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[Federal Register Volume 62, Number 72 (Tuesday, April 15, 1997)]
[Notices]
[Pages 18486-18493]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9428]

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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.

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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 cut-to-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 flat-rolled 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,

[[Page 18487]]

7208.52.0000, 7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 
7211.13.0000, 7211.14.0030, 7211.14.0045, 7211.90.0000, 7212.40.1000, 
7212.40.5000, and 7212.50.0000. Included 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 is grade X-70 plate. These 
HTS item numbers are provided for convenience and Customs purposes. The 
written description remains dispositive.
    On April 2, 1997, the Department determined that ``profile slab'' 
produced by Companhia Siderurgica de Tubarao (CST) constitutes a type 
of plate and therefore falls within the scope of the antidumping order 
on carbon steel plate from Brazil. Memorandum to Holly A. Kuga, 
Regarding the Final Scope Ruling--Antidumping and Countervailing Duty 
Orders on Certain Cut-to-Length Carbon Steel Plate from Brazil--Request 
by Wirth Limited for a Ruling on Profile Slab.
    The POR is August 1, 1994, through July 31, 1995. This review 
covers entries of certain cut-to-length carbon steel plate by Companhia 
Siderurgica de Tubarao (CST).

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 (CST) 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).

Comment 1

    Respondent argues that the Department incorrectly excluded home 
market credit costs from its margin calculations. In respondent's view, 
the taxa referential (TR), is the Brazilian equivalent to a benchmark 
interest rate, such as the prime rate or the LIBOR rate, and the 
Department erred in rejecting the TR as a useful surrogate for short-
term interest rates in Brazil.
    Respondent notes that CST did not have any short-term Brazilian 
currency borrowing during the POR and in its original Section B 
response it proposed using CST's borrowing rate in connection with coal 
purchases as a surrogate for short-term interest rates. Respondent adds 
that the Department rejected this approach and asked CST to provide 
published home market prime rates, such as the rates for the Bank of 
Brazil or the Bank of Minas Gerais, and use these rates for the 
calculation of credit costs.
    Respondent states that in its supplemental response it provided TR 
rates during the POR and provided background materials on the TR which 
state that the TR is a referential interest rate and not an inflation 
index. Respondent notes that the Department did not raise any questions 
about the use of the TR or any discrepancies associated with the TR 
during verification, in the verification report or elsewhere during the 
proceeding, prior to the September 25, 1996, decision memorandum. 
Respondent argues that the Department's conclusion in this memorandum 
that the TR is an inflation index, not an interest rate, was not 
supported and the Department did not explain its departure from past 
findings. CST objects on procedural grounds to the Department's 
decision not to make a home market credit adjustment as the Department 
did not inform respondents of questions it had regarding submitted 
information. See Bowe-Passat v. United States,  17 CIT 335, 343 (1993).
    CST alleges that the TR is an appropriate rate to measure the cost 
of credit because it is a rate calculated and published by the Bank of 
Brazil similar to the prime rate. Respondent also notes that the 
Department, after extensive verification, used the TR as the surrogate 
home market interest rate in Ferrosilicon from Brazil, 59 FR 732, 735 
(Jan. 6, 1994). Respondent attached an excerpt from a Brazilian 
treatise on financial markets which states that the TR was created to 
serve as a basic referential rate of interest to be charged in the 
month of issuance and ``should function as the LIBOR or prime rate.''
    Petitioners support the Department's denial of CST's claimed 
deduction for home market credit expenses without elaboration.
Department's Position
    We agree in part with respondent and have allowed a credit 
adjustment in the final results. We note that the original materials 
about the TR provided by respondent (see CST's February 29, 1996, 
submission) were unclear as to whether the TR is a pure short-term 
interest rate. These documents, taken from the provisional bill 
establishing the TR and the ``Collor Plan'' Manual prepared by the 
Economy Ministry, describe the TR as calculated by the Central Bank of 
Brazil from ``the average of monthly net revenue by deposits with fixed 
terms raised by branches of commercial banks, investment banks or 
multiple banks with commercial or investment divisions, and/or federal 
public bonds. * * *'' (CST's translation.) This takes into account all 
deposits with fixed terms, including those in investment banks, and 
federal public bonds, not just short-term deposits. However, the 
information submitted by respondent as an attachment to its November 4, 
1996, case brief states that the TR was initially calculated based on 
the weighted average of the rates on 30-35 day bank deposit 
certificates issued by a subgroup of 20 financial institutions, and 
since May 1, 1993, was calculated on a daily basis.
    The TR is further described in the original materials we received 
as ``a type of interest rate which is based on the market rate, 
including the expectation of economic agents with regard to the future 
revenue of financial assets.'' The phrase ``a type of interest rate 
which is based on the market rate,'' suggests that there is some kind 
of adjustment from an actual interest rate. Respondent's more recent 
submission states that a part of the actual interest rate is deducted 
in calculating the TR so as to discount the cost of taxes on the bank 
deposit certificates.
    Finally, we note that beyond issuing a supplemental questionnaire, 
the Department is not required to give prior notice before disallowing 
a claimed adjustment. Our supplemental questionnaire clearly requested 
CST to use published Brazilian prime rates in its calculation of home 
market credit expenses. CST substituted the TR without explanation. 
There is no indication that the respondent in Ferrosilicon was asked to 
use a bank rate for its home market credit calculation. The Department 
is not obligated to make additional requests for information showing 
that the data respondent submits meet the requirements imposed by the 
Department. However, because we have determined that the TR does, in 
fact, appear to be a benchmark comparable to a prime rate and is 
published by the Bank of Brazil, we have used the submitted TR data in 
calculating CST's credit adjustment.

