Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-849]

Final Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Carbon Steel Plate From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final determination of sales at less than fair value.

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EFFECTIVE DATE: November 20, 1997.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski, Doreen Chen, Gregory

Weber, N. Gerard Zapiain or Stephen Jacques, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-1385, (202) 482-0413, (202) 482-1102, (202) 482-

1395 or (202) 482-1391, respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the statute are

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

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

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

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

regulations codified at 19 CFR Part 353 (April 1, 1996).

Final Determination

We determine that certain cut-to-length carbon steel plate from the

People's Republic of China (``PRC'') is being, or is likely to be, sold

in the United States at less than fair value (``LTFV''), as provided in

section 733 of the Act. The estimated margins are shown in the

``Suspension of Liquidation'' section of this notice.

Case History

The petitioners in this investigation are Geneva Steel Company and

Gulf States Steel Company.

The respondents which are PRC firms unless otherwise indicated:

(1) China Metallurgical Import & Export Liaoning Company

(``Liaoning''), an exporter of subject merchandise; Wuyang Iron and

Steel Company (``Wuyang''), which produced the merchandise sold by

Liaoning;

(2) Anshan Iron and Steel Complex (``AISCO''), a producer of

subject merchandise; Angang International Trade Corporation (``Anshan

International''), a wholly-owned AISCO subsidiary in China which

exported subject merchandise made by AISCO, and Sincerely Asia, Limited

(``SAL'') a partially-owned Hong Kong affiliate of AISCO involved in

sales of subject merchandise to the United States (collectively,

``Anshan'');

(3) Baoshan Iron & Steel Corporation (``Bao''), a producer of

subject merchandise; Bao Steel International Trade Corporation (``Bao

Steel ITC''), a wholly-owned subsidiary of Bao responsible for selling

Bao material domestically and abroad; and Bao Steel Metals Trading

Corporation (``B. M. International''), a partially-owned U.S.

subsidiary involved in U.S. sales, (collectively ``Baoshan'');

(4) Wuhan Iron & Steel Company (``Wuhan'') a producer of subject

merchandise; International Economic and Trading Corporation (``IETC''),

a wholly-owned subsidiary responsible for exporting Wuhan merchandise;

Cheerwu Trader Ltd. (``Cheerwu'') a partially-owned Hong Kong affiliate

of Wuhan involved in sales of subject merchandise to the United States

(collectively ``WISCO'');

(5) Shanghai Pudong Iron and Steel Company (``Shanghai Pudong'') a

producer and exporter of subject merchandise. During the investigation,

we also requested information from and conducted verification of

Shanghai No.1, a non-exporting producer of subject merchandise which

Shanghai Pudong had earlier indicated shared a common trustee, Shanghai

Metallurgical Holding (Group) Co. (``Shanghai Metallurgical'').

We consider Liaoning, Anshan, Baoshan, WISCO and Shanghai Pudong to

be sellers of the subject merchandise during the POI.

Since the preliminary determination in this investigation

(Preliminary Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Carbon Steel Plate from the People's Republic of China,

62 FR at 31972 (June 11, 1997)), the following events have occurred:

From June through July 1997, we verified the questionnaire

responses of the respondents. Pursuant to section 782(d) of the Act,

the Department rejected certain portions of submissions submitted by

Anshan, Baoshan and WISCO one week prior to verification. On August 5,

1997 we issued our verification reports.

At the request of the Department, interested parties submitted

additional information on surrogate values on August 5, 1997, for

consideration in the final determination.

The petitioners and all of the respondents submitted case briefs on

August 29, 1997, and rebuttal briefs on September 9, 1997. The

Department held a public hearing for this investigation on September

16, 1997 at the requests of respondents and petitioners.

On October 24, 1997, the Department entered into an Agreement with

the Government of the PRC suspending this investigation. Pursuant to

Section 734(g) of the Act, petitioners, Liaoning and Wuyang have

requested that this investigation be continued. If the ITC's final

determination is negative, the Agreement shall have no force or effect

and the investigation shall be terminated. See Section 734(f)(3)(A) of

the Act. If, on the other hand, the Commission's determination is

affirmative, the Agreement shall remain in force but the Department

shall not issue an Antidumping duty order so long as (1) the Agreement

remains in force, (2) the Agreement continues to meet the requirements

of subsection (d) and (l) of the Act, and the parties to the Agreement

carry out their obligations under the Agreement in accordance with its

terms. See Section 734(f)(3)(B) of the Act.

Scope of the Investigation

The products covered by this investigation are hot-rolled iron and

non-alloy steel universal mill plates (i.e., flat-rolled products

rolled on four faces or in a closed box pass, of a width exceeding 150

mm but not exceeding 1250 mm and of a thickness of not less than 4 mm,

not in coils and without patterns in relief), of rectangular shape,

neither clad, plated nor coated with metal, whether or not painted,

varnished, or coated with plastics or other nonmetallic substances; and

certain iron and non-alloy steel flat-rolled products not in coils, of

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

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

other nonmetallic substances, 4.75 mm or more in thickness and of a

width which exceeds 150 mm and measures at least twice the thickness.

Included as subject merchandise in this petition are flat-rolled

products of nonrectangular cross-section where such cross-section is

achieved subsequent to the rolling process (i.e., products which have

been ``worked after rolling'')--for example, products which have been

bevelled or rounded at the edges. This merchandise is currently

classified in the Harmonized Tariff Schedule of the United States (HTS)

under item numbers 7208.40.3030, 7208.40.3060,

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7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000,

7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030,

7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000.

Although the HTS subheadings are provided for convenience and customs

purposes, our written description of the scope of this investigation is

dispositive.

Period of Investigation

The period of investigation (POI) is April 1, 1996, through

September 30, 1996.

Separate Rates

All of the respondents have requested separate, company-specific

rates. In their questionnaire responses, respondents state that they

are independent legal entities. Of the five respondents, Anshan,

Baoshan, Liaoning and WISCO have reported that they are collectively-

owned enterprises, registered as being ``owned by all the people.''

Shanghai Pudong and Shanghai No. 1 are ``owned by all the people';

Shanghai Pudong has also stated that these two firms are owned by

Shanghai Metallurgical, which is in turn is also owned by ``all the

people.'' Shanghai Pudong stated that it does not have any corporate

relationship with any level of the PRC Government.

As stated in the Final Determination of Sales at Less than Fair

Value: Silicon Carbide from the People's Republic of China, 59 FR at

22585, 22586 (May 2, 1994) (``Silicon Carbide'') and in the Final

Determination of Sales at Less Than Fair Value: Furfuryl Alcohol from

the People's Republic of China, 60 FR at 22544 (May 8, 1995)

(``Furfuryl Alcohol''), ownership of a company by ``all the people''

does not require the application of a single rate. Accordingly, each of

these respondents is eligible for consideration for a separate rate.

To establish whether a firm is sufficiently independent to be

entitled to a separate rate, the Department analyzes each exporting

entity under the test established in the Final Determination of Sales

at Less Than Fair Value: Sparklers from the People's Republic of China,

56 FR. at 20588 (May 6, 1991) (``Sparklers'') and amplified in Silicon

Carbide. Under the separate rates criteria, the Department assigns

separate rates in nonmarket-economy cases only if an exporter can

affirmatively demonstrate the absence of both (1) de jure and (2) de

facto governmental control over export activities. See Silicon Carbide

and Furfuryl Alcohol.

1. Absence of De Jure Control

The respondents have placed on the administrative record a number

of documents to demonstrate absence of de jure control. Respondents

submitted the ``Law of the PRC on Industrial Enterprises Owned By the

Whole People,'' adopted on April 13, 1988 (the Industrial Enterprises

Law). The Department has previously determined that this Civil Law does

not confer de jure independence on the branches of government-owned and

controlled enterprises. See Sigma Corp v. United States, 890 F. Supp.

1077, 1080 (CIT 1995). However, the Industrial Enterprises Law has been

analyzed by the Department in past cases and has been found to

sufficiently establish an absence of de jure control of companies

``owned by the whole people,'' such as those participating in this

case. (See e.g., Notice of Preliminary Determination of Sales at Less

Than Fair Value and Postponement of Final Determination: Certain

Partial-Extension Steel Drawer Slides with Rollers from the People's

Republic of China, 60 FR at 14725, 14727 (June 5, 1995) (``Drawer

Slides''); Notice of Preliminary Determination of Sales at Less Than

Fair Value: Honey from the People's Republic of China, 60 FR at 14725,

14727 (March 20, 1995); and Furfuryl Alcohol. The Industrial

Enterprises Law provides that enterprises owned by ``the whole people''

shall make their own management decisions, be responsible for their own

profits and losses, choose their own suppliers, and purchase their own

goods and materials. The Regulations of the People's Republic of China

for Controlling the Registration of Enterprises as Legal Persons (Legal

Persons Regulations), issued on July 13, 1988 by the State

Administration for Industry and Commerce of the PRC, provide that, to

qualify as legal persons, companies must have the ``ability to bear

civil liability independently'' and the right to control and manage

their business. These regulations also state that, as an independent

legal entity, a company is responsible for its own profits and losses.

See Notice of Final Determination of Sales at Less Than Fair Value:

Manganese Metal from the People's Republic of China, 60 FR at 56046

(November 6, 1995).

In sum, in prior cases, the Department has analyzed the Chinese

laws and regulations on the record in this case, and found that they

establish an absence of de jure control for the types of companies

seeking separate rates in this investigation. We have no new

information in these proceedings which would cause us to reconsider

this determination.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) whether the export prices are set by or are

subject to the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses. See, e.g., Silicon Carbide and Furfuryl Alcohol.

These factors are not necessarily exhaustive and other relevant indicia

of government control may be considered.

Respondents have asserted, and we verified, the following: (1) they

establish their own export prices independently of the government and

without the approval of a government authority; (2) they negotiate

contracts, without guidance from any governmental entities or

organizations; (3) they make their own personnel decisions including

the selection of management; and (4) they retain the proceeds of their

export sales, use profits according to their business needs, and have

the authority to obtain loans. In addition, respondents' questionnaire

responses indicate that company-specific pricing during the POI does

not suggest coordination among exporters. During the verification

proceedings, Department officials viewed such evidence as sales

documents, company correspondence, and bank statements. This

information supports a finding that there is a de facto absence of

government control of the export functions of these companies.

Consequently, we have determined that the five responding exporters

have met the criteria for the application of separate rates. We

determine, as facts available, that non-responsive exporters have not

met the criteria for application of separate rates. See also Comments 1

and 55.

China-Wide Rate

The petition filed on November 5, 1996 identified 28 PRC steel

producers with the capacity to produce cut-to-length carbon steel plate

during the POI. We received adequate responses from the five

respondents identified above. We received certification of non-

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shipment with respect to seven companies from the China Chamber of

Commerce for Metals and Chemicals (CCCMC) in a letter dated January 22,

1997. Additionally, we received a letter from one respondent factory

indicating shipments through parties which have not responded to the

questionnaire. See Non-Responsive Exporters section above. All other

companies did not respond to our questionnaire. Further, U.S. import

statistics indicate that the total quantity and value of U.S. imports

of cut-to-length carbon steel plate from the PRC during the POI is

greater that the total quantity and value of plate reported by all PRC

companies that submitted questionnaire responses. Given these

discrepancies, we conclude that not all exporters of PRC plate

responded to our questionnaire. Accordingly, we are applying a single

antidumping rate--the China-wide rate--to all exporters in the PRC

other than those receiving an individual rate, based on our presumption

that those respondents who failed to respond constitute a single

enterprise under common control by the PRC government. See, e.g., Final

Determination of Sales at Less Than Fair Value: Bicycles From the

People's Republic of China, 61 FR at 19026 (April 30, 1996) (Bicycles).

Facts Available

This China-wide antidumping rate is based on facts available.

Section 776(a)(2) of the Act provides that ``if an interested party or

any other person--(A) withholds information that has been requested by

the administering authority; (B) fails to provide such information by

the deadlines for the submission of the information or in the form and

manner requested, subject to subsections (c)(1) and (e) of section 782;

(C) significantly impedes a proceeding under this title; or (D)

provides such information but the information cannot be verified as

provided in section 782(i), the administering authority * * * shall,

subject to section 782(d), use the facts otherwise available in

reaching the applicable determination under this title.''

In addition, section 776(b) of the Act provides that, if the

Department finds that an interested party ``has failed to cooperate by

not acting to the best of its ability to comply with a request for

information,'' the Department may use information that is adverse to

the interests of that party as the facts otherwise available. The

statute also provides that such an adverse inference may be based on

secondary information, including information drawn from the petition.

As discussed above, all PRC exporters that do not qualify for a

separate rate are treated as a single enterprise. Because some

exporters of the single enterprise failed to respond to the

Department's requests for information, that single enterprise is

considered to be uncooperative. Accordingly, consistent with section

776(b)(1) of the Act, we have applied, as total adverse facts

available, the highest margin calculated for a respondent in this

proceeding. Based on our comparison of the calculated margins for the

other respondents in this proceeding to the margins in the petition, we

have concluded that the highest calculated margin is the most

appropriate record information on which to form the basis for dumping

calculations in this investigation since this rate is higher than the

highest rate in the petition. Accordingly, the Department has based the

China-wide rate on information from respondents. In this case, the

highest calculated margin is 128.59 percent.

Fair Value Comparisons

To determine if the cut-to-length plate from the PRC sold to the

United States by the PRC exporters receiving separate rates was sold at

less than fair value, we compared the ``United States Price'' (USP) to

NV, as specified in the ``United States Price'' and ``Normal Value''

sections of this notice.

United States Price

Export Price

We based USP on export price (EP) in accordance with section 772(a)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and because

constructed export price methodology was not otherwise indicated. In

accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-

wide weighted-average export prices (EPs) to NV based on the factors of

production. See Company Specific Calculation Memoranda, October 24,

1997.

For those exporters that responded to the Department's

questionnaire, we calculated EP based on prices to unaffiliated

purchasers in the United States. We made deductions, where appropriate,

for foreign inland freight, ocean freight, marine insurance, and

foreign brokerage. See ``Factor Valuations'' section of this notice.

Normal Value

A. Factors of Production

Because the Department has determined that China is a non-market

economy (``NME'') country, we calculated NV based on factors of

production reported by respondents in accordance with section 773(c) of

the Act. Where an input was sourced from a market economy and paid for

in market economy currency, we used the actual price paid for the input

to calculate the NV in accordance with our practice. See Lasko Metal

Products v. United States (``Lasko''), 437 F. 3d 1442, 1443 (Fed. Cir.

1994). We valued the remaining factors using publicly available

information from India where possible. Where appropriate Indian values

were not available, we for the most part used publicly available

information from Indonesia. In one case, when no appropriate value was

available from a country at the same level of development, we used a

U.S. value. See Comment 19 (slag).

B. Factor Valuations

The selection of the surrogate values was based on the quality and

contemporaneity of the data. Where possible, we attempted to value

material inputs on the basis of tax-exclusive domestic prices. Where we

were not able to rely on domestic prices, we used import prices to

value factors. To the extent possible, we removed from the import data

import prices from countries which the Department has previously

determined to be NMEs. As appropriate, we converted import prices for

inputs to delivered prices. For those values not contemporaneous with

the POI, we adjusted for inflation using wholesale price indices (WPI),

or consumer price indices (CPI) published in the International Monetary

Fund's International Financial Statistics. For a complete analysis of

our selection of surrogate values, see each company's Factors Valuation

Memorandum dated October 24, 1997. We have made the following changes

to surrogate valuation since the preliminary determination:

To value coal, we used import prices for the months contemporaneous

with the POI for which such data were available from the Monthly

Statistics of the Foreign Trade of India (Monthly Statistics). We also

valued coal as two separate categories: coking coal and other coal. See

Comment 16.

