Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40461

This determination is issued and

published in accordance with sections

735(d) and 777(i)(1) of the Act.

Dated: July 20, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–20021 Filed 7–28–98; 8:45 am]

BILLING CODE 3510–DS–D

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE

ADMINISTRATION

[A–583–828]

Notice of Final Determination of Sales

at Less Than Fair Value: Stainless

Steel Wire Rod from Taiwan

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 29, 1998.

FOR FURTHER INFORMATION CONTACT:

Laurel LaCivita or Alexander Amdur,

Import Administration, International

Trade Administration, U.S. Department

of Commerce, 14th Street and

Constitution Avenue, NW, Washington,

DC 20230; telephone: (202) 482–4740 or

(202) 482–5346, 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 Department’s regulations 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 Taiwan 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.

Case History

The preliminary determination in this

investigation was issued 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 Taiwan, 63 FR 10836 (March 5,

1998) (Notice of Preliminary

Determination). Since the preliminary

determination, the following events

have occurred:

On March 12, 1998, we received a

submission from Yieh Hsing Enterprise

Corporation, Ltd. (Yieh Hsing) alleging

that the Department made ministerial

errors in the preliminary determination.

In response to Yieh Hsing’s ministerial

error allegations, we issued an amended

preliminary determination on March 30,

1998. See Notice of Amended

Preliminary Determination of Sales at

Less Than Fair Value: Stainless Steel

Wire Rod From Taiwan, 63 FR 16972

(April 7, 1998).

In March 1998, we issued

supplemental questionnaires to and

received responses from the

respondents in this case, Walsin Cartech

Specialty Steel Corporation (Walsin)

and Yieh Hsing (hereinafter

‘‘respondents’’).

In March, April, and May 1998, we

verified the sales and cost questionnaire

responses of these two respondents. In

June 1998, Yieh Hsing 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 the

respondents submitted case briefs on

June 8 and 10, 1998, and rebuttal briefs

on June 16 and 17, 1998. We held a

public hearing on June 18, 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,

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.

Molybdenum .............. 1.50/2.50.

Lead .......................... Added (0.10/0.30).

Tellurium .................... Added (0.03 min.)

K–M35FL

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

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

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

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

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

Sulfur ......................... 0.03 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 Taiwan to the United States were

made at less than fair value, we

compared the Export Price (EP) and/or

Constructed Export Price (CEP) to the

Normal Value (NV). Our calculations

followed the methodologies described

in the preliminary determination,

except as noted below and in companyspecific analysis memoranda dated July

20, 1998.

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
40462 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

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.

We made product comparisons based

on the same characteristics and in the

same general manner as that outlined in

the preliminary determination. As in the

preliminary determination, in instances

where a respondent has reported a nonAISI grade (or an internal grade code)

for a product that falls within an AISI

category, we have used the actual AISI

grade rather than the non-AISI grade

reported by the respondents for

purposes of our analysis. In instances

where the chemical content ranges of a

reported non-AISI grade (or an internal

grade code) are outside the parameters

of an AISI grade, we have used the nonAISI (or internal) grade code reported by

the respondents for analysis purposes.

However, in instances in which an

internal grade matches all the specified

chemical content tolerance ranges of an

AISI grade, but the internal grade also

contains amounts of chemicals that are

not otherwise specified as being

included in the standard AISI

designation, we have used the

corresponding AISI grade rather than

the internal grade. For further

discussion, see Comment 2 and

Comment 16 in the ‘‘Interested Party

Comments’’ section of this notice.

Export Price/Constructed Export Price

For Walsin, we used EP and CEP

methodology as defined in sections

772(a) and 772(b) of the Act. For certain

unreported CEP sales made during the

POI by Carpenter Technology Corp.

(Carpenter), Walsin’s U.S. affiliate, we

applied facts available in accordance

with Section 776(a) of the Act. For the

reasons stated in the DOC Position to

Comment 1 in the ‘‘Interested Party

Comments’’ section of this notice, we

determined that adverse inferences in

selecting among the facts otherwise

available are not warranted in this

instance. Therefore, as facts available,

we applied the weighted-average margin

calculated for all reported sales to the

unreported CEP sales at issue.

For Yieh Hsing, we used EP

methodology as defined in section

772(a) of the Act. In the preliminary

determination, we reclassified some of

Yieh Hsing’s U.S. sales of SSWR as CEP

sales. Based on the record developed

since the preliminary determination, the

Department has reconsidered its

decision and has accepted Yieh Hsing’s

classification of all of its U.S. sales of

SSWR as EP sales for purposes of the

final determination. For further

discussion, see Comment 18 in the

‘‘Interested Party Comments’’ section of

this notice.

A. Export Price

We calculated EP based on the same

methodology used in the preliminary

determination, with the following

exceptions:

Walsin

We corrected for certain clerical errors

found during verification with respect

to Walsin, including the corrections to

the response that Walsin identified in

the course of preparing for verification

and reported in its May 11, 1998

submission.

Yieh Hsing

We made additional deductions from

the starting price, where appropriate, for

U.S. handling and other charges, U.S.

customs duties, harbor maintenance and

merchandise processing fees (which are

included in U.S. duties), and U.S. entry

fees, pursuant to section 772(c)(2)(A) of

the Act.

We corrected for certain clerical errors

found during verification with respect

to Yieh Hsing’s calculations, including

gross unit price, foreign inland freight,

foreign brokerage and handling, U.S.

commission, entry fees, U.S. handling

and other charges, and U.S. credit

expenses.

B. Constructed Export Price

We calculated CEP for Walsin based

on the same methodology used in the

preliminary determination, with the

following exceptions:

We corrected for certain clerical errors

found during verification with respect

to Walsin, including the corrections to

the response that Walsin identified in

the course of preparing for verification

and reported in its May 11, 1998

submission. We made additional

deductions from starting price for U.S.

brokerage expense pursuant to section

772(c)(2)(A) of the Act (see Comment 9

in the ‘‘Interested Party Comments’’

section of this notice).

We recalculated indirect selling

expenses incurred in the United States

as a result of our findings at verification

(see Comment 1 in the ‘‘Interested Party

Comments’’ section of this notice and

the July 20, 1998 Memorandum from

Laurel LaCivita to the File, WalsinCartech Specialty Steel Corporation:

Concurrence Memorandum for the Final

Determination (Walsin Concurrence

Memorandum).

Normal Value

We used the same methodology to

calculate NV as that described in the

preliminary determination, with the

following exceptions:

A. Walsin

We corrected for certain clerical errors

found during verification with respect

to Walsin, including the corrections to

the response that Walsin identified in

the course of preparing for verification

and reported in its May 11, 1998

submission.

B. Yieh Hsing

We included all of Yieh Hsing’s home

market sales to affiliated customers in

our analysis because we determined that

these sales were made at arm’s-length

prices and thus in the ordinary course

of trade.

We corrected for certain clerical errors

found during verification with respect

to Yieh Hsing’s calculations, including

interest revenue and inland freight.

Cost of Production

We calculated the weighted-average

cost of production (COP), by model,

based on the sum of each respondent’s

cost of materials and fabrication for the

foreign like product, plus amounts for
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40463

home market selling, general and

administrative (SG&A) expenses and

packing costs in accordance with

section 773(b)(3) of the Act. We relied

on the submitted COP except in the

following specific instances where the

submitted costs were not appropriately

quantified or valued:

A. Walsin

We made changes based on our

findings at verification with respect to

Walsin’s reported yield loss. (See

Comment 11 in the ‘‘Interested Party

Comments’’ section of this notice and

Memorandum to Christian Marsh from

Stan Bowen and Laurens Van Houten

dated July 20, 1998 (‘‘Walsin Cost

Memo’’)). We revised Walsin’s

submitted general and administrative

(G&A) expense factor to include idle

capacity, miscellaneous income and

expenses, salvage income, and loss on

the sale of equipment. (See Comment 13

in the ‘‘Interested Party Comments’’

section of this notice and Walsin Cost

Memo). We adjusted the reported

transfer price for copper purchased from

an affiliate to reflect the market price.

(See Comment 14 in the ‘‘Interested

Party Comments’’ section of this notice

and Walsin Cost Memo).

B. Yieh Hsing

Yieh Hsing failed to report a unique

COP for each of the product categories

it reported on its computer sales listing.

