Notice of Final Results of Antidumping Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube From Turkey

DEPARTMENT OF COMMERCE

[A-489-501]

Notice of Final Results of Antidumping Duty Administrative

Review: Certain Welded Carbon Steel Pipe and Tube From Turkey

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

SUMMARY: On July 5, 1996, the Department of Commerce published the

preliminary results of its administrative review of the antidumping

duty order on certain welded carbon steel pipe and tube from Turkey.

The review covers shipments of this merchandise to the United States

during the period May 1, 1994, through April 30, 1995.

Based on our analysis of the comments received, the correction of

certain clerical and computer program errors, and the correction of

errors found at verification, we have changed the preliminary results.

The final results

[[Page 69068]]

are listed below in the section ``Final Results of Review.''

EFFECTIVE DATE: December 31, 1996.

FOR FURTHER INFORMATION CONTACT: Jennifer Stagner, Brian Smith

(Erbosan), or Gabriel Adler (Borusan), Office of AD/CVD Enforcement II,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-1673, (202) 482-1766, and

(202) 482-1442, respectively.

SUPPLEMENTARY INFORMATION:

Background

This review covers two manufacturers/exporters to the United States

of the subject merchandise, the Borusan Group (Borusan) and Erviyas

Boru Sanayii ve Ticaret A.S. (Erbosan), and the period May 1, 1994,

through April 30, 1995. On July 5, 1996, the Department of Commerce

(the Department) published in the Federal Register the Preliminary

Results of Administrative Review of the Antidumping Duty Order on

Certain Welded Carbon Steel Pipe and Tube from Turkey (61 FR 35188)

(Preliminary Results). We issued supplemental questionnaires to Borusan

and Erbosan in July 1996; we received the responses in August 1996.

Verification was conducted in September 1996. We received case and

rebuttal briefs on November 12, 1996, and November 19, 1996,

respectively.

The Department has now completed this administrative review in

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

Act).

Scope of the Review

Imports covered by this review are shipments of certain welded

carbon steel pipe and tube products with an outside diameter of 0.375

inch or more but not over 16 inches, of any wall thickness. These

products are currently classifiable under the following Harmonized

Tariff Schedule of the United States (HTSUS) subheadings:

7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40,

7306.30.50.55, 7306.30.50.85, and 7306.30.50.90. These products,

commonly referred to in the industry as standard pipe and tube, are

produced to various American Society for Testing and Materials (ASTM)

specifications, most notably A-120, A-53 or A-135.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

proceeding is dispositive.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are to the

current regulations, as amended by the interim regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

Product Comparisons

In accordance with section 777A(d)(2) of the Act, we calculated for

Borusan transaction-specific Export Prices (EPs) and compared them to

normal value (NV) based on either weighted-average home market prices

or constructed values. For Erbosan, we calculated transaction-specific

EPs and compared them to NV based on weighted-average home market

prices only. The EPs and NVs were calculated and compared by product

characteristics and, where possible, at the same level of trade (see

``Level of Trade'' section below). For price-to-price comparisons, we

compared identical merchandise, where possible. Where there were no

sales of identical merchandise in the home market to compare to U.S.

sales, we made similar comparisons based on the characteristics listed

in the Department's antidumping questionnaire. For both Borusan and

Erbosan, we excluded certain reported products in the home market from

our analysis because the merchandise was not part of the foreign like

product. For Erbosan, we found that there were U.S. sales of certain

products for which there were no home market sales of identical or

similar products sold in the same month. As discussed in the

Preliminary Results, we did not apply the Department's 90/60 day rule

because Turkey experienced hyperinflation during the period of review

(POR). In general, where no match can be found for a U.S. sale, the

Department would normally resort to CV as the basis of NV. In this

case, however, no specific request was made by the Department that

Erbosan provide CV in these instances. Therefore, as facts available,

we assigned the U.S. sales without home market matches the average of

the calculated margins. In determining what to use as facts available,

we considered whether Erbosan cooperated to the best of it ability

using the criteria set for in section 776(b) of the Act. We determined

that Erbosan met all these criteria and concluded that an adverse

inference should not be made (see Erbosan Sales Comment 1 below).

Level of Trade

As set forth in section 773(a)(1)(B)(i) of the Act and in the

Statement of Administrative Action (SAA) accompanying the URAA at 829-

831, to the extent practicable, the Department will calculate NV based

on sales at the same level of trade as the U.S. sale. When the

Department is unable to find sale(s) in the comparison market at the

same level of trade as the U.S. sale(s), the Department may compare

sales in the U.S. and foreign markets at a different level of trade.

See Final Determination of Sales at Less than Fair Value; Certain Pasta

from Italy, 61 FR 30326 (June 14, 1996) (Pasta from Italy).

In accordance with section 773(a)(7)(A) of the Act, in comparing

U.S. sales to NV sales, the Department will adjust the NV to account

for any difference in level of trade if two conditions are met. First,

the sales must in fact be made at different levels of trade, which can

exist only if there are differences between the actual selling

functions performed by the seller at the level of trade of the U.S.

sale and the level of trade of the NV sale. Second, the difference must

affect price comparability as evidenced by a pattern of consistent

price differences between sales at the different levels of trade in the

market in which NV is determined.

In order to determine that there is a difference in level of trade,

the Department must find that two sales have been made at different

stages of marketing, or the equivalent. Different stages of marketing

necessarily involve differences in selling functions, but differences

in selling functions (even substantial ones) are not alone sufficient

to establish a difference in the level of trade. Similarly, seller and

customer descriptions (such as ``distributor'' and ``wholesaler'') are

useful in identifying different levels of trade, but are insufficient

to establish that there is a difference in the level of trade. See

Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-

to-Length Carbon Steel Plate from Canada: Preliminary Results of

Antidumping Duty Administrative Review, 61 FR 51891, 51895-96 (October

4, 1996) (Steel from Canada).

In implementing this principle in this review, we examined

information regarding the selling activities of the producers/exporters

associated with each stage of marketing, or the equivalent. In

addition, we examined any claimed levels of trade (LOTs) reported by

each respondent.

[[Page 69069]]

In reviewing the selling functions reported by the respondents, we

considered all types of selling activities, both claimed and unclaimed,

that had been performed. In analyzing whether separate LOTs existed in

this review, we found that no single selling activity in the pipe and

tube industry was sufficient to warrant a separate LOT (see Notice of

Proposed Rulemaking and Request for Public Comments, 61 FR 7307, 7348

(February 27, 1996)). For this review, we determined that the following

selling functions and activities are relevant to the pipe and tube

industry: (1) Inventory maintenance; (2) technical services; (3)

warranty services; (4) customer advice and product information; (5)

delivery arrangements; (6) sales from warehouse vs. direct sales; and

(7) direct advertising. We did not consider trade discounts as a

selling function (see Pasta from Italy).

When examining claimed LOTs, we analyzed the selling activities

associated with the classes of customers and marketing stages the

respondents reported. In applying this analysis, we expect that, if

claimed LOTs are the same, the functions and activities of the seller

should be similar. Conversely, if a party claims that LOTs are

different for different groups of sales, the functions and activities

of the seller should be dissimilar. The Department not only counts

activities, but weighs the overall function performed for each claimed

level of trade. In determining whether separate LOTs existed in the

home market, pursuant to section 773(a)(1)(B)(i) of the Act, we

considered the selling functions reflected in the starting price of the

home market sales before any adjustment.

A. Borusan

Borusan claimed that it has three LOTs in the home market: (1)

Direct sales; (2) reseller back-to-back sales; and (3) reseller

inventory sales. It reported only one LOT in the U.S. market (i.e.,

trading companies). We agree with Borusan that one LOT exists in the

U.S. market because Borusan has one chain of distribution and one

customer category in the U.S. market. However, based on our practice,

as stated recently in Steel from Canada, we have determined, for the

reasons described below, that there are not three, but only two LOTs in

the home market.

The first step in this analysis requires that the Department

identify the different stages of marketing. We find that there are two

stages of marketing: (1) Sales shipped directly to distributors/

wholesalers (direct sales and reseller back-to-back sales); and (2)

warehouse sales to retailers (reseller inventory sales).

After determining the number of marketing stages, we must then

examine whether the selling functions performed by the seller support

Borusan's claimed LOTs or the separate marketing stages determined by

the Department. For the claimed LOTs in the home market, we did not

find that there were three distinct sets of selling functions performed

by the seller. Rather, we found two distinct sets of selling functions

performed by the seller, which reflected the two marketing stages

determined by the Department. Thus, we concluded that there are two

distinct LOTs in the home market based on the marketing stages and

selling functions performed by the seller at those stages.

Next we examined the selling functions performed by the seller with

respect to both markets to determine if U.S. sales can be matched to

home market sales at the same LOT. See Sales Comment 3 for a complete

discussion; see also Memorandum to the File from the Team, dated

December 17, 1996.

