[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65264-65284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30784]



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DEPARTMENT OF COMMERCE
[A-428-814]


Certain Cold-Rolled Carbon Steel Flat Products From Germany; 
Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative 
Reviews.

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SUMMARY: On August 2, 1995, the Department of Commerce (the Department) 
published the preliminary results of the administrative review of the 
antidumping duty order on Certain Cold-Rolled Carbon Steel Flat 
Products from Germany (A-428-814) (Preliminary Results). The review 
covers sales from one manufacturer of the subject merchandise to the 
United States and the period August 18, 1993, through July 31, 1994. We 
gave interested parties an opportunity to comment on our preliminary 
results. Based on our analysis of the comments 

[[Page 65265]]
received, we have changed the results from those presented in the 
preliminary results of review.

EFFECTIVE DATE: December 19, 1995.

FOR FURTHER INFORMATION CONTACT: Steve Bezirganian or Robin Gray, 
Office of Agreements Compliance, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-1395 or (202) 482-0196, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On August 2, 1995, the Department published in the Federal Register 
(60 FR 39355) the preliminary results of the administrative review of 
the antidumping duty order on certain cold-rolled carbon steel flat 
products from Germany (58 FR 44170, August 19, 1993). The Department 
has now completed this administrative review in accordance with section 
751 of the Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the statute and to the 
Department's regulations are references to the provisions as they 
existed on December 31, 1994.

Scope of these Reviews

    The products covered by this review include cold-rolled (cold-
reduced) carbon steel flat-rolled products, of rectangular shape, 
neither clad, plated nor coated with metal, whether or not painted, 
varnished or coated with plastics or other nonmetallic substances, in 
coils (whether or not in successively superimposed layers) and of a 
width of 0.5 inch or greater, or in straight lengths which, if of a 
thickness less than 4.75 millimeters, are of a width of 0.5 inch or 
greater and which measures at least 10 times the thickness or if of a 
thickness of 4.75 millimeters or more are of a width which exceeds 150 
millimeters and measures at least twice the thickness, as currently 
classifiable in the HTS under item numbers 7209.11.0000, 7209.12.0030, 
7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090, 
7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1010, 7209.24.1050, 
7209.24.5000, 7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 
7209.41.0000, 7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 
7210.70.3000, 7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 
7211.30.5000, 7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 
7211.41.7030, 7211.41.7060, 7211.41.7075, 7211.41.7085, 7211.49.1030, 
7211.49.1090, 7211.49.3000, 7211.49.5030, 7211.49.5060, 7211.49.5090, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7217.11.1000, 
7217.11.2000, 7217.11.3000, 7217.19.1000, 7217.19.5000, 7217.21.1000, 
7217.29.1000, 7217.29.5000, 7217.31.1000, 7217.39.1000, and 
7217.39.5000. Included in this review are flat-rolled products of 
nonrectangular cross-section where such cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling'')--for example, products which have been 
bevelled or rounded at the edges. Excluded from this review is certain 
shadow mask steel, i.e., aluminum-killed, cold-rolled steel coil that 
is open-coil annealed, has a carbon content of less than 0.002 percent, 
is of 0.003 to 0.012 inch in thickness, 15 to 30 inches in width, and 
has an ultra flat, isotropic surface. These HTS item numbers are 
provided for convenience and Customs purposes. The written description 
remains dispositive.
    This review covers one exporter of certain cold-rolled carbon steel 
flat products, Thyssen AG (TAG). The review period is August 18, 1993, 
through July 31, 1994.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. Petitioners and Thyssen requested a public hearing 
but later withdrew their requests. Petitioners and Thyssen filed case 
briefs and rebuttal briefs on September 1, 1995, and September 12, 
1995, respectively.
    Comment 1: Petitioners argue that fundamental and pervasive flaws 
in Thyssen's responses require the use of total best information 
available (``BIA''). Petitioners argue that the failure of the 
Department to apply total BIA provides a significant disincentive for 
respondents to comply with the Department's instructions and 
information requests in the future, and encourages them to respond 
selectively in accordance with what would be to their benefit in the 
margin calculation.
    Thyssen counters that the Department correctly determined in its 
July 20, 1995, memorandum on the use of BIA (``July 20, 1995, 
memorandum'') that the use of total BIA is not warranted in this case, 
and that petitioners' ``total BIA'' argument grossly mischaracterizes 
the record and does not provide any new information which would warrant 
a departure from the Department's preliminary results. Thyssen argues 
that total BIA is reserved for those respondents who have been truly 
uncooperative or whose submissions have been so replete with errors as 
to make application of partial or neutral BIA impossible. See 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
from France; et al; Final Results of Antidumping Administrative 
Reviews, 60 FR 10900, 10908 (February 28, 1995). Thyssen argues that 
the Department's use of BIA should not unfairly penalize a respondent 
who substantially cooperates. See, e.g., Allied-Signal Aerospace Co. v. 
United States, 996 F. 2d 1185 (Fed. Cir. 1993); NTN Bearing Corp. of 
America v. United States, Slip Op. 93-129 (CIT July 13, 1993).
    Department's Position: As discussed in the Department's July 20, 
1995, memorandum, the Department applies total BIA when a respondent 
fails to submit information in a timely manner, or when the submitted 
data is sufficiently flawed, so that the response as a whole is 
rendered unusable. The Department considers the errors and 
inconsistencies in Thyssen's submission of such a nature that they have 
had a limited effect upon the analysis and, as appropriate, can be 
dealt with on an individual basis. Individual issues which petitioners 
argue warrant the use of total BIA, and Thyssen's rebuttals, are 
addressed below in Comments 2 through 4.
    Comment 2: Petitioners argue that Thyssen's reporting of product 
characteristics was replete with mistakes and omissions and could not 
be conclusively verified by the Department given Thyssen's failure or 
refusal to provide mill certificate information. Petitioners argue that 
Thyssen's unreliable product comparisons and erroneous reporting 
preclude an accurate determination of the true dumping margin in this 
review, as demonstrated by the home market verification report. 
Furthermore, petitioners argue that product characteristics could not 
be conclusively verified because of Thyssen's failure to provide mill 
certificates or similar information that would conclusively demonstrate 
the physical properties of the merchandise in question. Petitioners 
argue that order documentation, product brochures, and Thyssen's ``List 
of Analysis'' directory do not indicate the particular specifications 
to which each transaction in fact conforms. Petitioners note that 

[[Page 65266]]
while Thyssen has attempted to justify its failure to produce such 
documentation at verification by claiming that these documents 
generally are not requested by Thyssen's home market customers because 
of the extra charge, Thyssen's price list in its Section III response 
indicates that Thyssen does not always charge extra for preparation of 
information typically provided on mill certificates or similar 
documentation.
    Thyssen responds that, as the Department noted in its July 20, 
1995, memorandum, almost all of Thyssen's home market product 
characteristic errors involved products with the quality classification 
of ``other high strength'' that would not be used for matching 
purposes. Thyssen also argues that, as noted in the Department's July 
20, 1995, memorandum, the only errors in Thyssen's U.S. sales product 
characteristics involved sales to specific customers which Thyssen 
brought to the Department's attention at the beginning of the product 
characteristic review in Germany, and which Thyssen had corrected by 
the beginning of the U.S. verification.
    Thyssen argues that mill certificates were never required, as the 
Department's July 20, 1995, memorandum also noted, and that the 
Department properly did not demand access to Thyssen's magnetic tape 
records for whatever mill certificate information might have been 
available. Thyssen argues that it does not maintain mill certificates 
in its current ``database'' for more than three months after shipment 
for two reasons: these documents generally are not requested by 
Thyssen's customers, and so database access is not required; and the 
volume of business makes retention in the database impractical. Thyssen 
notes that the mill certificate information was and remains available 
on magnetic tape, but that retrieval of isolated pieces of data from 
this medium is time consuming. Thyssen notes that it was able to 
provide from its ``database,'' immediately upon request, a mill 
certificate for a sale in February 1995 for the only shipment where 
this document was requested by the customer. Thyssen argues that it 
provided the Department with mill certificates for all of its U.S. 
sales, where mill certificates are an order requirement, and argues 
that the Department confirmed that the ordered material corresponded to 
that which was produced and sold. Finally, Thyssen argues that 
petitioners' citation of a price list showing that some minimal 
information will be provided free of charge ``if selected and precisely 
ordered by the purchaser'' does not contradict the Department's finding 
that Thyssen charges extra for ``the vast majority of test 
certificates.''
    Department's Position: Petitioners have questioned several aspects 
of Thyssen's reporting of product characteristics. First, we disagree 
with petitioners regarding the errors in reported product 
characteristics for home market sales involving the quality ``other 
high strength.'' These errors were discovered in a review of 
observations that Thyssen had designated with this specific quality. 
The specific sales in which errors were discovered were not used for 
matching purposes. After the discovery of this error, the Department 
examined additional ``high strength'' sales; no discrepancies were 
identified.
    Regarding the majority of product characteristic errors for U.S. 
sales, the Department verified that Thyssen had identified the correct 
product characteristic information. We instructed Thyssen to 
incorporate those corrections in its final tape submission, and Thyssen 
did so in a satisfactory manner. Regarding mill certificates, the 
Department indicated in its verification outline of March 8, 1995, and 
throughout its review of product characteristics of home market and 
U.S. sales during verification in Germany, that it would be preferable 
if we were able to review the appropriate mill certificates for the 
observations in question. Thyssen indicated at verification that an 
attempt to locate available information for the period of review 
(``POR'') from magnetic tape would be very burdensome. In any case, the 
Department remains satisfied with Thyssen's presentation of 
documentation regarding the product characteristics of its reported 
sales. Although the documentation reviewed at verification in Germany 
indicated several errors committed by Thyssen in its reporting of 
product classifications, nothing was noted at verification that 
indicated that Thyssen shipped merchandise, as specified in its 
commercial invoices, that differed from the specifications noted in the 
corresponding purchase orders and in Thyssen's general production 
standards by grade. (Contrary to Thyssen's assertion, most of the mill 
certificates provided during the verification in Detroit were not used 
for purposes of product characteristic verification, as the 
verification of the product characteristics of pre-selected and 
surprise sales for both markets had already been completed during the 
verification in Germany.) As noted in the Department's July 20, 1995, 
memorandum, the Department did not insist that Thyssen's magnetic tape 
records be reviewed because the retrieval of isolated pieces of data 
from Thyssen's magnetic tape records would have been inordinately 
burdensome for Thyssen to have accomplished during verification.
    Comment 3: Petitioners claim that the numerous corrections and 
clarifications provided by Thyssen demonstrate that Thyssen's response 
cannot be deemed reliable or usable. Petitioners argue that the nature 
of the errors precludes proper product matching, distorts claimed 
expenses and adjustments, and prevents an accurate analysis and 
substantiation of costs overall.
    Thyssen argues that the clerical errors identified and corrected by 
Thyssen during the course of the review were inconsequential when 
compared to the millions of bits of information reported; that the 
Department noted numerous instances, in its verification reports, where 
no discrepancies were found; and that the Department correctly 
concluded in its July 20, 1995, memorandum that the problems found were 
not sufficient to render Thyssen's submission unreliable or unusable.
    Department's Position: We disagree with petitioners. As reflected 
in the Department's July 20, 1995, memorandum and elsewhere in this 
final determination in regard to particular areas of concern, the 
Department properly allowed Thyssen to make corrections to its 
submissions. We determined that the remaining errors and 
inconsistencies did not warrant disregarding Thyssen's submission as a 
whole, and could be dealt with on an individual basis.
    Comment 4: Petitioners assert that Thyssen failed to report cost 
information as requested by the Department, thereby rendering the 
company's responses unusable for the purposes of our final results. 
Specifically, petitioners first argue that Thyssen failed to provide a 
schedule of production quantities, thereby preventing the Department 
from tying control number specific cost of production (``COP'') and 
constructed value (``CV'') figures to Thyssen's accounting records. 
Petitioners argue that the verification of production quantities was 
crucial in determining the accuracy of Thyssen's reported COP and CV 
amounts because the company used production quantities to compute (1) 
the average per-unit costs contained in its cost center expense 
reports, (2) the per-ton basis costs that were common to all products 
within each cost center, and (3) all product-specific basis costs 
within each cost center as part of the ``tons per hour'' factor. 
Petitioners note that the Department has stated that the 

