Circular Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-809]

Circular Welded Non-Alloy Steel Pipe From the Republic of Korea;

Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: On December 8, 1997, the Department of Commerce published the

preliminary results of its administrative review of the antidumping

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

Korea. This review covers imports of pipe from four producers/exporters

during the period November 1, 1995 through October 31, 1996.

Based on our analysis of comments received, these final results

differ from the preliminary results. In addition, we continue to find

for these final results that sales of subject merchandise were made

below normal value during the review period.

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Craig Matney,

Import Administration, International Trade Administration, US

Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington DC 20230; telephone (202) 482-4087 and 482-1778,

respectively.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

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

indicated, all citations to the Department of Commerce's (the

Department's) regulations refer to the regulations, codified at 19 CFR

part 353, April 1997.

Background

This review covers four manufacturers/exporters, i.e., Hyundai Pipe

Co. Ltd. (Hyundai), Korea Iron and Steel Co., Ltd. (KISCO) and its

affiliate Union Steel Manufacturing Co., Ltd. (Union), SeAH Steel

Corporation (SeAH) and Shinho Steel Co., Ltd. (Shinho), collectively

referred to as ``the respondents.'' Since the publication of our Notice

of Preliminary Results of Antidumping Duty Administrative Review of

Circular Welded Non-Alloy Pipe from the Republic of Korea, (Preliminary

Results) 62 FR 64559 (December 8, 1997), we received revised home

market datasets from the respondents in December 1998. We also received

case briefs from the respondents and from the petitioners on January

20, 1998, and rebuttal briefs on January 30, 1998.

Scope of Review

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

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

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

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

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

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

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

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

conditioning units, automatic sprinkler systems, and other related

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

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

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

bearing purposes in the construction, shipbuilding, trucking, farm

equipment, and other

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related industries. Unfinished conduit pipe is also included in this

order.

All carbon-steel pipes and tubes within the physical description

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

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

and tube hollows for redraws, finished scaffolding, and finished

conduit. In accordance with the Department's Final Negative

Determination of Scope Inquiry on Certain Circular Welded Non-Alloy

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

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

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

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

specifications, which falls within the physical parameters as outlined

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

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

Imports of these products are currently classifiable under the

following Harmonized Tariff Schedule (HTS) subheadings: 7306.30.10.00,

7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55,

7306.30.50.85, and 7306.30.50.90. Although the HTS subheadings are

provided for convenience and customs purposes, our written description

of the scope of this proceeding is dispositive.

Date of Sale

The respondents have argued that, contrary to the methodology used

in the Preliminary Results, we should use invoice date as the date of

sale for sales to the United States. For these final results, we

continue to find contract date to be the appropriate date of sale with

respect to sales to the United States. (For further discussion of this

issue, see Comment 1 in the General Comments section of this notice

below.)

Product Comparisons

On January 8, 1998, the Court of Appeals for the Federal Circuit

issued a decision in CEMEX v. United States (CEMEX), 1998 U.S. App.

LEXIS 163. In that case, based on the pre-URAA version of the Act, the

Court ruled that the Department may not resort immediately to

constructed value (CV) as the basis for foreign market value (now

normal value, or ``NV'') when the Department finds home market sales of

the identical or most similar merchandise to be outside the ordinary

course of trade. This issue was not raised by any party in this

proceeding. However, the URAA amended the definition of sales outside

the ordinary course of trade to include sales below cost. See, Section

771(15) of the Act. Consequently, the Department has reconsidered its

practice in accordance with this court decision and has determined that

it would be inappropriate to resort directly to CV as the basis for NV

where the Department finds foreign market sales of merchandise

identical or most similar to that sold in the United States to be

outside the ordinary course of trade. Instead, the Department will use

other sales of similar merchandise to compare to the US sales if such

sales exist. The Department will use CV as the basis for NV only when

there are no above-cost sales that are otherwise suitable for

comparison.

Accordingly, in this proceeding, when making comparisons in

accordance with section 771(16) of the Act, we considered all home

market sales of the foreign like product that were in the ordinary

course of trade for purposes of determining appropriate product

comparisons to US sales. Where there were no sales of identical

merchandise in the home market in the ordinary course of trade to

compare to US sales, we compared US sales to sales of the most similar

foreign like product made in the ordinary course of trade, based on the

characteristics listed in Sections B and C of our antidumping

questionnaire. Thus, we have implemented the Court's decision in CEMEX

to the extent that the data on the record permitted.

Aside from the preceding, we followed the methodology outlined in

our Preliminary Results with the following exception: for certain of

Shinho's models that had identical product characteristics but were

assigned non-identical control numbers, we recoded them with identical

control numbers.

Export Price and Constructed Export Price

We followed the methodology in the Preliminary Results with the

following exceptions: (1) We used in our analysis all export price (EP)

transactions that were entered during the POR; (2) we recalculated

adjustments for duty drawback for SeAH; (3) we recalculated the short-

term interest rate for KISCO/Union on a collapsed basis; (4) we

included interest revenue in the calculation of net price for KISCO/

Union.

