Certain Cut-To-Length Carbon Steel Plate From Germany: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-428-816]

Certain Cut-To-Length Carbon Steel Plate From Germany: Final

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On July 13, 1995, the Department of Commerce (the Department)

published the preliminary results of the administrative review of the

antidumping duty order on certain cut-to-length carbon steel plate from

Germany. This review covers one manufacturer/exporter of the subject

merchandise to the United States during the period of review (POR),

February 4, 1993, through July 31, 1994. We gave interested parties an

opportunity to comment on our preliminary results. Based on our

analysis of the comments received, we have changed the results from

those presented in the preliminary results of review.

EFFECTIVE DATE: March 28, 1996.

FOR FURTHER INFORMATION CONTACT: Nancy Decker or Linda Ludwig, Office

of Agreements Compliance, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-3793.

SUPPLEMENTARY INFORMATION:

Background

On July 13, 1995, the Department published in the Federal Register

(60 FR 36105) the preliminary results of the administrative review of

the antidumping duty order on certain cut-to-length carbon steel plate

from Germany (58 FR 44170, August 19, 1993). The Department has now

completed this administrative review in accordance with section 751 of

the Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

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

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Scope of These Reviews

The products covered by this administrative review constitute one

``class or kind'' of merchandise: Certain cut-to-length carbon steel

plate. These products include hot-rolled carbon steel universal mill

plates (i.e., flat-rolled products rolled on four faces or in a closed

box pass, of a width exceeding 150 millimeters but not exceeding 1,250

millimeters and of a thickness of not less than 4 millimeters, not in

coils and without patterns in relief), of rectangular shape, neither

clad, plated nor coated with metal, whether or not painted, varnished,

or coated with plastics or other nonmetallic substances; and certain

hot-rolled carbon steel flat-rolled products in straight lengths, of

rectangular shape, hot rolled, neither clad, plated, nor coated with

metal, whether or not painted, varnished, or coated with plastics or

other nonmetallic substances, 4.75 millimeters or more in thickness and

of a width which exceeds 150 millimeters and measures at least twice

the thickness, as currently classifiable in the Harmonized Tariff

Schedule (HTS) under item numbers 7208.31.0000, 7208.32.0000,

7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000,

7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000,

7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000,

and 7212.50.0000. Included are flat-rolled products of nonrectangular

cross-section where such cross-section is achieved subsequent to the

rolling process (i.e., products which have been ``worked after

rolling'')--for example, products which have been bevelled or rounded

at the edges. Excluded is grade X-70 plate. These HTS item numbers are

provided for convenience and Customs purposes. The written description

remains dispositive.

The POR is February 4, 1993, through July 31, 1994. This review

covers entries of certain cut-to-length carbon steel plate by AG der

Dillinger Huttenwerke (Dillinger).

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received case and rebuttal briefs from the

respondent (Dillinger) and petitioners (Bethlehem Steel Corporation,

U.S. Steel Company a Unit of USX Corporation, Inland Steel Industries,

Inc., Geneva Steel, Gulf States Steel Inc. of Alabama, Sharon Steel

Corporation, and Lukens Steel Company). Dillinger requested a hearing

then subsequently withdrew its request; therefore, no hearing was held.

Comment 1: Petitioners assert that based on the overwhelming number

of problems with Dillinger's information, the Department has no choice

but to apply total best information available (BIA). Petitioners base

their assertion on a claim that, despite an inordinate number of

opportunities to correct its deficient submissions, Dillinger has still

failed to provide reliable data on even the most fundamental elements

of the Department's analysis. According to petitioners, the

Department's verification reports and exhibits demonstrate Dillinger

failed verification. Petitioners assert that problems with Dillinger's

data include: a majority of Dillinger's home market sales transactions

examined at verification contained erroneous data; Dillinger's product

coding contains systemic problems; Dillinger failed to demonstrate

complete reporting of U.S. sales for 1994 and home market sales for

1992 and 1994; Dillinger failed to resolve a discrepancy between

verification documentation and reported U.S. sales quantities;

Dillinger did not provide the necessary actual to theoretical weight

conversion factors for cost of production (COP), constructed value

(CV), and differences in merchandise (DIFMER) adjustment; Dillinger

miscoded customer levels of trade; Dillinger failed to demonstrate that

certain freight services provided by related parties were at arm's-

length; Dillinger failed to demonstrate that commissions paid to

related parties were at arm's-length; Dillinger failed to provide

information regarding 500 related companies thus preventing the

Department from verifying whether they provide Dillinger with services

related to subject merchandise; Dillinger extensively misreported dates

of sale and failed to demonstrate to the Department that its reported

sales took into account changes in price and payment date; Dillinger

reported as date of payment the date on which payment was due to it

rather than the actual date on which payment for home market sales was

received; and Dillinger's data contains numerous additional

inaccuracies and omissions.

Petitioners cite the Department's recent decision to assign total

(uncooperative) BIA to Mannesmannrohren-Werke AG (MRW)

[[Page 13835]]

in Small Diameter Circular Seamless Carbon and Alloy Steel, Standard,

Line and Pressure Pipe from Germany (60 FR 31978-79--June 19, 1995).

Petitioners argue that this makes the case for applying total BIA to

Dillinger all the more compelling because Dillinger's errors and

omissions are far more egregious than those committed by MRW. In the

Seamless Pipe case, petitioners note that the Department found that:

MRW company officials were unable to explain or provide adequate

documentation for numerous discrepancies and omissions; DIFMER data

could not be tied to the financial statements; and MRW did not

adequately demonstrate that sales data reported to the Department took

into account changes in price, quantity, and date of sale. Similarly,

the petitioners assert that the Department's verification reports and

exhibits indicate that the Department encountered essentially the same

problems with respect to Dillinger's responses, and demonstrate that

the Department was unable to verify the completeness of either

Dillinger's reported home market or U.S. sales databases. Therefore,

according to petitioners, Dillinger's home market and U.S. sales

databases have not been demonstrated to be reliable and thus cannot be

used to calculate accurate dumping margins.

According to petitioners, significant errors in reporting product

characteristics, sale dates, and levels of trade effectively eliminate

any possibility of matching home market and U.S. sales. Petitioners

assert that the failure to identify related parties renders reported

charges and expenses meaningless.

Petitioners argue that Dillinger has significantly impeded the

Department's administration of this review by providing seriously

deficient information. Furthermore, petitioners claim that Dillinger

failed to alert the Department to any difficulties with respect to,

among other deficient areas, the reporting of: levels of trade; prime/

non-prime merchandise; actual/theoretical weights and conversion

factors; and dates of sale. Moreover petitioners argue that Dillinger

has repeatedly ignored or provided incomplete and/or inaccurate

responses to the Department's requests for information. Therefore,

petitioners continue, the Department should disregard Dillinger's

responses and use as BIA, the highest rate ever applicable to the firm

for the same class or kind of merchandise from the investigation.

Finally, petitioners assert that if the Department determines to

contradict its standard practice (see Defrost Timers from Japan (59 FR

1928--January 13, 1994), Tapered Roller Bearings from Japan (60 FR

22349--May 5, 1995), and Certain Carbon Steel Flat Products from

Belgium (58 FR 37083, 37084, 37090--July 9, 1993)) and erroneously

concludes not to apply total BIA, it should make certain adjustments

which are discussed in petitioners' other comments.

Respondent argues that petitioners concentrate on arguments which

are either not supported by the record evidence, supplant the

Department's judgment of what data should have been verified or taken

into evidence as verification exhibits, or take out of context judicial

opinions and ignore the relevant case law and standard practices of the

Department. Certain of petitioners' comments (i.e., regarding the

majority of Dillinger's home market sales containing erroneous data)

are nothing more than unsupported statements.

Specifically, respondent contends that contrary to petitioners'

assertions, the Department verified the completeness of Dillinger's

reported home market and U.S. sales databases. Concerning petitioners'

allegation that there is a significant discrepancy in Dillinger's

reported value of U.S. sales, respondent argues that it satisfactorily

demonstrated that its own accounting records list only the price of the

merchandise as it leaves Germany. This value does not include expenses,

which are incurred by Francosteel (Dillinger's related U.S. selling

agent), included in the sales price to the first unrelated purchaser

(e.g., U.S. duty, U.S. inland freight, etc.). The respondent contends

that the Department verified the total sales value and quantity for

both 1993 and 1994 at Francosteel and tied these amounts to

Francosteel's financial statements. Therefore, respondent argues that

petitioners' allegation has no foundation in fact.

Respondent further argues that petitioners' assertions of

significant errors in reporting product characteristics, sales dates,

levels of trade, and failure by Dillinger to identify related parties,

are without merit. Respondent contends that the evidence on the record

unequivocally shows that the data submitted by Dillinger was verified

and accurate in all material respects.

With respect to partial BIA, the respondent does not believe any

adverse changes should be made to any item addressed by the

petitioners, but if the Department decides to change its calculations,

only the actual figure attributable to the sale in question should be

changed. Alternatively, a reasonable figure, such as an average of the

data provided, should be used rather than the most adverse number

advocated by petitioners.

