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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-421-803]

Certain Cold-Rolled Carbon Steel Flat Products From the

Netherlands; Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: On July 12, 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 the Netherlands. The review covers one exporter of the

subject merchandise to the United States, Hoogovens Groep BV

(Hoogovens) and the period August 18, 1993, through July 31, 1994. The

Department has now completed this administrative review in accordance

with section 751 of the Tariff Act of 1930, as amended (the Act).

EFFECTIVE DATE: September 13, 1996.

FOR FURTHER INFORMATION CONTACT: Helen Kramer or Linda Ludwig, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Room 7866,

Washington, D.C. 20230; telephone: (202) 482-0405 or (202) 482-3833,

respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Background

On July 12, 1995, the Department published in the Federal Register

(60 FR 35893) the preliminary results of the administrative review of

the antidumping duty order on certain cold-rolled carbon steel flat

products from the Netherlands (58 FR 44172, August 19, 1993). On

February 6, 1996, and on August 7, 1996, the Department sent Hoogovens

supplemental questionnaires on the subject of reimbursement of

antidumping duties. We gave interested parties an opportunity to

comment on our preliminary results and the supplemental questionnaires.

Based on our analysis of the comments received, we have changed the

results from those presented in the preliminary results of review.

Scope of This Review

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

[[Page 48466]]

the thickness, as currently classifiable in the Harmonized Tariff

Schedule (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, 7209.24.1000, 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, 7211.41.7090, 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 sales of cold-rolled carbon steel flat products

from the Netherlands by Hoogovens Groep BV. 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. We also gave them an opportunity to comment on the

issue of potential reimbursement of antidumping duties to be assessed.

We received comments and rebuttal comments from Hoogovens Groep BV, an

exporter of the subject merchandise, (respondent), and from Bethlehem

Steel Corporation, U.S. Steel Group a Unit of USX Corporation, Inland

Steel Industries, Inc., LTV Steel Company, Inc., National Steel

Corporation, AK Steel Corporation, Gulf States Steel Inc. of Alabama,

Sharon Steel Corporation, and WCI Steel Inc., petitioners.

Comment 1: The respondent argues that the Department should have

exercised its discretion not to require Hoogovens to report a very

small quantity of U.S. sales of secondary merchandise by a U.S.

affiliate, Precision Slitting, Inc. (PSI), which were its only sales of

``seconds'' in the United States. While acknowledging that the

Department considers the antidumping law to require the inclusion of

all U.S. sales during the period of review (POR) in the calculation of

margins, it cites American Permac, Inc. v. United States, 783 F. Supp.

1421, 1423-24 (CIT 1992), in support of its contention that sales of

seconds should be excluded from the calculation of dumping margins when

they are de minimus and distortive of the margins.

Petitioners respond that the Department's practice of including all

U.S. sales was held to be reasonable in NSK Ltd. v. United States, 896

F. Supp. 1263, 1267-68 (CIT 1995).

Department's Position: It is normal Department practice to consider

all of a company's U.S. sales in an administrative review, including

those that were excluded due to time and resource constraints in the

original investigation. American Permac, upon which Hoogovens relies,

states that, while U.S. sales outside the ordinary course of trade

normally should be included in the sales database, ``a methodology is

to be applied which accounts for sales which are unrepresentative and

which do not lead to a fair price comparison.'' 16 CIT 41, 42 (1992).

The American Permac court then upheld the Department's inclusion of a

small number of sales alleged by the plaintiff in that case to be

distortive, noting that it was not clear from the record that any

distortion actually occurred in that case. Id. at 43-44. Thus, American

Permac stands for the proposition that U.S. sales in small quantities

will be included unless they are shown to be distortive.