Therefore, we used the COP of the most

similar model for each missing product

category. (See Memorandum to

Christian Marsh from Stan Bowen and

Laurens Van Houten dated July 20, 1998

(‘‘Yieh Hsing Cost Memo’’)). We

adjusted the cost of billets that Yieh

Hsing obtained from an affiliated

supplier to reflect the higher of the

market price, transfer price, or COP of

the billets. In addition, we adjusted the

cost of the billets that Yieh Hsing

obtained from its affiliate to include

revised G&A and interest expenses of

the affiliate, bonus payments that the

affiliate paid to its employees, and the

cost of billet freight from the affiliate to

Yieh Hsing. We adjusted the cost of

sales figure used to compute Yieh

Hsing’s G&A and interest expense rates

by the amount of its scrap revenue. This

resulted in a revision to reported G&A

and interest expense. We further

adjusted the calculation of Yieh Hsing’s

G&A expense rate by including bonus

payments that Yieh Hsing paid to its

employees, and by excluding certain

foreign exchange gains, gains on the

disposal of long-term investments and

properties, investment loss, and rental

income. For further discussion, see

Comments 24, 25 and 26 in the

‘‘Interested Party Comments’’ section of

this notice; and Yieh Hsing Cost Memo.

We also conducted our sales below

cost test in the same manner as that

described in our preliminary

determination. We found that, for

certain models of SSWR, more than 20

percent of Walsin’s and Yieh Hsing’s

home market sales within an extended

period of time were at prices less than

the 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 EPs or CEPs to CV

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

the Act.

Constructed Value

In accordance with section 773(e) of

the Act, we calculated CV based on the

sum of the respondent’s cost of

materials, fabrication, G&A, U.S.

packing costs, direct and indirect selling

expenses, interest expenses, and profit.

We relied on the submitted CVs except

for the specific changes described above

in the ‘‘Cost of Production’’ section of

the notice.

Price-to-Price Comparisons

We made price-to-price comparisons

using the same methodology as that

described in the preliminary

determination, with the following

exceptions:

A. Walsin

In making circumstance-of-sale

adjustments to NV for comparison to EP

sales under section 773(a)(6)(C)(iii) of

the Act and section 351.410(c)(4) of the

regulations, we recalculated home

market and U.S. credit expenses as a

result of our findings at verification (see

Comment 7 in the ‘‘Interested Party

Comments’’ section of this notice). For

comparisons to both EP and CEP sales,

as a result of our findings at verification,

we also recalculated inventory carrying

costs and indirect selling expenses

incurred in the home market that were

used in our calculation of the

commission offset (see Comments 7 and

8 in the ‘‘Interested Party Comments’’

section of this notice and the Walsin

Concurrence Memorandum).

B. Yieh Hsing

In making circumstance-of-sale

adjustments to NV for comparison to EP

sales under section 773(a)(6)(C)(iii) of

the Act and section 351.410(c)(4) of the

regulations, we made additional

adjustments for interest premium

expenses and letter of credit fees.

Furthermore, because we verified that

Yieh Hsing properly calculated

inventory carrying costs in its responses

submitted subsequent to the preliminary

determination, we included inventory

carrying costs in the weighted-average

amount of home market indirect selling

expenses used to offset U.S.

commissions in calculating NV. For

further discussion, see Comment 21 in

the ‘‘Interested Party Comments’’

section of this notice.

Price-to-CV Comparisons

For Walsin, we made price-to-CV

comparisons using the same

methodology as that described in the

preliminary 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 773(A) of the

Act.

Interested Party Comments

A. Walsin

Comment 1: Treatment of Verification

of CEP Sales.

The petitioners claim that the

Department’s verification report

covering Carpenter’s CEP sales outlines

serious issues, omissions, and errors

that were discovered at verification.

They argue that these errors and

omissions were so material and so

pervasive as to make the response

unreliable for purposes of calculating a

final antidumping duty margin. The

petitioners note that these errors and

omissions impeded the proceeding and

prevented the Department from

verifying Carpenter’s questionnaire

response. Consequently, the petitioners

urge the Department to use adverse facts

available in calculating the margin for

Walsin’s CEP sales and to apply the

highest rate calculated for either EP or

CEP sales to all of Carpenter’s CEP sales

for the final determination.

The petitioners claim that Carpenter

did not intentionally fail verification as

suggested by Walsin. Rather, they argue

that Carpenter provided information to

Walsin, which was submitted to the

Department in consolidated form in

Walsin’s questionnaire responses.

Carpenter also provided certifications

for that information, and participated in

a verification of CEP sales at Carpenter’s

headquarters. The petitioners note that

throughout the investigation, Walsin’s
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counsel was in the role of assisting

Carpenter, including being present at

Carpenter’s verification.

The petitioners argue that the

Department’s inability to verify

Carpenter’s CEP information has no

connection to Carpenter’s intent and

status as one of the petitioners in this

investigation. They further maintain

that the statute requires the use of facts

otherwise available in reaching a

determination if any of the following

circumstances are present: (1) Necessary

information is not available on the

record; (2) someone withholds

information requested by the

Department; (3) someone fails to

provide such information by the

deadlines or in the form and manner

requested; (4) someone significantly

impedes a proceeding; or (5) someone

provides information but the

information cannot be verified. The

petitioners note that the statute directs

the Department to apply facts otherwise

available without making a specific

finding of intent not to cooperate.

Walsin argues that any verification

failure by Carpenter, the principal

petitioner in this investigation, should

be adverse to Carpenter’s interest and

not adverse to Walsin. Walsin notes that

some of the information that was

required to be reported on the CEP sales

was in the exclusive possession and

control of Carpenter, whose primary

interest during the POI was domestic

production of SSWR rather than

importation of SSWR from Taiwan.

Consequently, Walsin contends that

Carpenter may not have had an interest

in the success of the CEP verification. In

the event that the Department is unable

to use the submitted CEP information

and must apply facts available in the

final determination, Walsin argues that

the Department should use the lowest

non-aberrant, transaction-specific

margin from Walsin’s verified EP sales

for all of the CEP transactions.

DOC Position

We discovered at verification that

there were certain significant errors and

deficiencies in the information

submitted on the record by Carpenter.

The Department’s verification report of

June 2, 1998, cited the following

important deficiencies in the

verification of Carpenter’s information:

Carpenter failed to report a significant

percentage of sales and price

adjustments to covered merchandise in

its computer sales listing; Carpenter was

not able to substantiate the amount of

indirect selling expenses reported in its

questionnaire response; and, for certain

sales, Carpenter failed to report all of

the freight expenses that it incurred to

transport merchandise from the port and

warehouse to the customer in the

United States.

Section 776(a) of the Act provides that

the Department may use facts otherwise

available if an interested party

withholds information that has been

requested by the Department, fails to

provide such information or in the form

requested, significantly impedes a

proceeding under the antidumping

statute, or provides information that

cannot be verified. Section 776(b) states

that the Department may use an

inference which is adverse to the

interest of the party in selecting from

among the facts otherwise available if

the party has failed to cooperate by not

acting to the best of its ability to comply

with the Department’s request for

information.

Our analysis of the information

presented on the record indicates that

adverse inferences with respect to

Walsin’s CEP sales are not warranted, as

suggested by the petitioners. With

respect to U.S. indirect selling expenses

and U.S. freight charges, the Department

has verified information to use to

correct the deficiencies for these

expense items. As facts available, for

indirect selling expenses, we used the

verified selling expenses recorded on

Carpenter’s audited trial balance for the

specialty steel division and adjusted for

freight and commissions. We derived an

indirect selling expense factor by

dividing the amount of indirect selling

expenses by the total value of sales

recorded on the audited financial

statements for the specialty steel

division. We applied the factor to gross

price, and used the resulting per unit

indirect selling expense in our

calculations. With respect to the

unreported freight expenses discovered

at verification, we applied the

additional verified freight expense to

the reported freight expense for the

affected sales, and used the resulting

revised per unit freight charge in our

calculations. For further discussion of

these issues, see Walsin Concurrence

Memorandum.

With respect to Carpenter’s failure to

report a significant number of CEP sales

and price adjustments on its computer

sales listing, we have determined not to

use adverse inferences in applying facts

available to account for such

information. Given the nature of the

relationship between Walsin and

Carpenter; Carpenter’s participation in

this proceeding as a petitioner; and

Carpenter’s exclusive control of the

sales and price information at issue, we

find that Walsin was not in a position

to report this information. Given these

unusual circumstances, we have not

determined that Walsin failed to act to

the best of its ability to comply with the

Department’s request for information.