Normal Value

We used the same methodology outlined in the Preliminary Results

with the following exceptions: (1) For sales with weight conversion

factors below the allowed minimum, we used the minimum as non-adverse

facts available; (2) sales failing the arm's-length test and resales of

products purchased from other producers were not included in the

product-matching concordance for Hyundai and SeAH; (3) we reallocated

SeAH's foreign brokerage, US duty and US brokerage expenses on a value

basis; (4) sales of overruns were removed from the arm's length test

for SeAH; (5) indirect selling expenses for KISCO/Union were

recalculated; (6) the short-term interest rate for KISCO/Union was

recalculated on a collapsed basis; (7) we recalculated Shinho's CV

interest expenses with respect to short-term interest offsets and

foreign exchange gains/losses; 8) we recalculated the credit expenses

for one of Shinho's home market customers.

Level of Trade/CEP Offset

We received no comment from interested parties on the methodology

we employed in the Preliminary Results with respect to level of trade.

Based on our analysis of information on the record as articulated in

the Preliminary Results, we are not changing our methodology with

respect to level of trade for these final results.

Cost of Production Analysis

As discussed in the Preliminary Results, we conducted an analysis

to determine whether the respondents made sales of the foreign like

product in the home market at prices below their cost of production

(COP) within the meaning of section 773(b)(1) of the Act. We used the

same methodology employed in the Preliminary Results with the following

exceptions: (1) The general and administrative (G&A) and interest

factors for all respondents were recalculated using a denominator

inclusive of packing; (2) we recalculated KISCO/Union's G&A and

interest expense on a collapsed basis; (3) we recalculated Shinho's

interest expenses with respect to short-term interest offsets and

foreign exchange gains/losses.

Constructed Value

In calculating CV, we followed the methodology employed in our

Preliminary Results, with the following exceptions: (1) The SG&A and

interest factors for all respondents were recalculated using a

denominator inclusive of packing; (2) we adjusted Hyundai's CV for

direct selling expenses incurred in the home market; (3) we converted

CV profit to a theoretical-weight basis for Shinho; (4) we corrected

the circumstance of sale (COS) adjustment for credit expenses for

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Shinho; (5) we recalculated Shinho's interest expenses with respect to

short-term interest offsets and foreign exchange gains/losses.

Interested Party Comments

General Comments

Comment 1: Invoice Date v. Contract Date as the Date of U.S. Sale

The respondents note that before the issuance of the original

questionnaire in this proceeding on January 13, 1997, the Department

adopted the policy of using invoice date as the presumptive date of

sale in February 1996 with the publication of its proposed antidumping

regulations (see Antidumping and Countervailing Duties: Notice of

Proposed Rulemaking and request for Public Comments, (Proposed

Regulations) 61 FR 7308, 7381 (February 27, 1996)). Consistent with the

instructions in the questionnaire, the respondents state that they used

invoice date as the date of sale for US sales and received no

indication from the Department that this was not acceptable until

October 30, 1997, despite meetings subsequent to the issuing of the

questionnaire with Department officials on this same issue.

The respondents acknowledge that the Proposed Regulations and Final

Regulations (i.e., Antidumping Duties; Countervailing Duties: Final

Rule, (Final Regulations) 62 FR 27926, 27411 (May 19, 1997) codified at

19 CFR Sec. 351.401(i)) speak of the use of dates other than invoice

date under circumstances involving long-term contracts, sales with

exceptionally long periods of time between invoice and shipment dates,

and situations involving large custom-made merchandise. However, the

respondents then point out that the particular circumstances in this

case with respect to US sales (i.e., long periods of time between the

date on which the material terms of sale are set and invoice date) do

not fall within these stated exceptions. The respondents also emphasize

that the Final Regulations clearly state that exceptions to the

presumption to use invoice date must be narrowly drawn. Indeed, the

respondents note that in Certain Stainless Steel Wire Rod from India:

Final Results of New Shipper Antidumping Duty Administrative Review,

(Certain Stainless from India) 62 FR 38976, 38978 (July 21, 1997), the

Department maintained that the use of invoice date as the date of sale

was appropriate over the objection of the petitioners that the lag time

of up to several months between purchase order date and invoice date

was too long. The respondents also cite other cases in which the

Department held that invoice date was the appropriate date of sale.

The respondents argue that since their sales processes are quite

typical for manufactured products, that they should be afforded typical

consideration--i.e., the use of invoice date as the date of sale.

Otherwise, argue the respondents, the exception of not using invoice

date as the date of sale would become the rule, and the selection of

the date of sale would be purely at the discretion of the Department.

The respondents point out that even if the sales terms rarely

change after the contract date, the possibility for change exists and

sometimes does occur. The respondents then cite to the Preamble to the

Final Regulations where it states that ``absent satisfactory evidence

that the terms of sale were finally established on a different date,

the Department will presume that the date of sale is the date of

invoice'' (Final Regulations at 27349). According to the respondents,

the sales terms in this case are subject to change and are not,

therefore, ``finally established'' within the meaning of the Preamble

to the Final Regulations until the date of invoice.