Based on our analysis, we determined that there is one U.S. LOT and

two home market LOTs, one of which we determined to be identical in

aggregate selling functions to that at which sales are made to the

United States. We compared sales at the sole LOT in the U.S. market to

sales at the identical home market LOT. If no home market match was

available at the same LOT in the same month as the U.S. sale, we

compared sales at the sole LOT in the U.S. market to sales at the other

LOT in the home market. We then examined whether a LOT adjustment was

appropriate for Borusan when comparing sales at its U.S. LOT to sales

at the non-identical LOT.

To determine whether an LOT adjustment was necessary, we examined,

on a monthly basis, the prices of comparable product categories, net of

all adjustments, between sales at the identical home market LOT and

sales at the non-identical home market LOT. We did not find a

consistent pattern of price differences between sales at these LOTs.

Therefore, for non-identical LOT matches, we made no LOT adjustments.

If no home market match was found, we compared EP to constructed value.

It is now the Department's practice to calculate, to the extent

possible, a CV by LOT, using the selling expenses and profit determined

for each LOT in the comparison market. See Antifriction Bearings (Other

Than Tapered Roller Bearings) and Parts Thereof From France, Germany,

Italy, Japan, Romania, Singapore, Thailand and the United Kingdom;

Preliminary Results of Antidumping Duty Administrative Reviews,

Termination of Administrative Reviews, and Partial Termination of

Administrative Reviews, 61 FR 35713, 35718 (July 8, 1996). However,

because the record of this review does not include selling expense and

profit data specific to each LOT, we have calculated a CV for each

product without regard to LOTs.

B. Erbosan

Erbosan made no claim that different levels of trade existed.

However, the Department must still examine whether there are different

levels of trade when the information on the record permits adequate

analysis of the issue (see Pasta from Italy). In determining whether

separate levels of trade actually existed between the U.S. and home

markets, we first examined Erbosan's marketing stages. In reviewing the

chains of distribution and customer categories reported in the home

market, we found no differences between the reported chains/categories.

Thus, we found only one stage of marketing in the home market. For the

U.S. market, Erbosan had only one chain of distribution and one

customer category. Thus, we determined that Erbosan has one stage of

marketing in the U.S. market.

As described above, it is still necessary to examine the selling

functions performed to determine whether separate levels of trade exist

between these market stages. Our analysis was based on the selling

functions we examined at verification. Based on information contained

on the record and our verification findings, we determine that there

are no differences in the selling functions performed in the home

market within the LOT. Thus, for purposes of our final results, we have

considered all sales in the home market to be at one LOT. In reviewing

the same selling functions for the U.S. market, we found that the home

market LOT is not similar in aggregate selling functions to that found

in the United States. Thus, we determined that Erbosan has one LOT in

the home market and a different one in the U.S. market. See Memorandum

to the File from the Team, dated December 17, 1996.

If the Department determines that a LOT adjustment is warranted,

and if information on the same product and company is not available in

order to make such an adjustment, the Department may consider the sales

of other products by the same company or the selling experience of

other producers in the foreign market for the same product (or other

products) in

[[Page 69070]]

order to make an adjustment. See SAA at 830.

In this case, we found no information on the record which would

enable us to make a level of trade adjustment. Thus, we compared

Erbosan's sales at the sole LOT in the U.S. market to its sales at the

sole home market LOT without making a LOT adjustment.

Fair Value Comparisons

To determine whether sales of pipe and tube to the United States

were made at less than fair value, we compared the EP to the NV, as

described in the ``Export Price'' and ``Normal Value'' sections of this

notice.

Export Price

We calculated EP in accordance with section 772(a) of the Act,

because the subject merchandise was sold directly to the first

unaffiliated purchaser in the United States prior to importation and

Constructed Export Price (CEP) methodology was not otherwise warranted

based on the facts of this investigation.

A. Borusan

We calculated EP based on the same methodology used in the

Preliminary Results, except that we deducted payments made by Borusan

to its customers in the United States (see Sales Comment 4B below).

B. Erbosan

We based EP on prices to unaffiliated purchasers in the United

States. We made deductions from the starting price (gross unit price),

where appropriate, for foreign inland freight, foreign brokerage and

handling expenses, and international freight. Furthermore, we added

countervailing duties imposed on the subject merchandise to offset

export subsidies, pursuant to section 772(c)(1)(C) of the Act.

Normal Value

A. Borusan

We calculated NV as noted in the ``Price to Price Comparisons'' and

``Price to CV Comparisons'' sections of this notice.

B. Erbosan

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared Erbosan's volume of home market sales of the foreign like

product to the volume of its U.S. sales of the subject merchandise, in

accordance with section 773(a)(1)(C) of the Act. Since Erbosan's

aggregate volume of home market sales of the foreign like product was

greater than five percent of its aggregate volume of its U.S. sales of

the subject merchandise, we determined that the home market was viable.

We calculated NV as noted in the ``Price to Price Comparisons'' section

of this notice.

Cost of Production Analysis

As discussed in the Preliminary Results, the Department conducted

an investigation to determine whether Borusan made home market sales

during the POR at prices below its cost of production (COP) within the

meaning of section 773(b) of the Act. No below-cost allegation was made

with respect to Erbosan. Before making any fair value comparisons, we

conducted the COP analysis described below.

A. Calculation of COP

We calculated the COP based on the sum of Borusan's cost of

materials and fabrication for the foreign like product, plus amounts

for home market selling, general, and administrative expenses (SG&A)

and packing costs in accordance with section 773(b)(3) of the Act. As

noted in the Preliminary Results, we used Borusan's reported monthly

COP figures which were based on the current production costs incurred

during each month of the POR. This was done in order to avoid the

distortive effect of inflation on our comparison of costs and prices.

We relied on the reported COP amounts with the following exceptions:

1. We calculated a weighted-average per-unit variable cost of

manufacturing and total cost of manufacturing for each product;

2. We recalculated Borusan's SG&A expenses (see Cost Comment 2

below);

3. We recalculated Borusan's interest expenses (see Cost Comment 3

below);

4. We recalculated the reported product costs to reflect product-

specific weight-savings ratios where available (see Cost Comment 4

below); and

5. We adjusted the cost of a product for which an average coil cost

had been reported, to account for a more expensive input coil for that

product.

B. Test of Home Market Prices

As stated in the Preliminary Results, we used Borusan's adjusted

monthly COP amounts and the wholesale price index from the government

of Turkey's State Institute of Statistics to compute an annual weighted

average COP for the POR. We compared the weighted-average COP figures

to home market sales of the foreign like product as required under

section 773(b) of the Act, in order to determine whether these sales

had been made at prices below the COP. On a product-specific basis, we

compared the COP to the home market prices, less any applicable

movement charges, rebates, and direct selling expenses.

C. Results of COP Test

Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20

percent of a respondent's sales of a given product were at prices less

than the COP, we did not disregard any below-cost sales of that product

because we determined that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a respondent's

sales of a given product were at prices less than the COP, we

disregarded the below-cost sales where such sales were found to be made

at prices which would not permit the recovery of all costs within a

reasonable period of time (in accordance with section 773(b)(2)(D) of

the Act). Where all sales of a specific product were at prices below

the COP, in accordance with section 773(b)(1) of the Act, we

disregarded all sales of that product, and calculated NV based on CV,

in accordance with section 773(e) of the Act.

We found that, for certain products, more than 20 percent of

Borusan's home market sales were sold at below the COP and, therefore,

that below-cost sales were made within an extended period of time in

substantial quantities. We also determined that these below-cost sales

were made at prices which would not permit recovery of all costs within

a reasonable period of time, in accordance with section 773(b)(2)(D) of

the Act. We therefore excluded these sales from our analysis and used

the remaining above-cost sales as the basis for determining NV, in

accordance with section 773(b)(1) of the Act. For those pipe and tube

products for which there were no above-cost sales in the ordinary

course of trade, we compared export prices to CV.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of Borusan's cost of materials, fabrication, SG&A and

U.S. packing costs as reported in the U.S. sales databases. In

accordance with section 773(e)(2)(A) of the Act, we based SG&A and

profit on the actual amounts incurred and realized by Borusan in

connection with the production and sale of the foreign like product in

the ordinary course of trade (i.e., sales disregarded under section

773(b)(1) of the Act pursuant to the cost test and under section

773(e)(2) of the Act not at arm's length), for consumption in the

foreign country (see Sales Comment 8 below). We calculated CV based on

the

[[Page 69071]]

methodology described in the calculation of COP above and added an

amount for profit. For selling expenses, we used the weighted-average

home market selling expenses.

Price-to-Price Comparisons

A. Borusan

For those comparison products for which there were sales at prices

above the COP, we based NV on home market prices. We calculated NV

based on FOB mill/warehouse or delivered prices to unaffiliated

customers, or prices to affiliated customers which were determined to

be at arm's length. We calculated NV based on the same methodology used

in the Preliminary Results, with the following exceptions:

1. We deducted advertising and warranty expenses (see Sales Comment

9 below).

2. We set to zero the warehousing and freight expenses reported for

back-to-back sales, based on our findings at verification. See sales

verification report at 1.

3. For certain reseller sales, we revised the warehousing and

freight expenses, based on our findings at verification. See sales

verification report at 12-13.