[[Page 65267]]
failure of a respondent to show that the product-specific costs 
included in COP and CV are tied to the company's accounting records 
results in a failed verification. See Antifriction Bearings (Other Than 
Tapered Roller Bearings and Parts Thereof From the Federal Republic of 
Germany); Final Results of Antidumping Duty Administrative Review, 56 
FR 31692, 31707 (July 11, 1991) (AFBs From Germany). Petitioners argue 
that, despite the Department's specific request for such a schedule, 
Thyssen refused to provide this information, claiming that it would be 
extremely burdensome, but failing to show why that was the case. 
Petitioners claim that the Department appears to have contradicted the 
record, including its own cost verification report, when it stated that 
``Thyssen did report product-specific costs in that it computed actual 
product-specific costs using production quantities at each stage of the 
production process'' and that ``[t]hese production quantities were 
reviewed and tested at verification.'' Petitioners believe the cost 
verification report indicates that product-specific production quantity 
information was not provided to the Department at verification. 
Petitioners argue that the Department's ``alternative verification 
procedures,'' i.e., the examination of fiscal-year ending inventory 
balances and movements in and out of a single warehouse, cannot be 
deemed to have demonstrated a link between production quantity 
information and Thyssen's financial records.
    Petitioners also argue that Thyssen failed to identify product-
specific costs as standard or actual costs, thereby preventing the 
Department from tying ``basis costs'' to actual production quantities. 
Petitioners argue that the Department has determined that it cannot use 
the cost response of a respondent which failed to provide actual costs 
and was unable to support its standard costs. See Final Determination 
of Sales at Less Than Fair Value: New Steel Rail, Except Light Rail, 
from Canada, 54 FR 31984, 31985-86 (August 3, 1989).
    Petitioners argue that throughout the review Thyssen has failed to 
conclusively identify whether its reported cost figures are based on 
standard or actual cost amounts. Petitioner contends that all of the 
information on the record indicates that Thyssen's product-specific 
manufacturing costs for the COP and CV figures are based on standards 
for which variances must be calculated. Petitioners assert that the 
information on the record is inconsistent with statements from the 
Department's cost verification report that it ``tested that the 
standard costs were fully adjusted by the variances incurred and thus 
the submitted costs reflect the actual costs incurred during the 
respective fiscal periods.''
    Petitioners conclude that Thyssen's failure to report cost 
information as requested requires the Department to reject the 
company's questionnaire responses and apply total BIA. Petitioners 
argue that the flaws in Thyssen's reporting of COP and CV preclude the 
Department from conducting its sales-below-cost test and prevent the 
Department from having confidence in the difference-in-merchandise 
(``difmer'') data, which are needed in the Department's margin 
calculations. Petitioners argue that, if the Department determines not 
to reject Thyssen's responses on the whole, the Department must, at the 
very least, apply as BIA to Thyssen's cost information the highest cost 
of manufacturing for all COP and CV values from sales in this review.
    Thyssen counters that there is no doubt that the Department 
verified the company's actual production costs and actual production 
quantities. The Department utilized an exacting standard to verify 
Thyssen's submitted costs and the results of the Department's 
verification are supported by substantial evidence. Respondent argues 
that petitioners' claims must be rejected.
    Thyssen argues that the Department's statements in its July 20, 
1995, memorandum regarding this issue are accurate, contrary to the 
assertions of petitioners. Thyssen argues that its own submissions and 
the Department's cost verification report confirm that the actual 
production quantities were provided and verified. The actual costs were 
incurred by each processing cost center, based upon actual production, 
actual yield, actual work time and standard performance.
    Furthermore, Thyssen argues that petitioners have mischaracterized 
the purpose of the Department's request for product-specific quantity 
information which was provided by alternative means. According to 
Thyssen, the request for quantity information pertained not to the 
compilation of production costs, but rather was designed to allow the 
Department to reconcile to Thyssen's inventory.
    Department's Position: We disagree with petitioners' allegation 
that Thyssen failed the cost verification. The Department's 
verification provided reasonable assurance of the accuracy of Thyssen's 
reported costs, and our cost verification report outlined all of the 
testing which we performed and noted any exceptions or deficiencies in 
the results of that testing. As stated recently by the Court of Appeals 
for the Federal Circuit, the Act ``gives Commerce wide latitude in its 
verification procedures.'' American Alloys Inc. v. United States, 30 
F.3d 1469, 1475 (Fed. Cir. 1994). The standard for verification is not 
to verify all information or to require perfect accuracy. 
``Verification is like an audit, the purpose of which is to test 
information provided by a party for accuracy and completeness, so that 
Commerce can justifiably rely on that information.'' Tatung Co. v. 
United States, Slip Op. 94-195 (CIT December 14, 1994). Accordingly, as 
detailed below, we are satisfied that the shortcomings identified in 
the cost verification report regarding Thyssen's data do not undermine 
the reliability of Thyssen's submission as a whole and do not warrant 
resort to BIA.
    Contrary to petitioners' assertions, we do not believe that 
Thyssen's omission of product-specific (i.e., control number-specific) 
production quantities renders the company's questionnaire response 
unreliable for purposes of calculating COP and CV. As Thyssen explained 
in its response and as we observed at verification, the company does 
not maintain production quantities on such a product-specific basis as 
part of its normal accounting system. Instead, Thyssen relies on total 
production quantity figures at each of its steel production stages to 
compute an average per-unit coil cost for all products. Thyssen then 
converts this average coil cost to a product specific cost based on a 
standard table of ``extras,'' which are discussed further below. Thus, 
the total production quantities at each production stage are 
determinative, as relied upon by Thyssen to calculate the per-stage 
costs which are then accumulated to determine the coil production cost.
    As part of our verification testing, we required Thyssen to provide 
accounting records showing actual production quantities at each stage 
of production. In order to verify the accuracy of Thyssen's reported 
per-unit costs we examined production quantities and total production 
costs for selected cost centers within specific production stages. We 
found no discrepancies between the production quantities used by 
Thyssen to compute the actual weighted-average cost reported to the 
Department and the company's normal production records.
    In contrast to Thyssen, the respondent in question in AFBs From 
Germany, the case cited by petitioners, was able to report the relevant 
information (regarding labor, overhead and other 

[[Page 65268]]
expenses) on a model- or product-specific basis. The Department 
determined, however, that it could not tie the reported model-specific 
amounts to the respondent's internal accounting records and financial 
statements, information which was successfully verified. AFBs From 
Germany, 56 FR at 31707. Being unable to devise a methodology to better 
allocate labor and overhead costs, the Department relied upon total 
BIA. Id. Following a challenge by respondent, the CIT remanded the AFBs 
From Germany determination, stressing that the actual information 
provided by respondent was accurate and verified. The CIT required the 
Department to further explain why, instead of relying upon total BIA, 
it had not supplied its own methodology or that of another respondent. 
Nippon Pillow Block Sales Co. v. United States, 820 F. Supp. 1444, 1455 
(CIT 1993). Following remand, the CIT upheld the Department's 
determination that it could not develop an allocation methodology or 
use that of another respondent which would allow it to use the 
previously verified data. Nippon Pillow Block Sales Co. v. United 
States, 837 F. Supp. 434, 436 (CIT 1993).
    Hence, as demonstrated by both the Department's initial 
determination and the CIT's two decisions, AFBs From Germany stands for 
the principle that the Department should rely upon a party's 
information to the extent possible. Here, because we found Thyssen's 
cost information as well as its accounting methodology reasonable and 
verifiable, we see no reason for resorting to BIA.
    With respect to petitioners' claim that it is unclear whether 
Thyssen reported standard or actual costs, it is clear from the 
computer tape submitted by Thyssen and from the verification report 
that Thyssen reported the actual weighted-average cost of producing 
cold-rolled coil. The adjustments Thyssen made to adjust the base cost 
to actual cost are described in the cost verification report at pages 
5-7. Thyssen adjusted the average cost of coil by three factors on the 
computer tape: the computer variables CREXT1 and CREXT2 (``extras'') 
accounted for composition, size, width, and form differences between 
the average product and the unique product; the computer variable 
THMOADJ adjusted the average coil cost for year-end accruals, price and 
overhead variances. These three computer variables adjusted the average 
coil cost to actual product-specific cost.
    Petitioners' reliance upon New Steel Rail From Canada is misplaced. 
In that case, the Department rejected the respondent's COP information 
after determining that it could not be verified. The Department found, 
among other deficiencies, that the respondent had developed information 
for the investigation based on the standard product costs used by the 
company, ``which were not part of the normal financial accounting 
system and which were for a period subsequent to the period of 
investigation.'' New Steel Rail From Canada, 54 FR at 31985. Despite 
having a cost system which reported actual costs, the company in 
question ``chose not to use this information for its response.'' Id. By 
contrast, there is no evidence in the record of this review indicating 
that Thyssen deviated from its normal accounting methodology except to 
the extent necessary to meet the Department's reporting requirements.
    We also disagree with petitioners' contention that it is 
inappropriate to use standard machine times as a basis on which to 
compute labor cost for specific products. The use of standard machine 
times as a reasonable and appropriate allocation basis is well 
substantiated in both accounting and Departmental practice. Notice of 
Preliminary Determination of Sales at Less than Fair Value and 
Postponement of Final Determination: Certain Welded Stainless Steel 
Pipes from the Republic of Korea, 57 FR 27731, 27733 (June 22, 1992). 
Machine hours effectively relate the labor cost incurred to the 
specific product. We find it reasonable and not distortive to use 
standard machine hours to allocate actual processing costs to specific 
products.
    In sum, Thyssen supported its COP and CV figures with substantial 
evidence on the record as is indicated by the company's questionnaire 
responses, supplemental responses and verification exhibits. We 
reviewed and tested the accuracy and completeness of Thyssen's 
submitted COP and CV data and did not identify any problems which would 
cast doubt on the company's response as a whole. Accordingly, we have 
relied on Thyssen's cost response as the basis for our final results of 
this administrative review.
    Comment 5: Petitioners argue that, should the Department determine 
not to disregard Thyssen's cost response, it must still account for 
Thyssen's failure to provide actual costs of material inputs from 
related parties. Petitioners argue that this failure prevents the 
verification of the valuation of materials acquired from related 
suppliers and requires the application of BIA.
    Petitioners first contend that Thyssen's provision of financial 
statements or reports for a related iron ore supplier and a related 
ferrous scrap supplier in lieu of actual costs was insufficient for 
determining whether transfer prices are above or below the cost of 
production. Petitioners cite the final determination in the underlying 
investigation, which stated that ``[f]or the Department to be assured 
that the transfer prices are above costs, the Department must be able 
to test the transfer prices against the actual costs of production of 
the inputs. * * *'' Notice of Final Determination of Sales at Less Than 
Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain 
Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
from Germany, 59 FR 37136, 37151 (July 9, 1993) (Steel from Germany). 
Petitioners argue that the Department's verification of Thyssen's 
related iron ore supplier was inadequate to show whether transfer 
prices were above costs, and did not account for the fact that the 
overall profit on that supplier's income statement may obscure the fact 
that it incurs costs, on sales to Thyssen that are most likely not 
incurred on other sales, such as transportation and additional 
processing costs. Petitioners argue that the COP information provided 
by the related scrap supplier are also insufficient to demonstrate that 
the merchandise was sold above the cost of production. Furthermore, 
petitioners argue that Thyssen failed to distinguish between the cost 
of merchandise sold to Thyssen and the cost of merchandise sold to 
other customers. Consequently, petitioners argue that Thyssen failed to 
demonstrate that the transfer prices paid were above the supplier's 
cost of production, and therefore the application of BIA is warranted.
    Thyssen responds that petitioners' claims ignore the cost 
verification report, the accompanying exhibits and analysis, as well as 
the substantial documentation provided by Thyssen. Thyssen points to 
its March 8, 1995, submission at 8-17 and accompanying exhibits 11-15, 
and pages 12-16 and exhibit G of the Department's May 17, 1995, cost 
verification report. Thyssen argues that the Department did not base 
its decision to accept related party input suppliers' prices solely on 
profit information in the financial statements. Further, Thyssen 
provided extensive information relating to sales quantities and 
production costs for its related iron ore supplier which established 
that transfer prices were above actual production costs. Thyssen 
counters that given its related iron ore suppliers' 

[[Page 65269]]
product mix, petitioners' suggestion that potentially differing terms 
of sale could have resulted in production costs exceeding transfer 
prices is absurd on its face.
    In regard to scrap sales, Thyssen quotes the cost verification 
report at 16 which concluded that the ``Rhine region scrap division, 
the only division providing scrap to Thyssen Stahl AG (``TSAG''), was 
profitable on a DM per ton basis.'' Thyssen states the Department acted 
reasonably in using the transfer prices submitted in determining COP 
and CV in the absence of any evidence that the cost data supplied was 
unreliable or any evidence of record more probative than that which 
Thyssen and its related suppliers submitted.
    Further, Thyssen contends that the cost information submitted by 
petitioners cannot be considered because it consists of factual 
information available to petitioners prior to publication of the 
preliminary determination and therefore was not timely filed. See NSK 
Ltd. v. United States, 798 F. Supp. 721, 725 (CIT 1992).
    Department's Position: The Department disagrees with petitioners. 
Thyssen submitted evidence that the prices paid to related suppliers 
for the most significant inputs identified by the Department were at 
arm's length and were not at prices below the related suppliers' cost 
of production. The Department tested the submitted prices from a major 
related iron ore supplier and a major related scrap supplier. The 
Department found that the iron ore prices from unrelated and related 
suppliers were the same. The Department found that scrap prices from 
unrelated and related suppliers were comparable. The Department also 
tested that the prices were above the cost of production. The 
Department computed a cost per ton of iron ore from the constant 
currency income statements of the major related iron ore supplier for 
the years ending December 31, 1993 and December 31, 1994. We compared 
this amount to the average sales price, noting that the transfer price 
was higher than the average cost. It was appropriate in this case to 
use the average cost calculation because the major iron ore supplier's 
sole business is the sale of iron ore; therefore, financial results are 
not affected by other lines of business. Petitioners' argument that the 
profit on domestic sales may far exceed the profit on export sales is 
speculative and not supported by evidence on the record. Export sales 
constituted the majority of the related suppliers' sales. Export sales 
commanded significantly higher prices than domestic sales; this higher 
price should reflect any additional processing or transportation costs 
envisioned by petitioners.
    In addition, at verification we reviewed the profit analysis of the 
major scrap supplier's Rhine region division, which supplies Thyssen 
with its ferrous scrap, and concluded that the division was profitable 
and therefore its sales of scrap were at prices above the cost of 
production.
    Comment 6: Petitioners assert that the Department should use BIA 
for the CV of material inputs. Petitioners argue that for purposes of 
calculating CV, it is not sufficient that the transfer prices of major 
inputs reflect market value. Rather, section 773(e)(2) of the Act 
requires the Department to disregard the transfer price of a major 
input and use the actual cost of producing the input if the transfer 
price is below the related supplier's COP for that input. See 
Antifriction Bearings From France, supra, 60 FR at 10924. Petitioners 
argue that Thyssen's failure to provide credible evidence that the 
transfer price for iron ore was above the cost of production despite 
numerous requests from the Department for this information constitutes 
reasonable grounds to believe or suspect that the transfer prices paid 
by Thyssen were less than the cost of production. With respect to 
``non-major'' inputs, petitioners argue that Thyssen failed to 
demonstrate that its transfer prices were at arm's length as, except 
for scrap, which the Department examined at verification, Thyssen 
provided only self-selected invoices which cannot be considered 
representative of prices.
    Department's Position: The Department disagrees with petitioners. 
As discussed above in response to comment 5, the Department's testing 
at verification revealed that Thyssen's related party did not offer 
preferential pricing to related suppliers for major inputs. Moreover, 
we verified that major inputs were purchased at prices that were not 
below their cost of production. We are satisfied with Thyssen's 
submissions regarding this issue, as verified. With respect to 
materials purchased from related suppliers which consisted of a small 
part of the cost of manufacturing--so-called ``non-major'' inputs--the 
Department elected not to verify these amounts. We determined that 
these inputs had a minimal effect on the total cost of manufacturing. 
Given this fact, the constraints of time, and the nature of 
verification (see response to comment 4), we did not consider it 
necessary to verify these amounts individually.
    Comment 7: Thyssen argues that, for purposes of its COP and CV 
calculations, the Department incorrectly reduced Thyssen's reported 
interest income by interest/dividends earned on security investments of 
working capital. Thyssen disputes the Department's rationale that ``the 
Department does not generally allow dividends as an offset to financing 
expense because dividends are not considered to be short-term in 
nature.'' According to Thyssen, only short-term income from current 
assets was included in the interest income offset. Thyssen argues that, 
since this income was attributable to Thyssen's ``short term 
investments of its working capital,'' it should not have been excluded 
from the interest income offset. See, e.g., Antifriction Bearings From 
France, 60 FR at 10926; and Television Receivers, Monochrome and Color 
from Japan; Final Results of Administrative Review, 56 FR 23281, 23282-
83 (May 21, 1991). Thyssen argues that a cost verification exhibit 
confirms that its claim was limited to income from current assets and 
did not include interest from long term securities and interest other 
than from current assets.
    Petitioners agree with the Department's preliminary determination 
that Thyssen has not demonstrated that the source of the claimed income 
is short-term in nature.
    Department's Position: Thyssen has not demonstrated that it is 
entitled to an offset to interest expenses for income derived from 
dividends. The Department's long-established practice is to deny an 
offset for income of this nature. See Final Determination of Sales at 
Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe From the 
Republic of Korea, 57 FR 42942, 42953 (September 17, 1992); Final 
Determination of Sales at Not Less Than Fair Value: Saccharin From 
Korea, 59 FR 58826, 58828 (November 15, 1994). The CIT recently 
affirmed the Department's general standard in NTN Bearing Corp. v. 
United States, Slip Op. 95-165 (CIT Oct. 2, 1995). Relying on its 
earlier decision in Timken Co. v. United States, 852 F. Supp. 1040, 
1048 (CIT 1994), the court clarified that to qualify for an offset, 
interest income must be related to the ``ordinary operations of a 
company.'' NTN Bearing at 32. While this standard does not require that 
interest income be tied directly to the production of the subject 
merchandise, a respondent must show ``a nexus between the reported 
interest income'' and its ``manufacturing operation.'' Id. at 33; see 
Timken at 1048. Unlike interest income earned from the short-term 
investment of working capital, 

