40422 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

and performed minor further

manufacturing activities to produce

merchandise that was still within the

scope of the review. Changwon claims

that the above determinations are

indistinguishable from the facts

pertaining to Changwon and, thus, the

Department should continue to utilize

Changwon’s reported manufacturer for

each sale.

Petitioners did not comment on this

issue.

DOC Position

We agree with Changwon and given

there are no arguments or evidence on

the record to suggest otherwise, we have

continued to use Changwon as the

manufacturer, as reported, where

appropriate.

Continuation of Suspension of

Liquidation

In accordance with section 733(d) of

the Act, we are directing the Customs

Service to continue to suspend

liquidation of all entries of SSWR from

Korea that are entered, or withdrawn

from warehouse, for consumption, on or

after the date of publication of this

notice in the Federal Register. The

Customs Service shall continue to

require a cash deposit or posting of a

bond equal to the estimated amount by

which the normal value exceeds the

U.S. price as shown below. These

suspension of liquidation instructions

will remain in effect until further notice.

The weighted-average dumping margins

are as follows:

Exporter/manufacturer

Weightedaverage

margin percentage

Dongbang Special Steel Co.,

Ltd./ Changwon Specialty

Steel Co., Ltd./ Pohang Iron

and Steel Co., Ltd. ................ 3.18

Sammi Steel Co., Ltd. .............. 28.44

All Others .................................. 3.18

Pursuant to section 735(c)(5)(A) of the

Act, the Department has excluded the

margins determined entirely under

section 776 of the Act (facts available)

from the calculation of the ‘‘All Others

Rate.’’

ITC Notification

In accordance with section 735(d) of

the Act, we have notified the

International Trade Commission (ITC) of

our determination. As our final

determination is affirmative, the ITC

will, within 45 days, determine whether

these imports are materially injuring, or

threaten material injury to, the U.S.

industry. If the ITC determines that

material injury, or threat of material

injury does not exist, the proceeding

will be terminated and all securities

posted will be refunded or canceled. If

the ITC determines that such injury

does exist, the Department will issue an

antidumping duty order directing

Customs officials to assess antidumping

duties on all imports of the subject

merchandise entered for consumption

on or after the effective date of the

suspension of liquidation.

This determination is published

pursuant to section 777(i) of the Act.

Dated: July 20, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–20017 Filed 7–28–98; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–475–820]

Notice of Final Determination of Sales

at Less Than Fair Value: Stainless

Steel Wire Rod From Italy

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 29, 1998.

FOR FURTHER INFORMATION CONTACT:

Shawn Thompson or Irina Itkin, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW, Washington, DC 20230;

telephone: (202) 482–1776 or (202) 482–

0656, respectively.

The Applicable Statute

Unless otherwise indicated, all

citations to the Tariff Act of 1930, as

amended (the Act), are references to the

provisions effective January 1, 1995, the

effective date of the amendments made

to the Act by the Uruguay Round

Agreements Act (URAA). In addition,

unless otherwise indicated, all citations

to the regulations of the Department of

Commerce (the Department) are to the

regulations at 19 CFR part 351, 62 FR

27296 (May 19, 1997).

Final Determination

We determine that stainless steel wire

rod (SSWR) from Italy is being sold in

the United States at less than fair value

(LTFV), as provided in section 735 of

the Act. The estimated margins are

shown in the ‘‘Suspension of

Liquidation’’ section of this notice,

below.

Case History

Since the preliminary determination

in this investigation on February 25,

1998 (see Notice of Preliminary

Determination of Sales at Less Than

Fair Value and Postponement of Final

Determination: Stainless Steel Wire Rod

from Italy, 63 FR 10831 (Mar. 5, 1998)),

the following events have occurred:

In February 1998, we issued

supplemental questionnaires to the two

respondents in this case, Acciaierie

Valbruna S.r.l. (including its subsidiary

Acciaierie di Bolzano SpA) (collectively

‘‘Valbruna’’) and Cogne Acciai Speciali

S.r.l. (CAS). We received responses to

these questionnaires in March 1998.

In March, April, and May 1998, we

verified the questionnaire responses of

the two respondents, as well as the

section A response of an additional

company, Rodacciai SpA (Rodacciai). In

May 1998, CAS and Valbruna submitted

revised sales databases at the

Department’s request.

The petitioners (i.e., AL Tech

Specialty Steel Corp., Carpenter

Technology Corp., Republic Engineered

Steels, Talley Metals Technology, Inc.,

and the United Steel Workers of

America, AFL-CIO/CLC) and both

respondents submitted case briefs on

June 3, 1998, and rebuttal briefs on June

10, 1998. The Department held a public

hearing on June 17, 1998.

Scope of Investigation

For purposes of this investigation,

SSWR comprises products that are hotrolled or hot-rolled annealed and/or

pickled and/or descaled rounds,

squares, octagons, hexagons or other

shapes, in coils, that may also be coated

with a lubricant containing copper, lime

or oxalate. SSWR is made of alloy steels

containing, by weight, 1.2 percent or

less of carbon and 10.5 percent or more

of chromium, with or without other

elements. These products are

manufactured only by hot-rolling or hotrolling, annealing, and/or pickling and/

or descaling, are normally sold in coiled

form, and are of solid cross-section. The

majority of SSWR sold in the United

States is round in cross-sectional shape,

annealed and pickled, and later coldfinished into stainless steel wire or

small-diameter bar.

The most common size for such

products is 5.5 millimeters or 0.217

inches in diameter, which represents

the smallest size that normally is

produced on a rolling mill and is the

size that most wire-drawing machines

are set up to draw. The range of SSWR

sizes normally sold in the United States

is between 0.20 inches and 1.312 inches

diameter. Two stainless steel grades,
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40423

SF20T and K–M35FL, are excluded

from the scope of the investigation. The

chemical makeup for the excluded

grades is as follows:

SF20T

Carbon ....................... 0.05 max.

Manganese ................ 2.00 max.

Phosphorous ............. 0.05 max.

Sulfur ......................... 0.15 max.

Silicon ........................ 1.00 max.

Chromium .................. 19.00/21.00.

Molybednum .............. 1.50/2.50.

Lead .......................... added (0.10/0.30).

Tellurium .................... added (0.03 min).

K–M35FL

Carbon ....................... 0.015 max.

Silicon ........................ 0.70/1.00.

Manganese ................ 0.40 max.

Phosphorous ............. 0.04 max.

Sulfur ......................... 0.03 max.

Nickel ......................... 0.30 max

Chromium .................. 12.50/14.00.

Lead .......................... 0.10/0.30.

Aluminum .................. 0.20/0.35.

The products under investigation are

currently classifiable under subheadings

7221.00.0005, 7221.00.0015,

7221.00.0030, 7221.00.0045, and

7221.00.0075 of the Harmonized Tariff

Schedule of the United States (HTSUS).

Although the HTSUS subheadings are

provided for convenience and customs

purposes, the written description of the

scope of this investigation is dispositive.

Period of Investigation

The period of investigation (POI) is

July 1, 1996, through June 30, 1997.

Fair Value Comparisons

To determine whether sales of SSWR

from Italy to the United States were

made at less than fair value, we

compared the Export Price (EP) to the

Normal Value (NV). Except as noted

below, our calculations followed the

methodologies described in the

preliminary determination.

On January 8, 1998, the Court of

Appeals for the Federal Circuit issued a

decision in CEMEX v. United States,

1998 WL 3626 (Fed Cir.). In that case,

based on the pre-URAA version of the

Act, the Court discussed the

appropriateness of using constructed

value (CV) as the basis for foreign

market value when the Department

finds home market sales to be outside

the ‘‘ordinary course of trade.’’ This

issue was not raised by any party in this

proceeding. However, the URAA

amended the definition of sales outside

the ‘‘ordinary course of trade’’ to

include sales below cost. See Section

771(15) of the Act. Consequently, the

Department has reconsidered its

practice in accordance with this court

decision and has determined that it

would be inappropriate to resort

directly to CV, in lieu of foreign market

sales, as the basis for NV if the

Department finds foreign market sales of

merchandise identical or most similar to

that sold in the United States to be

outside the ‘‘ordinary course of trade.’’

Instead, the Department will use sales of

similar merchandise, if such sales exist.

