39736 (July 26,

1993). In Color TVs, the Department

justified the extension of the

reimbursement regulation to affiliated

parties in CEP transactions on the basis

that otherwise the remedial effect of the

antidumping law could be defeated. 61

FR at 4410. In short, the reimbursement

regulation is intended to prevent

attempts by foreign exporters to avoid

the impact of an antidumping order by

reducing the effective price to U.S.

customers. Hoogovens considers that

the Department’s application of the

reimbursement regulation to CEP

transactions is without statutory basis.

Further, respondent argues that since

transactions between Hoogovens and

HSUSA are not CEP sales, and

Hoogovens does not make CEP sales of

subject merchandise to unaffiliated

purchasers, antidumping margins

cannot be calculated on transactions

between Hoogovens and HSUSA, as

these transactions have no bearing on

the effective price to Hoogovens’

unaffiliated U.S. customers.

Finally, respondent claims that in the

absence of any possible effect on U.S.

price, the Department’s decision to

make a deduction in this case can only

be construed as an attempt to expand

the reimbursement regulation to treat

duty as a cost. Further, respondent

alleges that the Department’s

methodology in the preliminary results

of deducting the calculated margin from

U.S. price, thereby more than doubling

Hoogovens’ dumping margin, violates

Article 9.3 of the Agreement on

Implementation of Article VI of the

General Agreement on Tariffs and Trade

1994 (‘‘WTO Antidumping Code’),

which provides that the amount of any

antidumping duties assessed shall not

exceed the calculated dumping margin.

Petitioners support the Department’s

decision to apply the reimbursement

regulation and to deduct from U.S. price

the antidumping duties that Hoogovens

has agreed to reimburse to its affiliated

importer. In Color Television Receivers

from the Republic of Korea, 61 FR 4408,

4411 (February 6, 1996), the Department

determined that reimbursement takes

place between affiliated parties if the

evidence demonstrates that the exporter

directly pays antidumping duties for the

affiliated importer or reimburses the

importer for such duties.

Petitioners argue that the

Department’s decision to apply the

reimbursement regulation in the

preliminary results of this review was

well founded, given the verified record

evidence. At verification, the

Department examined HSUSA’s role as

the importer of record, including its

payment of import duties and fees. The

Department examined the notes to

NVW’s financial statements, credit notes

and the associated bank statements, and

obtained Hoogovens’’ agency agreement

with NVW (now known as HSUSA).

Petitioners argue further that

respondent’s interpretation is flatly

inconsistent with the terms of the

regulation and has been explicitly

rejected by the Court of International

Trade (CIT). The regulation provides

that the adjustment for the

reimbursement of antidumping duties

will be made in calculating the United

States price. See 19 CFR 353.26 (a) (1).

As the Department calculates the United

States price at the time of its final

results, not some time after liquidation

and the actual payment of antidumping

duties, the regulation plainly anticipates

that an adjustment for the

reimbursement of antidumping duties

can be made as part of the final results

based on evidence of an agreement to

reimburse such duties.

Petitioners cite the CIT’s decision in

PQ Corp. v. United States, 652 F. Supp.

724, 737 (CIT, 1987), reaffirmed in

Federal-Mogul Corp. v. United States,

813 F. Supp. 856, 872 (CIT, 1993), as

approving the Department’s practice of

making an adjustment for reimbursed

antidumping duties (1) as part of its

calculation of the dumping margin, (2)

based on the actual amount to be

assessed, and (3) based on the

producer’s agreement to reimburse such

duties.

Petitioners argue further that in cases

where there is no clear evidence of an

agreement to reimburse, the CIT has

looked to whether there is ‘‘a link

between intracorporate transfers and the

reimbursement of antidumping duties.’’

See, e.g. Torrington Company v. United

States, Slip. Op. 96–163, CIT (1996). In

the present case, the Department found

evidence of both an agreement to

reimburse antidumping duties and

actual evidence of such reimbursement

in the form of transfers to cover cash

deposits of antidumping duties.

Petitioners urge the Department to

reject the amended agency agreement

filed by respondent on September 26,

1996, as untimely. Even if the

Department does not reject the new

information, petitioners argue that at the

time the transactions took place, and at

the time the merchandise was imported,

respondent had agreed to reimburse

antidumping duties.

Petitioners note that the test for

determining whether the reimbursement

regulation applies in a situation where

there is an affiliated importer is not

whether there has been a demonstrated

impact upon the U.S. price, but whether

the evidence demonstrates that the

exporter directly pays or reimburses the

importer for such duties. See Color

Televisions from Korea, 61 FR at 4411;

Brass Sheet and Strip from the

Netherlands, 57 FR at 9537 (March 19,

1992); Brass Sheet and Strip from

Sweden, 57 FR at 2708 (January 23,

1992); Brass Sheet and Strip from Korea,

54 FR at 33258 (August 14, 1989).

Petitioners further observe that even

though the regulation does not require

some kind of independent showing of

an effect on price, it is clear that where

an exporter reimburses an importer for

antidumping duties, the importer, along

with the ultimate purchaser, is relieved

of liability of the duties.

Petitioners argue that Hoogovens’

claim that the Department’s application

of the reimbursement regulation in this

review violates the WTO Antidumping

Code is unfounded. Article 2.4 of the

Code specifically provides for

adjustments to be made to ensure a fair

comparison between the export price

and the normal value. In petitioners’

view, the Department appropriately

made an adjustment to account for the

fact that Hoogovens was reimbursing the

importer for antidumping duties, and

was therefore bearing the expense of

such duties.

Department’s Position

We previously determined that

reimbursement, within the meaning of

§ 353.26 of the Department’s

regulations, takes place between

affiliated parties if the evidence

demonstrates that the exporter directly

pays antidumping duties for the

affiliated importer or reimburses the

importer for such duties. See Color

Television Receivers from the Republic

of Korea; Final Results of Antidumping

Duty Administrative Reviews, (‘‘Final

Results of Korean Tvs’’) (61 FR 4408,

4411, Feb. 6, 1996). This position has

been upheld by the Court of

International Trade in Outukumpu

Copper Rolled Products AB v. United

States, 829 F. Supp. 1371 (CIT 1993).

However, as we also stated in the Final

Results of Korean Tvs, application of the

regulation to affiliated parties does not

imply that exporters and producers

automatically will be assumed to have
18478 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

reimbursed affiliated U.S. importers for

antidumping duties by virtue of the

relationship between them. While we

have recognized that all transactions

between affiliated parties must be

scrutinized with care, the relationships

between the parties are too complex to

justify such an assumption. Instead we

have relied upon evidence of

inappropriate financial intermingling or

an agreement to reimburse antidumping

duties between the two affiliated

parties. Id at 4411.

Consistent with our practice, in the

first administrative review of this order

we stated that an agreement to

reimburse antidumping duties is

sufficient to trigger the reimbursement

regulation. See Certain Cold-Rolled

Steel Flat Products From the

Netherlands; Final Results of

Antidumping Duty Administrative

Review; 61 FR 48465, 48470 (Sept. 13,

1996). For the preliminary results of this

review, as in the first review of this

order, we based our determination upon

evidence that an agreement was in place

for the reimbursement of duties to be

assessed. See Certain Cold-Rolled Steel

Flat Products From the Netherlands;

Preliminary Results of Antidumping

Duty Administrative Review; 61 FR

51888, 51891 (Oct. 4, 1996). In light of

the evidence now on the record, we

have determined that Hoogovens and

HSUSA no longer have an agreement to

reimburse antidumping duties to be

assessed for this review and that

HSUSA is responsible for the payment

of such duties. See Proprietary Memo to

File, April 2, 1997.

Petitioners have argued that

Hoogovens continues to reimburse

duties. However, in the Department’s

view, the evidence on the record of this

review indicates that the respondent has

changed its practice with respect to

reimbursement and has refunded cash

deposits paid by Hoogovens.

