Certain Forged Steel Crankshafts From the United Kingdom; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-602]

Certain Forged Steel Crankshafts From the United Kingdom; 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 June 18, 1996, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on certain forged steel crankshafts from the

United Kingdom (61 FR 30854). The review covers one producer/exporter

of this merchandise to the United States for the review period

September 1, 1993 through August 31, 1994.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments and rebuttal

comments received, we have corrected certain clerical errors in the

margin calculations. The final weighted-average dumping margin for the

reviewed firm is listed below in the section entitled ``Final Results

of the Review.''

EFFECTIVE DATE: October 21, 1996.

FOR FURTHER INFORMATION CONTACT: J. David Dirstine or Lyn Johnson,

Office of Antidumping 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-

4733.

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.

SUPPLEMENTARY INFORMATION:

Background

On June 18, 1996, the Department published the preliminary results

of administrative review of the antidumping duty order on certain

forged steel crankshafts from the United Kingdom (61 FR 30854). We gave

interested parties an opportunity to comment on the preliminary

results. There was no request for a hearing. The Department has now

conducted this review in accordance with section 751 of the Tariff Act

of 1930, as amended (the Tariff Act).

Scope of Review

Imports covered by this review are certain forged steel

crankshafts. The term ``crankshafts,'' as used in this review, includes

forged carbon or alloy steel crankshafts with a shipping weight between

40 and 750 pounds, whether machined or unmachined. These products are

currently classifiable under item numbers 8483.10.10.10, 8483.10.10.30,

8483.10.30.10, and 8483.10.30.50 of the Harmonized Tariff Schedule

(HTS). Neither cast crankshafts nor forged crankshafts with shipping

weights of less than 40 pounds or more than 750 pounds are subject to

this review. The HTS item numbers are provided for convenience and

Customs purposes. The written description remains dispositive.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. On July 18, and 25, 1996, we received case and

rebuttal briefs from the petitioner, the Krupp Gerlach Company (KGC),

and the respondent, UES Ltd.--Forgings Division (UEF).

Issues Raised by KGC

Comment 1: KGC argues that the Department improperly used the cost

of production (COP) of UEF's sister company, UES Steels, for the steel

input cost in the calculation of CV. KGC asserts that it was improper

to use UES's COP as a measure of UEF's raw material input costs without

first obtaining the transfer prices charged to UEF by UES to determine

whether they were greater than UES's COP. KGC further claims that the

Department failed to follow its own hierarchy as established in Import

Administration Policy Bulletin Number 94.4 of March 25, 1994 (PB 94.4)

for measuring raw material costs supplied by a related party when

performing a CV analysis. KGC argues that, in accordance with this

hierarchy, the Department may use the related party's COP ``only'' if

it determines that the related party transfer price was below cost. KGC

further argues that, if raw material inputs were supplied at transfer

prices that exceeded the supplier's COP then, in accordance with PB

94.4, the Department should use those transfer prices, in the absence

of any better measure of the market value of those inputs, e.g., arm's

length prices to unrelated parties, KGC states that this is consistent

with numerous determinations including Oil Country Tubular Goods From

Austria, 60 FR 33551 (June 28, 1995), Certain Cold-Rolled Carbon Steel

Flat Products from

[[Page 54614]]

Germany, 60 FR 65264 (December 19, 1995); and Final Results of

Antidumping Duty Administrative Review of Antifriction Bearings from

France and Other Countries, 58 FR 39729 (July 26, 1993), where the

Department used transfer prices rather than the related party's COP.

UEF argues that, since UES Steels and UEF are both unincorporated

operating divisions within a single legal entity, UES Ltd., they are

parts of the same company and share a common steel COP. UEF maintains

that, although UEF and UES Steels use transfer prices as a bookkeeping

convention for internal management purposes, steel provided by UES

Steels to UEF is recorded in UES Ltd.'s books at actual cost. UEF also

argues that PB 94.4 does not provide a strict hierarchy that the

Department must follow in determining whether or not to use transfer

prices for related party transactions for the calculation of CV, but

instead constitutes a set of discretionary guidelines for calculating

CV.

