[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Notices]
[Pages 40422-40432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20018]


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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 hot-rolled 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 hot-
rolling, 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 cold-finished 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,

[[Page 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 above-cost 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);

[[Page 40424]]

    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 Corrosion-
Resistant 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

[[Page 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 non-subject 
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 non-subject 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 after-sale 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

[[Page 40426]]

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 long-term 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-to-price 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.

[[Page 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

[[Page 40428]]

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

[[Page 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 write-down 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-in-process (WIP), and finished goods 
inventories, which are stated on a last-in, 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-

[[Page 40430]]

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 write-down 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 write-down 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 year-end 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

[[Page 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 over-accruals 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 short-term interest experience. Consequently, the 
petitioners maintain that the Department should continue to exclude the 
current portion of Valbruna's long-term 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 short-term 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,

[[Page 40432]]

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 pre-sale 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 mis-matching 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 
weighted-average 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:

------------------------------------------------------------------------
                                             Weighted-                  
                                              average         Bonding   
          Exporter/Manufacturer               margin        percentage  
                                            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