Therefore, in applying facts available,

we used the weighted-average margin

for all of Walsin’s reported sales to the

CEP sales that were not reported to the

Department in the course of the

investigation. For further discussion, see

the Walsin Concurrence Memorandum.

Comment 2: Model Match.

The petitioners disagree with the

findings at verification, as outlined in

the Department’s June 2, 1998

verification report at page 5, that Walsin

accurately identified which products fit

into AISI codes in the ‘‘Content and

Property Tolerance’’ charts submitted in

Walsin’s March 22, 1998, second

supplemental questionnaire response.

The petitioners contend that Walsin

incorrectly coded several grades, and

assigned more than one grade code to

the same grade of material. The

petitioners provided a table in their case

brief identifying what they believe to be

the most appropriate grade codes

identifying the products sold in the

home and U.S. markets.

Walsin contends that the petitioners

failed to explain the methodology used

to revise Walsin’s grade code system. In

addition, Walsin notes that there are

obvious errors in the petitioners’ code

designations. Therefore, Walsin argues

that the Department should disregard

the petitioners’ concordance in its

entirety.

DOC Position

We agree with both the petitioners

and the respondent in part. Verification

revealed that the six-digit internal

chemistry code contained in Walsin’s

product model number provides the

most accurate information concerning

the chemical content of each grade of

steel identified in exhibit 13 of the

October 24, 1997 Section A response.

We found no discrepancies between the

information provided in the

questionnaire responses of October 24,

1997; November 12, 1997; January 20,

1998; and March 31, 1998; and the

primary source documents used by the

factory to produce and test the chemical

specifications of the subject

merchandise.

However, upon further examination,

we found that Walsin often assigned

more than one commercial grade name

to each six-digit internal chemistry code

in the normal course of business, and

that it assigned grade codes for the

Department’s product matching

purposes to each of its internal

commercial grade names. As a result, in

certain instances, more than one grade

code applied to the same grade of
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40465

merchandise. Therefore, we conducted

an analysis of Walsin’s grade code

designations for all of Walsin’s models

sold in the U.S. and home market. We

compared the AISI codes identified in

the GRADE1 field of the March 31, 1998

response with the grade code

designations in Walsin’s original section

B and C response of November 12, 1997.

If the grade code reported for a

particular model in the March 31, 1998

response differed from that in the

November 12, 1997 response, we

assigned to that model a grade code

corresponding to the AISI grade in the

GRADE1 field. These adjustments

allowed us to assign a unique grade

code to each AISI grade identified in the

GRADE1 field of the March 31, 1998

response. Therefore, all models

identified as AISI 304 in the GRADE1

field, for example, would have the same

grade code designation.

We then compared the

recommendations presented in the

petitioners’ case brief with Walsin’s

code designations, and our revised

grade code designations. In the event

that either the petitioners or the

Department disagreed with Walsin’s

grade code designations, we compared

the internal chemistry of each model in

question with the AISI standards

presented in the Worldwide Guide to

Equivalent Irons and Steels, and

followed the methodology outlined in

the ‘‘Fair Value Comparisons’’ section of

the notice. The results of our analysis

are recorded in the Walsin Concurrence

Memorandum.

Comment 3: Level-of-Trade

Adjustment.

The petitioners claim that the

Department should not change the levelof-trade analysis performed in the

preliminary determination, and should

continue to deny a level-of-trade

adjustment in the final determination.

The petitioners note that even with

slight differences in levels of selling

expenses, Walsin provided similar

selling functions in both the home and

U.S. markets. Thus, there is no reason

for the Department to make any changes

regarding level of trade in its analysis

for the final determination.

Walsin notes that it did not request a

level-of-trade adjustment for the

preliminary determination.

DOC Position

We conducted a level-of-trade

analysis for the preliminary

determination and found that all of

Walsin’s sales were made at the same

level of trade. We subsequently verified

the information on which our

preliminary level-of-trade analysis was

based. For a discussion, see Notice of

Preliminary Determination at page

10837, and the Concurrence

Memorandum for Preliminary

Determination of Investigation dated

February 25, 1998. No record evidence

has been presented since our

preliminary determination that would

lead us to change our analysis.

Therefore, we have not made a level-oftrade adjustment for purposes of the

final determination.

Comment 4: Second Quality

Merchandise.

The petitioners argue that the

Department should exclude sales of

second quality merchandise from the

pool of home market sales used to

calculate the margin in the final

determination. It notes that Walsin did

not report such sales in its computer

sales listing.

Walsin notes that it reported sales of

second-quality merchandise on its

computer sales listing as indicated by

the letter ‘‘U’’ at the end of the product

model number.

DOC Position

We agree with both the petitioners

and Walsin. An examination of the

March 31, 1998 computer sales listing

reveals that Walsin reported sales of

second-quality merchandise on its

computer sales listing as indicated by

the letter ‘‘U’’ at the end of the product

model number. We agree with the

petitioners that these sales should not

be used in our margin analysis since

Walsin made no sales of second-quality

merchandise to the United States. This

is consistent with the rationale outlined

in the preliminary determination. (See

Notice of Preliminary Determination at

page 10838.)

Comment 5: Affiliation in the Home

Market.

The petitioners contend that the

Department should regard two of

Walsin’s home market customers as

affiliated parties for the purposes of this

investigation, and disregard any home

market sales that are not found to be

made at arm’s length.

The petitioners claim that Walsin had

a ‘‘close relationship’’ with one of the

customers in question in which Walsin

acquired an ownership stake shortly

after the POI, and to which it sold a

significant amount of SSWR during the

POI. They claim that the volume of sales

and the knowledge that the acquisition

was about to occur would have affected

the price negotiations between Walsin

and its customer during the POI.

The petitioners claim that Walsin

directly or indirectly owned, controlled

or voted five percent or more of the

outstanding shares of the other customer

in question during the POI. Therefore,

the petitioners argue that the

Department should consider this

customer to be affiliated with Walsin,

conduct an arm’s-length test on the sales

between Walsin and the customer at

issue, and disregard from its margin

analysis any sales which were not made

at arm’s length during the POI.

Walsin claims that the petitioners

presented no support for the contention

that Walsin had a ‘‘close supplier

relationship’’ with its two customers

during the POI. Walsin notes that the

Department confirmed at verification

that Walsin did not have any long-term

investments in these two companies

during the POI. In addition, Walsin

points out that in the Department’s longstanding practice, the ‘‘close supplier’’

relationship alone is insufficient to

support conducting an arm’s-length test,

even when the sales at issue are subject

to a 100% exclusive buy-sell

arrangement between the parties.

DOC Position

We conducted extensive tests at

verification to determine whether

Walsin had any ownership of these two

companies during the POI and found

that Walsin had no ownership of either

of these two companies during the POI.

In light of the issues raised by the

parties, we considered whether Walsin

was affiliated with these companies

within the meaning of section 771(33) of

the Act and section 351.102(b) of the

Department’s regulations. An analysis of

the verified information on the

computer sales listing demonstrates that

the sales that Walsin made to these

customers account for only a small

portion of its total sales during the POI,

and that a significant portion of the

customers’ purchases of SSWR come

from producers other than Walsin (see

Walsin Concurrence Memorandum).

Based on these facts, we cannot

conclude that Walsin has close supply

relationships with the parties at issue in

the home market within the meaning of

section 351.102(b) of the Department’s

regulations. Based on the foregoing

analysis, we have not considered these

parties to be affiliated for the purposes

of the final determination.

Comment 6: Home Market Sales of

Merchandise Produced in France.

The petitioners argue that the

Department should include in its final

determination home market sales of a

certain grade of merchandise which

Walsin claimed was produced in France

and which Walsin failed to report in its

computer sales listing. The petitioners

argue that Walsin was not able to

document at verification that this

merchandise was actually manufactured

in France, as claimed in the
40466 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

questionnaire response. Consequently,

the petitioners argue that the

Department should make adverse

inferences concerning these sales by not

making any adjustments for selling

expenses incurred on these sales in the

calculation of NV.