Comment 2

    Respondent argues that the Department should calculate CST's home 
market imputed credit costs using gross price. CST claims that its 
liability for taxes is not contingent on customer payment. CST 
submitted credit costs based on net price and gross price. Respondent 
states that in previous decisions the Department has calculated credit 
costs based on a gross price

[[Page 18488]]

inclusive of taxes. (See Stainless Steel Angles from Japan, 60 FR 
16608, 16615 (March 31, 1995).)
    Petitioners counter that if the Department were to include a 
deduction for home market credit expenses, it should base this 
deduction on net price. Petitioners argue that imputed credit costs 
should reflect the cost to CST of the time value of money and that in 
this case, there is no opportunity cost to CST of carrying the tax 
amounts as receivables, since they will not be paid to the Brazilian 
government until after the receipt of payment from the customer 
(Furfuryl Alcohol from South Africa, 61 FR 22550, 22552 (May 8, 1995)).
Department's Position
    We agree with petitioners that credit expenses should be calculated 
on the basis of net price. See Final Determination of Sales at Less 
than Fair Value; Steel Wire Rope from Korea, 58 FR 11029, 11032 
(February 23, 1993), where the Department stated:

    It is not the Department's current practice to impute credit 
expenses related to VAT payments. We find that there is no statutory 
or regulatory requirement for making the proposed adjustment. While 
there may be a potential opportunity cost associated with the 
respondents' prepayment of the VAT, this fact alone is not a 
sufficient basis for the Department to make an adjustment in price-
to-price comparisons. We note that virtually every charge or expense 
associated with price-to-price comparisons is either prepaid or paid 
for at some point after the cost is incurred. Accordingly, for each 
pre- or post-service payment, there may also be an opportunity cost 
or gain. Thus, to allow the type of credit adjustment suggested by 
the respondents would imply that in the future the Department would 
be faced with the virtually impossible task of trying to determine 
the potential opportunity cost or gain of every charge and expense 
reported in the respondents' home market and U.S. databases. This 
exercise would make our calculations inordinately complicated, 
placing an unreasonable and onerous burden on both respondents and 
the Department, without necessarily ensuring a more accurate dumping 
margin calculation.

The comment in the Stainless Steel Angles case cited by the respondent 
refers to pre-shipment advance payment for the merchandise, rather than 
taxes, and is not contrary to the Department's position with respect to 
basing credit calculations on a price net of taxes.

Comment 3

    Respondent observes that the Department failed to make an upward 
adjustment to U.S. price for CST's duty drawback adjustment, which the 
Department must do under U.S. law. CST notes that it calculated and 
submitted and the Department verified a per-ton duty drawback 
adjustment. Respondent states that the Department should correct this 
error in its final determination.
Department's Position
    We agree with respondent and have made the suggested correction in 
the final results.

Comment 4

    Respondent argues that the Department should correct its home 
market tax deduction. Respondent claims that to achieve tax neutrality, 
the Department should deduct from normal value the full amount of the 
IPI tax assessed on CST's home market sales but not on export sales. 
Instead, the Department deducted only five percent of the IPI tax 
assessed, because CST is eligible for an incentive rebate of 95 percent 
of the IPI paid to the government. CST claims that this is not in 
accordance with antidumping law and that the Department has no 
authority in an AD proceeding to net any subsequent receipts under a 
fiscal incentive program against taxes imposed. Citing Huffy Corp. v. 
United States, 632 F. Supp. 50, 55 (CIT 1986), respondent argues that 
if the Department were to limit its adjustment in this case to reflect 
the provision of a subsequent incentive to CST, it would in effect be 
increasing the amount of AD duties by the amount of a possible (though 
not proven) subsidy, without ever determining whether such a subsidy 
were even countervailable. Respondent claims that in previous AD 
investigations involving companies entitled to the IPI fiscal incentive 
rebate, the Department has never reduced the IPI tax adjustment.
    Petitioners argue that the Department correctly calculated the IPI 
deduction. Petitioners state the Department's methodology was 
consistent with the URAA and cite the URAA's Statement of 
Administrative Action (SAA):