Commerce has met the standards set forth in American Permac by

providing for a methodology which accounts for the allegedly

unrepresentative sales involving secondary merchandise and leads to a

fair comparison. As explained in the memorandum of April 19, 1995, from

Roland L. MacDonald to Joseph A. Spetrini entitled Treatment of Non-

Prime Merchandise for the First Administrative Review of Certain Carbon

Steel Flat Products (``Non-Prime Memorandum''), which is part of the

General Issues record for all of the Carbon Steel first reviews, the

Department made every effort to avoid distortion by developing

methodologies to distinguish secondary merchandise in these reviews

from prime merchandise. Where the respondent combined prime and

secondary merchandise within a single product grouping, Commerce

separated them for the purpose of developing the model match

concordance. Similarly, secondary merchandise was segregated from prime

merchandise for purposes of conducting the arm's length test, the cost

test, and the margin calculation. In those cases in which a U.S. sale

of secondary merchandise could not be matched to a contemporaneous home

market sale of secondary merchandise, Commerce compared the U.S. sale

with constructed value (CV), using the approach upheld in IPSCO, Inc.

v. United States, 965 F.2d 1056, 1060 (Fed. Cir. 1992). Specifically,

because Hoogovens expended the same materials, capital, labor and

overhead for prime merchandise and secondary merchandise, the CV of

prime and secondary merchandise is identical. IPSCO, 965 F.2d at 1058,

1060-61.

Finally, Hoogovens own characterization of these sales as

``insignificant'' suggests that they could not significantly distort

the overall, weight-averaged, margin. Because Hoogovens has not shown

that, despite these measures, the relevant PSI sales are distortive,

Commerce has not excluded them from the U.S. sales database. See also

Comment 2.

Comment 2: Respondent contends that the Department's use of CV to

calculate foreign market value (FMV) for matches to U.S. sales of

seconds is internally inconsistent with its policy enunciated in its

Non-Prime Memorandum that ``the Department should consider, and

compensate for, the potentially distortive effects of including seconds

in our antidumping duty calculations.'' Respondent urges the Department

either to use Hoogovens' reported CV for seconds (which was based on

standard costs multiplied by the ratio of the sales value of seconds to

the sales value of prime merchandise), or to exclude from the margin

calculation those secondary sales for which there are no

contemporaneous home market matching sales, or to calculate FMV based

on the weight-averaged price of home market seconds for the entire POR.

Repondent argues that the Department's methodology is not

``compelled'' by the Court of Appeals decision in IPSCO, which affirmed

the Department's decision to allocate production costs equally between

the prime product and a co-product in calculating CV for the co-

product.

[[Page 48467]]

Respondent contends that seconds are by-products, and absent any

instructions from the court on how to calculate costs for by-products,

the Department must accept the costing of these products according to

GAAP. Hoogovens contends that it treats secondary merchandise as a by-

product in its accounting system.

Petitioners respond that Hoogovens' argument that seconds are a by-

product is unsupported by evidence in the record. Moreover, this claim

is contradicted by other evidence in the record. In the calculation of

CV, Hoogovens used the income from the sale of by-products as an offset

against the total costs of production, but used a different methodology

for costing seconds. Hoogovens' calculation of standard costs for

seconds is known as the ``sales value at split-off method,'' and is

generally used to cost co-products, not by-products. Petitioners claim

that PSI's sales of seconds are treated as sales of co-products, and

that therefore they should be costed in the same way as prime products,

like the secondary products at issue in IPSCO. Further, the petitioners

argue, the suggestion that including these sales distorts the

calculated margins has no basis. To the extent that there is any

potential for distortion, they argue, the Department has adopted a

methodology which compensates for such distortion by comparing U.S.

sales of seconds to sales of seconds in the home market, or when there

are no contemporaneous home market sales, to the constructed value

(CV).

Department's Position: We disagree with the respondent. The

Department continues to follow IPSCO in its practice. Respondent's

argument that seconds are a by-product is unsupported by the record. In

the response to Section VI of the Department's questionnaire (November

14, 1994), Hoogovens described its by-products accounting as follows

(Exhibit VI-2, p. 6): ``The cost of the by-products like cookery [sic]

by-products, slag, gas, etc. are part of the departmental budget for

raw materials cost of the iron and steel production. These by-products

are sold to third parties or transferred internally at market value.''

