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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-489-501]

Notice of Final Results of Antidumping Duty Administrative

Review: Certain Welded Carbon Steel Pipe and Tube From Turkey

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

SUMMARY: On May 13, 1997, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on certain welded carbon steel pipe and tube

from Turkey. The review covers shipments of this merchandise to the

United States during the period of review (POR) May 1, 1993, through

April 30, 1994.

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

of certain ministerial errors, we have changed the preliminary results.

The final results are listed below in the section ``Final Results of

Review.''

EFFECTIVE DATE: October 2, 1997.

FOR FURTHER INFORMATION CONTACT:

Charles Riggle or Kris Campbell, Office of AD/CVD Enforcement II,

Import Administration, International Trade Administration, U.S.

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

Washington, D.C. 20230; telephone: (202) 482-0650 and (202) 482-3813,

respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

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

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Background

This review covers two manufacturers/exporters to the United States

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

Ihracat Ithalat ve Pazarlama A.S. (Yucelboru). On May 13, 1997, the

Department published in the Federal Register the Preliminary Results of

Administrative Review of the Antidumping Duty Order on Certain Welded

Carbon Steel Pipe and Tube from Turkey (62 FR 26286) (Preliminary

Results). We received case and rebuttal briefs from the petitioners \1\

and Borusan on June 19, 1997, and June 26, 1997, respectively.

Yucelboru did not submit a case or rebuttal brief. On August 1, 1997,

we requested comments from Borusan and the petitioners regarding how we

intended to calculate importer-specific ad valorem assessment rates for

Borusan. Since Yucelboru's margin in the preliminary results was de

minimis, we did not request comments from Yucelboru. On August 5, 1997,

we received comments on the assessment rate from the petitioners.

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\1\ The petitioners are Allied Tube & Conduit and Wheatland Tube

Company.

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The Department has now completed this administrative review in

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

Act).

Scope of the Review

Imports covered by this review are shipments of certain welded

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

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

products are currently classifiable under the following Harmonized

Tariff Schedule of the United States (HTSUS) subheadings:

7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40,

7306.30.50.55, 7306.30.50.85, and 7306.30.50.90. These products,

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

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

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

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

proceeding is dispositive.

Comparison of United States Price and Foreign Market Value

For both companies involved in this review, we calculated

transaction-specific U.S. prices (USP) and compared them to foreign

market values (FMV) based on either weighted-average home market prices

or constructed values (CV). For price-to-price comparisons, we compared

identical merchandise, where possible. Where there were no sales of

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

made comparisons of similar merchandise based on the characteristics

listed in the Department's antidumping questionnaire.

Where sales were made in the home market on a different weight

basis from the U.S. market (e.g., theoretical versus actual weight), we

converted all quantities to the same weight basis, using the conversion

factors supplied by the company, before making our fair value

comparisons.

We have determined that Turkey experienced a high rate of inflation

throughout the POR, as measured by the wholesale price index (WPI)

published in International Financial Statistics. (See Comment 1 below).

Therefore, in accordance with our practice, and in order to avoid the

distortions caused by the effects of this level of inflation on prices,

we did not apply the Department's 90/60 day rule if we were unable to

match sales within the same month. Rather, we resorted to CV as the

basis of FMV. See Notice of Final Determination of Sales at Less Than

Fair Value: Certain Steel Concrete Reinforcing Bars from Turkey, 62 FR

9737, 9738 (March 4, 1997) (Rebar from Turkey).

In accordance with 19 CFR 353.58, we made comparisons at the same

level of trade, where possible (see Sales Comment 8 below). For

Borusan, we determined that there was one U.S. level of trade (i.e.,

distributor) and three home market levels of trade: wholesaler/

distributor, retailer, and end-user. Yucelboru had no level of trade

distinctions in either market.

[[Page 51630]]

United States Price

We based USP on purchase price in accordance with section 772(b) of

the Act, because the subject merchandise was sold directly to the first

unrelated purchaser in the United States prior to importation and the

exporter's sales price methodology was not indicated by the facts of

record. We calculated purchase price based on the same methodology used

in the Preliminary Results, with the following exceptions:

Borusan

1. We corrected the gross unit price and quantity reported for one

sales transaction (see Comment 9 below);

2. We added countervailing duties imposed on the subject

merchandise to offset export subsidies, pursuant to section

772(c)(1)(C) of the Act (see Comment 11 below); and

3. We converted certain direct selling and movement expenses from

Turkish lira to U.S. dollars using exchange rates based on the date of

shipment (see Comment 15 below).

Yucelboru

1. We converted certain movement expenses from Turkish lira to U.S.

dollars using exchange rates based on the date of shipment.