Walsin claims that it provided the

Department a clear documentary trail

establishing that this merchandise was

produced in France and not produced

during the POI. Walsin further notes

that its sales of this merchandise were

not made in the ordinary course of

trade, as they consisted of sales of either

second-quality or trial-grade

merchandise. Therefore, Walsin argues

that the use of such sales would have a

distortive effect on the determination of

NV and should be excluded from the

Department’s final analysis.

DOC Position

We agree with the petitioners in part.

Verification revealed that Walsin made

a significant number of home market

sales of the grade of merchandise at

issue which Walsin claimed was

produced in France and which it had

not previously reported to the

Department. At verification, Walsin was

not able to provide documentary

evidence that this merchandise was

produced in France, as it claimed in its

questionnaire responses. Therefore, we

have included these sales in our final

analysis. However, because Walsin

made no sales of this merchandise in

the United States during the POI, and

this merchandise has not been

identified as one of the most similar

grades of steel for comparison to any

products sold in the United States, the

application of adverse facts available is

unnecessary in reaching our final

determination.

Comment 7: The Interest Rate Used

for Credit Expense and Inventory

Carrying Cost.

The petitioners argue that the

Department should recalculate the

interest rate used for credit expenses

and inventory carrying costs in the

United States and home market using

adverse facts available, since

verification revealed that Walsin’s

interest rate was based on the

theoretical interest rate on all short-term

loans that were outstanding on the last

day of the fiscal year, rather than on the

actual interest rate obtained by the

company on its short-term loans.

Walsin disagrees, claiming that it

reported a figure for the total value of

loans which ties directly to the

company’s financial statements. It

maintains that this figure is a reliable

indicator of the interest rate because it

ties to the financial statements. Walsin

argues that the figure is reasonable and

should be used in the final

determination.

DOC Position

We agree with the petitioners. We

found at verification that Walsin

improperly reported both the value of

its loans and interest payments during

the POI. Walsin’s reporting

methodology did not allow the

Department to determine prior to

verification that any problems existed in

the company’s method for determining

its interest rate, and to request that

Walsin revise its methodology

accordingly.

Section 776(a)(1) of the Act provides

that the Department may use facts

available in situations in which the

necessary information is not available

on the record. Section 776(b) states that

the Department may use an inference

which is adverse to the interest of the

party in selecting from among the facts

otherwise available if the party has

failed to cooperate by not acting to the

best of its ability to comply with a

request for information from the

administering authority.

Since Walsin did not provide the

information that was required by the

Department in order to determine the

appropriate interest rates to be used in

the calculation of U.S. and home market

credit expenses and inventory carrying

costs incurred in the home market, and

since the provision of this information

was within its control, we determined

that Walsin has failed to cooperate by

not acting to the best of its ability to

comply with the Department’s request

for information. Therefore, we

determined that it is appropriate to

make adverse inferences in this case.

Therefore, as adverse facts available for

credit expense, we used the lowest

short-term interest rate obtained in the

home market and reported in

verification exhibit 18 to recalculate

short-term credit expenses for home

market sales. For EP sales, we used the

prime interest rate as defined by the

Federal Reserve Bank to recalculate

short-term credit expenses. For

inventory carrying cost incurred in the

home market, we have used in our final

calculations the highest per-unit

expense reported in the May 11, 1998

submission for U.S. sales and the lowest

per-unit expense reported in the May

11, 1998 submission for home market

sales.

Comment 8: Indirect Selling Expenses

in the Home Market.

The petitioners contend that the

Department must recalculate home

market indirect selling expenses to

exclude direct selling expenses, foreign

inland freight and travel expenses to

foreign countries in accordance with our

verification findings.

Walsin agrees that the reported home

market indirect selling expenses

included export expenses, inland

freight, marine freight and royalty

expenses that had already been

included in direct selling expenses, and

thus the amount of home market

indirect selling expenses reported on

the computer sales listing was

overstated.

DOC Position

We agree with both the petitioners

and Walsin that the reported home

market indirect selling expenses

incorrectly included certain direct

selling expenses and export-related

expenses that were reported elsewhere

in Walsin’s response. In order not to

double-count these expenses in our

calculations, we have adjusted the

figures accordingly for use in the final

determination.

Comment 9: The Inclusion of U.S.

Brokerage and Handling in Movement

Expenses.

The petitioners argue that the

Department erroneously neglected to

deduct U.S. brokerage and handling

from Walsin’s gross U.S. price.

Walsin did not comment on this

issue.

DOC Position

We agree and have corrected the error.

Comment 10: Minor Corrections to the

Response.

Walsin submitted a number of

corrections at the start of the sales and

cost verification. It claims that the

Department reviewed those corrections

as a part of its regular verification

process, and therefore requests that the

corrections be accepted for the purposes

of the final determination.

DOC Position

We examined the corrections

presented at the beginning of

verification and have accepted them

with the exception of those relating to

inventory carrying costs (see Comment

7 for the treatment of inventory carrying

costs).

Comment 11: Yield Loss.

Walsin argues that it accurately

reported the yield loss incurred

throughout the entire SSWR

manufacturing process. To support its

position, Walsin states that the

Department should reexamine several

accounting worksheets that the verifiers

took as cost verification exhibits 14, 15,

and 16. According to Walsin, these

exhibits, which calculate the company’s

cumulative yield loss, demonstrate that
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40467

it accurately reported its yield loss.

Thus, Walsin argues that there is no

basis to make any further adjustment in

this regard. Walsin states further that if

the Department does adjust its reported

yield loss, it cannot rely on certain

production reports taken as cost

verification exhibit 30. According to

Walsin, these reports only show the

realized yield of its first grade products

and not the accumulated yield of both

first and second grade products.

Therefore, Walsin claims that the yield

rate reported on this exhibit is

inaccurate for calculating the cost

associated with its yield loss.

The petitioners contend that the

Department should adjust Walsin’s

reported costs to reflect the fact that

they do not adequately account for the

company’s yield loss. The petitioners

argue that the Department cannot accept

Walsin’s reported costs because the

company has understated its reported

cost of manufacturing. Thus, the

petitioners suggest that the Department

should either adjust Walsin’s reported

costs according to verification findings,

substitute costs based on facts available,

or completely reject Walsin’s costs.

DOC Position

We disagree with Walsin that it has

adequately accounted for its yield loss

incurred in manufacturing SSWR. For

the calculation of COP and CV, we

found that Walsin applied the yield loss

of each production stage only to the

costs incurred in that stage. This

methodology, however, fails to properly

account for yield costs incurred in

previous stages which are input into the

subsequent stages. Thus, the reported

yield loss amounts do not accurately

capture the actual overall yield loss

incurred by the company in producing

SSWR. Walsin should have calculated

its reported yield loss amount by

applying each production stage’s yield

loss rate to the sum of each stages’s

preceding and current production costs.

In fact, Walsin calculates its overall

yield loss in the ordinary course of

business in the same manner by

combining its previous production

stage’s costs with the current production

stage’s costs. Walsin then divides the

total costs by finished output to

calculate a yielded cost (see the last

three pages of cost verification exhibit

14). As referenced by Walsin in its case

brief, cost verification exhibit 14

contains worksheets that depict the

company’s normal recognition of its

overall yield loss for a single model on

a per-unit basis. We note, however, that

the fully yielded material costs at the

final stage of manufacturing are

different from the material costs

reported in Walsin’s cost database. For

its reported costs, Walsin only reported

a material cost that it yielded at the

billet manufacturing stage. This results

in a yield loss that is less than the actual

overall yield loss of the fully processed

product. For the final determination, we

adjusted Walsin’s reported billet costs

for the yield loss rate experienced in the

rolling, annealing, and pickling

production processes. We computed the

yield loss rate for these production

processes based on the information used

by Walsin in the ordinary course of

business to compute a fully yielded

material cost. Walsin provided this

information in cost verification exhibit

8.

Comment 12: Flood Damage Loss.

Walsin asserts that the Department

should not consider the company’s

flood damage loss component of COP.

Walsin explains that in its normal

course of business it treated the loss as

an extraordinary item and not a

manufacturing or general expense item

because it was the result of an unusual

and infrequent occurrence. According to

Walsin, this treatment is in accordance

with Taiwanese Generally Accepted

Accounting Principles (GAAP) and,

thus, the Department should accept it.