In addition, the respondents argue that using a different date of

sale for home market sales than for US sales contradicts the

Department's preference of using a single date of sale for a given

respondent instead of a different date for each sale, as stated in the

Preamble to the Final Regulations (see 62 FR 27348). As support for

using the same date of sale in both markets, the respondents cite to

Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line

Pressure Pipe from Germany: Preliminary Results of Antidumping Duty

Administrative Review, (Germany Line Pipe) 62 FR 47446, 47448

(September 9, 1997) in which the Department used shipment date (a proxy

for invoice date which occurred after the shipment date) despite a long

lag time between order confirmation date and shipment date in order to

maintain dates of sale in the home market and the United States on the

same basis.

The petitioners point out that both the Proposed and Final

Regulations cited by respondents are not applicable to this proceeding

since it was initiated prior to the date on which these regulations

became effective. Even if they were, add the petitioners, the

Department's decision not to use invoice date as the date of sale for

US sales was fully consistent with those regulations as they state:

[T]he Department may use a date other than the date of invoice

if the Secretary is satisfied that a different date better reflects

the date on which the exporter or producer establishes the material

terms of sale.

See Final Regulations at 27411. The petitioners take issue with the

respondents' assertion that the listed exceptions are the only

allowable circumstances under which the Department may abandon the use

of invoice date. Instead, state the petitioners, the list of exceptions

is illustrative and not exhaustive. The petitioners also note that

while the respondents cite to language in the regulations speaking

generically about the malleable nature of sales terms up until the time

that payment is demanded, they have not cited to evidence on the record

of this proceeding which would demonstrate that sales terms in this

case are not usually established on the contract date for sales to the

United States. Rather, state the petitioners, there is more than

satisfactory evidence on the record of this proceeding showing that

contract date better reflects the date on which material terms of sale

were established for US sales.

Department's Position

While we agree with the respondents that the Department prefers to

use invoice date as the date of sale, we are mindful that this

preference does not require the use of invoice date if the facts of a

case indicate a different date better reflects the time at which the

material terms of sale were established. Indeed, as all parties have

recognized, both the Proposed and Final Regulations speak to giving the

Department flexibility to abandon the use of invoice date. In granting

this flexibility, the regulations anticipate the possibility of

inappropriate comparisons via the strict use of invoice date as the

date of sale.

As for the respondents point that the facts in this case (i.e.,

long lag times between contract date and invoice date) do not fit the

exceptions articulated in the regulations, we note that the exceptions

listed are exemplary and are not intended to be limiting as can be seen

in the Proposed Regulations where it states:

[T]he Department recognizes that [invoice] date may not be

appropriate in some circumstances, such as those involving certain

long-term contracts or sales in which there is an exceptionally long

time between the date of invoice and the date of shipment. [Emphasis

added.] (Proposed Regulations at 7330.)

If invoice date does not reasonably approximate the date on which

the material terms of sale were made in

[[Page 32836]]

either of the markets under consideration, then its blanket use as the

date of sale in an antidumping analysis is untenable. The facts in this

case, as explained below, clearly demonstrate that the use of invoice

date as the date of sale in both markets would lead to inappropriate

comparisons.

In this case, the sales processes for US and home market sales

differ markedly. Sales in the home market are typically out of

inventory with the purchase order/contract, invoice and shipment dates

all occurring within a relatively short period of time. In contrast, US

sales are usually conducted on a made-to-order basis (CEP sales out of

inventory being an exception.). The material terms of sale in the US

are set on the contract date and any subsequent changes are usually

immaterial in nature or, if material, rarely occur. Most importantly,

due to the made-to-order nature of US transactions, there is a very

long period of time between the contract date, and the subsequent

shipment and invoicing of the sale. The long periods between the

contract date and invoice/shipment date for US transactions are

measured in multiple months with some reaching upwards of six months.

As can be seen from the foregoing, ``invoice'' dates in both markets,

while the same in name, are materially quite different for purposes of

determining price discrimination simply because the sales processes for

the two markets are quite different. If we were to use invoice date as

the date of sale for both markets, we would effectively be comparing

home market sales in any given month to US sales whose material terms

were set months earlier-- an inappropriate comparison for purposes of

measuring price discrimination in a market with less than very

inelastic demand. Notwithstanding the respondents' comment that the

terms of sale are subject to change and that, therefore, the final

terms are not known until the date of invoice, we find that, in this

case, there is no information on the record indicating that the

material terms of sale change frequently enough on US sales so as to

give both buyers and sellers any expectation that the final terms will

differ from those agreed to in the contract. Therefore, we are

continuing to use contract date as the date of sale with respect to US

sales for these final results, except for CEP sales out of inventory.

See also Notice of Final Results of Antidumping Duty Administrative

Review: Canned Pineapple Fruit From Thailand, 63 FR 7392, 7394

(February 13, 1998) (For CEP sales out of inventory, invoice date

reasonably approximates the date on which the material terms of sale

are set and is, therefore, appropriately used as the date of sale.).