B. Erbosan

We based NV on home market prices. We calculated NV based on FOB

factory prices to unaffiliated customers. We made deductions, where

appropriate, from the starting price for discounts and rebates, and we

added interest revenue. In accordance with section 773(a)(6) of the

Act, we deducted home market packing costs and added U.S. packing

costs.

We adjusted for differences in the circumstances of sale, in

accordance with section 773(a)(6)(C)(iii) of the Act. These

circumstances included differences in imputed credit expenses. Based on

our verification findings, we recalculated home market credit expenses.

We also made adjustments, where appropriate, for physical

differences in the merchandise in accordance with section

773(a)(6)(C)(ii) of the Act. Based on our verification findings, we

added an amount for thinner and lacquer costs to the variable

manufacturing cost and total cost of manufacture for all U.S. products.

We also added an amount for pipe straightening expenses to the costs

for certain U.S. products. Finally, we removed the amount for packing

expenses from the costs reported for all products. We indexed the

reported monthly costs to the end of the period using the wholesale

price index for Turkey. Next, we calculated average variable and total

costs of manufacturing by product based on sales quantities of the U.S.

and home market sales. (We used sales quantities because production

quantities were not available and because we assume that sales

quantities are a close approximation to production quantities.) We then

indexed the average variable and total costs of manufacturing to

restate them in the currency value of each respective month. The

adjusted monthly variable costs of manufacturing for U.S. and home

market products were then compared to arrive at the difference in

merchandise adjustment. To determine whether Erbosan's affiliated sales

were made at arm's length, we compared the gross unit prices of sales

to affiliated and unaffiliated customers net of all movement charges,

direct selling expenses, and packing (see Final Determination of Sales

at Less Than Fair Value; Certain Cold-Rolled Carbon Steel Flat Products

from Argentina, 58 FR 37062, 37077 (July 9, 1993)). We excluded all of

these sales from our analysis because they did not pass the arm's

length test in our analysis. See 19 CFR 353.45(a).

Price-to-CV Comparisons

For Borusan, where we compared CV to export prices, we deducted

from CV the weighted-average home market direct selling expenses and

added to CV the weighted-average U.S. product-specific direct selling

expenses.

Currency Conversion

The Department's preferred source for daily exchange rates is the

Federal Reserve Bank. However, the Federal Reserve Bank does not track

or publish exchange rates for the Turkish Lira. Therefore, we made

currency conversions based on the daily exchange rates from the Dow

Jones Service, as published in the Wall Street Journal.

Section 773A(a) directs the Department to use a daily exchange rate

in order to convert foreign currencies into U.S. dollars, unless the

daily rate involves a ``fluctuation.'' It is the Department's practice

to find that a fluctuation exists when the daily exchange rate differs

from a benchmark rate by 2.25 percent. The benchmark rate is defined as

the rolling average of the rates for the past 40 business days. See

Final Determination of Sales at Less Than Fair Value: Certain Pasta

from Turkey, 61 FR 30309 (June 14, 1996) (Pasta from Turkey).

However, we believe that it is appropriate in this case to use

actual daily exchange rates for currency conversion purposes, rather

than the benchmark rate. As noted in Policy Bulletin 96-1: Currency

Conversions, 61 FR 9434 (March 8, 1996), the Department is continuing

to examine the appropriateness of the currency conversion policy in

situations where the foreign currency depreciates substantially against

the dollar over the POR. In those situations, it may be appropriate to

rely on daily exchange rates. When the rate of domestic price inflation

is significant, as it is in this case, it is important that we use as a

basis for NV home market prices that are as contemporaneous as possible

with the date of the U.S. sale. This is to minimize the extent to which

calculated dumping margins are overstated or understated due solely to

price inflation that occurred in the intervening time period between

the U.S. and home market sales. For this reason, we have used the daily

exchange rates for currency conversion purposes.

Further, section 773A(b) directs the Department to allow a 60 day

adjustment period when a currency has undergone a sustained movement.

Such an adjustment period is required only when the foreign currency is

appreciating against the U.S. dollar. See SAA at 842. No adjustment

period is warranted in this review, because the Turkish Lira generally

remained constant or depreciated against the dollar during the POR.

Verification

In accordance with section 353.25(c)(2)(ii) of the Department's

regulations, we verified information provided by Borusan and Erbosan

using standard verification procedures, including on-site inspection of

the manufacturer's facilities, the examination of relevant sales and

financial records, and selection of original documentation containing

relevant information. We found certain errors at verification of both

Borusan and Erbosan, and have corrected for these errors in our final

results. For reasons stated in our preliminary results, we verified the

questionnaire responses submitted by both respondents after the

preliminary results were issued.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments from the petitioners and

Borusan. We received rebuttal comments from the petitioners and both

respondents.

[[Page 69072]]

A. Borusan

Cost Comments

Comment 1: Facts Available

The petitioners argue that Borusan's COP and CV data should be

rejected in favor of the facts available. According to the petitioners,

Borusan deviated from its normal accounting system in preparing its COP

and CV responses without obtaining authorization from the Department

for the methodologies used.

Specifically, the petitioners argue that Borusan departed from its

normal accounting practices in that it:

(a) Had the ability to track production costs on a product-specific

basis, but did not do so;

(b) Reported costs for products that had no production in a

particular month;

(c) Had the ability to report product-specific raw material costs

but failed to do so;

(d) Did not provide yields on a product-specific basis even though

it had at its disposal more accurate product-specific conversion

factors;

(e) Provided a single weight conversion factor even though it had

at its disposal more accurate product-specific conversion factors;

(f) Did not provide adequate verification support for the arm's

length nature of materials purchases from affiliated parties;

(g) Failed to accurately report factory-specific overhead;

(h) Misled the Department about its interest rate calculation;

(i) Failed to report freight costs to its customers; and

(j) Provided incorrect difference in merchandise (difmer)

information because of the same deficiencies alleged with respect to

the general cost data.

According to the petitioners, these departures from Borusan's

normal accounting system might have resulted in the allocation of costs

away from the subject merchandise and the foreign like product, with

little chance of detection. The petitioners contend that the burden of

creating an adequate response, including fully disclosing its record

keeping and reporting capabilities, rested with Borusan. Citing Olympic

Adhesives, Inc. v. United States, 899 F.2d 1565, 1572 (Fed. Cir. 1990),

the petitioners contend that if respondents are allowed to make

unilateral decisions about the information to be provided they would be

able to artificially lower antidumping margins by providing selected

information.

Borusan argues that the submitted COP data was based on its normal

cost accounting system to the extent permitted by the Department's

questionnaires, and that departures from the normal system were made

only in response to the Department's questionnaire requirements.

According to Borusan, the Department requested that COP data be

submitted on a basis different than that used in the normal course of

business to record costs. Borusan claims that it attempted to

recalculate current costs with as much product-specificity as possible,

and that the underlying source data was verified satisfactorily by the

Department. Borusan further contends that no elements of the reported

costs were unverified.

DOC Position

We disagree with the petitioners' contention that the methodologies

used by Borusan to prepare its COP responses warrant wholesale

rejection of those responses and the use of facts available. Section

776(a)(1) states that if necessary information is not available on the

record, the Department ``shall, subject to section 782(d), use the

facts otherwise available in reaching the applicable determination

under this title.'' Section 782(e) provides that the Department shall

not decline to consider information that is submitted by an interested

party and is necessary to the determination but does not meet all the

applicable requirements established by the Department if: (1) The

information is submitted by the deadline established for its

submission; (2) the information can be verified; (3) the information is

not so incomplete that it cannot serve as a reliable basis for reaching

the applicable determination; (4) the interested party has demonstrated

that it acted to the best of its ability in providing the information

and meeting the requirements established by the Department with respect

to the information; and (5) the information can be used without undue

difficulties. Accordingly, in using the facts available, the Department

may disregard information submitted by a respondent if any of the five

criteria has not been met.

We conducted numerous tests, described in our cost verification

report and summarized below, which supported the overall reasonableness

of the reported data. Although we agree that, in certain instances,

Borusan's reported costs did not reflect the same level of product-

specificity as the costs maintained in its normal course of business,

we have been able to adjust the reported costs to reflect more product-

specific data available on the record. Further, in the case of

unreported movement expenses affecting the integrity of our cost test

for certain sales, we have applied partial facts available that ensure

the viability of that test. Since Borusan's reported costs are in

general reliable, and deficiencies in those costs can be remedied via

data on the record and the application of partial facts available, we

find that the application of total facts available is not warranted.