To value iron ore, for the final determination, we have, to the

extent possible, treated different types of iron ore as separate

factors of production (i.e., we treated the different types of iron ore

as separate inputs with separate surrogate values). When a producer has

purchased any type of iron ore from one or more market economy

suppliers, we have relied, to the fullest extent possible, on the

market economy purchase prices which were verified by

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the Department. When a given producer sourced a particular type of iron

ore only locally, or imported only an insignificant percentage of that

type or iron ore, we valued that type of iron ore for that producer

based on Indian Monthly Statistics. See Comment 16.

To value steel scrap, we used import prices for the months

contemporaneous with the POI for which such data were available from

the Monthly Statistics. See Comment 17.

To value iron scrap, fluorite/fluospar, ferromanganese, magnesium

ore, aluminum and coke, we used Indian import values for the months

contemporaneous with the POI for which such data were available from

the Monthly Statistics. See Comment 18.

To value scale, we used the United States market price for slag,

which is a similar product. See Comment 19.

To value dolomite, we used import prices for ``agglomerated

dolomite'' from the Monthly Statistics. See Comment 15.

To value stones, we used data from the ``Stone, Sand and Gravel''

SITC 273 category from the United Nations Commodity Trade Statistics.

See Comment 20.

To value silicon manganese, we used import prices from the Monthly

Statistics. See Comment 21.

To value barge rates, we used a simple average of the rates used in

the preliminary determination and river rates from the Inland Waterways

Authority of India (part of the Ministry of Surface Transportation of

the Government of India) submitted by respondents. See Comment 25.

To value factory overhead, SG&A and profit for all respondents and

firms, we calculated a simple average using the financial reports of

the TATA Iron and Steel Company (``TATA'') and the Steel Authority of

India Limited (``SAIL''). See Comment 3.

Verification

As provided in section 782(i) of the Act, we verified the

information submitted by respondents for use in our final

determination. We used standard verification procedures including

examination of relevant accounting and production records and original

source documents provided by the respondents.

Critical Circumstances

Section 735(a)(3) of the Act provides that, in a final

determination, the Department will determine whether: (A)(i) there is a

history of dumping and material injury by reason of dumped imports in

the United States or elsewhere of the subject merchandise, or (ii) the

person by whom, or for whose account, the merchandise was imported knew

or should have known that the exporter was selling the subject

merchandise at less than its fair value and that there would be

material injury by reason of such sales, and (B) there have been

massive imports of the subject merchandise over a relatively short

period.

1. Importer Knowledge of Dumping

In determining whether there is a reasonable basis to believe or

suspect that an importer knew or should have known that the exporter

was selling the plate at less than fair value, the Department normally

considers margins of 15 percent or more sufficient to impute knowledge

of dumping for constructed export price (CEP) sales, and margins of 25

percent or more for export price (EP) sales. See, e.g., Preliminary

Critical Circumstances Determination: Honey from the People's Republic

of China (PRC), 60 FR at 29824 (June 6, 1995) (``Preliminary Honey'')

and Notice of Final Determination of Sales at Less Than Fair Value:

Brake Drums and Rotors from the People's Republic of China, 62 FR 9160

(Feb. 28, 1997) (``Brake Drums and Rotors'') .

Since the company specific margins for EP sales in our final

determination for carbon steel plate are equal to or greater than 25

percent for Anshan, Baoshan, Shanghai Pudong and WISCO, we have imputed

knowledge of dumping to importers of subject merchandise from these

exporters. We found that Liaoning had margins below 25 percent. Because

we found these margins to be below 25 percent, we do not impute

knowledge of dumping to importers of subject merchandise reported by

Liaoning. Therefore for Liaoning, we find that critical circumstances

do not exist with respect to the subject merchandise.

2. Importer Knowledge of Material Injury

Pursuant to the URAA, and in conformance with the WTO Antidumping

Agreement, the statute now includes a provision requiring the

Department, when relying upon section 735(a)(3)(A)(ii), to determine

whether the importer knew or should have known that there would be

material injury by reason of the less than fair value sales. In this

respect, the preliminary finding of the International Trade Commission

(ITC) is instructive, especially because the general public, including

importers, is deemed to have notice of that finding as published in the

Federal Register. If the ITC finds a reasonable indication of present

material injury to the relevant U.S. industry, the Department will

determine that a reasonable basis exists to impute importer knowledge

that there would be material injury by reason of dumped imports during

the critical circumstances period--the 90-day period beginning with the

initiation of the investigation. See 19 CFR 351.16(g). If, as in this

case, the ITC preliminarily finds threat of material injury (see Cut-

to-Length Carbon Steel Plate from China, Russia, South Africa, and

Ukraine, U.S. International Trade Commission, December 1996), the

Department will also consider the extent of the increase in the volume

of imports of the subject merchandise during the critical circumstances

period and the magnitude of the margins in determining whether a

reasonable basis exists to impute knowledge that material injury was

likely. As noted below, the extent of the import increase is nearly

double that needed to find ``massive imports.'' Despite the fact that

the ITC found only threat of injury, we find that the sheer volume of

imports entering the U.S. from the PRC would have alerted importers to

the fact that the U.S. industry would be injured by these dumped

imports.

3. Massive Imports

When examining the volume and value of trade flow data, the

Department typically compares the export volume for equal periods

immediately preceding and following the filing of the petition.

Pursuant to 19 CFR 353.16(f)(2), unless the imports in the comparison

period have increased by at least 15 percent over the imports during

the base period, we will not consider the imports to have been

``massive.'' In order to determine whether there have been massive

imports of cut-to-length plate, we compared imports in the three months

following the initiation of the investigation with imports in the three

months preceding initiation.

In this case, imports of Chinese plate increased 29 percent in the

three months following the initiation of the investigation when

compared to the three months preceding initiation, or nearly two times

the level of increase needed to find ``massive imports'' during the

same period.

4. China-Wide Entity Results

With respect to companies subject to the China-wide rate (i.e.,

companies which did not respond to the Department's questionnaire), we

are imputing importer knowledge of dumping based on the China-wide

dumping rate which is greater than 25 percent. As noted above, we have

also determined that importers knew or

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should have known that there would be material injury to the U.S.

industry due to dumping by the China-wide entity based on the ITC's

preliminary determination and the fact that imports in the comparison

period are nearly twice the level for finding ``massive imports.'' In

the absence of shipment data for the China-wide entity, we have

determined based on the facts available, and making the adverse

inference permitted under section 776(b) of the Act because this entity

did not provide an adequate response to our questionnaire, that there

were massive imports of certain cut-to-length carbon steel plate by

companies that did not respond to the Department's questionnaire.

Therefore, we determine that critical circumstances exist with regard

to these companies.

5. Cooperating Respondents Results

Based on the ITC's preliminary determination of threat of injury,

the massive increases in imports noted above, and the margins greater

than 25 percent for Anshan, Baoshan, Shanghai Pudong and WISCO, the

Department determines that critical circumstances exist for Anshan,

Baoshan, Shanghai Pudong and WISCO. Because we found margins to be

below 25 percent, we do not impute importer knowledge of dumping for

Liaoning. Therefore for Liaoning, we find that critical circumstances

do not exist with respect to the subject merchandise.

Index of Interested Party Comments

a. General Comments

1 Separate Rates

2 Reporting of Sales

3 Financial Data from Indian Annual Reports

4 Offset Interest Expense by Short-term Income

5 Exclusion of Packing and Other Expenses from SG&A

6 Exclusion of Taxes from SG&A and overhead

7 Adjustment of Overhead Rate

8 Energy Adjustment

9 Credit for By-Products

10 Treatment of Gases

11 Valuation of Self-Produced Inputs

12 Domestic Inland Freight Expenses

13 Regression-Based Analysis

14 Labor Factors

15 Valuation of Limestone, Dolomite and Quicklime

16 Basket Categories--Coal and Iron Ore

17 Steel Scrap, Pig Iron Valuation

18 Valuation of Iron Scrap, Fluorite/Fluorspar, Coke, Aluminum,

Magnesium

19 Scale and Slag

20 Stones

21 Silicon Manganese

22 Electricity

23 Nominal vs. Actual Thickness

24 Alloy/Non-Alloy Steel Issue

25 River Freight

26 Ocean Freight Rates

27 Brokerage and Handling

28 Rejection of Untimely Factual Information

29 Methodology Used for Selection of Surrogate Values

30 Ministerial Error--Freight for Purchases of Certain Inputs

b. Anshan Specific Comments

31 Valuation of Certain Inputs

32 Valuation of Ocean Freight for Input(s) imported from Market

Economy Suppliers

33 Factors for Sintering Plant

34 Anshan's Reporting Methodology

35 Freight Amount on SAL Invoices

36 Labor Plate Mill, Roughing Mill, Other Sintering Mill

37 Material Inputs at No. 2 Steelmaking Plant

38 By-Product Credits

39 Credit For By-Products Produced in Coke Plant

40 Raw Materials for Sintering Shop

41 Moisture Content of a Certain Factor

42 Ministerial Errors

c. Baoshan Specific Comments

43 Product Specificity

44 Further Processing of By-Products

45 Inconsistencies discovered at Verification

46 Freight Reporting

47 Valuation of Certain Input

48 Packing

d. Liaoning/Wuyang Specific Comments

49 Verification of Wuyang's Labor Allocations

50 Wuyang's Standard Raw Material Consumption Rates

51 Reliability of Labor Allocations

52 Treatment of Heavy Oil, Oxygen and Coal Gas

53 Transportation from Factory to Port

e. Shanghai Pudong Specific Comments

54 Facts Available

55 Shanghai Pudong and Shanghai No. 1

56 Unreported Consumption of Input

57 Transportation Charges for Certain Inputs

58 Unreported Inputs from Unaffiliated Company

59 Gas Inputs

60 Adjustment of Labor Inputs

61 Assignment of Appropriate Surrogate Values

62 Ministerial Errors

f. WISCO Specific Comments

63 Facts Available

64 By-Product Credits

65 Facts Available for a Certain Input

66 Financial Records

67 Product Specificity

68 Adjustment of Labor Inputs

69 Ministerial Error-River Freight

Interested Party Comments

Comment 1: Separate Rates

Petitioners contend that the Department's preliminary decision to

assign separate rates to the five respondents who submitted

questionnaire responses in this case--Anshan, Baoshan, Liaoning, WISCO

and Shanghai Pudong--cannot be sustained in the final determination.

Petitioners note that under the Department's policy, exporters in non-

market economies are entitled to separate, company-specific margins

only when they can demonstrate an absence of government control over

export activities, both in law and in fact. Final Determination of

Sales at Less Than Fair Value: Sparklers from the People's Republic of

China, 56 FR 20,588 (May 6, 1991) (``Sparklers''); Silicon Carbide.

They assert that none of the PRC respondents has met this burden of

proof, whether with respect to de jure or de facto control. Petitioners

claim that the PRC government controls the steel industry.

Petitioners also claim that respondents did not fully cooperate

with the Department. They note that Baoshan only submitted certain

``excerpts'' from its annual report to the Department at verification.

In addition, they contend that Anshan did not provide certain reports

and financial statements. Petitioners argue that this information would

likely demonstrate that respondents are not entitled to a separate

rate.

Respondents argue that petitioners' arguments regarding separate

rates are factually and legally flawed and must be rejected.

Respondents note that in the preliminary determination, the

Department determined, respondents were not subject to de jure or de

facto government control. They assert that petitioners do not provide

any valid arguments or evidence that would justify a reconsideration of

this determination. Respondents also note the Department verified the

accuracy of this information. Accordingly, they assert that the

Department should affirm its finding of an absence of de jure and de

facto control in the final determination and should continue to

calculate a separate rate for each respondent in the final

determination.

Department's Position: We agree with respondents. The Department's

NME separate rates policy is based upon a rebuttable presumption that

NME entities operate under government control and do not merit separate

rates. This presumption can be overcome by a respondent's affirmative

showing that it operates without de jure or de facto government

control.

We found that the respondents have met their affirmative

evidentiary burden with respect to the Department's criterion of de

jure control, because they have provided copies of business licences

and the applicable government

[[Page 61969]]

statute granting them the right to operate as independent companies.

We found that the respondents met the evidentiary burden with

respect to de facto control as well. During verification, the

Department examined the issue and found that information provided by

respondents supported the contention that there is a de facto absence

of government control of the export functions of the respondents. See

Separate Rates Memorandum, October 24, 1997. Consequently, we have

determined that the respondents have met the criteria for the

application of separate rates.

We also disagree with petitioners' assertion that Baoshan failed to

provide a complete annual report at verification. The Department

examined the entire annual report at verification and included in the

verification exhibits those segments applicable to the investigation.

We also disagree with petitioners that Anshan did not cooperate

regarding submission of certain documents; the Department never

requested the documents petitioners claim Anshan refused to provide.

Comment 2: Reporting of Sales

Petitioners contend that the respondents do not appear to have

reported all of their sales for export to the United States. They state

that a review of the quantity and value of subject merchandise reported

by the respondents during the six-month POI shows that sales of the

subject merchandise were under-reported as compared to U.S. import

statistics. Petitioners contend that should the Department find that

any respondent that has failed to cooperate by not reporting sales of

the subject merchandise for export in its questionnaire response should

be deemed a non-responsive exporter and denied eligibility for

consideration for a separate rate.

Respondents contend that as part of its investigation in this case,

the Department has conducted a thorough examination of the sales made

during the period of investigation by each of the respondents involved

in this proceeding. Respondents assert that the Department's

examination confirmed that the respondents have reported all of their

sales properly.

Department's Position: We agree with respondents. The Department

conducted verification of the sales quantity and value totals submitted

by each of the respondents in the questionnaire responses and we found

that all respondents properly reported sales during the POI.

Comment 3: Financial Data From Annual Reports of Indian Steel Companies

Petitioners argue that the Department should use financial data

from annual reports of major steel producers in the principal surrogate

country to calculate factor values for profit, SG&A and overhead.

Petitioners claim that representative data that most accurately reflect

the current earnings and expenditures of Indian cut-to-length plate

(``CTLP'') producers can be found in recent annual reports of the two

largest Indian steel plate producers: the TATA Iron and Steel Company

(``TATA'') and the Steel Authority of India Limited (``SAIL'').

Petitioners state that these reports closely correlate with the POI and

the industry being investigated. Petitioners note that the Department

used a very similar methodology in its selection of surrogate values in

the concurrent investigation of imports of CTLP from the Ukraine.

Petitioners state that, in its preliminary determination for both

Azovstal and Ilyich, the Department calculated COM, SG&A, profit and

overhead by averaging data from the annual reports of two companies in

Brazil, the principal surrogate country in that case. See Preliminary

Determination of Sales at less Than Fair Value: Certain Cut-to-Length

Carbon Steel Plate from the Ukraine, 62 FR at 31957, June 11, 1997.

In contrast, petitioners claim the most recent data published in

the Reserve Bank of India Bulletin (dated April 1995) are for 1992-

1993. They argue there is no indication that any of this combined data

is audited or follows Indian generally accepted accounting principles

(GAAP). Finally, they state that the Reserve Bank data used in the

preliminary determination are not specific to steel production and

include an unknown number of other manufacturing and chemical

companies.

Respondents agree that the use of information from Indian steel

producers may be preferable to the rates obtained from the Reserve Bank

of India Bulletin. However, respondents disagree with petitioners'

suggestion that the Department should limit its analysis to SAIL and

TATA when there is information on the record for six such companies:

(1) TATA; (2) SAIL; (3) Pennar Steels, Inc. (``Pennar''); (4) Nippon

Denro Ispat Ltd. (``Nippon Denro''); (5) Visvesvaraya Iron & Steel Ltd.