As for the respondents' additional concern that using a

``different'' date of sale in home market than in the United States

would be contrary to the Department's preference of using a single date

of sale as articulated in the Preamble to the (see Final Regulations at

27348), we find such concern to be unwarranted. Given the sales

processes of the different markets, the only dates which are

substantively equivalent for purposes of measuring price

discrimination, although different in name, are the invoice date in the

home market and the contract date in the United States.

Comment 2: Inclusion of All EP Sales Entered During The POR

SeAH argues that the Department erroneously excluded from its

analysis EP sales entered during the POR but with dates of sale outside

the POR. According to SeAH, Sec. 751(a)(2)(A) of the Act requires that

the Department examine each entry, as opposed to sale, during the POR

by stating:

For the purpose of [administrative reviews of antidumping duty

orders], the administering authority shall determine

(i) the normal value and export price (or constructed export

price) of each entry of the subject merchandise * * *

The petitioners counter that the review covers all ``sales'' during

the POR as delineated in the questionnaire. According to the

petitioners, it is the questionnaire which determines the reporting

requirements during a review and the questionnaire clearly stated,

``State the total quantity and value of the merchandise under review

that you sold during the period of review'' (see January 13, 1997

questionnaire at A-1). As for the language in the statute cited by SeAH

in support of a review covering all entries, the petitioners cite to

American Permac v. United States, 783 F. Supp. 1421 (CIT 1992)

(American Permac) to show that the statute does not preclude the

Department from excluding certain sales if they are distortive where it

says:

The court has a difficult time reading the ``each entry''

language to compel inclusion of all sales, no matter how distorting

or unrepresentative. In actuality, both investigations and periodic

reviews examine sales, not entries, and the methodology is not

distinguishable in any relevant way.

The petitioners also cite to 19 CFR 353.22(b) and, inter alia,

Final Results of Antidumping Duty Administrative Reviews: Portable

Electric Typewriters from Japan, (Typewriters from Japan) 56 FR 56393,

56397 (November 4, 1991) to show that the Department has the discretion

to base administrative reviews on entries, exports or sales.

Department's Position

We agree with SeAH that all POR entries of EP sales should be

included in our analysis. The petitioners' citation to American Permac

does not apply to this case. In that case, the Court was examining the

issue of whether or not the Department had the authority to deny a

request which did not arise until the hearing to exclude a certain

number of US sales from the universe of reported transactions. One of

the Department's arguments in American Permac was that it was required

by the statute to examine all sales in the reported universe. While the

Court based its final decision to uphold the Department's denial of

exclusion based on the untimely nature of the exclusion request, it did

state that it doubted that Congress ``intended to compel distortions if

exclusion of a few sales would remedy the problem'' (see American

Permac at 1424). While American Permac does support the authority of

the Department to exclude certain US sales from its analysis, it does

not address the issue of whether the universe of reported sales is to

be based on entries or sales during the POR.

Section 751(a)(2)(A) of the Act states that a dumping calculation

should be performed for each entry during the POR. While the

Sec. 353.22(b) of the Department's regulations does give the Department

some flexibility in this regard by stating that the review can be based

on entries, exports or sales, it is our preference to base the review

on entries when possible. In this case, we find no compelling reason to

move away from the use of entries to determine the universe of US sales

to be reported for EP sales as there are no circumstances on the record

that would require such a move. Accordingly, we have included in our

analysis for these final results all entries of EP sales during the POR

as reported by SeAH. In addition, we have made the same revision in our

calculations for all of the other respondents.

Comment 3: Inaccurate or Missing Conversion Factors

The petitioners state the respondents have reported some conversion

factors for the conversion of home market sales and cost information to

a theoretical-weight basis that are below the minimum conversion factor

allowable in various grades of standard pipe, as

[[Page 32837]]

determined using maximum industry-standard tolerance of wall thickness.

Where no other conversion factor exists for such products, the

petitioners propose assigning the highest reported conversion factor

among transactions of the same specification. In the event there is no

available conversion factor for a particular product, the petitioners

argue that Department should not apply any conversion factor.

Hyundai acknowledges that a few of its conversion factors were

calculated incorrectly and requests that the Department allow them to

correct this error. Additionally, Hyundai notes that the error did not

impact the Preliminary Results as the products with the incorrect

conversion factors were not used in calculating the margin.

KISCO/Union contends that the petitioners' argument refers to the

conversion factor between theoretical and standard actual weight, which

may differ slightly from the actual weight and that the petitioners

have presented no evidence that the conversion factors from actual to

theoretical weight fall below the industry-standard. KISCO/Union also

states that the home market customers have accepted this merchandise

without noting any weight problems. In the case that the Department

determines that conversion factors which fall below the industry

standards should not be applied, KISCO/Union argues that the Department

should substitute the industry standard for the limited number of

incorrect conversion factors reported in the response.