[[Page 65270]]
only rarely will dividend income earned from a company's investment 
activities meet this standard. See Final Determination of Sales at Less 
Than Fair Value: Certain Carbon and Alloy Steel Wire Rod from Canada, 
59 FR 18791, 18795 (April 20, 1994).
    Thyssen argues in its brief that its dividend income qualifies as 
an offset because it is ``short-term'' income from current assets, such 
as ``interest on current bank accounts, interest on time and fixed-term 
deposits and interest on short-term securities.'' However, the 
verification exhibit referred to by Thyssen as support actually 
characterizes the income in question as ``dividends from securities of 
working capital.'' Cost Verification Report, Exhibit K. This is very 
similar to the facts in NTN Bearings, where the CIT upheld the 
Department's denial of the offset. NTN Bearing at 33. See also 
Television Receivers, Monochrome and Color, from Japan; Final Results 
of Antidumping Duty Administrative Review, 56 FR 34180, 34184 (July 26, 
1991). Indeed, Thyssen made little if any effort to demonstrate why its 
dividend income qualified as an offset. Therefore, because Thyssen 
failed to show the necessary nexus between its dividend income and 
manufacturing operations, we have denied the claimed offset.
    Comment 8: Thyssen reported separate cost and allocated expense 
data for sales observations according to the fiscal year in which the 
sales took place. The Department conformed its computer programs so 
that they could utilize these fiscal year data. Thyssen argues that the 
Department incorrectly calculated one weighted-average home market 
direct selling expense and one weighted-average home market indirect 
selling expense for the entire POR. Thyssen argues that this is 
inconsistent with the Department's utilization of separate fiscal year 
costs and expenses for all of the other elements utilized in 
calculating constructed value.
    Petitioners argue that calculating two such general expenses per 
control number (``CONNUM''), as requested by Thyssen, would improperly 
separate the class or kind into two categories, each of which has a 
separate cost. Petitioners argue more generally that the reporting of 
two costs and/or expenses per CONNUM conflicts with the statute and 
Department practice, distorts the effects of the costs and expenses, 
and is administratively burdensome. Consequently, petitioners argue 
that the Department should re-calculate a single weighted average for 
all costs and expenses covering the two fiscal periods.
    Department's Position: We disagree with petitioners' assertion that 
the reporting of costs for the two fiscal periods covered by the POR 
violates the antidumping statute which directs the Department to 
calculate for constructed value, the ``general expenses and profit 
equal to that usually reflected in sales of merchandise in the same 
general class or kind as the merchandise under consideration.'' Thyssen 
did calculate general expenses for the same class or kind of 
merchandise in accordance with the statute for the two fiscal periods 
encompassed within the POR. We have determined that computing general 
expenses by fiscal period does not, in effect, divide the class or kind 
of merchandise because the calculation for each period covers the 
entire class or kind. Using expenses associated with each fiscal period 
has not distorted our analysis because we have used contemporaneous 
prices and expenses. Contrary to petitioners' assertions, attempting to 
recalculate a single weighted average for all costs and expenses 
covering the two fiscal periods would be extraordinarily burdensome. We 
inadvertently did not account for two fiscal years in the instance 
noted by Thyssen, and have adjusted the programming language for 
weighted-average home market direct and indirect selling expenses so 
those calculations are in accordance with the Department's general use 
of separate fiscal year data. In this instance we have used the 
reported data.
    Comment 9: Thyssen argues that the Department, through clerical 
error, improperly calculated Thyssen's fiscal 1992/93 cost of 
manufacture for cost of production. Thyssen argues that the Department 
failed in one instance, due to a missing zero, to follow its June 16, 
1995, COP, CV, and Further Manufacturing Concurrence Memorandum in 
correcting Thyssen's thirteenth month adjustment.
    Department's Position: We agree with Thyssen, and have incorporated 
the correct information in the programming for the final results.
    Comment 10: Thyssen asserts that the Department improperly failed 
to adjust for physical differences in merchandise when comparing U.S. 
sales to home market sales falling within the same control number (or 
CONNUM, identified in the sales data bases as CONNUMU and CONNUMH, 
respectively).
    According to Thyssen, it reported its variable manufacturing costs 
on a weighted-average basis for each CONNUMU and CONNUMH, with the 
weighted average derived from actual costs attributable to each 
individual invoice. Consequently, Thyssen argues that the material 
costs, labor costs and overhead expenses were not necessarily identical 
for all sales within a particular CONNUM. Similarly, because the 
physical characteristics of the merchandise grouped together in the 
U.S. sales listing often differed from the physical characteristics of 
merchandise grouped together in the home market sales listing, the 
variable cost of manufacturing for U.S. sales (VCOMU) often differed 
from variable cost of manufacturing for home market sales (VCOMH) for 
product groupings with the same identifying CONNUM.
    As noted in the May 17, 1995, cost verification report at 22, ``the 
variable cost of manufacturing in the home market sales listing and the 
U.S. sales listing was computed by calculating a variable cost of 
manufacturing for each sale and weight averaging all sale specific 
model costs within the control number.'' Thyssen asserts that the 
Department verified that Thyssen had quantified its product-specific 
cost differences resulting from differences in physical characteristics 
not reflected in the model matching characteristics upon which the 
determination of specific CONNUMs is based. Therefore, according to 
Thyssen, the Department established that the differences in the VCOMH 
and VCOMU for product groupings with the same identifying CONNUM were 
based on the physical differences in the merchandise actually falling 
within each group.
    As support, Thyssen refers to section 771(16)(A) of the Act, which 
uses the phrase ``identical in physical characteristics.'' Because this 
phrase is not defined, Thyssen argues that it must be construed in 
accordance with its common meaning, i.e., ``exactly the same.'' Thyssen 
cites various cases where the Department noted that its product 
groupings are not necessarily limited to a single ``identical'' 
product. See, e.g., Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from France; et al.; Final Results of 
Antidumping Duty Administrative Reviews, 57 FR 28360, 28364-66 (June 
24, 1992); Antifriction Bearings (Other than Tapered Roller Bearings) 
and Parts Thereof from the Federal Republic of Germany, Final 
Determination of Sales at Less than Fair Value, 54 FR 18992, 19072 (May 
3, 1989). Thyssen concludes that the Department has refused to make 
adjustments for differences in costs of producing merchandise only when 
the products in question had identical physical characteristics. See 
Import Administration Policy Bulletin, No. 93.2 (July 29, 1992). 

[[Page 65271]]

    In response, petitioners argue that it is well established in the 
cold-rolled carbon steel flat products cases that all products which 
have the same CONNUM are considered by the Department to be 
``identical'' for the purpose of applying Section 773(a)(4)(C). For 
example, Appendix V of the questionnaire from the underlying 
investigation states that ``[f]or purposes of these investigations, 
products will be considered `identical' in thickness if they fall 
within the same thickness range * * * regardless of the actual 
thickness of the products''; ``products will be considered `identical' 
in width if they fall within the same width range identified * * * 
regardless of the actual width of the merchandise''; ``and ``[n]o 
difference in merchandise adjustment (difmer) may be claimed for 
products that are within the same thickness or width range, but differ 
in actual measurement.'' Similarly, the Department stated that, in 
following such an approach for determining which sales are of 
``identical'' merchandise, ``if there are `identical' matches according 
to our designated criteria, we will not make an adjustment for any 
additional differences in merchandise (difmer).''
    Petitioners argue that, in the present review, CONNUMs have been 
defined such that each CONNUM has a unique set of identifiers for the 
matching criteria established by the Department. As a result, products 
sold in the United States and home markets which have the same CONNUM 
would share the same ``identifier'' for all of the Department's 
product-matching criteria and, accordingly, the Department was correct 
in not making difmer adjustments for U.S. and home market products with 
the same CONNUM.
    Department's Position: We disagree with respondent. As explained 
below, the Department correctly declined to make difmer adjustments 
when U.S. sales were matched to what we determined to be home market 
sales of identical merchandise (i.e., when the U.S. and home market 
sales in question possessed the same product characteristics as set 
forth by the Department in its model matching criteria).
    Section 771(16) of the Act directs the Department to compare sales 
of home market merchandise which are ``such or similar'' to merchandise 
sold in the United States. In accordance with section 771(16)(A), the 
Department first identifies and compares that merchandise which is 
``identical'' in physical characteristics, followed by sales of 
merchandise which is most ``similar'' in physical characteristics. To 
make these determinations, the Department devises a hierarchy of 
commercially meaningful characteristics suitable to each class or kind 
of merchandise. The Department considers merchandise to be identical 
within the meaning of section 771(16)(A) when all the relevant 
characteristics match.
    The courts have recognized that the Department has broad discretion 
``to choose the manner in which `such or similar' merchandise shall be 
selected.'' Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. 
Cir. 1995). This discretion extends to determining which products 
properly should be considered identical.
    However, the Department is not authorized to grant difmer 
adjustments within identical product categories. Under section 
773(a)(4)(C) of the Act, the Department may only adjust for cost 
differences between two products which are ``similar'' in physical 
characteristics, and in this way compensate for any difference in the 
price derived solely from the physical difference between the two 
products compared.
    Basing its product matching criteria on commercially meaningful 
characteristics permits the Department to draw reasonable distinctions 
between products for matching purposes, without attempting to account 
for every possible difference inherent in certain classes or kinds of 
merchandise. Given the tremendous number of variations between products 
in the various flat-rolled carbon steel product categories, including 
cold-rolled steel, the Department has followed this approach in the 
present case, beginning with the original less-than-fair-value 
investigation. As such, the Department may define certain products as 
being ``identical'' within the meaning of section 771(16)(A), even 
though they contain minor differences. See Final Determination of Sales 
at Less Than Fair Value; Gray Portland Cement and Clinker From Mexico, 
55 FR 29244, 29247-48 (July 18, 1990). Similarly, the Department need 
not account for every conceivable physical characteristic of a product 
in its hierarchy. Thus, a range of products may be considered 
``identical'' within the meaning of the statute.
    For instance, as Thyssen correctly notes in its case brief, many 
steel products would have been treated by the Department as identical 
(i.e., in the same CONNUM) even when their widths differed from one 
another, because this product characteristic is identified in terms of 
ranges (e.g., 40 to 60 inches as identifier ``F'' for the width product 
characteristic). In other words, two sales could be classified in the 
same CONNUM even if one was of merchandise with a width of 41 inches 
and the other was of merchandise with a width of 59 inches because both 
would fall within the width category identified as ``F''.
    At the outset of the present review, when it had an opportunity to 
comment on the hierarchy of product matching criteria, Thyssen failed 
to argue that it considered the Department's width and thickness 
product categories overly broad, nor did Thyssen argue that additional 
product characteristics should be included within the hierarchy. 
Because the products within each CONNUM are identical within the 
meaning of the statute, the VCOMH and VCOMU reported by Thyssen within 
individual CONNUMs do not provide a basis for making difmer 
adjustments.
    Comment 11: Thyssen contends that the Department improperly 
compared U.S. sales of seconds to constructed value, rather than to 
home market sales of seconds. Thyssen acknowledges that home market 
seconds were sold at prices below cost. However, Thyssen cites the 
Senate Report accompanying the Trade Reform Act of 1974 to argue that 
neither the statute nor the Department's regulations mandate that all 
below cost home market sales be disregarded in calculating foreign 
market value. See S.Rep. No. 1298, 93d Cong., 2nd Sess. 173 (1974). 
Thyssen argues that in the steel industry it is normal business 
practice for all companies, including Thyssen, to sell secondary steel 
at less than the cost of producing prime steel of the same grade. At 
the same time, however, sales of seconds are relatively infrequent in 
comparison to sales of prime material and do not prevent a steel 
manufacturer from recovering production costs on all steel sales, 
primes and seconds, within a reasonable period in the normal course of 
trade. Thyssen contends that this result is directly contrary to the 
intent of Congress.
    Thyssen argues that IPSCO, Inc. v. United States, 965 F.2d 1056, 
1060 (Fed. Cir. 1992), which the Department cites at page 3 in its 
April 19, 1995, memorandum on treatment of non-prime merchandise (from 
Roland MacDonald to Joseph Spetrini, General Issue Case No. A-100-003), 
merely permits the Department to compare the prices of seconds to 
constructed value in appropriate circumstances; IPSCO does not mandate 
that result. Thyssen contends that the particular issue which it has 
raised, the question of whether Thyssen's sales of seconds were in 
sufficiently large quantities over a significantly lengthy period, is 
fact-