Further, petitioners seek to invoke the

reimbursement regulation regardless of

whether an amended agreement makes

HSUSA responsible for payment of all

antidumping duties and requires the

U.S. affiliate to refund cash deposits

because, petitioners contend, at the time

the transactions took place, respondent

had agreed to reimburse antidumping

duties. We find this argument

unpersuasive. The issue is not when the

arrangement to reimburse was

abrogated, but rather whether there is an

agreement to reimburse antidumping

duties to be assessed at the time of the

final results. As we stated in the first

review, the payment of cash deposits

does not, by itself, constitute

reimbursement of, or an agreement to

reimburse, antidumping duties to be

assessed. In the preliminary results of

this review, as in the first review, we

determined that the payment of cash

deposits by the parent company

substantiated the existence of an

agreement to reimburse duties to be

assessed. For these final results, HSUSA

has presented evidence that the

agreement has been amended to

eliminate reimbursement of

antidumping duties. It has substantiated

that amendment with evidence of a

refund of cash deposits pertaining to

entries in the first review period. Based

upon this evidence, we determined that

Hoogovens is no longer reimbursing, or

has an agreement to reimburse,

antidumping duties to HSUSA.

Therefore, we have not applied the

reimbursement regulation in the final

results of this review.

While we find that, based upon the

evidence on the record, the

reimbursement regulation is

inapplicable in this review, as noted

above, transactions between affiliated

parties must be scrutinized with care.

Because Hoogovens previously had an

agreement to reimburse duties, and

continues to advance the funds to cover

cash deposits, in future reviews we will

thoroughly monitor the refund of cash

deposits, scrutinize the operation of the

agreement, and examine whether there

is any inappropriate financial

intermingling, to ensure that

reimbursement does not recur. In

addition, we will verify relevant

information submitted on the record,

where appropriate.

Comment 2

Hoogovens argues that the

Department’s method of calculating

profit resulted in an excessive allocation

of profit to constructed export price

(CEP) sales. This occurred, respondent

alleges, because the Department

calculated the total profit on all reported

sales, including export price (EP) sales

and home market (HM) sales that were

outside the actual period of review

(POR) of August 1994 to July 1995. The

extended window period for home

market sales in this review was

December 1993 to September 1995,

whereas Hoogovens was required to

report CEP sales made during the POR.

The calculation of profit for a longer

period on EP and HM sales than for the

reported CEP sales results in an increase

in the amount of profit allocated to CEP

and hence deducted from U.S. price.

This, in turn, artificially inflates the

margins on CEP sales. Hoogovens claims

that in calculating the CEP profit ratio,

the Department should calculate the

total profit based only on EP and home

market sales made during the actual

POR.

Petitioners counter that this

suggestion conflicts with the plain

language of section 772 (f) (2) of the Act.

Under the statute, only normal value

and CEP sales are considered in the

calculation of CEP profit. EP sales do

not enter into the calculation. The

Department’s program erroneously

included the profit from EP sales. The

statute defines total actual profit as the

total profit earned by the foreign

producer, exporter and affiliated parties

(in the United States) for which total

expenses are determined. In turn, total

expenses are defined as those ‘‘incurred

with respect to the subject merchandise

sold in the United States and the foreign

like product sold in the exporting

country if such expenses were requested

by the administering authority for the

purpose of establishing normal value

and constructed export price.’’ The

Department requested home market

information for the extended window

period challenged by Hoogovens;

therefore under the statute the

Department must calculate profit using

this same information.

Department’s Position

We disagree with respondent. The

expenses requested by the Department

for the purpose of establishing the

normal value of the foreign like product

sold in the Netherlands were those

incurred during the extended window

period. Consequently, the statute

provides that these expenses are to be

used in the calculation of the CEP profit

ratio. We disagree with petitioners’

argument that EP sales should be

excluded from the total profit

calculation. The calculation of total

actual profit under section 772(f)(2)(D)

includes all revenues and expenses

resulting from the respondent’s EP sales,

as well as from its CEP and home

market sales. The basis for total actual

profit is the same as the basis for total

expenses under section 772(f)(2)(C). The

first alternative under this section states

that for purposes of determining profit,

the term ‘‘total expenses’’ refers to all

expenses incurred with respect to the

subject merchandise, as well as home

market expenses. Where the respondent

makes both EP and CEP sales to the

United States, sales of the subject

merchandise would encompass all such

transactions.

Comment 3

Petitioners argue that in the

preliminary results, the Department

improperly excluded imputed expenses

(i.e., credit expenses and inventory

carrying costs) from the calculation of
Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices 18479

total United States expenses for the

purpose of determining profit on CEP

sales. Section 772(d) of the Act provides

that the price used to establish CEP

shall be reduced by an amount for profit

allocated to U.S. selling expenses and

costs of further manufacturing. Section

772(f) further provides that the profit

shall be determined by multiplying total

actual profit by the ‘‘applicable

percentage,’’ i.e., the percentage

determined by dividing ‘‘total United

States expenses’’ by the total expenses.

The statute defines ‘‘total United States

expenses’’ as the total expenses

described in sections 772(d) (1) and (2).

These sections refer to the direct and

indirect selling expenses incurred in the

United States and the cost of any further

manufacturing in the United States.

Petitioners argue that CEP is

calculated by deducting credit expenses

and inventory carrying costs (‘‘ICC’’)

(from the selling price to the first

unaffiliated customer) under section

772(d)(1). Accordingly, these amounts

must be considered a part of ‘‘total

United States expenses’’ and must be

included in the allocation factor for

such expenses. In Certain Stainless Wire

Rods from France, the Department

indicated that this is its practice (61 FR

47874, 47882 (September 11, 1996)):

When the Department allocates a portion of

the actual profit to each U.S. CEP sale, we

have included imputed credit and inventory

carrying costs as part of the total U.S.

expenses allocation factor. This methodology

is consistent with section 772(f)(1) of the

statute which defines ‘‘total United States

Expenses’’ as the total expenses described

under section 772(d) (1) and (2). Such

expenses include both credit and inventory

carrying costs.

Petitioners conclude that the

Department should correct its margin

program to include imputed expenses in

the calculation of total United States

expenses.

Respondent argues that the

Department should not include imputed

expenses in its allocation of profit to

CEP sales. In the preliminary

determination, while the Department

excluded the imputed expenses from

CEPSELL, it also excluded imputed

expenses on EP and home market sales

from both the calculation of total profit

and the allocation of the profit. While

petitioners argue that the Department

should include the imputed expenses in

the numerator for this allocation

(CEPSELL), they fail to mention that

these expenses should also be included

in the denominator (TOTEXP) for this

calculation. Hoogovens argues that the

petitioners’ methodology would

artificially inflate the allocation ratio,

which would overstate the amount of

profit allocated to the CEP sale.

Hoogovens takes no position on

whether the imputed expenses should

be included or excluded from the CEP

allocation. Its sole concern is that these

expenses be treated consistently in all

aspects of the CEP profit allocation. In

the event that the Department decides to

include the imputed expenses in the

CEP selling expenses used to allocate

profit, Hoogovens argues the

Department should ensure consistency

by including the imputed expenses in

all aspects of the profit allocation. Thus,

in calculating the ratio of U.S. selling

expenses to total selling expenses,

Hoogovens argues the Department

should include the imputed expenses

on CEP sales in the numerator

(CEPSELL), and should include the

imputed expenses on all U.S. and home

market sales in the denominator

(TOTEXP).

Department’s Position

We agree with petitioners that

imputed credit and inventory carrying

costs should be included in the

definition of total United States

expenses used in the allocation of profit

to CEP sales, consistent with section

772(f)(1), and have revised our

methodology for these final results. The

Statement of Administrative Action

(SAA) of the URAA states that: ‘‘The

total U.S. expenses are all of the

expenses deducted under section 772(d)

(1) and (2) in determining the

constructed export price.’’ SAA at 154.