The Department will use CV as the basis

for NV only when there are no abovecost sales that are otherwise suitable for

comparison. Therefore, in this

proceeding, when making comparisons

in accordance with section 771(16) of

the Act, we considered all products sold

in the home market as described in the

‘‘Scope of Investigation’’ section of this

notice, above, that were in the ordinary

course of trade for purposes of

determining appropriate product

comparisons to U.S. sales. Where there

were no sales of identical merchandise

in the home market made in the

ordinary course of trade to compare to

U.S. sales, we compared U.S. sales to

sales of the most similar foreign like

product made in the ordinary course of

trade, based on the characteristics listed

in Sections B and C of our antidumping

questionnaire. We have implemented

the Court’s decision in this case, to the

extent that the data on the record

permitted.

In instances in which a respondent

has reported a non-AISI grade (or an

internal grade code) for a product that

falls within a single AISI category, we

have used the actual AISI grade rather

than the non-AISI grade reported by the

respondent for purposes of our analysis.

However, in instances in which the

chemical content range of a reported

non-AISI (or an internal grade code)

grade is outside an AISI grade, we have

used the grade code reported by the

respondents for analysis purposes. For

further discussion of this issue, see

Comment 3 in the ‘‘Interested Party

Comments’’ section of this notice,

below.

Level of Trade

In the preliminary determination, we

conducted a level of trade analysis for

both respondents. Based on this

analysis, we determined that a level of

trade adjustment was not warranted for

either company. No party to this

investigation has commented on our

level of trade determination.

Accordingly, for purposes of the final

determination, we continue to find that

a level of trade adjustment is not

warranted.

Export Price

For both respondents, we used EP

methodology, in accordance with

section 772(a) of the Act, because the

subject merchandise was sold directly to

the first unaffiliated purchaser in the

United States prior to importation and

CEP methodology was not otherwise

indicated. For further discussion, see

Comment 1 in the ‘‘Interested Party

Comments’’ section of this notice.

A. CAS

We calculated EP based on the same

methodology used in the preliminary

determination, except as noted below:

1. At the time of the preliminary

determination, CAS had not reported

U.S. customs duties and U.S. brokerage

and handling expenses for certain U.S.

sales. Because this information is now

on the record and has been verified, we

have used it for purposes of the final

determination.

2. We made adjustments for other

transportation expenses (e.g.,

demurrage), where appropriate, based

on our findings at verification.

B. Valbruna

We made no changes to the

methodology used in the preliminary

determination.

Normal Value

We calculated NV, cost of production

(COP) and CV based on the same

methodology used in the preliminary

determination, except as noted below.

A. CAS

For the calculation of COP and CV,

we adjusted CAS’s reported costs by:

1. Adding the accelerated portion of

CAS’s depreciation expenses (see

Comment 10);

2. Adding depreciation expenses

related to leasehold improvements (see

Comment 11);

3. Adding back to material costs a

deduction made by CAS for the balance

in its inventory provision (see Comment

12);

4. Deducting finished goods inventory

write-downs from CAS’s general and

administrative expenses (see Comment

12);

5. Adding back to material and

variable overhead costs a deduction

made by CAS for inventory write-up

adjustments (see Comment 13);

6. Adding unaccrued purchase costs

that were excluded by CAS (see

Comment 14);

7. Reclassifying certain expense and

income items from general and

administrative expenses to financial

expenses (see Comment 16);
40424 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

8. Correcting the double-counting of

certain expenses that were reported in

both variable overhead and general and

administrative (G&A) expenses; and

9. Correcting an error made by CAS in

a reported variable overhead adjustment

factor.

These adjustments are further

discussed in the Memorandum

regarding Cost Calculation Adjustments

from William Jones to Chris Marsh,

dated July 20, 1998.

As in the preliminary determination,

we found that, for certain models of

SSWR, more than 20 percent of CAS’s

home market sales within an extended

period of time were at prices less than

COP. Further, the prices did not provide

for the recovery of costs within a

reasonable period of time. We therefore

disregarded the below-cost sales and

used the remaining above-cost sales as

the basis for determining NV, in

accordance with section 773(b)(1) of the

Act. For those U.S. sales of SSWR for

which there were no comparable home

market sales in the ordinary course of

trade, we compared EP to CV in

accordance with section 773(a)(4) of the

Act.

We made the following changes to our

price-to-price or price-to-CV

comparisons:

1. In the preliminary determination,

we made no adjustment for home

market packing costs or warranty

expenses because CAS failed to provide

the supporting documentation requested

by the Department. Because verified

packing and warranty information is

now on the record, we have used it for

purposes of the final determination.

2. Also in the preliminary

determination, we made no adjustment

for home market credit expenses

because CAS based its credit periods on

estimates, rather than on the accounts

receivable information requested in a

supplemental questionnaire. Because

verified accounts receivable information

is now on the record, we made an

adjustment for home market credit

expenses for purposes of the final

determination.

3. We offset home market freight

expenses by a freight revenue factor

based on our findings at verification.

B. Valbruna

We made the following changes to our

price-to-price comparisons:

1. In the preliminary determination,

we made no adjustment for pre-sale

warehousing expenses because

Valbruna had not appropriately

segregated these expenses from its

indirect selling expenses. Because this

information is now on the record, we

have used it for purposes of the final

determination. See Comment 18.

2. In the preliminary determination,

we also made no adjustment for certain

inland freight expenses because these

expenses were based on data outside the

POI. Because Valbruna revised its

freight calculations to utilize POI data,

we have adjusted for these freight

expenses in the final determination.

Currency Conversion

As in the preliminary determination,

we made currency conversions into U.S.

dollars based on the exchange rates in

effect on the dates of the U.S. sales, as

certified by the Federal Reserve Bank in

accordance with section 773A of the

Act.

Interested Party Comments

General Issues

Comment 1: CEP vs. EP Methodology.

The petitioners argue that the

Department should treat all of the

respondents’ sales through their

affiliated parties in the United States as

CEP transactions. According to the

petitioners, the Department’s practice in

this area is to classify sales as CEP sales

when the U.S. affiliated party has more

than an incidental involvement in

making the sale (e.g., soliciting sales,

negotiating sales contracts or prices) or

performs other selling functions. As

support for this assertion, the

petitioners cite Certain Cold-Rolled and

Corrosion-Resistant Steel Flat Products

from Korea: Final Results of

Antidumping Duty Administrative

Reviews, 63 FR 13170, 13172 (Mar. 18,

1998) (Korean Steel); and Notice of

Preliminary Determination of Sales at

Less Than Fair Value and Postponement

of Final Determination: Stainless Steel

Wire Rod from Spain, 63 FR 10849,

10852 (Mar. 5, 1998) (SSWR from Spain

Preliminary).

The petitioners allege that documents

obtained at verification demonstrate that

the affiliated parties were substantially

involved in the sales process and were

not mere communication links with

their Italian parents. Specifically, the

petitioners assert that these documents

show that the affiliates served as

contacts for the U.S. customers and

were involved in the negotiation of sales

terms and prices.

Regarding CAS, the petitioners

maintain that its U.S. affiliate, CAS

USA, was unable to demonstrate at

verification that CAS controlled all

pricing decisions in Italy, because: 1)

CAS USA was unable to provide any

customer inquiries during the POI; and

2) the post-POI document proffered by

CAS merely showed that the Italian

sales manager approved a portion of the

order. Morever, the petitioners note that

CAS USA recorded the purchase and

resale of SSWR in its accounting

records, collected payment from the

customer, took title to the merchandise,

and stored it in a U.S. warehouse while

it awaited delivery to the U.S. customer.

According to the respondents, the

Department correctly found in the

preliminary determination that all of

their U.S. sales were EP transactions.

The respondents note that the

Department’s long-standing practice is

to classify sales as EP if the sale

occurred prior to importation and the

following three criteria are met: 1) the

merchandise is shipped directly to the

U.S. customer without entering the

affiliate’s inventory; 2) this is the

customary channel of trade for the

affected sales; and 3) the affiliate acts

only as a sales document processor and

communications link. In support of

their position, the respondents cite

Certain Cold-Rolled and CorrosionResistant Steel Flat Products from

Korea: Final Results of Antidumping

Duty Administrative Reviews, 62 FR

18404, 18423 (Apr. 15, 1997); Final

Determination of Sales at Less Than

Fair Value: Large Newspaper Printing

Presses and Components Thereof,

Whether Assembled or Unassembled

from Germany, 61 FR 38166, 38175 (July

23, 1996); and Final Results of

Antidumping Duty Administrative

Reviews; Certain Corrosion-Resistant

Carbon Steel Flat Products from

Canada, 63 FR 12725 (Mar. 16, 1998).