Department's Position: Although respondent describes UEF and UES as

``related'' in various sections of their questionnaire response, the

weight of record evidence (e.g., corporate structure charts and audited

financial statements) indicate that they are divisions of the same

corporation, UES Holdings Limited. The Department has determined that

section 773(e)(2) does not apply in such situations:

Since NSC's steel was manufactured internally by another

division of the same company, section 773(e) of the Act is

inapplicable. Section 773(e)(2) directs the disregarding, in certain

instances, of ``a transaction directly or indirectly between

[related] persons.'' A single corporation is not two or more

persons; it is legally one. Thus, we have used NSC's actual verified

costs rather than Japanese market prices for steel.

Offshore Platform Jackets and Piles From Japan: Final Determination

of Sales at Less Than Fair Value, 51 FR 11788, 11791 (Apr. 7, 1986).

Because UEF and UES Steels are divisions of the same corporation, UEF's

steel cost for producing crankshafts is the COP of the steel

manufactured by UES Steels. Sections 773(e)(2) and 773(e)(4), as well

as the cases cited by KGC, do not apply. Therefore, we used the COP

data provided by UEF in calculating CV.

Comment 2: KGC argues that UEF understated the fixed costs of the

crankshafts under review by improperly allocating fixed costs on the

basis of weight, as opposed to value. Based on its analysis of UEF's

financial statements, KGC maintains that the fixed costs that UEF has

reported for individual crankshaft models are disproportionately small

compared to UEF's general fixed cost experience. Furthermore, KGC

argues that UEF's allocation of fixed costs to the individual

crankshaft models in question is inherently suspect because of its

reliance on what is designated as an ``Actual Costs System'' (ACS). KGC

contends that the ACS does not supply the actual cost data in UEF's

accounting system, but only a reconstruction of that cost data for each

model. KGC asserts that UEF has not only failed to explain its cost

allocation methodology, but has not provided adequate support for its

methodology. Finally, KGC argues that UEF not only incorrectly used

weight to allocate certain end-of-year accounting adjustments, but also

made no effort to quantify or describe these adjustments.

In rebuttal, UEF asserts that its fixed cost allocation methodology

was described to, and accepted by, the Department in its Cost

Verification Memorandum of August 12, 1993 which was included at

Appendix H of UEF's April 11, 1996, submission. UEF also argues that

KGC's contention that the fixed cost data for individual crankshafts do

not accurately reflect the total fixed and variable costs reported for

UEF's forging facilities is completely false in that KGC ignored the

fixed costs that UEF identified as general and administrative expenses

(G&A) in its calculations. UEF contends that once the fixed costs

identified by UEF as G&A are included in these calculations, the total

fixed costs are consistent with those reported in UEF's submissions.

UEF states that its ACS, which was developed to allocate costs in

response to the Department's CV questionnaire and which was verified in

previous reviews, properly accounts for all fixed costs. Lastly,

regarding minimal end-of-year accounting adjustments, UEF argues that,

consistent with its practice in prior reviews, it uses weight to

allocate these costs among merchandise produced at its forging sites

because this method is as effective as any with respect to such

incidental costs.

Department's Position: We agree with UEF. KGC's argument that UEF

understated its fixed costs is incorrect, because KGC's allegation

failed to include the fixed costs that were reported as part of UEF's

G&A expenses. Moreover, there are a number of reasonable methods of

allocating costs, and allocation bases can vary from cost center to

cost center. Examples of this are the cost centers for the heat

treatment operation and the press operations. In the heat treatment

cost center, costs are incurred as a direct result of weight, because

heat treatment costs increase as weight (and size) increases.

