Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review: Circular Welded Non-Alloy Steel Pipe From the Republic of Korea

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-809]

Final Results of Antidumping Duty Administrative Review and

Partial Termination of Administrative Review: Circular Welded Non-Alloy

Steel Pipe From the Republic of Korea

AGENCY: International Trade Administration, Import Administration,

Department of Commerce.

ACTION: Final Results of Antidumping Duty Administrative Review and

Partial Termination of Administrative Review: Circular Welded Non-Alloy

Steel Pipe From the Republic of Korea.

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

SUMMARY: On July 9, 1997, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on circular welded non-alloy steel pipe from the

Republic of Korea. The review covers the following seven manufacturers/

exporters: Dongbu Steel Co., Ltd. (Dongbu), Korea Iron Steel Company

(KISCO), Korea Steel Pipe Co., Ltd. (KSP), Pusan Steel Pipe Co., Ltd.

(PSP), Dongkuk Steel Mill Co., Ltd. (DSM), Dong-Il Steel Mfg. Co., Ltd.

(Dong-Il), and Union Steel Co., Ltd. (Union). The period of review

(POR) is April 28, 1992, through October 31, 1993. We are also

terminating the review for one company, Hyundai Pipe Co., Ltd., because

the sole request for review of

[[Page 55575]]

this company has been withdrawn in a timely manner.

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

changes, including corrections of certain inadvertent programming and

clerical errors, to the margin calculations. Therefore, the final

results differ from the preliminary results. We have listed the final

weighted-average dumping margins for the reviewed firms below in the

section entitled ``Final Results of the Review.''

EFFECTIVE DATE: October 27, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Panfeld, Mark Ross, Thomas

Schauer, or Richard Rimlinger, Import Administration, International

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

Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-

4733.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Tariff Act), are references to the provisions in

effect as of December 31, 1994. In addition, unless otherwise

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

to the regulations as codified at 19 CFR part 353 (1997).

Background

On July 9, 1997, the Department published in the Federal Register

the preliminary results of its administrative review of the antidumping

duty order on circular welded non-alloy steel pipe from the Republic of

Korea (62 FR 36761). We gave interested parties an opportunity to

comment on our preliminary results. No interested party requested a

hearing.

We are terminating the review with respect to Hyundai Pipe Co.,

Ltd. On March 16, 1994, the petitioners withdrew their request for

review. No other interested party requested a review of this firm.

Scope of Review

The merchandise subject to this review is circular welded non-alloy

steel pipe and tube, of circular cross-section, not more than 406.4mm

(16 inches) in outside diameter, regardless of wall thickness, surface

finish (black, galvanized, or painted), or end finish (plain end,

beveled end, threaded, or threaded and coupled). These pipes and tubes

are generally known as standard pipes and tubes and are intended for

the low-pressure conveyance of water, steam, natural gas, air, and

other liquids and gases in plumbing and heating systems, air-

conditioning units, automatic sprinkler systems, and other related

uses. Standard pipe may also be used for light load-bearing

applications, such as for fence tubing, and as structural pipe tubing

used for framing and as support members for reconstruction or load-

bearing purposes in the construction, shipbuilding, trucking, farm

equipment, and other related industries. Unfinished conduit pipe is

also included in this order.

All carbon-steel pipes and tubes within the physical description

outlined above are included within the scope of this review except line

pipe, oil-country tubular goods, boiler tubing, mechanical tubing, pipe

and tube hollows for redraws, finished scaffolding, and finished

conduit. In accordance with the Department's Final Negative

Determination of Scope Inquiry on Certain Circular Welded Non-Alloy

Steel Pipe and Tube from Brazil, the Republic of Korea, Mexico, and

Venezuela (61 FR 11608, March 21, 1996), pipe certified to the API 5L

line-pipe specification and pipe certified to both the API 5L line-pipe

specifications and the less-stringent ASTM A-53 standard-pipe

specifications, which falls within the physical parameters as outlined

above, and entered as line pipe of a kind used for oil and gas

pipelines is outside of the scope of the antidumping duty order.

Imports of these products are currently classifiable under the

following Harmonized Tariff Schedule (HTS) 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. Although the HTS subheadings are

provided for convenience and customs purposes, our written description

of the scope of this proceeding is dispositive.

Non-Shippers

DSM and Dong-Il responded that they had no shipments of the subject

merchandise during the POR. We confirmed this information for both

companies with the U.S. Customs Service. Therefore, we have terminated

the review with respect to these companies.

Sales Below Cost in the Home Market

The Department performed a test to determine whether respondents

sold pipe in the home market at prices below the cost of production

(see Preliminary Results of Antidumping Duty Administrative Review;

Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 62 FR

36761, 36763 (July 9, 1997) (Korean Pipe Preliminary Results)). As a

result of that test, the Department disregarded sales below cost for

Dongbu, KSP, PSP, and Union in its analysis for these final results.

Analysis of Comments Received

A. General Issues

Comment 1: Petitioners allege that the Department deducted home

market commissions twice from home market price in calculating foreign

market value.

PSP, KSP, and Dongbu assert that because they reported no

commissions this issue is moot.

Department's Position: We agree with petitioners that we

inadvertently deducted commissions twice from the home market price in

the preliminary results. We changed the final results computer programs

to correct this error. However, because no respondents reported home

market commissions, this change does not affect the calculation of the

dumping margins.

Comment 2: The petitioners contend that, in the less-than-fair-

value (LTFV) investigation, the Department recognized that the

conversion factors the respondents used to translate actual to

theoretical weight were flawed due to wall build-up in the production

process (citing Final Determination of Sales at Less than Fair Value;

Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 57 FR

42942, 42945 (September 17, 1992) (Korean Pipe LTFV Final)). The

petitioners contend that the Department used the conversion factors in

the LTFV investigation because it could not find evidence that the wall

build-up resulted in understated costs. In the instant review, the

petitioners again argue that the Department should deny an adjustment

to cost of production/constructed value (COP/CV) based on differences

between actual and theoretical weight because (1) the respondents have

not demonstrated the accuracy of this adjustment and (2) the conversion

factors are not consistent with sales data in each response.

The petitioners maintain that the Department attempted to resolve

this matter by requesting sample cost calculations on a length basis.

However, the petitioners contend that the respondents have frustrated

this review by reporting a calculated pipe length based on a

theoretical-weight factor rather than on actual length. Petitioners

further contend that, due to the spot-check nature of verifications, it

is unlikely that the Department would find systematic understatement of

costs. Contrary to the Department's statements in its notice of

preliminary results that it has not found understated costs at

[[Page 55576]]

verification, the petitioners point to proprietary information the

Department collected at verification that they contend proves that wall

build-up does occur and, therefore, argue that the Department should

not accept respondents' adjustment.

In addition, the petitioners contend that the data are inconsistent

and unreliable. The petitioners assert that they conducted an analysis

of the two weight bases (standard actual and theoretical) which

respondents (other than KISCO) used to report home market sales and

costs. According to petitioners, they used the standard actual weight,

theoretical weight and reported length for each sale to calculate a

conversion factor in their analysis. Petitioners conclude from their

analysis of the data that the reported conversion factor differs from

the calculated conversion factor for a significant number of sales and

models. Moreover, the conversion factors respondents used to convert

weight for COP and CV calculations differed from those conversion

factors they used to report sales on a model-specific basis and,

according to petitioners, the range of differences is great. Finally,

petitioners note that some reported conversion factors used for both

sales and costs fall outside industry specifications and, therefore,

are inaccurate. Thus, notwithstanding their argument that respondents'

failed to meet their burden of proof, petitioners conclude that the

Department cannot rely on respondents' data.

The petitioners argue that it is the Department's long-standing

practice that a party requesting an adjustment must prove its

entitlement. Asserting that respondents have failed to properly justify

this adjustment and have failed to respond properly to the Department's

requests for information, petitioners contend that the Department

should deny the adjustment as best information available (BIA) under

section 776(c) of the Tariff Act.

KISCO, Union, Dongbu, PSP, and KSP disagree with the petitioners.

Union maintains that the Department correctly converted its

calculations to a theoretical basis. The other respondents claim that

the Department should perform the same conversion in calculating CV

and, in the case of Dongbu, KSP, and PSP, in performing the sales-

below-cost test by using costs converted to a theoretical-weight basis.

Respondents argue that the Department should use theoretical costs

since the Department will compare these costs to sales reported on a

theoretical-weight basis.

Respondents disagree with the petitioners' conclusion that the

Department should not convert actual-weight-basis costs because

respondents have failed to justify this adjustment. Respondents argue

that they record U.S. sales, home market sales, and production costs on

different quantitative bases. Respondents point to a March 18, 1994,

letter to interested parties from the Division Director of the

Department's Office of Antidumping Compliance that instructed

respondents to report sales and costs on a theoretical-weight basis.

Respondents argue that the theoretical-weight conversion factor is not

an adjustment per se. Rather, they contend, it is merely an attempt to

express production costs, U.S. sales, and home market sales on a

consistent basis so that the Department can make an apples-to-apples

comparison. Therefore, respondents assert, the burden of proof normally

associated with, for example, a circumstance-of-sale adjustment is not

applicable.

Dongbu, PSP, and KSP disagree with the petitioners' conclusion that

their data are inaccurate. Respondents argue that the Department has

verified that the record-keeping and methodologies respondents have

used in recording and reporting costs were accurate and that

petitioners have failed to point out any verification results that show

otherwise. Moreover, respondents claim that the petitioners' analysis

of conversion factors used in the sales and cost databases is flawed.

Respondents maintain that, while they have reported the sales data on a

standard-actual-weight basis, they have reported the costs on an

actual-weight basis. Furthermore, respondents note that standard-actual

weight varies from actual weight when input coil thicknesses vary and

that the record demonstrates this fact. Moreover, respondents contend

that the record does not support petitioners' assumption that

respondents reported costs on a standard-actual-weight basis.

Therefore, respondents conclude, any analysis of these two types of

conversion factors would likely yield differences.

KISCO states that, although the petitioners characterize this as an

issue common to all respondents, they failed to identify any errors in

KISCO's reporting methodologies.

Department's Position: We disagree with the petitioners in part.

The use of theoretical-weight-based sales prices and costs is not a

price or cost adjustment per se but a conversion to a different basis

that allows an apples-to-apples comparison. While respondents kept and

reported their COP on an actual-weight basis, respondents made and

reported their U.S. sales on a theoretical-weight basis. Therefore, a

conversion is necessary to make equitable comparisons.