The respondents argue that their sales

meet each of the above criteria.

Regarding the first two criteria, they

state that subject merchandise never

enters their physical inventory in the

United States and that this sales channel

is their customary channel of trade, CAS

argues that CAS USA exerts no physical

control over the subject merchandise,

because almost all sales are either

shipped directly to the U.S. customer or

to the customer’s storage facility for its

own account. Moreover, CAS asserts

that any warehousing performed at the

port is done merely while unloading

occurs; this merchandise is destined for

a specific customer and cannot be sold

to another party. Thus, CAS notes that

SSWR never enters CAS USA’s physical

inventory.

Regarding CAS USA’s involvement in

the sales process, CAS asserts that CAS

USA’s role is ancillary or incidental,

because CAS USA simply functions as

a paper processor and communications

link with CAS. CAS asserts that it

controls all aspects of the marketing and

sales process from Italy. Specifically,

CAS maintains that CAS USA has no
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40425

negotiating or pricing authority with

regard to SSWR, but rather only

forwards sales inquiries from U.S.

customers to Italy. According to CAS,

because most of its pricing instructions

to CAS USA are via telephone, the

absence of written records is not

significant.

CAS asserts that the decision made in

Korean Steel is not applicable here.

Specifically, CAS asserts that the U.S.

affiliate of one of the two respondents

in that case had almost complete

negotiating control over the sale,

including the authority to write and sign

sales contracts and to set prices, while

the U.S. affiliate of the other respondent

engaged in significant after-sale activity.

Valbruna notes that all of its U.S.

merchandise was shipped directly to the

U.S. customer without entering a

warehouse in the United States.

Moreover, Valbruna notes that its U.S.

affiliates act only as paper processors

and communications links with their

parent companies, due to the time

difference that exists between the

United States and Italy. Valbruna

maintains that it negotiates all sales and

makes all pricing decisions in Italy,

confirms the sale, determines the

production and delivery schedule,

arranges for the delivery, invoices the

customer, and collects payment.

According to Valbruna, the evidence of

U.S. selling activity cited by the

petitioners was either taken out of

context or misinterpreted. For example,

Valbruna notes that, in one instance, the

petitioners cited a fax relating to nonsubject merchandise and, in another,

merely referenced a pro forma closing

statement to a letter.

DOC Position

We agree with the respondents and

have continued to classify their U.S.

sales as EP transactions for purposes of

the final determination. We have based

this finding on an analysis of the three

factors that the Department uses to

determine the appropriate classification

of U.S. sales transactions (i.e.,

customary channel of trade, method of

shipment, and the affiliate’s role in the

sales process).

Regarding the first two criteria, we

find that both respondents shipped their

merchandise directly to the U.S.

customer without the merchandise

entering the affiliate’s inventory and

that this constituted the customary

channel of trade for the affected sales.

Thus, we find that the first two criteria

for designating these sales as EP

transactions have been met. Regarding

the petitioners’ contention that CAS

USA warehoused SSWR at the port, we

disagree that this is relevant. We noted

at verification that the warehousing

performed by CAS USA was

independent of the company’s normal

physical inventory maintained for nonsubject products. Because the

merchandise never entered CAS USA’s

physical inventory, we consider the

criterion for designating the sales as EP

transactions to be met.

Regarding the third criterion, we find

that both respondents’ affiliates acted as

processors of paperwork and

communication links with their Italian

parent companies for sales of subject

merchandise. Specifically, we

confirmed at verification that both

companies have no authority to

negotiate prices or sales terms with the

customer, they do not contact customers

on their own initiative, and they

perform no marketing activities or aftersale support functions. We found that

these companies received requests for

quotations from customers, via either

fax or telephone, which they then

forwarded on to Italy for approval or

counter-offer. For this reason, we find

that the significant selling activities for

the sales in question took place in Italy,

while those activities performed in the

United States (e.g., invoicing, collecting

payment, etc.) were ancillary or

incidental to the sale.

Regarding the company-specific

concerns raised by the petitioners, we

note that CAS USA was operational for

only four months during the POI.

Consequently, while CAS USA was able

to provide only a limited number of

examples of written communication

between itself and its parent, this is

sufficient to demonstrate that pricing

decisions are made in Italy. Regarding

Valbruna, we find that the statements

cited by the petitioners were taken out

of context, as asserted by Valbruna.

In addition, we note that the

petitioners’ citation to Korean Steel does

not apply here. In Korean Steel, one of

the U.S. affiliates had the authority to

write and sign sales contracts, while

another performed significant after-sale

support functions. Neither of these

conditions apply in this case. Likewise,

we find that SSWR from Spain

Preliminary also is not applicable. In

that case, not only was the respondent

unable to demonstrate that pricing

decisions were made in Spain, but the

U.S. affiliate admitted, and the

Department verified, that it had the

authority to set prices for certain sales

without consultation with its parent and

initiated contact with the U.S.

customers on its own authority. None of

these facts are present here.

Consequently, we have continued to

classify the respondents’ sales through

their U.S. affiliated parties as EP sales

for purposes of the final determination.

We also have continued to treat CAS’s

sales through AST USA as EP sales for

purposes of the final determination

because the sales process for these sales

is nearly identical to that of sales

through CAS USA. Our decision here is

consistent with our decisions on the

matter in the concurrently published

final determinations on SSWR from

Spain and Taiwan.

Comment 2: Date of Sale.

According to the petitioners, the

Department should continue to use

purchase order date as the date of sale

for CAS and revise its date of sale

methodology for Valbruna to use the

date of sales confirmation instead of

invoice date. The petitioners assert that

use of these dates is consistent with

both the Department’s regulations and

its practice, because the material terms

of sale are set at the time of the purchase

order/sales confirmation. As support for

Department precedent in this area, the

petitioners cite memoranda issued in

the 1995–1996 new shipper review on

stainless steel flanges from India and the

1996–1997 new shipper review on

stainless steel bar from India, in which

the Department used the date of

purchase order as the date of sale, as

well as the Notice of Final Results of

Antidumping Duty Administrative

Review; Canned Pineapple Fruit from

Thailand, 63 FR 7392, 7394 (Feb. 13,

1998), in which the Department used

the date of a sales contract.

The petitioners note that, not only do

both respondents produce SSWR to

order, but the sales documents reviewed

at verification also showed that the

price, quantity, product specifications,

and shipment dates were established

when the order was approved. Further,

the petitioners note that the lag-times

between shipment and invoicing (for

CAS) and sales confirmation and

invoicing (for Valbruna) are significant.

The petitioners contend that Valbruna

should not be allowed to report an

incorrect date of sale merely because the

proper date is not readily available in a

computerized database, especially given

that Valbruna was able to provide the

proper information in a previous

antidumping duty investigation

involving stainless steel bar. According

to the petitioners, the Department

should use the average number of days

between sales confirmation and invoice

date, as observed at verification, in

order to construct a theoretical date of

sales confirmation. Specifically, the

petitioners contend that this average

period should be subtracted from the

reported invoice date to derive the date

of sale, and that this resulting date
40426 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

should be used when making currency

conversions.

According to CAS, the Department

erred in its preliminary determination

by using the purchase order date instead

of the invoice date as the date of sale.

CAS argues that the Department’s

regulations establish a strong

presumption in favor of using invoice

date as the date of sale for purposes of

antidumping proceedings and that the

Department should adhere to this

presumption for several reasons.

First, CAS asserts that, because the

exact amount of the alloy surcharge is

not known until the time of shipment,

it would be distortive to compare U.S.

prices to Italian prices based on the

purchase order date as the date of sale.