Department's Position: We agree with respondent that the use of

total BIA is not warranted in this administrative review. Dillinger has

been cooperative throughout the proceeding. While we did discover some

errors and discrepancies at verification, the extent and magnitude of

the errors and discrepancies did not exceed those that are commonly

found at verification and were not so large as to render the

Dillinger's reported information unusable. Therefore, we find the use

of total BIA unjustified. Regarding date of sale, while changes in

price or quantity may have occurred after the date of sale Dillinger

reported, the reported price and quantity were correct. In other words,

only the date of sale may have been wrong. As the verification report

notes, home market date of sale is the date a sale is originally booked

in the computer; the date is not changed in this database if the order

is subsequently modified. As noted in the preliminary results, we have

used shipment date as date of sale for home market sales in our

calculations. The rest of petitioners' individual allegations are

addressed in other comments.

Comment 2: Respondent argues that the Department incorrectly added

a reserve for demolition of an old coking plant. It states that the

plant was torn down in 1984--ten years prior to the POR, and that it

ended production in July 1984. Accordingly, it states that the cost to

demolish this plant can correctly be allocated only to the steel which

was the beneficiary of this plant's production. Respondent summarizes

that since that steel is not subject to this review, no adjustment is

permissible.

Petitioners respond that the Department correctly added this

accrual to COP and CV. They state that Dillinger apparently capitalized

the costs of demolishing the coke plant because these costs were

expected to benefit future periods. Petitioners argue that the

subsequent accruals, therefore, represent the periodic benefit which

Dillinger associated with the demolition. Petitioners argue that the

fact that these expenses were included in Dillinger's fiscal 1993

financial records indicates that the accruals continued through the

period of review. The petitioners further state that this accrual

differs from the reversal of prior year operating expense accruals

(which represent a correction of an estimate made in a prior year)

which the Department does not include in COP and CV (see, e.g., Small

Diameter

[[Page 13836]]

Circular Seamless Carbon and Alloy, Standard Line, and Pressure Pipe

from Italy, 60 FR 31981, 31991, June 19, 1995).

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

accrual was recorded in Dillinger's accounting records during the POR.

It is the Department's general practice to include accruals which are

recognized in the respondent's audited financial statements in the COP/

CV calculations. While the old coking plant does not benefit current

operations, its removal does by rationalizing operations which was

recognized in the financial statements during the POR. In Steel Pipe

from Italy, 60 FR 31981, 31992 (June 19, 1995), we found that upon

disposal of assets, the gain or loss associated with them would be

included in COP/CV at that time. The demolition of the coke plant is

equivalent to the disposal of an asset; therefore we are continuing to

include this accrual in the calculation of COP/CV.

Comment 3: Respondent argues that the Department should not have

added an amount for Rogesa's (Dillinger's supplier of pig iron and a

partially owned subsidiary) write-off of receivables from Saarstahl AG

(SAG) (Dillinger's sister company), to COP and CV. Respondent argues

that this amount resulted from sales of pig iron by Rogesa to SAG,

which were written-off by Rogesa as an extraordinary loss solely

because of SAG's bankruptcy. Dillinger further states that because

Rogesa is a producer of pig iron and because SAG uses the pig iron to

manufacture non-scope products (neither Rogesa nor SAG are producers of

carbon steel plate), there is no link between this sale of pig iron and

the antidumping order on sales of carbon steel plate by Dillinger.

Respondent cites the fact that in prior cases, the Department has

determined an extraordinary loss should be included in COP only if it

relates to the production of subject merchandise (Antifriction Bearings

from Japan: Final Results, July 11, 1991, 56 FR 31692, 31734). Finally,

respondent states that if the Department continues to include this

amount in COP and CV, it should at least reduce the amount by 50

percent. It states that the cost verification report acknowledges that

Rogesa would be responsible for only half the amount written off

because of Rogesa's profit/loss sharing agreement with its parents.

Petitioners respond that the Department has considered expenses

related to bankruptcy proceedings to be ordinary operating expenses, as

opposed to extraordinary expenses (see Fresh and Chilled Atlantic

Salmon From Norway, 58 FR 37912, 37915, July 14, 1993); even if these

expenses were extraordinary, they still may be included in the COP and

CV if they are related to the subject merchandise. The petitioners

further state that the relevance of the SAG bankruptcy expenses to

Rogesa is indicated by the fact that the expenses were incurred by

Rogesa and were entered on Rogesa's accounting records in the normal

course of business. Petitioners continue that since Rogesa booked these

expenses as extraordinary rather than operating expenses relating to

particular merchandise, these expenses relate to Rogesa as a whole

rather than to particular merchandise manufactured or sold by Rogesa.

Petitioners claim that accordingly, these expenses are properly

included in COP and CV. Petitioners note that COP and CV comprise all

costs of producing the subject merchandise including general and

administrative (G&A) expenses which relate to the company as a whole

rather than to the production process. According to the petitioners,

including these expenses in the COP of the pig iron was correct since

the pig iron sold to Dillinger is used in the production of subject

merchandise. Finally, petitioners disagree with respondent that if the

Department includes this expense in COP and CV, it should at least be

reduced by 50 percent. Petitioners assert that the fact that Rogesa's

parent companies absorb its profit or loss has no relevance to the

determination of Rogesa's cost of producing the pig iron used in

manufacturing the subject merchandise.

Department's Position: We agree with petitioners that these

expenses are properly included in the COP for pig iron. We found these

expenses to be write-offs of receivables from SAG. Write-offs of

receivables are bad debt expenses. The Department considers these to be

ordinary operating expenses because they are by their very nature

indirect selling expenses since, under generally accepted accounting

principles, bad debt is recovered over time by future price increases

(see Fresh Cut Roses from Columbia, 60 FR 6980, 7014). Since cost

information was used for the purchase of pig iron from Rogesa (rather

than acquisition price) and since these expenses are ordinary operating

expenses, which relate to Rogesa as a whole, they are properly included

in Rogesa's COP along with Rogesa's other general expenses. The fact

that Rogesa's parents absorb its profit or loss has no relevance.

Rogesa's sales must cover all of its expenses (production and general).

Rogesa's G&A costs were divided by total production to give a cost per

ton of pig iron. We have treated the bankruptcy costs like Rogesa's

other general or overhead expenses.

Comment 4: Respondent argues that Department should not have

included two expenses related to SAG's bankruptcy in COP and CV.

According to respondent, one of the costs related to Dillinger's

assumption of SAG's debt to another company. Respondent states that

since SAG does not produce carbon steel plate, this cost is not

relevant to the antidumping duty order because it is not related to the

production or sale of carbon steel plate by Dillinger. According to

respondent, the other cost was an extraordinary loss that resulted from

the write-off of claims against SAG for pension obligations, which were

to be reimbursed to Dillinger. Again, Dillinger claims that since these

expenses do not concern the production of carbon steel plate, they have

no relevance to the antidumping duty order.

Petitioners argue that Dillinger: booked these expenses as

extraordinary expenses rather than operating expenses relating to

particular merchandise; entered into an arrangement to assume various

debts of SAG and to write-off receivables owed by SAG; and was jointly

liable for SAG's tax liability. Petitioners assert that the bankruptcy

expenses assumed by Dillinger, therefore, relate to Dillinger ``as a

whole'' and should be included in the G&A component of COP and CV.

Department's Position: We disagree with respondent. Contrary to

respondent's characterization, we found these expenses to be write-offs

of receivables from SAG and its subsidiaries. Write-offs of receivables

are bad debt expenses. The Department considers these to be ordinary

operating expenses because they are by their very nature indirect

selling expenses since, under generally accepted accounting principles,

bad debt is recovered over time by future price increases (see Fresh

Cut Roses from Columbia, 60 FR 6980, 7014). Therefore, we have included

these in the indirect selling expense portion of COP/CV.

Comment 5: Petitioners argue that the Department should include all

the bankruptcy expenses related to Dillinger Htte Saarstahl (DHS)

(Dillinger's and SAG's parent company) and SAG. Petitioners assert the

Department considers bankruptcy costs to be ordinary operating expenses

(see Fresh and Chilled Atlantic Salmon from Norway (58 FR 37912,

37915--July 14, 1993)). According to petitioners, even extraordinary

expenses may be included in calculating the COP and CV under

[[Page 13837]]

the principle of full absorption costing provided they are related to

the subject merchandise (see Tapered Roller Bearings from Japan (56 FR

41508, 41516--August 21, 1991) and Welded Stainless Steel Pipe from

Korea (57 FR 53693 and 53694--November 12, 1992)). Petitioners argue

that although Dillinger contended SAG was not involved in the

manufacture of subject merchandise, the information Dillinger submitted

at verification indicated otherwise. Petitioners assert that the

majority of expenses booked by Dillinger and Rogesa involve write-offs

of receivables owed by SAG to Dillinger and Rogesa. According to

petitioners, these receivables were generated as a result of the

operations of Dillinger and Rogesa. Petitioners claim that while the

Department adjusted for Rogesa's write-off of receivables from SAG in

the preliminary results, it did not adjust for receivables forgiven by

Dillinger or for debts assumed by Dillinger and Rogesa, or other

expenses of bankruptcy. Petitioners assert that these remaining

bankruptcy expenses should be included in Dillinger's COP/CV.