SeAH and Shinho acknowledge that the conversion factors on some

home market sales are below the minimum but point to the extremely tiny

proportion these sales constitute. In addition, KISCO/Union, SeAH and

Shinho state that most of these sales were not used in the Department's

calculation for the Preliminary Results.

Department's Position

We disagree with the petitioners that what amounts to adverse facts

available should be applied to sales with conversion factors below the

minimum allowed. Such errors in the respondents' data affect only a

minuscule number of transactions and appear to be inadvertent. With

respect to KISCO/Union's argument, we agree the conversion factor

between the theoretical and standard actual weight may differ from the

factor used to convert the actual weight to the theoretical.

Nevertheless, we find that certain reported conversion factors at issue

are aberrational because it is impossible to produce a pipe that is

within the industry-standard tolerances with conversion factor below

this minimum. See Final Results of Antidumping Duty Administrative

Review: Circular Welded Non-Alloy Steel Pipe from the Republic of

Korea, (First Review Final Results) 62 FR 55574, 55577 (October 27,

1997). Therefore, we have calculated the minimum conversion factor

allowable in various grades of standard pipe by using the maximum

industry-standard tolerance of wall thickness. We used the calculated

minimum factor for those sales and costs where the reported factors

fell below the minimum.

Comment 4: SG&A and Interest Ratios

The petitioners state that the respondents have calculated their

SG&A and interest ratios based on a sales denominator that includes

packing. When this ratio is multiplied by a cost of manufacturing (COM)

that is exclusive of packing, as was done in the preliminary

calculations, the petitioners allege that the resulting SG&A amount is

understated. The petitioners suggest that the Department could add

packing to the COM before the SG&A and interest expenses are calculated

as was done in the First Review Final Results.

Hyundai agrees with the petitioner that its SG&A ratio was

calculated with a packing-inclusive denominator and that packing should

be added to COM before calculating SG&A.

KISCO/Union, SeAH and Shinho state that the addition of packing to

the COM prior to calculating SG&A and interest expenses would have only

a negligible effect on the margin calculations and is, therefore, not

necessary.

Department's Position

In the preliminary results we did in fact understate SG&A and

interest expenses by multiplying a packing-exclusive COM by expense

ratios calculated based on a packing-inclusive amount. For these final

results, we have corrected this error by adding packing to the COM

before applying the ratios to calculate SG&A and interest expenses.

Comment 5: Duty Drawback Adjustment

The petitioners argue that duty drawback rebates received by

respondents, except for KISCO/Union, were based on a theoretical weight

basis while the payments of the original duties were on an actual

weight basis. As a result, the petitioners stated that total rebates

received exceed total duties paid. Since the Act allows only for the

addition to US price of import duties paid and rebated, the petitioners

point out than any adjustment should be capped by the amount of duty

actually paid. (See 19 U.S.C. Sec. 1677a(d)(B) (1994).)

The respondents point out that, contrary to the petitioners'

assertions, not all duty drawback rebates are excessive in that two

separate programs were used. In particular, state the respondents,

rebates under the individual-application system have been found by the

Department in previous segments of this proceeding to be non-excessive;

therefore, the Department was correct in adjusting US price by the

entire amount of the rebate. The respondents note that the Department

did limit the duty drawback adjustment to the amount of duties paid on

those transactions receiving rebates under the fixed-rate system in the

Preliminary Results.

Department's Position

As stated in the Preliminary Results at 64561, to the extent that

duty drawback rebates are in excess of the actual amount of duties

paid, we agree with the petitioners that adjustments to US price should

be limited to the amount of duties paid. The respondents received duty

drawback under two systems: the fixed rate system and the individual

application system. Rebates received under the individual application

system are limited to actual duties paid and are not excessive.

Therefore, we have used the full amount of rebates under the individual

application system in our analysis for these Final Results. Under the

fixed rate system, however, rebates exceed actual duties paid (see

First Review Final Results). In the Preliminary Results, we did cap the

amount of rebates received under the fixed-rate system, where

applicable, for all respondents except for SeAH. For these final

results, we have applied the cap to SeAH as well.

Comment 6: Income Offsets to G&A

The petitioners claim that Hyundai, KISCO/Union and Shinho have

understated their G&A expenses by offsetting such expenses by various

non-operating income items unrelated to the subject merchandise. Since

it is the Department's practice to limit offsets to G&A to income from

operations related to the production of subject merchandise, these

respondents' offsets should be denied. See, Final Determination of

Sales at Not Less Than Fair Value: Saccharin From Korea (Saccharin from

Korea) 59 FR 58828 (November 15, 1994) and Certain Fresh Cut Flowers

From Colombia: Final Results of Antidumping Duty Administrative Reviews

(Flowers from Colombia) 61 FR 42833, 42843 (August 19, 1996).

[[Page 32838]]

Hyundai maintains that its offsets to G&A do relate to the

production and sale of subject merchandise. KISCO/Union argues that

non-operating expenses should not be included in G&A if non-operating

income is found not to be an allowable offset. Shinho replies that it

has fulfilled the Department's requirement to include only items

related to production in its G&A offset.