While petitioners contend that the conversion factors respondents

used to translate actual weight to theoretical weight were flawed due

to wall build-up in the production process, we have verified the cost

data KSP, PSP, and Union submitted. We found that, with some minor

exceptions we noted in the respective verification reports, these

respondents' costs and conversion factors were reported properly. Our

verifications generally demonstrated that these respondents captured

and properly assigned all costs to the subject merchandise produced

during the POR. Wall build-up would only have significance if

respondents first calculated a per-metric-ton or per-kilogram cost for

the steel inputs and then applied those costs to a theoretical or

standard-actual weight of the pipe. In this instance, respondents

assigned the cost of one entire coil input to all of the merchandise

produced from that input, which is generally one type of pipe. Thus,

because all costs were captured and because the methodologies

respondents used to assign costs are consistent with the methodologies

they used to record production (i.e., actual weight), the possibility

that wall buildup may occur is inconsequential. Finally, with the

exception of the aberrant conversion factors noted below, we found at

verification that respondents calculated the reported conversion

factors properly by dividing the total actual weight of production of

each model by the theoretical weight of that production.

We also agree with respondents that certain differences among the

weight-conversion factors result when different coil-input thicknesses

are used to make the same product. This is acceptable within industry

standards so long as the ultimate product meets specification

tolerances. Moreover, the petitioners' analysis is flawed because it

compares standard-actual weight to theoretical weight. Respondents

provided the conversion factors to convert their reported actual-

weight-basis costs to theoretical weight (the basis of the United

States prices (USPs)). The standard-actual weights that petitioners use

in their analysis are not the actual weight but rather the standard

weight respondents used in Korea, much as theoretical weight is a

standard weight used in the United States. Therefore, some weight-

conversion disparities are not unusual on a sale-by-sale or sale-to-

[[Page 55577]]

cost basis. However, we have conducted our own analysis of the

reported conversion factors and agree with the petitioners that certain

individual factors are aberrational.

Using the maximum industry-standard tolerance of wall thickness, we

calculated the minimum conversion factor allowable in various grades of

standard pipe. We found that respondents reported model-specific

conversion factors that fall below this minimum. For more information,

see the final results analysis memoranda, dated October 2, 1997.

Because it is impossible to produce a pipe that is within the industry-

standard tolerances yet has a conversion factor below this minimum, we

consider certain reported conversion factors to be aberrational and

unverifiable under 19 CFR 353.37(a)(2). As such, we have disregarded

these aberrational factors and applied BIA in accordance with section

776(c) of the Tariff Act. As BIA, we examined the conversion factors

each respondent reported for the 1992 and/or 1993 costs for the same

model. If these factors were both below the minimum, as BIA we used the

minimum possible conversion factor. If one factor was below and the

other factor was above the minimum, as BIA we used the higher of the

two.

Comment 3: Petitioners contend that, except for Union, all

respondents paid duties on an actual-weight basis while they received

duty drawback on a theoretical-weight basis. Petitioners assert that

the duty drawback respondents received per unit of pipe therefore

exceeds the duties they paid on the inputs for the pipe because the

theoretical weight is greater than the actual weight. Citing section

772(d)(1)(B) of the Tariff Act, petitioners state the Department is to

increase the USP on each sale by ``the amount of import duties imposed

by the country of exportation which have been rebated'' on each of

those sales. Citing Avestra Sheffield Inc. et. al. v. United States, 17

CIT 1212, 1216 (1993) (Avestra Sheffield), petitioners continue that

the Department is not required to accept the full amount of the duty

drawback respondents claimed (as it does not reflect the actual duties

paid) even if it finds the two conditions of the duty-drawback test

enumerated in Far East Machinery Co. v. United States, 699 F. Supp.

309, 312 (1988) (Far East Machinery) have been met (test set forth

below). Thus, to ensure that the duty drawback reflects the duties paid

on materials actually incorporated into the exported product,

petitioners insist that the Department limit respondents' reported duty

drawback by the amount of actual duties paid.

Dongbu, KSP, and PSP contend that the Department's long-standing

practice has been to grant a full duty-drawback adjustment when (1) the

import duty and the pertinent rebate are directly linked to, and

dependent upon, one another, and (2) the company claiming the

adjustment can demonstrate that there were sufficient imports of raw

materials to account for the duty drawback received on the exports of

the manufactured product (citing Far East Machinery at 311). Dongbu,

KSP, and PSP assert that they met both required conditions and are

therefore entitled to their full duty-drawback claim.

Dongbu, KSP, and PSP further contend that, by arguing that

respondents receive more duty drawback than duties paid, the

petitioners are making a claim of subsidy. Citing Far East Machinery,

respondents contend that the Department cannot address subsidy

allegations in an antidumping proceeding.

Finally, Dongbu, KSP, and PSP argue that the petitioners are

requesting a level of precision required neither by common sense nor by

law and that only a reasonable, not an absolute, standard of precision

is required. Respondents contend that the petitioners' reliance on

Avestra Sheffield is misplaced because, respondents assert, that case

required only that the foreign producer demonstrate that it has

imported a sufficient amount of raw materials to account for the

drawback received upon exportation to satisfy the second condition.

KISCO argues that petitioners did not identify any evidence in the

record that supports this assertion with respect to its duty-drawback

claim. KISCO further contends that the Department's verification

directly contradicts the petitioners' assertion, in which the

Department determined that KISCO paid the duties for which KISCO

received duty drawback and that KISCO accurately quantified duty

drawback in its response.

Department's Position: We agree with petitioners in part. Section

772(d)(1)(B) of the Tariff Act directs us to add to USP ``the amount of

any import duties imposed by the country of exportation which have been

rebated, or which have not been collected, by reason of the exportation

of the subject merchandise to the United States' (emphasis provided).

Thus, the plain language of the statute directs us to add to USP the

amount of import duties paid and rebated. That is, we are not to add

the rebate but rather the duties that have been rebated. Therefore, if

the rebate received is greater than the duties paid, we are to increase

USP only by the amount of the actual duties paid.

While it is true that the Court of Appeals for the Federal Circuit

(CAFC) ruled in Far East Machinery that, if petitioners ``are arguing

impliedly that the * * * export rebate system * * * results in

excessive rebates because of lack of adequate controls, such an

allegation is properly made in the context of a countervailing duty

case, not the present antidumping suit,'' the CAFC continued in its

decision to state ``[n]onetheless, ITA is not limited to accepting the

full value of the ``rebate'' as an adjustment * * * even if there is

some linkage and even if the requisite import duties were paid on

suitable goods. That is, in deciding what the proper adjustment should

be when the linkage is broad-based ITA may make its own determination

as to how much of the rebate reflects actual cost elements of the

product under investigation, that is, how much actually represents

drawback.'' See Far East Machinery at 313-14. Thus, even if a

respondent meets both parts of the duty-drawback test set forth in Far

East Machinery, which all respondents in this case did, we are only

required to adjust the USP for the amount of drawback applicable to the

inputs actually used, whereas respondents received revenue pursuant to

a drawback claim based on theoretical weight, which, because it exceeds

the actual weight of the merchandise, includes an amount of drawback

not attributable to the actual input or duties paid on that input. The

second part of the test entitles respondents to a ``duty drawback

adjustment to U.S. price [up to] the amount of import duty actually

paid.'' See Far East Machinery at 312.

We examined the record and determined that petitioners' comment

applies only to duty drawback received under the ``fixed-rate'' duty

drawback provision and not an ``individual-transaction'' duty-drawback

provision. We found that, when respondents received duty drawback under

the individual-transaction duty-drawback provision, companies received

duty drawback based on the duties actually paid on the input of the

exported product. In the fixed-rate duty-drawback provision of Korean

law, companies merely needed to demonstrate that they had sufficient

imports of the input to cover the exports of the finished merchandise

and that they paid duties on the imports of the input. Respondents were

not required to demonstrate to the Korean government that the amount of

the drawback claim did not exceed the amount of duties paid. We also

found that companies

[[Page 55578]]

receiving duty drawback under the fixed-rate provision paid duties on

the basis of the actual weight of inputs imported but received drawback

on the basis of the theoretical weight of merchandise exported to the

United States. Because theoretical weight is generally greater than

actual weight, fixed-rate drawback calculated on a theoretical-weight

basis is greater than that calculated on an actual-weight basis.

Therefore, we conclude that the reported duty drawback of respondents

who received the drawback under the fixed-rate provision exceeds the

duties actually paid. Furthermore, we note that respondents did not

dispute the fact that they received duty drawback in excess of the

duties they paid on imports but, rather, disputed whether this fact is

relevant.

We also disagree with respondents' argument that the petitioners

are requesting a level of precision that neither common sense nor law

requires. While it is true that we require a reasonable, rather than an

absolute, standard of precision, the result in this case is a

reasonable and logical one, as has also been demonstrated by the

interpretation of this provision of the Tariff Act by the Court of

International Trade (CIT) in various cases. See Far East Machinery,

Avesta Sheffield, and Carlisle Tire & Rubber Co. v. United States, 657

F. Supp. 1287 (March 16, 1987).

Finally, we agree with KISCO that it did not receive duty drawback

in the manner that petitioners describe. KISCO received duty drawback

under the individual-transaction provision. Thus, the petitioners'

comment is not applicable to KISCO.

Accordingly, where respondents reported that they received duty

drawback under the fixed-rate provision, we adjusted the drawback claim

to reflect the amount of duty drawback actually paid by multiplying the

reported duty drawback by the factor converting theoretical weight to

actual weight. Because KSP and PSP received drawback under the fixed-

rate provision for the entire POR, we made this adjustment for all

sales. See KSP's April 7, 1994, submission at page 55 and PSP's April

11, 1994, submission at page 64. Because Dongbu received drawback under

the fixed-rate provision prior to April 1993, we made this adjustment

for all of Dongbu's sales made prior to April 1993 and have not

adjusted the drawback that Dongbu reported for sales made as of April

1993. See verification report for Dongbu dated March 18, 1997, at page

8. Because KISCO and Union did not receive duty drawback under the

fixed-rate provision, no adjustment to these companies' reported duty

drawback was necessary.

Comment 4: The petitioners argue that the Department should treat

indirect purchase price (IPP) sales which Union, KISCO, PSP, KSP, and

Dongbu made as exporter's sales price (ESP) sales. The petitioners

assert that the Department uses four criteria to test when a sale can

be classified as purchase price: (1) The sale transaction must occur

prior to importation; (2) the merchandise in question is shipped

directly from the manufacturer to the unrelated buyer without being

introduced into the inventory of the related selling agent; (3) the

transaction represents a customary commercial channel for sales of this

merchandise between the parties involved; and (4) the related agent in

the United States acts only as a processor of sales-related

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

Petitioners assert that respondents have not met two of these criteria

and, therefore, their sales to U.S. affiliates do not qualify as

purchase price transactions.

First, the petitioners contend that, generally, the U.S.

subsidiaries of the respondents take title to the merchandise in Korea

through a bill of lading and relinquish title when the merchandise

clears the U.S. Customs Service. Thus, the petitioners argue, the

merchandise enters the affiliate's inventory and, therefore, the

transactions do not meet the second criterion.

Second, the petitioners allege that the affiliates act as more than

just a processor of documents. With slight variations in each company's

factual situation, petitioners argue generally that the affiliates

purchase the merchandise from the manufacturers and obtain a letter of

credit to pay the manufacturers. Thus, the petitioners conclude, the

affiliates incur carrying costs until they receive payment from the

U.S. customers. Petitioners also contend that the affiliates incur the

obligation to pay U.S. Customs duties, marine insurance, and U.S.

brokerage and handling expenses and they carry accounts receivables on

their books until their U.S. customers settle their accounts.