Petitioners note that Dillinger and Rogesa incurred G&A costs (which

the questionnaire describes as those which relate to the company as a

whole rather than to the production process) to save DHS (their parent)

from bankruptcy. Petitioners argue that the exclusion of such costs is

contrary to Department practice, and therefore, the costs should be

included in G&A.

Respondent argues that the Department correctly excluded certain

expenses related to SAG's bankruptcy. It argues that these expenses are

not G&A, regardless of the petitioners' characterization, and

therefore, don't relate to the company as a whole. According to

respondent, many are selling expenses unrelated to scope merchandise

(incurred by SAG on purchases unrelated to plate). According to

respondent, petitioners do not explain how sales of pig iron by Rogesa

to SAG, another non-producer of plate, can be tied to the product under

review because there is no connection.

Department's Position: Of the bankruptcy expenses, the Department

included: Rogesa's write-off of receivables from SAG in the cost of

manufacturing (COM), as explained in Comment 3; and Dillinger's write-

off of receivables from SAG and its subsidiaries in the indirect

selling expense portion of COP/CV, as explained in Comment 4. The

Department did not include the following in COP/CV: Dillinger's and

Rogesa's assumption of DHS and SAG liabilities (including VAT

responsibilities) and bank debts (that is Dillinger and Rogesa assumed

some of SAG's bank debts) because these expenses are not directly

related to production. The fact that Rogesa and Dillinger assumed some

of SAG's debts does not relate to the manufacture of subject

merchandise.

Comment 6: Petitioners argue that the Department should include

severance payments made during the POR in Dillinger's COP/CV. They

state that during the POR, part of a prior period accrual for severance

payments was reversed, and a certain amount was actually paid. Neither

was included in the COP/CV calculations, but the petitioners argue, the

actual payments should have been included. Petitioners assert that

although Dillinger had claimed earlier in the proceeding that the

reversal should have been included, this amount was properly excluded.

Petitioners claim that this conforms with the Department's recent

statement in Steel Pipe from Italy (60 FR 31981, 31991--June 19, 1995).

However, the petitioners argue that the severance payments made in 1993

should be included in COM because they relate to the manufacturing

expenses during the POR. According to petitioners, in Steel Flat

Products from Japan (58 FR 37174), the Department stated that

termination allowances represent an expense recognized within the

period of investigation and should be reflected in the product cost in

accordance with full absorption costing principles.

The respondent argues that the Department should not just exclude

the reversal of the accrual for severance payments but deduct the

reversal from COP/CV. It claims that the Department included accruals

of severance expenses in its COP calculations in the original

investigation of Dillinger. It would be inequitable and without

justification for the Department to now ignore the reversal of the

accrual for the identical expense. Unlike the case cited by

petitioners, Dillinger claims it will achieve revenue or reduced

operating costs because it will no longer have to pay the sums

involved. According to the respondent, the Department's general view in

Steel Pipe from Italy does not make sense. According to the respondent,

the Department will only accept a reversal of an accrual in the same

year as the original accrual. Respondent argues that in that case,

there would be no accrual in the financial statement in the first

place. Respondent argues that this type of adjustment is conceptually

identical to a warranty expense. According to respondent, most warranty

expenses do not occur for sales within the period of review; they are

often granted later, yet the Department recognizes this as a legitimate

expense to be allocated over sales to which they do not apply.

Respondent argues that the same holds true for reversals of accruals.

Department's Position: We disagree with petitioners that the actual

severance payments should be included in COM. These expenses are

applicable to the COM of the period in which they were accrued, which

is not the period of review. This is in accordance with full absorption

costing principles, which, contrary to petitioners' assertion, is

consistent with the Japanese Flat Products case. In that case, the

termination allowances were recognized within the period of

investigation and therefore reflected in the product cost in accordance

with full absorption costing principles. In the instant review, the

severance expenses were recognized and accrued in a prior period. In

the period of review, Dillinger is simply paying severance amounts out

of the prior period expense/accrual.

We also disagree with respondent that the reversal of the accrual

should be included in COM. The original accrual occurred in 1990. The

accrual being reversed relates to costs expensed in 1990, which was

before the period of investigation. Therefore, these costs do not

relate to the merchandise under review. While reversals of accruals are

in accordance with generally accepted accounting principles (GAAP), the

Department relies on GAAP if it does not distort costs. In this case,

reversing costs that were accrued in 1990 distorts costs in the POR.

Furthermore, as we found in Steel Pipe from Italy, we do not consider

it appropriate to reduce current year production costs by the reversal

of prior year operating expense accruals and write-downs of equipment

and inventory. The subsequent year's reversal of these estimated costs

does not represent revenue or reduced operating costs in the year of

the reversal. Rather, they represent a correction of an estimate which

was made in a prior year. The position of the Department in Steel Pipe

from Italy considered the facts in that case, which included write-offs

and write-downs. These types of costs are not the costs at issue here.

There is not justification for distorting actual production costs

incurred in a subsequent year by reducing subsequent year costs by the

overestimated amount.

Comment 7: Petitioners argue that the Department should correct the

reduction Dillinger made to its COP and CV by reversing a prior period

accrual for its Stahlzulage (steel subsidy program). As petitioners

discussed in

[[Page 13838]]

Comment 6, the Department does not consider it appropriate to reduce

current year production costs by the reversal of prior year operating

expense accruals (see Small Diameter Circular Seamless Pipe from Italy

(60 FR 31991) and Al Tech Specialty Steel Corp. v. U.S., 651 F. Supp.

1421, 1430 (CIT 1986)). Petitioners assert that because Dillinger has

reduced its production costs by the reversal of prior period operating

expense accruals, the inclusion of Stahlzulage in COM is improper.

The respondent argues that Dillinger's financial statements, in

accordance with GAAP, reversed an accrual for a Stahlzulage subsidy.

They state that this was verified, and the Department treated this item

correctly in the Preliminary Results and should continue to do so in

the Final Results.

Department's Position: We disagree with petitioners. The reversal

of the Stahlzulage is permitted by German GAAP, and it is related to

assets in use during the POR. Therefore, it is appropriate to include

this amount in COM. In Italian Steel Pipe, the Department did not

consider it appropriate to reduce current year production costs by the

reversal of prior year operating expense accruals based on the fact

that these were estimated expenses. In the instant review, the

Stahlzulage is not an estimate but an amount which is intrinsically

linked to assets (currently used in production) based on a program

which was allowed by German law. Also, petitioners' citation to Al Tech

is inapposite. The issue in that case was whether a subsidy

determination could be made in the context of an antidumping

proceeding. The court ruled that such an investigation could not be

undertaken. With respect to the present proceeding, there has been no

countervailing duty investigation that has resulted in a determination

that the ``Stahlzulage'' is in fact a subsidy. Pursuant to Al Tech, the

Department is precluded from making such a determination in this

antidumping administrative review.

Comment 8: The petitioners argue that the Department should correct

the understated amount of Usinor Sacilor's G&A attributed to Dillinger.

Dillinger's method of identifying the share of its parent's (Usinor

Sacilor's) G&A attributable to Dillinger's operations is flawed.

Petitioners contend that the unconsolidated amount (i.e., parent

operating expenses less operating revenue) used to calculate this part

of G&A equals net operating income or loss, not G&A as should have been

calculated. Given the oversight nature of Usinor Sacilor and that no

information regarding Usinor Sacilor's unconsolidated expenses is on

the record, the Department should consider all of Usinor Sacilor's

unconsolidated operating expenses as G&A and should recalculate the

parent company portion of Dillinger's G&A accordingly.

Respondent contends that it correctly reported Usinor Sacilor's G&A

expenses. According to respondent, only the net expenses of Usinor

Sacilor, a holding company without any production of its own, are

allocated to affiliated companies; therefore, the net expenses

represent G&A expenses which are allocated to operating subsidiaries.

Respondent claims that as a non-operating company, Usinor Sacilor only

incurs G&A expenses. Although Dillinger disagrees that Usinor Sacilor's

G&A expense should be included at all, if it is, the Department's

methodology was correct.

Department's Position: We disagree with petitioners. The amount

Dillinger used to calculate Usinor Sacilor's G&A attributable to

Dillinger was taken from Usinor Sacilor's financial statements. Because

the unconsolidated company is a non-producing holding company, the only

expenses it incurs are general in nature. It would incur expenses on

its own behalf and on behalf of its subsidiaries. Revenue it receives

(including reimbursements from subsidiaries) offsets the G&A it incurs

on behalf of its subsidiaries. The difference between these two amounts

is the G&A expense of the parent company itself. A more detailed

allocation is not possible, and is not required, given the absence of

more detailed information on the record.