Below, we discuss each of the points raised by the petitioners as

enumerated above:

(a) The petitioners have challenged the lack of product specificity

of Borusan's material and overhead costs. With respect to material

costs, we note that the cost questionnaire issued by the Department to

Borusan on May 23, 1996, requested that Borusan submit its COP data on

a current cost basis (i.e., that materials costs for merchandise

shipped in a particular month be valued at the average inventory value

of those materials during the month of production) in order to account

for the effect of hyperinflation on production costs. However, in the

normal course of business, Borusan records production costs on a

historical cost basis (i.e., Borusan records material costs at the

average purchase price during the month of production, a practice which

does not reflect the effect of inflation between purchase and usage of

the inputs). Consequently, Borusan was obligated to recalculate its

material costs. Throughout this review, we have found no evidence that

Borusan could have feasibly provided current costs at the same level of

product-specificity as the historical costs that it records in the

normal course of business. However, the reported material costs did

reflect the grade of the input coil, which was the principal variant in

material cost observed at verification, and we fully verified the

material costs reported at this level of detail (see item (c) below).

As for transformation costs, the reported figures reflect a reasonable

level of product-specific detail (see item (g) below). Given that the

current cost methodology was requested by the Department, and that

Borusan provided such data at a more aggregate yet nonetheless

reasonable level, it would be inappropriate to infer that the lesser

degree of product specificity inherent in Borusan's reported costs

reflects an attempt by Borusan to artificially reduce antidumping

margins.

(b) Borusan's reporting of a current COP for all products in every

month of the POR, despite the fact that certain products were not

produced in every month, did not artificially lower the COP of the

merchandise that was

[[Page 69073]]

actually produced. Borusan calculated the cost that would have been

incurred to produce one unit of each unique product in their product

line for each month of the POR based on the average per-unit material

costs during that month (see, e.g., Silicon Metal from Brazil; Final

Results of Antidumping Duty Administrative Review, 59 FR 42806 (August

19, 1994)). The average per-ton cost of material inputs (e.g., steel

coil) in a particular month is independent of which particular models

are produced, and thus Borusan's reporting of current costs for certain

products for which there was no production does not imply an

underallocation of costs.

(c) We agree that Borusan did not report material costs at the same

level of product-specificity that is recorded in the normal course of

business. (In the normal course of business, on a historical cost

basis, Borusan tracks its material costs for every production run, so

that each batch of pipe of a specified type and size absorbs the costs

of the materials used in the production of that batch.) However, in

submitting its costs on a current basis, Borusan did calculate grade-

specific costs; as explained in our verification report, we observed

that grade B pipe reflected a higher material cost for more expensive

coil inputs than were used for grade A pipe. See cost verification

report at 8. We fully verified that the submitted costs reconciled to

the company's records by tracing the coil costs to invoices for

material purchases and associated freight, material inventory

subsidiary ledgers, and cost center records. Id. at 18-20.

In reviewing Borusan's material purchases and production techniques

we did not find evidence that factors other than the grade of the input

coil (such as coil thickness) would have had a significant impact on

product-specific material costs. With respect to thickness, we noted

that sample invoices for purchases of coils of varying thicknesses

reflected identical per-ton coil costs regardless of the thickness of

the coil. See cost verification report at 17, note 9.

We did discover at verification that Borusan had used high-cost API

coil for one production run of a standard pipe product in April 1995.

In its response, Borusan averaged the higher cost of the API coil

across all pipe products rather allocating this cost to the specific

product for which API coil was used as an input. API coil is a

specialized input for the production of line pipe, and because of its

comparatively high cost, Borusan does not normally use it for

production of standard pipe. Borusan stated that it used such coil for

one run of standard pipe in April 1995 due to excess inventory, and we

found no evidence that Borusan routinely uses API coil in the

production of standard pipe. We have adjusted the April 1995 cost of

the pipe product manufactured from API coil to reflect the higher cost

of the input.

(d) Borusan calculated average monthly yields (i.e., the percentage

of each material input not wasted in the production process) across all

pipe products, rather than providing the production-specific yields

Borusan records in the normal course of business. (In the normal course

of business, Borusan tracks slitting, welding, and testing scrap for

each batch of pipe.) Borusan claimed that reporting product-specific

yields under a current cost methodology would have required prohibitive

work and effort because it would have had to individually identify the

production run corresponding to each sale of subject merchandise.

Borusan did not explain whether its records would have allowed it to

submit an average monthly yield for each product, and due to time

constraints this issue was not pursued at verification. We note,

however, that during the plant tour we observed that the manufacturing

process for the various dimensions and types of subject merchandise is

uniform, and would be unlikely to generate significantly different

yields for different products. (In other words, the material lost in

the production of a ton of two inch galvanized pipe should not be

significantly different than the material lost in the production of a

ton of six-inch black ungalvanized pipe.) Given this, and the absence

of evidence on the record of this review to suggest that different

Borusan pipe products have materially different yields, we are

accepting in this review the reported average figures as a reasonable

measure of yields for the subject merchandise. However, we emphasize

that the Department requires that yields (like other elements of cost)

be reported on as product-specific a basis as is feasible given a

respondent's records, and that Borusan should be prepared to

demonstrate that reported yields are consistent with our practice in

future reviews of the antidumping order.

(e) Borusan reported its costs using a single weight conversion

factor even though it had at its disposal more accurate product-

specific conversion factors. (See Cost Comment 4 below.) The more

specific conversion factors are on the record of this review, and we

have been able to adjust the reported costs using these data, obviating

the need for the use of facts available.

(f) At verification we found, without exception, that sample

purchases of materials by Kartal Boru (Borusan's affiliate producer)

from affiliated parties had been marked up over the price charged by

the manufacturer. The wording in our report was not meant to suggest

that we had found any evidence of materials purchases at less than

arm's length.\1\

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

\1\ The cost verification report noted that ``for selected

purchases of coil, the affiliates mark-up the price from the

unaffiliated producer of the coil in their invoice to [Kartal

Boru].'' (Emphasis added). See cost verification report at 17. This

was not intended to imply that not all purchases of coil selected

for verification reflected a mark-up.

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

(g) We disagree that Borusan failed to accurately report product-

and size-specific overhead. In the normal course of business Borusan

calculates an average transformation cost for all products passing

through each cost center. However, given that the Gemlik plant has

several welding lines and that welding costs are the largest component

of total transformation costs, Borusan reported product- and size-

specific welding costs using productivity ratios (i.e., by calculating

the total tons of each product, by size, passing through each line per

hour). See cost verification report at 22. Thus, Borusan calculated

welding costs at a greater level of detail than is recorded in the

normal course of business.

We saw no evidence at verification that this methodology resulted

in an underallocation of transformation costs to subject merchandise.

On the contrary, we noted that non-subject merchandise such as line

pipe has much higher welding productivity ratios than standard pipe,

and therefore it would have been in the respondent's interest to have

reported an average welding cost for all pipe rather than the product-

specific welding costs actually submitted.

(h) We disagree with the petitioners'' claim that Borusan did not

adequately explain the basis for its interest rate calculation. Borusan

explained the basis for its calculation on pages 8-10 of the July 24,

1996, response, well before verification.\2\

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

\2\ We note, however, that we have recalculated the interest

expenses submitted in that response consistent with our practice of

basing interest expenses on the consolidated group of companies (see

Comment 3 below).

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

(i) We agree that Borusan did not report freight expenses incurred

in certain shipments of merchandise from affiliated resellers directly

to customers. Section 776(a)(1) of the Act states that if necessary

information is not available on the record, the Department shall use

the facts otherwise available in reaching the applicable determination

under this

[[Page 69074]]

title. In this case, Borusan chose not to report these freight

expenses. As Borusan did not act to the best of its ability in

responding to our request for such information pursuant to section

782(e)(4) of the Act, we have therefore drawn an adverse inference

under the authority provided by section 776 of the Act. As facts

available, we are assigning the highest freight rate per kilogram to

those sales with no freight reported from the affiliated resellers to

the customers.

(j) As discussed above, we have found Borusan's cost calculations

to be generally adequate, and the difmer data are no less reliable.\3\

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

\3\ As with the general cost data, we have recalculated

Borusan's difmer data to reflect product- and size-specific weight

savings ratio where available; see Comment 4 below.

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

In conclusion, we find that Borusan's cost calculations are, on the

whole, reasonable. In those instances where Borusan's submitted

calculations are not as product specific as possible or are otherwise

deficient, we have adjusted the calculations based on more specific

data on the record or applied partial facts available. Therefore, the

application of total facts available is not warranted.

Comment 2: Adjustments to Borusan's SG&A

The petitioners argue that the Department should ensure that

certain stockyard movement expenses, certain year-end adjustments by

Borusan's auditor, and a net assets tax should be included in Borusan's

SG&A. The petitioners also argue that certain home market freight

expenses which were not reported in the sales database should be

included in Borusan's SG&A for purposes of calculating COP.

Borusan agrees that the stockyard movement expenses should be

included in SG&A for the final results of review, and notes that at

verification it provided a revised schedule of SG&A expenses including

the stockyard movement expenses. Borusan also agrees that the year-end

adjustments and the net asset tax should be included in SG&A. However,

Borusan argues that the freight expenses in question (involving

shipments by affiliated resellers from their warehouse to end

customers) are minimal in amount and unrelated to production of

merchandise and, therefore, should not be included in SG&A.

DOC Position

We agree with both parties that Borusan's SG&A figure should

include both the stockyard movement expenses, the auditor's year-end

adjustments, and the net assets tax. We have revised the SG&A used in

our final calculations accordingly.