Second, CAS states that use of invoice

date eases the reporting and verification

burdens because it is the date recorded

in CAS’s accounting records in the

ordinary course of business. Third, CAS

argues that using the purchase order

date as the date of sale establishes bad

precedent, in that one of the purposes

of the Department’s current regulations

was to simplify reporting requirements

and improve the predictability of the

antidumping law. CAS notes that the

circumstances under which the

Department would depart from its

presumption in favor of the invoice date

are not present here, because CAS

neither sells large custom-made

merchandise nor sells pursuant to long

term contracts. As support for this

position, CAS cites to the preamble to

the Department’s regulations (see

Antidumping Duties; Countervailing

Duties; Final rule, 62 FR 27296, 27349,

27350 (May 19, 1997) (Final rule).

According to Valbruna, it

appropriately reported the date of

invoice as the date of sale. Specifically,

Valbruna notes that the Department not

only instructed it to report the date of

invoice, but the Department also

verified that this information was

reported accurately.

Valbruna maintains that the

petitioners’ reliance on the length of

time between sales confirmation and

invoicing is misplaced. According to

Valbruna, the Department’s standard

test is to compare the dates of shipment

and invoicing, rather than the dates of

order confirmation and invoicing. As

support for this contention, Valbruna

cites the Department’s questionnaire at

Appendix I–4. Valbruna asserts that the

time between when it ships its

merchandise and when it issues its

invoices is inconsequential, because this

period is a matter of days, not weeks or

months.

Finally, Valbruna asserts that the

petitioners’ reference to the stainless

steel bar investigation is equally

misplaced. According to Valbruna, in

the bar case, the order confirmation

used as the date of sale was the

confirmation issued by the U.S.

subsidiary. Valbruna asserts that, in this

investigation, all of the sales

documentation is issued by Valbruna in

Italy. Consequently, Valbruna claims

that there is no relationship between the

dates of sale used in the bar case and

here.

DOC Position

We disagree with CAS, in part, and

agree with Valbruna. The Department

treats the invoice date as the date of sale

under normal circumstances. As both

discussed in the preamble to the

Department’s regulations and noted by

CAS, use of invoice date simplifies the

reporting and verification of information

and enhances the predictability of

outcomes. See Final rule at 27348. The

preamble, however, confirms that the

Department retained the flexibility to

use a different date as the date of sale

in appropriate circumstances. See Final

rule at 27348, 27349 and 27411 (19 CFR

351.401(i)). In the preamble to the

regulations, the Department indicated

that use of invoice date may not be

appropriate in situations involving

large, custom-made products or longterm contracts. See Final rule at 27349,

27350. The Department further

articulated conditions under which it

would consider departing from the

invoice date as the date of sale in its

questionnaire. Therein, the Department

stated:

[G]enerally, the date of sale is the date of

invoice, as recorded in the exporter or

producer’s records kept in the ordinary

course of business, provided that: (1) the

exporter does not use long-term contracts to

sell its subject merchandise; and (2) there is

not an exceptionally long period between the

date of invoice and the date of shipment. See

letter from James Maeder to William

Silverman, September 19, 1997, at Appendix

I–4.

In the instant investigation, neither

respondent sold subject merchandise

pursuant to long-term contracts, nor did

they sell the type of large custom-made

merchandise envisioned in the

preamble to the regulations. However,

in the case of CAS, a significant period

of time often passes between the date of

shipment and the date of invoice.

Therefore, because the material terms of

sale are normally set no later than the

date of shipment, we find that the

invoice date is not an appropriate date

of sale for CAS. Having ruled out the

invoice date for CAS, we then

determined that the purchase order

date, which we used in the preliminary

determination, best reflected the date at

which the material terms of sale were

established.

We disagree with CAS’s assertion that

it would be distortive to compare U.S.

and Italian prices using the purchase

order as the date of sale. CAS’s

argument relies upon the fact that the

alloy surcharges are not known until the

time of shipment. However, this is not

accurate, as the final amount paid by the

customer often is determined at the time

of the purchase order. Nevertheless,

even assuming that the purchase order

date might not be appropriate in some

instances, use of this date does not

create distortion because: (1) we used it

as the date of sale for both markets; and

(2) we determined that the length of

time between purchase order and

invoice date was comparable in the two

markets. Given those circumstances and

the fact that we compare POI-average

NVs to POI-average EPs, we find that no

material distortion exists in our price-toprice comparisons due to minimal

timing differences related to the alloy

surcharges received by CAS.

For Valbruna, we have continued to

use invoice date as the date of sale. As

discussed above, our presumption is

that the invoice date is the appropriate

date of sale unless the facts suggest

otherwise. For Valbruna, there is no

significant difference between the

shipment and invoice dates, and we

have no reason to believe that the

material terms of sale are set

significantly prior to the date of invoice.

Moreover, the fact that a different date

of sale was used for Valbruna in the

stainless steel bar case is irrelevant

because each antidumping proceeding is

distinct and based on its own record.

Comment 3: Use of AISI Grade

Designations for Product Matching.

According to the petitioners, the

Department should perform its model

matches using standard AISI grades for

steel, rather than the respondents’

internal grade designations.

The respondents agree, noting that the

Department verified that they

appropriately classified each of their

internal grades into its corresponding

AISI category where possible.

DOC Position

We agree. We examined the

respondents’ grade classifications at

verification and confirmed that both of

the respondents appropriately classified

each of their internal SSWR grades into

the corresponding AISI category.

Accordingly, we have utilized this

information for purposes of the final

determination.

Comment 4: Corrections Arising From

Verification.
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40427

According to both the petitioners and

the respondents, the Department should

correct the respondents’ data for clerical

errors found during verification.l

DOC Position

We agree. We have made the

appropriate corrections for purposes of

the final determination. These

corrections are further discussed in a

separate memorandum regarding the

calculation adjustments performed for

this company. (See Memorandum

regarding Calculations Performed for

Acciaierie Valbruna Srl/Acciaierie di

Bolzano SpA (Valbruna) for the Final

Determination in the Antidumping Duty

Investigation on Stainless Steel Wire

Rod from Italy from Shawn Thompson

to The File, dated July 20, 1998.)

Specific Issues

A. CAS

Comment 5: Treatment of U.S. Sales

Involving AST USA: In the preliminary

determination, the Department treated

AST USA.

A party unaffiliated with CAS, as a

U.S. sales agent. According to the

petitioners, both CAS’s description of

AST USA’s sales process and the U.S.

sales documents contained in the

questionnaire responses and reviewed at

verification indicate that AST USA was

a customer rather than a sales agent.

Specifically, the petitioners cite CAS’s

March 16, 1998, supplemental response,

in which CAS stated that it ‘‘has

concluded that it may be more

appropriate to consider AST USA as

CAS’s first unaffiliated U.S. customer.’’

Accordingly, the petitioners state that,

because the Department is required to

base U.S. price on the sale to the first

unaffiliated customer, it must base U.S.

price on the price between CAS and

AST USA for purposes of the final

determination.

Nonetheless, the petitioners contend

that, should the Department determine

that AST USA acted as a sales agent, the

Department should also determine that

sales made through AST USA should be

classified as CEP sales for the same

reasons that sales made through CAS

USA should be classified as CEP sales.

See Comment 1.

Notwithstanding its March 16, 1998,

statement, CAS maintains that AST

USA operated as CAS’s unaffiliated

sales agent and not as its U.S. customer.

Therefore, CAS maintains that the

Department should continue to base

U.S. price on the price that AST USA

charged its unaffiliated customers.

DOC Position

We agree with CAS. Based on the

information on the record, we find that

AST USA acted as a sales agent for CAS

in making sales of SSWR in the United

States. Specifically, AST USA had a

formal sales representative agreement

with CAS which outlined the

relationship between the parties during

the POI. According to this agreement,

AST USA was responsible for taking

orders from U.S. end-user customers on

behalf of CAS, for which AST USA, in

turn, earned a sales commission. This

agreement stated explicitly that CAS

company officials have exclusive

authority to make decisions regarding

sales terms. See CAS Home Market

Verification Report, May 13, 1998, at 4.

In addition to the conditions outlined

in the formal agreement, we found that

CAS knew AST USA’s customers and it

shipped its merchandise directly to

them in the United States. At

verification, we found that AST USA

performed essentially the same role in

the sales process as did CAS’s affiliated

sales agent, CAS USA. See CAS USA

Verification Report, May 22, 1998, at 5.

For these reasons, we have continued

to treat AST USA as a sales agent for

purposes of the final determination.

Moreover, as discussed in Comment 1,

we have also continued to treat sales

through AST USA as EP sales.

Comment 6: Treatment of

Commissions Paid to AST USA.