The SAA also explains section

772(d)(1)(D) as providing for the

deduction from CEP of indirect selling

expenses. These typically include

imputed inventory carrying costs, which

represent the opportunity costs of the

capital tied up in inventories of the

finished merchandise. (Id.) Section

772(d)(1)(B) explicitly includes credit

expenses as among the direct selling

expenses to be deducted from CEP.

We disagree with respondent that

imputed credit and inventory carrying

costs should be added to the total

expenses used in the denominator in the

CEP profit allocation. In determining the

amount of profit to allocate to each CEP

sale, the Department first computes the

total profit earned by the foreign

producer. This amount is based on the

producer’s actual profits calculated in

accordance with section 772(f)(2)(D) of

the Act and includes any below cost

sales but excludes sales made to

affiliates at non-arm’s length prices.

Because it is the ‘‘actual’’ profit, the

amount reflects the actual interest

expense incurred by the producer.

A portion of the total actual profit is

then allocated to the U.S. expenses

incurred for each CEP sale. This is done

based on the applicable percentage

described in section 772(f)(2)(A) of the

Act. In calculating this percentage, the

statute directs us to include in the

numerator the CEP expenses deducted

under 772(d), which includes imputed

credit and inventory carrying costs. In

contrast, the total expenses in the

denominator are those used to compute

total actual profit. See section

772(f)(2)(D). As discussed above,

‘‘actual’’ profit is calculated on the basis

of ‘‘actual’’ rather than imputed

expenses. Although the actual and

imputed amounts may differ, if we were

to account for imputed expenses in the

denominator of the CEP allocation ratio,

we would double count the interest

expense incurred for credit and

inventory carrying costs because these

expenses are already included in the

denominator.

Comment 4

Petitioners argue that the Department

should reject Hoogovens’ claim that it

sells to only one level of trade (LOT). In

respondent’s initial Section A response

in this review, Hoogovens stated that it

sold to two categories of customers,

which constituted distinct levels of

trade: service centers and end-users.

However, when it submitted its Section

B response, Hoogovens claimed that all

its customers were at a single LOT and

that it was unable to distinguish

between the selling functions performed

for different customers. Hoogovens did

not complete the chart identifying

selling functions requested in a

supplemental questionnaire until

verification, and petitioners argue the

Department should have rejected it as

untimely.

Petitioners argue the record shows

that Hoogovens’ customers are at two

levels of trade. First, petitioners claim

that service centers, which function as

distributors, and end users are at

different phases of marketing. See

Certain Corrosion-Resistant Carbon

Steel Flat Products from Canada and

Certain Cut-to-Length Carbon Steel Plate

from Canada; Preliminary Results of

Antidumping Administrative Reviews,

61 FR 51891, 51896 (October 4, 1996).

In its Section A response at 13 (Public

Version), Hoogovens stated:

The basis for distinguishing steel service

centers from end-users is that the former do

not consume the steel they purchase from

Hoogovens, but rather function in a manner

similar to distributors (although * * * some

provide processing services). Steel service

centers/distributors, in turn, sell cold-rolled

steel to the same types of end-user customers
18480 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

as Hoogovens. Thus, the end-user customers

are further ‘‘removed’’ from Hoogovens’

factory than are the steel service centers.

Petitioners argue that the differences in

the selling functions performed for each

group are well-documented, citing

Hoogovens’ statement that it provided

‘‘far greater sales assistance, such as

quality and product development

support’’ to its end-user customers than

to its service center customers.

Hoogovens also stated that it had justin-time (JIT) delivery arrangements with

many of its end-user customers, but not

with service centers. (Section A

response at 14.) Petitioners ask the

Department to consider service centers

and end-users as distinct levels of trade

for the final determination, and to make

LOT adjustments, as appropriate.

Finally, petitioners ask the Department

to deny Hoogovens the capped CEP

adjustment, because Hoogovens has

failed to provide complete or timely

LOT data in this review.

Hoogovens responds that at the time

it submitted its Section A response in

this review, the Department had not yet

published any determinations

explaining and applying the URAA LOT

provisions. Hoogovens continued to rely

on the levels of trade used in the

investigation and the first

administrative review, which were

based on the market function of the

customer, rather than on selling

functions performed by Hoogovens.

While Hoogovens stated that it provides

more ‘‘sales assistance’’ to end-user

customers, the basic distinction was the

nature of the customer’s business rather

than the selling functions performed by

Hoogovens.

To the best of Hoogovens’ knowledge,

the supplemental questionnaire issued

by the Department in the investigation

of Certain Pasta Products from Italy and

Turkey, of which Hoogovens received a

copy before it submitted its Section B

response, was the first time that the

Department had developed a series of

questions designed to assist in making

determinations of LOT under the URAA

LOT provisions. After reviewing the

questionnaire, Hoogovens determined

that it could not substantiate the

previously-claimed LOT based on the

selling functions it performed for sales

to the two categories of customers.

Petitioners are wrong, Hoogovens

argues, to say that identifying sales ‘‘at

different phases of marketing’’

represents ‘‘the first prong of the test to

demonstrate two different levels of

trade.’’ Petitioners’ Brief at 5. On the

contrary, Hoogovens claims, it is wellestablished that under the URAA and as

stated in ADDENDUM I to the

Department’s questionnaire, ‘‘the selling

functions that a customer performs do

not establish that different LOTs exist

* * * ’’ Although the petitioners rely on

the Department’s preliminary

determination in the 1994/95

administrative reviews of the Canadian

flat-rolled steel cases as support for their

interpretation, in those results,

Hoogovens argues, the Department

stressed that ‘‘even substantial’’

differences in selling functions are not

alone sufficient to establish different

LOTs. Certain Corrosion-Resistant

Carbon Steel Flat Products from Canada

and Certain Cut-to-Length Carbon Steel

Plate from Canada; Preliminary Results

of Antidumping Administrative

Reviews, 61 FR 51891, 51896.

Respondent points out that even where

it found customers at different phases of

marketing, the Department did not

necessarily find different LOTs.

Hoogovens argues that the petitioners

have failed to point to any evidence in

the record showing that Hoogovens

provides different levels of selling

functions to automotive versus other

customers. In the investigation, the

Department concluded that automotive

customers did not constitute a separate

LOT. At that time, petitioners argued

that Hoogovens had ‘‘totally failed to

demonstrate significant differences’’

between automotive and other sales.

Final Determinations of Sales at Less

than Fair Value: Certain Hot-Rolled

Carbon Steel Flat Products and Certain

Cold-Rolled Carbon Steel Flat Products

from the Netherlands, 58 FR 37199,

37203 (July 9, 1993).

In its supplemental response dated

January 19, 1996, Hoogovens explained

(on page 5) that it had not filled out the

chart on LOT, because it had

determined that there were no

quantifiable differences between LOTs

for any of the listed selling functions.

Hoogovens points out that during

verification, the Department sought to

verify the statement contained in the

supplemental response by interviewing

the Senior Sales Executive and

reviewing the chart with him. For that

purpose, Hoogovens prepared the chart

contained in Verification Exhibit 12.

Hoogovens believes that the verified

evidence in the record confirms the

Department’s conclusion that there are

no differences in LOT in either the EP

or home markets resulting from

differences in selling functions

performed by Hoogovens. Moreover, in

Hoogovens’ view, this conclusion is

consistent with the Department’s

analysis of respondents in other steel

reviews.

Department’s Position

Neither the statute nor the SAA

defines LOT. The relevant provision in

the statute, section 773(a)(7)(A), allows

for a LOT adjustment where there is a

difference in LOTs between the EP or

CEP and normal value, if that difference

involves the performance of different

selling activities, and it is demonstrated

to affect price comparability, based on a

pattern of consistent price differences

between sales at different LOTs in the

foreign comparison market. This

adjustment may either increase or

decrease normal value. SAA at 829.