    The deduction from normal value for indirect taxes constitutes a 
change from the existing statute. The change is intended to ensure 
that dumping margins will be tax-neutral. The requirement that the 
home market consumption taxes in question be ``added to or included 
in the price'' of the foreign like product is intended to insure 
that such taxes actually have been charged and paid on the home 
market sales used to calculate normal value. * * * It would be 
inappropriate to reduce a foreign price by the amount of the tax, 
unless a tax liability had actually been incurred on the sale.

Petitioners argue that because the Department found that, although the 
IPI amounts were paid to the government, all but 95 percent of these 
amounts were immediately credited back to CST in the form of fiscal 
incentives, the Department correctly declined to deduct the full amount 
of the reported adjustment.
    Petitioners reject CST's argument that the Department should make 
an adjustment on the full amount of the IPI because the full amount is 
the amount that was ``paid.'' Petitioners note that in every instance 
part of the IPI is immediately credited back to CST in a percentage 
that is known beforehand, limiting CST's real tax liability to the 
small portion that is paid but not credited back. Thus, they state that 
the Department correctly calculated CST's home market tax deduction and 
that were the Department to do otherwise it would violate the SAA's 
requirement that dumping margins ``be tax neutral.''
    Petitioners also reject respondent's argument that the Department 
should not be investigating fiscal incentive credits in the context of 
an AD review because the credits may also be countervailable subsidies. 
Petitioners claim that Huffy fully supports the Department's course of 
action. In that case, according to petitioners, the CIT stated that the 
Department must refrain from making a subsidy determination in the 
context of a dumping investigation, and that in a dumping investigation 
the Department is not seeking the same information or asking the same 
questions as it would in a countervailing duty investigation. 
Petitioners conclude that whether it is possible that the IPI fiscal 
incentives may also be countervailable subsidies should not be 
considered in this proceeding.
Department's Position
    Because the reported home market sales are IPI-inclusive, we agree 
with the respondent that, given the particular circumstances of this 
case, the entire amount of IPI tax paid should be deducted from normal 
value, rather than the amount paid minus the amount rebated. Although 
respondent refers to the IPI rebate only as a ``possible (though not 
proven) subsidy,'' the Department has already made a determination that 
the IPI rebate at issue, which is provided only to steel companies, is 
a countervailable subsidy. See Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Brazil, 58 FR 37295, 37298-
99, 37301 (July 9, 1993). Benefits received on respondent's sales of 
carbon steel plate pursuant to the IPI rebate program at issue are 
currently being countervailed based on the countervailing duty order 
issued in that

[[Page 18489]]

companion case. Countervailing Duty Order and Amendment to Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Brazil, 58 FR 43751, 43751-52 (August 17, 1993). Section 
773(a)(6)(B)(iii) of the Act, (19 U.S.C. 1677b (a)(6)(B)(iii)) provides 
for reducing normal value by ``the amount of any taxes imposed directly 
upon the foreign like product or components thereof which have been 
rebated, or which have not been collected, on the subject merchandise, 
but only to the extent that such taxes are added to or included in the 
price of the foreign like product.'' This provision embodies the 
principle of GATT Article VI(5) that the simultaneous implementation of 
companion AD and CVD orders may not result in a double remedy. If the 
rebate were offset, it would reduce the amount of the IPI tax deduction 
from normal value by the amount of the rebate, thus increasing the 
margin and thereby correcting a second time for the rebate, which has 
already been countervailed under the companion CVD order.
    Huffy Corp. v. United States, 632 F. Supp. 50, 55 (CIT 1986), upon 
which both parties rely, does not govern the situation in this case. In 
Huffy, the CIT rejected a claim by petitioner that a subsidy should not 
be allowed to lower an AD margin and that therefore ITA improperly 
increased United States Price for a rebate of import duties on inputs. 
In reaching this decision, the Huffy court pointed to a specific 
statutory provision calling for the adjustment for the import duty 
rebate at issue and added that the Court should not preempt the 
countervailing duty statute and make determinations as to whether a 
subsidy exists in the context of an antidumping case. There was no 
companion CVD order in the administrative proceeding underlying the 
decision in Huffy. In this case, the determination that the IPI rebate 
constitutes a subsidy has already been made in the CVD case. The only 
question is therefore how to obtain a tax-neutral dumping margin and no 
double remedy for subsidies and dumping; this is achieved by 
countervailing the IPI rebate under the CVD order and deducting the 
full amount of IPI paid from normal value pursuant to section 
773(a)(6)(B)(iii).