Therefore, the petitioners contend, the affiliates incur the risk of

extending credit to their U.S. customers and bear the expenses of

carrying accounts receivables. The petitioners argue that these

circumstances lead to the conclusion that the affiliates perform

substantive functions beyond the simple ``processing of documents''

criteria outlined in the Department's purchase price test.

Dongbu, Union, PSP, and KSP argue that the sales-related activities

mentioned by the petitioners, such as incurring expenses, taking

physical and legal ownership, and obtaining and extending credit, ring

hollow when compared with the record evidence and Departmental and

judicial precedents. Moreover, the respondents argue that the

petitioners fail to provide a citation to support their position that

carrying merchandise in a merchandise-in-transit account equals

physical possession or holding merchandise in inventory.

Respondents, citing Certain Corrosion-Resistant Carbon Steel Flat

Products from Korea; Final Results of Antidumping Duty Administrative

Reviews (Carbon Steel from Korea), 61 FR 18547, 18562 (April 26, 1996),

argue that, even assuming that legal control of the merchandise

temporarily passes to the U.S. affiliate to facilitate transportation,

this constitutes a routine selling function because the sale occurs

prior to importation, thus satisfying one of the Department's four

factors to meet purchase price status. Respondents also argue that the

factual situation regarding the relationships and selling activities of

the respondents' affiliates are nearly identical to those in Certain

Cold-Rolled and Corrosion Resistant Carbon Steel Flat Products from

Korea; Final Results of Antidumping Duty Administrative Reviews (Carbon

Steel from Korea II), 62 FR 18404, 18423 (April 15, 1997), and in fact

involved two of the same companies. In that case, respondents contend,

the Department classified these sales as purchase price sales.

Respondents also refer to recent judicial precedents on this

subject. For example, respondents point out that the CIT has upheld the

classification of sales as purchase price sales in circumstances where

the related U.S. company undertook activities similar to, or even more

extensive than, those in this instance (citing, e.g., Outokumpu Copper

Rolled Products v. United States, 829 F. Supp. 1371, 1379-1380 (CIT

1993), E.I. du Pont de Nemours & Co., Inc. v. United States, 841 F.

Supp. 1237, 1248-50 (CIT 1993), and Zenith Electronics Corp. v. United

States, Consol. Ct. No. 88-07-00488, Slip Op. 94-146 (CIT) (Zenith)).

KISCO asserts that the record does not support petitioners' points.

KISCO claims that the Department's verification report confirms that

KISCO's exported merchandise is shipped directly to the unrelated U.S.

customer without entering the inventory of its U.S. affiliate, Dongkuk

International Inc. (DKA). Moreover, KISCO claims that DKA is merely a

processor of sales documents. KISCO

[[Page 55579]]

concludes that sending invoices, receiving payment, and arranging for

U.S. Customs Service clearance are precisely the types of activities

routinely performed by U.S. affiliates in IPP situations.

Department's Position: We disagree with petitioners that we should

treat the sales made through the U.S. affiliates and claimed as IPP

sales as ESP sales. Whenever companies make sales prior to the date of

importation through an affiliated sales entity in the United States, we

classify these sales as purchase price sales if the following

considerations apply: (1) The manufacturer shipped the subject

merchandise directly to an unrelated buyer without the merchandise

being introduced into the inventory of the related shipping agent; (2)

direct shipment from the manufacturer to the unrelated buyer is the

customary channel of the sales transaction between the parties

involved; and (3) the related selling agent in the United States acts

only as a processor of sales-related documentation and a communication

link with the unrelated U.S. buyer. See, e.g., Final Determination of

Sales at Less than Fair Value; Certain Stainless Steel Wire Rods from

France, 58 FR 68865, 68868 (December 29, 1993), and Granular

Polytetrafluoroethylene Resin from Japan; Final Results of Antidumping

Duty Administrative Review, 58 FR 50343, 50344 (September 27, 1993).

The Department first developed this test in response to the CIT's

decision in PQ Corporation v. United States, 652 F. Supp. 724, 733-35

(CIT 1987). The test is used to classify transactions involving

exporters and their U.S. affiliates, and the Department has routinely

applied this test in its determinations. See, e.g., Zenith.

Petitioners do not dispute that the companies made the sales prior

to exportation. Nor do the petitioners dispute that this is a customary

channel of distribution. Therefore, the precondition that these sales

are made prior to importation and one of the three considerations for

classifying the sales as purchase price sales are not at issue. Thus,

we must only determine whether respondents shipped the merchandise

directly to the unaffiliated U.S. customer without entering merchandise

into the affiliate's inventory and whether the affiliate acted as more

than a processor of documents and a communications link.

We agree with respondents that the merchandise does not enter the

inventory of the U.S. affiliate. The terms of sale for these

transactions are ex-dock, duty-paid. In these circumstances,

respondents transfer the merchandise to the unaffiliated U.S. customer

immediately after clearing U.S. Customs. Although the affiliate may

temporarily take title to the merchandise, this amounts to a simple

accounting entry. The existence of a ``merchandise-in-transit'' account

in the affiliates'' accounting records does not indicate that the

merchandise enters the affiliates' inventory.

We also agree with respondents that neither the nature nor the

scope of their affiliates' selling activities in the United States

exceed those types of activities that one would expect an exporter to

undertake in connection with IPP sales. Based on the respondents'

narrative explanation of the sales process and our verification of the

U.S. sales, we conclude that the respondents' U.S. affiliates did not

control the sales-negotiation process or perform other significant

selling functions; rather, they acted as a communication link passing

on the sales documents from the parent to the U.S. unaffiliated

customer. The types of activities which the petitioners allege

constitute an active role do not constitute substantial selling

activities. The U.S. affiliate's role is to function as a processor of

paperwork, not perform significant selling functions. See Carbon Steel

from Korea. Therefore, as in many similar instances, we consider these

sales to be purchase price transactions.

Comment 5: Petitioners allege that respondents in this proceeding

directly paid or reimbursed antidumping duties within the meaning of

Sec. 353.26 (a) of the Department's regulations. To account for

reimbursement, petitioners assert that, in calculating assessment and

duty deposit rates for the final results, the Department must deduct

from USP the amount of antidumping duties determined to be due on sales

made through respondents' affiliated importers.

In support of their reimbursement allegations, petitioners cite to

sales-process and terms-of-sale descriptions on the record in this

review. Petitioners assert that these descriptions imply that

respondents control both the prices their affiliated importers paid and

the prices their affiliated importers charge to unrelated U.S.

customers. Petitioners contend that this price control and the

existence of ``duty paid'' terms of sale allow the affiliated importers

to compensate for the duties by charging higher prices and, therefore,

constitute evidence of reimbursement of antidumping in accordance with

Sec. 353.26(a)(1)(ii) of the Department's regulations.

Petitioners make additional claims in support of the reimbursement

allegations against PSP, KSP, and Union. For PSP, petitioners claim

that a ``contingent liability for antidumping duty deposits'' listed on

the company's 1992 financial statement is evidence of reimbursement.

Petitioners acknowledge that the charge was reversed in the subsequent

year but contend that PSP did not conclusively establish that it did

not continue to be liable for the antidumping duties. For KSP,

petitioners assert that, because its affiliated importer went bankrupt,

KSP will bear any duties the affiliate owes above the amount of

antidumping duty deposited. Petitioners contend that this would

constitute direct payment of antidumping duties in accordance with

Sec. 353.26(a)(1)(i) of the Department's regulations.

Petitioners also contend that the Department should collapse KSP

and PSP with their affiliated importers in accordance with certain

collapsing factors outlined by the Department in Certain Cold-Rolled

Carbon Steel Flat Products From Korea; Preliminary Results of

Antidumping Duty Administrative Review, 60 FR 65284 (December 19, 1995)

(Steel from Korea 1993/94 Review Preliminary Results). Citing to record

evidence, petitioners contend that two of the collapsing factors

outlined by the Department in Steel from Korea 1993/94 Review

Preliminary Results apply to PSP and KSP and their affiliated importers

in this review. According to petitioners, the two collapsing factors

are (1) the level of common ownership and (2) intertwined company

operations (e.g., sharing of sales information, involvement in

production and pricing decisions, sharing of facilities or employees,

and transactions between companies). Petitioners assert that, once the

Department collapses the parties, it must make a finding of

reimbursement, reasoning that in a collapsing situation payment of

antidumping duties by the affiliated importer are essentially the same

as payment by respondents.

As additional support for a finding of reimbursement against Union,

petitioners claim that in examining this respondent in the LTFV

investigation of another proceeding the Department found that Union's

affiliated importer's role in paying antidumping duty deposits is a

relocation of routine selling functions from Korea to the United

States. Petitioners claim that such a scenario amounts to

reimbursement.

Petitioners conclude with a suggestion of how the Department should

apply the reimbursement regulation after making a determination of

reimbursement under Sec. 353.26(a) of the Department's regulations.

Citing

[[Page 55580]]

Color Television Receivers from the Republic of Korea; Final Results of

Antidumping Duty Administrative Review, 61 FR 4408, 4411 (February 6,

1996) (Korean TVS), petitioners claim that in practice the Department

has not always applied the adjustment for reimbursement in accordance

with Sec. 353.26(a) of the Department's regulations. In calculating

assessment and duty deposit rates for the final results of this

administrative review, petitioners request that the Department deduct

from USP the amount of antidumping duties determined to be due on sales

through respondents' affiliated importers.

Respondents claim that petitioners failed to cite any specific

evidence to show that foreign producers have determined to pay the

dumping duties of their affiliated importers or that the importers will

avoid such payment. Respondents rely on Torrington Co. v. United

States, 881 F. Supp. 622, 631-32 (CIT 1995), as support for the premise

that affirmative evidence of record is required to establish

reimbursement. Respondents assert that a mere allegation does not rise

to the enumerated standard and note that they are not aware of any

Departmental findings of reimbursement absent specific evidence of

payment of duties (or agreement to pay) on behalf of the importer.

Regarding petitioners' assertion that foreign producers reimbursed

affiliated importers for antidumping duties by manipulating the prices

charged, respondents contend that the Department has consistently

recognized that the existence of such pricing is not evidence of

reimbursement, even in situations where the transfer prices between the

affiliated parties are so low that they are below cost. Among other

court decisions, respondents cite Torrington Co. v. United States, 960

F. Supp. 339, 342 (CIT 1997), and INA Walzlager Schaeffler KG v. United

States, 957 F. Supp. 251, 269-270 (CIT 1997), in support of this

argument.