[[Page 65272]]
specific to the instant review and was not presented to the IPSCO 
court.
    Petitioners respond that it is inappropriate to combine prime and 
non-prime merchandise in determining whether the quantity of below cost 
sales is sufficiently large to warrant disregarding those sales in 
determining FMV. Petitioners contend that Thyssen has taken the 
inconsistent positions that the Department should separate prime and 
non-prime merchandise for the arm's length test, but combine both types 
of merchandise for the cost test. Petitioners argue that the comparison 
of U.S. sales with CV is mandated by statute whenever such or similar 
home market merchandise fails the COP test, that Thyssen admits that 
its sales of seconds fail this test, and that, accordingly, U.S. sales 
of non-prime merchandise should be compared to CV. Petitioners add that 
Thyssen did not provide any evidence that the costs of the merchandise 
consisting of a combination of both prime and non-prime merchandise 
would be recovered over a reasonable period of time, even if such an 
analysis were relevant.
    Department's Position: Thyssen is essentially requesting that the 
Department modify the below-cost test it applied in the preliminary 
results to include sales of seconds for matching purposes whenever the 
corresponding sales of prime were at above cost prices. In this regard, 
Thyssen mistakenly relies on the Senate report accompanying the 1974 
Trade Reform Act to contend that the Department should not disregard 
sales of seconds, regardless of whether they were at prices below cost. 
We disagree.
    The Act requires the Department to determine whether a respondent's 
sales were made over an extended period of time and in substantial 
quantities so as to warrant disregarding those sales in determining 
FMV. This test applies across sales of a model as a whole, whether they 
be prime, seconds or otherwise. See 19 U.S.C. Sec. 773(b). The 1974 
Senate report did list several exceptions to this test, including 
obsolete and end-of-model year merchandise, which the Department should 
not disregard regardless of the whether they were below cost.
    This category of exceptions is narrow, however, and is designed 
only to permit the inclusion of below-cost sales which can be expected 
to occur on an ``infrequent'' basis. S. Rep. No. 1298, 93d Cong., 2d 
Sess. 173 (1974); see also Final Determination of Sales at Less Than 
Fair Value: Dynamic Random Access Memory Semiconductor of One Megabit 
and Above From the Republic of Korea, 58 FR 15467, 15476 (March 23, 
1993). It is possible to verify whether merchandise claimed to be 
obsolete or end-of-model year actually falls within the exception. The 
exception does not include seconds, however, which tend to occur more 
frequently and which a party would be more inclined to 
``systematically'' sell at prices which will not permit recovery of all 
costs. See S. Rep. 1298 at 173. It would also be more difficult to 
verify whether a product was properly classified as a ``second.''
    In past cases, the Department has considered prime and secondary 
merchandise to be separate models for matching purposes. ``To do 
otherwise would distort the margins, since sales prices are dependent 
on the quality of the merchandise.'' Porcelain-on-Steel Cooking Ware 
From Mexico; Final Results of Antidumping Duty Administrative Review, 
58 FR 43327, 43328 (August 16, 1993). In IPSCO, the Court of Appeals 
upheld the Department's approach of applying the same cost to prime and 
secondary merchandise. See IPSCO, 965 F.2d at 1061. In this case, we 
computed the cost of Thyssen's secondary merchandise using a 
methodology consistent with that applied in the IPSCO case. Based on 
these cost figures, we found insufficient quantities of above cost 
sales and, accordingly used CV as FMV.
    Comment 12: Thyssen argues that the Department improperly combined 
sales of prime and secondary merchandise in its arm's length test. 
According to Thyssen, the Department should conduct separate arm's 
length tests and calculate separate customer-specific weighted-average 
price ratios for prime and secondary merchandise. In support of its 
argument, Thyssen asserts that such treatment would be consistent with 
the Department's April 19, 1995, memorandum on the treatment of non-
prime merchandise.
    Petitioners respond that Thyssen misrepresents the Department's 
statements on this matter, indicating a serious misunderstanding on 
Thyssen's part as to how the arm's length test was applied in the 
present case. Petitioners describe the Department's arm's length test 
as first comparing the net price of sales of a CONNUM sold to a related 
customer with the net price of sales of a CONNUM sold to unrelated 
customers. Only then, petitioners argue, is the related customer-
specific weighted-average price ratio calculated, by combining all 
CONNUMs, consisting of all prime and non-prime merchandise sold to both 
related and unrelated customers. The Department's test separates prime 
and non-prime merchandise in making the initial comparison of related 
and unrelated prices on a CONNUM-specific basis. It is this initial 
comparison to which the Department refers in its memorandum when it 
states that ``prime and seconds should be separated.'' Prime and non-
prime merchandise are necessarily separated for this initial CONNUM-
specific comparison because prime and non-prime merchandise do not 
share the same CONNUM. The separation of products on a CONNUM-specific 
basis for the initial price comparison is necessary because there are 
understandable differences in prices among CONNUMs, irrespective of 
whether the different CONNUMs consist of prime or non-prime 
merchandise. Petitioners argue that the objective of the Department's 
arm's length test is to determine whether sales to individual related 
customers are made at the same or greater prices than those at which 
sales of the same products are made to unrelated customers. To make 
this customer-specific determination, all sales of all CONNUMs, both 
prime and non-prime, must be combined, and, so, the Department combined 
all CONNUMs sold to related customers which are also sold to unrelated 
customers to determine the customer-specific weighted average price 
ratios.
    Department's Position: We disagree with Thyssen. The Department's 
April 19, 1995, seconds memorandum, states that ``if sales of seconds 
to related parties are compared to sales of prime (or prime and seconds 
combined) to unrelated parties, the results of the arm's length test 
could be distorted.'' The memorandum concludes that, consequently, 
``prime and seconds should be separated for purposes of conducting the 
arm's length test. . . .'' The recommendation section of the memorandum 
goes on to clarify, however, that the separation of prime and secondary 
merchandise is done on what amounts to a CONNUM-specific basis. In 
cases where sales of prime and secondary merchandise were reported 
together in the same CONNUM, the Department treated them as separate 
CONNUMs for purposes of the arm's length test. As petitioners point 
out, the Department would ordinarily follow this approach in the 
initial steps of conducting the arm's length test because there are 
understandable differences in prices among CONNUMs, irrespective of 
whether the different CONNUMs consist of prime or secondary 
merchandise. See April 19, 1995, memorandum at 2-3. In this specific 
case, Thyssen's seconds were already classified in separate CONNUMs 
distinct from sales of prime merchandise, meaning that the 

[[Page 65273]]
Department was not required to make such an initial separation.
    The purpose of the Department's arm's length test is to determine 
if total sales to a related party are at arm's length. To make this 
determination, we calculate, by CONNUM, prices to each related party as 
a percentage of prices of sales to unrelated parties. We then take a 
weighted average of this ratio for all CONNUMs sold to a given related 
party, including seconds and prime, to determine if sales to that 
related party are at arm's length. Thyssen has not demonstrated that 
the approach resulted in a distortion of the arm's length test. See 
Usinor Sacilor v. United States, 872 F.Supp. 1000, 1004 (CIT 1994).
    Comment 13: Thyssen contends that the Department improperly 
calculated the VAT adjustment. Thyssen argues that in Zenith 
Electronics Corporation v. United States, 988 F.2d 1573 (Fed. Cir. 
1993), the Federal Circuit held that the Department's practice of 
making a circumstance of sale adjustment to FMV to achieve tax 
neutrality was contrary to law, reasoning that ``Section 
1677a(d)(1)(C), the section dealing with tax adjustments, does not 
provide for any adjustment to FMV to correct for tax-related distortion 
of the dumping margin,'' and that ``the specific provision of Title 19 
for tax adjustments does not permit changes to FMV.'' Id. at 1580. 
Thyssen adds that in Daewoo Electronics v. International Union, 6 F.3d 
1511, 1519-20 (Fed. Cir. 1993), the Federal Circuit held that the tax 
should be applied at the sale price at which the tax was actually 
assessed.
    Thyssen argues that, in Federal Mogul Corp. v. United States, CAFC 
No. 94-1097 (Fed. Cir. August 28, 1995), the Federal Circuit expressly 
held that the Department had the authority to calculate the adjustment 
by taking the paid tax amount in the home market for the same 
merchandise, and adding ``that amount to the price actually paid in the 
United States.'' Slip Op. at 9. According to Thyssen, the Court 
reasoned that the tax neutral methodology which results from adding the 
identical tax amount to both the home market and the United States 
sides of the dumping equation ``clearly accords with international 
understandings, negotiated by this country regarding unfair trade 
policy,'' whereas any alternative methodology which artificially 
increases dumping margins may ``read a GATT violation into the 
statute.'' Id. at 22-23.
    Thyssen argues that the Department's preliminary results are 
contrary to Zenith in that it adjusted FMV by the tax relating to 
expenses that were deducted from FMV. Thyssen argues that the 
Department's preliminary results are contrary to Daewoo in that its 
calculation methodology resulted in the tax being applied to an ex-
factory price, rather than the sales price at which the tax was 
actually assessed. Thyssen argues that both Zenith and Daewoo prevent 
the Department from making any secondary adjustments in calculating the 
tax pursuant to section 772(d)(1)(C), and even if the Department had 
this authority, it must be limited to those isolated instances in which 
the primary tax adjustment created margins where none had previously 
existed. Thyssen argues that in the case of Thyssen a secondary 
adjustment could never be authorized, since Thyssen's deductible U.S. 
expenses exceed its deductible home market expenses, and since the 
Department's secondary adjustment artificially and significantly 
inflates dumping margins, in direct contravention to Federal Mogul.
    Thyssen concludes that the Department's preliminary results 
methodology, which applies the VAT to a different point in the chain of 
commerce than the point at which the tax is assessed, and which creates 
a secondary tax adjustment to FMV, is directly contrary to Federal 
Mogul, Zenith, and Daewoo. Thyssen argues that the Department should 
add to USP the exact amount of the tax added to FMV, as authorized by 
Federal Mogul, or, alternatively, calculate the tax added to FMV in the 
manner reported by Thyssen (gross price less discounts, times 0.15) and 
calculate the tax added to USP by multiplying TINC's net sales price 
(gross price less cash discount, where applicable) times the tax rate.
    Petitioners assert that the Department properly calculated the VAT 
adjustment in accordance with its statutory mandate and existing legal 
authority, which requires that an adjustment be made to USP to account 
for any VAT that may have been charged on the corresponding home market 
sale. To do this, the Department applied the rate from the home market 
to the U.S. sale and added this amount to USP.
    Petitioners argue that, because Federal Mogul does not require that 
any particular methodology be used, the Department's methodology in 
this case is not precluded by the Court's decision. While Thyssen is 
correct in pointing out that the Court of Appeals did rule on the issue 
of the VAT adjustment methodology, and clearly upheld the Department's 
previous methodology of calculating the amount of tax paid on the home 
market sale and adding the amount of the tax to USP, the opinion does 
not indicate that this is the only methodology that the Department may 
use. To the contrary, petitioners argue, the Court does not state that 
use of this methodology is required by the statute, but rather that it 
is not precluded by the statute. Furthermore, petitioners argue, as 
demonstrated by its use in several earlier determinations by the 
Department, the methodology used in this review is entirely reasonable. 
See, e.g., Color Television Receivers from the Republic of Korea; Final 
Results of Antidumping Duty Administrative Review, 59 FR 13700, 13701 
(March 23, 1994); Certain Internal-Combustion Industrial Forklift 
Trucks from Japan; Final Results of Antidumping Duty Administrative 
Review, 59 FR 1374, 1376 (January 10, 1994).
    Department's Position: In light of the Federal Circuit's decision 
in Federal Mogul, the Department has changed its treatment of home 
market consumption taxes. Where merchandise exported to the United 
States is exempt from the consumption tax, the Department will add to 
the U.S. price the absolute amount of such taxes charged on the 
comparison sales in the home market. This is the same methodology that 
the Department adopted following the decision of the Federal Circuit in 
Zenith, 988 F. 2d at 1582, and which was suggested by that Court in 
footnote 4 of its decision. The CIT overturned this methodology in 
Federal Mogul v. United States, 834 F. Supp. 1391 (1993), and the 
Department acquiesced in the CIT's decision. The Department then 
followed the CIT's preferred methodology, which was to calculate the 
tax to be added to U.S. price by multiplying the adjusted U.S. price by 
the foreign market tax rate; the Department made adjustments to this 
amount so that the tax adjustment would not alter a ``zero'' pre-tax 
dumping assessment.
    The foreign exporters in the Federal Mogul case, however, appealed 
that decision to the Federal Circuit, which reversed the CIT and held 
that the statute did not preclude the Department from using the 
``Zenith footnote 4'' methodology to calculate tax-neutral dumping 
assessments (i.e., assessments that are unaffected by the existence or 
amount of home market consumption taxes). Moreover, the Federal Circuit 
recognized that certain international agreements of the United States, 
in particular the General Agreement on Tariffs and Trade (GATT) and the 
Tokyo Round Antidumping Code, required the calculation of tax-neutral 
dumping assessments. The Federal Circuit remanded the case to the CIT 
with instructions to direct Commerce to determine which tax methodology 
it will employ. 

[[Page 65274]]