This reference to by-products of the coke ovens is the sole reference

to by-products in the response. Nowhere does Hoogoven indicate that any

by-products are generated in the steel rolling mills. To the contrary,

Hoogovens describes the ``seconds'' as ``prime quality steel that had

been declassified at RBC as a result of damage during transatlantic

shipment or during processing at RBC. Hoogovens does not actively

market secondary quality subject merchandise in the United States, and

exported no such material during the POR.'' (Letter to the Department

dated October 5, 1994, p. 2.) Thus, the merchandise Hoogovens exported

to the United States and sold as seconds was originally of prime

quality and incurred the same costs as merchandise ultimately sold as

prime quality.

Comment 3: Respondent argues that the Department should return to

the methodology used in the investigation to make the adjustment for

value added taxes (VAT), which was the methodology enunciated in Grey

Portland Cement and Clinker from Mexico, 58 FR 25803 (April 28, 1993),

to achieve tax neutrality. Although the Court of International Trade

(CIT) rejected this methodology in Federal Mogul Corp. v, United

States, 834 F. Supp. 1391 (CIT 1993), the Court of Appeals reversed

this decision on August 28, 1995 (Federal Mogul Corp. v, United States,

94-1097, -1104). Hoogovens claims that the Department's current

methodology inflates dumping margins over those that would be

calculated in the absence of a tax adjustment.

Alternatively, respondent argues that if the Department continues

to use its current methodology, it should apply the VAT only to gross

prices, because under Dutch law the proper tax basis is gross sales

price (the first level). Respondent contends the Department has no

authority to calculate the tax adjustment to USP on the basis of a unit

price net of all adjustments (the second level).

Petitioners comment that Hoogovens has misread the Court of

Appeal's decision in Daewoo Electronics v. United States, 6 F.3d 1511,

1519-20 (Fed. Cir. 1993), in which the court ruled that in making the

tax adjustment under 19 USC Sec. 1677a(d)(1)(C), the Department must

apply the tax rate to USP using a tax basis that is at an ``analogous

point'' in the stream of commerce as the tax basis for the home market

tax. Daewoo says nothing about the second level adjustment. Petitioners

argue that the Department's methodology fully complies with the

analogous point requirement: in both the home market and the U.S.

market, the basis for the Department's tax adjustment calculations was

the gross invoice price to the first unrelated customer. The Department

makes the second level adjustment in order to eliminate distortion

arising from different circumstances of sale in the home and U.S.

markets, such as differences in freight, physical characteristics of

the merchandise, or selling expenses. The CIT expressly recognized that

such an adjustment is appropriate in Daewoo Electronics Co. Ltd. v.

United States, 760 F.Supp. 200, 208 (Ct. Int'l Tr. 1991). Petitioners

characterize as baseless Hoogovens' argument that this holding was

rendered moot by the subsequent decision of the Court of Appeals in

that case that the delivered price, not the ex-factory price, was the

point at which taxes are incurred under Korean tax law. The CIT's

holding regarding the second level adjustment becomes even more

important when items such as freight charges (which are included in the

delivered prices) are part of the tax basis.

Department's Position: In light of the Federal Circuit's decision

in Federal Mogul v. United States, CAFC No. 94-1097, the Department

changed its treatment of home market consumption taxes for this review.

Where merchandise exported to the United States was exempt from the

consumption tax, the Department added 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 v. United

States, 988 F. 2d 1573, 1582 (1993), and which was suggested by that

court in footnote 4 of its decision. The Court of International Trade

(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 Commerce 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

[[Page 48468]]

instructions to direct Commerce to determine which tax methodology it

will employ.

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 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 longstanding policy of tax-

neutrality and with the GATT.

Comment 4: Respondents comment that the Department's computer

program incorrectly weight-averaged equally similar matches, because of

the absence of an output statement, and failed to weight-average the

differences in merchandise (``difmers'') of the equally similar home

market sales.

Department's Position: We agree, and have made the appropriate

corrections to the program for the final results.

Comment 5: Respondent and petitioners comment that the Department

used Hoogovens' reported interest rate on short-term borrowings,

instead of the interest expense factor for purposes of determining cost

of production and allocating profit on further manufactured sales.