Next, respondents address petitioners' assertion that the

Department should find reimbursement by collapsing the foreign

producers with their affiliated importers. Respondents claim that

collapsing is irrelevant to the issue of reimbursement. Citing Certain

Circular Welded Non-Alloy Steel Pipe from Mexico; Final Results of

Antidumping Duty Administrative Review, 62 FR 37014, 37023 (July 10,

1997) (Pipe from Mexico), and Brass Sheet and Strip from Sweden; Final

Results of Antidumping Duty Administrative Reviews, 57 FR 2706, 2708

(January 23, 1992), respondents request that the Department continue

its practice of treating the foreign producers and their affiliated

importers as separate entities for purposes of examining reimbursement.

KSP contends that, contrary to petitioners' claim, the bankruptcy

of its affiliated importer does not constitute evidence of

reimbursement. KSP notes that the affiliated importer is the importer

of record and paid the estimated antidumping deposit for entries

subject to review and asserts that, if additional duties are due, U.S.

Customs will request payment from the affiliated importer. KSP claims

that it is uncertain whether it is under any legal obligation to pay

assessments for its affiliated importer and contends that petitioners'

claims to the contrary are pure conjecture.

PSP contends that the antidumping duties listed as contingent

liabilities on its 1992 financial statements do not support a finding

of reimbursement. Citing to the Department's Cost Verification Report,

PSP notes that it mistakenly listed the contingent liability on the

1992 financial statements and that it corrected the error in the

subsequent year. Since the contingent liability was reversed, PSP

contends that there is nothing on the record showing that it is liable

for the payment of antidumping duties.

Department's Position: We agree with respondents. Section 353.26 of

our regulations requires that, in calculating USP, we deduct the amount

of any antidumping duty that the producer or exporter directly paid on

behalf of or reimbursed to the importer. The court has ruled that this

regulation requires ``evidence beyond mere allegation that the foreign

manufacturer either paid the antidumping duty on behalf of the U.S.

importer, or reimbursed the U.S. importer for its payment of the

antidumping duty.'' Federal-Mogul Corp., 918 F. Supp. at 393 (citing

Torrington Co. v. United States, 881 F. Supp. 622, 631 (CIT 1995)). In

Korean TVs, the Department specifically stated that it would not

presume reimbursement between affiliated parties absent specific

evidence that the exporter will pay or reimburse the antidumping duties

due. During this review, the Department found neither evidence of an

agreement between respondents and their affiliated importers for

reimbursement of antidumping duties nor evidence of actual

reimbursement of these duties between the two affiliated parties.

Petitioners are correct that PSP had a contingent liability for

antidumping duties on its 1992 financial statement. However, we found

no evidence that this account was in any way related to the

reimbursement of antidumping duties. Furthermore, as noted by

respondents, we verified that the entry was an error and that the

company corrected the mistake by reversing the entry in the subsequent

year.

We have disregarded the allegation of reimbursement based on the

claim that KSP will pay duties owed above the amount posted by its

bankrupt affiliated importer. First, based upon these final results,

KSP's duty assessments will be significantly lower than the amount

deposited. Even if the assessment had been higher in the final results,

our regulations characterize reimbursement as duties ``paid directly on

behalf of the importer.'' We have found no legal authority that would

substantiate petitioners' claim that the U.S. Customs Service can

pursue the foreign parent for the satisfaction of the bankrupt

importer's antidumping duties. Furthermore, petitioners have not cited

to a specific example in which the U.S. Customs Service was authorized

or obligated to collect duties from the foreign parent of an importer.

There is no evidence on the record indicating that the foreign parent

is legally obligated to take on the bankrupt importer's duty

liabilities. Thus, the petitioners' claim that reimbursement occurs

under the current facts has no merit.

Respondents are also correct in stating that collapsing them with

their affiliated importers for the purposes of reimbursement, as

petitioners advocate, is contrary to our practice. As we have noted

before, while we sometimes treat affiliated parties as a single entity

for purposes of the margin calculation, we treat such parties as

separate entities when examining the question of reimbursement. See,

e.g., Pipe from Mexico at 37023.

For the forgoing reasons, we do not find reimbursement of

antidumping duties within the meaning of Sec. 353.26(a) of our

regulations. However, as a further measure to account for

reimbursement, Sec. 353.26(b) of our regulations requires that

importers provide the U.S. Customs Service a certificate of non-

reimbursement before liquidation of entries. If they do not file that

certificate, we will presume that reimbursement took place and instruct

the U.S. Customs Service to double the antidumping duties due.

Comment 6: Petitioners note that the Department found at the cost

verifications of KSP and PSP that these companies had calculated their

selling, general and administrative expense (SG&A) factors and interest

expense factors using a cost-of-goods-sold denominator that includes

packing

[[Page 55581]]

expenses. They further note that the cost of manufacturing (COM)

respondents used to calculate SG&A and interest expenses does not

include packing. Petitioners contend that KSP and PSP have therefore

understated their SG&A and interest expenses, and they assert that both

Dongbu and Union duplicated this inconsistency. Petitioners argue that

the Department should recalculate SG&A and interest expense by

multiplying the factor by the sum of reported home market packing

expenses and the submitted COM.

KSP, PSP, Dongbu, and Union argue that an adjustment to the

reported expense is not warranted. Respondents assert that they

followed the Department's standard practice, which, according to

respondents, is to calculate these factors by dividing the expenses by

the cost of goods sold from the financial statements. Respondents also

allege that the Department never informed them that it required a

change to the methodology, and they claim that they only learned of

this possible change upon receiving the verification reports.

Therefore, respondents contend, there is no compelling reason to adjust

the data when complete data may or may not be available to make the

adjustment. They also contend that if the Department adjusted these

factors it would be a minimal adjustment.

Department's Position: We agree with petitioners. While we

typically prefer that respondents calculate the SG&A and interest

expense factors using data contained in the financial statements, they

should have calculated the factor on the same cost basis as the COM to

which they applied the factor. As noted by petitioners, respondents'

methodology for calculating the factors understates the reported SG&A

and interest expenses. To correct this problem, we have added packing

expenses to the reported COM for all companies to recalculate SG&A and

interest expenses. This ensures that the factors, and the COM to which

we apply them, are comparable and corrects the under-reporting of SG&A

and interest expenses.

Comment 7: KSP, PSP, Dongbu, and Union assert that the Department

inadvertently double-counted selling expenses in the cost test.

Respondents note that the Department deducted selling expenses from the

home market prices it used in the cost test but then included the

expenses in the COP it used in the cost test. Respondents contend that

this error can be corrected by not including selling expenses in the

COP used in the cost test.

Department's Position: We agree with respondents that we made an

error with regard to the home market selling expenses in the cost test.

We did not, however, correct the error as respondents suggested but,

rather, corrected the error by not deducting selling expenses from the

home market prices we used in the cost test. Our correction effectively

achieves the same result as the correction respondents suggest by

ensuring that we have included and excluded the same expenses in the

prices to which we compare the COP.

Comment 8: Respondents claim that the preliminary results of review

contained the wrong scope description. Respondents assert that the

scope the Department used contains a substantive error in that it

includes mechanical tubing, a product that neither the International

Trade Commission's affirmative injury determination nor the scope of

the antidumping duty order covers. Respondents request that, in the

final results of review, the Department publish the scope language set

forth in the antidumping duty order.

Petitioners agree that the Department should modify the scope

description it published in the preliminary results to exclude

mechanical tubing but contend that the scope description requires only

a minor modification to achieve this. Petitioners also assert that the

scope description should state clearly that standard pipe with

mechanical type applications, such as fence tubing, is included in the

order.

Department's Position: We agree with respondents and petitioners

that the scope description we published in the preliminary results was

incorrect. For the final results, we have adopted respondents'

suggestion and revised the scope description so that it is consistent

with the one published in the notice of antidumping duty order. See

Notice of Antidumping Duty Orders; Certain Circular Welded Non-Alloy

Steel Pipe from Brazil, the Republic of Korea (Korea), Mexico, and

Venezuela, and Amendment to Final Determination of Sales at Less Than

Fair Value; Certain Circular Welded Non-Alloy Steel Pipe from Korea, 57

FR 49453, 49454 (November 2, 1992). We did not adopt the petitioners'

suggestion for correcting the error since the scope description

published in the notice of antidumping duty order states clearly that

standard pipe used for light load-bearing applications, such as fence

tubing, is included in the antidumping duty order.

Comment 9: PSP and KSP contend that the Department miscalculated

their ESP assessment rates by dividing total ESP dumping duties due by

the entered value of all entries of subject merchandise made by their

affiliated importers during the POR. Respondents contend that this

methodology is distortive since the total quantity and entered value of

all POR subject merchandise entries of their affiliated importers are

different from the total quantity and entered value of subject sales

used to determine the dumping duties due on ESP transactions. Citing

Color Picture Tubes from Japan; Final Results of Antidumping Duty

Administrative Review, 62 FR 34201, 34211 (June 25, 1997) (CPTs from

Japan), respondents note that the Department's practice for the

calculation of ESP assessment rates is to divide the total dumping

duties due for ESP sales by the total entered value of the same ESP

sales. To correct the error in the ESP assessment-rate calculation

respondents suggest that the Department calculate an average entered

value based on the total price and quantity of all POR subject entries

made by their affiliated importers, multiply the average entered value

by the quantity of reported ESP sales, and use the resulting total

entered value for ESP sales as the denominator in the calculation of an

ESP assessment rate.

Department's Position: In most cases, we calculate assessment rates

on ESP sales by dividing the total dumping margins for the reviewed

sales by the total entered value of those reviewed sales for each

importer. See, e.g., Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, Germany, Italy, Japan,

Singapore, Sweden, and the United Kingdom; Final Results of Antidumping

Duty Administrative Reviews and Partial Termination of Administrative

Reviews, 61 FR 66472, 66475 (December 17, 1996), and CPTs from Japan at

34211. In our questionnaire, we asked respondents to report the entered

value of subject merchandise for their ESP sales. In response to our

request, PSP and KSP explained that they could not provide this

information since they were unable to tie entries to sales. As an

alternative reporting methodology, respondents gave us the total

quantity and value of all POR subject entries of their affiliated

importers. In the preliminary results, we used this information to

calculate assessment rates for ESP transactions. However, we have

reconsidered our use of this data in calculating assessment rates for

the final results.

For situations where the respondent does not know the entered value

of the merchandise for ESP sales, it has been our practice to calculate

either an approximate entered value or an average per-unit dollar

amount of antidumping duty based on all sales examined during

[[Page 55582]]

the POR. See Antifriction Bearings (Other Than Tapered Roller Bearings)

and Parts Thereof from the Federal Republic of Germany; Final Results

of Antidumping Duty Administrative Review, 56 FR 31692, 31694 (July 11,

1991). For the final results of this administrative review, we have

adopted the latter approach for all transactions subject to review

(i.e., ESP, direct purchase price, and IPP) because this is a more

precise calculation under the circumstances. We calculated a per-unit

dollar amount of antidumping duty by dividing the total antidumping

duties due for each importer/customer by the corresponding number of

units we used to determine the duties due. We will direct Customs to

assess the resulting per-ton dollar amount against each ton of

merchandise on each of the importers'/customers' subject entries during

the review period. This addresses respondents' concerns about the fact

that the entered values do not correspond to the total entered value of

sales we used to determine the dumping duties due.