    The Department has determined that the ``Zenith footnote 4'' 
methodology should be used. First, as the Department has explained in 
numerous administrative determinations and court filings over the past 
decade, and as the Federal Circuit has now recognized, Article VI of 
the GATT and Article 2 of the Tokyo Round Antidumping Code required 
that dumping assessments be tax-neutral. This requirement continues 
under the new Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade. Second, the Uruguay Round Agreements 
Act, (URAA) explicitly amended the antidumping law to remove 
consumption taxes from the home market price and to eliminate the 
addition of taxes to U.S. price, so that no consumption tax is included 
in the price in either market. The Statement of Administrative Action 
(p. 159) explicitly states that this change was intended to result in 
tax neutrality.
    While the ``Zenith footnote 4'' methodology is slightly different 
from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA 
law required that the tax be added to United States price rather than 
subtracted from home market price, it does result in tax-neutral duty 
assessments. In sum, the Department has elected to treat consumption 
taxes in a manner consistent with its long standing policy of tax-
neutrality and with the GATT.
    Comment 14: Thyssen argues that the Department, through clerical 
error, improperly failed to correct certain reported home market 
product characteristics. Thyssen argues that the Department did not in 
its arm's length test program make all of the product characteristics 
corrections made in its model match program.
    Department's Position: We agree with Thyssen that the arm's length 
test program did not contain all of the product characteristic 
corrections made in the model match program. However, we note that this 
oversight had no effect upon the Department's analysis because CONNUMs, 
rather than product characteristics, are used within the arm's length 
computer program, and the merchandise in question would still be 
classified in the same distinct CONNUMs even if the product 
characteristics were corrected. Consequently, we have removed any 
reference to product characteristic corrections from the arm's length 
program.
    Comment 15: Thyssen argues that the Department improperly excluded 
home market sales prior to February 1993 from its calculations. Thyssen 
argues that it is inconsistent for the Department to include in its 
analysis shipments to Thyssen's U.S. customers with dates of shipment 
from Germany during the POR regardless of the date of the requirements 
contract, while at the same time excluding all home market shipments 
with sale dates prior to February 3, 1993, even though the date of 
shipment from the mill, the functional equivalent of the shipment date 
from Germany for U.S. sale observations, is within the POR.
    Thyssen argues that this is particularly egregious, given that the 
Department has resorted to BIA for certain of Budd's U.S. resales 
because Thyssen did not report home market sales back far enough; it 
argues that the Department cannot penalize Thyssen for underreporting 
and at the same time exclude transactions for being prior to the 
requested reporting period.
    Department's Position: We disagree with Thyssen. The Department is 
applying BIA to the Budd sales with dates of sale in 1992 because 
Thyssen failed to report home market sales back far enough to provide 
home market sales contemporary with those Budd sales (see Comment 31). 
Normally we request home market sales for the entire period from the 
earliest U.S. sale date forward and would apply the arm's length test 
to all sales reported. However, Thyssen selectively reported sales 
prior to February 1993. Thyssen might have reported home market sales 
for an intervening period between the 1992 Budd sales and February 1993 
based solely upon the effects of such reporting on the arm's length 
test. Therefore, to avoid the risk of distorting the arm's length test 
results, we disregarded those sales, which were not contemporaneous 
with any U.S. sales.
    Thyssen's argument that some of the excluded home market sales were 
shipped during the POR, like the U.S. sales, is unpersuasive. The 
Department reviews shipments to the U.S. during the period of review. 
However, in order to make the price-to-price comparison, we look at the 
date of sale for the U.S. transaction, which may or may not be 
different than the date of shipment to the United States, and match it 
to a home market sale with a contemporaneous date of sale, which may or 
may not be the date of shipment in the home market. The fact that 
Thyssen considers the shipment to its home market customers the 
equivalent of shipment from Germany to the United States is not 
relevant for purposes of identifying home market sales for matching 
purposes.
    Comment 16: Petitioners argue that the Department should deduct all 
direct and indirect selling expenses incurred on further manufactured 
sales made in the U.S. market from the gross prices associated with 
those sales. Petitioners argue that the Department's calculation of a 
share of U.S. direct and indirect selling expense variables is 
appropriate for purposes of calculating the ESP cap, but that for 
purposes of calculating U.S. price, all direct and indirect selling 
expenses should be deducted.
    Thyssen counters that the computer programming language in question 
was present in the version of the program disseminated to all 
interested parties on October 13, 1994. Petitioners filed extensive 
comments on that program with the Department, but did not object to the 
Department's proposed reduction of U.S. price by only a share of U.S. 
direct and indirect selling expenses.
    Department's Position: We agree with petitioners that the 
methodology followed by the Department in the preliminary results, to 
reduce U.S. price by only a share of U.S. direct and indirect selling 
expenses, was inappropriate. The Department inadvertently included this 
language in its computer program. Such a share should only be used in 
the calculation of the ESP cap or offset for further manufactured sales 
in order to capture the portion of the indirect selling expenses 
attributable to foreign manufacturing. We have corrected the 
programming to reflect the correct methodology. The fact that 
petitioners failed to comment on this issue prior to the preliminary 
results does not alter the fact that they have identified a program 
error that should be corrected.
    Comment 17: Petitioners argue that, for U.S. sales observations 
which the Department determined required the use of BIA, the Department 
should not have applied what petitioners describe as neutral BIA, the 
deposit rate from the underlying investigation. Petitioners claim that 
Thyssen's submissions reflect widespread omissions and insufficiencies 
by Thyssen that require application of, at the least, adverse BIA. In 
support, petitioners emphasize the CIT's statement that, ``[a]lthough 
the ultimate purpose of BIA is not to punish, BIA is intended to be 
adverse and requires the use of adverse assumptions.'' National Steel 
Corp. v. United States, 870 F. Supp. 1130, 1136 (CIT 1994) (National 
Steel). Petitioners argue that, given Thyssen's numerous omissions and 
insufficiencies, it is highly probable that there remain other, 
undiscovered problems with Thyssen's submission.
    Petitioners also assert that should the Department continue to 
apply neutral partial BIA in its final results, respondents would have 
no reason to 

[[Page 65275]]
comply with the Department's requests for information knowing that the 
worst they could receive as BIA for any missing or incomplete 
information is the rate from the underlying investigation. Petitioners 
cite the CIT's reasoning that using ``BIA for only those segments of a 
submission that are rejected could permit a party * * * to select the 
data it believed would be to its benefit, leaving Commerce only to fill 
in the blanks.'' Tatung Co. v. United States, Slip. Op. 94-195 at 13 
(December 14, 1994) (citing Chinsung Indus. v. United States, 705 F. 
Supp. 598, 601 (CIT 1989)). Petitioners argue that an appropriately 
adverse partial BIA would be either the higher of the margin from the 
investigation or the highest non-aberrant margin calculated for 
Thyssen's sales in this review; because the latter figure is not known 
to respondents until the final calculation of the margin at the end of 
the review, respondents would be unable to perform the cost/benefit 
analysis to allow them to selectively disclose only certain 
information.
    Thyssen responds that the Department has broad discretion in 
choosing BIA, and need only give a reasonable explanation of its 
choice. See Neuweg Fertigung GmbH v. United States, Slip Op. 92-137 
(CIT August 20, 1992). Thyssen argues that, contrary to petitioners' 
claims, the Department is not required to utilize the highest non-
aberrant margin from a respondent's sales for respondents who comply 
with the Department's information requests, but provide information 
which is incomplete or inaccurate in some regard. Thyssen argues that 
in National Steel the Court affirmed the Department's decision to apply 
respondents' weighted-average margin as BIA where respondent fully 
cooperated in the investigation and the misreporting was limited in 
nature. Thyssen argues that the Department's choice of BIA in its 
preliminary results was identical to that utilized in Antifriction 
Bearings From Germany, 56 FR at 31705.
    Thyssen also argues that petitioners mistakenly presume that 
additional, undiscovered errors exist in Thyssen's database. Thyssen 
notes that it provided clerical error corrections to the Department, 
and the Department did additional spot checks at verification 
confirming errors had been corrected and were limited to isolated sales 
as reported by Thyssen. Thyssen concludes that the Department's use of 
a benign BIA would not encourage a future respondent to selectively 
report information.
    Department's Position: As we determined in the preliminary results, 
Thyssen's revised database did contain unauthorized changes and other 
unexplained problems, but the sales affected were minimal in quantity 
relative to the size of the entire data base. As a result, the 
Department did not apply ``the most adverse partial BIA'' to such 
observations, but chose instead to apply Thyssen's weighted-average 
margin from the original investigation. Contrary to the position taken 
by the petitioners, this approach was approved by the CIT in National 
Steel. See also Usinor Sacilor v. United States, 872 F.Supp. 1000, 1007 
(CIT 1994). At the same time, we do not consider this rate to be 
neutral, as argued by petitioners. It is considerably higher than the 
rate assigned to most of Thyssen's sales during this review which are 
based on the company's own data.
    Comment 18: Petitioners argue that the Department should multiply 
the total volume of the BIA sales by the BIA rate to calculate the 
total BIA margin, then combine the resulting BIA margin with the total 
dumping margin calculated for the other sales to arrive at the 
weighted-average dumping margin. Petitioners argue that contrary to its 
normal practice, the Department incorrectly used the value of most of 
the BIA sales in the calculation of the weighted-average dumping 
margin. That sales information, petitioners note, is inherently 
unreliable, given that they are BIA sales, and reduces the dumping 
margin.
    Thyssen acknowledges that the Department could use either 
methodology, assuming the use of BIA was appropriate. Thyssen argues, 
however, that use of the price information in the calculation of the 
weighted-average margin constitutes the most reasonable method because 
there were not price-related errors in the BIA sales in question.
    Department's Position: We agree with petitioner. We have decided to 
calculate the overall margin for the final determination by weight-
averaging the non-BIA and BIA margins by quantity alone because that is 
the Department's normal practice. Moreover, we note that, contrary to 
Thyssen's assertions, a few of the BIA observations in question did 
involve unauthorized changes in price.
    Comment 19: Thyssen argues that the Department's resort to BIA 
because of clerical errors or arguably incomplete analyses contained in 
summary worksheets presented at the commencement of the U.S. sales 
verification constitutes ``a clear abuse of administrative 
discretion.'' Thyssen contends that the CIT has held that the DOC has 
abused its discretion in the past by rejecting a respondent's post 
preliminary determination submission as untimely. See Usinor Sacilor v. 
United States, 872 F.Supp. 1000, 1008 (CIT 1994) (Usinor Sacilor). 
Thyssen cites the CIT decision in RHP Bearings v. United States, 875 
F.Supp. 854, 857 (CIT 1995) (RHP Bearings) that ``[a]n error, although 
untimely filed, is eligible for correction if the error is obvious from 
an examination of the administrative record which is before Commerce at 
the time of the preliminary results and the newly submitted information 
is obviously correct.'' Thyssen also cites Brother Industries, Ltd. v. 
United States, 771 F. Supp. 374, 384 (CIT 1991) (Brother), wherein the 
CIT ordered the Department to correct a respondent's clerical error, 
which respondent had brought to the Department's attention prior to 
publication of the preliminary results in an administrative review.
    Thyssen claims that these cases demonstrate that the Department's 
resort to BIA was inappropriate. Thyssen argues that all of the errors 
in question consisted of clerical errors in summary worksheets, the 
correct data were reported in its computer database, and the clerical 
errors were brought to the Department's attention immediately upon 
discovery and prior to publication of the preliminary results.
    Petitioners counter that, as the Department and Thyssen have both 
recognized, the information provided by Thyssen at and after 
verification was clearly erroneous and incomplete. Petitioners also 
argue that the erroneous information provided by Thyssen after 
verification did affect the veracity of the database as a whole. 
Petitioners argue that since the majority of errors were not identified 
until after verification, corrections made to the data base after 
verification obviously were not verified by the Department. Petitioners 
state that Thyssen did not identify the errors made in its submissions, 
supplying corrections only after petitioners had identified them, and 
that Thyssen's first attempt at clarification, the June 13, 1995, 
submission, included additional erroneous information. Petitioners 
assert that isolated verification of so-called corrected information 
does not negate the pervasive errors throughout groups of sales within 
Thyssen's database, and that a worksheet indicating an invoice 
``change'' does not constitute sufficient notice to the Department 
because it does not identify the type or number of ``changes'' made to 
these invoices.
    Petitioners add that it is not the Department's duty or obligation 
to 

[[Page 65276]]
correct a respondent's errors. See NSK Ltd. v. United States, 825 F. 
Supp. 315, 319 (CIT 1993); Color Television Receivers from the Republic 
of Korea; Final Results of Antidumping Duty Administrative Reviews, 59 
FR 42805, 42812 (August 19, 1994). Petitioners contend that Thyssen has 
failed to satisfy its burden of providing reliable information. 
Petitioners explain that the various cases cited by Thyssen do not 
proscribe the application of BIA in the circumstances of this 
proceeding.
    Department's Position: We disagree with Thyssen's assertion that 
the Department's use of BIA was inappropriate. Thyssen failed to make 
changes it proposed at verification which the Department had 
authorized. Thyssen also made changes which the Department did not 
authorize. This called into question the accuracy of the information 
reported for those observations. Thyssen was given the opportunity to 
explain how the changes in its final tape submission reflected the 
changes authorized by the Department's May 15, 1995, and May 17, 1995, 
memoranda to the file. Where Thyssen's explanation was not 
satisfactory, BIA was applied, as described elsewhere in this notice, 
in the preliminary notice, and the Department's analysis memoranda.
    Furthermore, we agree with petitioners that the cases cited by 
Thyssen do not require a different outcome. For example, in Usinor 
Sacilor, the Court found the Department had abused its discretion by 
rejecting a post-preliminary results submission from the respondent. A 
controlling consideration for the Court, however, was that the 
Department's questionnaire had been misleading, which is not the case 
here. In RHP Bearings, also cited by Thyssen, the Court emphasized that 
it may be appropriate to correct respondent's errors if the errors are 
obvious from the record prior to the preliminary results and the new 
information is obviously correct. Thyssen's errors were neither obvious 
nor was the ``newly submitted information'' correct.
    Finally, Brother is distinguishable from the current situation as 
well. There, the Court only required the Department to consider 
respondent's revised data because it was ``clerical'' in nature and 
because the Court was ordering remand on other issues. The Court 
stressed that its decision should not be construed as undermining the 
Department's authority to disregard untimely information. Brother, 771 
F.Supp. at 384. In Thyssen's case, most of the information was provided 
after verification and none of Thyssen's unauthorized changes could be 
verified by the Department. Indeed, as petitioners argue, in Brother 
the Court emphasized the need for proper analysis and verification for 
such information, stating that the statute may require that inadequate 
submissions be corrected if received in time to permit proper analysis 
and verification of the information concerned. Such was not the case 
here.
    Comment 20: Thyssen provided information at the beginning of the 
U.S. verification to correct sales that it stated had been reported 
twice in its U.S. database. The Department determined that Thyssen's 
efforts to correct the problem involving the ``duplicates'' at 
verification and in its final tape submission were unsatisfactory. 
Accordingly, the preliminary results reflected a BIA margin for the 
total quantity of steel in any of the invoices listed by Thyssen as 
``duplicates'' and not appearing in its final tape submission.
    Petitioners contend that the Department should assign a BIA margin 
to the total volume of the duplicate U.S. sales deleted by Thyssen from 
its U.S. market database. Petitioners argue that this amount is 
handwritten on Thyssen's June 13, 1995, submission, one of Thyssen's 
submissions intended to explain changes reflected in Thyssen's final 
tape submission.
    Thyssen asserts that petitioners have ignored the methodology used 
by the Department. Thyssen argues that, once the decision was made to 
use BIA in this situation, the Department cannot accept post-
verification corrections which were adverse to Thyssen, while at the 
same time, rejecting all other corrections as sufficiently unreliable 
to justify the use of BIA.
    Thyssen argues that the Department improperly applied BIA to U.S. 
invoices identified by Thyssen at verification as duplicates. Thyssen 
argues that it provided the list to the Department prior to 
verification, it advised the Department of clerical errors contained in 
the list, and it explained the reason for the discrepancies.
    Department's Position: We disagree with Thyssen, and have continued 
to apply BIA in this situation. The numerous errors in Thyssen's 
proposed deletions call into question whether or not any of the 
invoices in question should actually have been deleted. In the 
preliminary results, we inadvertently failed to increase the U.S. sales 
database by the quantities reported for any of the invoices listed in 
the ``deletion of alleged duplicates'' section of the relevant 
verification exhibit that were deleted in Thyssen's final tape 
submission; these quantities could very well have reflected distinct, 
unduplicated sales. The actual invoice and quantity information is 
included in the Department's December 12, 1995, Final Analysis 
Memorandum from Steve Bezirganian to the File (December 12, 1995, 
analysis memorandum). We have corrected this error in these final 
results.
    We agree with Thyssen that it would be inappropriate to base the 
quantity to which BIA is applied upon the amount cited by petitioners. 
We were unable to determine how the handwritten number to which 
petitioners allude was calculated. Therefore, because we have no basis 
from which to conclude that the handwritten number represents the total 
quantity for the deleted invoices, we have not used that amount.
    Comment 21: Petitioners argue that the Department should ensure 
that the BIA dataset it creates contains all of the invoices for which 
a BIA margin is to be used. For example, the Department stated in its 
June 16, 1995, memorandum that its preliminary results reflected the 
use of a BIA margin for sales to which Thyssen made unauthorized 
changes in quantity and/or price in its last tape submission. The 
Department applied BIA in the preliminary results to four such 
``quantity/price'' observations because they reflected unauthorized 
price and/or quantity changes for these observations. Petitioners argue 
that the Department failed to include three invoices containing similar 
unauthorized changes to quantity and/or price. Petitioners also argue 
that the Department inadvertently left out of its BIA programming one 
of the four quantity/price invoices by adding an extra zero to the 
invoice number in its programming.
    Petitioners also argue that the Department inadvertently did not 
include three Richburg Division invoices in its BIA list because the 
spaces indicated in these invoice numbers were not reported by Thyssen 
in the Sales Verification exhibit in question.
    Thyssen responds that for the first quantity/price invoice cited by 
petitioners, the change in quantity was minimal and it was explained by 
Thyssen. Thyssen notes that the invoice contained three separate lines, 
and therefore is divided into three distinct U.S. sales observations. 
Thyssen argues that the change in question only affected one line, so 
any BIA should only be applied to the observation reflecting that line 
of the invoice.
    For the second quantity/price invoice cited by petitioners, left 
out of the Department's BIA list because of clerical 