Comment 5

    Respondent alleges that the Department incorrectly determined that 
CST's date of sale in the home market should be the order confirmation 
date. CST states that many sales had multiple order acknowledgments and 
that the prices and terms set forth in any given order acknowledgment 
could be and were changed at will. Respondent claims that the 
Department does not recognize an event in the sales process as a 
reliable date of sale if there is a chance that the terms and 
conditions of sale can and will change after that event. Respondent 
cites Certain Cut-to-length Carbon Steel Plate from Brazil, 58 FR 
37091, 37093 (July 9, 1993) (Final), arguing that in this case the 
Department rejected one respondent's U.S. date of sale methodology 
because it found evidence of changes in the material sales terms after 
the reported date of sale in a small quantity of sales. Respondent also 
cites to Canned Pineapple Fruit from Thailand, 60 FR 29553 (June 5, 
1995) (Final) in which respondent claims the Department asked 
respondents to indicate whether changes could occur after the order 
date.
    Respondent acknowledges that CST does issue a new order 
acknowledgment when terms are changed, but argues that new order 
acknowledgments can be issued until the date of shipment and that 
changes can and do occur after an order acknowledgment is issued. 
Respondent also notes that the price in local currency is not known 
until the date of invoice and cites the Department's new draft 
regulations in support of using date of invoice.
    Petitioners argue that the Department correctly determined the home 
market date of sale to be the order acknowledgment date. Petitioners 
respond to CST's argument that a sale may have multiple order 
acknowledgment dates, and that the terms are not definitively set until 
shipment, by noting that if terms were changed a new order 
acknowledgment would be issued. Petitioners add that the mere fact that 
changes might occur is irrelevant, since CST admits that if there are 
changes a new order acknowledgment is issued.
    Petitioners distinguish this case from the cases cited by 
respondent. With respect to Certain Cut-to-length Carbon Steel Plate 
from Brazil, 58 FR 37091, 37093 (July 9, 1993) (Final), petitioners 
note that USIMINAS's reported date of sale was rejected because the 
Department found evidence that there were changes in the terms of sale 
after the respondent's date of sale. Petitioners argue that even if 
CST's claim that the Department selected the invoice date as the date 
of sale in Pineapples is correct, that case is distinguishable from 
this proceeding, because in this case there is no possibility that 
there were changes in material terms after respondent's reported date 
of sale.
    Petitioners also reject CST's argument that the order 
acknowledgment date cannot be the date of sale because the price in 
local currency is not known until the date of invoice. Petitioners 
state that the law is clear--``the essential terms of price and 
quantity are firm when they are no longer within the control of the 
parties to alter.'' (See Polyvinyl Alcohol from Taiwan, 61 FR at 
14067.) Petitioners, citing the Department's analysis memorandum and 
verification report, add that by CST's own admission, at the time of 
order acknowledgment the parties agree on both the price in dollars and 
on the exchange rate to be used on the date of invoice. Thus, in 
petitioners'' view, price and quantity are set on the date of order 
acknowledgment, as the final invoice price is outside the control of 
either party and is effectively fixed for purposes of determining the 
date of sale.
Department's Position
    We agree with petitioners. CST stated at verification that if there 
are changes to an order acknowledgment, a new order acknowledgment 
always is issued. This is fully consistent with our findings at 
verification; we found no instances in which any terms were changed 
after the final order acknowledgment was issued. Thus, while respondent 
may not know in advance if an individual order acknowledgment will be 
the final one, in retrospect it can always do so. As petitioners note, 
this fact distinguishes the facts of this case from the cases cited by 
respondent.
    We also reject CST's argument that the order acknowledgment date 
cannot be the date of sale because the price in local currency is not 
known until the date of invoice. We found at verification that CST and 
its customer agree on both the price in dollars and on the exchange 
rate to be used on the date of invoice at the time the order 
acknowledgment is issued. Thus, price and quantity are set on the date 
of order acknowledgment, as the final invoice price is outside the 
control of either party and is effectively fixed for purposes of 
determining the date of sale. It is immaterial if the exact price in 
local currency is not known at this time as long as the mechanism for 
determining this price is set--which it is in this case.