Comment 10: Dongbu, PSP, KSP, and Union contend that the model-

match hierarchy the Department used in the preliminary results

improperly places wall thickness above surface finish (black or

galvanized). Respondents argue that the Department's hierarchy defies

commercial reality in that it assumes that a customer who is unable to

obtain galvanized pipe of a particular wall thickness would find a

black pipe of the same wall thickness to be more similar than a

galvanized pipe of a different wall thickness. Respondents reason that

a customer will only incur the significant additional costs associated

with galvanized pipe if there is a sufficient need for the corrosion

resistance afforded by the galvanization.

Department's Position: We disagree with respondents' contention

that surface finish should be placed above wall thickness in the model-

match hierarchy. We acknowledge that galvanization plays a significant

role in the matching hierarchy, but we do not agree that it is more

important than a dimensional characteristic such as wall thickness.

After grade and nominal pipe size, wall thickness is the next most

important criterion in the model match. Wall thickness is a significant

factor of compatibility in pipe applications, especially when dealing

with pipe of a small diameter. For the merchandise subject to this

review, we consider surface finish to be less important than the

dimensional characteristics because users of this merchandise can

freely interchange black and galvanized products if the dimensional

characteristics are the same. The significant difference between

galvanized and black pipe is that the galvanized pipe will last longer

in a corrosive environment.

In this administrative review, the matching hierarchy we applied is

consistent with the one we applied in the LTFV investigation. See

Korean Pipe LTFV Final at 42944. While the hierarchy the Department

used in the LTFV investigation is not binding, respondents have not

provided sufficient facts to warrant a change. Thus, lacking a

compelling reason, we have not changed the matching criteria for the

final results. Furthermore, with respect to our ranking of wall

thickness above surface finish, adopting this position is in the

interest of maintaining a stable and predictable approach to the

antidumping duty margin calculations and is consistent with our

position on the matching hierarchy for other proceedings involving

steel pipe. See, e.g., Appendix VI of the March 22, 1996, questionnaire

for the 1994/1995 administrative review of the antidumping duty order

on circular welded non-alloy steel pipe and tube from Mexico or

Appendix V of the questionnaire for the 1995/1996 administrative review

of the antidumping duty order on certain welded carbon standard steel

pipes and tubes from India.

B. Company-Specific Issues

KSP

Comment 1: Petitioners argue that the Department should ensure that

in KSP's post-verification submission KSP made all corrections the

Department identified in KSP's sales and cost verification reports.

KSP contends that it made all such corrections.

Department's Position: We have reviewed the revised computer tape

submission which we requested that KSP submit and are satisfied that

KSP made all the corrections we identified in our sales and cost

verification reports regarding KSP.

Comment 2: Petitioners assert that the Department should reject

KSP's U.S. and home market sales response because the information it

reported, according to petitioners, is unreliable. Petitioners note

that the Department found the following problems: the date of shipment

for one U.S. sale and the date of payment for a number of U.S. sales

were incorrect; KSP was unable to produce invoices for some

transactions through KSP's U.S. affiliate; KSP could not produce its

affiliate's bank statements demonstrating payment. Petitioners further

observe that KSP's failure to report its home market sales net of

returns and inclusion of returned goods in the home market sales

database may cause distortion. For these reasons, petitioners contend

that the Department should reject KSP's United States and home market

sales responses and calculate KSP's margin using BIA.

KSP argues that the petitioners ignored a significant body of

evidence on the record that confirms the accuracy of KSP's responses

and relied on isolated issues that arose during the sales verification.

With regard to the U.S. sales data to which petitioners refer, KSP

contends that, while it was unable to present the documents the

Department prefers to examine for some sales, the Department was able

to verify the information using alternative methodologies. KSP also

argues that petitioners exaggerate and highlight minor differences on

reported sales dates and payment dates. With regard to the home market

sales data to which petitioners refer, KSP argues that its methodology

is reasonable and the effect that returned goods have on weighted-

average prices would be inconsequential, given the relatively small

quantity of returned goods to home market sales and the stability of

home market prices during the POR. KSP concludes that, because it

cooperated with all of the Department's requests for information and

because its submissions were successfully verified, the application of

BIA to KSP's U.S. sales would be inappropriate.

Department's Position: We agree with respondents. With regard to

the dates of shipment and payment, we found that, of the discrepancies

noted by petitioners, all, with one exception, would have been

disadvantageous to KSP had we not found the discrepancies and allowed

KSP to correct them. With regard to the fact that KSP was unable to

produce certain documents we requested, we note that KSP was able to

present other documentation that supported the data it reported in its

response. We are reviewing a POR that ended in 1993. KSP's U.S.

affiliate filed for bankruptcy proceedings in 1993 and no longer

operates. It is appropriate to recognize the lapse of time since the

POR ended and the fact that the U.S. affiliate is no longer in

operation. In our view, KSP cooperated to the best of its ability,

considering the circumstances. Due to the fact that we were able to tie

the reported information back to other documentation and that, in our

view, the errors to which petitioners refer are not nearly as grave as

petitioners assert, we are satisfied with the accuracy of KSP's U.S.

sales database.

[[Page 55583]]

With regard to home market sales returns, it is impossible to

determine from the record whether any distortion exists or what effect

this hypothetical distortion, if it exists, may have on the margin. As

KSP notes, the quantity of returned goods was very small in proportion

to the volume of home market sales, which would suggest that any

distortion that may exist would have, at best, a minuscule effect on

the margin. Therefore, we have used KSP's home market sales database

because there is no record evidence that KSP's reporting methodology is

distortive. To simply reject KSP's entire home market sales response

because KSP was not able to match returns to sales would be, in our

view, unwarranted and punitive, given the cooperation that KSP

provided.

Comment 3: Petitioners argue that KSP's interest expense must be

recalculated to exclude certain offsets for interest income because KSP

could not demonstrate that the underlying investments were short-term

in nature at verification.

KSP does not object to a modification of its interest expense

factor to account for income that was not proven to be associated with

short-term investments as long as the adjustment is limited to that

income alone.

Department's Position: We agree with petitioners. Short-term-

interest expense may only be offset by short-term-interest income.

Because KSP could not demonstrate that the underlying investments were

short-term in nature at verification, we have disallowed these items of

interest income as an offset to interest expense and recalculated KSP's

interest-expense factor accordingly.

Comment 4: KSP asserts that the Department improperly treated the

schedule of ASTM pipe, i.e., the wall thickness, as a grade

specification in applying the model-match hierarchy. KSP asserts that

the schedule of ASTM pipe represents wall thickness and argues that,

since wall thickness is a distinct characteristic under the

Department's physical-characteristics hierarchy, it should be

disregarded in matching pipe by grade specification.

Department's Position: We agree with KSP. We have corrected this

error for the final results.

Comment 5: KSP argues that the Department should disregard level of

trade in making model matches for KSP because there is no evidence on

the record indicating any correlation between prices or expenses and

levels of trade in the home market in the case of KSP. KSP further

notes that this issue was the subject of litigation in the LTFV

investigation, where the CIT remanded the issue to the Department to

conduct a correlation test to determine whether any correlation between

prices or expenses and levels of trade existed. According to KSP, the

Department found, after conducting this test, that no such correlation

existed and recalculated KSP's margin without regard to level of trade.

KSP also submitted an analysis of prices and selling expenses based on

the home market sales data it previously submitted to demonstrate that

there was no correlation in the current POR.

Petitioners contend that the Department should reject KSP's level-

of-trade analysis because it is untimely and flawed, stating that its

test data cannot be verified or carefully analyzed. Petitioners also

contend that KSP's assertion that the results of the LTFV investigation

compel the same result in this review is incorrect and assert that the

Department's policy is to treat discernable levels of trade as separate

unless a party provides evidence that there is not a significant

correlation between prices and selling expenses on the one hand and

levels of trade on the other.

Petitioners argue that the analysis KSP submitted in its case brief

is flawed with regard to unit prices because it compares aggregate

prices rather than monthly prices and, therefore, may be subject to

other market factors, distorting the analysis. Petitioners further

argue that the analysis is flawed with regard to selling expenses

because the selling expenses KSP uses in its analysis were all

allocated proportionally to all sales in the response regardless of

level of trade.

Department's Position: We agree with petitioners in part and with

KSP in part. Because petitioners are correct in arguing that each

review stands alone, whatever factual pattern may have existed during

the LTFV investigation does not pertain to our findings in this review.

Therefore, to be consistent with the past practice of this case, we

conducted a correlation test to determine whether there is a

significant correlation between prices and levels of trade. In this

test we compared home market prices net of movement and packing

expenses by level of trade. We found that there is no significant

correlation between prices and level of trade for KSP. For a more

detailed discussion of our finding, see KSP's Final Results Analysis

Memorandum, dated October 2, 1997. Furthermore, while it is true that

we cannot conduct a study of the correlation of selling expenses

because KSP allocated its indirect selling expenses proportionally to

all sales, a study of selling expenses is moot because there is a lack

of correlation between prices. Therefore, we conclude that matching

KSP's sales by level of trade in this review is not appropriate and

have modified KSP's margin calculation accordingly.

PSP

Comment 1: Petitioners argue that the Department should use BIA to

calculate foreign inland freight, foreign brokerage, and wharfage on

PSP's direct purchase price sales for which it did not report an

adjustment before verification. Petitioners note that the Department

found at verification that PSP failed to report these per-unit

adjustments for many direct purchase price sales and corrected the

error by providing average amounts based on purchase price sales on

which it had previously reported the transaction-specific amounts.

Petitioners contend that since PSP did not provide the information in a

timely fashion the Department should reject the average adjustments and

instead apply BIA. Petitioners suggest that the Department use as BIA

the highest amount for any sale on which PSP reported adjustments on a

transaction-specific basis.

PSP claims that the use of average amounts instead of transaction-

specific amounts is reasonable and non-distortive because the

differences between the average amounts and the amounts reported are

insignificant. PSP contends that BIA is inappropriate since there is no

evidence that it meant to exclude the transaction-specific adjustments

or attempted to manipulate the data through the reporting of averages.

PSP concludes that manipulation is not possible when the missing

figures represent three minor adjustments on a relatively small number

of sales and that the three charges are exactly the type of charges

that are often reported as averages. PSP asserts, therefore, that the

application of BIA would be inappropriate.

Department's Position: We have disregarded PSP's claim that the use

of average amounts instead of transaction-specific amounts for the

movement adjustments is reasonable and non-distortive because the

company's claims are unsubstantiated and, despite its ability to

provide actual transaction-specific expenses, PSP did not do so.