The petitioners argue that the

Department should make an adjustment

for commissions paid to AST USA for

selling the subject merchandise in the

United States. As support for their

position, the petitioners cite section

772(d)(1)(A) of the Act and 19 U.S.C.

1677a(d)(1)(A).

CAS agrees that the Department

should adjust for commissions paid to

AST USA for purposes of the final

determination.

DOC Position

Where U.S. price is based on EP, it is

the Department’s practice to adjust for

commissions paid to unaffiliated parties

under the circumstance of sale

provision set forth in section 773(a)(6)

of the Act. (See also 19 CFR 351.410(e).)

Because AST USA is an unaffiliated

party that received commissions related

to EP sales during the POI, we have

made a circumstance-of-sale adjustment

to NV to account for these commissions

for purposes of the final determination.

Comment 7: Treatment of

Commissions Paid by CAS to CAS USA.

The petitioners assert that the

Department should treat the difference

between the price that CAS charged

CAS USA and the price that CAS USA

charged the unaffiliated customer as a

commission for purposes of the final

determination. The petitioners further

assert that the Department should adjust

for these commissions, regardless of

whether the Department determines

CAS’s U.S. sales to be EP or CEP sales.

If the Department finds CAS’s U.S. sales

to be CEP sales, the petitioners assert

that the Department should use the

commission as a surrogate for indirect

selling expenses, given that CAS was

not required to report its actual indirect

selling expenses.

According to CAS, the spread

between the price that CAS charged

CAS USA and the price that CAS USA

charged the unaffiliated U.S. customer

accounts for costs that CAS would have

incurred in Italy, but for the relocation

of the incidental services that CAS USA

performs on behalf of CAS in the United

States. Further, CAS states that, since

these expenses would not be deductible

from the U.S. price in an EP scenario,

the Department should not deem the

difference to be a commission and,

therefore, should not make a

commission adjustment for purposes of

the final determination.

DOC Position

We agree with CAS. The Department’s

current practice is to not make an

adjustment for affiliated party

commissions in EP situations because

we consider them to be intra-company

transfers of funds to compensate an

affiliate for actual expenses incurred in

facilitating the sale to unaffiliated

customers. See Notice of Final

Determination of Sales at Less Than

Fair Value: Steel Wire Rod from

Trinidad and Tobago, 63 FR 9177, 9181

(Feb. 24, 1998) and Antifriction Bearings

(Other Than Tapered Roller Bearings)

and Parts Thereof From France,

Germany, Italy, Japan, Romania,

Singapore, Sweden, and the United

Kingdom; Final Results of Antidumping

Duty Administrative Reviews, 63 FR

33320, 33345 (Jun. 18, 1998).

Consequently, we have not adjusted

U.S. price for these commissions for

purposes of the final determination.

Regarding the petitioners’ argument

concerning the commission adjustment

as a surrogate for indirect selling

expenses, this issue is moot because we

have determined that the sales made by

CAS through CAS USA are EP sales. See

Comment 1.

Comment 8: Treatment of Unreported

Sales.

During the U.S. verification, the

Department discovered that CAS did not

report any POI sales with invoices

issued in 1998. According to the

petitioners, for purposes of the final

determination, the Department should

base the margins for these sales on

either: (1) the average of the margins
40428 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

alleged in the petition; or (2) the highest

non-aberrant calculated margin. As

support for its position, the petitioners

cite Final Determination of Sales at Less

Than Fair Value: Certain Stainless Steel

Wire Rods from France, 58 FR 68865,

68869 (Dec. 29, 1993) (SSWR from

France), in which the Department used

best information available to determine

the margin for sales that were not

reported due to a computer error.

According to CAS, its failure to report

the sales in question was inadvertent.

Specifically, CAS notes that, at the time

the Department requested that sales data

be submitted on an order date basis, the

invoices in question had not yet been

issued and, therefore, were not available

for inclusion in the sales listing.

However, CAS maintains that, because

the prices associated with these sales

are typical of other POI sales, no adverse

inference is warranted.

CAS asserts that the situation in

SSWR from France is distinguishable

from the present case. Specifically, CAS

states that the French sales were omitted

due to computer error, whereas its own

sales data were not available at the time

of the submission of the relevant sales

listing. Furthermore, CAS notes that this

issue would be moot if the Department

were to use invoice date as the date of

sale (see Comment 2, above).

DOC Position

We agree with the petitioners.

Although the invoice data did not exist

at the time that CAS submitted its

January 1998 sales listing, the purchase

order and other transaction-related

information did exist when CAS

completed its questionnaire response.

Moreover, the invoice information

existed and was available when CAS

submitted its March 1998 supplemental

response. Because CAS failed to provide

a complete database, we have based the

margin for the unreported U.S. sales on

facts available.

Section 776(b) of the Act provides

that adverse inferences may be used

when a party has failed to cooperate by

not acting to the best of its ability to

comply with requests for information.

See also Statement of Administrative

Action accompanying the URAA, H.R.

Rep. No. 316, 103d Cong., 2d Sess. 870

(SAA). CAS’s failure to report the

information in question to the

Department’s questionnaire

demonstrates that it has failed to act to

the best of its ability in this

investigation. Thus, the Department has

determined that, in selecting among the

facts otherwise available to this

company, an adverse inference is

warranted.

As adverse facts available, we have

selected a margin from the fair value

comparisons which were performed for

CAS’s reported sales that is sufficiently

adverse so as to effectuate the statutory

purposes of the adverse facts available

rule to induce respondents to provide

the Department with complete and

accurate information in a timely

manner. We also sought a margin that is

indicative of CAS’s customary selling

practices and is rationally related to the

transactions to which the adverse facts

available are being applied. To that end,

we selected a margin for sales of a

product that involved a substantial

commercial quantity and fell within the

mainstream of CAS’s transactions based

on quantity. Finally, we found nothing

on the record to indicate that the sales

of the product we selected were not

transacted in a normal manner. For

details regarding the methodology used

to select the margin for the sales in

question, see the Sales Calculation

Memorandum from Irina Itkin to the

File, dated July 20, 1998.

Comment 9: Treatment of Unpaid

Sales.

At verification, the Department found

that CAS had not received payment for

a small number of U.S. sales. According

to the petitioners, the Department

should use the date of the final

determination as date of payment for

these transactions. As support for their

position, the petitioners cite Certain

Stainless Wire Rods from France; Final

Results of Antidumping Duty

Administrative Review, 61 FR 47874,

47881 (Sep. 11, 1996).

DOC Position

We disagree. The Department’s recent

practice regarding this issue has been to

use the last day of verification as the

date of payment for all unpaid sales. See

Brass Sheet and Strip from Sweden;

Final Results of Antidumping

Administrative Review, 60 FR 3617,

3620 (Jan. 18, 1995), Notice of Final

Determination of Sales at Less Than

Fair Value: Static Random Access

Memory Semiconductors From Taiwan,

63 FR 8909 (Feb. 23, 1998), and

Extruded Rubber Thread from Malaysia;

Final Results of Antidumping Duty

Administrative Review, 63 FR 12752,

12757 (Mar. 16, 1998). Accordingly, we

have used the last day of CAS’s U.S.

verification as the date of payment for

all unpaid transactions or portions

thereof.

Comment 10: Depreciation Expenses.

The petitioners argue that the

Department should increase CAS’s COP

and CV data for accelerated depreciation

expenses, which were excluded from its

submitted costs. The petitioner notes

that the Department’s policy is to

calculate COP/CV based on the normal

accounting records maintained by the

respondent and that CAS’s income

statement reflects the accelerated

depreciation expenses in question.

CAS notes that Italian fiscal law

allows companies to recognize

additional depreciation expense (i.e.,

accelerated depreciation) on new

equipment in an amount equal to the

ordinary expense that would be

calculated using a straight-line

depreciation method. According to CAS,

the purpose of recognizing such

additional expense is to reduce taxable

income. CAS argues that, because

accelerated depreciation does not

accurately reflect the company’s actual

cost of manufacturing, it excluded the

accelerated portion of depreciation

expense recognized in the company’s

financial statements. Specifically, CAS

claims that the use of both ordinary

straight-line depreciation and

accelerated depreciation would double

its depreciation expenses for qualified

assets and, thus, cannot reasonably

reflect the company’s actual

manufacturing costs. As support for its

position, CAS cites to Final

Determination of Sales at Less Than

Fair Value: Fresh and Chilled Atlantic

Salmon from Norway, 56 FR 7661, 7665

(Feb. 25, 1991) (Norwegian Salmon), in

which the Department included only

the respondent’s ordinary depreciation

expenses in COP and CV.