We agree with the petitioners that Borusan failed to report

movement expenses incurred by home market affiliated resellers, but

disagree that these expenses should be included in Borusan's SG&A. The

movement expenses incurred by the affiliated resellers are related to

sales activities on behalf of Borusan's domestic sales, and are

unrelated to Borusan's production activities. Had they been reported,

these movement expenses would have been deducted from the home market

prices for the specific sales in which they were incurred, rather than

added to COP. Since Borusan failed to report these expenses, we have

drawn the adverse inference that reporting of the expenses would have

resulted in the affected sales failing the cost test. See Comment 1

above.

Comment 3: Interest Rate Factor

The petitioners argue that the Department should use an interest

expense factor calculated on the basis of the monthly interest expenses

of the consolidated group of companies of which Borusan is a member

(i.e., the interest expense of Borusan Holding Company). The

petitioners also argue that the Department should not offset interest

expenses by the amount of foreign exchange gains.

Borusan does not disagree that the Department should use an

interest expense factor calculated on the basis of the interest

expenses of the consolidated group of companies, but argues that the

rate suggested by the petitioners is exaggerated and factually

unfounded. Borusan notes that only annual (rather than monthly)

consolidated interest expenses could be provided. Borusan also contends

that the Department verified that foreign exchange income was primarily

short-term in nature and that this income should be offset against

interest expenses.

DOC Position

We agree with the petitioners that Borusan's interest expenses

should be calculated on the basis of the interest expenses of the

consolidated group of companies. While our normal practice is to

require monthly interest calculations (see, e.g., Pasta from Turkey),

we agree with Borusan that doing so in this case would have imposed an

unreasonable burden (see section 782(c)(1) of the Act) given that many

of the companies in the group do not prepare monthly schedules of

interest expenses in the ordinary course of business and that the group

as a whole prepares only semi-annual consolidation of expenses (see

cost verification report at 25). We therefore have relied on the annual

interest expenses for the consolidated group. However, in order to

follow our normal practice as closely as possible, we have allocated

these expenses to each month of the POR using the ratio of monthly to

annual interest expenses for the four largest firms of the Borusan

group, which Borusan provided in its cost response of June 10, 1996.

We agree with the petitioners that foreign exchange gains should

not be used to offset the interest expenses. At verification, we found

that the vast majority of the foreign exchange gains were not debt-

related, but rather involved export sales activities (i.e., the gains

arising from foreign-currency denominated export receivables). Since

the foreign exchange gains are unrelated to interest, it would be

inappropriate to offset interest expenses by these gains and we have

not done so.

Comment 4: Weight Savings Gains

The petitioners argue that Borusan had the ability to provide

weight-savings ratios (i.e., the ratio of theoretical weight of pipe to

actual weight of pipe) for each product but deliberately provided an

average ratio for all products. According to the petitioners, the

Department should either disallow the weight-savings adjustment or, in

the alternative, recalculate Borusan's costs to reflect product-

specific weight-savings ratios wherever the record permits

identification of such ratios.

Borusan argues that the weight-savings adjustment is necessary for

an apples-to-apples comparison of prices to costs, since materials

costs are incurred on an actual weight basis and sales prices are

charged on a theoretical weight basis. According to Borusan, the

Department verified the accuracy of the weight-savings data and the

reasonableness of the underlying methodology. Borusan does not rebut

the petitioners' argument that product-specific weight-savings data

should be used wherever available on the record.

DOC Position

We agree with Borusan that the weight-savings adjustment is

necessary for a proper comparison of Borusan's sales prices to costs

because of the difference in the weight bases. At the same time, we

agree with the petitioners that the product-specific weight-savings

factors should be used wherever available. As discussed in our

verification report, Borusan calculated a weight-savings rate on a

product- and size-specific basis for pipe and tube with diameters

between \1/2\'' and 6'',

[[Page 69075]]

which account for a large majority of Borusan's sales. These rates were

then averaged, and the average was applied to all products. See cost

verification report at 16. Given that specific weight-savings ratios

for Borusan's products are on the record for most sales, there is no

reason to use an average ratio where product-specific ratios are

available. Accordingly, for these final results, we have revised the

submitted cost data to reflect product- and size-specific weight-

savings gain ratios where available; where such ratios are not

available, we have applied the weighted-average ratio calculated by

Borusan.

Comment 5: Imputed Selling Expenses for Constructed Value

The petitioners argue that the Department neglected to include

imputed selling expenses such as credit expenses and inventory carrying

costs in the calculation of constructed value. The petitioners cite to

Import Administration's Policy Bulletin 94.6 (March 25, 1994) in

support of their position.

Borusan argues that, to the extent that the Department includes

imputed selling expenses in the buildup of constructed value, imputed

and actual interest expenses must not be double counted.

DOC Position

We disagree with the petitioners that imputed selling expenses must

be included in the calculation of constructed value. Under the URAA,

for both COP and CV, the statute provides that SG&A be based on actual

amounts incurred by the exporter for production and sale of the foreign

like product. Our previous practice with respect to COP was to compute

selling expenses exclusive of credit and inventory carrying costs

because these are imputed amounts that the Department relies on to

measure the effect of specific respondent selling practices in the

United States and the comparison market. Since the new law provides

that the Department compute SG&A for both COP and CV using the actual

data of the exporter, in order to ensure consistent treatment of COP

and CV we no longer include imputed selling expenses in CV.

Comment 6: Weighted-Average Cost of Production

The petitioners argue that the Department should calculate a

weighted-average COP, and apply facts available for any product for

which production quantities or COP data are not available.

DOC Position

For the preliminary results, the Department calculated a simple-

average COP because monthly production quantities had not yet been

reported. At verification, we confirmed that Borusan had reported

production quantities and cost data for all products. Since the

Department's normal practice is to calculate weighted-average costs of

production (see e.g., Pasta from Turkey), we have done so for these

final results.

Comment 7: Initiation of Cost Investigation

Borusan argues that the Department should not have initiated a

sales-below-cost investigation in this review because the petitioners'

cost allegation was not submitted until over three months after the

regulatory deadline for such allegations. Borusan further contends that

the allegation did not provide reasonable grounds to suspect that

Borusan had made below-cost sales, since it contained a number of

errors and failed to account for hyperinflation in Turkey. In addition,

Borusan claims that subsequent discovery of below-cost sales cannot

justify the improper initiation of a below-cost investigation.

The petitioners argue that the Department has the discretion to

extend the deadline for allegations of sales below cost when a

questionnaire response is received after the deadline for such

allegations, and that the deficiencies in the allegation alleged by

Borusan were factually incorrect and immaterial to the decision to

initiate a cost investigation. In addition, the petitioners contend

that there is no ``exclusionary'' rule that would compel the Department

to ignore a finding of sales below cost even if an investigation was

initiated pursuant to an untimely and unsupported allegation.

DOC Position

We agree with the petitioners. With respect to the timeliness

issue, as explained in detail in the memorandum from Laurie Parkhill to

Holly Kuga dated May 3, 1996, initiating the sales-below-cost

investigation, we found that a number of extenuating circumstances

beyond the petitioners'' control (including the delayed issuance of the

questionnaire and receipt of the questionnaire response, and the

extended closures of the Department due to the Federal budget crisis

and a blizzard) warranted an extension of the deadline for filing of a

sales-below-cost allegation, as permitted under 19 C.F.R.

353.31(c)(1)(ii). See also Notice of Final Results of Antidumping Duty

Administrative Review: Certain Forged Steel Crankshafts From the United

Kingdom, 60 FR 52150, 52153 (October 5, 1995) (noting that the

Secretary will use its discretion in setting a deadline for a COP

allegation where a relevant response is ``untimely or incomplete'').

With respect to the allegation itself, we found that it provided

reasonable grounds to believe or suspect that Borusan had made below-

cost sales. Borusan fails to note that the petitioners submitted a

revised allegation correcting for the errors noted by the respondent,

and that the revised allegation still provided evidence of below-cost

sales. Moreover, the Department considered Borusan's hyperinflation

argument, and determined that the petitioners' methodology was

reasonable given the information available to them. (The Department

made appropriate adjustments to account for the hyperinflation problem

identified by Borusan in the course of conducting the sales-below-cost

investigation.) Because the sales-below-cost investigation was

initiated pursuant to a timely and reasonable allegation, Borusan's

argument that a finding of sales below cost cannot be used to justify

the improper initiation of a sales-below-cost investigation is moot.

Comment 8: Offset to Interest Expenses for Short-Term Interest Income

Borusan claims that short-term interest income should be allowed as

an offset to interest expenses, since the Department verified the

sources and short-term nature of such income. The petitioners do not

dispute Borusan's claim that the sources and short-term nature of the

income in question were adequately verified.

DOC Position

We agree with Borusan, and have offset interest expenses (based on

the consolidated group of companies) accordingly.