Moreover, the respondent argues that

the exclusion of this cost reasonably

reflects the costs associated with

producing SSWR and it avoids aberrant

cost fluctuations. Walsin also notes that

in Certain Fresh Cut Flowers From

Columbia 62 FR 19772, 19778 (April 8,

1997), the Department allowed the

respondent a similar exclusion for

severe water damage and consequent

loss of production.

The petitioners argue that the

Department should include the loss

from the flood in Walsin’s calculation of

COP and CV. According to the

petitioners, Walsin incurred the

expenses associated with the flood

during normal operations. Thus, it is

appropriate that the Department include

this expense in the calculation of COP

and CV.

DOC Position

We agree with Walsin that it is

appropriate in this case to exclude its

flood damage loss from the calculations

of COP and CV. Walsin reported that

during the POI, the area in which

Walsin’s manufacturing plant is located

received a historically high amount of

rainfall over a short period of time. The

excessive amount of rainfall caused the

local levy to break and flood the

surrounding area. Because of the flood,

Walsin incurred out-of-the-ordinary

cleanup expenses and losses associated

with the write-off of damaged

equipment and supplies. Consistent

with our position in the Final

Determination of Sales at Less Than

Fair Value: Large Newspaper Printing

Presses and Components Thereof,

Whether Assembled or Unassembled

From Japan; 61 FR 38139, 38153 (July

23, 1996) (‘‘LNPP from Japan’’), it is the

Department’s practice to allow

respondents to exclude out-of-theordinary losses if such losses stem from

an accident that constitutes an

unforeseen disruption in production

which is beyond the management’s

control. See Uruguay Round

Agreements Act Statement of

Administrative Action (SAA) at 162. In

such instances, we rely on the actual

costs incurred for production exclusive

of the costs associated with the

unforeseen event.

At verification, we confirmed that the

flood and the damages resulting from

the flood were unforseen and beyond

management’s control. Therefore, for the

final determination, we did not include

any of the additional expenses incurred

as a result of the flood in the calculation

of COP and CV.

Comment 13: Idle Capacity Loss.

Walsin argues that the Department

should not include its idle capacity loss

in the calculation of COP and CV

because it is an extraordinary loss.

According to Walsin, this loss consists

of the idle depreciation expense on

plant and equipment that was not in use

or was underutilized during the POI.

Walsin maintains that because the

company is a relatively new producer it

determined that it was reasonable to

classify this type of cost as

extraordinary until the company reaches

a normal production level. Moreover,

Walsin emphasizes that classifying this

cost as extraordinary is appropriate and

acceptable under Taiwanese GAAP.

Therefore, Walsin requests that the

Department follow Taiwanese GAAP

which considers the idle capacity loss

charge as extraordinary, and exclude the

loss from the calculation of COP and

CV.

The petitioners disagree, stating that

the Department should include Walsin’s

idle capacity loss, which the company

reported on its audited income

statement, in the calculation of COP and

CV. According to the petitioners, the

Department is directed to adjust a

respondent’s cost if it determines that

the respondent has shifted costs away

from production of the subject

merchandise as stated in the SAA.

DOC Position

We disagree with Walsin that we

should exclude its idle capacity loss

from the calculation of COP and CV. As
40468 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

Walsin has noted, the idle capacity loss

consisted of depreciation expense that

the company incurred on holding idle

production assets. For this type of

expense, it is our normal practice to

include it as part of G&A. For instance,

in the Final Results of Antidumping

Duty Administrative Review:

Silicomanganese From Brazil, 62 FR

37869, 37871 (July 15, 1997) and Final

Determination of Sales at Less Than

Fair Value: Extruded Rubber Thread

From Malaysia, 61 FR 54773, 54772

(October 22, 1996), we considered ‘‘idle

depreciation to be period costs (i.e.,

costs that are more closely related to the

accounting period rather than the

current manufacturing costs) and

included the expense in our calculation

of G&A expenses.’’ As for Walsin’s

contention that its idle capacity loss is

an extraordinary expense under

Taiwanese GAAP and should therefore

be excluded from the company’s

reported costs, we disagree. Simply

because a company characterizes certain

expenses as extraordinary in the

ordinary course of business in

accordance with its home market GAAP

does not mean the cost automatically is

the result of an unforeseen disruption in

production that is beyond

management’s control and should

therefore be excluded from COP and CV

(see LNPP from Japan at 38153). In this

instance, we see nothing unusual or

unforeseen about depreciation expense

incurred on idle assets for a

manufacturing company. Thus, for the

final determination we have included

Walsin’s idle capacity loss in the

calculation of its COP and CV.

Comment 14: Transfer Price for

Copper.

The petitioners state that the

Department should revise the reported

transfer price for copper obtained from

affiliates to reflect the market value paid

to non-affiliates. According to the

petitioners, the reported transfer price is

less than the purchase price of

comparable copper obtained from nonaffiliates. Based on these facts, the

petitioners maintain that the

Department should revise the reported

transfer price for copper to reflect the

market value.

Walsin contends that the transfer

price for copper included in its reported

costs should not be revised. According

to Walsin, there is no evidence to

support that the affiliated-party copper

sales were not made on an arm’s-length

basis. Therefore, Walsin states that the

Department should not revise the

transfer price of copper in Walsin’s

reported section D database.

DOC Position

We agree with the petitioners. We

compared the reported transfer price

paid for copper purchased from an

affiliated supplier to reported market

prices and the affiliated suppliers’ cost,

and found that the average market price

was the highest. We performed this

comparison in accordance with section

351.407(b) of the Department’s

regulations, which sets forth the method

by which the Department will

determine value under the major input

rule for the purposes of section 773(f)(3)

of the Act. This provision, which

applies to the calculation of both CV

and COP, states that the Department

will determine the value of a major

input purchased from an affiliated

person based on the higher of: (1) the

price paid by the exporter or producer

to the affiliated person for the major

input; (2) the amount usually reflected

in sales of the major input in the market

under consideration; or (3) the cost to

the affiliated person of producing the

major input. We have relied on this

methodology in the Final Results of

Antidumping Duty Administrative

Review; Certain Corrosion-Resistant

Carbon Steel Flat Products and Certain

Cut-to-Length Carbon Steel Plate From

Canada, 62 FR 18449, 18457 (April 15,

1997), Final Results of Antidumping

Duty Administrative Review;

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof from France, Germany, Italy,

Japan, Singapore, and the United

Kingdom, 62 FR 2081, 2115 (January 15,

1997), and the Final Results of

Antidumping Duty Administrative

Reviews and Revocation in Part of an

Antidumping Finding; Tapered Roller

Bearings and Parts Thereof, Finished

and Unfinished, From Japan and

Tapered Roller Bearings, Four Inches or

less in Outside Diameter, and

Components Thereof, From Japan, 61

FR 57629, 57644 (November 7, 1996). In

this case, we found the market price to

be higher than the reported transfer

price and the affiliated suppliers’ cost.

Thus, for the final determination, we

have increased Walsin’s affiliated

supplier’s copper cost to reflect the

market value paid by non-affiliates.

B. Yieh Hsing

Comment 15: Modification of Control

Numbers.

Yieh Hsing argues that the

Department should not modify Yieh

Hsing’s reported control numbers

(CONNUMs) as Yieh Hsing reported in

its March 31, 1998 submission. Yieh

Hsing claims that the Department

verified that Yieh Hsing correctly

assigned the CONNUMs in accordance

with AISI grades, and in accordance

with the Department’s instructions.

The petitioners agree with the

respondent, except in two cases: 1) if

the Department decides to reclassify

grades for all respondents based on any

general model-match decisions, and 2) if

the Department decides to reclassify one

of Yieh Hsing’s steel grades based on its

verification findings (see Comment 16

below).

DOC Position

For purposes of the final

determination, we have continued to

employ the same general model-match

methodology as that outlined in the

preliminary determination (see ‘‘Fair

Value Comparison’’ section of this

notice for further discussion.) Therefore,

there is no need to generally reclassify

the grades reported by Yieh Hsing and

verified by the Department. (See also

DOC Position to Comment 16 below).

Comment 16: Classification of An

Internal Grade.

The petitioners disagree with Yieh

Hsing’s classification of one of its

internal grades as AISI grade 304. The

petitioners argue that this internal grade

is more appropriately classified as

another AISI grade, and request that the

Department reclassify this internal grade

accordingly. The petitioners base their

argument on the chemical specifications

listed on the mill certificate for this

grade that were discussed in the

Department’s verification report.