Although the identity of the customer

(e.g., end-user or service center) is an

important indicator in identifying

differences in LOT, the existence of

different classes of customers, as well as

different functions performed by such

customers, is not sufficient to establish

a difference in the LOTs. Accordingly,

we consider the class of customer as one

factor, along with the producer/

exporter’s selling functions and the

selling expenses associated with these

functions, in determining the stage of

marketing, i.e., the LOT associated with

the sales in question.

For CEP sales, the relevant customers

in our LOT analysis are Hoogovens’’

U.S. affiliates, i.e., the customers at the

level of the CEP. The CEP represents a

price exclusive of all selling expenses

and profit associated with economic

activities occurring in the United States.

SAA at 823. The adjustments we make

to the starting price pursuant to section

772(d) of the Act normally change the

LOT. Accordingly, we must determine

the LOT of CEP sales exclusive of the

expenses (and concomitant selling

functions) that we deduct pursuant to

this subsection. This approach does not

result in a reliance on an ex-factory

transfer price to the U.S. affiliate in our

LOT analysis. Transfer prices do not

enter into our analysis because the CEP

is a calculated price derived from the

resale price to the first unaffiliated

customer. CEP is not a price exclusive

of all selling expenses, because it

contains the same type of selling

expenses as a directly observed export

price. See Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof from France, et al., Final

Results of Antidumping Duty

Administrative Reviews, 62 FR 2081,

2107 (January 15, 1997) (AFBs VI).

We agree with petitioners that endusers and service centers/distributors

constitute different phases of marketing.

However, as respondent notes, this is

not sufficient for the Department to find

that different LOTs exist. In order to

determine whether sales in the
Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices 18481

comparison market are at a different

level of trade than the export price or

CEP, we examine whether the

comparison sales were at different

stages in the marketing process than the

export price or CEP. We make this

determination on the basis of a review

of the distribution system in the foreign

comparison market, including selling

functions, class of customer, and the

level of selling expenses for each type

of sale. Different stages of marketing

necessarily involve differences in

selling functions, but differences in

selling functions, even substantial ones,

are not alone sufficient to establish a

difference in the LOT. Similarly, while

customer categories may be useful in

identifying different levels of trade, they

are insufficient in themselves to

establish that there is a difference in the

level of trade. See AFBs VI at 2105.

Initially, Hoogovens stated that there

were multiple levels of trade and that it

performed different selling functions for

its end-user customers than for its

service center customers. However, the

LOT chart provided by respondent at

verification indicated that the selling

functions provided to all customers, in

both markets, are identical. Hoogovens

explained that after more in-depth

examination, it was unable to

distinguish among the selling functions

provided to different categories of

customers. See Verification Report, p.

10. Based upon the results of our

verification, we find that there are no

differences in LOT. See the comment

below on CEP offsets.

Comment 5

Hoogovens argues that the

Department should make a CEP offset

adjustment to normal value pursuant to

section 773(a)(7)(B) of the Act when

comparing the reported CEP sales to

normal value. Respondent claims the

Department’s practice is to compare the

ex-factory CEP price to the price of the

home market sale, including all selling

functions that are provided to home

market customers. Hoogovens argues

that the Department has repeatedly

concluded that a CEP offset is

appropriate where it finds, following

this comparison, that the unadjusted

home market price is at a more

advanced level of trade (LOT) than the

adjusted CEP price. In the preliminary

results, the Department concluded that

there were no differences between the

adjusted CEP price and the unadjusted

home market price. Hoogovens claims

that this results in a comparison of sales

at different levels of trade, because the

starting price of the home market sales

allegedly reflects many selling activities

not reflected in the adjusted CEP price.

These include indirect selling activities,

indirect technical service and warranty

expenses, and inventory carrying costs

incurred on home market sales. All of

these types of expenses have been

deducted from the net CEP used to

establish the LOT for CEP sales.

Accordingly, Hoogovens concludes, the

home market LOT must be deemed to be

at a different, more advanced LOT than

the adjusted CEP LOT.

Hoogovens claims there were no sales

in the home market at a LOT equivalent

to the CEP LOT. Moreover, all home

market sales were at the same LOT.

There are no data available to quantify

a LOT adjustment to account for the

difference between the CEP LOT and the

home market LOT. Accordingly,

Hoogovens concludes, the Department

should make a CEP offset adjustment to

normal value for indirect selling

expenses up to the amount of indirect

selling expenses deducted from CEP, as

required by 19 U.S.C. 1677b(a)(7)(B).

Petitioners point out that the CEP

offset is not automatic. The respondent

bears the burden of demonstrating that

such an offset is warranted. See

Mechanical Transfer Presses from

Japan, 61 FR 52910, 52915 (October 9,

1996); Large Newspaper Printing Presses

and Components Thereof, Whether

Assembled or Unassembled, from Japan,

61 FR 38139, 38143 (July 23, 1996).

Petitioners argue that to qualify for a

CEP offset, a respondent must first

establish that there are different levels

of trade between home market and U.S.

sales. Then, if the data on the record do

not provide an adequate basis for a LOT

adjustment and normal value is

established at a more advanced stage of

distribution than the CEP, the

Department is required to reduce

normal value by the CEP offset.

Petitioners argue that Hoogovens has

failed to meet the prerequisites for such

an adjustment, because it has provided

no evidence that its CEP sales are at a

distinct LOT from its home market

sales. In response to the Department’s

request at verification for LOT data,

Hoogovens’ Senior Sales Executive

stated that the company ‘‘provides the

same types of services to all customers

in all markets.’’ (Sales Verification

Report at 10 (Public Version).)

Department’s Position

Respondent’s claim for a CEP offset is

inconsistent with its position that its

sales are to only one LOT in both

markets. (See Comment 4.) In

submitting its LOT chart at verification,

Hoogovens did not identify any

differences in selling functions and

selling expenses between its home

market sales and CEP sales after

deductions of the U.S. expenses

pursuant to section 772(d) of the Act. In

accordance with section 773(a)(7)(B) of

the Act, a CEP offset is granted where

normal value is established at a LOT

which constitutes a more advanced

stage of distribution than the LOT of the

CEP sale and the data available do not

provide an appropriate basis to

determine a LOT adjustment.

Hoogovens failed to meet any of these

requirements under section 773(a)(7)(B).

Indeed, Hoogovens failed to make a LOT

claim and has failed to substantiate any

claim.

The instructions regarding LOT in

ADDENDUM I to the Department’s

questionnaire explained:

When the U.S. sale is classified as a

constructed export price (CEP) sale, the LOT

for that sale is based upon the selling

functions provided by the seller (i.e., the

exporter and its affiliates) to the first

unaffiliated party, less those selling functions

related to expenses which are deducted

under section 772(d) of the Act. Thus, for

CEP sales, the selling functions used to

establish the LOT cannot include selling

functions related to expenses deducted under

section 772(d). For comparison market sales,

the LOT is based upon the selling functions

provided by the seller (and its affiliates) to

the first unaffiliated customer.

Respondent failed to respond to the

Department’s supplemental

questionnaire on LOT by the due date.

The instructions for preparing the LOT

chart specifically asked respondents not

to include in the chart those expenses

deducted from U.S. price. These

deductions include direct selling

expenses (credit expense), indirect

selling expenses (warranties, inventory

carrying costs) and further

manufacturing costs. In filling out the

chart submitted at verification,

Hoogovens did not distinguish between

its CEP sales, which are all further

manufactured, and its EP sales. Despite

being given every opportunity to

demonstrate on the record that its CEP

sales and home market sales are at

different levels of trade, Hoogovens has

failed to establish that normal value is

at a different LOT than CEP sales.