Foreign Market Value

Where FMV was based on home market price, we used the same

methodology to calculate FMV as that described in the Preliminary

Results, with the following exceptions:

Borusan

1. We deducted home market direct selling expenses and added U.S.

direct selling expenses as a COS adjustment to FMV (see Comment 14

below); and

2. We indexed home market packing expenses before deducting them

from FMV and indexed U.S. packing expenses before adding them to FMV

(see Comment 13 below).

Yucelboru

1. We deducted home market direct selling expenses and added U.S.

direct selling expenses as a COS adjustment to FMV; and

2. We indexed home market packing expenses before deducting them

from FMV and indexed U.S. packing expenses before adding them to FMV.

Where FMV was based on CV, we used the same methodology for Borusan

as that described in the Preliminary Results, with the following

exceptions:

1. We adjusted the calculated interest expenses to avoid double

counting imputed credit and inventory carrying expenses (see Comment 5

below);

2. We indexed all material costs (see Comment 3 below); and

3. We deducted home market direct selling expenses and added U.S.

direct selling expenses as a COS adjustment to FMV (see Comment 14

below).

Cost of Production

As discussed in the Preliminary Results, we conducted an

investigation to determine whether Borusan or Yucelboru made home

market sales during the POR at prices below its cost of production

(COP) within the meaning of section 773(b) of the Act (see also Comment

2 below). We disregarded individual below-cost sales of models for

which greater than 10 percent and no more than 90 percent of sales were

sold at less than COP over an extended period of time. We disregarded

all sales of models with greater than 90 percent of sales at less than

COP over an extended period of time.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments and rebuttal comments from

the petitioners and Borusan, but did not receive any comments from

Yucelboru.

Comment 1: Inflation. Borusan argues that Turkey did not experience

hyperinflation until the last four POR months (January through April,

1994). Accordingly, Borusan argues that the Department should limit the

application of its hyperinflationary methodology to sales made during

these months. Citing Final Determination of Sales at Less Than Fair

Value: Certain Fresh Cut Flowers from Peru, 52 FR 7000, 7002 (March 6,

1987) (Flowers from Peru), Borusan states that the Department that

previously limited its hyperinflationary methodology in this manner

where a country experiences high inflation for a only a few months

during the POR. As support for its position, Borusan claims that

Turkey's inflation rate for 1993 was 56 percent, which is below the

Department's established threshold of 60-65 percent (citing, inter

alia, Import Administration Policy Bulletin Number 94.5, ``Differences

in Merchandise Calculation in Hyperinflationary Economies'' (March 25,

1994) at 1, n.1).

The petitioners respond that the Department appropriately applied

its hyperinflationary methodology to the entire POR. Citing Final

Results of Administrative Review: Certain Fresh Cut Flowers from

Colombia, 61 FR 42833, 42845 (August 19, 1996) (Flowers from Colombia),

the petitioners note that, contrary to Borusan's claim that the

hyperinflationary threshold is 60 percent, the Department recently

stated that economies are considered hyperinflationary where annual

inflation is greater than 50 percent. The petitioners assert,

therefore, that the 56 percent inflation rate for 1993 cited by Borusan

is hyperinflationary.

The petitioners further add that Borusan provided no justification

for why the Department should differentiate between certain months

within the review period and state that no justification exists

because, in this case, the POR inflation rate exceeds 125 percent.

Regarding the precedent cited by Borusan for such a differentiation,

the petitioners note that Flowers from Peru was an investigation and

content that, consequently, the Department's practice of using

aggregate comparison market prices and costs in investigations (as

opposed to monthly prices in reviews) makes investigations more

appropriate proceeding for using a hyperinflationary methodology for

only part of the period.

DOC Position: We agree with the petitioners. Although Import

Administration Policy Bulletin Number 94.5 states that ``an economy is

deemed to be hyperinflationary if its monthly or annual inflation rates

are greater than 5 percent and 60 percent, respectively,'' in recent

cases we have considered inflation rates lower than 60 percent to

warrant application of our high-inflation methodology to avoid the

distortions that may be caused by such inflation. See Flowers from

Colombia, at 42845 and Notice of Final Determination of Sales at Less

Than Fair Value: Certain Pasta from Turkey, 61 FR 30309, 30314 (June

14, 1996) (Pasta from Turkey). Thus, even if we were to split the POR

into 1993 and 1994 segments as requested by Borusan, we would find high

inflation to exist for the entire period, since the inflation rate was

greater than 50 percent during both 1993 and 1994.