Sales Comments

Comment 1: Home Market Sales of Bitumen-Coated Pipe

Borusan argues that it properly excluded sales of bitumen-coated

pipe from its home-market sales listing. According to Borusan, bitumen-

coated pipe is not within the scope of the antidumping order in this

review, and in any event its cost is sufficiently high to ensure that

the Department would never compare U.S. sales of standard pipe to home-

market sales of bitumen-coated pipe.

The petitioners claim that bitumen-coated pipe is within the scope

of the order on standard pipe from Turkey,

[[Page 69076]]

and should have been reported. According to the petitioners, the cost

differences alleged by Borusan, although reviewed by the Department at

the verification of Borusan's sales responses, were not subject to the

same kinds of procedures followed at the verification of Borusan's cost

responses. Therefore, they argue the difmer test performed at

verification is not accurate.

DOC Position

In performing its dumping calculations, the Department's practice

is to match U.S. sales of subject merchandise to home market sales of

subject merchandise. Where no identical matches exist, the Department

compares the U.S. sales to sales of the foreign like product, provided

that merchandise is within a 20 percent difmer threshold (i.e., the

ratio of the difference of the variable cost of manufacture of the two

products over the total cost of manufacture of the product sold in the

United States must not exceed 20 percent). If there are no home market

sales of similar merchandise within the 20 percent difmer threshold,

the Department resorts to CV. See Import Administration Policy

Bulletin: Number 92.2, July 28, 1992, Differences in Merchandise; 20

percent Rule. In the instant review, Borusan had no sales of bitumen-

coated pipe in the United States, so sales of bitumen-coated pipe in

the home market would not have served for identical matches. Further,

at verification we noted that the difmer between a standard pipe

product and that same product coated with bitumen exceeded the 20

percent threshold for comparison of similar products, so home-market

sales of bitumen-coated pipe would not have served for comparison to

U.S. sales of similar merchandise.4

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

\4\ Contrary to the petitioners' argument, during the sales

verification the Department verified the cost differences between

standard pipe and similar pipe covered with bitumen using the

identical procedures followed at the cost verification. See sales

verification report at 5-6, stating that the cost differences were

verified ``using the same procedures followed in the [cost]

verification''; see also sales verification exhibit 19, including

Borusan records supporting the costs in question. Also, we note that

Borusan did not volunteer the difmer data for bitumen-coated

products; these data were requested by the Department's verifiers.

See sales verification report at 5.

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

In the Preliminary Results, the Department inadvertently included

an incorrect description of the scope of this order. Based on the

actual scope language, which makes no distinctions based on surface

coating, we conclude that bitumen-coated pipe is within the scope.

Because bitumen-coated pipe did not serve for comparison to U.S. sales

of similar merchandise, however, it is immaterial that Borusan failed

to report these sales.

Comment 2: VAT Drawback

Borusan argues that the Department failed to make a circumstance of

sale (COS) adjustment for VAT drawback in the preliminary results.

Borusan states that the statute (19 U.S.C. 1677b(a)(6)(C)(iii))

requires the Department to make an adjustment for circumstances of sale

that are different between the U.S. and home market products--as the

Department does with imputed credit expenses. It claims that under

Turkish VAT law, Borusan is required to pay a 15 percent VAT on all

imported materials used for domestic consumption. Eventually, the

company will be reimbursed for the VAT at the time of the sale to the

customer. However, in the time period between payment and

reimbursement, Borusan bears the financial cost of the VAT (which it

characterizes as an interest-free loan to the Turkish government).

Borusan argues that this is a real and substantial cost because Turkey

is a hyperinflationary economy. It states that it does not have to pay

VAT on imported materials used in exported products and that this

differing VAT treatment has a direct impact on the expense of making

sales in the U.S. and home markets. According to Borusan, this

difference is a difference in the circumstance of sale and therefore

should be allowed for the final results.

The petitioners argue that the Department should not grant the VAT

adjustment because eligibility for an adjustment for drawback of duties

is limited to a rebate of duties paid and rebated (19 U.S.C.

1677a(c)(1)(B)). They contend that no case precedent nor statutory

authority exists that would allow the Department to grant such an

adjustment. The Department's regulations state that the Department will

make a reasonable allowance for a bona fide difference in the

circumstances of the sales when those circumstances bear a direct

relationship to the sales compared. See 19 C.F.R. 353.56(a)(1). The

petitioners argue that, unlike credit expenses which represent a cost

of carrying the purchaser's debt (directly related to a sale), the VAT

drawback relates to the cost of purchasing raw materials. It is an

imputed cost associated with the purchase of raw materials, and is

therefore a cost of production. They cite to Departmental practice

which is to not make a circumstance of sale adjustment for differences

in the costs of production. See Final Administrative Review: Certain

Welded Carbon Steel Standard Pipe from India, 57 FR 54360 (November 18,

1992). According to the petitioners, if the Department does not

consider the VAT to be part of the COP, it should consider it a general

expense as it did in past cases; in Certain Welded Carbon Steel Pipes

and Tubes from Thailand, 61 FR 56515 (November 1, 1996), the Department

treated interest expenses on financing raw material imports as a

general expense.

DOC Position.

We agree with petitioners, and have disallowed a COS adjustment for

imputed interest resulting from delayed ``reimbursement'' of VAT paid

on inputs. Allowing Borusan such an adjustment would involve imputing

an expense incurred not between Borusan and its customers, but between

Borusan, its supplier, and the government. ``[W]hile such a[n expense]

may affect the notion of true economic cost to [Borusan], it tells us

nothing about the difference in prices that result from the different

circumstances of sale.'' See Federal-Mogul Corp. v. United States, 839

F. Supp. 881, 885 (November 30, 1993).

Furthermore, while the amount of the imputed expense cannot be

quantified until Borusan makes a sale to a domestic customer, it is

incurred regardless of whether Borusan actually makes such a sale. In

other words, there is no direct relationship between the imputed

expense and the sales being examined. Accordingly, there is no basis

for the Department to make a COS adjustment.

Comment 3: Level of Trade

In the preliminary results, for Borusan, the Department determined

that there was one LOT in the U.S. market and three levels of trade in

the home market and did not distinguish between customer class within a

LOT. The petitioners argue that the Department should reject Borusan's

claimed distinctions between LOTs A (mill direct sales) and B (reseller

back-to-back sales) and combine them into one LOT. They contend the

selling functions between Borusan's claimed levels of trade show little

differences in the sales staff functions between Borusan and its

affiliates--only a difference in that LOT B involves handling of sales

paperwork. The petitioners cite to the Department's proposed

regulations (Proposed Regulations at 61 FR 7348), noting that ``small

differences in the functions of the seller will not alter the level of

trade.'' According to the petitioners, the sales functions performed at

LOT B are similar to those performed for export

[[Page 69077]]

sales. Thus, the petitioners argue that no adjustment should be made

between U.S. sales and home market sales of LOT B.

The petitioners further argue that the Department should continue

to make no distinctions between customer class within a LOT because the

record does not indicate any consistent pricing differences between the

customer classes within the claimed levels of trade.

Finally, the petitioners argue that no LOT adjustment should be

granted for LOT C sales (reseller inventory sales) because any

adjustments for differences in levels of trade must be linked to

differences in selling functions resulting in a consistent pattern of

price difference. They argue that Borusan did not establish such a link

nor any consistent patterns of price differences.

Borusan states that the Department was correct in its analysis of

the levels of trade in the preliminary results. It argues that it has

demonstrated three distinct levels of trade in the home market, which

the Department verified. Its LOT A sales involve high volume sales to a

small number of customers; LOTs B and C involve smaller quantities and

have relatively higher selling expenses. Borusan claims that this

results in higher prices for sales at LOT B and C than those at LOT A.

It further notes that the Department, in its own analysis, found a

consistent pattern of price differences between sales at the different

levels of trade in its preliminary results. Thus, Borusan argues that

the Department should continue to make the same distinctions in the

final results.

DOC Position

We agree with the petitioners with respect to finding one LOT for

Borusan's claimed LOTs A and B. As discussed above in the ``Level of

Trade'' section, the Department first examines whether there are

separate market stages in a particular market. In this case, we found

that there were two stages. The Department must then determine whether

there are identical selling functions between the market stages. In

this case, the selling functions examined are stated in the ``Level of

Trade'' section above. (In the preliminary results, we also examined

agent coordination of production and delivery and general vs. specialty

sales staff--we discuss these two functions below as well.) We found

that the selling functions were identical between Borusan's claimed

LOTs A and B. Thus, we combined these sales into one LOT. See

Memorandum from the Team to the File, dated December 17, 1996.

In our preliminary results, we considered agent coordination of

production and delivery and general vs. specialty sales staff to be

selling functions in our LOT analysis. At verification, we noted the

differences between the sales staff among the Borusan Group. (We

confirmed that the home market resellers had a general sales staff

whereas Borusan and Dagitim had specialty sales staff.) However, the

SAA states that ``a sales subsidiary created merely to perform the role

of a de facto sales department is not an appropriate basis for

adjustment.'' Thus, for purposes of these final results, we did not

consider these to be selling functions and did not incorporate them

into the LOT analysis.