Rather, to the contrary, Hoogovens

insisted that there were no differences

in the services provided to customers in

the two markets. The SAA states:

Only where different functions at different

levels of trade are established under section

773(a)(7)(A)(i), but the data available do not

form an appropriate basis for determining a

level of trade adjustment under section

773(a)(7)(A)(ii), will Commerce make a

constructed export price offset adjustment

under section 773(a)(7)(B). (SAA at 160.)

Thus, the adjustment is not automatic

and the burden is on the respondent to
18482 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

demonstrate that normal value is at a

different LOT than the CEP, and that the

normal value LOT is at a more advanced

stage of distribution (i.e., more remote

from the factory). Hoogovens has failed

to establish the basis for any CEP offset.

Accordingly, we have not granted a CEP

offset adjustment in the final results of

this review.

Comment 6

Respondent argues that the

Department should not match U.S. sales

of secondary merchandise (‘‘seconds’’)

to constructed value (CV) for prime

merchandise. The Department’s policy

in the steel cases is to match sales of

prime merchandise to other sales of

prime merchandise, and to match sales

of seconds in the U.S. market to sales of

seconds in the comparison market. In

the preliminary results, where there

were no matching home market sales of

seconds within the ‘‘90/60 window’’

period, the Department matched the

U.S. secondary sale to the CV of sales

of prime merchandise. Hoogovens

disagrees that the Department is

compelled by the decision of the Court

of Appeals in IPSCO, Inc. v. United

States, 965 F.2d 1056, 1060 (Fed. Cir.

1992), to use this approach, and alleges

that this comparison results in unfair

and artificially inflated margins on U.S.

sales of seconds. Hoogovens argues that

this allegedly unfair approach could be

avoided by the expedient of matching

U.S. sales of seconds to home market

sales of seconds that pass the difmer

test, without considering whether they

fall within the ‘‘90/60 window’’, to

calculate margins for seconds.

Petitioners argue that the Department

should reject Hoogovens’’ proposed

change in methodology, which fails to

recognize that the Department’s

methodology is consistent with past

practice and in accordance with IPSCO,

in which the Court upheld the

Department’s practice of allocating

production costs equally between

secondary and prime merchandise.

Petitioners also point out that the reason

the Department uses the ‘‘90/60

window’’ is that it satisfies the statutory

requirement (section 773 (a) (1) (A)) that

normal value be compared with

contemporaneous EP or CEP sales. See

also Certain Circular Welded Carbon

Steel Pipes and Tubes from Thailand,

61 FR 1328, 1332 (January 19, 1996).

Department’s Position

We agree with the petitioners.

Seconds are merchandise which has

suffered some sort of defect either in the

production process or in subsequent

handling, and does not meet the

customer’s specifications. In this

review, we have continued to follow the

policy with respect to comparisons of

sales of seconds set forth in the first

review of this order. (See Cold-rolled

Carbon Steel Flat Products from the

Netherlands; Final Results of

Antidumping Duty Administrative

Review, 61 FR 48465, 48466–7

(September 13, 1996).) We only resorted

to CV when there were no

contemporaneous matches of seconds.

Hoogovens’ suggestion that we use

home market sales outside the ‘‘90/60

window’’ period is inconsistent with the

requirement in section 773 that we use

contemporaneous sales as the basis for

normal value.

In Decision Memorandum from

Roland L. MacDonald to Joseph A.

Spetrini, Deputy Assistant Secretary for

Compliance, ‘‘Treatment of Non-Prime

Merchandise for the First

Administrative Review of Certain

Carbon Steel Flat Products,’’ (April 19,

1995) at 4, we stated: ‘‘In past cases the

Department has held that the cost of

production (COP) of seconds is the same

as the COP of the prime merchandise it

was intended to be because seconds

have undergone the same production

processes as prime merchandise.’’ The

Department’s methodology for

calculating the COP for primary and

secondary merchandise has been upheld

by the Court of Appeals. See IPSCO.

Similarly, there is no basis on the record

for distinguishing between the CV of

primary and secondary merchandise.

Comment 7

Hoogovens argues that the

Department should use the Customs

Service’s quarterly exchange rates to

make currency conversions in its final

determination. At the time it made the

sales under review, Hoogovens expected

that their antidumping duty liability

would be determined on the basis of

these rates. However, on March 8, 1996,

the Department published a notice that

it intended to change its practice for

determining the exchange rate, and

would use Federal Reserve daily

exchange rates for one year, and then

evaluate the model computer program’s

performance. Notice: Change in Policy

Regarding Currency Conversions, 61 FR

9434 (March 8, 1996). Despite the fact

that the change was announced over

seven months after the end of the POR,

and after verification in the current

review, the Department used the

proposed program to make currency

conversions in the preliminary results.

Hoogovens argues that the effect of this

change is that its margins were

determined using different exchange

rates than those Hoogovens had

reasonably expected would be used at

the time it made the sales under review,

resulting in considerable increases in

Hoogovens’’ antidumping duty liability.

Respondent further claims that the

Department’s change of policy created

dumping margins on a considerable

number of sales for which Hoogovens

reasonably expected that there would be

no dumping margin found, and

increased margins on many other sales.

Hoogovens relied on the Department’s

consistent prior practice of using the

Customs rates to set its prices so as to

avoid dumping. Respondent argues that

the Department should not apply

retroactively such basic changes in

methodology as the proposed currency

conversion policy. According to

Hoogovens, the Department must, under

its duty to administer the law fairly, ‘‘be

bound by its prior actions so that parties

have a chance to purge themselves of

antidumping liability.’’ Shikoku

Chemicals Corp. v. United States, 795 F.

Supp. 417, 421 (CIT 1992).

Section 773A of the Uruguay Round

Agreements Act (URAA) provides that

the Department shall convert currencies

using ‘‘the exchange rate in effect on the

date of sale of the subject merchandise.’’

19 U.S.C. 1677b—1(a). Hoogovens

argues that this section does not specify

which rate the Department shall use or

in any way mandate or prohibit the use

of exchange rates obtained from any

given source. Hoogovens claims that use

of the Customs rates in this review

would therefore be fully consistent with

the mandate of section 773A to use the

exchange rate in effect on the date of

sale.

Petitioners argue that the

Department’s use in the preliminary

determination of this review of the daily

exchange rates in effect on the dates of

sale, as certified by the Federal Reserve,

is in accordance with the plain language

of section 773A. The SAA also

unequivocally states that the

Department must adopt a new practice

of applying a daily exchange rate, in the

place of its previous practice of using a

quarterly rate, as follows: ‘‘Under new

section 773A, the general rule will be to

convert foreign currencies based on the

dollar exchange rate in effect on the date

of sale.’’ SAA at 172. Petitioners note

that the new law has taken effect and

the Department is bound by it.

Petitioners argue that Hoogovens had

ample warning that a change in

methodology was dictated by new

section 773A. Therefore, in petitioners’

view, the Department should continue

to apply the daily exchange rate for the

final results of review.
Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices 18483

Department’s Position

We agree with petitioners. This

review was conducted in accordance

with the URAA. Section 773A(a)

requires the Department to ‘‘convert

foreign currencies into United States

dollars using the exchange rate in effect

on the date of sale of the subject

merchandise.’’ Consequently, the

Department has modified its

methodology in various respects to

conform to the new provisions in the

law.