For the final results, we have disregarded the weighted-average

per-unit adjustments PSP provided at verification. Instead, we made the

adjustment based on partial BIA. Section 776(c) of the Tariff Act

requires that we use BIA ``whenever a party or any other person refuses

or is unable to produce information requested in a

[[Page 55584]]

timely manner and in the form required, or otherwise significantly

impedes an investigation.'' Despite PSP's claim to the contrary, we

find there are a significant number of sales on which the firm did not

provide the transaction-specific movement adjustments. Our examination

of freight records at verification revealed that PSP could have

provided transaction-specific amounts instead of averages. Since we are

not satisfied that PSP reported the adjustments to the best of its

ability, our application of partial BIA is warranted. In Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From

France, et al.; Final Results of antidumping Duty Administrative

Reviews, Partial Termination of Administrative Reviews, and Revocation

in Part of Antidumping Duty Orders, 60 FR 10900, 10907 (February 28,

1995), we applied partial BIA in similar situations.

Thus, for the direct purchase price sales where PSP did not report

transaction-specific movement adjustments, as partial BIA we applied

the highest amount for any purchase price sale on which PSP reported

transaction-specific values for foreign inland freight, foreign

brokerage, and wharfage. We note that, even in a partial BIA situation,

BIA is intended to be adverse. This induces respondents to provide

timely, complete, and accurate information. In this situation, we are

making an adverse inference that the unreported adjustments would have

been higher than the weighted-average movement adjustments PSP

provided.

Comment 2: Citing PSP's sales verification report, petitioners

contend that PSP misallocated adjustments for U.S. duties, U.S.

brokerage, and U.S. handling charges since it incurred the charges

based on product value but allocated the charges on a theoretical-

weight basis. Petitioners assert that PSP's methodology results in

distortions where an entry covers merchandise of varying values, i.e.,

allocation by weight disregards the fact that some products are more

expensive than others and, therefore, a weight-based allocation may

assign lower charges than required. To correct this problem, the

petitioners request that the Department multiply the entered value of

the merchandise by the duty rate to determine U.S. duties and by the ad

valorem charges for brokerage and handling to determine U.S. brokerage

and U.S. handling.

PSP contends that petitioners misunderstand the methodology it used

to calculate U.S. duties, U.S. brokerage, and U.S. handling and request

that the Department dismiss the arguments. PSP explains that, for

situations where an entry covered more than one type of merchandise, it

employed a two-step allocation process to derive the reported per-

metric-ton movement expenses. PSP explains that in the first step it

allocated the total charge for an entry (which is based on an ad

valorem duty rate and total value of all products on the entry) to

individual products based on the cost-and-freight value of each

individual product divided by the total value of all products on the

entry. In the second step, PSP states, it calculated the reported per-

metric-ton expense by dividing the value from the first step by the

total weight of the individual product. PSP asserts that petitioners

focused on the second step of the calculation mistakenly in reaching

their assumption that the allocation methodology is based solely on

weight and would result in distortions where the entry consists of

merchandise that varies in value.

Department's Position: We agree with PSP. The description of the

allocation methodology that the petitioners cite from our verification

report only applies to situations where the entry covered a single type

of merchandise. For entries covering more than one type of merchandise

PSP employed a two-step allocation process. The first step in the

allocation process assigns expenses to individual products based on

value and, by that, avoids the distortions which petitioners allege.

Comment 3: PSP contends that the Department neglected to add duty

drawback to its ESP sales.

Petitioners note that PSP paid the duties on an actual-weight basis

and received drawback on a theoretical-weight basis. Citing to the

arguments on this issue elsewhere, petitioners contend that if the

Department grants PSP a drawback adjustment it must reduce the claimed

adjustment by the amount of the conversion factor.

Department Position: We agree with PSP that we neglected to add

duty drawback to its ESP sales. However, we also agree with petitioners

that the claimed duty-drawback adjustment must be reduced by the amount

of the conversion factor before adding the adjustment to USP (see our

response to Comment 5 in the ``General Issues'' section of this notice

for a complete summary of the interested parties' arguments and the

Department's position on adjusting duty drawback). Accordingly, we

added the duty drawback to USP up to the amount of the actual duty

paid.

Comment 4: Petitioners assert that PSP did not follow the

methodology the Department required for calculating factors to use to

derive the per-unit general and administrative (G&A) expenses and

interest expenses reported in the COP and CV datasets. Petitioners

argue that, because PSP failed to report its data in the manner the

Department requested, the Department should use the ten-percent

statutory minimum for SG&A as BIA. Petitioners contend that, if the

Department does not base PSP's SG&A on BIA, it must recalculate the G&A

expense and interest expense factors using the methodology the

Department identified in its November 8, 1996, supplemental

questionnaire and based on a cost-of-goods-sold denominator that is

exclusive of packing expenses and all non-operating incomes.

PSP contends that it calculated the factors for G&A expenses and

interest expenses properly and requests that the Department use the

values it reported for the final results. PSP claims that the

Department's factor-calculation methodology double-counts G&A expenses

associated with resales by its affiliates because it increases the

total expense in the numerator to include the additional expenses

associated with resales by PSP's affiliates but does not

correspondingly increase the cost of sales in the denominator. PSP also

asserts that the methodology it utilized is acceptable since it is

consistent with methodology the Department accepted for POSCO in the

LTFV investigations involving steel products from Korea. PSP also

claims that the G&A expense factor is approximately the same regardless

of the methodology employed.

Petitioners argue that PSP is incorrect about the Department's

factor-calculation methodology double-counting G&A expenses associated

with resales by its affiliates. Petitioners assert that the cost of

sales in the denominator of the factor calculation does not need to

include the cost of sales connected with the affiliates' resales of

PSP's merchandise because PSP bore the cost of the sales, not the

affiliates. Petitioners also contend that the methodology the

Department applied to POSCO should be ignored and request that

Department decide the methodology to apply based on the facts of the

current review. Finally, petitioners assert that, if the G&A expense

factors truly are similar regardless of the methodology employed, then

PSP should have no objection to using the Department's methodology.

Department's Position: We agree with petitioners in part. As

petitioners assert, the cost of sales in the denominator of the

expense-factor calculations does not need to include the cost of sales

connected with the affiliates' resales of

[[Page 55585]]

PSP merchandise. This is because PSP bore the cost of the sales, not

the affiliates. Our factor-calculation methodology therefore does not

result in double-counting but, rather, results in a more reasonable

estimate of PSP's per-unit G&A expenses and interest expenses for use

in calculating COP than PSP's methodology. Thus, for the final results,

we have recalculated the G&A expense and interest expense factors using

the methodology we required in our November 8, 1996, supplemental

questionnaire. We also adjusted the numerator in the factor calculation

to account for the fact that the cost-of-goods-sold denominator

includes packing expenses. See our response to Comment 6 in the

``General Issues'' section of this notice for a more detailed

explanation of this adjustment. Contrary to petitioners' suggestion, we

did not need to adjust the factor calculations for non-operating income

since we verified that PSP properly excluded all such income. After

making these adjustments, PSP's reported SG&A expenses are above the

ten-percent statutory minimum and, therefore, we used the actual SG&A

expenses for calculating CV.

Dongbu

Comment 1: Petitioners contend that the Department's failure to

verify Dongbu's cost response violates the statute. Citing section

776(b) of the Tariff Act, petitioners claim that the statute requires

the Department to verify Dongbu's cost response since it ``relied

upon'' this information in calculating the margin. Petitioners claim

that, since significant corrections were either presented to, or found

by, the Department at the cost verifications of other respondents and

at the sales verification of Dongbu, it is likely the same would have

occurred if the Department verified Dongbu's cost submission. Finally,

the petitioners cite their January 17, 1997, comments on Dongbu's COP

and CV submission in support that ``good cause'' existed for a

verification.

Dongbu asserts that in accordance with section 776(b)(3) of the

Tariff Act the Department was under no legal obligation to verify any

part of its submission. Citing Timken Co. v. United States, 852 F.

Supp. 1122, 1130 (CIT 1994), Dongbu contends that the courts have

interpreted the statutory provision as not requiring verification of a

respondent during the first administrative review even if the

respondent at issue was not subject to the original investigation.

Dongbu notes that in this review the Department verified its sales data

and contends that the results of that verification are a sufficient

basis for concluding that its entire response is accurate and complete.

Dongbu also contends that the result of its sales verification or cost

verification of other respondents is irrelevant to a determination of

whether its cost data are accurate.

Department's Position: We agree with Dongbu. For an administrative

review, section 776(b)(3)(B) of the Tariff Act states that we will

verify all information upon which we rely if ``good cause'' exists or

we conducted no verification during the two immediately preceding

reviews. Since this is the first administrative review, the latter

requirement was not a consideration in deciding whether to verify

Dongbu's cost data. We did however take into consideration whether

``good cause'' exists for the verification of this information. We took

all of the petitioners' comments into consideration and, where we

decided it was necessary, we requested or made corrections. Given the

analysis we performed and our time, resources, and other constraints,

we decided not to verify Dongbu's cost data. Furthermore, contrary to

petitioners' assertion, we found no discrepancies at Dongbu's sales

verification or the cost verifications of other respondents that

suggest Dongbu's cost data is unreliable. Since we are satisfied with

Dongbu's cost data, we find no ``good cause'' to require a cost

verification and relied upon Dongbu's information for these final

results.

Comment 2: Petitioners assert that the Department should

recalculate the home market interest rate Dongbu used to impute credit

expenses for its home market sales in order to account for short-term

usance loans that relate to production. Petitioners argue that it is

the Department's policy to treat all short-term loans as fungible for

the calculation of a weighted-average short-term interest rate. Without

evidence that the loans were not used to finance sales, petitioners

contend that the Department must use the usance loans to recalculate

Dongbu's home market short-term interest rate. However, petitioners

assert that such a recalculation is not possible because Dongbu did not

provide accurate information on the usance loans. Therefore, in

recalculating the home market short-term interest rate for the final

results, petitioners suggest that as BIA the Department weight-average

the lowest reported usance-loan interest rate with the home market

weighted-average short-term interest rate used for the preliminary

results based on the ratio of Dongbu's usance loans to its total short-

term borrowings.

Dongbu contends that the Department should not make the change

petitioners request. Dongbu asserts that the Department verified its

weighted-average short-term interest rate fully in this review. In

addition, Dongbu asserts that the Department has accepted its

methodology in the administrative reviews of the antidumping duty

orders on cold-rolled and corrosion-resistant steel from Korea. Dongbu

argues that the Department should not account for the usance loans in

the calculation of its home market weighted-average short-term interest

rate because they relate specifically to the financing of raw-material

purchases. Dongbu also argues that the petitioners' suggestion for

adjusting the interest rate for usance loans based on BIA is

unwarranted. Dongbu asserts, however, that if the Department applies

this methodology, the Department should not use petitioners' data for

weight-averaging the lowest reported usance loan with the borrowing

rate used to impute credit expenses for the preliminary results. Dongbu

contends that petitioners mistakenly weight-averaged the two rates

using the ratio of the U.S. affiliate's, Dongbu Corporation's, usance

loans to its total short-term borrowings instead of the ratio

applicable to Dongbu Steel Co., Ltd. Dongbu therefore requests that if

the Department weight-averages the two rates to account for usance

loans it must use Dongbu Steel Co., Ltd.''s borrowing experience as the

basis of this calculation.

