[Federal Register Volume 62, Number 72 (Tuesday, April 15, 1997)]
[Notices]
[Pages 18476-18486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9427]



[[Page 18476]]

-----------------------------------------------------------------------

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 cold-rolled 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

[[Page 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 
Sec. 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

[[Page 18478]]

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

[[Page 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

[[Page 18480]]

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 
just-in-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 well-
established 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 end-users 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

[[Page 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

[[Page 18482]]

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.

[[Page 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

[[Page 18484]]

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 
double-counting. 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

[[Page 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 Sec. 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 cold-rolled 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 
Sec. 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

[[Page 18486]]

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 
weighted-average margin exists:

------------------------------------------------------------------------
                                                                 Margin 
           Manufacturer/exporter             Period of review  (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 cold-rolled 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 Sec. 353.26 of the Department's regulations to 
file a certificate regarding the reimbursement of antidumping duties 
prior to liquidation of the relevant entries during this review period. 
Failure to comply with this requirement could result in the Secretary's 
presumption that reimbursement of antidumping duties occurred and the 
subsequent assessment of double antidumping duties.
    This notice also serves as 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 Sec. 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 Sec. 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