Department's Position: We agree, and have used the interest expense

factor for ESP sales in our final margin calculations. This was not an

issue for purchase price sales, as all of these sales had home market

matches and CV was not used.

Comment 6: Respondent comments that the Department erred in not

converting packing costs incurred in the Netherlands for U.S. sales

from guilders to dollars in calculating foreign market value. Because

of a typographical error, the format sheets supplied with Hoogovens'

January 13, 1995, response incorrectly stated that these expenses were

reported in U.S. dollars.

Department's Position: We agree and have corrected this error in

our final margin calculation.

Comment 7: Respondent comments that in adding missing further

manufacturing cost data for two control numbers, the Department erred

in adding these costs to sales with process code ``40,'' which are ``as

is'' sales of seconds.

Department's Position: After the preliminary results, the

Department found that some sales of seconds were erroneously coded as

prime merchandise, which caused the computer program to identify the

further manufacturing cost data for those sales as missing. For the

final results, we have corrected the coding and used the respondent's

reported cost data for the sales in question.

Comment 8: Respondent comments that in the first model comparison,

the Department set the variable costs of home market sales of seconds

equal to the variable costs of home market sales of prime merchandise

for the same control number, but failed to make this change in the

second model comparison.

Department's Position: We agree with respondent and have corrected

the program.

Comment 9: Respondent notes that for some of PSI's sales of seconds

corresponding to six control numbers, the Department used Hoogovens'

reported variable costs for seconds to compare with the (corrected)

prime variable costs of home market sales of seconds. Hoogovens

proposed adding new programming language to the model match and section

2 of the margin calculation programs.

Department's Position: We agree with respondent. This error

occurred because Hoogovens incorrectly coded certain U.S. sales of

seconds as prime sales. We have made the suggested corrections in the

programs for our final results.

Comment 10: Petitioners argue that Hoogovens' claimed adjustments

for home market rebates should be denied, because they include amounts

paid on out-of-scope merchandise and are allocated on a per ton, rather

than an ad valorem basis. In addition, for some of the sales, Hoogovens

included post-sale price adjustments in the same field as rebates.

Respondent replies that since rebates were paid at the same rate

for both scope and non-scope merchandise, there is no possibility that

the reported amounts were skewed by the rebates paid on non-scope

merchandise. The CIT has consistently recognized, even in the

Torrington case cited by the petitioners (Torrington v. United States,

881 F. Supp. 622 [CIT 1995]), that respondents may apportion rebates

that are paid at the same percentage rate on both scope and non-scope

merchandise. (Torrington, 881 F. Supp. at 640, citing Smith-Corona

Group v. United States, 713 F.2d 1568, 1580 [Fed. Cir. 1983].)

Hoogovens' reported rebates were ``calculated directly from actual

sales figures and from the total amount of rebate paid,'' as required

by the Court of Appeals in Smith-Corona. Hoogovens also notes that it

granted rebates on both scope and non-scope merchandise to only one

customer. Further, Hoogovens reported its rebates on a per ton basis,

because this is the basis on which they are recorded in Hoogovens'

financial records. The Department should therefore continue to use the

reported rebates in the final results. Finally, respondent argues that

inclusion of post-sale price adjustments in the rebate field for five

home market invoices does not affect the calculation of margins where

the Department has fully verified that all the components of the

amounts reported in the field are accurate. Where the respondent has

reported these expenses in the manner in which they are recorded in his

accounting system, and the Department has verified the accuracy of

these adjustments, there is no reason why they should not be accepted

by the Department.

Department's Position: We agree with respondent. We verified that

Hoogovens apportioned rebates on scope and non-scope merchandise at the

same percentage rate. During verification, we also examined the

allocation of rebates for scope and non-scope merchandise. We verified

that the customers met their required sales target and traced the

rebate payment through supporting documents. We saw no indication that

Hoogovens ties the rebate to the invoice in their ledger system, or

that the allocation method distorted the amounts reported. Hoogovens

usually reported home market post-sale price adjustments in the

``OTHDIS1H'' field. However, for five home market sales, there was both

a post-sale price adjustment and a rebate combined and reported in the

``REBATE1H'' field. In the January 13, 1995, response (Exhibit 23),

Hoogovens broke out the post-sale price adjustments and rebates for

each of the sales. We verified the rebate given in the course of the

sales traces, and traced the post-sale price adjustments to

[[Page 48469]]

the sales journal and supporting documentation.