Department's Position: Dongbu calculated the home market weighted-

average short-term interest rate to measure its cost of extending

credit on home market sales when it sold merchandise on account. In

calculating this rate, we agree with petitioners that Dongbu should

have included its short-term usance loans. As petitioners assert, it is

the Department's practice to treat short-term loans, or the cost of

working capital, as fungible. See, e.g., Ferrosilicon From Brazil;

Notice of Final Results of Antidumping Duty Administrative Review, 62

FR 43504, 43512 (August 14, 1997) (Department's practice recognizes the

fungible nature of invested capital resources), and Gray Portland

Cement and Clinker From Mexico; Final Results of Antidumping Duty

Administrative Review, 62 FR 17148, 17160 (April 9, 1997) (the

Department indiscriminately included all interest expenses incurred in

acquiring debt in the calculation of production costs). While Dongbu

obtained the usance loans to finance the purchase of raw materials used

in production, these borrowings may have

[[Page 55586]]

relieved Dongbu of the need to borrow money to cover other operating

costs. Therefore, we are concerned with all of Dongbu's home market

loans that relate to short-term working capital. Thus, to measure

Dongbu's cost of extending credit accurately, we must base the

calculation on Dongbu's overall short-term borrowing experience, which

includes usance loans.

For the final results, we recalculated Dongbu's home market

weighted-average short-term interest rate to account for usance loans

by applying an adjustment methodology similar to the one petitioners

suggest. However, due to the reasons explained by Dongbu above, we did

not use the same data as petitioners for performing this calculation.

Instead, we took the simple average of the interest rates Dongbu

reported for usance loans and weight-averaged this rate with the

reported rate based on the ratio of Dongbu Steel Co., Ltd.'s usance

loans to its total short-term borrowings. See Dongbu's Final Results

Analysis Memorandum dated October 2, 1997, for a detailed illustration

of this calculation. We used the new rate to recalculate imputed credit

expenses for home market sales for these final results.

Comment 3: Dongbu contends that the Department made a clerical

error that resulted in the comparison of home market prices expressed

on an actual-weight basis to USPs expressed on a theoretical-weight

basis. Dongbu requests that for the final results the Department use

home market prices expressed on a theoretical-weight basis.

Petitioners request that the Department base Dongbu's price

comparisons on the weight basis on which it made sales in each market.

Petitioners assert that the home market theoretical-weight-based prices

Dongbu reported are inaccurate because the conversion factors used to

derive these prices from actual-weight-based prices are inaccurate and

unverified. (See Comment 2 of the ``General Issues'' section for

further details on petitioners' argument.)

Department Position: We agree with Dongbu. For the final results,

we corrected the clerical error noted by Dongbu so that the home market

prices in our price comparisons are expressed on a theoretical-weight

basis.

Regarding petitioners' allegation of inaccuracies in the conversion

factor used to derive home market prices, we find that this assertion

is misplaced. Dongbu did not use conversion factors to derive the

theoretical-weight-based prices it reported. To calculate the prices on

a theoretical-weight basis Dongbu divided the total sales value of a

transaction (the home market sales occurred on an actual-weight basis)

by the theoretical weight of the transaction. See Dongbu's December 13,

1996, supplemental questionnaire response at page 18. Thus,

petitioners' assertion is incorrect.

Union

Comment 1: The petitioners argue that the Department should apply

adverse BIA to Union because the Department could not verify the

accuracy of Union's COP and CV data, there is insufficient information

on the record to correct these costs, and Union failed to cooperate to

the best of its ability. Specifically, petitioners cite to the

Department's finding at verification that Union's finished-goods

inventory, which Union used to allocate certain sub-materials costs and

fabrication costs, was a mixture of theoretical- and actual-weight-

based values. This finding, petitioners allege, is contrary to Union's

narrative response, citing Union Steel Manufacturing Co., Ltd.'s June

2, 1997, COP verification report at page 2. Moreover, the petitioners

allege that Union refused to provide a breakout of the finished-goods

inventory that would allow the Department to evaluate the extent of the

inaccuracy.

For the preliminary results, the petitioners state, the Department

attempted to correct this inaccuracy by converting the coil-input

costs, but not the sub-materials costs or the fabrication costs, to a

theoretical-weight basis. Petitioners allege that this approach is

inadequate because all costs, which petitioners contend should include

coil costs, are allocated based on the weights recorded in the

finished-goods inventory. Therefore, petitioners argue, at a minimum

the Department should treat coil costs the same as the fabrication and

sub-materials costs. However, the petitioners also argue that merely

disallowing the conversion of coil costs to a theoretical-weight basis

is not enough because the mixed-weight system will skew the difference-

in-merchandise (difmer) calculations.

Petitioners argue that, for matches of ``similar'' rather than

``identical'' merchandise, the Department will calculate the difmer on

a different basis than the U.S. sale if it uses the mixed-weight

system. Because Union refused to provide a report segregating the

export and domestic sales quantities, petitioners allege that the

Department cannot determine how much the difmer adjustment will be

skewed. For this reason, petitioners contend that the Department cannot

perform a difmer test nor is there sufficient data on the record to

correct the amounts.

In conclusion, the petitioners state that the Department could not

verify the accuracy of Union's cost data and Union refused to cooperate

with the Department's request to investigate this error. Union,

petitioners argue, should not be allowed to manipulate its margin by

selectively providing information, citing, e.g., Olympic Adhesives Inc.

v. United States, 899 F. 2d 1565, and Rhone Poulenc, Inc. v. United

States, 710 F. Supp 341, 346 (CIT 1989), aff'd 899 F. 2d 1185 (CAFC

1990). For the foregoing reasons, petitioners conclude, the Department

should base the final results on total and adverse BIA pursuant to

sections 776(b) and (c) of the Tariff Act.

Union argues that the petitioners fail to cite any factual evidence

that the cost-data error extended beyond the types of costs that the

Department corrected at the preliminary results. Union argues that it

was fully cooperative with the verification process, it conceded its

error, and the Department correctly applied BIA to an appropriate part

of its response. Union asserts that it is a well-established

Departmental practice to apply a partial BIA only to that part of a

response that is deemed deficient, citing Ad Hoc Committee of AZ-NM-TX-

FL Producers of Gray Portland Cement v. United States, 865 F. Supp. 857

(CIT 1994). Moreover, Union contends that the Department does not

consider the level of cooperation when applying partial BIA, citing

National Steel Corporation v. United States, 870 F. Supp. 1130, 1135

(CIT 1994). Thus, Union concludes, there is no factual or legal basis

for the Department to resort to total BIA.

Department's Position: We agree with petitioners in part. We have

reexamined the record and conclude that we should recalculate the

difmer adjustment in the same manner as Union's other costs for these

final results. See Union's Final Analysis Memorandum, dated October 2,

1997. However, we disagree that any additional effort to correct

Union's data is necessary.

We disagree with the petitioners' conclusion that Union's response

is unusable. We verified Union's home market and U.S. sales and found

Union's reporting to be largely correct. In addition, we verified that

Union's cost data was essentially correct with respect to hot-coil

costs and to most other elements included in its COP. We determined

that any errors we noted in the verification reports were limited,

correctable, and did not apply to hot-coil costs.

We agree with the petitioners that information does not exist on

the record

[[Page 55587]]

to enable us to correct Union's response. We also agree with the

petitioners that Union was uncooperative regarding our request that

Union provide a detailed breakout of its finished goods inventory. In

correcting Union's sub-materials and fabrication costs, we used an

adverse inference. Although Union could have provided data that would

have enabled us to calculate a more accurate COP, the data would have

lowered Union's weighted-average margin because any conversion to a

theoretical-weight basis would result in a lower per-unit cost. Thus,

by not converting these costs to a theoretical-weight basis, we applied

an adverse inference, obviated the need for more accurate data, and

responded appropriately to Union's limited failure to report accurate

data.

Comment 2: The petitioners allege that, for proprietary reasons,

the Department should consider Union and KISCO to be related firms and

assign these firms a single weighted-average margin to prevent the

possibility of manipulation of pricing and production decisions.

Petitioners argue that, in determining whether to collapse related

parties, the Department considers the following factors: (1) The level

of common ownership; (2) the existence of interlocking boards of

directors; (3) the existence of similar production facilities that

would not require significant retooling; and (4) closely intertwined

operations, citing Certain Cold-Rolled Carbon Steel Flat Products from

Korea, 60 FR 65284 (December 19, 1995). Petitioners allege that these

conditions have been met.

Union and KISCO argue that the Department should reject

petitioners' allegation as untimely and unsubstantial. Both firms note

that the record facts have been available to petitioners as early as

April 1994 and that the petitioners have had ample opportunity to raise

this issue before the Department in a more timely manner. By raising

this issue at the last possible moment, respondents assert that

petitioners did not allow the Department sufficient time to focus on

this issue and to take steps that would allow the Department to

calculate a meaningful single weighted-average margin. For example,

Union and KISCO note that, because the Department conducted a sales-

below-cost investigation with respect to Union but not with respect to

KISCO, the record does not contain KISCO's production-quantity data.

Thus, both firms argue that the Department will be unable to weight-

average difmer data. Union and KISCO also argue that the control

numbers for each company are different, thereby forcing the Department

to make various assumptions and hinder its ability to make correct

product matches. Union contends that these problems will lead to

distortive results and that the Department should reject petitioners'

arguments on this ground alone.

Notwithstanding these logistical problems, Union argues that the

facts on the record do not support a finding that Union and KISCO

should be considered one entity. Union notes that the Department did

conduct an inquiry into the relationship between Union and KISCO

through a supplemental questionnaire and verification and that the

Department did consider factors that it would have analyzed in a

collapsing decision. However, Union observes, the Department did not

collapse Union and KISCO in the preliminary results. Union asserts that

it and KISCO do not have an interlocking board of directors. Moreover,

Union contends the board members common to KISCO and Union through a

third party are ``non-standing'' members and, thus, do not participate

in the day-to-day operation and management of the companies. Union also

argues that there is no record evidence that the two firms are closely

intertwined. Union argues that, in the past, the Department has stated

that this condition is the most important decision in its collapsing

analysis, citing the January 18, 1994, memorandum from Joseph A.

Spetrini to Susan G. Esserman on the record for the antidumping duty

order on certain corrosion-resistant carbon steel flat products from

Korea. Union indicates that petitioners' only evidence for such a

conclusion is that Union sold a small amount of subject merchandise to

KISCO and both companies exported subject merchandise through two

affiliated parties. In contrast, Union claims that it and KISCO are

competitors in both the domestic and U.S. markets and operate as

separate and distinct entities. For the foregoing reasons, Union

requests that the Department reject the petitioners' allegations as

untimely and meritless.