(``Visvesvaraya''); and (6) Lloyds Metals and Engineers, Ltd.

(``Lloyds''). Respondents agree that the Department's goal in selecting

expense rates should be to use representative data that most accurately

reflect the current earnings and expenditures of Indian cut-to-length

plate producers. Respondents claim that ignoring two-thirds of the data

that is on the record would be clearly inconsistent with the

Department's goal of obtaining representative data--and would violate

the Department's fundamental obligation to calculate dumping margins as

fairly and accurately as possible. Respondents also dispute

petitioners' claim that there is insufficient detail in SAIL's annual

report to calculate an overhead rate.

Liaoning and Wuyang argue that the Department should calculate

surrogate overhead costs, SG&A expenses, and profit using the actual

data contained in the annual financial reports of the six Indian

producers of flat-rolled steel products that are on the record in this

investigation. They argue that the data contained in these six annual

reports are more appropriate for calculating overhead, profit and SG&A

ratios than the information from the Reserve Bank of India Bulletin

used in the preliminary determination because the annual report

financial information is specific to India's steel industry. They state

that using factory-specific information also would be consistent with

the approach taken by Commerce in a number of other investigations. See

Brake Drums and Rotors, 62 FR 9160; Melamine Institutional Dinnerware

Products From the People's Republic of China, 62 FR 1708 (January 13,

1997); Tapered Roller Bearings and Parts Thereof, Finished or

Unfinished, from the Hungarian People's Republic, 52 FR 17428 (May 8,

1987); Bicycles, 61 FR 19026.

Liaoning and Wuyang also argue that the financial experience of

these companies represents a broad spectrum of India's flat-rolled

steel industry, and an analysis that omits certain companies (or uses

only the large or only the small companies) would result in overhead,

profit and SG&A ratios that are not representative of either India's or

China's steel industry. For example, not all of the PRC respondents are

large-scale producers like the Indian producers SAIL and TATA. Wuyang,

in particular, is a small steel mill, whose annual sales are only ten

percent of those of TATA, and whose size (in number of employees) is

far more similar to Visvesvaraya or Nippon Denro. Moreover, they argue

that Wuyang does not have a blast furnace or basic oxygen furnace.

Wuyang's steelmaking relies entirely on electric arc furnaces, and

Wuyang's overhead, profit and SG&A ratios are much more likely to be

similar to those of Lloyds or Pennar than those of SAIL or TATA. They

state that only an analysis that

[[Page 61970]]

includes all the Indian steel producers will result in surrogate

overhead, profit and SG&A ratios that are equally representative of the

surrogate experience.

Liaoning and Wuyang argue that, in calculating the ratios, Commerce

should not calculate weighted-average ratios for the Indian steel

producers. Rather, Commerce should calculate overall ratios using a

straight average of the data contained in the six companies' financial

statements. See Bicycles from China, 61 FR at 19039 (when using the

Indian producers' annual reports to derive overhead, profit and SG&A,

Commerce calculated ``a simple average of the financial statements

consistent with [its] normal practice'').

Petitioners argue the Department should not rely on the data from

Pennar, Nippon Denro, Visvesvaraya or Lloyds Metals at all, but instead

use data from SAIL and TATA only. Petitioners state that the

Department's preference is to derive its calculation of NME financial

ratios from firms that are significant producers of merchandise that is

identical or most similar to that produced by the respondents under

investigation. See Melamine Institutional Dinnerware Products from the

People's Republic of China, 62 FR 1708, 1712 (January 13, 1997); Brake

Drums and Brake Rotors from the People's Republic of China, 62 FR 9160,

9167 (Feb. 28, 1997) (Final Determination) (financial data of two

companies not used because there was no information indicating their

production of subject merchandise during the POI); Polyvinyl Alcohol

from the People's Republic of China, 61 FR 14057 at 14061 (March 29,

1996) (Final Determination) (``the Department seeks to base surrogate

values on the industry experience closest to the product under

investigation'') . Petitioners claim that TATA and SAIL are companies

that produce cut-to-length carbon steel plate. By contrast, petitioners

claim Pennar Steels, Nippon Denro, Visvesvaraya, and Lloyds Metals do

not produce subject merchandise. Therefore, petitioners argue that,

because reliable financial data is available from Indian carbon steel

plate producers, consistent with its standard practice, the Department

should not rely on the data of other companies that do not produce

subject merchandise.

Department's Position: We agree with petitioners. It is the

Department's preference to base SG&A and profit ratios on data from

actual producers of subject merchandise in the surrogate country. See

Brake Drums and Rotors, 62 FR at 9168. Of the six companies whose

annual reports were submitted on the record, only SAIL and TATA

actually produce cut-to-length carbon steel plate. In addition, SAIL

and TATA are the only two companies whose annual reports reflect the

costs of producing steel and hot-rolled coils. This is relevant as all

five Chinese respondents produce coils and steel that are manufactured

into plate. The Department is not using the annual report of

Visvesvaraya because it is a subsidiary of SAIL and, therefore, all its

financial information is already incorporated into SAIL's annual

report. In addition, Visvesvaraya produced alloy and specialty steel,

not cut-to-length plate. The Department is not using Pennar's annual

report because Pennar buys hot-rolled coils and processes the coils

into cold-rolled strips. Thus, Pennar produces neither steel nor cut-

to-length plate. The Department is not using the annual report of

Lloyd's Metals or Nippon because both produce sponge iron and send the

iron to an affiliate where it is processed into hot-rolled coils (the

affiliates' costs are not incorporated into the annual reports). The

coils are then sent back to Lloyd's and Nippon, where they are

processed into cold-rolled products. Thus, like Pennar, neither Lloyd's

Metal nor Nippon produces steel or cut-to-length plate.

In contrast, the annual reports of both SAIL and TATA list plate as

products. In addition, Iron and Steel Works of the World, 12th edition

lists both companies as producers of plate. There does appear to be a

slight discrepancy in regard to TATA. Page 49 of TATA's annual report

indicates that TATA has not produced any ``plate'' since 1993. However,

the physical characteristics of the ``plate'' category for the

production statistics are unclear. It is possible that products that

the Department considers plate could be included in the category

``sheets''. Furthermore, TATA's annual report shows significant

production of both steel and hot-rolled coils.

Consequently, for the final determination, we have calculated

overhead, SG&A, and profit surrogate values by using a simple average

of relevant data from the annual reports of TATA and SAIL.

Comment 4: Interest Expenses Offset for Short-Term Income

Liaoning and Wuyang argue that Commerce should, when possible,

offset the interest and financial expenses of Indian steel producers

with their corresponding operating income. That is, when calculating

SG&A, Commerce should offset interest expenses by the amount of short-

term interest income. See Brake Drums and Rotors, 62 FR at 9168

(Department reduced interest expenses by amounts for interest income

and also allocated a portion of ``other income'' as short-term interest

income for those companies that did not specify a breakdown of their

non-operating income); see also Frozen Concentrated Orange Juice from

Brazil; Final Results of Antidumping Duty Administrative Review, 55 FR

26721, Comment 8 (June 29, 1990). Liaoning and Wuyang state that merely

adding financial expenses to SG&A without reducing those amounts by any

corresponding operating income would overstate actual net financial

expenses. They claim that offsetting financial expenses against

financial gains reflects more accurately the Indian producers' actual

financial cost of doing business.

Petitioners argue that Liaoning is incorrect in arguing that the

Department should, when possible, offset interest and financial

expenses of Indian steel producers with their corresponding operating

income. Petitioners argue that neither Brake Drums and Rotors nor

Frozen Concentrated Orange Juice from Brazil supports offsetting

financial expenses by operating income other than short-term interest

earned. Petitioners state that in Brake Drums and Rotors, where the

respondents made the same claim based on the Orange Juice

determination, the Department offset interest expenses by the amount of

short-term interest income. Petitioners cite Brake Drums and Rotors, in

which the Department ``disagree{d} that operating income * * * should

be in the offset.'' 62 FR at 9168. Petitioners claim that although the

Department did offset the interest expense of certain producers by a

portion of their ``other income'' or ``miscellaneous receipts,'' this

was done merely as a means of allocating short-term interest costs for

those producers whose financial statements did not specify a breakdown

of non-operating income. Petitioners argue that interest and financial

expenses may be reduced by amounts for interest income only if the

surrogate producers' financial reports note that the income was short-

term in nature.

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

will offset interest expense by short-term interest income only where

it is clear from the financial statements that the interest income was

indeed short-term in nature. See Brake Drums at Rotors, 62 FR at 9168.

For the annual report of SAIL, the Department considered the following

items of the line item ``Interest Earned'' (page 31 of SAIL's annual

report) as short-term interest income: (1) loans and advances to other

companies, (2) loans

[[Page 61971]]

and advances to customers, (3) loans and advances to employees, and (4)

term deposits. Therefore, we offset SAIL's interest expense by these

amounts for the final determination. For the annual report of TATA, we

found that the interest expense reported (page 24 of TATA's annual

report) was already net of all short-term interest income. Therefore,

for the final determination, we did not further offset the interest

expense.

Comment 5: Exclusion of Packing and Other Expenses From SG&A Expenses

Liaoning and Wuyang also argue that, when calculating SG&A,

Commerce should exclude all expenses incurred by Indian steel producers

that relate to packing, as well as all other direct selling expenses.

They state that since packing and direct selling expenses are

separately accounted for in the Department's dumping calculation, these

expenses must be excluded to avoid double-counting. They argue that

Commerce should ensure that packing and other direct selling expenses

are not double-counted by excluding the categories ``other expenses''

and ``miscellaneous expenses'' in the Indian financials from the

surrogate SG&A values. They cite the Preliminary Determination of Sales

at Less Than Fair Value; Brake Drums and Rotors from China, 61 FR

53190. In that case, there was no indication from an Indian producer's

financial statement used to calculate SG&A as to which line item

expenses included a specific amount for packing expenses. Commerce

considered packing expenses to be included in the line item labeled

``miscellaneous expenses'' since ``there appears to be no other entry

under which such an expense could be included.'' Commerce therefore

removed the amount for ``miscellaneous expenses'' from the SG&A

calculation. See Factor Valuation Memorandum, Attachment 9, Shivaji

Analysis, at 2. Similarly, because there was no indication from the

financial statement of another producer as to which line item expenses

included a specific amount for packing expenses, Commerce considered

this expense to be included in the line item labeled ``other

expenses,'' and removed the amount for ``other expenses'' from the SG&A

calculation. Id., Rico Analysis, at 2. Liaoning and Wuyang argue that

in this investigation, where the Indian steel producers' financial

statements do not indicate what amounts are related to packing,

Commerce similarly should remove ``other expenses'' or ``miscellaneous

expenses'' from the calculation of SG&A in order to avoid including an

expense that is already deducted from U.S. price.

Liaoning and Wuyang also argue that Commerce should exclude from

the calculation of SG&A all direct selling expenses incurred by the

Indian steel producers that normally are deducted from export price and

constructed export price transactions when calculating net U.S. price.

They state that direct selling expenses, such as commissions,

discounts, bank charges, royalties, etc., should not be included in

normal value as part of the surrogate SG&A ratio because they are

deducted from U.S. price. They claim that Commerce cannot make a fair

comparison of normal value to export price and constructed export price

if it includes direct selling expenses in SG&A in the normal value

calculation, but deducts such expenses from EP and CEP. See Torrington

Co. v. United States, 66 F.3d 1347, 1352 (Fed. Cir. 1995) (the

antidumping statute requires an ``apples to apples'' comparison). They

argue that to ensure a fair comparison, Commerce therefore should

calculate an amount for SG&A that is net of all direct selling

expenses.

Petitioners argue there is no basis for Liaoning's claim that costs

related to packing would be included in either a ``miscellaneous

expense'' of ``other expense'' category. To the contrary, petitioners

argue that most steel companies pack their merchandise at the

production site; thus, the labor and materials associated with packing,

if there are any, will be included in cost of manufacturing, not in

SG&A. Petitioners argue that for those companies that pack merchandise

at a separate facility and assign the costs to SG&A, packing is usually

specified as a discrete item.

Petitioners argue that even if some companies were to include

packing in a miscellaneous or catch-all expense category, it is clear

the packing would be just one of numerous expenses. Petitioners claim

it would therefore be inappropriate--indeed distortive--to deduct the

entire amount of the reported miscellaneous or other expense, as

respondents suggests.

Petitioners suggest that respondents' reliance on the preliminary

determination in Brake Drums and Rotors is misplaced. Petitioners claim

for its preliminary determination, the Department removed the amount

for ``other expenses'' for the Indian producer RICO to account for

packing expenses. Brake Drums and Rotors, 61 FR 53190 at 53197 (October

10, 1996). Petitioners state that in the final determination, however,

the Department reversed itself. Petitioners state that the Department

expressly included RICO's ``other expenses'' in its SG&A calculations.

Petitioners argue that the Department should reject respondents'

argument that all direct selling expenses should be excluded from its

surrogate SG&A calculation. Petitioners argue that the purpose of the

calculation of the SG&A of the Indian producer is to determine the

ratio of selling, general and administrative expense to the cost of

manufacture. Petitioners argue that all expenses incident to selling,

general and administrative functions of the company should be part of

the SG&A calculation.

Even if the Department should decide to exclude direct selling

expenses, petitioners argue, respondents' classification of such

expense is overly broad. Petitioners argue that there is no evidence

that the suggested exclusions were directly related to specific sales.

Petitioners argue that because the Department has no information on the

specific amount of direct selling expenses incurred by surrogate

country producers, the Department should decline to make an item-by-

item evaluation of the Indian companies' SG&A components. See

Oscillating Fans and Ceiling Fans from the People's Republic of China

(``Oscillating Fans''), 56 FR 55271 at 55276 (Oct. 25, 1991) (Final

Determination); Tapered Roller Bearings and Parts Thereof, Finished or

Unfinished, from the Socialist Republic of Romania, 52 FR 17433, 17436

(May 8, 1987) (Final Determination). Petitioners argue that since there

is no indication whether (or how much of) such purported expenses are

directly related to specific sales, the Department should reject

respondents' claim that ``direct selling'' expenses should be excluded

from the surrogate SG&A ratios.

Department's Position: We agree with respondents that packing

expenses should be excluded from the SG&A surrogate value to the extent

possible. However, we disagree that all ``other expenses'' and

``miscellaneous expense'' categories should be excluded to prevent

double-counting from occurring. If there is a line in an Indian

producer's financial statement for packing expenses, then the

Department should not include it in SG&A. However, for both SAIL and

TATA there is no specific line item limited to packing expenses. As

petitioners state, it would be unreasonable and distortive for the

Department to exclude all ``other'' or ``miscellaneous'' expenses just

because they might contain packing expenses. These categories are

undoubtedly made up of many expenses and may not include packing

expenses

[[Page 61972]]

at all. It is possible, as petitioners suggest, that these companies

included packing expenses in their raw material costs.

We note that the fact pattern in this investigation differs from

Brake Drums and Rotors. We found that the ``other'' and

``miscellaneous'' categories listed in SAIL's and TATA's annual reports

are too large to throw out simply because they might contain packing.

Our examination of TATA's other expenses (page 26 of TATA's annual

report) shows that it includes items such as provision for

proportionate premium on redemption of non-convertible debentures,

expenses of issue of rights shares, loss on discarded assets, provision

for diminution in value of investments and exchange differences. We

find that there is no indication that the other expenses category

includes packing. Our examination of SAIL's annual report indicates

that there is no explanation of the miscellaneous category other than

that it includes a donation (page 36 of SAIL's annual report).