Comment 11: Petitioners argue that Hoogovens inappropriately used

different averaging periods when calculating the interest for home

market and U.S. purchase price sales. These rates were used to

calculate inventory carrying charges and credit expenses. Petitioners

urge the Department to use the same averaging period for both home

market and U.S. sales, or to calculate separate home market interest

rates for the non-overlapping periods.

Respondent replies that the Department specifically instructed

Hoogovens to calculate its interest rates based on the time period for

which sales were reported in each market, and that the Department fully

verified the reported interest rates.

Department's Position: We agree with respondent. As instructed by

the Department, Hoogovens used the average interest rate for each sales

reporting period in each market. It is appropriate to utilize the

average interest rate applicable to sales in each of the reporting

periods. This more accurately reflects the borrowing experience of the

respondent for the respective sales reporting periods.

Comment 12: Petitioners argue that in calculating the dumping

margin, the Department should deduct from United States Price (USP) the

actual dumping duties to be paid by NVW (U.S.A.) Inc. (``NVW''), i.e.,

the Department should treat antidumping duties as a cost. Petitioners

interpret 19 U.S.C. Sec. 1677a(d) as including antidumping and

countervailing duties in the phrase ``import duties,'' which are

deducted from purchase price and exporter's sales price. The

Department's margin program calculates the difference between foreign

market value and USP on each sale. ``This difference is essentially

equal to the antidumping duties to be paid by NVW and referred to in

Sec. 1677a(d)(2)(A).'' Petitioners urge the Department to modify its

program so that once this difference is calculated, it is deducted from

USP before the final margin is determined.

Respondent replies that petitioners' proposal has been repeatedly

rejected by the Department, the courts and the U.S. Congress, and that

the petitioners cite no authorities in support of their interpretation

of the statute. The effect of their proposal would be to inflate

Hoogovens' margins geometrically. In effect, the margin would be

doubled on each transaction. This inflated rate, they argue, would then

become the basis for the deduction from USP in the succeeding

administrative review, and would again be doubled. Moreover, Hoogovens

actually paid only estimated duty deposits upon entry of the

merchandise, rather than the final duties to be calculated in this

review. These entries have not been liquidated; hence there are no

antidumping duties actually paid that the Department could deduct from

USP, even if such action were legally appropriate. In Federal-Mogul

Corp. v. United States, 813 F. Supp. 856 (CIT 1993), the CIT agreed

with the Department's consistent practice of refusing to consider the

amount of estimated antidumping duties based upon past margins in its

calculation of current margins.

Department's Position: It is the Department's longstanding position

that antidumping and countervailing duties are not a cost within the

meaning of 19 U.S.C. Sec. 1677a(d). Antidumping and countervailing

duties are unique. Unlike normal duties, which are an assessment

against value, antidumping and countervailing duties derive from the

margin of dumping or the rate of subsidization found. Logically,

antidumping and countervailing duties cannot be part of the very

calculation from which they are derived. This logical rationale for the

Department's interpretation of the statute is consistent with prior

decisions of the Court of International Trade. See Federal-Mogul v.

United States, 813 F. Supp. 856, 872 (1993) (deposits of antidumping

duties should not be deducted from USP because such deposits are not

analogous to deposits of ``normal import duties'').

In contrast, Petitioners' reasoning is circular rather than

logical: in calculating the dumping margin the Department must take

into account the dumping margin. Such double counting, i.e., including

the same unfair trade practice twice in a single calculation, is

unjustifiable, except in the limited circumstances provided for in

section 353.26.