Comment 9: Petitioners contend that the Department should include

home market commissions paid to related parties in the calculation of

home market selling expenses for COP/CV (SELLCOP). The preliminary

margin program determines whether sales were made below cost by

comparing net price with COP. Yet, the petitioners claim, the

Department did not include in this program the expenses related to

Dillinger's related party commissions despite the fact that these are

clearly costs of production. Petitioners assert that home market

commissions should have been included in SELLCOP (which only included

indirect selling expenses in the preliminary results).

Respondent argues that the Department should exclude home market

commissions paid to related parties in the calculation of home market

selling expenses for purposes of COP. Since Dillinger included both its

own indirect selling expenses as well as those of its related sales

agent, Saarlux, in the indirect selling expense field, the petitioners'

methodology of including Saarlux's sales commissions as well would be

double counting.

Department's Position: We agree with respondent. Since Saarlux's

expenses are included in indirect selling expenses, commissions to

Saarlux should not also be included in total selling expenses for COP/

CV. Since Dillinger pays Saarlux commissions to cover Saarlux's costs

related to Dillinger's sales, to include both the commissions and

Saarlux's actual costs would be double-counting. Since Dillinger did

not demonstrate that commissions were at arm's-length, we would not use

these commissions as a cost in any event.

Comment 10: Petitioners contend that the Department should apply

BIA to determine the COP, CV, and DIFMER of sales for which no weight

conversion factor was provided. The weight of steel is an essential

element in determining unit price. Dillinger reported all U.S. sales on

a theoretical weight basis and home market sales on either a

theoretical or actual basis. Petitioners assert that Dillinger did not

provide conversion factors to compare home market prices reported on a

theoretical weight basis to COP reported on an actual weight basis.

Petitioners argue that the Department, therefore, cannot apply the

sales-below-cost test to such home market sales. In addition,

petitioners assert that conversion factors were not provided to compare

the CV amounts, reported on an actual weight basis, to U.S. sales on a

theoretical weight basis. In the flat-rolled steel investigation, the

Department recognized that U.S. and home market prices, as well as COP

and CV, must be on the same weight basis to accurately calculate

margins (see Cut-to-Length Carbon Steel Plate from Finland (58 FR 37122

and 37123--July 9, 1993) and Certain Welded Stainless Steel Pipes from

Taiwan (57 FR 53705, 53711--November 12, 1992)). Petitioners assert

that although Dillinger eventually provided conversion factors to

permit price-to-price comparisons on the same weight basis, it did not

provide factors for converting the costs of producing merchandise from

an actual to theoretical weight basis. Therefore, petitioners continue,

sales prices, on a theoretical weight basis, cannot be compared to COP

and CV, which are based on actual weight.

Petitioners argue that Dillinger ignored the questionnaire's

explicit instruction to report COP and CV on the same basis as sales

were reported. Dillinger's responses state that its cost accounting

system uses actual material prices and actual material quantities,

[[Page 13839]]

and that the average actual cost of materials and processing per ton

for all production, at each step, is calculated monthly. The factors

Dillinger provided to convert the weight of home market merchandise

sold on an actual weight basis to a theoretical weight basis cannot be

used to convert COP or CV to a theoretical weight basis because the

conversion factors provided are transaction specific and not control

number (CONNUM) specific. Accordingly, the Department should apply BIA

to all sales for which Dillinger failed to provide a conversion factor

to enable the COP/CV to be compared on the same measure of weight as

prices (i.e., all U.S. sales compared to CV and all home market sales

made on a theoretical weight basis).

Respondent contends that it reported COP, CV, and DIFMER on a

theoretical weight basis. Dillinger reported actual costs and actual

weights of inputs at the beginning of the production process. According

to respondent, the actual cost per ton of the finished product was

calculated using theoretical weight. According to Dillinger, it used

theoretical weight as the denominator for the per ton calculation of

COP, CV, and DIFMER amounts. Respondent further asserts that there is

no weighing station at the end of the production line in the factory.

Dillinger does not know the actual weight of each production run, much

less record it for cost accounting purposes. The Department can

therefore correctly calculate dumping margins using COP, CV, and DIFMER

data.

Department's Position: We disagree with petitioners that Dillinger

reported its costs on an actual weight basis. When Dillinger reported

that it uses actual material prices and actual material quantities, the

``actual'' in that sense refers to the actual in actual cost accounting

versus standard cost accounting (used for cost inputs), as opposed to

the actual in actual weight versus theoretical weight. Verification

Exhibit 2 includes a map of the plate rolling mill. This reveals, as

respondent contends, that there is a scale at the entrance to the mill,

but there is not one at the end of the process. Therefore, they cannot

weigh the finished product at the end of the product line, which

indicates that finished product costs are based on theoretical weight.

Also, on pages 5-6 of Dillinger's November 14, 1994, Section VI

response, Dillinger indicates that its inventory value, which is

calculated from the actual average cost system, is based on theoretical

production. The inventory amount is only adjusted to actual at year-

end. Therefore, Dillinger's day-to-day costs in their accounting system

are based on theoretical weight. We agree with petitioners that costs

and prices must be on the same weight basis to accurately calculate

margins. In this case, the costs and prices are on the same weight

basis (theoretical), so the petitioners' argument for BIA moot.

Comment 11: Petitioners argue that the Department should assign BIA

to Dillinger's misreported product characteristics. As petitioners have

previously pointed out and the Department recognized in its preliminary

results, Dillinger has misreported non-prime products (Y-grades) as

prime products. Petitioners argue that by including non-prime products

within the same product specification as prime products, Dillinger has

precluded the agency from comparing prime merchandise to prime

merchandise in both markets. The Department's computer program excludes

all home market sales of products with specifications that cover Y-

grade merchandise. However, petitioners assert, by simply excluding all

products with those particular specifications, the Department likely

has excluded sales of prime merchandise as well. The petitioners argue

that the exclusion of the home market control numbers (CONNUMHs) with

these particular product specifications from the margin calculation

program in the preliminary results, actually favors Dillinger by

lowering its margin. According to petitioners, it was inappropriate to

reward Dillinger for this error. The petitioners argue that when a

respondent fails to provide the information requested, the Department

must use BIA. When employing BIA, there should be an adverse assumption

on the part of the Department unless special circumstances dictate

otherwise. Petitioners assert that as BIA, all U.S. sales matched to

the sale of a home market product in which the specification code is

one which includes Y-grade products, should be assigned the higher of

the highest, non-aberrant margin calculated on any individual

transaction for this review or the 36.00 percent margin assigned to

Dillinger in the investigation.

Respondent argues that the Department incorrectly assumed that Y-

grade material contained both prime and non-prime merchandise.

Dillinger informed the Department that non-prime merchandise sold in

the home market should not be compared to prime material. In order to

facilitate the Department's calculations, Dillinger reported all non-

prime home market sales in a separate file. Thus, respondent contends,

only prime Y-grade material is contained in Dillinger's primary home

market sales file. Dillinger claims that it informed the verification

team that Y-grade material was guaranteed for chemistry, dimensions and

for tensile strength. According to respondent, no mill test certificate

was issued for mechanical properties because none was requested by the

customer. Dillinger did provide an analysis report to the customer.

There is a published specification sheet for Y-grade material,

indicating it is a prime product, made to order. Thus, respondent

argues, while the chemical composition of the products in question did

not meet their originally intended specifications, they were

nevertheless prime material, meeting the requirements of the published

Y-grade specifications. Generally speaking, according to Dillinger, it

treats Y-grades no differently from any other prime grade (i.e., A36).

Dillinger claims that the verification team simply misinterpreted the

facts. According to respondent, all sales reported as Y-grade

specifications were treated by Dillinger as prime merchandise.

Dillinger argues that its non-prime sales are sold in rail car lots

containing mixed products (e.g., carbon and alloy), without reference

to type, specification, measurement, or grade. According to the

respondent, there is nothing on the record (e.g., verification report)

to suggest that Y-grade material is considered to be non-prime

material. Respondent asserts that the only record evidence (in the

verification report) confirms that all non-prime material is sold in

unmarked lots.

Department's Position: We disagree with respondent that Y-grades

should be treated as prime merchandise. This is a question of

methodology. Dillinger believes this to be prime material, since this

is how it was reported and sold. We found at verification that there

were ``Misfit Cast'' products, which were characterized as such because

of an error in pouring. These were classified as Y-grades. The term

``Misfit Cast'' denotes non-prime merchandise. Since Dillinger did not

provide enough information to refute this classification, we are

continuing to treat Y-grades as non-prime merchandise. However, since

Dillinger provided all requested information, and given the relatively

small number of sales involved, we have determined simply to exclude

from the home market sales database all specification codes containing

Y-grade material. We do not agree with petitioners that our methodology

(disregarding sales with specifications

[[Page 13840]]

that contain Y-grades) actually favors Dillinger. Even though these

specification codes contain some prime material, given the structure

and hierarchy of the model match, these specification codes would not

match to any U.S. sales. Therefore, the impact on the dumping margin is

essentially non-existent.