DOC Position

We agree with the petitioners and

have adjusted CAS’s submitted costs to

reflect the total depreciation expense

reported in its financial statements.

Section 773(f)(1)(A) of the Act states:

[c]osts shall normally be calculated based on

the records of the exporter or producer of the

merchandise, if such records are kept in

accordance with the generally accepted

accounting principles of the exporting

country (or the producing country, as

appropriate) and reasonably reflect the costs

associated with the production and sale of

the merchandise. The administering

authority shall consider all available

evidence on the proper allocation of

costs . . . if such allocations have been

historically used by the exporter of producer,

in particular for establishing appropriate

amortization and depreciation periods, and

allowances for capital expenditures and other

development costs.

For the past three years, CAS has

chosen to use an accelerated

depreciation methodology, which is

consistent with Italian generally

accepted accounting principles (GAAP),

to calculate depreciation expenses on

both its audited financial statements

and its tax return. Accelerated
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40429

depreciation methods, such as the one

applied by CAS, provide for a higher

depreciation charge in the years

immediately following an asset’s

acquisition, while lower charges are

recorded in later periods. We disagree

with CAS’s assertion that the use of this

accelerated depreciation methodology

results in an inaccurate cost of

manufacturing. Other than merely

stating that the accelerated depreciation

method results in a greater expense than

would be calculated using a straight-line

methodology, CAS has provided no

evidence demonstrating that its

depreciation methodology is distortive.

According to Intermediate

Accounting: 8th Edition (Kieso &

Weygandt, 1995), the use of an

accelerated depreciation methodology is

neither wrong nor distortive. The text

notes that an accelerated method may,

in some instances, be more appropriate

than a straight-line depreciation method

that records an equal amount of

depreciation each year an asset is in

service. As the text states, ‘‘The

matching concept does not justify a

constant charge to income. If the

benefits from the asset decline as the

asset gets older, then a decreasing

charge to income would better match

cost to benefits.’’

In past cases, the Department has

included the accelerated portion of

depreciation expenses when such an

approach is reflected in the

respondent’s financial statements, in

accordance with the home country

GAAP, and the respondent has not

demonstrated that the use of accelerated

depreciation is distortive. See, e.g.,

Silicon Metal from Brazil; Final Results

of Antidumping Duty Administrative

Review and Determination Not to

Revoke in Part, 62 FR 1954, 1958 (Jan.

14, 1997), in which COP was calculated

using the respondent’s financial records,

which reflected the historical use of

accelerated depreciation in accordance

with Brazilian GAAP; and Notice of

Final Determination of Sales at Less

Than Fair Value: Foam Extruded PVC

and Polystyrene Framing Stock From

the United Kingdom, 61 FR 51411,

51418 (Oct. 2, 1996), in which COP was

calculated using the respondent’s

financial records, which historically

used an accelerated depreciation

method. Our practice is to adhere to a

respondent’s recording of costs in

accordance with GAAP of its home

country if we are satisfied that such

records reasonably reflect the costs of

producing the subject merchandise. See,

e.g., Certain Fresh Cut Flowers from

Colombia; Final Results of Antidumping

Duty Administrative Reviews, 61 FR

42833, 42846 (Aug. 19, 1996); and

section 773(f)(1)(A) of the Act. This

practice has been sustained by the Court

of International Trade (CIT). See, e.g.,

Laclede Steel Co. v. United States, Slip

Op. 94–160 at 21–25 (CIT Oct. 12, 1994)

(upholding the Department’s rejection of

the respondent’s reported depreciation

expenses in favor of verified

information from the company’s

financial statements that were

consistent with Korean GAAP); and

Hercules, Inc. v. United States, 673 F.

Supp. 454 (CIT 1987) (upholding the

Department’s reliance on COP

information from the respondent’s

normal financial statements maintained

in conformity with GAAP).

Comment 11: Leasehold

Improvements.

The petitioners argue that the

Department should adjust CAS’s COP

and CV data to include the cost of

leasehold improvements, which were

excluded from its submitted costs. The

petitioners note that the Department’s

policy is to calculate COP and CV based

on the normal accounting records

maintained by the respondent and that

CAS’s income statement reflects the cost

of leasehold improvements.

CAS notes that, during 1995 and

1996, it made several improvements to

leased assets, including a new

production facility roof, a new cafeteria,

and an infirmary. According to CAS,

under Italian GAAP, lessors are

prohibited from capitalizing and

depreciating leasehold improvements

and, instead, are required to expense

such costs in the year incurred. CAS

argues that the inclusion of the full

value of its leasehold improvements in

COP/CV would be highly distortive,

given that these expenditures represent

a long-term investment in fixed assets

and have a multi-year usefulness. CAS

proposes that a logical alternative to

excluding leasehold improvement costs

in total would be to depreciate the cost

over the thirty-year term of its lease.

DOC Position

We agree with the petitioners, in part.

Section 773(f)(1)(A) of the Act states

that COP and CV shall normally be

calculated based on the books and

records of the exporter or producer of

the merchandise if such records are kept

in accordance with GAAP of the

exporting country and if such records

reasonably reflect the costs associated

with the production of the merchandise

under investigation. Because the

leasehold improvements made by CAS

represent costs that were associated

with the production of the merchandise

under investigation, we find that it is

appropriate to include them in the

calculation of its COP and CV.

We disagree with the petitioners,

however, that the full cost of the

leasehold improvements should be

recognized in the year incurred. These

costs, as argued by CAS, are expected to

benefit future periods. We therefore

consider it appropriate, in this instance,

to deviate from Italian GAAP by

capitalizing and depreciating these costs

over a reasonable period of time, not to

exceed the actual term of the lease.

CAS’s proposal of a thirty-year

depreciation period would be

appropriate if the company could be

expected to benefit from the

improvements for that period of time.

However, the useful life of CAS’s fixed

assets, as submitted, indicates that a

shorter period is appropriate for the

types of leasehold improvements in

question. Accordingly, we calculated

depreciation expense for the leasehold

improvements made by applying the

accelerated depreciation methodology

used in CAS’s normal accounting

records to the useful life of the assets.

Comment 12: Adjustment Related to

the Inventory Write-down Provision.

The petitioners argue that the

Department should value material costs

in accordance with CAS’s financial

statements. Specifically, the petitioners

argue that the Department should

disallow CAS’s submitted offset to

materials costs for its inventory writedown provision. According to the

petitioners, the Department’s policy is

to calculate COP and CV based on the

normal accounting records maintained

by the respondent.

CAS argues that it properly reduced

its materials costs for the inventory

write-down provision. CAS notes that it

adjusts the provision at the end of each

fiscal year to account for fluctuations in

the values of its raw materials, work-inprocess (WIP), and finished goods

inventories, which are stated on a lastin, first-out (LIFO) basis. CAS claims

that the provision reflects the difference

between the LIFO values of its

inventories and their current market

values. CAS argues that, consistent with

this approach, its reported materials

costs reflect the deduction of the

inventory write-down provision from

the cost of materials consumed as

reported on its financial statements. As

support for its position, CAS cites to

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof From France, Germany, Italy,

Japan, Singapore, and the United

Kingdom; Final Results of Antidumping

Duty Administrative Reviews, 62 FR

2081, 2118 (Jan. 15, 1997), in which the

Department stated that the respondent’s

inventory write-downs ‘‘are not actual

costs but are a provisional reduction-in-
40430 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

inventory value in anticipation of a

lower resale value.’’

According to CAS, the Department

noted at verification that CAS included

the 1996 addition to its inventory writedown provision in its reported G&A

expenses. CAS argues that, should the

Department revise the reported COP/CV

data in order to exclude the provision,

it should make a corresponding

adjustment by removing the 1996

addition from the G&A calculation to

avoid double-counting this expense.

DOC Position

We agree with the petitioners that

CAS should not have reduced its

material costs by the value of its

inventory write-down provision. The

provision that CAS established for

inventory value fluctuations is a balance

sheet account that relates to CAS’s

inventory values at the end of the year

and has no impact on the actual cost of

materials used in production.