Therefore, it is reasonable to allocate heat treatment cost center

expenses by weight. In the press cost center, fixed costs are

determined on the basis of production time, because costs are incurred

in relation to the time it takes to produce a given crankshaft. Other

elements in this cost center, such as fuel, are calculated on the basis

of production tons, because costs are incurred in relation to the

amount of fuel consumed in heating the metal before it is pressed. The

Department examined UEF's cost allocation methodology in a prior review

and found no discrepancies. Accordingly, we find nothing inherently

wrong in allocating certain fixed costs on the basis of weight.

Moreover, in some circumstances, it would be inappropriate to

allocate costs on the basis of value. For example, as discussed above,

heat treatment costs relate to weight and size, not to value. Small,

high-value crankshafts incur lower heat treatment costs than large,

low-value crankshafts.

In summary, since we find UEF's fixed cost allocation methodology

in this review to be accurate and consistent with the methodology

verified and accepted in the previous review, we have continued to

accept it for this review.

Comment 3: KGC argues that the Department abused its discretion by

declining to initiate a below-cost investigation based on KGC's

allegation that reasonable grounds existed to believe or suspect that

UEF had engaged in sales below cost in its home market during the POR.

According to KGC, the Department's conclusion that KGC's allegation was

unrepresentative of the crankshaft models sold by UEF in its home

market is inconsistent with the Act, which requires only that there

exist reasonable grounds to believe or suspect that sales below cost

have been made in the home market. Moreover, KGC argues that the

Department's policy for initiating a below-cost investigation of home

market sales requires only that the examples used in an allegation be

representative of the broader range of foreign models which may be used

to determine FMV, not of the home market sales in general. KGC argues

that its allegation was representative of the former in that the only

home market comparators used for price-to-price comparisons in this

review were subjects of KGC's below-cost allegations. KGC concludes

that use of these models for comparison purposes improperly skews the

review results and that the Department should rectify this by using CV

for these comparisons.

[[Page 54615]]

In rebuttal, UEF contends that the Department has broad discretion

in determining whether to begin a COP investigation and that the

Department properly declined to initiate a below-cost investigation of

UEF's home market sales in this case.

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

the Department will initiate a cost investigation whenever it has

reasonable grounds to believe or suspect that sales in the HM or third

country, if appropriate, have been made at prices below the COP. 19

U.S.C. 1677b(b). An allegation by petitioner of sales below cost will

be deemed to have provided reasonable grounds if: (1) a reasonable

methodology is used in the calculation of the COP including the use of

respondent's data if available or, if not available, the petitioner's

own data adjusted for any known differences; (2) using this

methodology, sales are shown to be made at prices below COP; and (3)

the sales allegedly made at prices below COP are representative of a

broader range of models that may be used as a basis for foreign market

value (FMV) (see Import Administration Policy Bulletin Number 94.1 of

March 25, 1994 (PB 94.1)).

UEF sold both machined and unmachined crankshafts in the U.S. and

HM during the POR. Accordingly, both types of crankshaft were subject

to review in this case. As petitioners note, however, the Department

does not match machined crankshafts to unmachined crankshafts, or vice-

versa. Therefore, only HM sales of machined crankshafts can be compared

to U.S. sales of machined crankshafts.

Thus, for a COP allegation to be representative it must address

both machined and unmachined crankshafts. If it does not, then the

Department will not initiate a COP inquiry, unless the allegation is

model-specific. As the Department explained in its policy bulletin,

``[i]f the allegation examples are not representative, then we would

not have reasonable grounds to conclude other models might be sold

below cost, and ought not to initiate the inquiry, unless the

allegation specifically requests a cost investigation of specific

models.'' See PB 94.1 at 3 (emphasis added).