Comment 12: The petitioners argue that the Department should use

adverse BIA to account for Dillinger's unreported and unverified home

market sales. Petitioners assert that there is no indication that

Dillinger's 1994 financial statements were ever examined by the

Department during the sales verification. Petitioners continue that the

absence of such financial statements during the verification prevented

the Department from tying home market sales for 11 of the 23 months for

which home market sales were reported, to Dillinger's audited financial

statements. The petitioners argue that it is not possible to conclude

that all 1992 and 1994 sales in the home market were reported or that

accurate information was provided for home market sales in 1992 and

1994 since neither years' sales were traced to their respective audited

financial statements. Since Dillinger presented 1994 semi-annual

financial statements to the cost verification team but not to the sales

verification team, the petitioners assert that this indicates selective

presentation of information, which casts further doubt on the

completeness of Dillinger's home market sales database. If the

Department erroneously concludes that Dillinger's reported home market

sales are usable, petitioners argue that BIA should be used to account

for unreported or unverified home market sales. Petitioners continue

that any U.S. sale made in February or March 1993, or between November

1993 and July 1994, should be assigned as BIA the higher of the highest

non-aberrant margin or the 36.00 percent margin from the investigation

Respondent contends that the Department verified the total quantity

and value in both the U.S. and home markets for the entire period of

review, 1993 and 1994. Dillinger provided all data requested by the

Department during verification. Respondent argues that as the

petitioners are well aware, the Department does not trace sales to the

financial reports for each month in the period of review.

Department's Position: We disagree with petitioners. We consider

total home market sales to be verified. Contrary to petitioners'

assertion, we were not prevented from verifying certain months during

the POR. Verification is a testing procedure and not every single item

is examined (see Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT

1988)). In the present case, we traced 1993 totals to the audited

financial statements and performed completeness checks on various

months in 1993 and 1994. For example, we reviewed the general ledger,

sales ledger, sales journal, and profit and loss statement from the

general ledger for the months of October 1993, February 1994, and June

1994. Dillinger provided all requested information, and contrary to

petitioners' assertion, we were not prevented from verifying any month

of the period. Because no discrepancies were found, we consider total

home market sales to be reported and verified.

Comment 13: Respondent notes that in comparing foreign market value

(FMV) to end-user sales in the United States, the Department made an

adjustment to FMV to compensate for the problem discovered at

verification where Dillinger incorrectly coded the customer code and

level of trade for six home market sales. Respondent argues that as a

result, the Department used one level of trade in the home market and

increased the price of all end-user sales--both those incorrectly coded

as well as those correctly coded--by the level of the discount granted

to service centers/distributors when compared to end-user sales in the

U.S. Respondent argues that this methodology added the full amount of

the discount to sales that were correctly coded. Instead, respondent

proposes that a smaller adjustment be made to all end-user sales which

would be calculated by applying to the discount the ratio of

incorrectly coded sales to total sales examined.

Petitioners note that the Department's adjustment incorrectly

assumes Dillinger misreported the home market customer level of trade

in only one manner--by identifying service center sales as end-user

sales. Petitioners note Dillinger also misreported end-user sales as

service center sales. Because of Dillinger's improper reporting of

level of trade and failure to adequately explain the Handlerrabatt and

its commissions have precluded the Department from identifying the

correct level of trade, the Department should assume all sales

constituted sales to end-users and increase all home market prices by

the amount of the discount.

Department's Position: We agree with petitioners that respondent's

improper reporting of level of trade and its failure to report

separately certain other adjustments have precluded the Department from

identifying the correct level of trade. Since the only known difference

in terms of sale to service centers/distributors and end-users was that

service centers/distributors received a trader discount

(Handlerrabatt), in matching home market sales to sales to U.S. end-

users, we have adjusted FMV for this discount. We disagree with

petitioners that this amount should be added to FMV for all home market

sales matching to U.S. service center sales. The Department's

methodology in effect treats all home market sales as service center

sales. Therefore, there is no reason to increase the FMV for home

market sales matched to U.S. service center sales. We also disagree

with respondent that we should adjust FMV by a ratio applied to the

discount, rather than the full discount. Given the pervasive errors in

the respondent's database in the coding of the customer and the level

of trade, it is appropriate to treat all home market sales as service

center sales and increase FMV for all such home market sales matched to

U.S. end-users by the full trader discount.

Comment 14: Respondent states that the sales verification report

contained misstatements concerning discounts for home market sales and

other expenses. The verification report states that the reported gross

unit price is net of a market discount and trader's commission. The

report also states that the reported gross unit price includes an end-

user discount which is paid directly to the customer and is reported in

the other expense field. Respondent states that all discounts granted

to service centers/distributors, whether market, trader's or end-user,

are subtracted by Dillinger during negotiation with the purchaser, and

the invoice price is net of these discounts. Thus, according to

respondent, the end-user discount is not found in the other expense

field. Respondent states that if the verification report were correct,

the other expense field would have an amount corresponding to discounts

given to service centers for end-user sales.

Department's Position: We disagree with respondent. Respondent is

confusing the end-user rebate with discounts given to service centers

for end-user sales. In the verification report the term ``trader's

commission'' refers to discounts given to service centers for end-user

sales. This discount is netted out of reported gross unit price.

However, end-user rebates--paid directly to the service center's

customer--are included in reported gross unit price and are reported in

the other expense field.

Comment 15: Petitioners state that the Department should correct

Dillinger's reported home market gross unit prices

[[Page 13841]]

to account for the conversion from actual to theoretical weight.

Respondent agrees that the Department should compare sales in each

market on a same weight basis.

Department's Position: We agree that Dillinger's reported home

market gross unit prices should be adjusted from actual to theoretical

weight and have done so in these final results. Additionally, we have

converted to a theoretical weight basis, other Dillinger adjustments

which were reported on an actual weight basis (see Analysis Memorandum,

November 6, 1995).

Comment 16: Petitioners argue that the Department should deny

Dillinger's home market credit expenses because Dillinger reported

payment due dates rather than the actual dates of payment. Should the

Department erroneously grant Dillinger a downward adjustment for home

market credit expenses, this adjustment should be limited to the

smallest credit expense reported by Dillinger for any home market sale.

Respondent notes that the Department verified the actual dates of

payment for Dillinger's home market sales. These dates, according to

respondent, were substantially the same as those reported in the

responses. Respondent argues that no change in methodology should be

made to that used in the preliminary results.

Department's Position: We agree with respondent that we should not

deny Dillinger's adjustment to home market price for credit expenses.

However, contrary to Dillinger's assertion, at verification we found

that Dillinger's actual payment dates were different than reported in

that they generally were later than those reported. As such,

Dillinger's actual expenses, on those sales that were verified,

generally exceeded those that were claimed. Accordingly, we are

allowing the claimed expense.

Comment 17: Petitioners argue that the Department should deny

Dillinger's claimed adjustment for global credit and debit notes and

other expenses. Petitioners state that Dillinger has not given a

consistent explanation of these adjustments. Both global credits and

debits are reported for certain transactions. According to petitioners,

it appears that the other expenses field also includes global credit

notes, which would result in double counting of global credit notes.

Petitioners question whether gross unit price has already been adjusted

for end-user discounts.

Respondent disputes petitioners' claims, noting that Dillinger gave

the Department a detailed explanation of the global credit and debit

notes at verification and provided the identity of all customers

receiving these credits and debits. Respondent asserts that the

Department verified how Dillinger allocated these notes on a customer-

by-customer basis, and the Department correctly accounted for these

notes in the preliminary results. Respondent explains that global

credits and debits could have been granted for the same sales because a

particular customer could have been granted credits on some sales and

debits on other sales. With respect to the other expense variable,

respondent notes that this variable is correctly described on page 31

of the sales verification report, which states that this field contains

rebates, invoicing errors, or warranty expenses.

Department's Position: We disagree with petitioners. At

verification we verified Dillinger's methodology for allocating global

credits and debits on a customer-by-customer basis. We found that

global credits and debits were accurately reported. We agree with

respondent that global credits and debits could have been granted for

the same sales because a particular customer could have been granted

credits on some sales and debits on other sales. As noted in our

verification report, we found at verification that gross unit price had

not been adjusted for end-user discounts and this discount was reported

in the other expense field. The other expense field does not include

global credits or debits. Hence there is no double counting.

Comment 18: Petitioners state that the Department should

recalculate Dillinger's overly inclusive and misallocated home market

indirect selling expenses. According to petitioners, Dillinger included

both their sales cost as well as those of Saarlux. Petitioners assert

that this is different than the methodology used to calculate the U.S.

indirect selling expenses. Petitioners continue that Dillinger reduced

its costs to account for functions performed by Francosteel and Daval

(Francosteel's parent and a commission agent on U.S. sales).

Petitioners further assert that Dillinger did not provide an

explanation for how it determined cost of manufacturing used to

allocate U.S. indirect selling expenses. Because of the complete

miscalculation of its home market indirect selling expenses, the

Department should deny Dillinger any adjustment for home market selling

expenses. If the Department determines to grant this adjustment, then

at a minimum, the Department should assign the smallest reported home

market selling expense for any sale to all home market sales.

Respondent states that it did not double count any home market

indirect selling expenses. Dillinger argues that it did not

artificially reduce any sales expenses attributable to U.S. sales.