Comment 8

Petitioners claim that Hoogovens

incorrectly calculated its inventory

carrying costs (‘‘ICC’’) applicable to CEP

sales. For these sales, Hoogovens

reported the ICC from the time

production was complete at IJmuiden

until the time the merchandise cleared

Customs at the U.S. port of entry in the

field DINVCARU. ICC incurred by

Hoogovens’ U.S. affiliated companies

prior to shipment to the U.S. customer

were reported in the field INVCARU. In

calculating both variables, petitioners

allege Hoogovens failed to use the

actual, product-specific cost of the

merchandise. Instead Hoogovens used

the price of the merchandise, deflated

by the ratio of total cost of goods sold

to total sales revenue to simulate the

cost-based value of the merchandise in

inventory. Petitioners argue that

Hoogovens’ methodology is flawed

because it applies the ICC factor to the

transfer price, rather than the cost of

production. Petitioners claim that this is

inconsistent with the Department’s

practice, which is to calculate ICC by

dividing the number of days that the

goods remain in inventory by 365 and

then multiplying the result by the

appropriate interest rate and the actual

cost of the unit, i.e., the product-specific

costs. Petitioners argue that the

Department should recalculate

Hoogovens’ ICC using Hoogovens’

reported constructed value (CV)

according to the following formula:

DINVCARU/INVCARU = (COMCV +

GNACV + INTEXCV) (interest rate)

(number of days in inventory/365)

Hoogovens responds that the

Department rejected the petitioners’

argument with respect to the same

methodology in the final results of

Hoogovens’ 1993/94 administrative

review. Certain Cold-Rolled Carbon

Steel Flat Products from the

Netherlands, 61 FR 48465, 48470

(September 13, 1996). Moreover, the

Department also verified the reported

data in the current review. Hoogovens

argues that its methodology is in fact

cost-based because after multiplying the

ICC factor by the transfer price to its

U.S. affiliates, it then multiplies the

result by the ratio of Hoogovens’ average

cost of production to average sales price.

Hoogovens states that this results in an

ICC amount that is in effect based on the

cost of production.

Hoogovens argues that the petitioners’

proposed methodology contains several

flaws. First, the petitioners propose to

use the constructed value of

manufacturing costs (COMCV) in their

equation, which is inherently less

accurate, because COMCV includes the

product mix for sales to all markets of

each CONNUM (i.e., EP, home market

and CEP), whereas Hoogovens’

methodology is based solely on the costs

of material actually sold by the U.S.

affiliates. Second, petitioners did not

convert the values used in their

proposed calculation (COMCV, GNACV,

AND INTEXCV) , which are reported in

guilders, to U.S. dollars. This correction

would substantially reduce the amount

of ICC calculated under their

methodology. Hoogovens argues that

petitioners have failed to show that

there is anything unreasonable or

inaccurate in Hoogovens’ ICC

methodology, and that the Department

should accordingly continue to use the

reported ICC amounts in the final

results.

Department’s Position

We agree with the respondent that the

methodology Hoogovens used is

reasonable, and have accepted the

verified reported ICC amounts.

Hoogovens’ accounting system used in

the normal course of business is based

upon standard costs. Consequently, the

costs carried in the company’s accounts

are not product (or CONNUM)-specific.

While CV is CONNUM-specific for the

products sold in the United States,

general, selling and administrative

expenses and profit are calculated as if

the merchandise were sold in the home

market. Hoogovens’ use of the ratio of

average costs of cold-rolled carbon steel

flat products to the average sales price

during the POR as a deflator for the

transfer price to its affiliates in the

United States is therefore a reasonable

approximation of a product-specific,

cost-based ICC calculation.

Comment 9

Petitioners claim that Hoogovens

incorrectly reported yield losses

associated with its U.S. affiliate’s further

manufacturing operations. Hoogovens

determined the yield loss per machine

by dividing the total scrap generated

during processing by the starting weight

processed at each machine. Petitioners

argue that Hoogovens omitted to take

into account ‘‘unrecovered scrap’’ in the

numerator of this calculation, and that

the Department should resort to facts

otherwise available under section 776 of

the Act. Petitioners further assert that

the Department should make an adverse

inference in its selection of facts

available, because of Hoogovens’ alleged

failure to comply with a request for

information from the administering

authority. See 19 U.S.C. 1677e(b).

Hoogovens replies that petitioners

have simply misread or misunderstood

the yield loss reports from which

Hoogovens calculated its affiliate’s yield

loss ratios. Hoogovens argues that a

proper reading of the yield loss reports

reveals that there was no such

‘‘unrecovered scrap.’’ Petitioners

incorrectly assumed that several

headings listed on the yield reports refer

to material that vanished as

‘‘unrecovered scrap’’ during or after

processing. Hoogovens explains that

none of these categories, however, refer

to actual scrap or material otherwise lost

or damaged in processing that was not

accounted for in Hoogovens’

calculation. Hoogovens argues that the

verified evidence in the record does not

support petitioners’ claim that any

unsalvaged material losses were omitted

from Hoogovens’ reported ratios. See

RBC Verification Report at 17.

Hoogovens urges the Department to use

the reported yield loss ratios in the final

results.

Department’s Position

We agree with respondent. The

Department verified the reported yield

losses and found no discrepancies.

Petitioners’ allegations are based on a

misinterpretation of certain column

headings in the yield loss report. See

RBC Verification Exhibit 27.

Comment 10

Petitioners argue that Hoogovens

failed to include the costs of certain

outside processing in RBC’s reported

cost of materials. Hoogovens instead

added these costs to the further

manufacturing cost reported in

FURMANU. Because these outside

processing costs were part of RBC’s

direct material costs, petitioners argue

that these costs and the freight expenses

for transporting these goods to RBC,

should have been reported as material

costs and should have been subject both

to the application of yield loss and the

allocation of G&A and interest expenses.

The Department’s questionnaire

instructs respondents at page E–7 to

include in the direct materials

component of further manufacturing

costs ‘‘transportation charges and other

expenses normally associated with
18484 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

obtaining the materials that become an

integral part of the finished product sold

in the United States.’’ Petitioners

calculated an amount they propose that

the Department add to the relevant sales

to account for additional yield loss,

interest and G&A expenses.

Hoogovens replies that it added the

cost of further processing paid to the

outside processor, increased by the

yield loss associated with outside

processing, to the reported further

manufacturing costs for the relevant

sales. It reported G&A and interest

expenses for the appropriate sales as

part of the costs of processing this

material at RBC. Some of RBC’s

overhead and administrative costs were

allocated to the material processed by

the outside processor. Hoogovens argues

that this material does not cost more to

process because of the processing it has

undergone prior to arrival at RBC.

Accordingly, to allocate more

processing and administrative costs to

these sales would appear to be doublecounting. Moreover, there are two errors

in the petitioners’ proposed correction,

one in the proposed yield loss and the

other in the G&A factor.

Department’s Position

We agree in part with the petitioners.

The transportation charges associated

with bringing the steel processed by the

outside processor to RBC’s plant should

have been included in direct materials

cost and an amount added to the

relevant sales to account for additional

yield loss, interest and G&A expenses.

However, since we disagree with

petitioners’ calculation of the yield loss

(as discussed in Comment 10) and

petitioners used the wrong G&A factor,

we have modified the petitioners’

suggested programming code to correct

further manufacturing costs for outside

processed sales using the values for

yielded outside processing costs, SG&A

and interest expense shown in Exhibit

1 of respondent’s rebuttal brief. (See the

Department’s margin calculation

program.)

Comment 11

Petitioners argue that Hoogovens

should have included U.S. port-to-plant

freight costs and repacking expenses

incurred in the United States in further

manufacturing costs. Instead, they were

reported in the Section C (CEP) data

base in the fields ‘‘INLFPWU’’ and

‘‘REPACKU.’’ Petitioners cite the

Department’s questionnaire, which

states that further manufacturing costs

include ‘‘any costs involved in moving

the product from the U.S. port of entry

to the further manufacturer’’ and

‘‘additional U.S. packing expenses.’’

Petitioners point out that inclusion of

these expenses is important because of

the effect on the allocation of profit for

CEP sales. To correct this error,

petitioners urge the Department to add

the amounts reported in INLFPWU and

REPACKU to FURMANU for each CEP

(further manufactured) sale.

Hoogovens notes that it followed the

Department’s instructions in its

questionnaire in reporting these

expenses in the Section C (CEP) fields,

ensuring that these expenses are

properly deducted from U.S. price.