Department's Position

The Department permits offsets to G&A expenses for income earned

from the company's production operations. During the course of this

proceeding, we have received from respondents responses to our original

questionnaire and multiple supplemental questionnaires. Based on our

examination of these responses with respect to the calculation of G&A

expenses and offsets, we are accepting what respondents have provided

with the exception of dividend income offsets claimed by Hyundai and

KISCO/Union. See U.S. Steel v. United States, Slip Op. 98-17, (CIT

February 25, 1998). In particular, we find that the items petitioners

complain about appear, on their face, to be of a general nature arising

from the companies' operations.

We are disallowing the offsets to G&A due to dividend income for

Hyundai and KISCO/Union. We note that dividend income is generally

claimed as an offset to interest expenses and is allowable when such

income arises from short-term investments of a company's working

capital. However, in this case, we find that Hyundai's and KISCO/

Union's dividend income has not been shown to be derived from short-

term investments.

Comment 7: CV Credit Expenses

The respondents argue that, in the Preliminary Results, the

Department double-counted imputed credit expenses in the calculation of

CV. The respondents state that this occurred because the Department

included both total actual interest expense and imputed U.S. credit

expenses in the CV calculation. The respondents state that it is the

Department's practice first to subtract home market imputed credit

expenses before adding U.S. imputed credit expenses in calculating a

circumstance-of-sale (COS) adjustment for CV. As evidence of this

practice, several respondents cite, inter alia, Certain Stainless Steel

Wire Rods from France: Final Results of Antidumping Duty Administrative

Review, (France Wire Rods) 62 FR 7206, 7209, (February 18, 1997).

The petitioners dispute that the Department double-counted the

respondents' imputed credit expenses in CV, and state that the

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

However, the petitioners concede that the Department's new-law practice

is to make a COS adjustment to NV for differences in credit expenses

between the US and exporting country markets.

Department's Position

We agree with the petitioners that we calculated CV in accordance

with section 773(e) of the Act. However, we also agree with both the

petitioners and the respondents that we made an error in our COS

adjustments to CV by not deducting home market credit expenses before

adding US credit expenses. It is the Department's standard practice to

make such an adjustment. See, e.g., France Wire Rods and Stainless

Steel Bar From India: Final Results of Antidumping Duty Administrative

Review, 63 FR 13622, 13624 (March 20, 1998) (Comment 5). We have

adjusted the calculations accordingly for these final results.

Company-Specific Comments

Hyundai

Comment 8: Further Processed Merchandise

Hyundai argues that, in the Preliminary Results, the Department

improperly treated sales of subject merchandise that were purchased

from unaffiliated suppliers and further processed. In Hyundai's view,

US sales of subject merchandise may only be compared to sales of the

foreign like product that were produced in the same country by the same

person. Hyundai states that if sales data consists of merchandise

produced by two different manufacturers, the Department normally

compares the sales produced by each company separately. Hyundai cites

Steel Wire Rope from the Republic of Korea: Preliminary Results of

Antidumping Duty Administrative Review and Intent To Revoke Antidumping

Duty Order in Part, 62 FR 64353 (December 5, 1997), noting that

respondents sold merchandise in both the US and home market that was

produced by the respondent and by unaffiliated suppliers and that the

Department compared the merchandise according to producer. Hyundai

continues its argument by saying that the further processing of the

purchased pipe does not convert the pipe from non-subject to subject

merchandise. It maintains that because the pipe was already subject

merchandise, the Department must segregate Hyundai's sales into two

categories (pipe purchased and further processed by Hyundai, and pipe

manufactured by Hyundai) and compare the two categories separately.

Petitioners argue that the Department's precedent supports treating

Hyundai as the producer of the finished products, citing Antifriction

Bearings and Parts Thereof from France, 61 FR 66,472 (December 17,

1996). In Antifriction Bearings, a respondent purchased finished

bearings from an unaffiliated subcontractor and resold them in the home

market and United States. According to the petitioners, the Department

treated sales of goods not manufactured by a company to be products of

that company because the subcontractor did not know the destination of

the products, and because the respondent company controlled the

production and sale of the product. The petitioners argue that the same

facts exist in this case.

Department's Position

Because Hyundai engages in what is often substantial further

manufacturing and because it sells and warrants the further-processed

merchandise as its own product, it is unclear whether the Steel Wire

Rope methodology is appropriate in this case. Nevertheless, the issue

is moot, as Hyundai was unable to provide the necessary information for

us to follow the methodology. In Steel Wire Rope, the specific

suppliers of each resold item were identifiable. In this case, the

suppliers for specific sales are not known; Hyundai is only able to

distinguish whether it manufactured the product from start to finish,

or whether it purchased the product before further processing. Thus,

even if it were appropriate, the information provided by Hyundai does

not allow us to employ the methodology used in Steel Wire Rope.