[[Page 65277]]
error, Thyssen argues that BIA is improper because the errors, for this 
and other Richburg sales, related solely to the summary worksheet 
provided to the Department at verification and did not affect the 
veracity of the data submitted in the database. Thyssen notes that the 
Department did not find an error in quantity during the sales trace of 
one observation that appeared as an addition on the summary list, and 
that the quantity observed for another sales trace observation 
corresponded to the corrected quantity in Thyssen's June 13, 1995, 
submission. Petitioners counter by noting that examples of sales with 
correct quantity information do not negate the pervasive errors 
throughout the whole group of sales in question.
    For the third quantity/price invoice cited by petitioners, Thyssen 
argues that it did report the changes in U.S. Sales Verification 
Exhibit 24A1 and 24A3.
    Thyssen claims that it also identified at verification as requiring 
correction the four quantity/price observations to which the Department 
chose to apply BIA in its preliminary results, two of which were listed 
in its column of changes entitled ``Deletion of Duplicate Invoices.'' 
The other two were listed in the column of changes entitled ``Misc. 
Corrections.'' Petitioners counter that a worksheet indicating an 
invoice ``change'' does not constitute sufficient notice to the 
Department because it does not identify the type or number of 
``changes'' made to these invoices.
    Regarding the quantity/price invoice for which the Department added 
an extra zero, Thyssen argues that it had identified this invoice as a 
``change,'' and provided the Department with corrected information 
immediately upon discovery of the summary worksheet error.
    Regarding the other three Richburg invoices which petitioner argues 
should be included in the BIA dataset, Thyssen again argues that BIA is 
not appropriate for the sales in question because the errors related 
solely to the summary worksheet provided to the Department at 
verification.
    Thyssen concludes that the Department should treat Thyssen's 
clerical mistakes in the same manner as petitioners have suggested the 
Department should correct the Department's own clerical errors. Thyssen 
argues that the limited burden of correcting the mistakes is far 
outweighed by the preference for accuracy in final dumping 
determinations, and that it would be both paradoxical and a clear abuse 
of discretion for the Department to punish Thyssen for its attempt to 
create as error-free and as accurate a margin calculation as possible.
    Department's Position: The Department is not applying BIA to the 
first quantity/price invoice in question. That invoice is referred to 
on page 9 of the U.S. Sales Verification report as having an error in 
reported actual weight. The Department did not instruct Thyssen to make 
the correction to that invoice in its post-verification database; 
however, applying BIA to the invoice in question because Thyssen 
unilaterally corrected an error amounting to roughly two-tenths of one 
percent that the Department identified at verification, would be 
inappropriate.
    The Department is applying BIA to the second quantity/price invoice 
in question, as it did for other Richburg Division invoices which 
Thyssen attempted to correct at U.S. verification. As noted in the 
Department's June 16, 1995, analysis memorandum, Thyssen provided a 
number of changes to the U.S. sales database with respect to sales from 
Richburg, but some of these changes differed from those provided at 
verification; differences included incorrect quantities, deletion of 
non-existing invoices or portions thereof, and incorrect shipping 
dates. The numerous errors and inconsistencies in Thyssen's 
presentation of changes involving Richburg sales created doubts about 
the observations in question. The errors in Thyssen's proposed changes 
only became apparent after verification, when Thyssen submitted its 
post-verification database on May 22, 1995. Furthermore, the fact that 
the verification report seems to indicate that a sale was reported 
accurately is not dispositive, and we agree with petitioners that the 
numerous errors called into question the reliability of the Richburg 
observations as a whole.
    Regarding the third quantity/price invoice in question, the 
Department agrees with Thyssen that it provided the appropriate changes 
to the Department at verification in U.S. Sales Verification Exhibit 
24A1 and 24A3.
    We are applying BIA to the four quantity/price observations, 
consistent with our preliminary results, because there was no 
indication in the correction exhibits provided by Thyssen at the U.S. 
verification that quantity and/or price of these observations would be 
changed in Thyssen's final tape submission. These observations differ 
from the first quantity/price change observation cited by petitioners 
as inappropriately left out of the Department's BIA dataset. The latter 
observation involved an extremely small error precisely identified 
during a sales trace at verification, while the former four 
observations involve previously unidentified and unexplained changes to 
quantity and/or price. We note that for one of these four invoices, as 
noted by petitioners, we inadvertently included an extra zero in the 
invoice number, and have corrected this error.
    Regarding the other three Richburg invoices cited by petitioners, 
we are including these in the BIA dataset, in accordance with the 
explanation above regarding the Richburg observation changes presented 
at verification.
    Thyssen's general argument that the burden to correct its mistakes 
is limited is unfounded. The mistakes in question are of such nature 
that the accuracy of the observations involved is called into question. 
It is unclear whether the ``corrected'' data actually are correct, and 
the Department cannot be expected to take the steps necessary (i.e., an 
additional verification) to make that determination. Thyssen had 
numerous opportunities to correct its mistakes. One such opportunity 
was at the beginning of verification, when Thyssen did in fact provide 
lengthy lists of changes. Review of these corrections proved very time 
consuming, particularly when errors in the ``corrections'' were 
discovered. Any changes that were not authorized by the Department 
prior to Thyssen's final tape submission, or that were not clearly 
explained as resulting from such an authorized change, were rightfully 
subject to adverse BIA.
    Comment 22: Thyssen argues that the Department incorrectly applied 
a 16.56 percent BIA margin to all U.S. observations relating to several 
shipments of steel covered by a single order. Thyssen contends that the 
Department believes the data provided in Thyssen's post-verification 
database submission did not reflect the changes provided to the 
Department at verification. Those changes involved Thyssen's attempt to 
update its database to account for what previously had been unshipped 
balances. Thyssen contends that, in its June 13, 1995, submission, it 
advised the Department of a typographical error in the relevant 
correction sheet provided at verification, and that the actual quantity 
shipped and the actual unshipped balances were correctly reported in 
the United States database.
    Petitioners argue that the Department properly applied BIA to this 
order, for which information was inaccurately reported.
    Department's Position: We disagree with Thyssen. After reviewing 
these data issues at verification, and after allowing Thyssen to 
provide a post-verification submission to clarify 

[[Page 65278]]
changes to its database. We have determined that these errors are not 
fully explained by the typographical error identified by Thyssen. It is 
still not clear how each of the invoice numbers and shipment quantities 
listed under the order in question relate to each other and to specific 
observations in Thyssen's post-verification database submitted on May 
22, 1995. Consequently, we have continued to apply a margin based on 
BIA to the U.S. observations relating to the order in question.
    Comment 23: Petitioners argue that the Department, in its 
preliminary results, improperly treated Thyssen's reported ``trader 
discounts'' granted to trading companies for sales made to customers 
that were end-users. Petitioners argue that, since the trading company 
never receives title to or takes possession of the merchandise, these 
deductions should be treated as a commission expense to Thyssen, rather 
than as a price discount. Moreover, given that the trading companies 
serve only as facilitators, there is no evidence that the prices 
charged the end-user customers in these transactions are altered or 
affected by the commission.
    Citing Industrial Phosphoric Acid from Israel, 52 FR 25440, 25442 
(July 7, 1987), Thyssen responds that the reduction in price on these 
end-user sales should properly be considered discounts granted to the 
trading companies. Respondent acknowledges initially having 
characterized these as commissions, but argues that it later clarified 
that they are discounts because the trading company is invoiced, it is 
responsible for paying Thyssen, and it bears the risk of loss if the 
customer does not pay. Thyssen argues that the trader discount is a 
reduction on the invoice of the invoice amount, for which no separate 
payment by TSAG is made, and that it reduces the net price received by 
TSAG, since it is a deduction from the amount paid by the trading 
company. Thyssen argues further that the Department noted, in its July 
20, 1995 memorandum, that it verified that if the traders were invoiced 
and responsible for payment, they did in fact receive the ``discount.''
    Department's Position: Generally speaking, a commission is a 
payment to a sales representative for engaging in sales activity, 
normally on behalf of the seller but occasionally on behalf of the 
customer. See, e.g., Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et al; Final Results of 
Antidumping Duty Administrative Reviews, Partial Termination of 
Administrative Reviews, and Revocation in Part of Antidumping Duty 
Orders, 60 FR 10,900, 10,914 (Feb. 28, 1995); Final Determination of 
Sales at Less Than Fair Value: Sulfur Dyes, Including Sulfur Vat Dyes, 
From the Peoples Republic of China, 58 FR 7537, 7543 (Feb. 8, 
1993)(Sulfur Dyes). A discount is a reduction in price to a customer. 
See Sulfur Dyes From the PRC. Therefore, the key question here is 
whether there was one transaction between Thyssen and the ultimate 
purchaser in which the trading companies acted as Thyssen's sales 
representatives for a commission; or whether there were two 
transactions, one in which the trading companies bought from Thyssen 
and received a discount on the price for that initial sale and the 
ultimate purchaser then bought from the trading companies.
    In addressing this question, we looked first to the manner in which 
Thyssen reported its sales. Significantly, Thyssen identified the 
transactions involving the trading companies as sales made by Thyssen 
itself to the ultimate customer. This indicates that in Thyssen's view, 
there were no separate sales to the trading companies; instead, the 
first and only sale was to the ultimate purchaser. Thus, the role of 
the trading companies must have been that of a commissionnaire. 
Thyssen's claim that the trading companies are intermediate purchasers 
who receive a price discount is inconsistent with its reporting of 
sales to the ultimate customers.
    Thyssen's acknowledgement that it conducted the price negotiations 
with the ultimate customers also supports the conclusion that there was 
a single sale between Thyssen and the ultimate customer. In addition, 
as petitioners stressed, Thyssen originally referred to the amounts in 
question as ``commissions,'' then used the term ``discount'' after the 
Department requested supplemental information on the commissions.
    On the other hand, information in the record appears to indicate 
that Thyssen invoices the trading companies, and the trading companies 
invoice the ultimate customer. This suggests the presence of two 
transactions. Moreover, the Department did verify that the actual 
invoices to the trading companies referred to the amounts in question 
as discounts. Although there is conflicting evidence on the record, it 
is most reasonable to treat this issue consistently with Thyssen's 
reporting of its home market sales. Accordingly, we have revised the 
preliminary results in this respect and have treated these deductions 
as commissions.
    Comment 24: Petitioners contend that the Department should deny 
Thyssen's claimed indirect selling expense adjustment for home market 
technical services expenses. The home market verification report 
describes the technical services expenses claimed by Thyssen as 
consisting primarily of research and development (R&D), which 
petitioners argue are generally considered production expenses rather 
than selling expenses. Petitioners conclude that these R&D expenses 
cannot be tied directly to sales of the subject merchandise, and so do 
not qualify as technical services expenses.
    Thyssen argues that the Department noted in its Home Market Sales 
Verification at 21 that the technical services expenses claimed by 
Thyssen are related to customer-specific testing (not to be confused 
with the R&D expenses claimed as indirect expenses), and that, as such, 
these expenses are product-specific.
    Department's Position: We disagree in part with petitioners. 
Thyssen's January 17, 1995, submission, at page 56, and Exhibit 31 of 
that submission describe the technical services identified on page 16 
of Thyssen's November 21, 1994, Section IV submission. Exhibit 31 
depicts the costs of assorted functions, including the provision of 
advice regarding potential new products and adjustments in production 
processes. However, home market verification report Exhibit XXI 
indicates that the cost center from which the costs were derived was 
identified as ``material complaints.'' As the verification report 
confirms, the category material complaints pertains to testing costs 
related to warranty claims. Because the information in Exhibit XXI 
referring specifically to R&D is not reflected in the technical 
services expense data reported by Thyssen, we reject petitioners' 
assertion that these data include R&D costs.
    However, we do agree with petitioners that the expenses in question 
cannot be tied to subject merchandise, and we note that Thyssen's 
allocation methodology, as presented at verification, was deficient. 
Verification Report Exhibit XXI indicates that Thyssen derived its 
reported DM/ton expense by dividing total technical services expenses 
by shipments in Germany. Thyssen's total expenses, as is clear from the 
exhibit, include those for all cold-rolled material, including that 
which was further processed out of the scope of this review. Thyssen's 
total expenses also include those for merchandise produced for all 
customers, not just those in Germany. Consequently, we have reduced 
this expense amount by that amount which we estimate pertains to non-
covered merchandise. See the Department's 