We further note with respect to Borusan's proposal to break the POR

into discrete periods that, although not dispositive of this issue, we

routinely examine the entire review period when determining whether

high inflation exists. Borusan has provided no compelling rationale to

depart from this methodology other than citing inflation rates for the

two periods. See Pasta from Turkey, at 30314, and Notice of Final

Results of Antidumping Duty Administrative Review: Certain Welded

Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 69068 (December

31, 1996) (the 1994-95 Review). With respect to the one case cited by

Borusan where the Department treated one portion of the period as

inflationary and the other portion as non-inflationary,

[[Page 51631]]

wholesale price index data compiled by the International Monetary Fund

(IMF) indicate that the inflation rate for the period designated as

non-inflationary in that case exceeded 50 percent. As such, the finding

in Flowers from Peru, which was made over ten years ago, conflicts with

our current practice.

Comment 2: Initiation of Cost Investigation. Borusan argues that

the Department improperly initiated a sales-below-cost investigation

because: (1) The petitioners' cost allegation was not submitted until

14 months after the deadline set forth in 19 CFR 353.31(c)(ii); and (2)

the allegation contained serious methodological flaws. With respect to

the issue of timeliness, Borusan contends that, even though the

issuance of the questionnaire and the submission of the response both

occurred after the regulatory deadline for filing COP allegations (120

days after initiation of the review), the petitioners should not be

excused for filing the COP allegation an additional six months after

the submission of the sales questionnaire response (citing Notice of

Final Results of Antidumping Duty Administrative Review: Certain Forged

Steel Crankshafts From the United Kingdom, 60 FR 52150, 52153 (October

5, 1995) (Crankshafts from the U.K.)). Borusan adds that the allegation

was insufficient because it: (1) Deducted credit expenses from the HM

prices while including them in the costs, and (2) excluded downstream

HM sales by related resellers from the analysis. Borusan contends that

because the sales-below-cost investigation was improperly initiated,

the Department should ignore the results of the cost test (citing Koyo

Seiko, Ltd. v. United States, 806 F. Supp. 1008 (1992)).

The petitioners maintain that because the Department did not issue

its questionnaire in this review until 254 days after publication of

the notice of initiation, the 120-day time limit does not apply, and

the Department was free to establish any reasonable date as the

deadline for the sales-below-cost allegation. The petitioners state,

however, that the Department did not establish a new deadline for

filing a COP allegation. The petitioners add that the computerized

version of Borusan's initial sales questionnaire response (filed in May

1995) was unreadable, as acknowledged by Borusan, and state that

Borusan did not submit a readable computer tape until September 1995.

Finally, the petitioners contend that the COP allegation itself is

accurate because: (1) Non-investment interest expenses are in fact not

included in the COPs, and (2) the exclusion of reseller sales is in

accord with Borusan's claims during the POR that the Department should

not consider such sales in its dumping analysis.

DOC Position: We agree with the petitioners. Regarding the

timeliness of the sales-below-cost allegation, section 353.31(c)(1)(ii)

of our regulations authorizes the Secretary to determine a new time

limit beyond the general 120-day limit for alleging sales below cost

if, in the Secretary's view, a relevant response is untimely or

incomplete. In this respect, we find that a number of factors warrant

our acceptance of the petitioners' allegation. The Department delayed

issuance of the sales questionnaire until February 24, 1995, and the

computerized version of Borusan's initial questionnaire response

submitted on May 25, 1995, was unreadable. Therefore, the petitioners

did not initially have the requisite data with which to make the

allegation until a readable computerized version of Borusan's

questionnaire response was submitted on September 29, 1995. Once the

petitioners received the necessary data, they filed their allegation on

January 11, 1996, which was within a reasonable time after receiving

readable computer data under the circumstances of this case. During the

period September 29, 1995, to January 11, 1996, there were closures at

the Department due to the Federal budget crisis and a blizzard (i.e.,

November 15 through 21, 1995, and December 16, 1995, through January

11, 1996). These extenuating circumstances were clearly beyond the

petitioners' control. In addition, the petitioners requested an

extension for filing their allegation. This is unlike the facts in

Crankshafts from the U.K., where the petitioners failed to make an

allegation of sales-below-cost until filing their case brief, even

though they had access to the data that would have enabled them to file

a timely allegation. Id., at 52153.

Regarding the merits of the allegation, section 773(b) of the Act

requires that the Department make a sales below cost determination

whenever it has reasonable grounds to believe or suspect that sales in

the home market have been made at prices below the cost of production.

As stated in our December 4, 1996, ``Petitioners' Allegation of Sales

Below the Cost of Production Memorandum'' (COP Allegation Memorandum),

we found that the data submitted by the petitioners, which was based on

information contained in Borusan's questionnaire responses, provided

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

cost sales.

Borusan's claims notwithstanding, we determined that the

methodology used by petitioners gave us reason to suspect that sales

were made below cost. Because petitioners excluded non-investment

interest expenses from the SG&A component of COP, thereby understating

Borusan's actual costs, they made a corresponding adjustment to price

by subtracting credit expenses. Based on this analysis there was a

considerable number of sales made below cost. Furthermore, for a

significant number of these sales the price/cost differential was such

that, even if credit expenses were added back into the price

calculation, we had reason to believe that these would have been below-

cost sales.