Moreover, the treatment of antidumping and countervailing duties

(already paid or to be assessed) as a cost to be deducted from the

export price is an issue that was arduously debated during passage of

the Uruguay Round Agreements Act (URAA) and ultimately rejected by

Congress. See, H.R. 2528, 103rd Cong., 1st Sess. (1993). Alternatively,

Congress directed the Department to investigate, in certain

circumstances, whether antidumping duties were being absorbed by

affiliated U.S. importers. 19 U.S.C. Sec. 1675(a)(4). Thus, Congress

put to rest the issue of antidumping and countervailing duties as a

cost. URAA Statement of Administrative Action at 885 (``The duty

absorption inquiry would not affect the calculation of margins in

administrative reviews. This new provision of the law is not intended

to provide for the treatment of antidumping duties as a cost.''); see

also H. Rep. No. 103-826(I), 103rd Cong., 2nd Sess. (1994) at 60.

Comment 13: Petitioners argue that Hoogovens should have reported

direct selling expenses for NVW, and urge the Department to apply the

best information available (``BIA'') by making the adverse assumption

that all of NVW's expenses were direct expenses.

Respondent replies that NVW ``serves only as a facilitator,

communication link and processor of documents for its U.S. imports and

sales.'' In this capacity, NVW processes sales of both subject and non-

subject merchandise. NVW's expenses consist primarily of rent for

office space and the salaries of its officers. The Department always

treats these types of expenses as indirect selling expenses. Hoogovens

reported all of NVW's expenses in its calculation of U.S. indirect

selling expenses, and these expenses were verified by the Department.

Department's Position: We agree with respondent. Petitioners

misquoted Hoogovens' response of October 6, 1994, when they claimed

that Hoogovens characterized NVW as its ``selling agent'' in the United

States. Hoogovens' response made clear that its U.S. sales are

negotiated by its sales office in IJmuiden, the Netherlands and not by

NVW in the United States.

Comment 14: Petitioners argue that Hoogovens miscalculated its

inventory carrying costs (``ICC'') for its ESP sales, contending that

the amounts reported in the INVCARU field are substantially lower than

should result from Hoogovens' methodology, and that this methodology is

flawed. Petitioners object to Hoogovens' use of the transfer price,

rather than the cost of production (``COP'') in the calculation, citing

Hoogovens' statement that ``the inventory cost must be based on the

cost of producing the steel, not the price for which it is sold.''

(Secs. III-V Supplemental Response at 35). Although the Department's

practice has been to use the cost of manufacture (COM) in the

calculation, petitioners further argue that COP better measures the

true opportunity cost to Hoogovens, because it includes COM and

additional general, administrative and interest expenses. Second,

petitioners argue, the transfer price is not on the same basis as the

total cost of goods sold and should not be reduced by the ratio of the

total cost to total sales. Third, petitioners argue that the home

market interest rate should be used in the ESP

[[Page 48470]]

ICC calculation. Petitioners urge the Department to recalculate INVCARU

for the ESP sales using the following formula:

ESP ICC = COP x HM Int. Rate x Inv. Days/365

Respondent replies that the methodology it used is reasonable and

has been verified by the Department. Moreover, the alternative

methodology the petitioners propose is almost identical to Hoogovens'

methodology, and would change the calculated margins by an infinitesmal

amount. Furthermore, Hoogovens' reported ICC is, in fact, cost-based.

Although Hoogovens multiplies the ICC factor by the transfer price, it

then multiplies the factor by the ratio of Hoogovens' average cost of

production to average sales price. This results in an ICC amount that

is, in effect, based on the COP. It would be inappropriate to use gross

unit price, instead of the transfer price, in the equation, because the

gross unit price reported for ESP sales is the price charged by

Hoogovens' affiliates to the first unrelated customer. However, the ICC

in question is the cost of carrying inventory from the time of

production in the Netherlands to the time of delivery to Hoogovens'

U.S. affiliates. In calculating the inventory cost for time in the

Netherlands and time on the water, Hoogovens used the transfer price

and a cost/sales ratio based on Hoogovens' own sales revenues. Thus,

the price and the cost/sales ratio used in the calculation of ICC were

calculated on the same basis. In regard to the interest rate, Hoogovens

submits that U.S. ICC expenses should be calculated based on the costs

of carrying inventory for the period for which Hoogovens reported its

U.S. sales. Accordingly, the Department should not adjust Hoogovens'

reported data.