In regard to direct selling expenses, we agree in part with

respondents. We note that in this investigation, all U.S. sales were EP

sales. Therefore, we have not included, in our calculation of SG&A and

overhead, items for which we made adjustments to U.S. price (i.e.,

movement expenses). However, we do not agree with respondents that

items such as commissions, export sales expenses, insurance, and

royalties should be excluded from our calculation of SG&A and overhead.

All of these factors contribute to the SG&A and overhead ratios of

Indian steel producers; therefore these items (i.e., commissions,

export sales expenses, insurance, and royalties) have been included in

our SG&A calculations for the final determination. However, we have not

included, in our calculations of SG&A and overhead values, items for

which we made adjustments to U.S. price. To the extent possible, we

only deducted from U.S. price such items such as movement expenses. For

all five respondents, we deducted brokerage and handling from U.S.

price. In addition, we deducted from U.S. price, insurance related to

export sales for two respondents.

Respondents claim we should exclude commissions, export sales

expense, insurance, and royalty and ``cess'' as direct selling expenses

for SAIL. Likewise, they claim we should exclude royalty, insurance

charges, and commission/discounts as direct selling expenses for TATA.

We disagree with respondents' arguments. Because we did not exclude

such expenses from U.S. price, we are including them in SG&A.

Comment 6: Exclusion of Taxes From Overhead and SG&A

Liaoning and Wuyang also argue that the Department should not

include in its calculation of the overhead and SG&A ratios the expenses

incurred by Indian producers of steel that relate to taxes paid to

governmental authorities. They state that, in past cases, the

Department's practice has been to construct a value for the subject

merchandise as if it were manufactured by a producer in the surrogate

country for export. Pencils from the People's Republic of China, 59 FR

at 55625 (Nov. 8, 1994). Hence, they argue, in constructing values

based on Indian domestic prices, the Department must eliminate excise

duties, levies, and sales taxes from those prices, as these items are

rebated upon export from India. See Brake Drums and Rotors, 62 FR at

9163. In addition, they state that the Department has expressed a clear

preference for PAI that is tax exclusive. See Disposable Lighters from

the PRC, 59 FR at 64191, 64914 (Dec. 13, 1994); Sebacic Acid from the

PRC, 59 FR at 28053 (May 31, 1994). Therefore, they argue Commerce

should remove from the surrogate overhead and SG&A calculation any

excise duty listed in the financial reports. Brake Drums and Rotors, 62

FR at 9164.

Department's Position: We agree in part with respondents. We have

deducted all excise duties from our calculation of SG&A. However, we

have not excluded the line ``rates and taxes'' from our calculations.

These taxes represent the taxes and licenses, property taxes and other

miscellaneous taxes that Indian steel producers incur in the normal

course of business and, thus, should be a part of our SG&A surrogate

value.

Comment 7: Adjustment of Surrogate Overhead Rate

Respondents state that in the preliminary determination, the

Department adjusted the surrogate overhead rate for all Chinese

respondents who reported any workers as performing overhead or SG&A

functions that were not specifically tied to the production of subject

merchandise. Respondents argue that this adjustment was unnecessary

because (1) the surrogate overhead rate used by the Department in the

preliminary determination included overhead and SG&A labor and (2) the

Chinese respondents in this investigation properly allocated labor

between direct labor, indirect labor, factory overhead labor, and SG&A

labor.

Respondents argue that the labor adjustment made in the preliminary

determination arbitrarily and unfairly reclassified all workers working

in plants involved in the production of subject merchandise as direct

production workers, regardless of the tasks performed. Respondents

claim this unfairly penalized Chinese respondents for following normal

Departmental practice and excluding hours worked by overhead and SG&A

workers from the hours reported for production of subject merchandise.

Respondents argue that as a matter of principle and established

practice, the Department recognizes (1) that some functions performed

by workers are properly classifiable as factory overhead or SG&A

functions and (2) that the Department's normal value calculations in

non-market economy cases should include only workers involved in the

production of subject merchandise--workers performing overhead and SG&A

tasks are not to be included. See Carbon Steel Butt-Weld Pipe Fittings

from the People's Republic of China, 57 FR at 21058, 21064 (May 18,

1992) (direct labor hours for factory level administrators and workshop

level supervisors found to be factory overhead and SG&A, respectively);

Furfuryl Alcohol, 60 FR at 22544, 22548 (``Since our surrogate value

for factory overhead includes indirect labor and it is the Department's

practice to only include the production labor related to the subject

merchandise, we have revised our final calculations on labor to avoid

double counting labor.''). Respondents argue that the reason overhead

workers and SG&A workers should not be included in the Department's

calculations is that the costs of such workers are already reflected in

the surrogate overhead and SG&A rates applied by the Department to the

direct production costs incurred by the non-market economy producers.

Respondents claim that they undertook an analysis of the workers

employed in the facilities involved in the production of subject

merchandise and attempted to classify workers in a manner consistent

with the Department's request for information and the Department's

practice. Respondents state that in the questionnaires issued by the

Department in this investigation, the Department required Chinese

respondents to report labor hours for ``direct, skilled workers,''

``direct, unskilled workers,'' and ``indirect workers''--yet never

provided specific (or even illustrative) instructions regarding how

such workers should be

[[Page 61973]]

identified. They also claim the Department never provided any guidance

regarding how ``indirect'' workers were to be distinguished from

``factory overhead'' workers or SG&A workers. Respondents state that

they disclosed in their responses the rules applied by each respondent

for classifying workers, as well as a substantial amount of information

regarding the tasks performed by workers in the production facilities.

Respondents argue that, under these classification methodologies, the

dominant characteristic of workers classified as ``factory overhead''

workers is that these workers were responsible for the maintenance of

the facilities. They also argue the dominant characteristic of SG&A

workers is that they performed relatively high-level, supervisory or

administrative functions within the facilities and were not physically

involved in the production process.

Respondents claim that neither the Department nor the petitioners

have objected to the classification methodologies used by the Chinese

respondents to distinguish between direct, indirect, factory overhead,

and SG&A workers. They also claim that neither the Department nor the

petitioners have proposed any modifications or alternatives to the

methodologies used by the respondents to classify labor. Respondents

claim that, in light of these circumstances, it is fair to conclude

that the rules used by the respondents to classify labor are

reasonable. Respondents claim, in other words, that they were correct

in classifying maintenance workers as factory overhead workers and in

classifying supervisors and administrators as SG&A workers and in

excluding such workers from their reported labor hours, (i.e., labor

outside SG&A and overhead Therefore, respondents argue that any re-

classification of workers is unnecessary.

In addition, respondents argue that the Indian surrogate values for

factory overhead and SG&A rate reflect the labor cost of maintenance

and administration. Accordingly, they claim there is no reasonable

justification for ``adjusting'' (i.e., inflating) such rates to account

for maintenance workers and administrative personnel--since such an

adjustment would double-count labor expenses.

Liaoning and Wuyang reiterate that the Department should not, in

the final determination, make an adjustment to increase the surrogate

overhead value for Wuyang to account for labor resources dedicated to

overhead. They state that in its reported production expense factors,

Wuyang excluded from its ``labor'' calculation certain workers because

of the Department's policy for calculating overhead and SG&A in non-

market economy investigations. They argue that these workers can be

divided into three categories according to the relationship of their

activities to the subject merchandise: (1) activities entirely

unrelated to steel plate, in particular the activities of the

automation research and development division, which performs research

and development related to the company's consulting services in the

field of industrial automation; (2) activities generally related to all

products and services (for example, the personnel department); and (3)

activities generally related to steelmaking, in particular the

activities of the steel research and development division. They argue

with respect to category (3), to Liaoning and Wuyang's knowledge the

Department has never included R&D in the factors of production because

doing so would almost certainly double-count R&D included in the

surrogate values for factory overhead and SG&A. See, e.g., Oscillating

Fans, 56 FR at 55271 (Commerce Department agreed with Respondent that

product development and manufacturing liaison costs are not direct

manufacturing costs to be included in the factors of production and

that these costs are properly valued using surrogate country data for

factory overhead). They state that because surrogate overhead and SG&A

values already include R&D expenses, the overhead value would double-

count R&D if the Department were to include Wuyang's R&D labor in the

factors of production. They also argue that the Department has

established an explicit policy in NME cases of not adjusting the

surrogate values for R&D expenses under any circumstances. In Chrome-

Plated Lug Nuts from China, for example, a respondent requested the

Department to exclude R&D expenses from the surrogate value for factory

overhead on the ground that the respondent did not actually incur R&D

expenses. They claim that the Department refused to exclude the R&D,

citing the Department's policy not to make an ``item-by-item evaluation

of overhead components.'' 61 FR at 58514, 58517 (November 15, 1996),

citing Pure Magnesium and Alloy Magnesium from the Russian Federation,

60 FR 16440 (March 30, 1995) and Tapered Roller Bearings from Hungary,

52 FR at 17428 (May 8, 1987). They state that the Department reiterated

this policy in Heavy Forged Hand Tools from China, 61 FR 46443

(September 3, 1996), when the Department refused to deduct R&D expenses

from surrogate overhead values based on data published in the April

1995 Bulletin of the Reserve Bank of India, the same source upon which

petitioners relied in their petition to calculate factory overhead.

Liaoning and Wuyang conclude that given the nature of the overhead

and SG&A activities described above and the Department's established

policy in NME cases, Commerce should not reallocate any of Wuyang's

overhead labor to the labor valued directly based on factors of

production. In the alternative, they argue that if Commerce does adjust

the surrogate overhead value to account for ``additional labor,''

however, then Commerce also should (1) make all necessary corresponding

adjustments to Wuyang's energy consumption factors, because Wuyang

allocated its energy consumption based on its reported labor hours; and

(2) exclude ``other manufacturing expenses,'' ``other expenses,'' and

``miscellaneous expenses'' from the surrogate overhead and SG&A values

to avoid double counting labor expenses.

Petitioners state that this issue is not relevant to the final

determination unless the Department again chooses to rely on a source

for the surrogate value for overhead that does not include labor, such

as the Bulletin of the Reserve Bank of India data. However if this is

the case, petitioners argue the Department should make an adjustment

along the same lines as the one made in the preliminary determination

because the Department's methodology is sound.

Petitioners claim that respondents' criticism of the Department's

approach rests on several false premises: (a) that the values from the

Reserve Bank of India Bulletin already included labor; (b) that

overhead and SG&A workers are not to be included in the Department's

calculations; (c) that the Department's labor adjustment to overhead

arbitrarily and unfairly reclassified all workers working in plants

involved in the production of subject merchandise as direct production

workers, regardless of the tasks performed; and (d) that the Department

would have acted differently had it understood that not all respondents

had allocated a majority of their workers to overhead and SG&A.

Petitioners also argue that normal value in NME cases always

includes a component for overhead and SG&A. Petitioners state that

respondents do not seem to disagree in principle with the notion that

the labor associated with overhead belongs in the surrogate value for

overhead. Petitioners argue that it then becomes a factual question of

[[Page 61974]]

whether such labor is, or is not, included in the surrogate data.

Petitioners argue that labor is not included in the surrogate overhead

value calculated from the Reserve Bank of India Bulletin.

Finally, petitioners argue, respondents are wrong in focusing on

the Department's statement in the preliminary determination that

respondents allocated a majority of the labor employed in their

facilities to overhead and selling and general administrative tasks.

Petitioners argue it is plain from the preliminary calculation

memoranda that the Department's decision to adjust overhead for labor

was not dependent on a respondent allocating a ``majority'' of its

workers to overhead and SG&A.

Petitioners argue that respondents have presented no cognizable

basis for challenging the Department's practice of adjusting the

surrogate overhead value for labor where such value does not already

include overhead labor. Petitioners state that if, in the final

determination, the Department uses a surrogate overhead value other

than the value derived from the Reserve Bank of India Bulletin, and if

that alternative value likewise does not include all overhead labor, a

similar adjustment should be made.

Department's Position: Because the Department is now using a simple

average of the annual reports of SAIL and TATA, rather than the Reserve

Bank of India Bulletin, to calculate our surrogate overhead and SG&A

values the question of whether or not the data in that publication

included overhead labor is now moot. We agree with petitioners that to

the extent that our new surrogates do not include overhead or SG&A

labor, adjustments to these values are appropriate.

SAIL's annual report explicitly states that ``employee remuneration

and benefits'' are not included in the overhead category ``repairs and

maintenance.'' Nor is there any indication that ``employee remuneration

and benefits'' would be included in the following overhead categories:

``stores and spares,'' ``joint plant committee,'' ``insurance,''

``rent,'' ``royalty and cess,'' ``cash discount,'' ``conversion

charges,'' or ``water charges.'' However, ``handling expenses,'' which

is broken down into handling of raw materials, finished goods, and

scrap recovery, would appear to consist entirely of overhead labor. In

addition, there are SG&A categories that appear to account for SG&A

labor, such as, ``directors fee,'' ``remuneration to auditors,'' ``cost

audit fee,'' and ``miscellaneous.'' It is also likely that the

following SG&A categories contain some labor: ``export sales expense,''

``security expenses,'' ``traveling expenses,'' ``training expenses.''

Therefore it appears that the surrogate overhead and SG&A values

calculated from SAIL's annual report contain overhead and SG&A labor.

TATA's annual report also explicitly states that overhead items

``stores consumed,'' ``repairs to buildings,'' ``repairs to

machinery,'' and ``relining expenses'' exclude amounts charged to wages

and salaries. There is no indication that the other overhead

categories, ``rents,'' ``royalty,'' ``insurance charges,'' ``joint

plant committee funds,'' ``conversion charges,'' and ``depreciation''

include overhead labor. TATA's material handling charges appear to be

included with freight charges in the category ``freight and handling

charges'' which we allocated to COM as they are part of TATA's cost. We

have no way of determining how much of this figure should be allocated

to handling charges, and thus, to overhead. Therefore, we are including

the entire amount in COM. With regards to SG&A labor, the annual report

indicates that managerial remuneration is included in the SG&A category

``other expenses.'' Therefore, it appears that the surrogate overhead

and SG&A values calculated from TATA's annual report contain SG&A

labor, however, it is inconclusive whether or not it contains overhead

labor.

As stated above, the Department's surrogate SG&A and overhead

values are based on a simple average of the values calculated from the

annual reports of TATA and SAIL. Therefore, since both the annual

reports clearly contain SG&A labor, it is not necessary for the

Department to make an adjustment to our SG&A surrogate value to account

for SG&A labor.

As mentioned above, the overhead surrogate value calculated from

SAIL's annual report does contain overhead labor, however it is

inconclusive whether the overhead surrogate value calculated from

TATA's annual report contains overhead labor. Therefore, our simple

average of the two contains some overhead labor but it is not clear

whether it contains sufficient overhead labor. To ensure that no double

counting occurs, the Department is faced with the options of (1)

excluding from its calculation of overhead all SAIL and TATA income

statement line items that might include overhead labor and making a

similar overhead adjustment as in the preliminary determination (in the

preliminary determination, the Department adjusted the overhead

surrogate value using ratios developed from respondents reported

overhead and direct workers), or (2) leaving the overhead surrogate as

calculated and not making the overhead labor adjustment. The Department

considers it more reasonable to leave the overhead surrogate as

calculated. The Department fears that excluding all categories that

might include overhead labor would unfairly exclude many costs that

should be included in our overhead surrogate. Therefore, given the

Department's new surrogate values for SG&A and overhead, we did not

make any adjustments for overhead or SG&A labor in the final

determination.