Second, we did not include sales made by Borusan's related

resellers in our analysis of the cost allegation because neither we nor

the petitioners could determine from Borusan's response the additional

costs incurred by the related resellers. Therefore, we did not find it

appropriate to include these sales in our analysis of whether to

initiate a below-cost investigation. See COP Allegation Memorandum.

Moreover, the sales we did examine were ``representative of the broader

range of foreign models which may be used to determine FMV for the

various U.S. models'' and our analysis of the below-cost allegation

regarding these sales indicated that there was a sufficient basis to

initiate a below-cost investigation. See Import Administration Policy

Bulletin No. 94/1, ``Cost of Production--Standards for Initiation of

Inquiry'' (March 25, 1994).

Comment 3: Exclusion of Material Costs from WPI Adjustment to COP.

The petitioners allege that the Department erroneously excluded some,

but not all, raw materials from the indexing of the cost of

manufacturing (COM). Specifically, the petitioners claim that the

Department failed to subtract varnish and coupling costs from the total

monthly COM figures before indexing. The petitioners contend that the

Department should index the rest of the COM, calculate a weighted

average, then deflate the average and add direct materials costs,

including the varnish and coupling costs, to calculate the monthly COM.

Borusan concurs with the petitioners that the Department should

subtract varnish and coupling costs before indexing and calculating the

COM.

DOC Position: We disagree with both parties. In cases involving

high inflation, it is our general practice to index all costs, whether

they are reported on a replacement cost or historical cost basis. In

the Preliminary Results, the coil, zinc, varnish and coupling costs all

should have been

[[Page 51632]]

indexed in order to derive indexed weighted-average COMs that include

raw materials costs. In high-inflation cases, it is normally the

Department's practice to request that respondents report their material

costs on a monthly replacement cost basis (i.e., the costs to the

producer to replace the materials in the month consumer). See Final

Results of Antidumping Duty Administrative Review: Ferrosilicon from

Brazil, 61 FR 59407, 59408 (November 22, 1996). This data reflects the

increases in materials costs from month to month due to inflation.

However, in accordance with our practice, we still need to index

all monthly replacement costs forward to the end of the POR in order to

calculate a POR weighted-average COM, which applies to both

inflationary and non-inflationary cases. We then deflate this POR

average COM to derive a cost for each month that is based on a POR

weighted average. This monthly cost is then compared to sales in that

month. It we did not index costs in this manner, our calculations could

be affected by monthly changes, other than inflation, that affect these

costs (i.e., price fluctuations due to material shortages).

Comment 4: Use of Production Quantity. The petitioners maintain

that the Department should use monthly production quantities contained

in Borusan's post-verification data submission rather than sales

quantities to weight-average the indexed COP.

Borusan claims that the Department did in fact use production

quantities to weight average the COP in the preliminary results and

therefore no correction is required.

DOC Position: We agree with Borusan. In the Preliminary Results, we

used the production quantities contained in Borusan's March 31, 1997,

data submission to weight-average COP (see lines 22436, 22437, 22561

and 22562 of Department's SAS margin program used in the Preliminary

Results). The preliminary results calculation memorandum erroneously

stated that we used the sales quantity to weight-average the indexed

conversion costs. See Analysis for Borusan Group (Calculation

Memorandum)(May 8, 1997). We have continued to use the production

quantities to weight-average the COP in the final results.

Comment 5: Interest Expense--Inclusion of Foreign Exchange Gains

and Losses. Borusan claims that the Department should exclude foreign

exchange losses from the interest expense calculation used in the COP/

CV calculations. Maintaining that these losses are primarily losses on

foreign currency loans due to the high inflation experienced in Turkey

and the devaluation of the Turkish Lira, Borusan contends that the

losses should be treated as an inflation adjustment and not as a cost

of production.

The petitioners maintain that Borusan should not be allowed to

exclude foreign exchange losses from its costs on the basis that a

significant portion of the foreign exchange losses resulted from

inflation. The petitioners contend that the Department already adjusts

for the inflation effects of each cost element by using its

hyperinflationary methodology to calculate infation-adjusted costs.

They further contend that the Department's practice, as set forth in

Rebar from Turkey, is to include these losses in the COP/CV financial

expenses even where the economy is considered hyperinflationary. The

petitioners also note that the Department's verification report

indicates that the interest expenses obtained were to be adjusted using

wholesale price indices for the preliminary results but that no

adjustment was made.