[[Page 65279]]
December 12, 1995, analysis memorandum.
    Comment 25: Petitioners assert that the interest rate used by the 
Department to calculate Thyssen's home market credit and inventory 
carrying cost adjustments should be based solely upon the company's 
short-term borrowings from unrelated parties. Petitioners note that the 
Department has recognized that expenses paid to related parties in the 
home market may sometimes be priced above the market rate for those 
expenditures, and, in such instances, the market rate of interest 
should be employed in the calculation of the adjustments to home market 
price. See Color Picture Tubes from Japan; Final Results of Antidumping 
Duty Administrative Review, 55 FR 37915, 37922-23 (Sept. 14, 1990) 
(Color Picture Tubes from Japan); High Information Content Flat Panel 
Displays and Display Glass Therefor from Japan: Final determination; 
Recission of Investigation and Partial Dismissal of Petition, 56 FR 
32376, 32393 (July 16, 1991)(Flat Panel Displays). Petitioners suggest 
that the market ``expense'' of Thyssen's borrowings should be 
determined by using interest rates of Thyssen's borrowings from 
unrelated parties.
    According to Thyssen, the information on the record confirms that 
the interest rates charged for intra-company loans were consistent with 
other loans. Thyssen notes that it was the nature of the loan, rather 
than the relationship of the lender to Thyssen, which was the critical 
factor in determining Thyssen's interest rates during the POR.
    Thyssen also argues that, in the fair value investigation, the 
Department rejected a similar claim by petitioners that the Department 
should ignore Thyssen's related company borrowings, where differences 
in rates were not significant. Steel from Germany, 58 FR at 37149. 
Thyssen adds that in Final Determination of Sales at Less Than Fair 
Value: Fresh Kiwifruit from New Zealand, 57 FR 13695, 13705 (April 17, 
1992), the Department rejected a respondent's attempt to disregard a 
related-party loan, stating that ``there was no evidence that the 
interest rate on the related-party loan did not reflect market interest 
rates.''
    Department's Position: We disagree with petitioners. As in the 
original investigation, Steel from Germany at 37149, we have determined 
that information on the record indicates that the intracompany loans in 
question were made at what could be considered market rates.
    The situation here differs from that in both determinations relied 
upon by petitioners. In Color Picture Tubes from Japan, the Department 
determined at verification that the related party charged the 
respondent more for freight than the related party was charged by the 
trading company that actually delivered the merchandise. In Flat Panel 
Displays from Japan, the Department found that, rather than being a 
market price, the price charged by the related party was established 
for respondent's internal bookkeeping purposes only. By contrast, in 
the present case, neither the information in Exhibit XIV of the Home 
Market Sales Verification, which provides interest rates on loans of 
varying duration from related and unrelated parties, nor the 
Department's May 2, 1995, Home Market Sales Verification Report, 
support the contention that interest rates on concurrent loans of 
similar duration provided to Thyssen by related parties differed in any 
meaningful way from those offered by unrelated parties.
    However, we note that in the preliminary results we did not account 
for the fact that Thyssen incorrectly reported home market credit 
expenses that were calculated based on a price that does not net out 
discounts that are not on the invoice. While Thyssen has stated that it 
pays these discounts every quarter, there is no information on the 
record indicating that Thyssen pays the customers such ``discounts'' 
for a particular sale before the customer pays for the merchandise. 
Thyssen confirmed on page 13 of its June 23, 1995, submission that it 
``does not incur any financing expenses from date of shipment to date 
of payment for these out of invoice discounts.'' Consequently, we have 
adjusted home market credit expenses for the final results and are 
calculating this expense net of discounts not on the invoice. See the 
Department's December 12, 1995, analysis memorandum.
    Comment 26: Petitioners argue that the Department should exclude 
the R&D and general and administrative (G&A) costs from the 
miscellaneous indirect selling expense variable amounts claimed by 
Thyssen. Petitioners reiterate that expenses pertaining to R&D are 
generally not selling expenses, but, rather, production costs, and that 
such expenses should be classified as non-sales-related general and 
administrative expenses. Petitioners also argue that none of the 
various G&A expenses claimed by Thyssen qualify as indirect selling 
expenses, since they are not associated with selling activities. 
Finally, petitioners argue that should the Department decide to include 
Thyssen's claimed R&D in the indirect selling expenses deducted from 
USP and FMV, it must correct the allocation of those R&D expenses to 
the home and U.S. markets.
    Thyssen responds that the record clearly establishes that it 
correctly included these expenses in its home market indirect selling 
expenses. Thyssen argues that the R&D expenses categorized as indirect 
selling expenses include items related to selling, not production 
activities. See Antifriction Bearings from France, 60 FR at 10920. 
Thyssen argues that the same is true for the various G&A expenses 
included as indirect selling expenses. Finally, Thyssen argues that the 
Department confirmed at verification that the R&D expenses in question 
had been allocated to each market on the identical basis as were 
selling expenses, verified by the DOC.
    Department's Position: We disagree with petitioners regarding G&A 
expenses. Our verification indicated that the expenses in question were 
indirect selling expenses. The type of costs which Thyssen listed 
include meals and transportation for Thyssen's customers. These are 
costs which we reasonably consider to be selling expenses.
    However, petitioners are correct that the Department does not 
normally consider R&D expenses to be costs associated with selling the 
merchandise. See Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et al.; Final Results of 
Antidumping Duty Administrative Reviews, 57 FR 28360, 28415 (June 24, 
1992). There are exceptions to this policy. See Antifriction Bearings 
From France, 60 FR at 10920. However, we have determined that Thyssen 
has not shown that the R&D costs in question constitute selling 
expenses. We have therefore adjusted Thyssen's miscellaneous home 
market indirect selling expense variable to reflect this finding. See 
the Department's December 12, 1995, analysis memorandum.
    Comment 27: Petitioners argue that Thyssen's reported home market 
warranty expenses for the POR are aberrational and that the Department 
should instead use a weighted-average for these indirect selling 
expenses based on Thyssen's reported data for calendar years 1990 and 
1991, and fiscal years 1991/92, 1992/93, and 1993/94. Petitioners cite 
Television Receivers, Monochrome and Color, From Japan; Final Results 
of Antidumping Duty Administrative Review, 56 FR 38417, 38421 (Aug. 13, 
1991)(Television Receivers from Japan); and Final 

[[Page 65280]]
Determination of Sales of Less Than Fair Value: Certain Carbon And 
Alloy Steel Wire Rod from Canada, 59 FR 18791, 18795-6 (April 20, 1994) 
(Steel Wire Rod from Canada).
    Petitioners argue that for U.S. warranty expenses, the Department 
should employ BIA in place of Thyssen's claimed adjustment. Petitioners 
argue that for both its automotive and non-automotive divisions Thyssen 
provided U.S. warranty expense information which pertains to products 
well beyond the scope of this review, and that Thyssen's use of total 
warranty expenses over total sales does not conform to the CIT's ruling 
that the Department must ``develop a methodology which removes 
technical services and warranty expenses incurred on sales of out of 
scope merchandise.'' Federal-Mogul Corp. v. United States, 862 F. Supp. 
384, 406-07 (CIT 1994). Petitioners also argue that the reliability of 
Thyssen's reported warranty expenses are further undermined by 
Thyssen's failure to provide information on its ``historical experience 
of warranty/guarantee expenses for U.S. sales in each of the five years 
preceding the period of review,'' as requested by the Department.
    Petitioners argue that the Department should recalculate Thyssen's 
per-unit U.S. warranty expense adjustment by dividing the total 
warranty expense amounts reported by Thyssen for fiscal years 1992/93 
and 1993/94, by the total volume of subject merchandise sold by Thyssen 
in the U.S. market in each of those fiscal years, respectively. 
Furthermore, petitioners argue that, because Thyssen did not provide 
information on its warranty experience for the five years preceding the 
POR, the Department should apply the higher of the two fiscal year 
amounts as BIA to all U.S. sales.
    Petitioners conclude that, should the Department use the reported 
home market warranty expenses in question without weight-averaging, at 
a minimum it must also use the U.S. warranty expense data from the same 
exhibit.
    Thyssen responds that the Department generally uses warranty 
expenses incurred during the POR, and will only resort to historical 
experience in those instances in which: (1) a respondent is not able to 
demonstrate a relationship between POR sales and its warranty expense 
claim, by tying actual warranty expenses to POR sales; and (2) a 
historical average would be a more representative proxy of eventual 
warranty expenses on POR sales than warranty expenses actually incurred 
during the review period. See Steel Wire Rod from Canada, 59 FR at 
18795-96, and Television Receivers from Japan, 56 FR at 38421-22. 
Thyssen argues that the Department properly relied upon Thyssen's home 
market warranty expenses incurred in fiscal year 1993/94, and that 
these expenses were only slightly higher than those for fiscal year 
1992/93 on either an absolute or a percentage [of sales] basis. Thyssen 
also argues that, for the last three fiscal years, Thyssen's home 
market warranty expenses reflected a relatively steady aggregate 
amount.
    Regarding its U.S. warranty expenses, Thyssen argues that it did in 
fact provide adequate historical information. It also argues that 
Federal Mogul does not preclude the Department from accepting the 
warranty expense allocation methodology presented by Thyssen, and that 
the Department accepted a similar methodology in Antifriction Bearings 
from France, 60 FR at 10910. Thyssen argues that even petitioners 
acknowledge that the Department verified both the amount of U.S. 
warranty expenses incurred during the POR and the total value of sales 
upon which warranty expenses were allocated. Thyssen argues that, 
contrary to petitioners' claim, the Department never explicitly 
instructed Thyssen to report only those warranty expenses applicable to 
cold-rolled steel, but rather requested that it do so or clarify why it 
could not do so; and the Department confirmed in its U.S. sales 
verification report at 12-14 that the necessary records were not 
maintained, either by supplier or product type.
    Thyssen argues that petitioners' suggestion that the Department 
should apply 100 percent of Thyssen's verified warranty expenses to 
cold-rolled shipments must be rejected, since the Department has 
confirmed that the expenses relate to all products, and the Department 
cannot penalize a respondent for failing to maintain business records 
in a particular manner or for utilizing an allocation method which 
subsequently may be rejected by the Department. See, e.g., Industrial 
Quimica del Nalon, S.A. v. United States, 15 CIT 240, 244 (CIT 1991).
    Finally, Thyssen also argues that petitioners' alternative of 
applying a deutsche marks per metric ton warranty expense to Thyssen's 
U.S. shipments based on a home market sales verification exhibit is 
flawed, since the document upon which petitioners rely does not include 
data for fiscal year 1992/93. Thyssen argues that if the Department 
does decide to use BIA for U.S. warranty expenses, it should rely on 
data utilized in its fair value investigation, which were purportedly 
accepted by petitioners and verified by the Department from both a 
historical and actual perspective.
    Department's Position: We disagree with petitioners' arguments that 
we should use weighted-averaged expenses calculated for earlier years 
because Thyssen's reported home market warranty expenses were 
aberrational. As noted in Television Receivers from Japan, the 
Department generally uses warranty expenses incurred during the POR. As 
the Department's May 2, 1995, Home Market Sales Verification Report 
indicates, there were no problems observed with Thyssen's reported home 
market warranty expenses. Various factors may lead to some variation in 
warranty expenses, and the variations in Thyssen's expenses do not 
appear to be abnormal.
    Regarding Thyssen's reported U.S. warranty expenses, we agree with 
Thyssen that it would not be appropriate to apply Thyssen's total 
warranty expenses over total sales of subject merchandise, as suggested 
by petitioners. Given Thyssen's substantial U.S. sales of non-subject 
merchandise relative to its U.S. sales of subject merchandise, such an 
approach would be inappropriately adverse.
    However, Thyssen did submit, as noted by petitioners, warranty 
expenses for U.S. shipments of cold-rolled flat products made during 
fiscal year 1993/94. The data for 1993/94 U.S. shipments, contained in 
Home Market Verification Exhibit XIX, were reviewed at the home market 
verification, and found to be reasonable. Thus, we are able to use this 
figure for calculating the adjustment, a methodology which is 
consistent with the CIT's directive in Federal Mogul. Thyssen did not 
submit similar data in a timely fashion for fiscal year 1992/93. 
However, there is no indication on the record that Thyssen's 1992/93 
fiscal year warranty expenses for U.S. sales of subject merchandise 
were any higher or lower than those for fiscal year 1993/94. Therefore, 
we have used the 1993/94 data for all of Thyssen's U.S. sales, 
regardless of fiscal year.
    Comment 28: Petitioners argue that the Department should reject all 
of the cash discount information supplied by Thyssen and employ 
instead, as BIA, an ad valorem cash discount for all U.S. sales based 
on the highest discount granted to a U.S. customer. Petitioners argue 
that the Department recognized in its May 11, 1995, memorandum from 
Richard O. Weible to Roland L. MacDonald (May 11, 1995, discount 
memorandum), that the cash discount information provided by Thyssen is 

[[Page 65281]]
highly unreliable and subject to serious deficiencies, and that it is 
possible that there are other inaccuracies in the U.S. discount data 
that remain undetected. Petitioners argue that the fact that the errors 
found at verification were limited to certain customers does not 
indicate that such errors were not more widespread, but rather suggests 
that the contrary may be true, since the errors noted were self-
produced by Thyssen. Furthermore, petitioners argue that Thyssen has 
failed to explain why at times its customers took the discount when 
eligible, at other times they did not take the discount when eligible, 
and at still other times they took the discount when they were 
technically not eligible.
    Thyssen argues that the Department's verification confirmed that 
Thyssen had properly reported its cash discounts for all of its U.S. 
customers other than those specifically referred to in the Department's 
May 11, 1995 discount memorandum. Thyssen also argues that the 
Department verified the total discounts granted by TINC as a percentage 
of sales. Consequently, Thyssen argues that the Department must reject 
petitioners' call for use of BIA beyond that applied for U.S. cash 
discounts in the preliminary results.
    Department's Position: We disagree with petitioners. Our review of 
U.S. discounts at verification included the pre-selected and surprise 
sales trace observations, as well as a thorough review of Thyssen's 
changes to its discounts, which were proposed in a timely manner. As 
noted in the Department's July 20, 1995, memorandum at 5, the only 
problems noted were limited to a few specific customers, and discounts 
reported for other customers were found to be accurate. See also May 
11, 1995, discount memorandum. The only relevant issue is the total 
amount of the discounts, which has been determined as noted above. The 
reasons why a discount was offered or accepted for specific 
transactions is irrelevant to this inquiry.
    Comment 29: Petitioners argue that the Department should deny 
Thyssen's attempt to include interest income in the calculation of its 
U.S. short-term interest rate. Petitioners argue that the calculation 
of a respondent's imputed credit and inventory carrying costs should be 
based on the short-term interest rate either actually or potentially 
incurred by the respondent in financing its accounts receivable. For 
purposes of calculating its imputed credit and inventory carrying 
costs, Thyssen's borrowing costs during the POR are fully and 
accurately represented by its weighted-average gross interest expense. 
Petitioners argue that the Department should base Thyssen's U.S. 
imputed credit and inventory carrying cost amounts upon the short-term 
interest rates reported by the company prior to verification.
    Thyssen argues that it properly reduced its borrowing rate to 
account for short-term interest income in order to avoid a double 
deduction of interest resulting from the fact that Thyssen included an 
amount equal to TINC's allocated share of the interest expense of 
Thyssen AG in its U.S. indirect selling expense deduction from USP. 
Thyssen argues that a similar adjustment was made to avoid double-
counting in Antifriction Bearings (Other than Tapered Roller Bearings) 
and Parts Thereof from West Germany, 56 FR 31692, 31721 (July 11, 
1991). Because the Department's questionnaire does not provide for this 
particular deduction, if interest income is not deducted from interest 
paid, interest expenses deducted from USP will be greater than 
Thyssen's actual borrowing costs for the POR.
    Department's Position: We have denied Thyssen's claim for an 
adjustment to its borrowing rate to offset short-term interest income 
against the deduction of credit expenses and inventory carrying costs 
from U.S. price. The Department does not normally allow an offset of 
this type outside the context of a COP or CV calculation. As explained 
in Comment 7, in a COP or CV calculation, the Department does generally 
offset interest expenses for short-term interest income earned through 
a company's ``general operations,'' which excludes unrelated and long-
term interest income such as that earned from investment activities. 
NTN Bearing Corp., Slip Op. 95-165 at 33; Timken Co., 852 F.Supp. at 
1048.
    By contrast, in a sales calculation, respondents must demonstrate a 
more direct relationship between the interest income and the sales 
under review in order to qualify for an offsetting adjustment.
    See Certain Internal-Combustion, Industrial Forklift Trucks from 
Japan; Final Results of Antidumping Duty Administrative Review, 59 FR 
1374, 1378 (January 10, 1994). In accordance with this standard, the 
Department has offset interest income actually shown to reduce the 
respondent's cost of extending credit to its customers. For instance, 
the Department granted an offset for interest earned on a respondent's 
sales of the subject merchandise pursuant to a special arrangement with 
another party. Polyethylene Terephthalate Film, Sheet and Strip From 
the Republic of Korea; Final Results of Antidumping Duty Administrative 
Review, 60 FR 42835, 42838 (August 17, 1995); see also Certain 
Internal-Combustion, Industrial Forklift Trucks from Japan; Final 
Results of Antidumping Duty Administrative Review, 57 FR 3167, 3178 
(January 28, 1992). The Department has also permitted an offset for 
interest earned from pre-shipment advance money, Final Determination of 
Sales at Less Than Fair Value: Antidumping Duty Investigation of 
Stainless Steel Angle From Japan, 60 FR 16608, 16615 (March 31, 1995); 
Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel 
Flat Products, and Certain Corrosion Resistant Carbon Steel Flat 
Products From Japan, 58 FR 37154, 37173 (July 9, 1993) (Steel From 
Japan), and for interest earned on late payments. Final Determination 
of Sales at Less Than Fair Value; Certain Internal-Combustion, 
Industrial Forklift Trucks from Japan, 53 FR 12552, 12571 (April 15, 
1988). The Department has also determined that pre-payment funds for 
which a party claims to have received interest income may not be used 
to finance ongoing operations. Steel From Japan at 37173.
    Thyssen did not claim the offsetting adjustment for interest income 
until verification. Thus, the Department was never able to investigate 
the basis of its claim. The verification report, which contains the 
only explanation regarding the funds, states only that Thyssen received 
income ``attributed to interest that was part of a legal settlement.'' 
U.S. Verification Report at 10. An accompanying verification exhibit 
provides some detail as to the origin of the interest income, in chart 
form, but contains no indication that the funds were derived from sales 
of the subject merchandise. Id. at Exhibit 19.
    Based on the record evidence we are unable to determine whether the 
interest income claimed as an offset was associated with actual sales 
of the subject merchandise. It was the responsibility of Thyssen to 
demonstrate entitlement to this adjustment to U.S. price and we find 
that Thyssen has failed to meet the Department's standard, as set forth 
above. We have, therefore, revised our preliminary results to eliminate 
the offset for Thyssen's claimed interest income.
    Comment 30: Petitioners argue that the Department should adhere to 
its decision not to allow Thyssen's claimed currency hedging 
adjustment. Petitioners agree with the Department's 