According to Dillinger, it simply did not incur many traditional

selling expenses applicable to U.S. sales because those functions are

performed by Daval and Francosteel. Dillinger asserts that it also does

not incur all home market selling expenses because many of them are

performed by Saarlux. Dillinger argues that it correctly calculated

indirect selling expenses in both markets predicated on cost of

manufacturing, and that this is confirmed in verification exhibits.

Department's Position: We agree with respondent. We found both home

market and U.S. indirect selling expenses to be allocated on the basis

of cost of manufacturing. The methodology used by Dillinger for

calculating home market indirect selling expenses was reasonable and

not overly inclusive. U.S. indirect selling expenses have not been used

in the calculation of antidumping duty margins as we consider

Dillinger's U.S. sales to be purchase price and there are no home

market commissions to offset with U.S. indirect selling expenses.

Therefore, issues relating to the use or calculation of U.S. indirect

selling expenses are moot.

Comment 19: Petitioners state that the Department should deny the

erroneous adjustment for inventory carrying costs it granted to

Dillinger. Petitioners assert that Dillinger failed to provide any

support for its method of calculating the number of days between the

date of production and the date of shipment. Petitioners summarize that

Dillinger has thus failed to demonstrate entitlement to this

adjustment, and the Department should deny it.

Respondent argues that it provided a detailed explanation of how it

derived inventory carrying costs at verification. According to the

respondent, the Department accepted and verified that explanation.

Department's Position: We disagree with petitioners. At

verification, Dillinger provided the Department with a copy of a

submission estimating the number of days between the date of production

and the date of shipment. These figures appeared reasonable at

verification, and result in an extremely small adjustment for inventory

carrying costs. We note that inventory carrying costs are included in

indirect selling expenses. As stated above in the Department's position

on question 18, we have not used U.S. indirect selling expenses in our

calculations. We further

[[Page 13842]]

note that home market indirect selling expenses are only included to

the extent that they do not exceed U.S. commissions. As home market

indirect selling expenses exceed U.S. commissions even if inventory

carrying costs are not included, this issue is moot.

Comment 20: Petitioners argue that the Department should treat

Dillinger's U.S. sales as exporter's sales price (ESP) transactions.

According to petitioners, there is no documentary evidence that

supports Dillinger's assertion that its related selling arm in the

United States, Francosteel, is only a processor of sales-related

documentation. Petitioners assert that Dillinger's sales through

Francosteel do not meet the statutory definition of purchase price. The

Department uses a three-part test to determine whether ESP or purchase

price should be used to determine United States price (USP) when the

sale is made prior to the date of importation. Petitioners argue that

only the third factor in this test (whether the related selling agent

in the U.S. acted only as a mere processor of sales-related

documentation and a communications link with the unrelated U.S. buyers)

directly addresses the question for whether the sales took place in a

foreign country for exportation to the United States. Before the

Department can make a finding that the related party is just a

processor of documentation, there has to exist evidence in the record

to support that conclusion. Petitioners assert that in this case, the

Department only has Dillinger's assertion. Petitioners argue that there

is nothing in the record that indicates that Francosteel communicated

with Daval before it issued its confirmation of sale. Petitioners argue

that the price at which the merchandise is sold to the unrelated

purchaser is different from the price at which it was purchased from

Daval. Petitioners assert that in PQ Corp v. U.S., 652 F. Supp. 732

(CIT 1987), the court noted that this is a factor that supports a

determination that the sale is an ESP transaction. Petitioners argue

that Dillinger has the burden of producing the information that proves

Francosteel is only a processor of sales related documentation, and it

has not done so.

Petitioners further argue that Francosteel sells for its own

account in the United States. According to petitioners, Francosteel's

agreement with Daval demonstrates that Francosteel has undertaken to

sell, in the United States, the products of a related party, and that

it, Francosteel, not the unrelated purchaser, obtains those products

through a purchase from Daval. Because the sale takes place in the

United States between a party related to the foreign seller and an

unrelated purchaser, the sale is clearly ESP. Petitioners assert that

since Francosteel purchases the products from the foreign seller and

the unrelated purchaser does not, the transaction falls outside of the

purchase price definition.

Petitioners further argue that declarations made on Customs Form

7501 clearly indicate that Francosteel is the purchaser of the imported

merchandise. Petitioners assert that given these declarations, this

merchandise was apparently entered for appraisement by Dillinger under

transaction value, the most common basis of determining Customs value.

According to petitioners, transaction value is defined as the price

actually paid or payable for the merchandise when sold for exportation

to the United States. Petitioners assert that this definition is

largely the same as purchase price. Petitioners argue that given the

similarity of the statutes, Dillinger's claim that its U.S. sales to

the first unrelated purchaser should be treated as purchase price

transactions is inconsistent with a claim that the merchandise should

be appraised under transaction value at the price established by the

Daval/Francosteel transaction.

Respondent asserts that the first unrelated customer purchases the

merchandise from Dillinger, not Francosteel. Respondent argues that at

the time of the order and order confirmation, Francosteel does not have

title to the merchandise. According to respondent, Francosteel merely

receives the order from the unrelated customer and forwards it to

Dillinger for approval. Respondent further states that once Dillinger

approves the order, it notifies Francosteel, and then Francosteel

notifies the customer. Dillinger treats the date of sale as the date it

enters the order confirmation into its system. According to respondent,

only after the plate is produced does the contract between Daval and

Francosteel become applicable. Respondent states that at this time the

steel has already been sold to the first unrelated customer. Respondent

asserts that Francosteel's agreement with Daval operates only from the

time that Francosteel obtains the merchandise at the European port

until it invoices the U.S. customer upon arrival at the U.S. port. Even

if Francosteel took title, in Outokumpu Copper Rolled Products AB v.

U.S., 829 F. Sup. 1371 (CIT 1993), the Court held that where the

subsidiary took title to the exported merchandise and paid customs

duties, the sales were nevertheless properly classified as purchase

price transactions.

The respondent further asserts that a related U.S. company can

receive purchase orders directly from U.S. customers, send invoices

directly to those customers, act as an importer of record and receive

payment, and still be deemed to be a mere processor of documentation

and a communication link (see E.I. DuPont de Nemours & Co. v. U.S., 841

F. Supp. 1237 (CIT 1993)). Therefore, the Department should continue to

treat U.S. sales as purchase price transactions.

Department's Position: We disagree with petitioners. The Department

determined that purchase price, as defined in section 772 of the Tariff

Act, was the appropriate basis for calculating USP. All sales were made

through Francosteel, a related sales agent in the United States, to

unrelated purchasers. Whenever sales are made prior to the date of

importation through a related sales agent in the United States, we

typically determine that purchase price is the most appropriate

determinant of the USP based upon the following factors: 1) the

merchandise in question was shipped directly from the manufacturer to

the unrelated buyer, without being introduced into the inventory of the

related shipping agent; 2) direct shipment from the manufacturer to the

unrelated buyers was the customary commercial channel for sales of this

merchandise between the parties involved; and 3) the related selling

agent in the United States acted only as a processor of sales-related

documentation and a communication link with the unrelated U.S. buyers.

See Certain Stainless Steel Wire Rods from France: Final Determination

of Sales at Less than Fair Value, 58 FR 68865, 68868 (December 29,

1993); Granular Polytetrafluoroethylene Resin from Japan: Final Results

of Antidumping Duty Administrative Review, 58 FR 50343, 50344

(September 27, 1993). In the present review, we found that: the

essential terms of sale were set prior to importation by or on approval

by Dillinger; the merchandise was shipped immediately to the customer

upon importation into the United States, without being introduced into

the inventory of the related shipping agent; direct shipment from the

manufacturer to the unrelated buyers was the customary commercial

channel for sales of this merchandise; the merchandise was not

warehoused by Francosteel during the normal course of business; and the

related selling agent in the United States acted only as a processor of

sales-related documentation and a

[[Page 13843]]

communication link with the unrelated U.S. buyers.

Even if Francosteel temporarily takes title to the merchandise, it

is not inventoried by them. The term ``inventory'', as it is commonly

used in business, implies that the merchandise is in storage and is

available for sale. We have determined that the subject merchandise

that Francosteel imports (the merchandise is not physically warehoused

by Francosteel during the normal course of business) is not generally

available for sale. It is awaiting delivery to a specific customer (see

Stainless Steel Wire Rods from France).

Although Francosteel takes title to the merchandise and

participates in sales negotiations, we found at verification that it

does not have the flexibility to set the price of the steel and only

acts as a processor of sales-related documentation (see Stainless Steel

Wire Rods from France). Furthermore the Court of International Trade

found in Independent Radionic Workers of America v. U.S., (Slip Op. 95-

45, March 15, 1995 CIT), that while the respondent processed purchase

orders, performed invoicing, collected payments, arranged U.S.

transportation, and was the importer of record, these duties, while

substantial, are not necessarily disqualifying of purchase price

treatment.

For all of the above reasons, we are continuing to treat U.S. sales

as purchase price sales.

Comment 21: Petitioners argue that the Department should apply BIA

to the value of a discrepancy in Dillinger's reported U.S. sales for

1993 and its sales ledger information. Petitioners state that Dillinger

underreported both the quantity and value of its U.S. sales.