Yieh Hsing argues that the

Department should not reclassify this

steel grade. Yieh Hsing contends that

the Department verified that Yieh Hsing

correctly classified this grade as AISI

304. Yieh Hsing also states, based on the

chemical specifications of this grade

that it reported to the Department, that

this grade may not be classified as the

AISI grade suggested by the petitioners.

Yieh Hsing also notes that the

Department verified for one selected

home market transaction that the grade

at issue met the specifications for AISI

grade 304. Yieh Hsing also argues that

if, notwithstanding these facts, the

Department still decides to reclassify

this grade as the AISI grade requested by

the petitioners, the Department should

recalculate COP and CV for the latter

grade to reflect the reclassification.

DOC Position

We agree with Yieh Hsing. Based on

our review at verification of a mill

certificate for the grade at issue, we

found that this grade meets the

specifications of AISI grade 304, and

does not meet the specifications of the

grade proposed by the petitioners, or of
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40469

any other AISI grade of which we are

aware. Furthermore, we note that in

instances in which an internal grade

matches all the specified chemical

content tolerance ranges of an AISI

grade, but that the internal grade also

contains chemicals that are not

otherwise specified as being included in

the standard AISI designation, it is

appropriate to classify the internal grade

as the AISI grade. We therefore have

accepted Yieh Hsing’s classification of

this grade as AISI grade 304 in the final

determination. For further discussion,

see Memorandum from Alexander

Amdur to Holly Kuga on Yieh Hsing

Enterprise Corporation, Ltd.: Analysis of

Issues Raised in the Case and Rebuttal

Briefs for the Final Determination (Yieh

Hsing Concurrence Memorandum).

Comment 17: Model Matching

Program.

Yieh Hsing argues that the

Department should modify its SAS

program to correctly match Yieh Hsing’s

U.S. sales with home market sales. Yieh

Hsing claims that the SAS program that

the Department used for the preliminary

determination, by comparing the

absolute values of the control numbers,

would result in improper matches of the

most similar grades identified in Yieh

Hsing’s March 31, 1998 submission.

The petitioners argue that the

Department should continue to use the

model-match program from the

preliminary margin calculation. The

petitioners state that this program

accurately identified the most similar

grades based on the comparison of the

absolute values of the control numbers,

and this program is more accurate than

Yieh Hsing’s reported most similar

models.

DOC Position

We agree in part with both the

respondent and the petitioners. In the

preliminary determination, the modelmatch program correctly identified

matches of identical grades by

comparing the absolute values of the

control numbers. In cases where no

matches of identical grades existed, we

inserted language into the model-match

program to correctly identify the most

similar grades based on Yieh Hsing’s

reported most similar grades. For the

final determination, we have continued

to use this program, and have made any

necessary modifications to ensure that

this program correctly identifies the

most similar grades as reported by Yieh

Hsing in its March 31, 1998 submission,

and clarified in its June 8, 1998 case

brief.

Comment 18: Classification of Sales as

EP or CEP.

Yieh Hsing argues that the

Department incorrectly determined in

the preliminary determination that Yieh

Hsing’s sales to one of its U.S.

customers were CEP sales. Yieh Hsing

claims that the Department, in

reclassifying these sales as CEP sales,

incorrectly determined that Yieh

Hsing’s sales agent acted as more than

a ‘‘processor of sales-related

documentation’’ and a ‘‘communication

link’’ with this customer. Yieh Hsing

notes that it explained in its March 31,

1998 submission (submitted after the

preliminary determination) that its sales

agent refaxed messages received from

Yieh Hsing to this customer, and that

the sales agent was not required to, and

did not, make any sales promotion

efforts during the POI. Yieh Hsing

argues that a letter examined by the

Department at verification shows that its

U.S. sales agent acted as a

communication link between Yieh

Hsing and this customer, and shows that

the sales agent did not negotiate sale

terms. Citing to the Department’s

verification report, Yieh Hsing also

argues that the Department verified that

Yieh Hsing correctly explained its sales

agent’s role in its March 31, 1998

submission.

Yieh Hsing further claims that the

Department improperly cited Yieh

Hsing’s January 13, 1998 submission for

the conclusion that Yieh Hsing’s U.S.

sales agent performed various selling

functions on behalf of Yieh Hsing. Yieh

Hsing states that it reported that its sales

agent acted on behalf of Yieh Hsing to

distinguish the sales agent from working

on behalf of Yieh Hsing’s customer.

Yieh Hsing also states that it reported

that it gave a quotation to the sales agent

because Yieh Hsing communicated with

its customer through the sales agent.

Yieh Hsing states that it never stated

that the sales agent negotiated sales

terms with the customer, or that it

instructed its sales agent to solicit

customers on its behalf.

The petitioners argue that the

Department properly concluded that

Yieh Hsing’s sales to this U.S. customer

meet the statutory definition of CEP

sales. The petitioners further argue that

the Department’s preliminary

conclusion is further supported by

documents found at verification. The

petitioners state that a letter examined

by the Department at verification (also

referred to by Yieh Hsing) demonstrates

that Yieh Hsing’s sales agent negotiates

price and seeks out customers on its

own, and thus is more than a ‘‘paperpusher’’ and a ‘‘communications link’’

between Yieh Hsing and Yieh Hsing’s

customer.

DOC Position

We agree with the respondent that its

U.S. sales to this customer should be

treated as EP sales. In the preliminary

determination, in order to determine

whether sales made prior to importation

through Yieh Hsing’s sales agent in the

United States were EP or CEP

transactions, we analyzed whether Yieh

Hsing’s U.S. sales to this customer met

the Department’s three criteria for EP

sales: (1) whether the merchandise in

question is shipped directly from the

manufacturer to the unaffiliated buyer

without being introduced into the

physical inventory of the selling agent;

(2) whether direct shipment from the

manufacturer to the unaffiliated buyer is

the customary channel for sales of the

subject merchandise between the parties

involved; and (3) whether the selling

agent in the United States acts only as

a processor of sales-related

documentation and a communication

link with the unaffiliated U.S. buyer.

Based on the information on the

record at the time of the preliminary

determination, we determined that Yieh

Hsing’s U.S. sales to this customer

during the POI met the first two of the

Department’s three criteria for EP sales.

We further determined that Yieh Hsing’s

U.S. sales to this customer did not meet

the Department’s third criterion for EP

sales since the reported sales-related

responsibilities (including seeking out

customers on its own and negotiating

sales terms) of Yieh Hsing’s sales agent

in the United States demonstrated that

the sales agent functioned as more than

a ‘‘paper-pusher’’ in the U.S. sales

process.

The record, as it has been developed

since the preliminary determination,

continues to show, and both parties do

not contest, that Yieh Hsing’s U.S. sales

to this customer meet the first two

criteria. In reexamining whether the

third criterion (i.e., whether the selling

agent acts as more than a document

processor), is satisfied, we considered

whether the U.S. sales agent’s

involvement in making the sale is

incidental or ancillary. See Certain

Cold-Rolled and Corrosion-Resistant

Carbon Steel Flat Products from Korea:

Final Results of Antidumping Duty

Administrative Review, 63 FR 13170

(March 18, 1998). See also Viscose

Rayon Staple Fiber From Finland: Final

Results of Antidumping Duty

Administrative Review, 63 FR 32820

(June 16, 1998).

The record now shows that Yieh

Hsing’s U.S. sales agent’s role was

incidental or ancillary in making the

sales to this customer during the POI.

Yieh Hsing clarified in its March 31,
40470 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

1998 response, and we verified, that the

role of Yieh Hsing’s sales agent in Yieh

Hsing’s sales to this customer during the

POI mainly involved refaxing messages

between Yieh Hsing and this customer,

communicating Yieh Hsing’s price

quotations to this customer, and

assisting Yieh Hsing in handling U.S.

Customs clearance of Yieh Hsing’s

merchandise. We also verified that all

sales were initiated by this customer

based on its production requirements.

We further agree with the respondent

that the letter examined at verification

that is referenced by both the

respondent and the petitioners shows

that Yieh Hsing’s U.S. sales agent acted

as a communication link between Yieh

Hsing and this customer, and that the

sales agent did not negotiate sale terms.