Comment 8: Overhead Energy Adjustment

Respondents argue that the Department's overhead energy adjustment

was unnecessary and improper in the context of this investigation,

because (1) virtually all energy used by the Chinese respondents is

already included in the Department's normal value calculation, and (2)

the calculation used by the Department bears no relationship to any

reasonable ``overhead energy'' costs incurred in the production of

subject merchandise. Respondents state that the only energy inputs

treated as overhead by the Department were water, compressed or forced

air, and steam. Respondents claim that each of the overhead energy

items is relatively inexpensive so the overall cost of ``overhead

energy'' is negligible. They argue no adjustment is necessary in the

final determination.

Respondents argue that the adjustment used by the Department in the

preliminary determination was arbitrary and improper. They claim the

costs calculated using this methodology bear no relationship to any

reasonable cost of overhead energy. They contend that the purpose of

the overhead energy adjustment made in the preliminary determination

was to include a portion of overhead that was apparently missing from

our selected surrogate. The Reserve Bank of India Bulletin overhead

data does not contain any items that would lead the Department to

believe that overhead energy was accounted for. They claim there is no

reasonable basis to believe the adjustment used by the Department would

provide a reasonable estimate of the costs of providing water, steam,

and compressed air to the steel production facilities of the Chinese

respondents and therefore should not be used in the final

determination.

Petitioners argue that, had the Department not made some kind of

adjustment for the omission of power and fuel from the overhead

calculation, it would have improperly ignored respondents' overhead

energy costs.

[[Page 61975]]

Petitioners argue there is no support on the record for respondents'

belated claim that these costs are ``negligible'', because they have

not been reported. Petitioners state that the point of the adjustment

is to develop a reasonable estimate of the overhead energy costs of

producers of plate in the surrogate country. Petitioners do agree that

the methodology used by the Department is arbitrary, but the solution

proposed by respondents (i.e., ignoring the issue altogether) is not

adequate. Instead, petitioners claim if the Department continues to use

data from the Reserve Bank of India Bulletin for overhead, the energy

adjustment should be accomplished by other means. Because the record

data from Indian sources does not allow the Department to precisely

distinguish overhead energy from direct energy inputs used in the steel

industry, petitioners argue the Department should develop a ratio from

the cost accounting data provided by Geneva Steel in the petition.

Consistent with the usual cost accounting practices of the steel

industry, petitioners argue the petition separately sets forth direct

energy inputs and overhead energy consumption. From this information,

petitioners suggest the Department can determine the ratio of Geneva's

overhead energy costs to direct energy costs. Petitioners argue that

the surrogate value for overhead should be increased by an amount equal

to the above ratio times the individual respondent's total surrogate

costs for direct inputs of fuels, utilities, and gases.

Petitioners point out that, like the adjustment to overhead for

additional labor, the overhead energy adjustment is largely a function

of the Department's choice of the source for the overhead surrogate

value. Petitioners argue that regardless of the Department's choice of

overhead surrogate value in the final determination, it should

carefully examine whether overhead energy is included; if it is not,

the Department should make an overhead energy adjustment similar to the

one just described.

Department's Position: We agree with petitioners that this issue is

tied to the Department's choice of the source for the overhead

surrogate value. As discussed above, we have chosen a simple average of

the annual reports of SAIL and TATA as the source for the overhead

surrogate value. We then examined whether overhead energy was included

in the overhead values reported in those reports. Using a methodology

similar to that used in the preliminary determination, we excluded the

categories ``power and fuel,'' ``fuel oil consumed,'' and ``purchase of

power'' from our value for overhead since we are valuing these items as

direct inputs. For SAIL, we included in our overhead calculation the

item ``water charges'' since the Department normally treats water as an

overhead expense. In addition, we consider it likely that additional

overhead energy is included in the overhead item ``stores and spares.''

We allocated the item ``stores and spares'' to overhead. For TATA,

there is no item that is entirely comprised of overhead energy.

However, we consider it likely that some overhead energy is included in

the overhead item ``stores and spares.''

As with our calculation of overhead labor described in Comment 7,

the simple average of SAIL's and TATA's calculated overhead values

contains some overhead energy but it is not clear whether it contains

sufficient overhead energy. To ensure that no double counting occurs,

the Department is faced with the options of (1) excluding from its

calculation of overhead all SAIL and TATA income statement line items

that might contain overhead energy and making an appropriate overhead

energy adjustment, or (2) leaving the surrogate overhead value as

calculated and not making an adjustment for overhead energy. The

Department considers it more reasonable to leave the overhead surrogate

as calculated. As with labor, the Department fears that excluding all

categories that might include overhead energy would unfairly exclude

many costs that should be included in our overhead surrogate.

Therefore, given the Department's new surrogate value for overhead, we

did not make any adjustment for overhead energy in the final

determination.

Comment 9: Credit for By-Products

Respondents argue the Department must credit respondents' cost of

manufacture for by-products before applying the factory overhead rate

in the final determination. They argue that in the preliminary

determination, the Department treated costs and credits asymmetrically

by deducting by-products from the cost of manufacture after applying

the factory overhead rate and without including factory overhead in its

calculations of by-product credits.

Department's Position: We agree with respondents. In calculating

the cost of manufacture, the Department uses a net material amount that

we derive by deducting the by-products from gross materials. Therefore,

we credit by-products before we calculate the cost of manufacture and

overhead.

Comment 10: Treatment of Gases

Respondents argue that the Department should treat industrial gases

as overhead for the final results. Respondents argue that, in deciding

whether to treat industrial gases as overhead or direct material

inputs, the fundamental issue is how such materials are treated by

Indian steel producers. Respondents state that if the standard practice

for Indian firms is to treat industrial gases as overhead, then those

values must already be included in the surrogate value for factory

overhead that the Department is using. Respondents claim that, if this

is the case, including industrial gases as a direct input as well as in

overhead would result in double-counting.

Respondents argue that a review of the financial information of

Indian steel producers on the record reveals that the standard practice

for Indian steel companies is to include industrial gases as part of

factory overhead. Respondents claim that none of the annual reports of

Indian steel companies provided in this investigation treated

industrial gases as either a material input or an energy source. Thus,

respondents argue, including the cost of those gases as a direct input

in the final calculations would double-count those costs.

Petitioners argue that industrial gases used in iron and steel

making should be treated as direct energy inputs, and not as overhead.

Petitioners state that unless a gas is used specifically for overhead

energy (e.g., to heat a facility) it should not be characterized as

overhead. Petitioners argue that gases such as oxygen are important

inputs in the steel making process, serving both as refining agents and

as an energy source. Petitioners argue that valuing these gases as

direct inputs would not result in double-counting as respondents claim.

Petitioners state that worksheets provided by the Department in its

Factor Valuation Memorandum show that these energy inputs are not

included in factory overhead (Commerce specifically excluded ``power

and fuel'' expenses before it calculated the overhead rate for the

preliminary determination). Accordingly, petitioners argue there is no

double counting.

Petitioners argue that the respondents' contention that the

standard practice for Indian steel companies is to include these energy

inputs as part of factory overhead is incorrect. Petitioners claim that

respondents' statement that ``none of the annual reports * * * treated

industrial gases as either a material input or an energy source'' is

incorrect. Petitioners argue that the listing for

[[Page 61976]]

``Others'' in the power and fuel cost of SAIL most likely includes

industrial gases. Petitioners argue that neither SAIL's annual report

nor TATA's provides any information which supports respondents'

contention that industrial gas inputs should be included in factory

overhead.

Petitioners state that Indian accounting practices actually require

that energy inputs be treated as direct inputs. They argue that in

Brake Drums and Rotors, the Department found that, under Indian GAAP,

inputs may be treated as factory overhead only if they are not consumed

in the production process. See 62 FR at 9160, 9169 (citing the

Compendium of Statements and Standards published by the Institute of

Chartered Accountants of India). Petitioners argue that in this case

there can be no dispute that these energy inputs are consumed in the

production process. Accordingly, petitioners argue that respondents'

arguments regarding the inclusion of energy inputs in factory overhead

should be rejected.

Department's Position: We agree with petitioners. There is no

indication in the annual reports of SAIL and TATA that they treat

industrial gases as overhead energy costs. We have therefore valued

these gases as direct inputs and excluded the line items ``power and

fuel,'' ``fuel oil consumed,'' and ``purchase of power'' from our

overhead calculations to ensure that no double counting of these costs

occurs.

Comment 11: Valuation of Self-Produced Inputs

Respondents argue the Department's primary goal and responsibility

in selecting surrogate values in investigations involving producers in

a non-market economy (NME) is to determine--as accurately, fairly, and

predictably as possible--the costs that would have been incurred in

producing the subject merchandise if the costs of such production had

been determined by market forces. See Oscillating Fans, 56 FR at 55271,

55275, cited with approval in Lasko, 43 F.3d at 1442. To do so, the

Department requires respondents to report the actual inputs they use in

the production of the subject merchandise, and then values those inputs

at the price for those inputs in a comparable market economy. In this

case, the Department is calculating a normal value for steel plate

based on the actual inputs used by the Chinese producers to manufacture

steel plate and the values for those inputs primarily in India.

Respondents claim that the same rationale that leads the Department

to calculate normal value for steel plate based on the actual factors

of production also requires that it use a similar methodology for self-

produced inputs (such as oxygen, nitrogen, argon and similar gases) ``

at least when the necessary information is available on the record. In

this case, respondents argue the Department does have verified

information on the actual inputs used to produce the oxygen, nitrogen,

argon and similar gases that are used in steel plate production by

Anshan, Baoshan, Shanghai Pudong and WISCO. Respondents argue the

Department should therefore calculate the value for those gases based

on the actual inputs.

Respondents state that in the preliminary determination, the

Department ignored the actual inputs used to make these gases, and

instead valued these gases based on price quotations for such gases in

India. Respondents claim such an approach would be appropriate only if

the Department were to assume that it is more accurate to use the

prices in India for those gases than to build up the values for those

gases from the actual inputs used to produce them. Respondents claim

that assumption is flatly inconsistent with the entire methodology used

in non-market-economy cases, and cannot be correct. Respondents argue

that, if previous assumption were correct, then it would follow that

Commerce should value steel plate based on price quotations from Indian

suppliers rather than to build up a normal value based on the actual

factors of production used in manufacturing steel plate.

Petitioners argue that the values assigned to industrial gases used

by respondents should be based on Indian surrogate values and not

respondents' factors of production for these gases. Petitioners claim

that the respondents' factors of production cannot be used by the

Department because they are inherently unreliable. Petitioners argue

that it is only where the Department can determine that a non-market

economy producer's input prices are reliable that accuracy, fairness

and predictability are enhanced by using those input prices. See

Oscillating Fans, 56 FR at 55271 and 55274-75.

Petitioners claim that respondents used the Department's August 18,

1997 request for spreadsheets used in calculating the factors of

production as a chance to cure existing deficits in the record

regarding respondents' industrial gas production by submitting complete

factor of production data for ``certain'' gases. Petitioners claim it

would be unfair for the Department to use this mostly unverified data

to calculate factors of production for industrial gases because

petitioners have not been afforded the opportunity to comment on these

data and the Department did not have ample opportunity to consider

whether to verify the data pertaining to industrial gases.

Petitioners argue that respondents did not, as they contend, submit

complete factor information for the industrial gases used in the

steelmaking processes in their questionnaires or supplemental

questionnaires. Petitioners claim that the cites to questionnaire and

supplemental questionnaire responses did not adequately identify the

data necessary to sustain respondents' contention that they produce all

of the industrial gases they use. Petitioners also argue that the

Department's findings at verification regarding gas usage and

production by respondents further calls into question the reliability

of respondents' industrial gas production factor information. In

addition, petitioners argue that respondents have not put any

information on the record regarding the ownership of their gas plants.

For these reasons, petitioners argue that the respondents' factors of

production for these gases are unreliable and should not be used for

the final determination.

Department's Position: We agree that, for some respondents, the

value of the subject merchandise in this case is more accurately

measured if the self-produced gases are valued based on the actual

inputs used to make these gases.

In NME cases, the Department selects the surrogate values that

reflect best the costs that would have been incurred in producing the

subject merchandise if the costs of such production had been determined

by market forces. It is the Department's practice to collect data on

all direct inputs actually used to produce the subject merchandise,

including any indirect inputs used in the in-house production of any

direct input.

To accurately value all direct and indirect inputs, the Department

requires sufficient time to analyze usage rates and select appropriate

surrogate values. It is also important that interested parties have the

opportunity to comment on the reported usage rate and surrogate value

proposed by the Department. For these reasons, it is important that the

Department receives the respondents in a timely manner. In the instant

case, although WISCO claimed that the inputs for the production of this

gas were reported in its April 14, 1997 submission, the actual

information was not submitted until seven days before the verification.

The later submission was untimely because the Department had

specifically

[[Page 61977]]

requested that information and provided a deadline which was more than

two months earlier. The fact that this information was verified does

not commit the Department to consider it timely in its final

determination.

Similarly, Baoshan's April 14, 1997 supplemental response claimed

to have reported the inputs used in self-producing a certain gas, but

the actual data were absent from the specified appendix. Baoshan claims

that data on this gas and its material inputs can be found in a

different appendix and this information was verified. However, that

appendix responds to the Department's question on energy consumption

and contained a Baoshan Energy Department report for only the month of

July. Furthermore, no labor factors involved in the self-production of

oxygen are included on the worksheet. The Energy Department report was

later verified for the integrity of the reported energy consumption

rather than for production of this gas. Not until Baoshan's August 21,

1997 submission, which reached the Department after verification, did

Baoshan provide, in a usable format, the complete factors for the gas

it self-produces.

The Department is rejecting WISCO and Baoshan's production data for

their self-produced gases due to untimeliness and lack of consistency.

For WISCO and Baoshan, therefore, we are continuing to use the Indian

surrogate values that were used for the preliminary determination for

their self-produced gases.

Anshan reported gases which were self-produced and their production

inputs. Shanghai Pudong reported three factors as being as self-

produced and provided their inputs. For these two respondents, the

Department used their reported production inputs for valuing the

factors for producing the subject merchandise.

We disagree with the petitioner's claim that the verification of

the self-produced gases showed them to be unreliable for Anshan and

Shanghai Pudong. These data were submitted on the record in a timely

fashion and were verified. The verification report contains no mention

of discrepancies in these data.

Comment 12: Domestic Inland Freight Expenses

Liaoning and Wuyang maintain that if the Department uses Indian

Monthly Statistics to derive surrogate values for raw material inputs,

it should not add to these costs an extra amount for domestic inland

freight expenses. Respondent argues that in Sigma Corporation v. the

United States, 117 F.3d 1401 (Fed. Cir. July 7, 1997) (``Sigma''), the

U.S. Court of Appeals for the Federal Circuit (``CAFC'') ruled that to

do so would overstate the value of the freight component of normal

value. In making its decision, they argue, the Court determined that

the Department's methodology of adding a constructive freight charge on

top of the import prices double counted a substantial component of the

total freight expense. These respondents conclude that the Court's

holding in Sigma is applicable to this case, and if the Department uses

Indian Monthly Statistics to derive surrogate values for raw material

inputs, it should not add a constructive freight charge on top of these

prices for the shipment of such raw materials from Chinese suppliers to

the respondents in this investigation.

Petitioners argue that, in Sigma, the CAFC did not preclude the

Department from making an adjustment to account for domestic freight.

Petitioners argue that, to the contrary, the Court expressly determined

that the Department must devise an appropriate methodology to account

for the freight component without double counting. Petitioners add that

it is obvious that, depending on distances and modes of transportation,

the domestic freight expense to transport an input from a supplier in

China to the producer of the subject merchandise can be considerably

greater than the freight included in the Indian Monthly Statistics.