Accordingly, in calculating COP and

CV, there is no basis for reducing the

material costs actually incurred by the

full amount of the inventory write-down

provision on CAS’s balance sheet.

We disagree with CAS’s assertion

that, because we have not reduced the

company’s materials costs by the full

amount of the inventory write-down

provision, the Department must exclude

from G&A expenses the amount of the

change to the provision that was

reported as an expense in CAS’s 1996

income statement. Specifically, only the

incremental increase or decrease in this

provisional account is recognized by the

company on its income statement and

the incremental change during 1996 was

reported by CAS as a G&A expense item

for purposes of its submission. The

incremental change in the provision is

the only portion of the provision that

may be appropriate to include in CAS’s

COP and CV calculations. In this case,

however, the full amount of the increase

to the provision should not be included

in the calculation of COP and CV

because the portion of the write-down

associated with finished goods

inventory is not a cost of production to

CAS. Unlike the complete write-off of

unsaleable merchandise which the

Department considers a cost, this type of

inventory write-down arises when a

company determines that the market

value for its finished goods inventory is

less than its cost to produce the

merchandise. Consequently, it would be

unreasonable to include such writedown amounts, which arise only

because CAS cannot sell the

merchandise for what it cost to produce,

as an additional cost of production.

We disagree with CAS’s assertion,

however, that write-downs associated

with raw materials and WIP inventories

should also be excluded from COP and

CV. Both raw materials and WIP

inventories are inputs into the cost of

manufacturing the merchandise. It is the

Department’s practice to recognize the

full amount paid to acquire production

inputs, which are included in raw

materials and WIP inventories, in

determining the cost of producing the

merchandise.

Consequently, for the final

determination, we removed the offset to

CAS’s material costs for the inventory

write-down provision. Additionally, we

included in G&A expense only the

incremental change in CAS’s inventory

write-down provision that is associated

with raw materials and WIP inventories.

Comment 13: Materials and Spare

Parts.

The petitioners argue that CAS

inappropriately reduced its 1997

materials and spare parts costs for an

inventory ‘‘write-up’’ adjustment that is

not reflected in its financial statements

or normal accounting records. CAS

applied the adjustment to the costs

shown in its normal accounting records

to derive the reported costs.

CAS argues that, in calucating its

reported 1997 material and spare parts

costs, it adjusted its inventory based on

prices paid during the period. CAS

argues that such an adjustment is

necessary to calculate its cost of

production on a current basis, although

the adjustment is not reflected in its

financial statements.

DOC Position

We agree with the petitioners. It is the

Department’s practice to base the cost of

manufacturing on costs incurred during

the period of investigation, as reflected

in CAS’s normal books and records,

rather than on current prices. In

accordance with section 773(f)(1)(A) of

the Act, the Department accepts the

inventory valuation methods

historically used by the respondent

unless it can be shown that these

methods distort the reported costs. The

simple fact that costs would be lower

using an alternative inventory valuation

method is not a valid reason for

deviating from a company’s normal

books and records. Accordingly, we

have removed the adjustment applied

by CAS in calculating its submitted

costs.

Comments 14: Accruals for Previous

Year Purchases.

The petitioners argue that the

Department should make an adjustment

for supplier invoices related to 1996

purchases that were excluded from

CAS’s reported costs.

CAS argues that the Department

should not adjust its submitted costs.

According to CAS, at year-end 1996, it

properly accrued expenses on purchases

for which it anticipated it would receive

invoices in 1997. CAS claims that its

accrual was based on a reasonable

estimate of the amounts on the invoices

to be received and was prepared in

accordance with Italian GAAP and the

company’s normal internal accounting

policies. CAS notes that it recorded the

difference between its accrual and the

invoiced amounts as extraordinary

expense in 1997, and that such

treatment is also consistent with Italian

GAAP.

DOC Position

We agree with the petitioners. While

CAS’s treatment of the supplier invoices

received in 1997 for 1996 purchases

may have been in accordance with

Italian GAAP, it does not properly

reflect the cost of production during the

period of investigation. The recording of

an accrual is a normal part of the yearend accounting process and, as CAS

notes, is based on an estimate. At the

end of 1996, CAS recorded accruals for

supplier invoices yet to be received for

purchases made during the year. In

early 1997, it became known that CAS’s

1996 accruals were understated and,

therefore, its 1996 production costs

were understated. The POI encompasses

portions of both 1996 and 1997 and,

thus, it is proper to adjust the submitted

amounts to include the correct input

costs rather than an incorrect estimate.

We have therefore corrected for the

understated production costs for

purposes of the final determination.

Comment 15: Offset to G&A Expenses.

The petitioners claim that the

Department should remove an offset

that was included in CAS’s G&A

expense calculation. The offset amount

represents a correction of prior year

accruals and is classified in the

financial statements as non-operating

management profits. The petitioners

argue that a correction of prior year

accruals does not relate to operations

during the POI and, therefore, should

not be used to offset actual G&A

expenses incurred during the POI.

DOC Position

We agree with the petitioners. Since

CAS failed to provide details

surrounding the over-accrued amounts

which were corrected during the POI,

we are unable to determine exactly what

merchandise the accruals relate to. The

prior year accruals being corrected may

relate solely to non-subject merchandise
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40431

(in which case we would exclude the

correction), solely to subject

merchandise (in which case we would

apply the amount to offset the cost of

manufacturing), or to the general

production activity of the company as a

whole (in which case we would apply

the offset to G&A expenses). Since we

do not know which activities these overaccruals relate to, we excluded the

correction of the prior year’s accruals

from the submitted COP and CV

computations.

Comment 16: Foreign Exchange Gains

and Losses.

The petitioners argue that the

Department should revise CAS’s

reported G&A expense calculation to

exclude certain foreign exchange gains

and losses related to hedging. The

petitioners note that such amounts were

classified in CAS’s financial statements

as financial income or financial expense

and argue that the Department should

treat these amounts in the same manner.

CAS agrees with the petitioners

regarding the classification of foreign

exchange gains and losses.

DOC Position

We agree. The foreign exchange gains

and losses incurred by CAS on its

hedging operations are more properly

classified as financial income and

expenses. Accordingly, we reclassified

these amounts for the final

determination.

Comment 17: Double-Counting of

Currency Option Expenses.

CAS argues that the Department, in

making its preliminary determination,

improperly adjusted CAS’s financial

expenses to include an amount related

to currency option expenses. CAS notes

that this amount was already included

in its G&A expense calculation and, as

a result, the Department double-counted

these costs in calculating COP and CV.

DOC Position

We agree. We have corrected the G&A

expense calculation to exclude the

amount that was double-counted.

B. Valbruna

Comment 18: Home Market

Warehousing Costs.

According to Valbruna, the

Department erred in its preliminary

determination by not adjusting for

various costs incurred at its home

market service centers. Specifically,

Valbruna contends that the Department

should have deducted its service center

costs from NV under the warehousing

provision of the regulations (i.e., 19 CFR

351.401(e)(2)), because one of the

functions of the service centers is

warehousing. However, Valbruna asserts

that, if the Department does not

consider all service center costs to be

warehousing for purposes of the final

determination, it should, at a minimum,

deduct all costs directly associated with

warehousing.

The petitioners argue that the

Department should continue to disallow

an adjustment for Valbruna’s service

center costs. The petitioners cite the

Department’s preliminary concurrence

memorandum, which stated that the

Department denied Valbruna’s claim for

the preliminary analysis because: 1) the

service centers were merely branches or

sales offices of Valbruna; and 2) only

one of the service centers carried

inventory of SSWR. Accordingly, the

petitioners maintain that, if the product

under investigation is not maintained in

inventory at the service centers, there is

no basis for subtracting from NV any

warehousing costs incurred there.

DOC Position

We agree with Valbruna, in part.

Under 19 CFR 351.401(e)(2), the

Department considers warehousing

expenses that are incurred after the

merchandise leaves the original place of

shipment to be movement expenses.

Accordingly, to the extent that Valbruna

incurred expenses relating to the

warehousing of SSWR at its service

centers, we have treated these expenses

as movement costs.

Regarding those expenses incurred at

the service centers which relate to

selling functions, however, we disagree

with Valbruna that these expenses also

constitute part of its warehousing.