In this case, KGC's COP allegation neither contained data for

machined crankshafts, nor explained how the unmachined models it did

contain data for were representative of machined crankshafts. Moreover,

KGC did not request a cost investigation of specific models, although

it could have done so (as PB 94.1 suggests). Similarly, KGC did not

request that the Department's cost investigation be limited to

unmachined crankshafts. Rather, KGC requested ``a COP investigation

that covers all crankshaft models sold by UEF in its home market, at

least to the extent that those home market models may potentially be

considered as matches for the U.S. sales that are the subject of this

review.'' See Feb. 10, 1995 COP allegation at 14 (emphasis in

original). Because UEF sold both machined and unmachined crankshafts in

the U.S. and HM during the POR, both types could have been potential

matches for UEF's U.S. sales. Thus, KGC's request, by its plain terms,

applied to both types.

KGC's allegation, which only contained data for unmachined

crankshafts, was not representative of the HM database as a whole.

Therefore, it did not provide reasonable grounds for the Department to

believe or suspect that HM sales of machined and unmachined crankshafts

had been made at prices below the COP. Accordingly, we did not initiate

a COP investigation in this review.

Issues Raised by UEF

Comment 4: UEF claims that it made a clerical error by reporting a

shipment of crankshafts using the wrong model number. UEF contends that

when the first shipment of a new replacement model was made, its

computer system was not set up to recognize the new model number.

Therefore, when the shipment data for the new model entered the

computer system, it was erroneously recorded under the model number of

the crankshaft it replaced. UEF contends that information on the record

verifies that the shipment reported is in fact a shipment of the new

model number and submitted additional documentation to support its

claim. UEF requests that the Department correct this clerical error for

the final results.

KGC argues that UEF does not provide sufficient documentation to

support its claim that the alleged error is clerical. Petitioner argues

that the documentation provided by respondent contains handwritten

notes and the Department has no way to verify when those notes were

written. KGC also argues that since the payment date for the shipment

in question approximates the payment dates for other shipments of the

old model number, the record suggests that it was a shipment of the old

model rather than of the new replacement model. KGC further argues that

because there were at least five other shipments of the old model after

the shipment in question, the record again suggests that it was a

shipment of the old model rather than of the new replacement model.

Department's Position: We agree with respondent. In the final

results on certain fresh cut flowers from Ecuador, we established our

policy for correcting clerical errors of respondents. See Certain Fresh

Cut Flowers From Ecuador: Final Results of Antidumping Duty

Administrative Review, 61 FR 37044, 37047 (July 16, 1996) (Ecuadorian

Flowers). As stated in Ecuadorian Flowers, we will accept clerical

errors under the following conditions: (1) the error in question must

be demonstrated to be a clerical error, not a methodological error, an

error in judgment, or a substantive error; (2) the Department must be

satisfied that the corrective documentation provided in support of the

clerical error allegation is reliable; (3) the respondent must have

availed itself of the earliest reasonable opportunity to correct the

error; (4) the clerical error allegation, and any corrective

documentation, must be submitted to the Department no later than the

due date for the respondent's administrative case brief; (5) the

clerical error must not entail a substantial revision of the response;

and (6) the respondent's corrective documentation must not contradict

information previously determined to be accurate at verification. We

reviewed UEF's alleged clerical error and evaluated it using the above

six criteria from Ecuadorian Flowers with the following results: (1)

Upon examination of UEF's data, we find that the mixup in model numbers

was not an error in method, judgment, or substance, since UEF's

computer system was not set up to recognize the replacement (new) model

number at the time the data for the first shipment of the new model was

entered into its computer system. This resulted in the first shipment

of the new model being recorded under the old model number. (2)

Although the invoice for this shipment indicates that the new customer

part number and new model number were entered into the system under the

old customer part and UEF model numbers, the invoice contains

information, e.g., the cast number, which ties to the cast record. The

cast record (which records the production data for the batch of the

steel alloy used to produce the new replacement model) corresponds with

the cast number on the invoice as well as the new model number. In

addition, a letter from UEF's customer, included in UEF's original

submission, stated that UEF was authorized to produce the new model

starting with the next scheduled shipment. The letter was dated October

[[Page 54616]]

27, 1993, which was two weeks before the date on the cast record, and

four weeks before the shipment date on the invoice for the first

shipment of the new model. The letter referenced the part and model

numbers and the steel alloy to be used to produce the new model.