Petitioners maintains that, as the Sigma Court recognized, the

Department had a statutory duty to select a methodology that produces

``reasonably accurately estimates of the true value of the factors of

production.'' Petitioners conclude that this includes a proper

accounting of the domestic inland freight and that, accordingly, the

Department should devise an appropriate methodology to account for the

freight charges from the Chinese suppliers of the input to Wuyang's

factory without double counting.

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

respondents. The CAFC's decision in Sigma requires that we revise our

calculation of source-to-factory surrogate freight for those material

inputs that are valued on CIF import values in the surrogate country.

The Sigma decision states that the Department should not use a

methodology that assumes import prices do not have freight included and

thus values the freight cost based on the full distance from domestic

supplier to producer in all cases. Accordingly, as in the Notice of

Final Determination of Sales at Less Than Fair Value: Collated Roofing

Nails from the People's Republic of China, 62 FR at 51410 (October 1,

1997) (``Nails''), we have added to CIF surrogate values from India a

surrogate freight cost using the shorter of the reported distances from

either the closest PRC port of export to the factory, or from the

domestic supplier to the factory. Where the same input is sourced by

the same producer from more than one source, we used the shorter of the

reported distances for each supplier.

Comment 13: Regression Based Analysis

Some respondents argue that the Department should use its

regression-based analysis to value labor. Respondents argue that the

Department's current policy, as stated in its revised regulations, is

to use a regression-based wage rate, in order to achieve a fairer, more

accurate, and more predictable result. Respondents state that as the

Department explained in the commentary accompanying its revised

regulations: ``[B]y combining data from more than one country, the

regression-based approach will yield a more accurate result. It also is

fairer, because the valuation of labor will not vary depending on which

country the Department selects as the economically comparable surrogate

economy. Finally, the results of the regression analysis are available

to all parties, thus making the labor value in all NME cases entirely

predictable.'' See Antidumping Duties, Countervailing Duties, 62 FR

27296, 27367 (May 19, 1997) (final rule).

Respondents argue that the Department has stated that these revised

regulations ``serve as a restatement of the Department's interpretation

of the requirements of the [Tariff] Act as amended by the URAA,'' even

in cases which are not directly governed by the new regulations. See 19

CFR Sec. 351.701. Thus, respondents argue the new wage rate methodology

set forth in the revised regulations (and in the Department's June 2,

1997, Policy Memorandum) should be applied in this case.

Petitioners argue the Department should reject the suggestion that

labor inputs should be valued using the new regression-based

methodology described in the Final Rule. Petitioners claim that: (1)

unless the regression model is limited to data from surrogate countries

that are at a level of economic development similar to China's, the new

labor valuation methodology set forth in 19 CFR Sec. 351.701(c)(3) is

contrary to section 773(c)(4) of the Act, 19 U.S.C. 1677b(c)(4), (2) it

fails to account adequately for labor costs other than wages, (3) by

its own terms, the new regulation does not apply to this investigation,

(4) it has not been the

[[Page 61978]]

Department's practice to use the regression methodology in NME cases

initiated prior to the effective date of the new regulations; and (5)

the new regression model has not yet been published in accordance with

the requirements of the Administrative Procedure Act.

Petitioners also urge the Department not to use the labor cost

methodology used in the preliminary determination. Petitioners state

that, in the preliminary determination, the Department applied a single

labor rate for the three levels of labor (skilled, unskilled and

indirect) that all respondents used in calculating their labor factors.

They state that in this case, the Department used data from the

Ministry of Labour, Government of India Annual Report 1994-95 which

contains 1990-91 data for the average labor cost in rupees per man-day

worked for the ``Basic Metals and Alloys Industries.'' Petitioners

argue that the labor data found in the Report and used by the

Department in its preliminary determination are aberrational. First,

they note that these data are approximately six years old. Second, they

point out that the Report does not provide any information as to which

industry sectors or companies are included in the category ``Basic

Metal and Alloys Industries.'' Third, they argue that the methodology

used by companies or industry associations to obtain the data submitted

to the Ministry of Labour and compiled for its Report is unknown. As a

result of the above, petitioners argue that it is not clear whether the

labor rate provided in the Report closely reflects the average labor

rate paid by a large integrated steel producer in India.

Instead of the regression-based model described in its new

regulations or the approach used in the preliminary determination,

petitioners argue that the Department should instead use a labor

surrogate value methodology based on data provided in TATA and SAIL's

1995-1996 Annual Reports to calculate a surrogate labor value.

Petitioners claim that a labor factor value based on the actual wages

paid to the employees of a large integrated steel producer in the

surrogate country is a more accurate means of calculating the labor

value than either of the two approaches previously described.

Furthermore, petitioners argue that use of a labor value calculated

from SAIL and TATA financial information would be consistent with the

use of COM, SG&A and profit values derived from annual reports of these

companies.

Liaoning and Wuyang argue that, as a surrogate value for labor,

Commerce should use the average labor cost per man-day worked for the

Basic Metal and Alloys Industries as reported in the Ministry of Labour

Government of India Annual Report 1994-95, which Commerce used in the

preliminary determination. They claim Commerce should not calculate the

surrogate labor value using data contained in the financial statements

of Indian producers of steel as recommended by petitioners because such

a methodology is both unreasonable and unreliable.

First, they argue that the salary and wage data listed in the

Indian financial statements include high remuneration for company

management personnel and other salaried workers, rather than being

specific to line production workers, which is the group for which a

surrogate labor valuation is sought. They claim the calculation of any

surrogate labor rate based on such figures therefore would grossly

inflate the Indian labor rate for production workers in the steel

industry.

Second, they argue that any relationship between the annual

expenditure of a company for wages, salaries, etc. and the absolute

number of employees of any given day during the year is entirely

speculative. They state that the Indian steel producer financial

statements on the record provide information regarding yearly employee

remuneration and benefit amounts, but none of the financial statements

provides specific information regarding (1) the number of labor hours

worked at each company during the year, (2) the number of different

employees paid during the year, (3) whether such employees worked

overtime, and (4) whether such employees were paid an additional amount

for overtime worked.

Finally, they argue that the record evidence provides no support

whatsoever for petitioners' assertion that the employee remuneration

paid by SAIL in 1995-96 corresponds only to the 187,504 persons

reported as employees on March 31, 1996. They state that the data

provided by petitioners vis-a-vis TATA are even more tenuous, since

there is no support for their assumption that the total number of

employees reported in the 1997 Iron and Steel Works of the World

publication is accurate or even related to TATA's 1995-96 fiscal year.

These questions, they argue, render unusable petitioners' suppositions

as to the number of workers employed by each company, and the possible

number of hours worked each day by company employees.

In comparison, Liaoning and Wuyang argue that the Report used by

Commerce in the preliminary determination includes figures that are

representative of the entire Indian steel industry, including both

large companies and small, and provides labor cost data specific to

production line workers. In addition, they state that, as noted in the

Commerce Department's factor valuation memoranda, the labor rate

provided in the Report is inclusive of wages and salaries, all types of

bonuses, money value of benefits in kind, old age benefits, maternity

benefits, social security charges, family pension, retirement benefits,

and other group benefits. They argue that unlike the unsubstantiated

figures calculated by petitioners, the Ministry of Labour values are

not distorted by conjecture regarding such factors as the number of

employees, man days worked, the inclusion of overtime hours. Therefore,

they claim Commerce should continue to value labor in the final

determination using the average labor cost per man-day worked for the

Basic Metal and Alloys Industries from the Report, which Commerce did

in the preliminary determination.

Department's Position: We agree with Liaoning and Wuyang. Because

the regulations applicable to this investigation do not dictate a

particular approach to selecting surrogate value for labor, the

Department has the discretion in choosing a method of valuing labor.

However, it has not been our practice to use the regression-based labor

rate developed in the new regulations initiated prior to issuing these

new regulations. Because we have not elected to use the regression

analysis approach, we need not address all of the arguments concerning

this methodology. We also disagree with petitioners' proposal to use

the financial statements of SAIL and TATA. These statements include

high wages for company management personnel and other salaried workers,

and thus are not specific to direct and other production labor. Also,

the financial statements only report aggregate labor costs and do not

provide information regarding the number of labor hours and thus we

could not determine a labor rate for these companies.

Comment 14: Labor Factors

Anshan, Baoshan, Shanghai Pudong and WISCO state that, throughout

this investigation, petitioners have contended that the data on labor

usage submitted by the Chinese respondents must be compared to

information in PaineWebber's World Steel Dynamics. Respondents state

that petitioners claim that any differences between information

reported by the respondents and the information contained in World

Steel Dynamics is to be treated as

[[Page 61979]]

evidence that the Chinese respondents are reporting their information

inaccurately is without merit. Anshan, Baoshan, Shanghai Pudong and

WISCO state that the labor hours reported are the result of a detailed

analysis of the companies' labor forces, based on the Department's

reporting requirements. Anshan, Baoshan, Shanghai Pudong and WISCO

argue the source documents and methodology used to derive these figures

were examined in detail by the Department during verification, and no

significant discrepancies were found. Therefore, they argue, these data

have been shown to be reliable.

By contrast, respondents argue, the source of the information in

World Steel Dynamics is unknown, the methodology used by World Steel

Dynamics to derive that information is not explained, and the figures

reported in World Steel Dynamics have not been verified. Respondents

claim that, in these circumstances, the labor usage figures reported in

World Steel Dynamics have no probative value at all. Respondents argue

that data from this service certainly do not provide a reasonable basis

for disregarding the verified information reported by respondents.

Department's Position: We agree with respondents. We verified all

of the respondents' reported labor factors and we noted no major

discrepancies. In light of these facts, we have no reason to believe

that the labor factors they provided in their questionnaire have been

misreported.

Comment 15: Valuation of Limestone, Dolomite and Quicklime

Anshan, Baoshan, Shanghai Pudong and WISCO argue that, in the final

determination, the Department should value limestone and dolomite based

on domestic Indian prices, rather than on Indian Monthly Statistics.

Respondents argue that domestic Indian prices for limestone and

dolomite are preferable because (1) it is Department policy to use

domestic, tax-exclusive prices where possible; (2) due to the low

market value of limestone, limestone is ordinarily obtained

domestically; and (3) import values used for limestone and dolomite are

aberrational when compared to the domestic prices submitted for these

values. Respondents claim that the Department incorrectly used, as the

surrogate value for dolomite, price information for ``calcined''

dolomite, although the dolomite inputs used by respondents are

``uncalcined.'' Furthermore, the value for quicklime, respondents

contend, should be the same as the value for limestone because the two

products are comparable. They contend that petitioners' argument (see

below) is internally inconsistent and should therefore be disregarded.

Liaoning and Wuyang argue that the Department should base the

surrogate values for these raw material inputs on data contained in the

financial statements of Indian producers. See Brake Drums and Rotors,

62 FR at 91631 (Feb. 28, 1997). They state that, following its normal

practice, Commerce should derive tax-exclusive surrogate values by

deducting from the raw material costs all excise taxes, central sales

taxes, and state sales taxes. See Public Version of the Factor

Valuation Memorandum from Brake Drums and Rotors, at 2 (Feb. 21, 1997)

(Commerce ``adjusted the domestic average value to exclude the excise

and sales tax'' and ``accepted the four-percent sales tax as a

conservative estimate of Indian state sales tax and have deducted

amounts for sales taxes'' at that rate). They argue a simple average

tax-exclusive surrogate value should be calculated for materials for

which data exists from more than one company.

In their case brief, petitioners maintain that the import values

used in the preliminary determination are accurate surrogate values for

limestone and dolomite sourced domestically by some of the respondents,

because certain other Chinese steel producers imported limestone and

dolomite for use in the production process. Petitioners agree with

respondents that it is the responsibility of the Department to find

surrogate values which reasonably reflect the economic conditions faced

by Chinese producers of cut-to-length carbon steel plate. See

Oscillating Fans, 56 FR at 55271, 55275. Therefore, petitioners contend

that it is reasonable for the Department to use surrogate import raw

material input sources when Chinese producers also import the same.

However, in their rebuttal brief, petitioners urge the Department

to use adverse facts available in valuing limestone, claiming that

respondents failed to provide complete and truthful answers to the

Department's questionnaires with regard to the source of supply for

these inputs. Should the Department agree to apply adverse facts

available, petitioners suggest that it rely on the data of an Indian

producer of subject merchandise, SAIL, because this data constitutes

both the highest value on the record, as well as the most reliable and

appropriate surrogate value under the Department's precedent.

Petitioners urge the Department to value dolomite with the same

value that it assigned to limestone. Petitioners argue that

respondents' claim that the proper surrogate value for dolomite is for

``uncalcined'' dolomite is without merit, because there is no evidence

provided by the respondents or otherwise that their dolomite inputs are

uncalcined. In addition, petitioners refute respondents' claim that

dolomite and limestone should be valued as ``crushed stones''

(Respondents PAI Memorandum, August 5, 1997). According to petitioners,

evidence on the record shows that crushed stones are not pure enough

for use in metallurgy.

For quicklime, petitioners argue that the Department should

separately value limestone and quicklime, as was done in the

preliminary investigation . However, they maintain that should the

Department decide to value the two products with the same surrogate

value, the Department should use SAIL's value for limestone and

quicklime.

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

surrogate value for limestone in the preliminary determination was

based on the Indian import price. We find that this value is the most

representative of the prices for limestone during the POI because the

domestic prices submitted by respondents appear to be significantly

lower than both the Monthly Statistics and data from Indian steel

producers that was submitted by petitioners. In addition, because we

are unfamiliar with India 1995: A Reference Annual, we hesitate to give

it greater weight as a source for limestone value than we give to the

Monthly Statistics, which we have frequently used for valuation

purposes and have no reason to believe is not reliable with respect to

this input. We also agree with petitioners that some companies import

limestone and that this provides support for the use of appropriate

import data to value limestone. For the final determination, we are

relying on the same surrogate value used in the preliminary

determination. We reject petitioners' argument that we should apply

adverse facts available for limestone based on what petitioners believe

to be uncooperative behavior on the part of one company, because there

is no evidence on the record to support their assertion that one

company did not act to the best of its ability to provide certain

information concerning limestone to the Department.

We agree with respondents that limestone and quicklime are

comparable products, based on our review of the Monthly Statistics.

However, we have decided that the difference between them is too

significant to value quicklime based on the surrogate for limestone. We

therefore agree with

[[Page 61980]]

petitioners that we should value the two products based on their

individual values as reported in Monthly Statistics.

With respect to dolomite, we agree that limestone and dolomite,

though separate products, are of comparable value. We have determined

that the Monthly Statistics upon which we relied in the preliminary

determination are obviously aberrational because the value from the

source which we used in the preliminary determination (a value for

``calcinated'' dolomite) is approximately ten times the value of

limestone. In contrast, based on our examination of Indian steel

producers' data, we find that the value of the dolomite they use (which

is not identified as either ``calcinated'' or nor ``calcinated'') is

generally significantly lower than that of the limestone they use.

Therefore, for the final determination, we determined that the value

for ``agglomerated'' dolomite in the Indian Monthly Statistics is

comparable to that for limestone in the same source. Therefore, we are

using the Monthly Statistics value for ``agglomerated'' dolomite to

value dolomite in the final determination.

Comment 16: Basket Categories--Coal and Iron Ore

Anshan, Baoshan, Shanghai Pudong and WISCO contend that the

Department's decision to use a single surrogate value for all coal and

iron ore inputs in the preliminary determination was faulty and suggest

that the Department instead assign different values for each kind of

coal and iron ore input used in the production process.