Hoogovens argues that the alternative

methodology proposed by the

petitioners is pointless, as reporting

these expenses in the Section E file

would achieve the same result. To the

extent that the Department considers it

appropriate to include these expenses in

the CEP profit allocation, Hoogovens

proposes that the Department do so by

means of a simple correction to the

program. Hoogovens urges the

Department to take great care that it

does not double count these expenses.

Department’s Position

We agree that these expenses should

be included in total United States

expenses for the purpose of calculating

the CEP profit allocation, and have

modified the computer program for the

final results. We note that the

Department’s questionnaire contains

conflicting instructions, and will take

steps to clarify them in the next

administrative review.

Comment 12

Petitioners observe that the

Department’s computer program makes

several errors with respect to the

currency of U.S. packing costs.

Petitioners propose programming

language to make the appropriate

currency conversions.

Hoogovens comments that there are

several errors in the petitioners’

proposed language and proposes

alternative corrections. Hoogovens

points out that the petitioners erred in

proposing to include the costs of

repacking in the United States in the

calculation of constructed value (CV).

Department’s Position

We agree with petitioners that there

were currency conversion errors in the

treatment of packing expenses in the

program used for the preliminary results

of review. We also agree with

Hoogovens that U.S. repacking should

not be included in CV, because CV

includes only costs incurred in the

Netherlands. We have corrected the

program for the final results of review.

Comment 13

Petitioners point out that Hoogovens

added an extra category (‘‘F’’) to the

thickness tolerance categories laid out

in the Department’s questionnaire. The

Department’s model match program,

however, does not account for sales

with a thickness tolerance of ‘‘F.’’

Petitioners propose programming

language to correct this oversight.

Hoogovens agrees with the proposed

correction.

Department’s Position

We have incorporated the proposed

correction in the model match program

for the final results.

Comment 14

If the Department decides not to apply

the reimbursement regulation in its final

results, petitioners urge that the

antidumping duties be deducted as

‘‘United States import duties’’ or

‘‘additional costs, charges, or expenses’’

under section 772(c)(2)(A) of the Tariff

Act of 1930, as amended. Petitioners

argue that the plain language of the

statute requires that the Department

deduct antidumping duties paid by the

respondent or its related party from the

price used to establish EP or CEP.

Specifically, petitioners state that the

phrase ‘‘import duties,’’ as used in 19

U.S.C. 1677a(c), includes AD and

Countervailing duties, as such duties are

plainly ‘‘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.’’

Petitioners argue that U.S. courts and

agencies charged with administering the

customs and unfair trade laws have long

recognized that ‘‘Congress desired and

intended that {AD/CVD} duties * * *

should be considered as duties for all

purposes.’’ C.J. Tower & Sons v. United

States, 71 F.2d 438, 445 (C.C.P.A. 1934).

See also Imbert Imports, Inc. v. United

States, 331 F. Supp. 1400, 1406 (Cust.

Ct. 1971) and PQ Corp. v. United States,

652 F. Supp. 724, 736 n. 15 (CIT 1987).

Petitioners assert that there is nothing in

the language or legislative history of

section 772(c) to indicate that Congress

intended a meaning for the phrase

‘‘import duties’’ other than the ‘‘natural

and accepted’’ meaning established by

the courts. Petitioners further argue that

under accepted canons of statutory

construction, the items to be deducted

in calculating EP and CEP pursuant to

section 772(c)(2)(A) must be read to

include AD/CVD duties. The cited

section requires a deduction for import

duties and other expenses ‘‘except as

provided in paragraph 1(C).’’ This

paragraph, in turn, refers to certain
Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices 18485

countervailing duties imposed to offset

export subsidies. If AD/CVD duties were

not intended to be included in the items

deducted under section 772(c)(2)(A),

petitioners claim the exception

provided by Congress for certain

countervailing duties would be

superfluous. Petitioners hold it is a

fundamental precept of statutory

construction that ‘‘a statute should be

construed so that effect is given to all its

provisions, so that no part will be

inoperative or superfluous, void or

insignificant, and so that one section

will not destroy another.’’ Sutherland

Stat Const § 46.06 (5th Ed).

While petitioners admit that the CIT

has never explicitly held that the

language of section 772(c)(2)(A) covers

actual antidumping duties, they claim it

has assumed so implicitly. Petitioners

cite Federal-Mogul Corp. v. United

States, (813 F. Supp. 856, 872 (CIT

1993)) in which the plaintiff challenged

the Department’s refusal to deduct

estimated antidumping duty deposits.

According to petitioners, the CIT

affirmed the Department’s refusal to

deduct the estimated AD duties, relying

on the fact that the duty deposits were

only estimates. However, petitioners

claim, the Court did not adopt the

Department’s reasoning that section 772

applied only to ‘‘normal’’ import duties,

and that antidumping duties were not

normal duties within the meaning of the

statute. This case, according to

petitioners, requires the Department to

deduct from U.S. price any import

duties that can be accurately determined

at the time the Department is calculating

the current dumping margins.

Petitioners insist the legislative

history of the URAA in no way suggests

that Congress rejected the petitioners’’

construction of section 772 (c)(2)(A).

Petitioners claim that the Senate

Finance Committee specifically

recognized that the issue of whether

antidumping duties must be deducted

as a cost was being considered by the

CIT, and directed the Department to

abide by the outcome of that litigation.

Accordingly, petitioners argue it is clear

that Congress did not intend to ratify the

Department’s failure to treat duties as a

cost in the URAA, but instead

recognized that the issue would be

resolved through the judicial process.

Petitioners conclude by stating that

treatment of antidumping duties as a

cost would be accomplished in the same

manner as the adjustment for

reimbursement of antidumping duties in

the preliminary margin program. The

actual difference between normal value

and EP or CEP on each sale is calculated

by the margin program. This difference

is equal to the antidumping duties to be

paid by the importer and referred to in

section 772 (c)(2)(A). Once this

difference is calculated, it must then be

deducted from EP or CEP for use in

calculating the final margin on each

transaction.

Hoogovens claims that the petitioners’

argument is flatly erroneous and is

based either on a failure to acknowledge

or a misinterpretation of statements by

all three branches of government on this

issue. In past cases the Department has

repeatedly rejected the argument that

antidumping duties should be deducted

as a cost. In fact, the Department dealt

with this issue and rejected petitioners’

argument in the final results of the first

administrative review of the order

governing Hoogovens’ imports of coldrolled carbon steel. (61 FR at 48469.)

See also Certain Hot-Rolled Lead and

Bismuth Carbon Steel Products from the

United Kingdom; Final Results of

Antidumping Duty Administrative

Review, 60 FR 44009 (August 24, 1995)

and Certain Corrosion-Resistant Carbon

Steel Flat Products from Korea; Final

Results of Antidumping Duty

Administrative Review, 61 FR 18547,

18553 (April 26, 1996). No reviewing

court has ever reversed the

Department’s interpretation of the

statute on this point. None of the cases

cited by petitioners dealt with the issue

at hand. For example, C.J. Tower

described antidumping duties as

‘‘duties’’ for the purpose of

distinguishing them from ‘‘penalties’’

that would require compliance with the

due process guarantees of the Fifth

Amendment to the U.S. Constitution.

Hoogovens claims it did not remotely

consider the issue whether antidumping

duties are to be included among the

‘‘United States import duties’’ referred

to in 19 U.S.C. 1677a (c)(2)(A).

Hoogovens points to the petitioners’

acknowledgment that the Department’s

position before the CIT in Federal Mogul

was that the statute’s ‘‘import duty’’

language applied to neither

antidumping deposits nor actual

assessed duties, and Hoogovens asserts

there have been no legal developments

since the Department stated its position

in that case to cause it to reconsider; to

the contrary, all developments have

been in favor of the Department’s

approach.