We also note that other letters examined

at verification show the following: that

Yieh Hsing and this customer

communicated with each other through

Yieh Hsing’s U.S. sales agent; that Yieh

Hsing, and not its agent, determined the

terms of sale with this customer; and

that Yieh Hsing, and not its agent,

accepted or rejected all sales to this

customer.

There is also no evidence that Yieh

Hsing’s U.S. sales agent otherwise had

substantial involvement in the sales

process. Based on these facts, we have

concluded for purposes of the final

determination that EP treatment is

appropriate for all of Yieh Hsing’s U.S.

sales to this customer, as these sales

were made by the producer, Yieh Hsing,

prior to importation to a purchaser in

the United States not affiliated with the

producer (see section 772(a) of the Act).

For further discussion, see Yieh Hsing

Concurrence Memorandum.

Comment 19: The Classification of

Sales to Another U.S. Customer.

The petitioners argue that the

Department should treat Yieh Hsing’s

sales to another U.S. customer as CEP

sales. The petitioners state that

information obtained at verification

shows that this customer holds

inventory of Yieh Hsing’s SSWR which

the customer sells after it enters the

United States. The petitioners further

state that this customer, based on

documents found at verification, is more

than a ‘‘paper pusher.’’

Yieh Hsing contends that the

Department should continue to treat

Yieh Hsing’s sales to this customer as

EP sales. Yieh Hsing argues that the

petitioners’ arguments are based on a

false presumption that this customer, a

U.S. distributor, is a sales agent, and

notes that it sold its SSWR to this

customer, and not through this

customer. Yieh Hsing further maintains

that the petitioners’ arguments are

irrelevant to sales made to an

unaffiliated U.S. distributor, since the

Act defines EP sales as sales to an

unaffiliated purchaser in the United

States. Yieh Hsing also contends that

this customer’s status as a distributor is

insufficient to conclude that Yieh Hsing

and this customer are affiliated, and that

the verified facts show that there is no

close relationship between Yieh Hsing

and this customer that would

characterize them as affiliated parties.

DOC Position

We agree with the respondent. The

main factors in analyzing whether U.S.

sales are EP or CEP sales are whether

they are first sold to an unaffiliated

purchaser before or after importation,

and if such sales are made before

importation, whether such sales are

made outside or in the United States.

See sections 772(a) and 772(b) of the

Act. In this case, the record indicates

that the U.S. sales at issue were made

prior to importation by Yieh Hsing in

Taiwan to the unaffiliated U.S.

purchaser. We also agree with Yieh

Hsing that there is no evidence on the

record to suggest that this customer was

acting on Yieh Hsing’s behalf or is

affiliated with Yieh Hsing. Therefore,

since Yieh Hsing sold SSWR to this

unaffiliated U.S. customer before the

date of importation, Yieh Hsing’s sales

to this customer meet the statutory

criteria of EP sales. For further

discussion, see Yieh Hsing Concurrence

Memorandum.

Comment 20: Weight-Averaging of

U.S. Prices.

Yieh Hsing argues that the

Department should weight-average all

U.S. prices of identical SSWR to

calculate Yieh Hsing’s dumping margin,

rather than calculating dumping

margins separately for EP and CEP sales,

as the Department did for the

preliminary determination. Yieh Hsing

states that the Act and the Department’s

regulations do not permit the separate

averaging of EP and CEP sales in

calculating the weighted-average U.S.

prices. Yieh Hsing further argues, citing

the ‘‘plain meaning’’ rule, that the

relevant sections of the Act and the

regulations, which discuss comparing

the weighted average of the normal

values to the ‘‘weighted average of the

export prices and constructed export

prices’’ (emphasis added), should be

interpreted as stated, and should not be

interpreted as ‘‘the weighted average of

the export prices or constructed export

prices.’’ Yieh Hsing also contends that

even though the Department rejected

Yieh Hsing’s ministerial error allegation

on the same issue, the Department has

not yet addressed whether the

methodology used in the preliminary

determination was legally correct.

The petitioners argue that the

Department should calculate the final

antidumping margin in the same

manner as that done for the preliminary

margin analysis. The petitioners note

that the Department stated, in response

to Yieh Hsing’s comment on the same

subject in Yieh Hsing’s ministerial error

allegation, that ‘‘the Department

followed its normal methodology to

calculate Yieh Hsing’s dumping margins

in this investigation.’’ The petitioners

also note that the SAA and the

Department’s antidumping manual

support the Department’s position, as

both specifically mention comparing the

weighted average of the normal values

with ‘‘a weighted average of export

prices or constructed export prices.’’

DOC Position

Given that the Department has now

classified all of Yieh Hsing’s U.S. sales

as EP sales, we need not make a

determination on this issue. See

Comments 18 and 19 above for further

discussion of the Department’s

classification of Yieh Hsing’s U.S. sales.

Comment 21: Home Market Inventory

Carrying Costs.

Yieh Hsing argues that the

Department should include Yieh

Hsing’s reported home market inventory

carrying costs in the dumping margin

analysis in the final determination. Yieh

Hsing notes that the Department did not

include Yieh Hsing’s reported home

market inventory carrying costs in the

calculations for the preliminary

determination because the Department

concluded that Yieh Hsing did not

correctly calculate these costs. Yieh

Hsing also notes that the Department

verified the inventory carrying costs as

reported in Yieh Hsing’s March 31, 1998

submission.

DOC Position

We agree with the respondent. We

verified that Yieh Hsing correctly

calculated its inventory carrying costs in

its March 31, 1998 submission.

Therefore, we have included Yieh

Hsing’s reported inventory carrying

costs in our final margin analysis, where

appropriate.

Comment 22: Home Market Sales of

Second-Quality Merchandise.

The petitioners argue that the

Department should exclude sales of

second quality merchandise from the

home market database as was done in

the preliminary margin analysis. The

petitioners state that it is not

appropriate to compare sales of nonprime quality or seconds in the home
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40471

market to U.S. sales of prime quality

merchandise.

DOC Position

We agree with the petitioners. In the

preliminary determination, given the

limited home market sales quantity of

non-prime and defective merchandise

and the fact that no such sales were

made to the United States during the

POI, we excluded sales of non-prime

and defective merchandise from our

analysis in accordance with our past

practice. Since these facts have not

changed from the preliminary

determination, we have continued to

exclude sales of non-prime and

defective merchandise from our analysis

in the final determination.

Comment 23: Corrections to the

Response.

Yieh Hsing argues that the

Department should incorporate the

corrections to minor errors that Yieh

Hsing submitted at verification in the

calculations for the final determination.

Yieh Hsing states that these corrections

were timely submitted and verified by

the Department.

The petitioners argue that the

Department must incorporate all clerical

errors discovered at verification in its

final margin calculation. In particular,

the petitioners note that the Department

found at verification that Yieh Hsing

incorrectly labeled its corrections

submitted at verification for U.S.

brokerage and letter of credit expenses.

DOC Position

We agree with both the respondent

and the petitioners, and have made the

appropriate corrections to all clerical

errors that Yieh Hsing submitted and/or

that we found at verification in our final

calculations. See ‘‘Export Price/

Constructed Export Price’’ and ‘‘Normal

Value’’ sections of this notice.

Comment 24: Treatment of Costs of

Billets Purchased from An Affiliate.

Yieh Hsing claims that the

Department should not adjust its

reported billet costs for purchases from

its affiliated supplier to reflect an

imported market price. According to

Yieh Hsing, its reported affiliated

supplier billet costs are based on the

higher of COP, transfer price or market

value, in accordance with section

773(f)(2) and (3) of the Act. Moreover,

Yieh Hsing states that it appropriately

used the price for physically

comparable billets that its affiliate sold

to non-affiliates as the market price for

comparison purposes. The respondent

emphasizes that the price it paid to nonaffiliated suppliers for imported billets

is not an appropriate basis to determine

market price because the imported

billets are of a higher quality, most do

not require grinding, and the processing

time they require is substantially less

than those obtained from the affiliate.

Yieh Hsing argues further that because

it can demonstrate that the imported

billets are qualitatively different, the

Department should reject the

petitioners’ assertion that it rely on the

market price of such raw material, as it

did in the Final Results of Antidumping

Duty Administrative Review:

Silicomanganese from Brazil, 62 Fed.

Reg. 37869, 37874 (July 15, 1997).