Comment 6

    Respondent argues that the Department incorrectly determined that 
CST is affiliated with USIMINAS and COSIPA. Respondent notes that the 
Bozano Group only owned 20.3 percent of the stock of CST and 8 percent 
of the stock of USIMINAS. Respondent notes that with respect to CST 
there were two other shareholders with a percentage

[[Page 18490]]

ownership of CST that was equal to Bozano's and there were two other 
shareholders which each owned almost 13 percent of CST's stock.
    Respondent claims that there is no evidence to support 
petitioners'' claim that Bozano was part of a controlling shareholder 
group consisting of Bozano and CVRD. Respondent cites to the 
Shareholders'' Agreement in Verification exhibit 4A, which speaks of a 
core group, consisting of the Bozano Group, CVRD plus UNIBANCO and 
Kawasaki. Citing the Shareholders'' Agreement, respondent argues that 
no single member of the group would be in a position to exercise 
control, as actions must have the support of parties holding at least 
60 percent of the shares. Respondent further notes that Bozano and 
CVRD, even together, only appoint four of the nine members of CST's 
Board of Directors, known in Brazil as the Administrative Council.
    Respondent claims that Julio Bozano's position as president of 
CST's Administrative Council did not permit him to exercise restraint 
or control over CST. Again citing to the Shareholders'' Agreement, 
respondent argues that the purview of the Administrative Council is 
limited to large corporate and financial decisions, rather than setting 
product pricing or production decisions.
    Respondent claims that the Department determined that CST was 
affiliated with COSIPA solely because of USIMINAS' stockholdings in 
COSIPA. Respondent does not discuss whether USIMINAS and COSIPA are 
affiliated because of its contention that CST is not affiliated with 
USIMINAS. Respondent argues if it is not affiliated with USIMINAS, it 
is also not affiliated with COSIPA.
    Petitioners counter that the Department's determination that CST is 
affiliated with USIMINAS AND COSIPA is correct and fully supported by 
the record. Petitioners note that the Department's decision was based 
on the following: Julio Bozano is both President and Chairman of CST's 
Board and President of USIMINAS's Board; Banco Bozano provided 
substantial financing to all three steel producers; the Bozano Group 
has a significant minority shareholding interest in all three steel 
producers; the combination of Julio Bozano's role as President of 
USIMINAS, USIMINAS' ownership of almost half of COSIPA's voting stock, 
and the Bozano Group's minority ownership of COSIPA place Bozano in a 
position of influence over COSIPA. Petitioners state that CST does not 
challenge the Department's conclusion regarding Bozano's control over 
USIMINAS and COSIPA.
    Petitioners argue that the legislative history of the URAA makes it 
clear that the statute does not require majority ownership for a 
finding of control, and cites to prior Department control decisions in 
which a party did not have the power to appoint a majority of the board 
(Certain Cold-Rolled Carbon Steel Flat Products from Korea, 60 FR 65284 
(Dec. 19, 1995). Petitioners claim that in addition to its substantial 
ownership stake in CST and its ability to name two board members, Banco 
Bozano was the largest private lender to CST throughout the POR. Thus, 
in petitioners' view, CST's argument that Bozano did not control CST 
ignores ``business and economic reality,'' the standard in the SAA.
    Petitioners also disagree with respondent's claims regarding the 
Administrative Council. They note that CST acknowledges that its 
Administrative Council's jurisdiction includes power over: 
consolidations, mergers and splitting operations involving CST, and 
approval of, and changes in CST's long-term business plans. Petitioners 
argue that these are precisely the types of power that a producer's 
management exercises in restructuring manufacturing priorities, such as 
would be involved in shifting production between CST and USIMINAS. 
Petitioners further argue that the Administrative Council's powers are 
more extensive than CST concedes. Citing CST's Bylaws, petitioners 
claim that additional powers of the Council include: monitoring the 
performance of the directors; examining the Company's books; requesting 
information on contracts; setting the general orientation for Company 
business; establishing the basic guidelines for executive actions, as 
well as issues relating to technical aspects of production and 
marketing; and authorizing the opening, transfer or closing of offices, 
affiliates, subsidiaries, or other Company establishments. Petitioners 
also explain that on a day-to-day basis the Administrative Council 
exercises control over CST through an executive management group called 
the executive directorate, selected by and responsible to the 
Administrative Council. Thus, petitioners conclude that the Council 
does have legal power to exercise restraint and direction over CST's 
operations.
Department's Position
    We agree with petitioners that CST is affiliated with USIMINAS and 
COSIPA. Section 771(33) of the Act, which governs which entities shall 
be considered ``affiliated,'' requires the Department to base its 
findings of control on several factors, not merely the level of stock 
ownership. In commenting on this section, the SAA states that: ``The 
traditional focus on control through stock ownership fails to address 
adequately modern business arrangements, which often find one firm 
`operationally in a position to exercise restraint or direction' over 
another even in the absence of an equity relationship.'' SAA at 838, 
quoting section 771(33). Our decision regarding affiliation was based 
on the following: Julio Bozano is both President and Chairman of CST's 
Board and President of USIMINAS's Board; Banco Bozano provided 
substantial financing to all three steel producers; the Bozano Group 
has a significant minority shareholding interest in all three steel 
producers; the combination of Julio Bozano's role as President of 
USIMINAS, USIMINAS' ownership of almost half of COSIPA's voting stock, 
and the Bozano Group's minority ownership of COSIPA place Bozano in a 
position of influence over COSIPA.
    Respondent's argument against affiliation focuses on: Bozano's 
minority shareholder role; under the terms of the Shareholders' 
Agreement support of 60 percent of the shareholdings is required; 
Bozano does not appoint a majority of the members of the board; and 
that Julio Bozano's position as President of CST's Administrative 
Council did not permit Bozano to exercise restraint or control over 
CST.
    As petitioners state, the legislative history of the URAA makes it 
clear that the statute does not require majority ownership for a 
finding of control. Even a minority shareholder interest, examined 
within the context of the totality of other evidence of control, can be 
a factor that we consider in determining whether one party is 
operationally in a position to control another. In this case, the 
Bozano Group has a minority shareholder interest in all three steel 
companies in question, and this can appropriately be considered in our 
affiliation analysis. As respondent's only argument with respect to 
Bozano's control over USIMINAS and COSIPA was that Bozano's minority 
shareholding was not a sufficient basis for control, and respondent did 
not address the other factors considered by the Department, we continue 
to support our original decision with respect to these companies.
    With respect to CST's Shareholders' Agreement, we note that despite 
multiple submissions from parties on the issue of affiliation and 
petitioners' specific allegations regarding the existence of a 
``control group,'' the first