Rather, we find that these expenses

constitute indirect selling expenses.

Because we have found U.S. sales to be

EP sales and we are making no offsets

for U.S. commissions under 19 CFR

351.410(e), we have disregarded these

expenses for purposes of the final

determination.

Comment 19: Use of Long-Term Debt

in the Calculation of the Home Market

Interest Rate.

Valbruna argues that the Department

should base the calculation of its home

market interest rate on the company’s

interest experience on all of its current

liabilities, not just those arising from

short-term obligations. Specifically,

Valbruna asserts that the Department

should include in its calculation the

short-term portion of a long-term debt,

because this debt is classified as a

current liability on the company’s

balance sheet. As such, Valbruna

asserts, it is part of the company’s

working capital, which is used to

finance the company’s current assets

(including accounts receivables).

The petitioners disagree. According to

the petitioners, it is irrelevant that

Valbruna reclassified a portion of its

long-term debts as a current liability; the

interest rate on that portion remains the

rate paid on the company’s long-term

obligations. According to the

petitioners, it is not appropriate to

include long-term debts in the formula

used to calculate the weighted-average

short-term interest rate, because the

interest paid on these debts does not

properly measure a company’s shortterm interest experience. Consequently,

the petitioners maintain that the

Department should continue to exclude

the current portion of Valbruna’s longterm debt from the calculation of its

short-term interest rate.

DOC Position

We agree with the petitioners. The

imputed credit calculation measures the

opportunity cost associated with

carrying accounts receivables. Because

accounts receivables are short-term in

nature, it is appropriate to base the

interest rate used in the credit

calculation only on rates paid on shortterm loans.

We note that long-term debt generally

is incurred to finance large-scale

projects (e.g., acquisition of machinery,

capital improvements, etc.). Because it

is not incurred to manage the day-to-day

cash flow of a company, it would be

inappropriate to include the interest

paid on this type of debt in the credit

calculation. The fact that some portion

of the long-term debt becomes a current

liability each year is irrelevant to this

reasoning. Accordingly, we have

continued to exclude long-term debt

from the calculation of the home market

interest rate for purposes of the final

determination.

Comment 20: Inventory Carrying

Costs as a Direct Selling Expense.

Valbruna claimed the inventory

carrying costs at certain of its service

centers as a direct selling expense.

According to the petitioners, the

Department should continue to treat

these expenses as indirect, because

Valbruna could not substantiate its

claim for direct treatment at verification.

Specifically, the petitioners argue that

Valbruna could not demonstrate that it

maintained a customer-specific

inventory during the POI, nor could it

show that the merchandise initially

tagged for shipment to particular

customers was not sold to different

companies after it left the factory.

Valbruna contends that the expenses

in question are analogous to pre-sale

warehousing expenses. According to

Valbruna, the URAA establishes that

home market movement expenses,
40432 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

including pre-sale freight and

warehousing expenses, are to be

deducted from normal value in all cases,

without being subject to a ‘‘direct/

indirect’’ test similar to selling

expenses.

Nonetheless, Valbruna argues that the

facts cited by the petitioners are

inconsequential. According to Valbruna,

the fact that its inventory records are not

company-specific does not prove that it

incurred no pre-sale warehousing

expenses. Moreover, Valbruna asserts

that it shipped merchandise tagged for

particular customers to other clients

only under emergency situations.

DOC Position

We agree with the petitioners. The

expenses in question are not actual presale warehousing expenses, such as rent

on the warehouse or salaries of the

warehousing personnel. Rather, they are

the imputed costs associated with

maintaining an inventory at the

warehouse. As such, they form part of

Valbruna’s selling expenses, not its

warehousing expenses.

Valbruna was unable to substantiate

the facts on which it based its assertion

that these costs were directly related to

the sales of SSWR reported in its home

market sales listing. Notably, we found

that the data which formed the basis for

Valbruna’s claim reflected the

company’s inventory levels more than

eight months after the end of the POI.

Therefore, we have made no adjustment

for these expenses for purposes of the

final determination.

Comment 21: Home Market Freight

Costs.

In its questionnaire response,

Valbruna calculated freight expenses at

one of its service centers using an 11-

month period, rather than the full 12-

month POI. Valbruna contends that the

Department should accept this

calculation, rather than recalculate

Valbruna’s freight costs using 12

months, because the volume of

shipments in the twelfth month was

insignificant. Valbruna asserts that such

a recalculation would be inappropriate

because it would result in a mismatching of expenses over time.

According to the petitioners, the

Department should allocate Valbruna’s

freight costs over the entire POI. The

petitioners note that not only did

Valbruna make shipments throughout

the POI, but also many of the expenses

(e.g., depreciation and insurance) were

incurred regardless of whether the

company’s trucks were idle.

DOC Position

We agree with the petitioners. At

verification, we noted that Valbruna

both shipped SSWR to its customers

and incurred freight expenses

throughout the POI. Accordingly, we

have used a freight factor applicable to

the 12-month POI for purposes of the

final determination.

Continuation of Suspension of

Liquidation

In accordance with section

735(c)(1)(B) of the Act, we are directing

the Customs Service to continue to

suspend liquidation of all entries of

SSWR from Italy—except those

produced and sold for export to the

United States by Valbruna, for whom

the final antidumping rate is de

minimis—that are entered, or

withdrawn from warehouse, for

consumption, on or after March 5, 1998,

the date of publication of our

preliminary determination in the

Federal Register. Article VI.5 of the

General Agreement on Tariffs and Trade

(GATT 1994) provides that ‘‘[n]o

product . . . shall be subject to both

antidumping and countervailing duties

to compensate for the same situation of

dumping or export subsidization.’’ This

provision is implemented by section

772(c)(1)(C) of the Act. Since

antidumping duties cannot be assessed

on the portion of the margin attributed

to export subsidies, there is no reason to

require a cash deposit or bond for that

amount. The Department has

determined, in its Final Affirmative

Countervailing Duty Determination:

Certain Stainless Steel Wire Rod from

Italy, that the product under

investigation benefitted from export

subsidies. Normally, where the product

under investigation is also subject to a

concurrent countervailing duty (CVD)

investigation, we instruct the Customs

Service to require a cash deposit or

posting of a bond equal to the weightedaverage amount by which the NV

exceeds the EP, as shown below, minus

the amount determined to constitute an

export subsidy. (See Antidumping Order

and Amendment of Final Determination

of Sales at Less Than Fair Value:

Extruded Rubber Thread from Malaysia,

57 FR 46150 (Oct. 7, 1992).) For CAS,

we are subtracting for cash deposit

purposes, the cash deposit rate

attributable to the export subsidies

found in the CVD investigation for that

company (i.e., 0.01 percent). The ‘‘All

Others’’ deposit rate is also based on

subtracting the rate attributable to the

export subsidies found in the CVD

investigation for CAS.

These suspension of liquidation

instructions will remain in effect until

further notice. The weighted-average

dumping margins are as follows:

Exporter/Manufacturer

Weightedaverage

margin

percentage

Bonding

percentage

Acciaierie Valbruna/Acciaierie di Bolzano SpA ....................................................................................................... 1.27 N/A

Cogne Acciai Speciali S.r.l ....................................................................................................................................... 12.73 12.72

All Others ................................................................................................................................................................. 12.73 12.72

Pursuant to section 735(c)(5)(A) of the

Act, the Department has excluded all

zero and de minimis weighted-average

dumping margins from the calculation

of the ‘‘All Others’’ rate.

ITC Notification

In accordance with section 735(d) of

the Act, we have notified the

International Trade Commission (ITC) of

our determination. As our final

determination is affirmative, the ITC

will, within 45 days, determine whether

these imports are materially injuring, or

threaten material injury to, the U.S.

industry. If the ITC determines that

material injury, or threat of material

injury does not exist, the proceeding

will be terminated and all securities

posted will be refunded or canceled. If

the ITC determines that such injury

does exist, the Department will issue an

antidumping duty order directing

Customs officials to assess antidumping

duties on all imports of the subject

merchandise entered for consumption

on or after the effective date of the

suspension of liquidation.

This determination is published

pursuant to section 735(d) of the Act.

Dated: July 20, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–20018 Filed 7–28–98; 8:45 am]

BILLING CODE 3510–DS–P