Department's Position: Petitioners' argument is based on the

erroneous conclusion that Hoogoven's ICC reporting was not cost-based.

Respondent's methodology of multiplying the ICC factor by the ratio of

average cost of production to average sales price results in an ICC

based on cost of production. Therefore, we have accepted Hoogoven's ICC

calculation methodology. However, the ICC reported in the INVCARU field

is incorrect for a different reason. Prior to verification, respondent

reported to the Department certain corrections to its previous

submissions, including corrections of the short-term interest rates on

its borrowings in both the home and U.S. markets. (Letter to the

Department dated March 15, 1995, Exhibit 5.) On March 31, 1995, at the

Department's request, Hoogovens submitted revised computer files

containing corrections to certain errors identified prior to

verification. These files purportedly included revised ICC to reflect

the corrected short-term borrowing rates. However, this correction to

ICC was not made for U.S. sales owing to a programming error. For the

final results, the Department has modified its margin calculation

program to correct this error.

Comment 15: Petitioners argue that the Department improperly

excluded three zero-priced U.S. ``sample sales'' by Hoogovens' U.S.

affiliate, although it is its practice in administrative reviews not to

exclude sample sales, unless the respondent can demonstrate either that

(a) no transfer of ownership occurred between the exporter and

unrelated U.S. purchaser, or (b) that the product was not used for

commercial consumption. Hoogovens has not so claimed for any of these

sales, and therefore the Department should include them in its margin

calculation.

Hoogovens contends that these sales of ``small, throw-away pieces

of damaged steel'' cannot reasonably be described as ``samples,'' and

that it would be unfair to require Hoogovens to pay antidumping duties

on a tiny quantity of damaged steel of no commercial value. Further,

Hoogovens argues that no case has been made that exclusion of these

sales would prejudice the petitioners' interests.

Department's Position: We agree with petitioners. In general, the

Department does not exclude any U.S. sales from its calculation of USP.

The Department has considered all transactions to be sales whenever

ownership transfers to an unrelated party. However, the Department has

in the past determined that, in appropriate circumstances, free-of-

charge samples are not ``sales'' within the meaning of section 772 of

the antidumping law. The CIT has recognized that the Department must

make its determinations regarding sample sales by examining the

relevant facts of each individual case and that the burden of proof in

demonstrating that such sales are outside the ordinary course of trade

lies with the respondent. Hoogovens did not claim or offer evidence

that these sales were outside the ordinary course of trade.

Consequently, the Department has no basis for excluding them from the

margin calculation. See Granular Polytetrafluoroethylene Resin from

Japan: Final Results of Antidumping Duty Administrative Review, 58 FR

50343 (September 27, 1993); The Timken Company v. United States, 862 F.

Supp. 413, 417 (CIT 1994).

Comment 16: Petitioners comment that the Department mistakenly

added two incorrect program lines to its margin calculation program for

further manufacturing sales which had the effect of allocating U.S.

direct and indirect selling expenses on the basis of the ratio of

foreign manufacturing to total manufacturing.

Department's Position: We agree with petitioners and have removed

these lines from the program.

Comment 17: Petitioners argue that Hoogovens' response to the

February 6, 1996, supplemental questionnaire demonstrates that

Hoogovens is reimbursing NVW for payment of antidumping duties.

Hoogovens responds that the issue cannot arise until final antidumping

duties are assessed following completion of the administrative review.

Hoogovens also argues that because NVW is not an unaffiliated U.S.

customer, and makes no sales to such customers, transactions associated

with NVW's ``routine selling functions'' on behalf of its foreign

parent cannot ``implicate the remedial purposes of the reimbursement

regulation.''