Respondent counters that it explained at verification the double

counting of one invoice. Respondent also states that the discrepancy in

the value of U.S. sales is accounted for by expenses incurred by

Francosteel which are not contained in Dillinger's books.

Department's Position: We agree with respondent. As Francosteel

explained at verification, Dillinger only retained one entry for the

same tonnage in its calculations of total volume and value, thinking

that the second identical tonnage was a duplication. However, the same

tonnage was reported on two separate invoices, and was properly

reported in Dillinger's U.S. sales listing. This second ``duplicate''

invoice accounts for virtually all of the tonnage discrepancy. The

difference in value is accounted for by expenses incurred by

Francosteel.

Comment 22: Petitioners argue that the Department should apply BIA

to the value of all 1994 Francosteel imports, as Dillinger failed to

demonstrate the completeness of its 1994 U.S. sales at verification.

Respondent states that petitioners' assertion is without any

foundation on the record. Nowhere in the verification report does the

Department state that any material data was not verified. Accordingly,

the Department should continue to use Dillinger's 1994 sales data.

Department's Position: We agree with respondent. As discussed

above, verification is a testing procedure and not every single item

need be examined. See Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT

1988). We consider total U.S. sales to be verified. We traced 1993

totals to the audited financial statements and performed completeness

tests on various months in 1993 and 1994. For example, we randomly

selected sales from Francosteel's invoice registers for the months of

August 1993 and August 1994 to determine if products were properly

included and/or excluded from Dillinger's U.S. sales listing. Because

no discrepancies were found, we consider total U.S. sales to be

reported and verified.

Comment 23: Petitioners claim that the Department should apply BIA

to unreported sales made by Berg Steel Pipe (Berg). Petitioners state

that they gave the Department information indicating that Dillinger

failed to report sales of subject merchandise (pipe) by Berg Steel

Pipe, a related party to Dillinger. According to petitioners, the

Department did not confirm whether there were any sales of subject

merchandise made by Berg to unrelated customers in the United States

during the POR. Petitioners argue that simply because Dillinger stated

that Berg did not purchase subject merchandise from it during the POR

does not foreclose the possibility that Berg already had subject

merchandise in stock which it could have sold during the POR.

Petitioners argue that furthermore, Dillinger permitted the Department

to select invoices only from a computer-generated listing at

verification, rather than an actual sales journal, and did not

demonstrate that the computer program which generated the listing was

outputting appropriate and complete information. Publicly available

data shows that Francosteel imported and shipped steel plate to Panama

City, Florida, where Berg is located, during the POR.

Respondent states that the Department verified that all sales and

entries in the POR by Dillinger to Berg were of non-scope merchandise.

Respondent asserts that assuming, arguendo, that Berg had sales of

scope merchandise in the POR which were entered prior to the POR, the

petitioners' point is moot. Respondent argues that entries prior to the

POR are not subject to this review and have already been liquidated in

any case.

Department's Position: We agree with respondent. While it is true

that Dillinger sold plate to Berg during the POR, there is no evidence

that any of this steel was subject merchandise. To establish whether

any sales of subject merchandise were made to Berg, we examined random

invoices selected from a company computer report listing all sales to

Berg at verification. This report was generated from Dillinger's normal

sales accounting system. The sales invoices we examined described the

plate sold to Berg as X-70 grade steel, which is outside the scope of

this review. We reviewed mill certificates for certain invoices,

confirming that this steel was X-70 grade and the strength levels were

above 70,000 pounds per square inch. We found this to be sufficient

proof that Dillinger did not sell subject merchandise to Berg during

the POR.

Comment 24: Petitioners state that the Department should use BIA

for foreign brokerage and handling. Because there has been no

demonstration of arm's-length transactions between Dillinger and the

related company that provided its foreign brokerage and handling

services, the Department should apply adverse BIA.

Respondent notes that the Department verified that the brokerage

and handling fees charged by this related company were at arm's-length.

Department's Position: We disagree with petitioners. As noted

above, verification is a testing procedure and not every single item

need be examined. See Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT

1988). We performed an arm's-length test on one related party (a barge

company) and found that prices for comparable services charged by the

unrelated party were less than those charged by the related party. We

also found that another related party providing services to Dillinger

was profitable. We have no reason to believe that foreign brokerage and

handling were provided on other than an arm's length basis and we are

allowing this adjustment.

Comment 25: Petitioners argue that the Department should use BIA

for ocean freight. They claim that there has been no demonstration of

arm's-length transactions between Dillinger and the

[[Page 13844]]

related company that provided ocean transportation services.

Respondent notes that the related party does not own the ships

which carry the plates to the United States; this related party simply

arranges transportation. Respondent argues that none of the ocean

carriers are related to Dillinger, and the payments made for ocean

freight were made to unrelated parties.

Department's Position: We agree with respondent. While ocean

freight is arranged by a related party, the actual ocean carriers are

unrelated parties. As such, there is no need to perform an arm's length

test because the actual ocean freight is not provided by a related

party.

Comment 26: Petitioners state that the Department should use BIA

for foreign inland freight. First, the petitioners argue, Dillinger

reported related-party foreign inland freight charges, but failed to

demonstrate that they were incurred at arm's-length prices. According

to petitioners, Dillinger attempted to demonstrate its foreign inland

freight expenses were at arm's-length by providing information at

verification concerning a transaction between Dillinger and an

unrelated freight company. However, the petitioners assert, the

verification report does not indicate the product shipped, the route,

or the basis for calculating the rate. Moreover, the petitioners argue,

the invoices examined were for a different period than those to its

related party. The petitioners argue that Dillinger also claimed its

transactions were at arm's-length based on transportation charges

between this related party and an unrelated customer. However, the

petitioners assert, the supporting documentation provided is merely a

translation of an agreement, with no actual original documentation. The

petitioners argue that the verification report does not indicate that

this information was ever verified. According to petitioners,

verification documentation also reveals that Dillinger often incurred

foreign inland freight expenses through another related company;

Dillinger did not attempt to demonstrate those transactions were at

arm's-length. Second, the petitioners assert, the Department's program

fails to correct the weight basis used for foreign inland freight. The

petitioners argue that Dillinger incorrectly converted a theoretical

weight figure to an actual weight figure, even though U.S. sales were

reported on a theoretical weight basis. Third, the petitioners assert,

Dillinger has failed to include costs associated with loading,

unloading, and transportation of the merchandise from Dillinger's

factory to the port of Dillingen.

Respondent counters that the verification report accurately

portrays the arm's-length nature of the foreign inland freight

expenses. According to respondent, the documents inspected by the

verification team completely satisfied the Department. The respondent

argues that concerning the weight basis of the shipped plate, the

Department is confused on the facts. Respondent states that the barge

company bills Dillinger on an actual weight basis. Respondent argues

that it converted this figure to a theoretical weight basis for

purposes of its responses.

Department's Position: We disagree with petitioners. Verification

is a testing procedure and not every single item need be examined. See

Monsanto Co. v. U.S., 698 F. Supp 275, 281 (CIT 1988). We performed an

arm's-length test on one related party (a barge company) and found that

foreign inland freight charges charged by an unrelated party were less

than those charged by the related party. In addition to the checks

performed at verification, we have compared the prices charged by this

unrelated party to reported foreign inland freight expenses for 1994

U.S. sales. We again found the related expenses to be greater than the

unrelated charges. Thus, we believe Dillinger's foreign brokerage and

handling expenses to be at arm's length. We agree with respondent that

verification exhibits demonstrate that these expenses were reported on

a theoretical weight basis. Regarding the costs associated with

loading, unloading, and transportation of the merchandise from

Dillinger's factory to the port, we found (on the basis of the

information submitted and verification findings) these expenses to be

included in COP/CV. In Dillinger's accounting system, these expenses

are embedded in the cost of production and are not easily separated.

These expenses are incurred on both home market and U.S. sales. Also,

because of the very short distance from the plant to port, these

expenses are extremely minor. Therefore, we are allowing Dillinger's

treatment of these loading, unloading, and transportation expenses.

Comment 27: Petitioners state that the Department should reject

Dillinger's reported U.S. short-term interest rate. In determining

whether to use loans obtained from related parties to calculate credit

and inventory carrying costs, the Department examines the terms of

these loans to determine whether they were made at arm's-length

interest rates. When a respondent fails or is unable to demonstrate

that such loans are at arm's-length, the Department excludes these

loans from its calculation of interest rate. According to the

petitioners, Dillinger did not demonstrate this and failed to exclude

these related party interest rates from the weighted-average interest

rate used to calculate credit and inventory carrying costs. Petitioners

argue that verification exhibits demonstrate that the related party

interest rates were not arm's-length. Petitioners assert that there is

no indication that Dillinger attempted to demonstrate the reported

interest rates reflected all of Francosteel's borrowing during the POR.