In addition, the petitioners argue that the Department should

disallow Borusan's reported foreign exchange gains as an offset to

interest expense because, contrary to the Department's policy for

allowing this offset, the foreign exchange gains resulted primarily

from export sales and not from the importation of raw materials.

DOC Position: We agree with the petitioners that we should include

Borusan's foreign exchanges losses and exclude Borusan's reported

foreign exchange gains in calculating the COP/CV. With respect to

foreign exchange losses, we have included this expense in our COP/CV

interest expense calculation. The cost verification report notes that

Borusan's foreign exchange losses are incurred on dollar-denominated

debt. Further, as noted by Borusan, these losses are reflected in its

income statement. The Department has clearly established that

translation losses on dollar-denominated loans, as reflected in a

company's income statement, are appropriately included in the cost of

production because they reflect an actual increase in the amount of

local currency that will have to be paid to settle these loans. See

Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses

from Ecuador, 60 FR 7019, 7039 (February 6, 1995)(Roses from Ecuador).

We not that although hyperinflation was largely responsible for the

depreciation of the Turkish Lira, the inflation factor has been

accounted for by indexing the interest expense for inflation using

WPIs. See Calculation Memorandum.

With respect to foreign exchange gains, we have not included such

gains in the interest expense calculation, consistent with our findings

in other segments of this proceeding. See the 1994-95 Review at 69072.

The record evidence demonstrates that the foreign exchange gains at

issue result from export sales transactions. See Exhibit 13 of the cost

verification report. Our practice is to include foreign exchange gains

as an offset to finance expenses if they are related to the cost of

acquiring debt for purposes of financing production operations, and to

exclude this item if it relates to sales. See Rebar from Turkey, at

9741, and Pasta From Turkey, at 30324. In this case, we find that

foreign exchange gains are related to sales, not production; therefore,

they should not be used as an offset for calculating home market

interest expenses.

Comment 6: Imputed Credit Expense in Constructed Value/Offset to

Trade Receivables and Finished Goods Inventory Portion of Interest

Expense. Borusan alleges that the Department failed to adjust the CV

interest expense factor to offset the imputed credit expense with that

portion of actual finance expenses related to the financing of trade

receivables. Borusan maintains that the Department's past practice, as

set forth in Final Determination of Sales at Less Than Fair Value:

Stainless Steel Butt-Weld Pipe Fitting from Taiwan 58 FR 28556, 28560

(May 14, 1993) (Fittings from Taiwan), is to include imputed credit

costs in CV and offset the actual finance expenses by an amount

attributed to financing trade receivables in order to avoid double

counting of finance expenses. Therefore, Borusan contends that the

Department should adjust the interest rate factor used for CV.

The petitioners respond that it is not clear that the Department

included imputed credit expenses in the CV in the preliminary results;

therefore, the Department must first ensure that it has included

imputed credit costs (and inventory carrying costs) in CV before making

any offset for trade receivables financing.

DOC Position: In the Preliminary Results, we correctly included

imputed credit expenses and inventory carrying expenses in the CV. The

inclusion of these imputed expenses in the CV is in accordance with our

established practice prior to the amendments made to the Act by the

Uruguay Round Agreements Act (URAA) effective January 1, 1995. See.

e.g., Final Determination of Sales at Less Than Value: Certain All-

Terrain Vehicles from Japan, 54 FR 4864, 4867 (January 31,

[[Page 51633]]

1989). However, we failed to adjust the interest expense in order to

avoid double counting that portion of the interest expense that

corresponds with the imputed credit expense or with the imputed

inventory carrying expenses, (i.e., financing of trade receivables and

financing of finished goods inventory). For these final results, we

offset the reported interest expense by an amount attributable to

financing trade receivables and finished goods inventory. See Fittings

from Taiwan at 28560. We calculated the offset as a percentage of trade

receivables and finished goods inventory to total assets, using the

balance reported in the audited financial statements. We then used this

ratio to reduce the interest rate used to calculate finance expenses in

our CV calculation.

Comment 7: Depreciation. The petitioners allege that Borusan

incorrectly calculated its depreciation because it did not index its

monthly depreciation expenses forward to equivalent terms. Rather, the

petitioners allege that Borusan calculated this expense by adding the

monthly amounts in its accounting records and then dividing the total

by 12. Instead of calculating a simple average, the petitioners contend

that Borusan should have inflated each monthly depreciation figure to

December 1993 so they would be expressed in equivalent terms. The

inflated figures should have then been summed and the result divided by

12 to obtain an inflation-adjusted monthly average that is then

deflated to derive depreciation costs for each month. The petitioners

further maintain that Borusan incorrectly deflated the simple monthly

average calculated for depreciation, as noted in the Cost Verification

report, and assert that the Department should deflate the monthly

average depreciation using the calculation formula shown in

verification exhibit M1.