Comment 9: Arm's Length Freight

The petitioners argue that Hyundai did not adequately demonstrate

that the transactions between Hyundai and an affiliated transport

company were at arm's length. The petitioners state that the Department

requested information on the affiliated company's provision of shipping

services to non-affiliated customers and that, because Hyundai failed

to provide this information, Hyundai's ocean freight rates should be

based on facts available. Furthermore, the petitioners note that when

the affiliated transport company arranged for third parties to

transport the subject merchandise, the affiliate did not charge

[[Page 32839]]

any mark-up, thus providing services for free, suggesting again that

the transactions were not arm's length.

Hyundai rebuts that the information on the record does adequately

demonstrate that the transactions were arm's length. Hyundai points to

documents which support their claim, such as an invoice and other

documents from an unaffiliated company and their affiliate's tariff

schedule. Hyundai argues that it is not required to provide information

showing that the affiliate charged the same rates to unaffiliated

customers. It also notes that it provided the same kind of evidence

supplied in Certain Cut-to-Length Carbon Steel Plate from Germany:

Final Results of Antidumping Duty Administrative Review, 61 FR 13834

(March 28, 1996), in which the Department determined that freight

services were provided by an affiliate at arm's length prices. Lastly,

Hyundai rejects the petitioners' argument that, because they were not

charged a mark-up by the affiliate when arranging services from a third

party, the transactions were not arm's length. Hyundai states that the

affiliate is often involved in name only and that, regardless of any

supposed lack of mark-up, it otherwise demonstrated that the prices

paid to its affiliate were comparable to prices charged to unaffiliated

parties and thus at arm's length.

Department's Position

As stated in the questionnaire issued to the respondents on January

13, 1997, ``arm's length transactions are those in which the selling

price between the affiliated parties is comparable to the selling

prices in transactions involving persons who are not affiliated.''

Hyundai demonstrated that the prices charged by its affiliate were

comparable to prices it is charged by unaffiliated freight providers.

Hyundai is not required to show that the affiliate charged a third

party comparable prices, although this is another way in which arm's

length can be demonstrated. The Department never specifically asked

Hyundai to supply this kind of information; rather, we suggested it as

one option Hyundai could choose to demonstrate arm's length. The fact

that the affiliate may at times not charge Hyundai with a mark-up when

arranging third party transactions is not in itself demonstrative of a

non-arm's length transaction. Rather, the evidence in this case that

Hyundai pays the affiliate comparable prices to those paid to

unaffiliated providers is sufficient to demonstrate arm's length.

Comment 10: Additional Freight

The petitioners find Hyundai's additional freight costs to be

unreliable and argue that the Department should deny any adjustment to

NV for this additional freight. The petitioners claim that there are

several problems with Hyundai's reporting of this expense. They state

that Hyundai did not indicate whether the service was provided by an

affiliate. They also maintain that Hyundai has not substantiated the

claim that it is not able to report these costs on a shipment-specific

basis, nor have they explained sufficiently the basis on which the

charges are incurred. The petitioners argue that the information on

these additional freight costs is unreliable, noting for example a

change in the total cost reported from one supplemental response to the

next.

Hyundai responds that it did provide adequate information on the

additional freight expenses. It explains that the service in question

is not provided by an affiliate and that because these services are not

invoiced on a shipment-specific basis they cannot be reported on a

shipment-specific basis.

Department's Position

After reviewing the information on the record, we see no reason to

deny the adjustment. Contrary to the petitioners' claims, the loading

service was not provided by an affiliate. Further, the way in which

Hyundai incurs this cost prohibits shipment-specific reporting.

Comment 11: Export Price Adjustment

Petitioners assert that the Department should deduct certain

expenses that they claim relate to movement (e.g., communication costs

and markups) incurred by Hyundai's U.S. affiliates from export price

under section 772(c)(2)(A)of the Act. According to the petitioners,

these costs are incident to bringing the subject merchandise from Korea

to delivery in the United States, and thus should be deducted from U.S.

price. Because Hyundai has not reported all of these expenses in its

response, petitioners advocate that we should apply, as facts

available, a factor based on the affiliates' SG&A rates.

Hyundai argues that because its sales to the United States are

export price sales, the specific expenses discussed by petitioner

cannot be deducted.

Department's Position

Pursuant to section 772(c)(2)(A) of the statute, the export price

is to be reduced by any additional costs, charges, or expenses which

are incident to bringing the subject merchandise from the exporting

country to the United States. In this case, the Department has made the

appropriate movement-related reductions to export price by deducting

the costs incurred for moving the subject merchandise from Korea to the

customer in the United States. In accordance with our normal practice,

these costs included brokerage and handling, marine insurance,

international freight, U.S. brokerage and wharfage, and inland freight

charges incurred in both countries. The Department does not consider

the type of expenses that the petitioners ask us to deduct from export

price as costs that are incident to bringing the subject merchandise

from Korea to the place of delivery in the United States.

Comment 12: Overstatement of Inventory Carrying Cost

The petitioners state that rather than using the cost reported in

the inventory records, Hyundai incorrectly used sales value when

computing the inventory carrying cost adjustment. They assert that the

reported adjustment should be recalculated downward to compensate for

this difference.