[[Page 65282]]
determination that the veracity of the currency hedging gain 
information is called into question by unexplained changes involving 
this information in Thyssen's post-verification database. Petitioners 
also argue that the adjustment should be denied on legal grounds. 
Petitioners cite the CIT's decision involving this adjustment in the 
underlying investigation, in which the court was ``not persuaded that 
the law presently permits any adjustment in the computation of dumping 
margins for either gains or losses which result from the hedging of 
currencies.'' Thyssen Stahl AG v. United States, 886 F.Supp. 23, 32 
(CIT 1995). Petitioners conclude that the accuracy of Thyssen's 
reported data for this adjustment is largely irrelevant since the CIT 
has ruled expressly on this issue.
    Thyssen responds that the Department improperly denied its currency 
hedging adjustment. Thyssen argues that the Department verified that 
Thyssen's currency exchange contracts were tied directly to its U.S. 
sales. Regarding the variations in the adjustment, Thyssen also points 
to its previous explanation that ``a change in any field used in the 
formula to calculate the exchange gain * * * changes the exchange 
gain.''
    Thyssen also argues that the CIT's decision in Thyssen Stahl AG is 
not final, since Thyssen has the opportunity to appeal that decision to 
the Court of Appeals for the Federal Circuit, and, moreover, that 
decision is directly contrary to Torrington Company v. United States, 
832 F. Supp. 379 (CIT 1993).
    Department's Position: We disagree with Thyssen. As noted in the 
preliminary results, Thyssen's post-verification database contained 
numerous unexplained and unauthorized changes in the currency exchange 
expense variable. While the Department recognized that this variable 
would change if one of many other variables changed, we were unable to 
reconcile all of the changes to the changes Thyssen was authorized to 
make in its final tape submission. Furthermore, the largest changes 
were clearly unauthorized by the Department, and were very much in 
Thyssen's favor. Consequently we are continuing to disallow this 
adjustment. For purposes of this review, therefore, petitioners' and 
Thyssen's arguments regarding the CIT's decision are moot.
    Comment 31: Petitioners agree with the Department's preliminary 
determination that BIA was warranted for those Budd sales in the United 
States for which Thyssen failed to report contemporaneous home market 
sales. Petitioners also argue, however, that the Department should 
apply BIA to all of Thyssen's remaining reported Budd sales to U.S. 
customers and to an additional estimated quantity of Budd sales to U.S. 
customers which Thyssen failed to report.
    Petitioners note that, contrary to Thyssen's assertions, the volume 
of the unreported home market sales relative to that of the Budd sales 
for which they were needed is irrelevant. Petitioners argue that the 
Department's longstanding practice is to compare each U.S. sale to the 
weighted-average FMV associated with all home market sales made in the 
ordinary course of trade within the same six-month period as the U.S. 
sale. See, e.g., Final Results of Antidumping Duty Administrative 
Review: Certain Forged Steel Crankshafts from the United Kingdom, 56 FR 
5975, 5976 (Feb. 14, 1991). Petitioners argue that, for the Budd sales 
given BIA because of Thyssen's failure to report shipment dates from 
Germany, Thyssen failed to offer any explanation in its brief as to why 
those shipment dates were not provided.
    Petitioners also contend that the Department should apply adverse 
BIA to all of the Budd sales which Thyssen did report because Thyssen 
did not adequately address any of the Department's questions regarding 
U.S. further processing by Budd. Specifically, petitioners argue that 
Thyssen did not describe the further manufacturing processes performed 
by Budd or the overhead factors or cost accounting methodology; Thyssen 
also failed to indicate whether manufacturing processes were performed 
in-house or by outside contractors, or what equipment or personnel were 
used.
    Finally, petitioners argue that the Department should apply BIA for 
sales by Budd that Thyssen failed to report. Petitioners argue that the 
Department is required by section 751 of the Act to determine the 
amount of the antidumping duty by determining ``the foreign market 
value and United States price of each entry of merchandise subject to 
the antidumping duty order.'' Petitioners provide a methodology for 
estimating Budd's unreported sales, and argue that the Department apply 
as BIA for these sales the higher of either the margin rate from the 
underlying investigation or the highest non-aberrant margin rate 
calculated for sales in this review.
    Thyssen asserts that the Department improperly applied a 16.56 
percent BIA margin to the 1992 Budd sales for which Thyssen did not 
report contemporaneous home market sales. Thyssen argues that it would 
be absurd to require it to report an enormous number of additional home 
market sales simply because a small amount of Budd sales involved 
requirements contracts consummated in 1992. Thyssen also argues that 
such a reporting burden is not appropriate given the inherent 
difficulty in calculating meaningful margins when comparing the home 
market sales price for cold rolled steel to the adjusted U.S. prices of 
motor vehicle component parts such as those sold by Budd. Thyssen 
concludes that the Department should exclude these Budd sales from the 
U.S. database, citing the CIT decision in Sonco Steel Tube Div. v. 
United States, 12 CIT 745, 748 (1988); or alternatively, the Department 
should apply Thyssen's weighted average margin for Budd resales, as 
determined in this review, citing Nat'l Steel Corp. v. United States, 
870 F.Supp. 1130 (CIT 1994).
    Thyssen acknowledges that the data submitted for Budd was not 
presented in the identical format as that submitted by TINC. But 
Thyssen argues that the Department accepted Budd's submission as 
complete, as evidenced by the fact that the Department did not advise 
Thyssen that additional information for Budd was required or that the 
manner in which Budd reported its costs failed to conform to Department 
reporting requirements. Thyssen argues that the information necessary 
for the Department's analysis was provided, and that the Department has 
a degree of latitude in implementing its verification procedures. 
Thyssen also counters petitioners' argument that the highest non-
aberrant margin from this review should be applied to petitioners' 
estimate of unreported Budd sales. According to Thyssen, the Department 
never questioned Budd's interpretation of its reporting instructions, 
thereby precluding resort to BIA. See, e.g., SKF USA, Inc. v. United 
States, Slip Op. 95-85 (CIT May 8, 1995).
    Finally, Thyssen argues that, contrary to petitioners' contention, 
the Department is not required to examine every U.S. sale made by 
respondents during the POR. See, e.g., Sonco Steel, 12 CIT at 748. The 
potentially unreported Budd resales, Thyssen argues, consist of 
merchandise which was shipped by TINC to Budd prior to the POR. 
Petitioners' methodology for estimating unreported Budd sales assumes 
that all of Budd's material costs consist of cold rolled steel exported 
from Germany by Thyssen, which ignores the fact that the majority of 
steel sold by TINC to Budd was not subject cold rolled steel, and that 
only a de minimis amount of Budd's material 

[[Page 65283]]
costs consisted of cold rolled steel purchased from Thyssen.
    Department's Position: The Budd Company, like TSAG and TINC, is 
wholly-owned by TAG. Thyssen reported sales in the U.S. by Budd after 
initially refusing to do so. However, Thyssen continued to refuse to 
provide the contemporaneous home market sales needed for matching to 
the earliest Budd sales. Because these Budd sales were made pursuant to 
requirements contracts, the necessary home market sales were dated in 
1992. We disagreed with Thyssen's request that the Budd's 1992 U.S. 
sales be completely excluded from the analysis or, alternatively, 
assigned the weighted average margin for other Budd sales in this 
review. See Preliminary Results, 60 FR at 39356. The Department 
requires respondents to report contemporaneous home market sales. 
Thyssen failed to do so for the sales in question, which included some 
observations for which Thyssen had failed to report a shipment date 
from Germany. Consequently, an adverse BIA is appropriate for the 1992 
Budd sales in question, and we have continued to apply the margin from 
the investigation. See Id; the Department's June 16, 1995, Analysis 
Memo from Steve Bezirganian to the File.
    We disagree with petitioners' contention that the Department should 
assign BIA to all of those U.S. sales by Budd which Thyssen did report 
because of what petitioners contend was Thyssen's failure to provide 
sufficient answers to the Department's further manufacturing 
questionnaire. The Budd sale submission contained the variables needed 
for the Department's calculations, albeit in an unwieldy format. 
Moreover, the Department did not request more detailed information on 
Budd's sales, because they constituted a very small portion of 
Thyssen's total U.S. sales. For those Budd sales which were reported, 
the only information lacking was the contemporaneous home market sales 
data discussed previously.
    The Department repeatedly requested that Thyssen report U.S. sales 
made by Budd. When Thyssen finally reported Budd sales, this reporting 
was incorrectly on shipments during the POR from TINC to Budd, rather 
than Budd sales to the first unrelated customer during the POR (or, in 
the case of requirements contracts between Budd and its customers, 
shipments from Germany during the POR). Petitioners are correct that 
this leaves open the possibility that Thyssen failed to report all 
sales by Budd.
    We agree with petitioners' suggestion that the Department assume 
that some percentage of Budd's sales during the POR were unreported, 
and that we should apply BIA to these ``estimated unreported'' sales. 
However, applying petitioners' methodology for estimating unreported 
sales by Budd would grossly overestimate this possibility. Therefore, 
we have determined that applying BIA in the manner suggested by 
petitioners would be unreasonable. Instead, we have adjusted 
petitioners' methodology to reflect our observation that very few of 
TINC's sales were to Budd. Therefore, for the final results, we have 
calculated a different estimate of the number of tons associated with 
these potentially unreported Budd sales, which we have added to the 
data base. As BIA, we have applied the rate from the original 
investigation to this estimated amount. See the Department's December 
12, 1995, analysis memorandum.
    Comment 32: Petitioners argue that the Department should account 
for unreported post-sale warehousing for certain U.S. spot sales. Spot 
sales were made from existing TINC inventories, and were normally 
shipped immediately after the sale took place. Thyssen conceded that, 
in certain limited instances, its U.S. spot sales were shipped ten days 
or more after the reported sale date. However, Thyssen argues that it 
advised the Department of this possibility in its November 22, 1994, 
questionnaire response. Thyssen argues that the Department verified 
that Thyssen reported all of its warehousing costs in the warehousing 
expense variable which the Department, as required by law, deducted 
from the sales price in calculating USP.
    Department's Position: The post-sale expenses to which petitioners 
refer constitute a small portion of the overall amount reported by 
Thyssen in its pre-sale warehousing expense variable. Because this 
post-sale expense is being deducted from U.S. price, and because this 
expense is very small for most sales in question, even if the 
Department attempted to separate it into a separate variable and chose 
to reclassify it as a direct selling expense, the effect upon Thyssen's 
final calculated margin would be negligible. Consequently, we have 
chosen not to make any adjustments to Thyssen's pre-sale warehousing 
expense variable.

Final Results of Review

    As a result of this review, we have determined that the following 
margin exists for the period August 18, 1993, through July 31, 1994:

------------------------------------------------------------------------
                                                               Margin   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Thyssen...................................................         5.88 
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
shall issue appraisement instructions directly to the Customs Service.
    Furthermore, the following deposit requirements shall be effective, 
upon publication of this notice of final results of administrative 
review, for all shipments of the subject merchandise from Germany that 
are entered, or withdrawn from warehouse, for consumption on or after 
the publication date, as provided for by section 751(a)(1) of the 
Tariff Act: (1) The cash deposit rate for Thyssen will be the rate 
established above; (2) for previously investigated companies not listed 
above, the cash deposit rate will continue to be the company-specific 
rate published for the most recent period; (3) if the exporter is not a 
firm covered in this review, or the original investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacturer of the merchandise; and (4) 
the cash deposit rate for all other manufacturers or exporters will 
continue to be 19.03 percent, the all others rate established in the 
final results of the first administrative review (58 FR 44170, August 
19, 1993).
    The deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with section 353.34(d) of the Department's 
regulations. Timely written notification of return/destruction of APO 
materials or conversion to judicial protective order is hereby 
requested. Failure to comply with the regulation and the terms of an 
APO is a sanctionable violation. 

[[Page 65284]]

    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: December 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-30784 Filed 12-18-95; 8:45 am]
BILLING CODE 3510-DS-P