For coal, they argue that the Department's practice has

traditionally been to base its surrogate values on the prices in the

surrogate country for materials which most closely reflect the specific

grade and chemical composition of the type of input used by the NME

producer. See Certain Helical Spring Lock Washers from the People's

Republic of China, 61 FR 41994, 41996-97 (August 13, 1996) (``Helical

Spring Lock Washers''), and Heavy Forged Hand Tools from the People's

Republic of China, 62 FR 11813, 11815 (March 13, 1997). Therefore, they

contend that the Department should separately value the different kinds

of coal used in the production process. Respondents also contend that

coal should be valued and based on Indian, not Indonesian, values.

For iron ore, Anshan, Baoshan, Shanghai Pudong and WISCO assert

that the Department should value different forms of this input based on

the market prices paid for such ores. These market economy purchase

prices and quantities, they maintain, were verified by the Department.

Similarly, they urge the Department to calculate freight rates for the

delivery of iron ore purchased from market economy suppliers using the

actual rates paid by the Chinese respondents for such shipments during

the POI. For domestically purchased iron ore, Anshan, Baoshan, Shanghai

Pudong and WISCO suggest that the Department value all iron ore using

one Indian domestic price from India 1995: A Reference Manual. They

also maintain that, in valuing freight for domestic iron ore purchases,

the Department should average the distances from each company's iron

ore suppliers and apply surrogate freight rates to this average

distance.

Petitioners maintain that it was appropriate to assign a single

surrogate value for all coal used, because respondents reported various

kinds of coal in a confusing manner. In addition, they assert that the

value used in the preliminary determination is accurate and reasonable.

Petitioners contend, however, that should the Department decide to

value different kinds of coal separately, it should rely on surrogate

values obtained from annual reports of certain Indian producers of

subject merchandise.

With respect to iron ore, petitioners assert that domestically

purchased iron ore could not be significantly cheaper than other forms

purchased from market economy suppliers due to the fact that the

imported iron ore is in the form of concentrate, which requires further

processing before it can be used. As a result, they urge the Department

to maintain the methodology it used in the preliminary determination.

Department's Position: COAL: We agree with respondents that the

Department should value coal based on the surrogate country values for

types of coal which most closely reflect the specific grades and

chemical composition of coal types used by the Chinese producers. We

have valued coking coal and other coal separately, relying on Indian

Monthly Statistics to formulate appropriate surrogate values. We did

not value thermal coal separately because the information submitted by

respondents comes from countries not normally used as surrogates and we

were unable to independently find values for this type of coal. For all

coal other than coking coal, we based our surrogate value on the

classifications ``other,'' ``anthracite'' and ``steam coal,'' which we

averaged. We used Indian Monthly Statistics because we determined that

the data were more appropriate and more specific than the data from the

Indian steel producers.

Iron Ore: With respect to iron ore, we note that it has been the

Department's position in the past that when a significant portion of an

input used by a given producer is purchased from market economy

suppliers, the Department relies entirely on the market economy

purchase prices in valuing that input for that producer. Our

methodology in the preliminary determination was to aggregate all iron

ore whether sourced domestically or from market economy suppliers into

a single basket which we valued at international prices from market

economy suppliers. However, for the final determination, we have, to

the extent possible, treated different types of iron ore as separate

factors of production (i.e., we have valued different types of iron ore

as separate inputs). When a producer has purchased any type of iron ore

from one or more market economy suppliers, we have relied to the

fullest extent possible on the market economy purchase prices which

were verified by the Department. When a given producer sourced a

particular type of iron ore only locally, or imported only an

insignificant percentage of that type of iron ore, we valued that type

of iron ore for that producer based on Indian Monthly Statistics.

Freight For Coal and Iron Ore: Where we relied on the market

economy purchase prices to value the input, we also relied, for freight

cost from the market economy suppliers to the Chinese port, on the

market economy freight rates which the Department verified. For Chinese

inland freight on market economy purchased imports and for domestically

sourced inputs, we relied on the Chinese domestic freight factors,

valued using Indian surrogate data. We have not based domestic freight

costs on an average of the distance between all suppliers and the

relevant producers because a supplier-by-supplier calculation provides

a more accurate estimate of the costs of a producer that sources

different amounts of an input from multiple suppliers in different

locations. See Comment 12 regarding the Department's current freight

methodology.

Comment 17: Valuation of Steel Scrap and Pig Iron

Anshan, Baoshan, Shanghai Pudong, and WISCO argue that the

Department should value steel scrap and pig iron based on domestic

price information from India from the Economic Times because the prices

reported in the Economic Times represents prevailing prices in the

Indian market which are preferable to import prices in the

[[Page 61981]]

Department's hierarchy of surrogate value sources, and the prices

reported in the Economic Times are contemporaneous with the POI.

Liaoning and Wuyang argue that the Department should base the

surrogate values for steel scrap and pig iron inputs on data contained

in the financial statements of Indian producers, citing Brake Drums and

Rotors, 62 FR at 9163. They state that, following its normal practice,

Commerce should derive tax-exclusive surrogate values by deducting from

the raw material costs all excise taxes, central sales taxes, and state

sales taxes. See Factor Valuation Memorandum from Brake Drums and

Rotors, at 2 (Feb. 21, 1997), which Liaoning and Wuyang have placed on

the record of this investigation (Commerce ``adjusted the domestic

average value to exclude the excise and sales tax'' and ``accepted the

four-percent sales tax as a conservative estimate of Indian state sales

tax and have deducted amounts for sales taxes'' at that rate). Liaoning

and Wuyang argue that a simple average tax-exclusive surrogate value

should be calculated for materials for which data exists from more than

one company. See Factor Valuation Memorandum from Brake Drums and

Rotors, at 4.

Petitioners contend that the Department should value steel scrap

and pig iron based on U.N. Trade Commodity Statistics, or else continue

to use the value used in the preliminary determination, which is based

on Indonesian import data. They maintain that values that the four

respondents submitted from the Economic Times represent a snapshot of

prices that do not represent prevailing prices throughout the entire

period of investigation.

Department's Position: For steel scrap, we are using

contemporaneous import data from Indian Monthly Statistics. For pig

iron, we were unable to use the Indian Monthly Statistics as we

determined that the import price was aberrational because the Indian

data was based on a very small quantity and was almost two times the

price of the Indonesian pig iron. Consequently, we are continuing to

use prices from Indonesian import statistics that we used in the

preliminary determination. We did not use the data submitted by either

petitioners or respondents for either pig iron and steel scrap because

we found that these values were aberrational compared to the Indonesian

import statistics. We did not use the values from the Economic Times

because we determine that the information in the Economic Times

submitted by respondents and in the U.N. Trade Commodity Statistics

submitted by petitioners was aberrational. More detail on this issue

may be found in the business proprietary version of the Concurrence

Memorandum.

Comment 18: Valuation of Iron Scrap, Fluorite/Fluorspar, Coke,

Aluminum, Magnesium Ore, Ferrosilicon, Ferromanganese and Magnesium Ore

Anshan, Baoshan, Shanghai Pudong and WISCO argue that the

Department should value iron scrap, fluorite/fluorspar, coke, aluminum,

magnesium ore, ferrosilicon, ferromanganese, and magnesium ore based on

Indian Monthly Statistics that correspond to the investigation period.

In the preliminary determination, the Department valued some of these

inputs based on import statistics which pre-dated the period of

investigation. These respondents argue that petitioners' suggestion

that the Department value some of these inputs based on data from 1994

U.N. Trade Commodity Trade Statistics should be ignored, respondents

argue because it is not contemporaneous and less specific to the inputs

in question.

Liaoning and Wuyang argue that the Department should base the

surrogate values for these inputs on data contained in the financial

statements of Indian steel producers. See Brake Drums and Rotors, 62 FR

at 9163. They state that, following its normal practice, Commerce

should derive tax-exclusive surrogate values by deducting from the raw

material costs all excise taxes, central sales taxes, and state sales

taxes, citing to Factor Valuation Memorandum from Brake Drums and

Rotors, at 2 (Feb. 21, 1997) which they have added to the record of

this case. They argue a simple average tax-exclusive surrogate value

should be calculated for materials for which data exists from more than

one company. See Factor Valuation Memorandum from Brake Drums and

Rotors, at 4.

Petitioners urge the Department to either value these inputs based

on the 1994 U.N. Commodity Trade Statistics, and argue that these

statistics, although less contemporaneous, are more reliable.

Department's Position: We agree with the four respondents. To the

extent possible, we have relied on contemporaneous data, as the

Department normally prefers to use prices that are representative of

prices in effect during the POI. For iron scrap, we used the same

Indian Monthly Statistics value as we did in the preliminary

determination because this is the most contemporaneous value on the

record. For ferrosilicon, flourite/fluorspar, ferromanganese, magnesium

ore, aluminum, and coke, we have adopted the values from the Indian

Monthly Statistics for April through July of 1996, as submitted by the

respondents as these values are more contemporaneous with the POI than

the similar values used in the preliminary determination. We have

rejected Liaoning and Wuyang's argument that we should value these

factors based on Indian domestic data because we have found appropriate

surrogate values that represent a larger sample of prices from Indian

Monthly Statistics.

Comment 19: Scale and Slag

Anshan, Baoshan, Shanghai Pudong and WISCO argue that the

Department appropriately valued slag at the low U.S. market price of

$6.91 per metric ton and that the Department should continue to value

slag in the same manner for the final determination. Anshan, Baoshan,

Shanghai Pudong and WISCO additionally contend, however, that the

Indian import price of $483.91 per metric ton for scale is aberrational

high and that the Department should apply the same surrogate value for

scale as it applies to slag. Furthermore, these respondents argue that,

because both slag and scale are self-generated by-products of the

steelmaking process, the Department should not apply any freight

expense to the surrogate prices for slag and scale in the final

determination.

Petitioners agree that slag is essentially a mineral waste and has

a relative low value. Scale, on the other hand, they argue, is

processed steel, consisting of cuttings from actual steel slabs. Scale,

reason petitioners, thus has a far greater value as an input in

steelmaking than does slag. Petitioners continue that there is nothing

on the record to substantiate respondents' claim that the Indian price

for scale is ``aberrational.'' Petitioners conclude that the Indian

price the Department adopted in the preliminary determination is

reliable and should be used for the final determination.

Department's Position: We agree with respondents in part. Scale is

of little value in the steelmaking process. Because slag and scale are

very similar, the Department used the same value for scale and slag

($6.91 per metric ton) in its final determination. Furthermore, we

agree with respondent that a freight expense should not be added to the

surrogate prices for slag and scale when no freight is incurred in

China on these inputs, because they are self-generated.

[[Page 61982]]

Comment 20: Stones

Anshan, Baoshan, Shanghai Pudong and WISCO argue that, to the

extent that surrogate values for some types of ``stones'' have already

been submitted on the record (e.g., manganese, quicklime, limestone and

dolomite), the Department should use that information for surrogate

values for these inputs. To value types of stones for which no specific

surrogate value has been provided to the Department (e.g., serpentine,

calcium carbon trioxide (CaCO3), silicon sand/silicon

dioxide), the Department should use the surrogate value for ``stone,

sand and gravel'' proposed by the petitioners in their August 5, 1997

submission at Exhibit A--that is, $25.21 per metric ton.

Petitioners state that, with respect to silicon, the Department has

already found an appropriate surrogate value. Petitioners contend that

respondents have conceded that the category ``stones'' contains

unreported ``silicon sand'' and silicon dioxide in unknown quantities.

Therefore, petitioners state that the Department should use the value

for silicon as facts available in valuing ``stones'' for which no

specific surrogate value has been provided. In addition, regarding

calcium carbonate (CaC2) rocks, petitioners argue that the

Department should recalculate consumption for each company.

Department's Position: We agree with respondents that the

Department should use appropriate and specific surrogate values for all

types of ``stones.'' For the final determination, for Baoshan,

Liaoning, Shanghai Pudong and WISCO, we have obtained appropriate

separate values for all types of stones which were separately reported.

For Anshan, we have obtained a value from the U.N. Trade Commodity

Statistics for ``stones, sand and gravel'' and are valuing stones for

which we do not have a surrogate value using this data. We disagree

with petitioners' assertion that we should use silicon as facts

available for silicon sand. Based on our understanding of the steel

industry, silicon sand is more comparable to generic sand than it is to

silicon, which is a comparatively expensive commodity.

Comment 21: Silicon Manganese

Respondents note that, in the preliminary determination, the

Department valued silicon manganese at $578.68 per metric ton, based on

information contained in the 1995-96 annual report of SAIL. Respondents

argue that, if the Department continues to use this source in the final

determination, the value should be adjusted not only for inflation, but

also to remove Indian taxes reflected in the reported number.

Petitioners counter that nothing in the record supports

respondents' claim that taxes are included in the surrogate value used

by the Department for silicon manganese (based on SAIL data). Even if

taxes were included, furthermore, there is no record information that

would allow for a determination of the amount of taxes paid.

Accordingly, petitioners contend that the SAIL data must be used as

reported.

Department's Position: Although we consider the value for silicon

manganese we used in the preliminary determination appropriate for use

in our final determination calculations, we have located a more

contemporaneous Indian Monthly Statistic for the period April 1996

through July 1996 which we believe to be more accurate and

representative of a larger sample of the commodity. For the final

determination, we are relying on this import price to value silicon

manganese.

Comment 22: Electricity

Anshan, Baoshan, Shanghai Pudong and WISCO contend that, in the

preliminary determination, the Department valued electricity at $0.06

per kilowatt hour, based on data reported in the July 1995 publication

Current Energy Scene in India, published by the Center for Monitoring

Indian Economy. These respondents contend that the Department should

continue to use this value in the final determination.

Petitioners state that respondents' suggested rate for electricity

reflects the simple average of the Indian state electricity rates for

the ``large industry'' category as of January 1, 1995, adjusted to the

POI. See Shanghai Pudong Factor Valuation Memorandum, June 3, 1997, at

4-5. Petitioners maintain that, in its final determination, the

Department should use the electricity rates reported by Indian flat-

rolled steel producers in their annual reports for the fiscal year

ending March 1996. These reported rates are preferable, argue

petitioners, because they are more contemporaneous with the POI and are

specific to large steel manufacturers. See Polyvinyl Alcohol from the

People's Republic of China, 61 FR 14057 at 14061 (March 29, 1996)

(Final Determination). Petitioners calculate the weighted average

electricity rate for Pennar Steels Ltd., Nippon Denro Ispat Ltd.,

Visvesveraya Iron & Steel Ltd., SAIL, and Tata Steel Ltd., at $0.0648

per kilowatt hour.

Department's Position: We agree with respondents. We consider the

rate for electricity we used in the preliminary determination

appropriate for use in our final determination calculations as it is

publicly available and nothing on the record suggests that this value

is aberrational.

Comment 23: Scope Issue

Petitioners argue that the scope should be clarified to state that

it covers plate 4.75 mm in thickness or more, in nominal or actual

thickness. They state that, due to thickness tolerances in the various

common plate specifications, foreign producers may sell plate as \3/16\

inch (4.75 mm) plate at thickness less than \3/16\ inch and remain

within the specification.

Petitioners allege that there is a significant U.S. market for \3/

16\-inch (4.75 mm) plate. They also argue that they always intended

that the scope of the investigation would cover product of 4.75 mm in

actual or nominal thickness because any plate within the tolerance for

4.75 mm nominal thickness plate will compete directly with any other

plate within the tolerance. The customer knows that all plates within

the tolerance meet the performance standards of the specification.

Petitioners argue that actual and nominal thickness products are

produced on the same equipment, marketed in the same way to the same

customers and generally priced identically. They allege that failure to

include plate with a nominal thickness of at least 4.75 mm but an

actual thickness of less than 4.75 mm would seriously undermine the

scope of the investigation by allowing products that are considered

identical in the market to be treated differently under the scope.