Borusan responds that the Department should not recalculate the

average monthly depreciation figure by expressing it in December 1993

terms because, as noted in Borusan's financial statements, the

depreciation amount is already stated in December 1993 terms. Borusan

contends that the petitioners' recommended approach would result in a

double indexing of this cost. Also, Borusan states that the manner in

which it converted this December 1993 depreciation amount to monthly

POR amounts is correct. With respect to the second point, Borusan notes

that the data used by the Department in the preliminary results, based

on Borusan's March 31, 1997, post-verification submission, already

incorporated the required correction to Borusan's depreciation

adjustment in the manner prescribed in the verification report.

DOC Position: We agree with Borusan. At our request, Borusan

submitted revised COP and CV databases on March 31, 1997, in which the

depreciation adjustment was recalculated in accordance with our

instructions. The revised data were used in the preliminary results.

See Calculation Memorandum, at 4. Furthermore, Borusan's depreciation

expenses were stated in December 1993 terms in accordance with Turkish

law. Note 2 of Borusan's audited financial statements for 1992 and 1993

states that ``Turkish commercial practice and tax legislation require

that financial statements be prepared in accordance with the historical

cost convention with the sole exception of the optional revaluation of

fixed assets on the basis of indices published on an annual basis by

the Ministry of Finance.'' Note 3(f) of the financial statements

indicates that property, plant and equipment were revalued on December

31, 1993 using the Ministry of Finance's officially published index of

58.4 percent. See Exhibit 4 of Borusan's questionnaire response dated

May 8, 1995. Specifically, each month's depreciation expense was

originally reported in December 1993 cost terms, and was then deflated

to each month. See page 25 and Exhibit M-1 of the cost verification

report. Therefore, consistent with our established practice, we have

not adjusted further Borusan's depreciation expense because the

reported depreciation expense had already been adjusted for inflation

when the assets were revalued based on the Ministry's index. See Rebar

From Turkey at 9748.

Comment 8: Level of Trade. Borusan contends that the Department's

decision in the Preliminary Results to collapse certain levels of trade

(LOTs) was in error. Borusan claims that it sells to five separate LOTs

in the home market: (1) direct mill sales to trading companies (LOT 1);

(2) direct mill sales to industrial end-users (LOT 2); (3) downstream

sales to local wholesalers (LOT 3); (4) downstream sales to retailers

(LOT 4); and (5) downstream sales to industrial end-users (LOT 5).

Borusan argues that the Department's decision to collapse LOT 1 with

LOT 3, and to collapse LOT 2 with LOT 5, is based on a fundamental

misunderstanding of Borusan's reported LOTs and cannot be justified by

the evidence contained on the administrative record in the review.

Borusan contends that it met its burden of justifying its claimed

LOTs through the information submitted in its questionnaire response.

Moreover, Borusan maintains that the Department provided insufficient

explanation in the preliminary results for collapsing these LOTs.

Alternatively, if the Department rejects this argument, Borusan

requests that the Department use the same LOTs as it did in the 1994-95

Review.

The petitioners contend that Borusan did not adequately

differentiate or document the asserted five levels of trade, despite a

specific request by the Department in a supplemental questionnaire for

such differentiation and documentation.

DOC Position: We agree with the petitioners. As in the Preliminary

Results, we treated Borusan's reported LOTs 1 and 3 as one LOT, and we

treated reported LOTs 2 and 5 as one LOT.

In determining the number of LOTs under the pre-Uruguay Round

Tariff Act, we examine the function of the respondent's customers and

determine where in the distribution chain the customers fall (i.e.,

wholesaler, retailer, end-user). See Import Administration Policy

Bulletin No. 92/1, ``Matching at Levels of Trade,'' (July 29, 1992), at

2; and Final Results of Antidumping Duty Administrative Reviews:

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

to-Length Carbon Steel Plate from Canada, 61 FR 13815, 13825 (March 28,

1996). It is the respondent's responsibility to distinguish its claimed

LOTs in this manner.

Applying this standard to the instant proceeding, the information

provided by Borusan does not indicate that LOTs 1 and 3 are distinct,

nor does it adequately distinguish LOTs 2 and 5. LOT 1 involves direct

sales by Borusan to trading companies. LOT 3 involves related party

resales to wholesalers. Evidence contained in Borusan's February 26,

1996, submission indicates that there is significant overlap in the

functions performed and the place in the chain of distribution for the

customers (trading companies and wholesalers) involved in claimed LOTs

1 and 3. For instance, certain trading companies sell directly to

retailers; these trading companies have the same function in the chain

of distribution as wholesalers, i.e., both function as resellers of the

subject merchandise to retailers. Thus, the fact that claimed LOT 1

involves direct sales while claimed LOT 3 involves resales does not

establish that separate LOTs in fact exist for these sales, absent

evidence that the customers involved in these two groups of sales

occupy different places in the chain of distribution. Because the

information provided by Borusan does

[[Page 51634]]

not indicate such differences in the chain of distribution, we

determined that LOTs 1 and 3 are appropriately considered as one level

for this review.