Department's Position: Section 353.26 of the antidumping

regulations requires the Department to deduct from the United States

price the amount of any antidumping duty that a producer or reseller

either pays directly on behalf of the importer or reimburses to the

importer. The Department has interpreted this regulation as applying

where the importer is an affiliated party (CEP situations) as well as

when the importer is unaffiliated. See Color Television Receivers from

the Republic of Korea; Final Results of Antidumping Duty Administrative

Review, 61 Fed. Reg. 4408, 4410-11 (Feb. 6, 1996). That interpretation

is consistent with both the plain language of the regulations and the

regulatory history. See, e.g., 19 CFR 353.41 (defining United States

price as the purchase price or the exporter's sales price).

Furthermore, contrary to Hoogovens' argument, the reimbursement

regulation can apply in the first review even though duties have not

yet been assessed. An agreement to reimburse is sufficient to trigger

the regulation. This is evident from the required reimbursement

certification, which must state that ``I have not entered into any

agreement or understanding for the payment or refunding to me. . .of

all or any part of the antidumping duties assessed. . . .'' 19 CFR

Sec. 353.26(b). The reimbursement adjustment is made not on the basis

of cash deposits, but rather on the basis of the actual amounts to be

assessed. This procedure was noted

[[Page 48471]]

with approval by the CIT in PQ Corp. v. United States, 11 CIT 53, 67

(1987). As the opinion notes:

Accordingly, ITA states that its practice regarding reimbursements

for antidumping duties is as follows. .... If merchandise is being sold

at less than fair value, then the amount of that difference--the

dumping margin--will be the basis for an actual assessment of

antidumping duties. Only at that point, while the merchandise is still

in liquidation, does ITA apply 19 CFR Sec. 353.55 by determining what

amount, if any, of the antidumping duties to be assessed are or will be

paid. . .[or]. . . refunded to the importer by the manufacturer,

producer, seller or exporter. The amount ``paid'' or ``refunded'' is

based on the antidumping duties to be assessed, not on the prior

deposit of estimated antidumping duties. Thus, if a producer agrees to

reimburse all antidumping duties, then the entire amount of the

antidumping duties to be assessed will be added in determining the

dumping margin pursuant to 19 CFR Sec. 353.55, regardless of whether a

larger or smaller deposit of estimated antidumping duties has been

posted. (Emphasis added).

Thus, if a producer or reseller agrees to reimburse all antidumping

duties, then the entire amount of the antidumping duties to be

assessed, as reflected in the initial calculation of whether dumping is

occurring in that period of review, will be added in determining the

dumping margin for final assessment, pursuant to 19 CFR Sec. 353.26. As

discussed above, the evidence of record demonstrates that Hoogovens has

agreed to reimburse NVW for antidumping duties. Therefore, the

regulation applies.

Final Results of Review

As a result of our review, we have determined that the following

margin exists:

------------------------------------------------------------------------

Margin

Manufacturer/exporter Time period (percent)

------------------------------------------------------------------------

Hoogovens Groep BV........................ 8/18/93-7/31/94 5.54

------------------------------------------------------------------------

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between United States price and foreign market value,

taking into account reimbursed duties, may vary from the percentage

stated above. The Department will issue appraisement instructions

directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of review for all

shipments of certain cold-rolled carbon steel flat products from the

Netherlands entered, or withdrawn from warehouse, for consumption on or

after the publication date, as provided for by section 751(a)(1) of the

Act: (1) The cash deposit rate for the reviewed company named above

will be 5.54 percent; (2) for all other Netherlands exporters, the cash

deposit rate will be the rate established in the less-than-fair-value

(LTFV) investigation; and (3) the cash deposit rate for non-Netherlands

exporters of the subject merchandise from the Netherlands will be the

rate applicable to the Netherlands supplier of that exporter. The

revised rate after remand established in the LTFV investigation is

19.32 percent. These deposit requirements, when imposed, shall remain

in effect until publication of the final results of the next

administrative review.

This notice serves as a 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 notification of return/destruction of APO materials

or conversion to judicial protective order is hereby requested. Failure

to comply with the regulations and the terms of an APO is a

sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22

of the Department's regulations.

Dated: August 30, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-23526 Filed 9-12-96; 8:45 am]

BILLING CODE 3510-DS-P