Hoogovens argues that petitioners

have misinterpreted the legislative

history of this issue, citing the Final

Results of the 1993/94 administrative

review, in which the Department stated

that Congress put to rest the issue of

AD/CVD duties as a cost in arduous

debates during the passage of the

URAA. (61 FR. at 48469.) Hoogovens

also cites the House Ways and Means

Committee’s Report accompanying the

URAA, which stated that the new duty

absorption provision ‘‘would not affect

the calculation of margins in

administrative reviews. This new

provision of law is not intended to

provide for the treatment of

antidumping duties as a cost.’’ H. Rep.

No. 826 (I), 103rd Cong., 2d Sess. 60–

61. Hoogovens concludes by asking the

Department to reaffirm its conclusion

regarding duty as a cost in the final

results of this review.

Department’s Position

It is the Department’s longstanding

position that antidumping and

countervailing duties are not a cost

within the meaning of 19 U.S.C.

1677a(d). See Certain Cold-Rolled

Carbon Steel Flat Products from the

Netherlands, 61 FR 48465, 48469

(September 13, 1996). Antidumping and

countervailing duties are unique. Unlike

normal duties, which are an assessment

against value, antidumping and

countervailing duties derive from the

margin of dumping or the rate of

subsidization found. Logically,

antidumping and countervailing duties

cannot be part of the very calculation

from which they are derived. This

logical rationale for the Department’s

interpretation of the statute is consistent

with prior decisions of the Court of

International Trade. See Federal-Mogul

v. United States, 813 F. Supp. 856, 872

(1993) (deposits of antidumping duties

should not be deducted from USP

because such deposits are not analogous

to deposits of ‘‘normal import duties’’).

In contrast, petitioners’’ reasoning is

circular rather than logical: in

calculating the dumping margin the

Department must take into account the

dumping margin. Such double counting,

i.e., including the same unfair trade

practice twice in a single calculation, is

unjustifiable, except in the limited

circumstances provided for in § 353.26.

Moreover, the treatment of

antidumping and countervailing duties

(already paid or to be assessed) as a cost

to be deducted from the export price is

an issue that was arduously debated

during passage of the Uruguay Round

Agreements Act (URAA) and ultimately

rejected by Congress. See, H.R. 2528,

103rd Cong., 1st Sess. (1993).

Alternatively, Congress directed the

Department to investigate, in certain

circumstances, whether antidumping

duties were being absorbed by affiliated

U.S. importers. 19 U.S.C. 1675(a)(4).

Thus, Congress put to rest the issue of

antidumping and countervailing duties

as a cost. URAA Statement of

Administrative Action at 885 (‘‘The

duty absorption inquiry would not
18486 Federal Register / Vol. 62, No. 72 / Tuesday, April 15, 1997 / Notices

affect the calculation of margins in

administrative reviews. This new

provision of the law is not intended to

provide for the treatment of

antidumping duties as a cost.’’); see also

H. Rep. No. 103–826(I), 103rd Cong.,

2nd Sess. (1994) at 60.

Final Results of Review

As a result of our review, we

determine that the following weightedaverage margin exists:

Manufacturer/

exporter Period of review

Margin

(percent)

Hoogovens

Staal B.V. .... 8/1/94–7/31/95 4.33

The Department shall determine, and

the Customs service shall assess,

antidumping duties on all appropriate

entries. Individual differences between

United States price and foreign market

value may vary from the percentages

stated above. The Department will issue

appraisement instructions directly to

the Customs Service.

Furthermore, the following deposit

requirements will be effective upon

publication of this notice of final results

of review for all shipments of coldrolled carbon steel flat products from

the Netherlands entered, or withdrawn

from warehouse, for consumption on or

after the publication date, as provided

for by section 751(a)(1) of the Act: (1)

The cash deposit rate for the reviewed

company will be the rate for that firm

as stated above; (2) if the exporter is not

a firm covered in this review, or the

original less than fair value (LTFV)

investigation, but the manufacturer is,

the cash deposit rate will be the rate

established for the most recent period

for the manufacturer of the

merchandise; and (3) if neither the

exporter nor the manufacturer is a firm

covered in this review, the cash deposit

rate will be 19.32 percent. This is the

‘‘all others’’ rate from the amended final

determination in the LTFV

investigation. See Amended Final

Determination Pursuant to CIT

Decision: Certain Cold-Rolled Carbon

Steel Flat Products from the

Netherlands, 61 FR 47871. These

deposit requirements, when imposed,

shall remain in effect until publication

of the final results of the next

administrative review.

This notice serves as a final reminder

to importers of their responsibility

under § 353.26 of the Department’s

regulations to file a certificate regarding

the reimbursement of antidumping

duties prior to liquidation of the

relevant entries during this review

period. Failure to comply with this

requirement could result in the

Secretary’s presumption that

reimbursement of antidumping duties

occurred and the subsequent assessment

of double antidumping duties.

This notice also serves as a reminder

to parties subject to administrative

protective order (APO) of their

responsibility concerning the

disposition of proprietary information

disclosed under APO in accordance

with § 353.34(d) of the Department’s

regulations. Timely notification of

return/destruction of APO materials or

conversion to judicial protective order is

hereby requested. Failure to comply

with the regulations and the terms of an

APO is a sanctionable violation.

This administrative review and this

notice are in accordance with section

751(a)(1) of the Act (19 U.S.C.

1675(a)(1)) and § 353.22 of the

Department’s regulations.

Dated: April 2, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–9427 Filed 4–14–97; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–351–817]

Certain Cut-to-Length Carbon Steel

Plate From Brazil: Final Results of

Antidumping Duty Administrative

Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of

antidumping duty administrative

review.

SUMMARY: On October 4, 1996, the

Department of Commerce (the

Department) published the preliminary

results of the administrative review of

the antidumping duty order on certain

cut-to-length carbon steel plate from

Brazil. This review covers one

manufacturer/exporter of the subject

merchandise to the United States during

the period of review (POR), August 1,

1994, through July 31, 1995. We gave

interested parties an opportunity to

comment on our preliminary results.

Based on our analysis of the comments

received, we have changed the results

from those presented in the preliminary

results of review.

EFFECTIVE DATE: April 15, 1997.

FOR FURTHER INFORMATION CONTACT:

Helen Kramer or Linda Ludwig,

Enforcement Group III, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW, Washington, D.C. 20230;

telephone: (202) 482–0405 or (202) 482–

3833, respectively.

SUPPLEMENTARY INFORMATION:

Background

On October 4, 1996, the Department

published in the Federal Register (61

FR 51904) the preliminary results of the

administrative review of the

antidumping duty order on certain cutto-length carbon steel plate from Brazil

(58 FR 44164, August 19, 1993). The

Department has now completed this

administrative review in accordance

with section 751 of the Tariff Act of

1930, as amended (the Act).

Applicable Statute and Regulations

Unless otherwise stated, all citations

to the Tariff Act of 1930, as amended

(the Tariff Act) are references to the

provisions effective January 1, 1995, the

effective date of the amendments made

to the Tariff Act by the Uruguay Round

Agreements Act (URAA). In addition,

unless otherwise indicated, all citations

to the Department’s regulations are to

the current regulations, as amended by

the interim regulations published in the

Federal Register on May 11, 1995 (60

FR 25130).

Scope of This Review

The products covered by this

administrative review constitute one

‘‘class or kind’’ of merchandise: certain

cut-to-length carbon steel plate. These

products include hot-rolled carbon steel

universal mill plates (i.e., flat-rolled

products rolled on four faces or in a

closed box pass, of a width exceeding

150 millimeters but not exceeding 1,250

millimeters and of a thickness of not

less than 4 millimeters, 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 hot-rolled carbon steel flatrolled products in straight lengths, 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

millimeters or more in thickness and of

a width which exceeds 150 millimeters

and measures at least twice the

thickness, as currently classifiable in the

Harmonized Tariff Schedule (HTS)

under item numbers 7208.40.3030,

7208.40.3060, 7208.51.0030,

7208.51.0045, 7208.51.0060,