[[Page 18491]]

time respondent even identified the existence of this agreement was at 
verification. It is true that this agreement is currently between the 
four parties identified by respondent. However, the Shareholders' 
Agreement indicates that it was originally an agreement between CVRD 
and Bozano (as of December 1, 1993). UNIBANCO became a party to the 
agreement on April 25, 1994. Kawasaki did not enter the agreement until 
May 25, 1995--close to the end of the POR.
    Respondent acknowledges that its Administrative Council's 
jurisdiction includes power over: consolidations, mergers and splitting 
operations involving CST, and approval of, and changes in CST's long-
term business plans. However, respondent has taken this list of 
functions from the Shareholders' Agreement, not CST's Bylaws. As 
petitioners correctly state, CST's Administrative Council has 
substantial additional functions under the terms of CST's Bylaws. Taken 
together, these are precisely the types of power that a producer's 
management exercises in restructuring manufacturing priorities, such as 
would be involved in shifting production between CST, USIMINAS and 
COSIPA. While it is true that the support of 60 percent of the 
shareholdings is required to make decisions under the terms of the 
Shareholders' Agreement, Julio Bozano's position as president of CST's 
Administrative Council allows him to chair Council meetings, help set 
the agenda for meetings, vote and voice his opinion on proposals before 
the Council. This clearly gives him the potential to influence pricing 
and production decisions with respect to CST. See Certain Cold-Rolled 
Carbon Steel Flat Products from Korea, 60 FR 65284, 65284-5 (December 
19, 1995),
    Thus, for the reasons originally enumerated in the Department's 
September 10, 1996, memorandum, we continue to find that CST is 
affiliated with USIMINAS and COSIPA.