Petitioners argue that there is no indication of any review of

Francosteel's accounts to verify whether Francosteel used other sources

of financing. Since Dillinger did not establish the arm's length nature

of its related party borrowings or demonstrate that all borrowings were

reported, its reported U.S. short-term interest rate should be denied

altogether. The Department should use the U.S. prime lending rate or,

at a minimum, use the weighted-average short-term interest rate

reported by Dillinger calculated without the related party interest

rates.

Respondent argues that the Department verified that loans from

related parties were at arm's length by comparing them to those

obtained from unrelated parties. Therefore, no change should be made to

the Department's methodology.

Department's Position: During verification, we examined

Francosteel's accounts to determine that all short-term borrowings had

been reported for use in the short-term interest rate. To accomplish

this, we inquired about all interest expenses on Francosteel's books

and their sources. We were satisfied that all borrowings had been

reported. We disagree with petitioners in part in that some of the

related party loans are considered to be arm's-length when compared for

contemporaneous periods. That is, we compared the loan from a related

party to those from unrelated parties, looking at when they were made.

Some of the related party loans were found to have rates at or above

those of unrelated parties, using time and term as the criteria.

Accordingly, loans from related parties whose loans were below arm's-

length were excluded from the interest rate calculation for purposes of

these final results (in the preliminary results, all loans from related

parties had been included in the calculations).

Comment 28: Petitioners state that the Department should apply BIA

to an unreported U.S. sale. Petitioners state that the Department's

examination of

[[Page 13845]]

one observation at verification revealed the amount invoiced to the

U.S. customer was less than the total amount appearing on the bill of

lading. Petitioners argue that although this sale should be included in

Dillinger's sales listing, the verification report provides no

indication the sales listing was examined to verify that the sale had

been reported, nor does it indicate any follow-through during

verification to determine similar discrepancies. Therefore, the

Department should presume the difference is caused by a missing sale

and should apply total BIA to the value of that sale.

Respondent notes that sales to one end user were made each time

that customer released tonnage from its inventory. Respondent asserts

that all tonnage contained in the bill of lading is accounted for in

the observations reported to the Department, and there are no

unreported U.S. sales.

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

calculation of U.S. duty on the observation in question, we examined

the total volume on the entry and verified it was totally reported in

Dillinger's submissions across a number of other observations.

Therefore, there is no missing U.S. sale.

Comment 29: Petitioners argue that the Department should adjust its

program to account for understated U.S. commissions. Petitioners assert

that the Department correctly treated Dillinger's U.S. commissions as a

direct selling expense. Petitioners argue that although the Department

found at verification that some of the reported commissions were

understated, the Department's program fails to adjust for this

understatement. As BIA, the Department should increase all commissions

by the average difference between Dillinger's reported commission and

its actual commission on these sales.

Respondent agrees that the Department found a discrepancy in U.S.

sales commissions for some sales, but points out that these

discrepancies are de minimis. If the Department makes a correction, it

should only be for the three sales in question.

Department's Position: After further examination of U.S.

commissions, we have determined that this expense has been correctly

reported. The sales referred to in the verification report include

multiple observations for each sale. We have found that taking the

total weighted-average of all the U.S. commissions corresponding to all

observations on a given invoice results in the amount described in the

verification report as the correct value for U.S. commissions (see

Analysis Memorandum, November 6, 1995).

Comment 30: Petitioners argue that the Department should adjust

U.S. price for warehousing expenses. Petitioners assert that although

the record indicates that Dillinger incurred warehousing costs for its

U.S. sales, Dillinger failed to report these expenses. The Department

should make an adjustment to USP to account for the cost of

warehousing. The Department should use, as BIA for warehousing

expenses, data provided in Francosteel's financial statements.

Respondent argues that the Department verified that Francosteel

incurred no warehousing expenses applicable to subject merchandise in

the period of review; therefore no adjustment is necessary. According

to respondent, warehousing in Francosteel's accounting documents is

merely an accounting term, and not a reference to a physical warehouse.

Department's Position: We agree with the respondent. We extensively

examined this topic at verification and found that Francosteel did not

physically inventory, i.e., warehouse, subject merchandise during the

POR (as discussed in the Francosteel verification report). Consequently

it did not incur any warehousing costs related to subject merchandise

during the POR.

Comment 31: Petitioners argue that the Department must ensure that

the value-added tax (VAT) amount added to USP is no more than the VAT

amount added to/included in FMV. Petitioners assert that the Department

neglected to adhere to the instructions of the CIT in Federal-Mogul v.

U.S., 862 F. Supp. 384, 394-95 (CIT 1994), requiring the Department to

impose a cap on the VAT adjustment made to USP. Accordingly, the

Department should ensure that the VAT amount added to USP is, in every

instance, no greater than the VAT amount which is added to the FMV to

which USP is being compared. The petitioners assert that the deposit

rate will be affected by an unwarranted increase in USP caused by the

Department's failure to apply a VAT cap.

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

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

changed its treatment of home market consumption taxes. Where

merchandise exported to the United States is exempt from the

consumption tax, the Department will add to the U.S. price the absolute

amount of such taxes charged on the comparison sales in the home

market. This is the same methodology that the Department adopted

following the decision of the Federal Circuit in Zenith v. United

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

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

(CIT) overturned this methodology in Federal Mogul v. United States,

834 F. Supp. 1391 (1993), and the Department acquiesced in the CIT's

decision. The Department then followed the CIT's preferred methodology,

which was to calculate the tax to be added to U.S. price by multiplying

the adjusted U.S. price by the foreign market tax rate; the Department

made adjustments to this amount so that the tax adjustment would not

alter a ``zero'' pre-tax dumping assessment.

The foreign exporters in the Federal Mogul case, however, appealed

that decision to the Federal Circuit, which reversed the CIT and held

that the statute did not preclude Commerce from using the ``Zenith

footnote 4'' methodology to calculate tax-neutral dumping assessments

(i.e., assessments that are unaffected by the existence or amount of

home market consumption taxes). Moreover, the Federal Circuit

recognized that certain international agreements of the United States,

in particular the General Agreement on Tariffs and Trade (GATT) and the

Tokyo Round Antidumping Code, required the calculation of tax-neutral

dumping assessments. The Federal Circuit remanded the case to the CIT

with instructions to direct Commerce to determine which tax methodology

it will employ.

The Department has determined that the ``Zenith footnote 4''

methodology should be used. First, as the Department has explained in

numerous administrative determinations and court filings over the past

decade, and as the Federal Circuit has now recognized, Article VI of

the GATT and Article 2 of the Tokyo Round Antidumping Code required

that dumping assessments be tax-neutral. This requirement continues

under the new Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade. Second, the URAA explicitly amended the

antidumping law to remove consumption taxes from the home market price

and to eliminate the addition of taxes to U.S. price, so that no

consumption tax is included in the price in either market. The

Statement of Administrative Action (p. 159) explicitly states that this

change was intended to result in tax neutrality.

While the ``Zenith footnote 4'' methodology is slightly different

from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA

law required that the tax be added to United States price rather than

subtracted from home market price, it does result in tax-

[[Page 13846]]

neutral duty assessments. In sum, the Department has elected to treat

consumption taxes in a manner consistent with its longstanding policy

of tax-neutrality and with the GATT.

Final Results of Review

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

margin exists:

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

Margin

Manufacturer/exporter Time period (percent)

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

AG der Dillinger Huttenwerke.... 2/4/93-7/31/94 1.42

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

The Department shall determine, and the Customs service shall

assess, antidumping duties on all appropriate entries. Individual

differences between United States price and foreign market value may

vary from the percentages stated above. The Department will issue

appraisement instructions directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

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

shipments of plate from Germany entered, or withdrawn from warehouse,

for consumption on or after the publication date, as provided for by

section 751(a)(1) of the Act: (1) the cash deposit rates for the

reviewed company will be the rate for that firm as stated above; (2)

for previously reviewed or investigated companies not listed above, the

cash deposit rate will continue to be the company-specific rate

published for the most recent period; (3) if the exporter is not a firm

covered in this review, or the original less than fair value (LTFV)

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) if neither the exporter nor the manufacturer

is a firm covered in this review, the cash rate will be 36.00 percent.

This is the ``all others'' rate from the LTFV investigation. See

Antidumping Duty Order and Amendment of Final Determination of Sales at

Less Than Fair Value: Certain Cut-To-Length Carbon Steel Plate from

Germany, 58 FR 44170 (August 19, 1993). These deposit requirements,

when imposed, shall remain in effect until publication of the final

results of the next administrative review.

This notice serves as a final reminder to importers of their

responsibility under section 353.26 of the Department's regulations to

file a certificate regarding the reimbursement of antidumping duties

prior to liquidation of the relevant entries during this review period.

Failure to comply with this requirement could result in the Secretary's

presumption that reimbursement of antidumping duties occurred and the

subsequent assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with section 353.34(d) of the Department's

regulations. Timely notification of return/destruction of APO materials

or conversion to judicial protective order is hereby requested. Failure

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

sanctionable violation.

This administrative review and this notice are in accordance with

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

of the Department's regulations.

Dated: March 20, 1996.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-7464 Filed 3-27-96; 8:45 am]

BILLING CODE 3510-DS-P