Anshan, Baoshan, Shanghai Pudong and WISCO point out that

petitioners' request to change the scope was submitted more than five

months after the filing of the petition. They argue that petitioners'

proposal to change the scope so late in the proceeding is contrary to

the requirements of the law. Respondents note that the statute does not

permit the Department to amend the scope of the petition so late in

this investigation.

Department's Position: We disagree with petitioners and have

decided not to change the scope of products under investigation. For a

more complete discussion of this issue, See Memorandum on Scope of

Investigations on Carbon Steel Plate from Joseph Spetrini to Robert S.

LaRussa.

Comment 24: Alloy/Non-Alloy Steel Issue

Petitioners allege that foreign producers are beginning to slightly

vary

[[Page 61983]]

the alloy content of their carbon plate in order to technically remove

the product from the non-alloy steel tariff subcategories in the

Harmonized Tariff Schedule of the United States (``HTSUS'') and place

the products within the ``other alloy steel'' HTSUS subcategories

without changing the specification, grade, physical characteristics or

applications of the CTLP. Petitioners contend that such low-alloy

plates should be covered by the scope.

Petitioners argue that products classified as alloy steel under the

HTS, but ordered and produced to ``carbon'' steel specifications,

should be included within the scope of the investigation. They argue

that the alloys being added to these products are not changing the

performance characteristics of plate, and the alloy-added carbon

products and other carbon products are the functional equivalents of

one another. Petitioners further contend that the products are produced

by the same manufacturers on the same equipment, are sold to the same

customers for the same uses, and have nearly identical costs.

Petitioners assert that where the added alloy does not change the

performance characteristics of the plate or affect the product's

classification within the industry specification, the product should

remain within the scope of the investigation. They argue that the

addition of alloys that do not change the performance characteristics

or specifications of the product will not change the purchasers'

perception of the value, function or use of the product. Petitioners

conclude by stating that the failure to include such completely

substitutable products within the scope would undermine the efficacy of

any order.

Anshan, Baoshan, Shanghai Pudong and WISCO again argue that

petitioners' request to change the scope was untimely submitted and

should be rejected by the Department, as it is contrary to the

requirements of the law. Moreover, respondents contend that Department

and classification practice demonstrate that carbon steel does not

include products with alloying agents such as boron. Finally,

respondents assert that the statute does not permit the Department to

amend the scope of the petition proposed in the manner proposed by

petitioners so late in this investigation.

Department's Position: We disagree with petitioners and have

decided not to change the scope of products under investigation. For a

more complete discussion of this issue, See Memorandum on Scope of

Investigations on Carbon Steel Plate from Joseph Spetrini to Robert S.

LaRussa.

Comment 25: River Freight

Anshan, Baoshan, Shanghai Pudong and WISCO argue that, in the final

determination, the Department should not value river freight costs for

purchases of materials (and for the shipments of finished products by

the Chinese producers) using the surrogate value relied upon for the

preliminary determination, which was based on a 1993 embassy cable

regarding river barge rates in India originally submitted for Helical

Spring Lock Washers, 61 FR at 41994. In particular, Anshan, Baoshan,

Shanghai Pudong and WISCO argue that this source should not be used in

the final determination because (1) the rates do not in any way reflect

the costs of shipping raw materials and merchandise on the Yangtze

River on which their steel mill and export facilities are located, and

(2) the rates do not even accurately reflect the costs of river

shipping in India.

Respondents argue that the Department must, to the extent possible,

select surrogate values for river rates which accurately and fairly

reflect the costs of the shipping raw materials and steel products on

the Yangtze River. Respondents maintain that the use of Indian river

barge rates to establish surrogate values for Chinese shipments of raw

materials and final steel products on the Yangtze River is

inappropriate because there are no rivers in India that are comparable

to the Yangtze River and river shipping rates are heavily dependent on

the types of rivers used for shipping and the types of products being

shipped.

As an alternative to the Indian barge rates in the 1993 cable,

respondents urge that the Department use published Mississippi River

shipping rates as surrogate values for the cost of shipping on the

Yangtze River because, they claim, the Mississippi River is a ``working

river'' that is comparable in size to the Yangtze River.

If the Department continues to use Indian shipping rates to value

shipping on the Yangtze river, respondents recommend that the

Department use current, actual shipping rates rather than the 1993

quotation used in the preliminary determination. Respondents argue that

the 1996-97 rates collected and reported by the Ministry of Surface

Transport of the Government of India, which they have submitted, are

preferable because they are less aberrational, more contemporaneous,

and based on a broader range or merchandise than the rates used in the

preliminary determination, which do not identify the product for which

these rates were quoted.

Petitioners argue that the data on river freight supplied by the

respondents are unreliable; therefore, they urge, the Department should

continue to use the same values as in the preliminary determination.

Petitioners argue that respondents' claim that Indian rivers are

generally not accessible to large vessels is baseless, stating that CIA

reports indicate that a large percentage of inland waterways in India

are navigable.

Petitioners object to the use of U.S. freight rates as surrogate

values, arguing that the Department must calculate normal value based

on, ``to the extent possible, the prices or costs of factors of

production in one or more market economy countries that are * * * at a

level of economic development comparable to that of the nonmarket

economy country * * *.'' 19 U.S.C. 1677b(c)(4). Petitioners contend

that United States is not an appropriate surrogate country because it

is at a different level of economic development than the People's

Republic of China and not one of the five countries identified by the

Department as potentially suitable surrogates. See Memorandum to E.

Yang from D. Mueller, January 29, 1997 (``DOC Surrogate Selection

Memo'').

Further, petitioners assert that the information on Indian river

freight rates supplied by respondents is questionable with respect to

its meaning, origin and reliability. Petitioners argue that respondents

have not provided any credible evidence that the rates used by the

Department in the preliminary determination are ``aberrational.''

Department's Position: We agree with both respondents and

petitioners in part. For the final determination, we have decided to

base the river rates freight on a simple average of the rates used in

the preliminary determination and information submitted by respondents.

We note that the river rates we used in the preliminary determination

were significantly higher than rates for other forms of transportation.

For example, to ship merchandise 1100 km. by river using the rates used

in the preliminary determination would cost $68 per ton, whereas to

ship the same distance by train would only cost approximately $15 per

ton. We note that a respondent would usually use, in the normal course

of business, the most cost effective and efficient mode of

transportation. However, respondents did not ship by train. It is our

own practice to value the factors of production actually used by

respondents. Consequently, we have concluded that to only use the

surrogate

[[Page 61984]]

value we used in the preliminary results would be inappropriate.

Respondents also submitted river rates from the Inland Waterways

Authority of India, which is part of the Ministry of Surface

Transportation of the Government of India. We disagree with

petitioners' argument that the Department should reject this

information because respondents used a consultant in obtaining this

information. While it is true that a consultant was involved in

obtaining this information, the fact remains that the source of the

data is the Indian Government. In addition, we can find no evidence to

support the conclusion that the river rates presented in that document

are unreliable or distortive. The rates represent a wide variety of

rivers, products and distances in India, including river rates to and

from Calcutta, which is a major port. At the same time, we hesitate to

use only the river rate information obtained by respondents for the

final determination. As no evidence on the record indicates what

instructions were given to the consultant or what questions the

consultant asked the Indian Waterways Authority to obtain the data.

We also disagree with respondents' contention that we should use

rates from the Mississippi River for the final determination. First,

the United States is not one of the selected surrogate countries that

the Department normally uses. The Department also searched for

alternative sources of information from other surrogate countries. In

particular, we attempted to obtain river rate information from Egypt

(the Nile river) and Pakistan (the Indus river). However, we were

unable to obtain publicly available information for river rates from

these countries. Second, all rivers are to some degree unique, and the

Department's ability to address the quantity and the types of

differences noted by respondents is limited. Thus, it is not our

practice to find a surrogate value for freight over a particular route,

but rather to ascertain a reasonable value for river freight.

Comment 26: Ocean Freight Rates

Respondents argue that the Department should apply product- and

port-specific ocean freight rates. Respondents maintain that, in the

preliminary determination, the Department improperly applied the ocean

freight rates for shipping steel plate to other types of products,

which would necessarily have different shipping rates. Respondents urge

that the Department should value raw materials purchased from market-

economy suppliers using sale-specific shipping cost information from

market economy ocean freight providers. Respondents recommend that

product-and port-specific ocean-shipping rates published in Shipping

Intelligence Weekly be used to value ocean freight shipments in the

final determination.

Petitioners argue that the Department should continue using the

ocean freight rates from U.S. import statistic reports (IM-145 reports)

used in the preliminary determination. Petitioners assert that the

Department should not value raw materials purchased from market-economy

suppliers using sale-specific shipping cost information from market

economy shippers unless there is sufficient evidence that the specific

respondent purchased the input from a market economy supplier in market

economy currency. Further, petitioners argue that the surrogate values

based on shipping rates reported from Shipping Intelligence Weekly

submitted by respondents are inadequate for several reasons. First,

petitioners note that rates reported from the Shipping Intelligence

Weekly are not actual freight rates paid by customers, but instead are

described as ``average earnings.'' Second, petitioners contend that

respondents chose rates for the most efficient type of vessel for their

surrogate value. Third, petitioners note that information from Shipping

Intelligence Weekly was not accompanied by the certification of

accuracy as required by 19 CFR Sec. 353.31(i). Petitioners urge the

Department to continue using import data in the preliminary

determination, since the import data is representative of a large

sample of shipments and relate specifically to the chosen surrogate

country.

Department's Position: We agree with petitioners that rates

reported from Shipping Intelligence Weekly are not actual freight rates

paid by customers, but instead are described as ``average earnings.''

Second, we agree that respondents appear to have provided rate data for

the most efficient type of vessel, rather than the actual freight rates

paid by customers. Consequently, we find that the value reported in the

Shipping Intelligence Weekly are not appropriate for use as surrogate

values for ocean freight. For the final determination, therefore, we

have continued to use the IM-145 ocean rates used in the preliminary

determination.

Comment 27: Brokerage and Handling

Anshan, Baoshan, Shanghai Pudong and WISCO argue that the surrogate

value for brokerage and handling charges used in the preliminary

determination is aberrational. This value was based on ranged, public

information from 1991-92 that was originally submitted in the

Department's investigation of Sulphur Vat Dyes from India, 38 FR at

11835, 11841. These respondents recommend that the Department use,

instead, as a surrogate value for brokerage and handling, prices they

have submitted which are reported by Amrok Shipping Private Ltd. , a

shipper from India.

Liaoning and Wuyang argue that the Department should use a

brokerage and handling value contained in the public version of the

response of Isibars Limited in the antidumping review of Stainless

Steel Wire Rod from India, which they have added to the record of this

case to value foreign brokerage. They maintain that the value for

brokerage and handling used in the preliminary determination is

inappropriate because that value is for a product unrelated to the

subject merchandise of this investigation. Liaoning and Wuyang contend

that the brokerage and handling value from 1995-96 Stainless Steel Wire

Rod from India is preferable because it is specific to steel, more

contemporaneous, and more reliable, since it has been verified by the

Department.

Petitioners argue that the Department should continue to use the

surrogate value for brokerage and handling used in the preliminary

determination. Petitioners find it significant that this surrogate

value for foreign brokerage and handling was used by the Department in

two other final investigations. Petitioners argue that information

provided by the four respondents is an anecdotal and selective

commentary by a private shipping company that may have been paid to act

as a consultant by the respondents. Petitioners urge that the

Department reject the information provided by the four respondents on

the basis that it is likely to be biased and unreliable.

Department's Position: We agree with Liaoning and Wuyang. In the

preliminary determination, we used brokerage and handling rates as

reported in ranged, public information from 1991-92 that was originally

submitted in the Department's investigation of Sulphur Vat Dyes. We are

unfamiliar with the Amrok Shipping brokerage and handling information

submitted by Anshan, Baoshan, Shanghai Pudong and WISCO and do not know

what questions the four respondents asked to obtain the brokerage and

handling rates. The brokerage and handling rates submitted constitute

an individual's estimate and were not specific concerning certain

charges. In addition, we have no background information on the period

[[Page 61985]]

of time applicable to the brokerage and handling values submitted by

these respondents. Since the brokerage and handling rates in used in

the Stainless Steel Wire Rod are more contemporaneous than the

information used in the preliminary determination, specific to steel

and verified by the Department, we have used those rates for the final

determination.

Comment 28: Rejection of Untimely Factual Information

The four respondents argue that the Department should not reject

factual information submitted within the deadlines established by its

regulations. Thus, respondents urge the Department to reconsider and

reverse its earlier decision to reject submissions from Anshan, Baoshan

and WISCO. Respondents maintain that the information at issue was

submitted within the deadlines pursuant to the Department's

regulations, which allow for the submission of factual information in

an antidumping investigation up to one week prior to the start of

verification, in accordance with 19 CFR Sec. 353.31(a). Respondents

maintain that the Department, in rejecting certain portions of the

respondents' submission, misapplied the provision of 19 CFR

Sec. 353.31(b)(2), which states that, '' in no event will the Secretary

consider unsolicited questionnaire responses submitted after the date

of publication of the Secretary's preliminary determination.'' Citing

to the preamble of the relevant regulations, respondents argue that

this provision applies only to questionnaire responses received from

voluntary respondents and not to those from mandatory respondents. See

Antidumping Duties, 54 FR at 12742, 12759-60 (Mar. 28, 1989) (final

rule).

Further, respondents maintain that, in accordance with the

provisions of its regulations, the Department has in the past allowed

respondents to supplement their previous questionnaire responses prior

to verification. See Certain Iron Construction Casting from the

People's Republic of China, 50 FR at 43594 (Oct. 28, 1985); Polyvinyl

Alcohol from the People's Republic of China, 60 FR at 32757 (June 17,

1997); Collated Roofing Nails from the People's Republic of China, 62

FR at 25895 (May 12, 1997) (preliminary determination). Moreover,

respondents argue that the Department had sufficient time to analyze

and verify the additional information submitted, and that the rejection

of this information would unfairly penalize respondents for providing

information that they claim the Department had not requested be

provided in a questionnaire with an earlier due date.

For Anshan, the rejected information consisted of freight

information for certain inputs. Anshan argues that this freight

information should be accepted because Commerce had not requested this

information in its supplemental questionnaires and thus this

information was not untimely provided.

For Baoshan Steel, the Department had requested information on

distances from suppliers for all inputs in its supplemental

questionnaire, and Baoshan Steel neglected to include information on

the distance for one category of inputs. Baoshan Steel submitted the

omitted information one week prior to the start of verification.

For WISCO, the information rejected by the Department consisted of

the factors of production for producing oxygen and similar gases.

Respondents argue that the Department, in the supplemental

questionnaire, gave WISCO the option of either providing these factors

of production or explaining why these factors of production should not

be used. Respondents allege that, due to an inadvertent error, the

factor information they intended to provide was omitted from the

supplemental questionnaire. Respondents submitted this information one

week prior to verification.

Petitioners argue that respondents' challenge to the Department's

decision to reject their untimely submission of information requested

in the Department's questionnaires is both misleading and without

merit. Petitioners refer to 19 CFR Sec. 353.32(b), which provides that,

in the Secretary's written request to an interested party for a

response to a questionnaire, the Secretary will specify the time limit

for response. 'The Secretary will return to the submitter, with written

reasons for return of the document, any untimely or unsolicited

questionnaire responses rejected by the Department.'' 19 CFR

Sec. 353.31(b)(2). Petitioners maintain that the respondents'

submissions were properly rejected by the Department in accordance with

section 353.31(b)(2) because (1) the information that respondents cla

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