KISCO argues that the petitioners' arguments are misguided and

should be rejected. KISCO argues that at least two of the Department's

four collapsing criteria it uses in collapsing decisions have not been

met by the companies. First, KISCO asserts that there is no evidence

that the two companies share sales information, make joint production

or pricing decisions, or share facilities or employees. Second, KISCO

asserts that there is no interlocking management.

KISCO also asserts that, by strategically withholding this

collapsing argument until after the record was closed, KISCO was

deprived of the opportunity to address these allegations in detail

during verification or to otherwise develop a factual record that would

serve to prove to the Department that it acts as an entirely

independent entity.

Finally, KISCO notes that, because the Department did not collapse

the companies at the preliminary results, KISCO will be denied an

opportunity to comment on the Department's methodology used in

calculating a consolidated dumping margin. For the reasons listed

above, KISCO requests that the Department deny the petitioners' request

to collapse.

Department's Position: We agree with petitioners. We have examined

the relationship between Union and KISCO and have determined that there

is a significant potential for price and cost manipulation. For these

final results, we have calculated a weighted-average margin for this

collapsed entity based on the costs and sales of Union and KISCO.

As we have noted before, ``[i]t is the Department's long-standing

practice to calculate a separate dumping margin for each manufacturer

or exporter investigated.'' Final Determinations of Sales at Less than

Fair Value; Certain Hot-Rolled Carbon Steel Flat Products, Certain

Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-Resistant

Carbon Steel Flat Products From Japan, 58 FR 37154, 37159 (July 9,

1993) (LTFV Japanese Steel Final). Because we calculate margins on a

company-by-company basis, we must ensure that we review the entire

producer or reseller, not merely a part of it. We review the entire

entity due to our concerns regarding price and cost manipulation.

Because of this concern, we examine the question of whether companies

``constitute separate manufacturers or exporters for purposes of the

dumping law.'' Final Determination of Sales at Less than Fair Value;

Certain Granite Products from Spain, 53 FR 24335, 24337 (June 28,

1988). Where there is evidence indicating a significant potential for

the manipulation of price and production, we will ``collapse'' related

companies; that is, we will treat the companies as one entity for

purposes of calculating the dumping margin. See Nihon Cement Co., Ltd.

v. United States, Slip Op. 93-80 (CIT May 25, 1993).

To determine whether to collapse companies, we make three

inquiries. First, we examine whether the companies in question are

related within the meaning of section 771(13) of the Tariff Act. See

Notice of Final

[[Page 55588]]

Determination of Sales at Less Than Fair Value and Final Negative

Critical Circumstances Determination; Disposable Pocket Lighters From

Thailand, 60 FR 14263, 14268 (March 16, 1995) (declining to collapse

non-related companies). Second, we examine whether the companies in

question have production facilities similar enough to enable the

shifting of production from one company to another without significant

retooling. See Certain Corrosion-Resistant Carbon Steel Flat Products

and Certain Cut-to-Length Carbon Steel Plate From Canada; Preliminary

Results of Antidumping Duty Administrative Review, 60 FR 42511 to 42512

(August 16, 1995) (Steel from Canada 1993/94 Preliminary Results of

Review). Third, we examine whether other evidence exists indicating a

significant potential for the manipulation of price or production. The

types of factors we examine to determine whether there is a significant

potential for manipulation include the following: (1) The level of

common ownership; (2) the existence of interlocking officers or

directors (e.g., whether managerial employees or board members of one

company sit on the board of directors of the other related parties);

and (3) the existence of intertwined operations.

Union and KISCO are related to each other within the meaning of

section 771(13) of the Tariff Act. See Memorandum from Laurie Parkhill

to Richard Moreland, dated October 2, 1997 (Collapsing Memorandum).

Second, the two companies have similar production facilities. These

companies produce a similar range of pipe sizes in a similar manner

and, thus, the companies would not need to engage in major retooling to

shift production. Third, other proprietary evidence indicates that

there is a significant potential for price or cost manipulation among

these companies. In general, this additional evidence of intertwined

operations consists of proprietary information establishing the

following: (1) The level of common ownership; (2) the existence of

interlocking directors; (3) the shipment of subject merchandise through

a common exporter to the United States; (4) a joint U.S. sales effort;

(5) an intertwined marketing effort; (6) intertwined financial

operations; and (7) inter-company transactions of the subject

merchandise. See Collapsing Memorandum.

Our determination whether to collapse is based on the totality of

the circumstances. See Steel from Canada 1993/94 Preliminary Results of

Review at 42512. We do not use bright-line tests in making this

finding. Rather, we weigh the evidence before us to discern whether the

companies are, in fact, separate entities or whether they are

sufficiently intertwined as to properly be treated as a single

enterprise to prevent evasion of the antidumping order via price, cost,

or production manipulation. Here we find that such potential for

manipulation exists for the companies in question. Therefore, have

collapsed Union and KISCO and treated them as one entity for purposes

of these final results.

We disagree with respondents' argument that the petitioners'

collapsing argument is untimely. In fact, the purpose of releasing

preliminary results is to invite comment from interested parties (see

Sec. 353.38(c)(2) of our regulations). Petitioners' argument

appropriately concerns how we applied the law to the facts of record

for the preliminary results. We also disagree with respondents that

they did not have the opportunity to establish a factual record on this

matter. In January 1997, we issued a supplemental questionnaire to both

Union and KISCO eliciting the kind of factual information that we

consider in our collapsing analysis. Respondents were aware at that

time that the Department was analyzing the affiliations among KISCO,

Union, DSM, and DKI, and had previously collapsed Union and DKI in

another proceeding. See Steel from Korea 1993/94 Review Preliminary

Results at 65284. Respondents were also aware that the Department had

``collapsed'' DSM's, Union's, and DKI's financial expenses in Steel

from Korea 1993/94 Review Preliminary Results because it had determined

that Union, DSM, and DKI were not independent companies. We also

reviewed the corporate relationships and related-party transactions at

verification in this administrative review. See Union's verification

report, dated March 20, 1997, at pages 2-3, and KISCO's verification

report, dated March 18, 1997, at page 1. Thus, we did not deprive Union

and KISCO of any opportunity to build a factual record supporting their

claims of independence. Moreover, both firms had an opportunity to

rebut petitioners' assertions after the preliminary results of review.

Respondents point to the logistical difficulties in combining their

data. We recognize these potential problems and have considered

respondents' concerns in calculating a single weighted-average margin.

Specifically, we are not subjecting KISCO's home market sales to a

below-cost-of-production examination. Instead, we have excluded Union's

below-cost sales from Union's home market database before combining

these sales with KISCO's home market sales. In addition, we have

ignored the different control numbers each firm used. Instead, we have

created a new and unique set of control numbers based on our model-

matching criteria. In this way, we have avoided any logistical

difficulties in combining the respondent's data. Therefore, for

purposes of calculating margins, we have collapsed Union and KISCO and

will apply the resulting single weighted-average margin to all subject

merchandise produced by these firms and exported to the United States.

Comment 3: Petitioners assert that the Department should not allow

dividend income, rental income, and the reversal allowance for

investment securities income as offsets to SG&A because Union was not

able to tie these items to its operations at verification. Petitioners

further contend that the Department should exclude income for dross and

scrap sales as offsets to SG&A because Union already accounted for

these items in its reported COM.

Department's Position: We agree with the petitioners. However, we

disallowed these offsets for the preliminary results and, therefore, no

change is necessary.

KISCO

Comment 1: KISCO argues that the Department failed to make

contemporaneous matches. KISCO requests that the Department correct

this error by adjusting the product-matching concordance section of the

program so that contemporaneous months are assigned the same value.

The petitioners agree that the Department should use a consistent

system for determining dates throughout the margin programs.

Department's Position: We agree with both parties and have altered

our program to match contemporaneous sales correctly.

Comment 2: KISCO argues that the Department did not read the home

market packing costs from its data tape properly. KISCO requests that

the Department reload the correct data or adjust the programming to

account for the incorrect decimal placement.

The petitioners agree that the Department did not read the home

market packing data correctly and request that the Department correct

the error. In addition, petitioners request that the Department confirm

that it transferred the other data fields correctly.

Department's Position: We have corrected this data error for the

final results. We checked to confirm that there were no other errors in

the reading

[[Page 55589]]

of KISCO's data and found that the variable cost of manufacturing and

the total cost of manufacturing reported in KISCO's U.S. sales data set

were also misread. Therefore, we also have corrected these fields for

the final results.

Comment 3: KISCO argues that the Department failed to adjust USP

for the interest revenue it earned as a result of the charges its U.S.

subsidiary made to late-paying customers. KISCO maintains that it is

the Department's long-standing practice to offset interest income

earned on sales of subject merchandise against imputed credit costs in

calculating the credit expense adjustment to USP.

Department's Position: We agree with KISCO and have corrected our

USP calculations to account for interest revenue.

Final Results of Review

We determine that the following percentage weighted-average margins

exist for the period April 28, 1992, through October 31, 1993:

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

Margin

Company (percent)

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

Dongbu Steel Co., Ltd........................................ 1.71

Korea Iron & Steel Co., Ltd./Union Steel Co., Ltd............ 1.53

Korea Steel Pipe Co., Ltd.................................... 3.15

Pusan Steel Pipe Co., Ltd.................................... 6.00

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

The Department shall determine, and the U.S. Customs Service shall

assess, antidumping duties on all appropriate entries. Because the

inability to link sales with specific entries prevents entry-by-entry

assessments, we will calculate wherever possible an exporter/importer-

specific assessment value.

With respect to assessment for ESP, purchase price, and IPP

transactions, for the reasons explained in the ``General Issues''

section of this notice, we calculated a per-unit dollar amount of

dumping duty by dividing the total dumping duties due for each

importer/customer by the corresponding number of units used to

determine the duties due. We will direct Customs to assess the

resulting per-ton dollar amount against each ton of merchandise on each

of the importers'/customers' subject entries during the review period.

Furthermore, the following deposit requirements will be effective

upon publication of these final results of review for all shipments of

subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the date of publication, as provided by section

751(a)(1) of the Tariff Act: (1) The cash deposit rates for the

reviewed companies will be the rates outlined above; (2) for previously

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 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) the cash deposit rate for all

other manufacturers or exporters will continue to be 4.80 percent, the

``All Others'' rate made effective by the amended final determination

of the LTFV investigation published on November 3, 1995. See Circular

Welded Non-Alloy Steel Pipe from Korea; Notice of Final Court Decision

and Amended Final Determination, 60 FR 55833 (November 3, 1995).

This notice also serves as a reminder to importers of their

responsibility under Sec. 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 the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d) of the Department's

regulations. Timely written notification of the return/destruction of

APO materials or conversion to judicial protective order is hereby

requested. Failure to comply with the regulations and terms of an APO

is a violation which is subject to sanction.

This administrative review and this notice are in accordance with

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

Sec. 353.22 of the Department's regulations.

Dated: October 20, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-28408 Filed 10-24-97; 8:45 am]

BILLING CODE 3510-DS-P