Finally, we agree with the petitioners with respect to not making a

LOT adjustment for Borusan. However, we note the Department will

normally make a LOT adjustment when there are consistent price

differences at different levels of trade, not customer categories as

stated by the petitioners. As discussed above in the ``Level of Trade''

section, we found that there were no consistent price differences

between the two home market levels of trade. Thus, we made no

adjustment when comparing U.S. sales to home market sales made at the

non-identical level of trade.

Comment 4: Countervailing Duty Adjustment

A. Formula. The petitioners argue that Borusan's calculation of the

amount of countervailing duty (CVD) to be added to U.S. selling price

is incorrect. They argue that the Department should instead simply

apply the CVD rate (7.26%) to the entered value of each transaction and

use that amount for the addition and the rebate of CVD duties.

Borusan contends that the formula used to calculate the CVD

adjustment is accurate and was examined by the Department at

verification. Thus, the Department should use Borusan's reported

amounts in its final results.

DOC Position

We tested the formula used by Borusan for the individual sales that

were examined at verification and noted no discrepancies. See sales

verification report (at page 9). Thus, we have used the values reported

by Borusan in its sales listings for our calculations of export price.

B. Adjustment to export price. The petitioners argue that the

Department must, in calculating export price, deduct funds that Borusan

provides to its customers equal to the amount of countervailing duties.

The petitioner contends that these payments are rebates, and that the

Department normally reduces U.S. price by the amount of such rebates.

Borusan argues that while applicable precedent supports the addition of

countervailing duties in the export price calculation, it prohibits the

Department from treating Borusan's payments to the importer of amounts

equal to the countervailing duty as rebates.

DOC Position

We agree that the statute requires that we add to the price in the

United States the amount of countervailing duties attributable to

export subsidies, and have done so. However, the payments to Borusan's

unaffiliated customer's amounted to a post-sale price adjustment or

rebate and have been deducted in the calculation of export price.

Comment 5: Antidumping Duties

The petitioners contend that Borusan made an agreement to reimburse

antidumping duties. Borusan argues that the petitioners' allegation is

false because it has never reimbursed, nor agreed to reimburse, its

customers for antidumping duties. Borusan further contends that the

Department found no evidence of such at verification.

DOC Position

We agree with Borusan. The Department found no evidence of

reimbursement of antidumping duties. Because of the proprietary nature

of this comment, we are unable to further discuss this issue; a

complete discussion of the issue is contained in a decision memorandum.

See Memorandum from the Team to Barbara R. Stafford, dated December 23,

1996.

Comment 6: Duty Drawback

The petitioners argue that Borusan is not entitled to a drawback

adjustment because its exported eligibility ratios exceeded certain

limitations on drawback allowed by the Turkish government. They contend

that Borusan's duty drawback should not be allocated to sales that were

not eligible to receive such a drawback; to do so would violate the

Department's duty drawback test, which requires importation of

sufficient duty-exempted raw materials to cover the exports against

which drawback is claimed. (See Steel Wire Rope from the Republic of

Korea, 60 FR 63499, 63505-06 (December 11, 1995) (SWR from Korea).)

They argue that, although the Turkish government allows this to occur,

the adjustment must meet the Department's test.

[[Page 69078]]

Borusan argues that it reported drawback that it had actually

received and that it complied with the Turkish provisions. It notes

that the Department fully verified the drawback documentation and

traced the information to Borusan's accounting records.

DOC Position

We agree with Borusan. In determining whether a duty drawback

adjustment is appropriate, the Department applies a two-prong test to

establish that: (1) The import duty and rebate are directly linked to,

and dependent upon, one another; and (2) there were sufficient imports

of raw materials to account for the drawback received on the exported

product. See, e.g., SWR from Korea.

Based on information contained in Borusan's questionnaire responses

and on the Department's findings at verification, the respondent's

methodology for calculating a duty drawback adjustment meets both

elements of the test.

It is not disputed that Borusan meets the Department's first

requirement. Regarding the second requirement, the Department verified

Borusan's drawback applications, which documented sufficient imports of

raw materials to account for the drawback claimed. In the drawback

applications reviewed by the Department, it was shown on import

certificates that sufficient imports of raw materials existed for the

claimed exported amounts of finished pipe. Thus, duty drawback is being

applied to all of Borusan's U.S. sales.

Comment 7: Credit Expense

The petitioners argue that the Department should calculate a single

interest rate for credit expenses on both the U.S. and home markets

because it treats money as fungible. They note that in Certain Welded

Carbon Steel Pipes and Tubes from Thailand; Final Results of

Antidumping Duty Administrative Review, 61 FR 56515, 56519 (November 1,

1996), the Department allowed the respondents to move credit expenses

on imported coil purchases to the companies' SG&A from cost of

manufacture on the basis that such financing is fungible. According to

the petitioners, the Department should consider whether a company's

foreign- and domestic-currency-denominated borrowing should be equally

applied to all sales.

Borusan states that the Department's longstanding practice is to

calculate credit expenses using a weighted-average short-term borrowing

rate which reflects the currency in which the sale was invoiced (see

Final Determination of Sales at Less Than Fair Value: Disposable Pocket

Lighters from Thailand, 60 FR 14263, 14269 (March 16, 1995)). According

to Borusan, interest rates are not fungible; they are tied to inflation

rates of the currency in which the loan is denominated. Borusan cites a

recent Departmental determination, where the Department stated that

``the measure of the company's extension of credit would be based on an

interest rate tied to the currency in which its receivables are

denominated'' (see Final Determination of Sales at Less Than Fair

Value: Oil Country Tubular Goods from Austria, 60 FR 33551, 33555 (June

28, 1995) (OCTG from Austria)).

DOC Position

We agree with Borusan. As the Department has noted in a recent

investigation:

A company selling in a given currency * * * is effectively

lending to its purchasers in the currency in which its receivables

are denominated * * * for the period from shipment of its goods

until the date it receives payment from its purchaser. Thus, when

sales are made in, and future payments are expected in, a given

currency, the measure of the company's extension of credit should be

based on an interest rate tied to the currency in which its

receivables are denominated. Only then does establishing a measure

of imputed credit recognize both the time value of money and the

effect of currency fluctuations on repatriating revenue.

See OCTG from Austria, 60 FR 33551, 33555. Thus, based on the

Department's practice, we are valuing credit expenses using the

interest rate applicable to the currency of the sale.

We find the petitioners argument regarding fungibility to be

misguided. The Department's policy of using the interest rate

applicable to the currency of a sale reflects the commercial reality

that different currencies have different costs of borrowing.

Comment 8: CV Profit

The petitioners argue that the Department should base its CV profit

calculation on above-cost sales and sales made at arm's length, in

accordance with 19 U.S.C. 1677b(e)(2)(A) and 1677(15). According to the

petitioners, the Department stated in Pipe from Thailand that its

policy is to include only above cost sales in its calculation of

profit.

Borusan states that the statute does not limit the sales to be used

by the Department in calculating average profit, other than that the

sales must be from the same ``general category of products.'' Borusan

notes that the SAA states that the ``general category of merchandise''

will encompass a category broader than the foreign like product and

that the Department has the discretion to determine the general

categories. SAA at 840. It argues that the statute does not imply that

the exclusion of below-cost sales (19 U.S.C. 1677b(e)(2)(A)) is

applicable to the alternative methodologies (19 U.S.C. 1677b(e)(2)(B)).

Borusan claims that this interpretation was upheld by the Court of

International Trade in Torrington v. United States, Slip. Op. 96-163

(CIT October 3, 1996). According to Borusan the statute states that for

determining the amount of profit used for constructed value, the profit

will be based on the ``actual amounts incurred and realized'' by the

producer ``in connection with the production and sale of a foreign like

product.'' Thus, Borusan argues that the Department should include

below cost sales in its profit calculation.

DOC Position

Section 773(e)(2)(A) of the Act specifies that profit for CV be

computed using only those sales of the foreign like product that were

made in the ordinary course of trade. Section 771(15) of the Act, in

turn, provides that sales and transactions considered outside the

course of trade include, ``among others,'' sales disregarded under

section 773(b)(1) pursuant to the cost test and under section 773(e)(2)

as not at arm's length. See also SAA at 839-40. We found that Borusan

had made sales in the home market that were disregarded either pursuant

to the cost test or because they were not at arm's length (see the

``Normal Value'' and ``Cost of Production Analysis'' sections above).

Thus, we have not used these sales in computing profit for CV.

The Torrington case cited by Borusan relates to the law as it

existed before January 1995. In that case, the profit amount discussed

was the statutory minimum of eight percent. As noted above, this

practice has been superseded by the new statute.

Comment 9: Clerical Errors Contained in the Preliminary Results

Borusan states that the Department made the following clerical

errors in its preliminary results: (1) It failed to deduct advertising

and warranty expenses in calculating normal value when it had deducted

these expenses in the LOT adjustment program; and (2) it eliminated

certain products from the matching analysis that should have been

included.