Our decision to collapse reported LOTs 2 and 5 is based on the same

principle. Claimed LOT 2 involves direct sales to end users, while

claimed LOT 5 involves related party resales to end users. As with

claimed LOTs 1 and 3, our examination of the record evidence indicates

that there is a significant overlap in the function of the customers in

the chain of distribution for these claimed levels (end users in both

cases). We therefore have collapsed LOT 2 with LOT 5. See Final

Determination of Sales at Less Than Fair Value: Certain Carbon and

Alloy Steel Wire Rod from Canada, 59 FR 18791, 18794 (April 20, 1994).

Finally, as to Borusan's argument that we use the same LOTs used in

the 1994-95 Review, the criteria upon which we examined Borusan's LOT

argument in 1994-95 Review cannot be applied to this review because

those criteria apply to cases administered under the URAA. See also

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

831.

Comment 9: Gross Unit Price Correction. The petitioners contend

that the Department should correct the gross unit price reported for

the first sales transaction examined at verification (i.e., SVE M.1)

based on its findings.

Borusan maintains that the Department found at verification that

the gross unit price reported for the sales transaction was correct.

DOC Position: We agree with the petitioners. The gross unit price

reported for the sales transaction at issue is incorrect because that

price is based on an incorrect weight amount noted in the sales

invoice. Although Borusan reported the weight listed in the invoice,

that weight was incorrectly calculated based on formulas used to

convert feet to metric tons. Therefore, we have corrected this error in

the sales database.

Comment 10: Verification Corrections. The petitioners state that

the Department should ensure that the errors noted in Borusan's March

31, 1997, submission have been corrected in the final data used in this

proceeding.

Borusan states that the Department used sales and cost databases

that incorporated data corrections contained in its March 31, 1997,

submission. Therefore, Borusan contends that there is no need for the

Department to make any additional changes to Borusan's sales and cost

information in the final results.

DOC Position: We agree with the petitioners and have ensured that

the sales and costs databases that we are using for the final results

incorporate all corrections from verification. In the course of

examining whether the corrections noted in the March 31, 1997,

submission were in fact included in the sales and cost databases, we

found that certain corrections noted in verification exhibit A1,

regarding customer-specific quantity rebates granted on 1993 sales,

were not included in the home market database. We have corrected this

for the final results.

Comment 11: Countervailing Duty Adjustment. Borusan maintains that

the Department erred in not making an upward adjustment to U.S. price

for countervailing duties as required by section 772(d)(1)(D) of the

Act.

The petitioners did not comment on this issue.

DOC Position: We agree with Borusan. Since the countervailing

duties in question concern export subsidies, we have added to the U.S.

price an amount for said duties (i.e., the actual amount paid in CVD).

This amount was determined by multiplying the 7.26 ad valorem rate by

the C&F value net of ocean freight expenses and CVD. See Exhibit O1 of

the cost verification report.

Comment 12: Imputed Interest on VAT Payments. Borusan argues that

the Department failed to allow a circumstance of sale (COS) adjustment

for financing expenses incurred on making VAT payments in the home

market. Borusan maintains that it must finance its payment of VAT

taxes, and that this expense represents a carrying expense incurred by

Borusan until it receives payment for the invoiced amount (inclusive of

VAT) for sales made to its home market customers. Borusan contends that

there is no discernible difference between adjusting for credit

expenses accrued in connection with sales and financing costs incurred

on VAT payments. Therefore, Borusan states that section 353.56 of the

Department's regulations authorizes the Department to make an

adjustment to account for the carrying costs incurred in financing VAT

payments.

The petitioners respond that the claimed adjustment does not

constitute a COS adjustment as defined in section 353.56 of the

Department's regulations. The petitioners cite to the 1994-95 Review

where the Department disallowed a COS adjustment for the same VAT

drawback claimed by Borusan in the present case.

DOC Position: We agree with the petitioners, and, consistent with

our treatment of this item in other segments of this proceeding, have

disallowed a COS adjustment for imputed interest resulting from delayed

refunds of VAT paid on inputs. See the 1994-95 Review, at 69076.

Allowing Borusan such an adjustment would involve imputing an expense

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

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

affect the notion of true economic cost to [the respondent], it tells

us nothing about the difference in prices that result from the

different circumstances of sale.'' See Federal-Mogul Corp. v. United

States, 839 F. Supp. 881, 885 (November 30, 1993).