Comment 7

    Petitioners argue that the Department must apply partial facts 
available because CST withheld crucial information regarding its 
affiliates. Specifically, petitioners state that the Department was not 
able to obtain sufficient information to confirm that CST was 
affiliated with a certain Brazilian steel reseller until verification. 
Petitioners state that this failure was crucial, because CST's sales to 
this affiliated party matched a majority of its U.S. sales, but failed 
the arm's length test and therefore could not be used by the Department 
in price-to-price comparisons. Furthermore, downstream sales to 
unaffiliated customers had not been reported. Petitioners claim that 
under the Department's regulations, it must use the facts otherwise 
available where a party withholds information requested by the 
Department. Petitioners note that CST did not identify this reseller as 
an affiliate, report its downstream sales to unaffiliated customers or 
contact the Department about the reporting of these sales. In 
petitioners' view, the Department should apply an adverse inference in 
its selection of facts available and apply the highest rate from the 
petition to the U.S. sales which were matched to CST's sales to this 
affiliate before application of the arm's length test.
    Respondent argues that the Department should not apply partial 
facts available for CST's sales to this reseller. Indeed, respondent 
argues that it is not affiliated with this reseller. CST argues that 
the Bozano Group is not in a position to exercise operational control 
over both CST and USIMINAS, and that even if USIMINAS and CST are 
affiliated, the Department would have to undertake a separate analysis 
with respect to the reseller in question. While noting that USIMINAS 
does control this reseller, respondent claims that there is no basis 
for finding that this company is affiliated with CST or that it is 
controlled by Bozano.
    Respondent argues that the Department's questionnaire initially 
leaves it up to the respondent to identify affiliated parties. 
Respondent states that in this case, the affiliated issue was complex, 
involving multiple submissions from interested parties and extensive 
analysis by the Department. Respondent also notes that this is the 
first case addressing the issue of mutual control/affiliation under the 
new law. Because CST did not purposely deceive the Department, in 
respondent's view, there are no grounds for punishing CST with the 
application of facts available. Respondent argues that even if the 
Department determines that this reseller is affiliated with CST, the 
Department should simply perform the arm's length test. Respondent 
claims that sales to this reseller are not overly significant in terms 
of margin calculations, and that all U.S. sales that are potentially 
matched to sales to this customer also match sales to other home market 
customers. Respondent argues that downstream sales made by this 
reseller are to end-users, while U.S. sales and other home market sales 
are to distributors/resellers. Finally, respondent argues, because it 
does not control the reseller in question, it could not have obtained 
resale information from this party.
Department's Position
    As noted in our response to comment 6 above, we continue to find 
that CST and USIMINAS are affiliated. Given that the reseller in 
question is 100 percent owned by USIMINAS, a separate affiliation 
analysis is not required. While it is true that affiliation is a new 
concept, since the issue of affiliation was raised early in this 
proceeding, respondent would have been well advised to seek guidance on 
its reporting of this reseller's downstream sales. Respondent did not 
do so.
    The Department applied the arm's length test to CST's sales to its 
affiliated reseller. These sales failed the test. Consequently, we did 
not use these sales in the preliminary results. Because these sales 
were only a small portion of CST's reported home market sales, we did 
not ask CST to report sales made by the affiliated reseller to the 
first unaffiliated customer (downstream sales). There were sufficient 
remaining home market sales to match to U.S. sales for the purpose of 
determining the dumping margin. All the sales to the affiliated 
reseller had the same CONNUMH and date of sale. Without these sales we 
found identical matches for the same CONNUM and sale month. Omitting 
these sales did not have a distorting effect on the margin calculation. 
Therefore, we have determined for these final results that there is no 
need to use facts otherwise available.

Comment 8

    Petitioners argue that the Department should use facts available 
for the difference in merchandise (difmer) adjustment. Petitioners 
argue that CST was required to provide variable and total cost on a 
product-specific basis to allow calculation of the difmer adjustment. 
However, petitioners state that CST only reported two sets of costs--
one for high manganese products and another for low manganese products. 
Petitioners argue that for partial facts available, the Department 
should select a difmer adjustment of 20 percent of total cost of 
manufacturing in each case where similar (rather than identical) 
products are matched. See Porcelain-on-Steel Cookware from Mexico, 61 
FR 54616, 54617 (October 21, 1996); Certain Cold-Rolled Carbon Steel 
Flat Products from Korea, 60 FR 65284, 65287 (December 19, 1995) and 
Cemex, S.A. v. United States, Slip Op. 96-132, at 9 (CIT August 13, 
1996).
    Respondent counters that the Department decided early in this

[[Page 18492]]

proceeding that CST's cost system was adequate for its dumping 
calculations. Respondent states that it submitted cost data in 
accordance with its existing cost accounting system. While petitioners 
requested that CST provide additional data, respondent notes that the 
Department did not ask it to do so and did not solicit CST to develop 
difmers outside its cost system. Respondent notes that the Department 
used the difmer data submitted by CST to analyze petitioners' cost 
allegation and argue that the Department would not have used this data 
unless the Department believed that CST's existing cost system and its 
submitted costs were useful and adequate for the purpose of this 
dumping proceeding. Respondent rejects petitioners' argument that it 
has a ``duty'' to develop a methodology to report costs that 
distinguish between product characteristics and claims that petitioners 
have failed to cite any support in the dumping law or case precedent 
for the proposition that this duty exists. Respondent also notes the 
Department's long-standing preference for the use of respondent's 
existing cost systems and cites Pineapples, in which the Department 
adjusted difmer costs for respondents because they were not based 
strictly on respondent's cost system.
Department's Position
    We disagree with petitioners. Section 773(f)(1)(A) of the Act 
expresses the Department's preference for using a respondent's existing 
cost accounting system when it is in accordance with generally accepted 
accounting practices (GAAP) and reasonably reflects the costs 
associated with the production of the subject merchandise. The approach 
used by CST in reporting the costs of its profile slabs, the only 
subject merchandise it exported during the POR, reasonably reflects 
CST's costs. Therefore, we did not ask CST to provide more detailed 
information on its variable and total costs of manufacturing. The 
reasons for this constitute proprietary information contained in CST's 
Section B response of November 13, 1995, beginning at B-37. See also 
the Analysis Memo of March 31, 1997. We verified CST's submitted 
variable and total costs of manufacturing; no discrepancies were 
identified. There is no basis to apply partial facts available in 
making a difmer adjustment under these circumstances.