[[Page 69079]]

The petitioners agree that advertising and warranty expenses should

be deducted. However, the petitioners argue that the products in

question should not be included in the product concordance (i.e., the

matching analysis) and further argue that any products produced to the

DIN 2458 specification should also be excluded. The petitioners contend

that (a) the excluded products have not been proven to be an

appropriate match to ASTM A-53 (U.S. products) as has the DIN 2440/44

standard; (b) DIN 2458 is not listed with other standard pipe products

in Borusan's product brochure; and (c) the excluded products are made

to nonstandard diameters.

DOC Position

We agree with Borusan. We have corrected for these errors in our

final results. At verification, we examined those products that were

excluded from our product comparison analysis. We found that all

products but one--boiler tube--were subject merchandise, and,

therefore, should have been included in our product comparisons.

B. Erbosan

Comment 1: Facts Available

The petitioners argue that the Department should base its final

results for Erbosan on total adverse facts available for the following

reasons: (1) Erbosan failed to comply with the Department's regulations

regarding service of questionnaire responses; and (2) Erbosan's data is

unusable. Regarding the first point, the petitioners contend that they

were not served with Erbosan's questionnaire response until seven

months after it was filed with the Department. A supplemental

questionnaire response was filed without much supporting documentation

and, according to the petitioners, contained serious deficiencies with

the reported variable costs of manufacture. Thus, a large proportion of

information was provided to the Department at verification which they

had no opportunity to review. Furthermore, the petitioners argue that

the verification exhibits were unreadable. Overall, the petitioners

argue, Erbosan's failure to provide this information in proper form and

on a timely basis precluded them from filing an allegation of sales

made below the COP.

Regarding its second point, the petitioners contend that Erbosan's

data is unusable because: (a) It failed to differentiate between grades

of pipe; and, (b) there is a high rate of errors for its reporting of

the dates of sale. If the Department does not find that adverse facts

available is appropriate, they suggest applying an additional

difference-in-merchandise adjustment for the differences in the grades.

The petitioners argue that with the absence of its due process

rights 5 and usable data, the Department should base the final

results for Erbosan on facts available. As facts available it should

choose either (a) 28.28 percent, the highest margin assigned to any

Turkish respondent since the order; or (b) the margin resulting from

the use of Erbosan's submitted data.

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

\5\ The petitioners cite to (1) the statute which states that

``[i]nformation that is submitted on a timely basis to the

[Department] * * * shall be subject to comment by other parties to

the proceeding'' (see 19 U.S.C. 1677m(g)); and (2) the SAA which

states ``all interested parties be informed of the essential facts

under consideration that form the basis for a determination in

sufficient time for the parties to the proceeding to defend their

interest'' (see H. Doc. No. 316, 103d Cong., 2d See. 871).

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

Erbosan contends that it tried to cooperate and follow the

Department's procedures to the best of its ability, without any outside

assistance. It notes that, although late, the petitioners did receive

Erbosan's questionnaire response and has possessed all of Erbosan's

submissions for several months. It also notes that the petitioners did

not argue that they had insufficient time to review information to

provide comments on the Department's verification or preparing their

case brief. Further, the petitioners were aware at the time of the

preliminary determination that the Department would be requesting

additional information from Erbosan and that it might use Erbosan's

information for the final results. Erbosan agrees that certain copies

of the verification exhibits were illegible, but notes that the

petitioners did not request more legible copies. Erbosan contends that

the petitioners had ample time to comment on the information submitted

on the record and defend their interest in this proceeding. Therefore,

the Department should not base Erbosan's final margin on facts

available.

Regarding the grade differences, Erbosan argues that the record

shows that there is no difference in its cost of producing both grades.

It notes that the Department verified this and noted this in its

verification report. Erbosan believes that, even if it should have

reported the grades separately, it does not render the response

unusable.

Regarding the misreporting of the dates of sale, Erbosan contends

that the sales in question are outside the POR. It notes that the

Department found no other occurrences in which the date of sale was

reported in the wrong month. Thus, Erbosan argues that this is a minor

error and does not undermine the data used for purposes of the

Department's analysis.

DOC Position

We disagree with the petitioners that the Department should

determine Erbosan's submissions as untimely and/or unusable and resort

to total adverse facts available for the final results. As described in

the preliminary results, a number of extenuating circumstances

prevented the petitioners and the Department from performing adequate

analyses of Erbosan's data before the preliminary results. Among these

reasons are the delayed issuance of the questionnaire and, therefore,

of receipt of the questionnaire response, and the extended closures of

the Department due to a blizzard and the Federal budget crisis. This

led to the Department's decision to assign facts available for the

preliminary results, present an additional supplemental questionnaire

to Erbosan, and verify Erbosan's response to that supplemental

questionnaire.

We agree that the petitioners were not initially served with

Erbosan's questionnaire response until seven months after it was filed

with the Department. However, we disagree that this precluded the

petitioners from making a cost allegation. In the case of Borusan, the

petitioners were granted their request for additional time for filing

of a sales below cost allegation despite the late date at which

Borusan's questionnaire responses were submitted to the Department.

Likewise, the petitioners could have made a similar request in the case

of Erbosan.

We agree with the petitioners that there was not much support

documentation on the record prior to verification and the reported

variable costs of manufacture were deficient. However, as explained in

the notice of preliminary results, although the Department requested

the respondent to support its claim that there were identical matches

for all U.S. sales, the Department failed to note the apparent

discrepancy in the respondent's initial questionnaire response that

differences in merchandise did exist. Furthermore, the Department

failed to address Erbosan's claim that the Turkish economy was

hyperinflationary at the time of the POR by providing standard

instructions regarding administrative reviews conducted within

hyperinflationary economies. (These instructions were provided to

Borusan when the Department re-issued section D of the questionnaire

with the

[[Page 69080]]

hyperinflation text.) Therefore, we find Erbosan's failure to report

its cost data properly as inadvertent, not uncooperative.

Regarding the additional points the petitioners raised with respect

to Erbosan's data as unusable, we disagree that Erbosan failed to

differentiate between grades of pipe or that there is a high rate of

errors for reporting dates of sale. Under section 776(a)(2)(D) of the

Act, the Department is authorized to use facts available if an

interested party provides necessary information, but the information

cannot be verified. In this case, however, based on our verification

findings, we find that Erbosan's cost data and sales data are accurate.

Regarding the cost data, we found no distinction between the steel

costs of grade A and grade B, and that Erbosan's cost accounting

records indicate the cost of steel is inclusive of both grades for all

products. Therefore, we disagree that the Department should apply an

additional difmer adjustment for the differences in grades. Regarding

the sales data, we find that the incorrect dates of sale for certain

transactions resulted in either those sales now being outside the POR

or resulted in minor changes in the month the sale was made for the

remaining transactions. Since Erbosan's errors are minor in nature, we

made the necessary corrections based on our verification findings and

are using Erbosan's data in the final results.

Comment 2: Correction for Errors Found at Verification

The petitioners contend that, if the Department does not base the

margin on facts available, it should correct for the errors discovered

at verification. These errors include omitted home market sales,

understated brokerage and handling, overstated discounts for home

market sales, and incorrect variable and total costs of manufacture

(including the grade differences as mentioned above in Comment 1).

Erbosan agrees that these errors, except for the grade differences

(as noted in Comment 1), should be corrected for the final results.

DOC Position

We agree with the respondent. Except for the adjustment for steel

grade differences, we have corrected the errors identified above in the

final results. We did not make adjustment for steel grade differences

to variable and total costs of manufacture because we found no

difference between actual costs for pipes with different grades, but

with the same dimension and size, sold in either market. Moreover, we

found no cost difference between grade A and grade B steel in Erbosan's

accounting records.

Final Results of Review

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

exist for the period May 1, 1994, through April 30, 1995:

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

Margin

Manufacturer/exporter Review period (percent)

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

Borusan................................... 5/1/94-4/30/94 3.15

Erbosan................................... 5/1/94-4/30/94 25.01

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

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. The Department will

issue appraisement instructions directly to Customs.

Furthermore, the following deposit requirements will be effective

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

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

final results of this administrative review, as provided by section

751(a) of the Act: (1) The cash deposit rate for Borusan and Erbosan

will be the rate established above; (2) for merchandise exported by

manufacturers or exporters not covered in this review but covered in

the original less than fair value (LTFV) investigation or a previous

review, the cash deposit will continue to be the most recent rate

published in the final determination or final results for which the

manufacturer or exporter received a company-specific rate; (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

that established for the manufacturer of the merchandise in these final

results of review or the LTFV investigation; and (4) if neither the

exporter nor the manufacturer is a firm covered in this or any previous

review, the cash deposit rate will be 14.74 percent, the ``all others''

rate established in the LTFV investigation.

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice also serves as final reminder to importers of their

responsibility 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 is 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 C.F.R. 353.34(d). Failure to

comply is a violation of the APO.

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 C.F.R.

353.22.

Dated: December 24, 1996.

Jeffrey P. Bialos,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-33296 Filed 12-30-96; 8:45 am]

BILLING CODE 3510-DS-P