Information on the record indicates that this alloy would not have been

used for making the old crankshaft model. The payment date for the

shipment corresponds with payment dates for other shipments of the new

model. We find this documentation to be supportive and reliable. (3)

and (4) The respondent notified the Department and submitted corrective

documentation no later than the due date for its case brief. (5)

Correcting the alleged error does not entail a substantial revision of

the response. (6) Since we did not conduct a verification, the

information does not contradict verified information. Therefore, we

have made this correction for our final results of review.

We disagree with the petitioner that UEF has not substantiated its

clerical error claim. The fact that the shipment in question occurred

four weeks before the next shipment of that model indicates only that

it was the first shipment of the new model. Similarly, KGC's

observation that there were five shipments of the old model after the

first shipment of the new model suggests that UEF was shipping the

remaining balance of the orders for the old model. Significantly, the

October 27, 1993 letter did not instruct UEF to cease production of the

old model, only that it was authorized to begin production of the new

model. Moreover, petitioner's observation that the payment date for the

shipment in question corresponds with the payment date for the old

models does not defeat UEF's claim, because there is no evidence

suggesting that these old models had been phased out of production.

Finally, the last payment for the old model took place approximately

three weeks before the payment date for the shipment in question.

Comment 5: UEF alleges that, as a result of a data input error, it

reported an incorrect value for imputed credit. KGC does not contest

UEF's assertion.

Department's Position: We agree with the respondent. UEF's data

input error was clerical, not methodological, and its questionnaire

response supports its clerical error claim. Therefore, we have made

this change for our final results of review.

Comment 6: UEF contends that it made a clerical error in

calculating the cost of manufacturing (COM) for one of its models.

Instead of actual number of units produced from a die, UEF argues that

it used the standard number of units produced from a die to calculate

the allocated, per-unit die cost for making this model. Because UEF

planned to terminate production of this particular model during the

POR, it produced substantially more than the standard number of units

from the die. Respondent contends that the use of actual rather than

the standard cost for computing COM in this situation would be in

accordance with the Department's preference.

KGC argues that respondent's request is not clerical but

methodological. KGC also argues that UEF does not provide documentary

evidence to support its claim.

Department's Position: We agree with petitioner. UEF has not met

either criterion one or two of our established policy regarding the

correction of clerical errors. First, this is a substantive allegation

that is based on information that was not submitted until after the

Department's preliminary determination. Second, the respondent has

provided no documentation to support its allegation. Therefore, we have

not made this change for our final results of review.

Final Results of Review

As a result of our review, we determine that the following

weighted-average margin exists for the period September 1, 1993 through

August 31, 1994:

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

Margin

Producer/exporter (percent)

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

UEF........................................................ 0.48

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and FMV may vary from the percentage stated

above. The Department will issue appraisement instructions directly to

the Customs Service.

Furthermore, the following deposit requirement will be effective

for all shipments of the subject merchandise entered, or withdrawn from

warehouse, for consumption on or after the publication date of the

final results of this administrative review, as provided for by section

751(a)(1) of the Tariff Act: (1) the cash deposit rate for the reviewed

company will be zero because the margin for this company is de minimis,

i.e., less than 0.5 percent); (2) for previously reviewed or

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, a

prior review, or the original LTFV 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) for all

other producers and/or exporters of this merchandise, the cash deposit

rate shall be 6.55 percent, the ``all others'' rate from the LTFV

investigation. These deposit requirements, when imposed, shall remain

in effect until publication of the final results of the next

administrative review.

This notice also 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 also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d). Failure to

comply is a violation of the APO.

This administrative review and notice is in accordance with section

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

of the Department's regulations (19 CFR 353.22(c)(5)).

Dated: October 11, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-26834 Filed 10-18-96; 8:45 am]

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