Comment 9

    Petitioners claim that the respondent omitted an initial cost 
associated with foreign exchange contracts, and argue that the 
Department should increase the imputed credit cost for each U.S. 
customer using the ratio of the alleged effective interest rate to the 
interest rate used in the CREDITU calculation.
    Respondent claims that petitioners are confusing the concepts of an 
exchange rate with an interest rate. Respondent states that there is no 
one-time fee associated with the foreign exchange contracts, and that 
the proper rate to be extracted from the contract is the interest rate, 
which is what CST used in its credit cost calculation.
Department's Position
    We agree with the respondent. The rate the petitioners 
misinterpreted as an additional interest cost is clearly an exchange 
rate used to convert the value of the foreign exchange contract in 
dollars into local currency. See Verification Exhibit 13.

Comment 10

    Petitioners claim that an adjustment must be made for quality 
control costs directly associated with U.S. sales and that CST failed 
to report any such costs. Petitioners state that ultrasonic testing is 
a condition of sale for U.S. sales, but not for home market sales. 
Petitioners argue that the Department has consistently held that where 
a quality control expense is a condition of sale and can be tied to a 
specific market or sale, it should be deducted as a selling expense. 
See Oil Country Tubular Goods from Argentina, 60 FR 33539, 33548 (June 
28, 1995); Industrial Belts and Components and Parts Thereof, Whether 
Cured or Uncured, from Japan, 58 FR 30018, 30024 (May 25, 1993); and 
Stainless Steel Sheet and Strip Products from France, 48 FR 19441, 
(April 29, 1983). As partial facts available, petitioners urge the 
Department to use the cost identified in USIMINAS' questionnaire 
response in the third administrative review.
    Respondent argues that the Department should not make any 
deductions for ultrasonic testing. Respondent claims that petitioners' 
allegation that ultrasonic testing is an unreported selling expense is 
untimely, as it is based on inferences from CST's technical protocols 
that were submitted much earlier in the proceeding. Respondent notes 
that if this argument had been made earlier, CST would have had an 
opportunity to rebut them in the form of verifiable submissions.
    Respondent asserts that ultrasonic testing is not a direct, 
separately identifiable selling expense because it is a production 
overhead cost that is reflected in cost of goods sold. While not all of 
CST's technical protocols require ultrasonic testing, CST notes that 
all profile slab is subject to ultrasonic testing as an internal 
quality control measure. Respondent also denies that ultrasonic testing 
was a condition of sale on U.S. sales. Respondent argues that there is 
no indication on the mill certificates or U.S. customers' orders 
indicating otherwise.
Department's Position
    We agree with the respondent. Neither the U.S. purchase orders nor 
the mill certificates include any notations concerning ultrasonic 
testing as a specification.

Comment 11

    Petitioners claim that the Department should correct a ministerial 
error in the calculation of the ICMS tax on home market sales. 
Petitioners argue that the Department should calculate this amount on 
gross price, not net price.
    Respondent states that ICMS is applied on net price plus freight, 
not gross price. Respondent argues that to attain tax neutrality the 
Department is calculating the ICMS tax on the home market sale as if it 
had been exported and that no taxes other than the reduced ICMS tax are 
applied to an export sale.
Department's Position
    We agree with respondent. The ICMS tax is not applied to gross 
price. Moreover, as respondent correctly notes, no tax other than ICMS 
is applied to export sales.

Final Results of Review

    As a result of our review, we have determined that no margin exists 
for Companhia Siderurgica de Tubarao (CST) during the period 8/1/94-7/
31/95. 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 plate from Brazil 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 rates for the 
reviewed company will be zero; (2) for previously reviewed or 
investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
period; (3) if the exporter is not a firm covered in this review, or 
the original 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

[[Page 18493]]

the merchandise; and (4) if neither the exporter nor the manufacturer 
is a firm covered in this review, the cash deposit rate will be 75.54 
percent. This is the ``all others'' rate from the LTFV investigation. 
See Antidumping Duty Order and Amendment of Final Determination of 
Sales at Less Than Fair Value: Certain Cut-To-Length Carbon Steel Plate 
From Brazil, 58 FR 44164 (August 19, 1993). 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. 97-9428 Filed 4-14-97; 8:45 am]
BILLING CODE 3510-DS-P
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