Further, to the extent that Borusan incurs such an expense, it is

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

other words, there is no direct relationship between the imputed

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

for making a COS adjustment.

Comment 13: Indexation of Packing Expenses. Borusan contends that

the Department should have indexed the packing expenses in connection

with home market and U.S. sales because the Department found that

Turkey experienced hyperinflation during the POR.

The petitioners argue that the Department should not index packing

expenses because the packing costs contain a large component of raw

materials which are already reported on a replacement cost basis.

DOC Position: We agree with Borusan and have indexed Borusan's

packing expenses in both markets. Because the timing of packing

materials purchases in a hyperinflationary economy may result in an

over- or under-statement of net prices, our practice is to index all

packing costs in the manner done for COM. See Pasta From Turkey, at

30323, and the 1994-95 Review, at 69071.

Moreover, as noted above in Comment 3, in accordance with our

practice, all costs, including materials, are indexed in

hyperinflationary economy cases. Therefore, we do not accept the

petitioners' argument that packing costs should not be indexed because

some of the packing expenses are reported on a replacement cost basis.

Comment 14: Direct Selling Expenses. Borusan argues that the

Department incorrectly deducted direct selling expenses from U.S. price

and added these expenses to FMV, thus double counting the expenses.

Borusan cites to section 773(a)(4) of the Act in support of its

argument.

The petitioners did not comment on this issue.

[[Page 51635]]

DOC Position: We agree with Borusan and have corrected this error

in the final results. To make the COS adjustment, we have deducted home

market direct selling expenses from FMV and then added U.S. direct

selling expenses to FMV.

Comment 15: Conversion of Certain Direct Selling and Movement

Expenses. Borusan contends that the Department incorrectly converted

certain direct selling and movement expenses from Turkish Lira to U.S.

dollars by using exchange rates based on dates of sale rather than on

dates of shipment.

The petitioners did not comment on this issue.

DOC Position: We agree with Borusan. In accordance with our

practice, we have corrected the error by using exchange rates based on

the date of shipment to convert expenses from Turkish lira to U.S.

dollars. See Final Determination of Sales at Less Than Fair Value:

Silicon Metal From Brazil, 56 FR 26977, 26980 (June 12, 1991) (Comment

3).

Comment 16: Assessment Rate. On August 1, 1997, we informed Borusan

and the petitioners that we intended to calculate importer-specific ad

valorem assessment rates on entered value. Since our antidumping

questionnaire did not request Borusan to submit entered values in its

questionnaire response, we informed the parties that we would calculate

entered values by subtracting international freight charges from the

gross unit prices reported in the U.S. sales database.

The petitioners contend that to calculate the entered values the

Department should also subtract from the gross unit prices the discount

that Borusan grants its customers.

Borusan did not comment on this issue.

DOC Position: We agree with the petitioners. We have removed all

discounts from gross unit prices to calculate entered values.

Final Results of Review

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

exist for the period May 1, 1993, through April 30, 1994:

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

Margin

Manufacturer/exporter Review period (percent)

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

Borusan.................................... 5/1/93-4/30/94 4.01

Yucelboru.................................. 5/1/93-4/30/94 0.00

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

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. The Department will

issue appraisement instructions directly to Customs.

For Yucelboru, a cash deposit rate of zero will be effective for

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

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

final results of this administrative review, as provided by section

751(a) of the Act.

For Borusan, the cash deposit rate will continue to be 2.57

percent, the rate effective since May 16, 1997, which was published in

the Notice of Amended Final Results of Antidumping Duty Administrative

Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 62 FR

27013 (May 16, 1997).

For merchandise exported by manufacturers or exporters not covered

in this review but covered in the original less-than-fair-value (LTFV)

investigation or a previous review, the cash deposit will continue to

be the most recent rate published in the final determination or final

results for which the manufacturer or exporter received a company-

specific rate; if the exporter is not a firm covered in this or a prior

review or the original investigation, but the manufacturer is, the cash

deposit rate will be that established for the manufacturer of the

merchandise; and if neither the exporter nor the manufacturer is a firm

covered in this or any previous review, the cash deposit rate will be

14.74 percent, the ``all others'' rate established in the LTFV

investigation.

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice also serves as final reminder to importers of their

responsibility to file a certificate regarding the reimbursement of

antidumping duties prior to liquidation of the relevant entries during

this review period. Failure to comply with this requirement could

result in the Secretary's presumption that reimbursement of antidumping

duties occurred and the subsequent assessment of double antidumping

duties.

This notice is the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 C.F.R. 353.34(d). Failure to

comply is a violation of the APO.

This administrative review and notice are in accordance with

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

353.22.

Dated: September 25, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-26196 Filed 10-1-97; 8:45 am]

BILLING CODE 3510-DS-M