If the Department finds it necessary to

adjust its reported billet costs for

purchases from its affiliated suppliers,

Yieh Hsing argues that the Department

should not use the same methodology

that it used in the preliminary

determination. According to Yieh Hsing,

the preliminary adjustment incorrectly

increased the billet cost for purchases

from its non-affiliated suppliers which

were already reported at a market price.

In addition, Yieh Hsing claims that the

Department distorted costs by not

making the adjustment more gradespecific. Therefore, Yieh Hsing

recommends that the Department

calculate more accurate grade-specific

adjustment factors and apply these

factors to only the billet costs for

purchases from its affiliated supplier.

Yieh Hsing asserts that the Department

has the necessary information to make

these calculations and provided several

examples of such calculations in its case

brief.

The petitioners contend that the

Department should adjust Yieh Hsing’s

reported billet cost to reflect the market

price for billets by using the imported

price. In determining the higher of COP,

transfer price, and market value, the

petitioners state that the Department

should use the imported price when

possible and, when no import price is

available, it should use the higher of the

affiliated supplier’s revised COP, the

transfer price to Yieh Hsing, or the

affiliated supplier’s sales price to

unaffiliated parties. As for differences in

physical characteristics, the petitioners

maintain that the fact that Yieh Hsing

grinds a higher percentage of billets

purchased from its affiliate does not

constitute a ‘‘significant difference in

product characteristics.’’ Therefore, they

conclude that imported billets are

comparable merchandise.

DOC Position

We disagree with Yieh Hsing that its

reported COP and CV amounts properly

reflect the cost of billets consumed.

Although Yieh Hsing provided the

transfer prices, its affiliated supplier’s

cost of production, and market values

for billets used to produce SSWR, it

failed to use the higher of these three

amounts in accordance with Section

773(f)(3) of the Act. Therefore, for the

final results we have adjusted Yieh

Hsing’s cost of billets purchased from its

affiliated supplier to reflect a market

price.

As for which market price to use in

making the adjustment, we agree with

Yieh Hsing that the appropriate market

price to use in our comparison is the

price at which the company’s affiliated

supplier sold comparable billets to nonaffiliates. In determining a market price

for an input acquired from an affiliated

supplier, the Department may rely on

sales transactions for a comparable

input between the affiliated supplier

and an unaffiliated customer in the

home market, or purchase transactions

for a comparable input between an

unaffiliated supplier and the respondent

company. In this case, however, we do

not consider it appropriate to rely on

Yieh Hsing’s purchases of billets from

its non-affiliated suppliers as a market

price because of the non-comparability

of the billets. The imported billets Yieh

Hsing purchased from non-affiliates are

physically different from those obtained

from the affiliate. For instance, Yieh

Hsing receives the imported billet in

such fashion that it does not require

grinding. However, the billets

purchased from its affiliated supplier

require grinding. At verification, we

confirmed that there were differences

between the imported billets and those

obtained from the affiliate supplier. On

a sample basis we examined daily

grinding reports, such as those

contained in cost verification exhibit 28,

which show that the imported billets

did not require grinding, whereas the

affiliate’s billets required grinding.

As for making our billet cost

adjustment for the final determination,

we first computed a market price for

those grades which have no market

price (i.e., those grades which Yieh

Hsing’s affiliated supplier did not sell to

non-affiliates). We did this by

calculating a weighted-average

adjustment factor based on those grades

that had a market price. On a gradespecific basis, we then used the higher

of transfer price, market value, and

revised COP for billets purchased from

affiliated suppliers (see Comment 25) in

accordance with section 773(f)(3) of the

Act.

Comment 25: Adjustments to the COP

of Billets from the Affiliate.

The petitioners state that the reported

COP of the billets obtained from Yieh

Hsing’s affiliate needs to be adjusted to

include an appropriate amount of G&A

expenses, financing costs, and bonus
40472 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

payments. According to the petitioners,

the method used by the affiliate to

allocate these costs to its billets is not

consistent with the Department’s

normal practice. Specifically, the

petitioners claim that the affiliate

allocated its G&A and interest expenses

based on production tonnages. The

petitioners, however, claim that the

Department’s normal practice is to

allocate G&A and interest expense on a

company-wide basis as a percentage of

cost of sales. As for the bonus payments,

the petitioners state that the affiliate

excluded this cost from its calculation

of the billet COP. According to the

petitioners, these payments represent

compensation to employees which

should be included in the calculation of

the billet COP.

Yieh Hsing asserts that recalculating

its affiliate’s COP for the alleged G&A

and financing expense adjustments at

issue would not affect the reported billet

costs contained in the section D

database. According to Yieh Hsing,

these adjustments do not increase the

affiliate’s COP to be above the billet’s

reported transfer price. Thus, Yieh

Hsing claims that adjusting the

affiliate’s COP is not necessary.

DOC Position

We agree with the petitioners that we

should compute G&A and interest

expenses on a company-wide basis as a

percentage of cost of sales. In addition,

we agree with the petitioners that the

bonus payments represent

compensation to employees that should

be included in the billet COP.

Accordingly, we adjusted the reported

billet COP of Yieh Hsing’s affiliate to

include the revised G&A expense,

revised financing costs, and bonus

payments in order to properly compare

the transfer price, market price and COP

of billets purchased from affiliated

suppliers in accordance with section

773(f)(3) of the Act (see Comment 24).

Comment 26: Adjustments to the Cost

of Sales Figure.

The petitioners claim that the

Department should adjust Yieh Hsing’s

cost of sales figure that was used to

compute the G&A and interest expense

rates in order to ensure it is on the same

basis as the reported cost of

manufacturing (COM) to which the rate

is applied. Specifically, the petitioners

state that the Department should reduce

Yieh Hsing’s cost of sales figure by the

scrap revenue amount reported on its

income statement. According to the

petitioners, this adjustment is necessary

to avoid the understatement of G&A and

financing costs because the COM figure

to which the G&A and interest expense

rates are applied has been reduced by

scrap revenue.

Yieh Hsing disagrees that such an

adjustment is necessary because the

resulting effect on its COP and CV is

insignificant. Because of its

insignificance, Yieh Hsing requests that

the Department disregard the

adjustment in accordance with section

777A(a)(2) of the Act. In addition, Yieh

Hsing disagrees with the petitioners that

its scrap sales revenue figure should

reduce its cost of sales. Instead, the

company recommends reducing its cost

of sales figure by the manufacturing cost

used to make the scrap it sold.

DOC Position

We agree with the petitioners that the

cost of sales figure used to compute

Yieh Hsing’s G&A and interest expense

rates should be reduced by the scrap

revenue amount reported on its income

statement. To calculate its reported G&A

and financing expense ratios, Yieh

Hsing used its cost of sales figure as

reported on its audited financial

statements. However, we note that this

cost of sales figure is not on the same

basis as the reported COM because the

company offset its reported COM with

the revenues it generated from the sale

of scrap. Consistent with our findings in

the Final Determination of Sales at Less

Than Fair Value of Certain Pasta From

Italy, 61 FR 30326, 30349 (June 14,

1996) and Final Results of Antidumping

Duty Administrative Review of Certain

Cold-Rolled and Corrosion-Resistant

Carbon Steel Flat Products From Korea,

62 FR18404, 18447 (April 15, 1997), we

have reduced Yieh Hsing’s cost of sales

figure by its scrap revenue to obtain a

cost of sales figure that is on the same

basis as the reported COM. We then

used this adjusted cost of sales amount

to calculate revised G&A and financial

expense ratios. Consequently, we

disagree with Yieh Hsing that the

correct method to adjust the cost of sales

figure is to reduce its cost of sales by the

cost of producing the scrap. We note

that reducing its cost of sales figure by

the cost of producing the scrap would

be inconsistent with the method by

which COM is calculated (i.e., COM less

scrap revenue). Furthermore, in

accordance with section 777A(a)(2) of

the Act, our normal practice is to make

corrections when an error is significant

in relation to the value of the

merchandise.

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

Taiwan, except those produced/

exported by Yieh Hsing Enterprise

Corporation, Ltd., 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

Weighted average margin

percentage

Walsin Cartech Specialty

Steel Corporation .............. 8.24

Yieh Hsing Enterprise Corporation, Ltd ...................... .02

All Others .............................. 8.24

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

Act, the Department has excluded any

de minimis 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 777(i) of the Act.

Dated: July 20, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–20022 Filed 7–28–98; 8:45 am]

BILLING CODE 3510–DS–P