Hyundai argues that it calculated the adjustment correctly, basing

inventory carrying cost on production cost, not sales value.

Department's Position

We agree with the petitioners that Hyundai's reported inventory

carrying cost adjustment is overstated. Upon examination of the record,

we are unable to substantiate the inventory carrying cost adjustment as

reported by Hyundai. It is not clear on what basis, value or cost, the

adjustment was calculated. In fact, Hyundai states in its original

response that it calculated the adjustment by using the ``value'' of

the inventoried merchandise. The Department requested that the

respondents calculate inventory carrying cost adjustment based on the

opportunity cost to maintain inventory, noting that the cost is

normally calculated by using the merchandise's cost or acquisition

price. Because Hyundai's inventory carrying cost adjustment is

overstated, we have recalculated this adjustment based on Hyundai's

reported COM.

Comment 13: Erroneous Coding

The petitioners note that Hyundai reported inland freight charges

on some home market FOB sales. They state that the Department should

deny any freight adjustment for these sales, but still reduce COP by

the amount of the claimed adjustment.

The respondent notes that these sales were incorrectly coded and

should have been reported delivered, not FOB.

[[Page 32840]]

Department's Position

We agree with Hyundai and have corrected the database for more

minor errors in reporting. Further, we find no reason to apply an

adverse inference to these transactions, as petitioners request.

KISCO/Union

Comment 14: Collapsing of Kisco and Union

KISCO/Union argues that the Department should reverse its decision

to ``collapse'' Union and KISCO and should instead calculate individual

dumping margins for each company based on the respective sales and cost

data, for the reasons set forth in previously submitted comments by

Union and KISCO on September 5, 1997 and September 11, 1997.

The petitioners first note that KISCO/Union's comment, other than a

reference to their previous submissions, presents no new arguments on

this issue. As such, the petitioners contend that KISCO/Union's comment

may not be considered, in accordance with section 353.38(c)(2) of the

Department's regulations which require that the case brief shall

separately present in full all arguments believed to be relevant to the

final results, ``including any arguments presented before the date of

publication of the preliminary determination or preliminary results.''

In case the Department chooses to reconsider Union and KISCO's previous

submissions on this issue, the petitioners argue that there is

overwhelming evidence that supports the Department's collapsing

decision, discussed in the petitioners' previously submitted comments

on October 16, 1997 and October 20, 1997.

Department's Position

For reasons discussed in our Preliminary Results, we continue to

find that it is appropriate to collapse Union and KISCO.

Comment 15: Kisco and Union's Collapsed Data

On October 22, 1997, the Department instructed KISCO/Union to

resubmit its cost and sales data on a consolidated basis. The

petitioners argue that KISCO/Union failed to do this properly. First,

the petitioners state that KISCO/Union's methodology of weighing each

field in the COP and CV databases by the production quantity in each

company's response creates varying G&A factors depending on each

company's production quantity of each product. The petitioners argue

that the Department should recalculate G&A expenses such that a single

entity-wide factor is applied to the weighted average cost of

manufacture or base KISCO/Union's G&A ratio on facts available.

According to the petitioners, a similar distortion is created for all

adjustments to NV or export price, such as indirect selling expenses

and all imputed expenses, that were based on individual company data

instead of aggregated data.

KISCO/Union first notes that the manner in which it reported its

data is materially identical to the methodology used by the Department

in the First Review Final Results, which was not challenged by the

petitioners. KISCO/Union disagrees with the petitioners' argument

relating to price adjustments, movement charges, and selling expenses,

arguing the Department's longstanding practice is to calculate such

adjustments as specifically as possible, which it claims was already

done in the individual companies' responses. Given such policy, KISCO/

Union further argues that use of a single indirect selling expense

ratio is inappropriate because KISCO and Union's sales are handled by

completely separate sales departments within their respective

companies, each with their own expenses. With respect to the

petitioners' arguments relating to the calculation of G&A and interest

expense, KISCO/Union contends recalculation is unnecessary because the

petitioners have failed to demonstrate that any material distortion

arose from the methodology used by it. Alternatively, KISCO/Union

states that the recalculation of G&A and interest expense on an entity-

wide basis can be performed using data already on the record and do not

require use of facts available.

Department's Position

We agree with the petitioners in part. Because the Department has

decided to collapse Union and KISCO and thus treat the two companies as

a single entity for purposes of calculating the dumping margin, we find

that G&A, interest expense, indirect selling expense ratio and interest

rate should be calculated on an entity-wide basis. We note that the

methodology employed by the Department in the First Review Final

Results was limited by the information that was available on the record

in that proceeding.

For these final results, we have recalculated G&A by adding the G&A

expenses from Union and KISCO and dividing this sum by the total sum of

cost of goods sold for the two companies. With respect to interest

expenses for companies that are part of a consolidated group, the

Department's policy is to base the interest expense calculation on the

consolidated financial statements of the group. Because Union and KISCO

are part of the Dongkuk Steel Mill Group (DSM group), the interest

expense for the collapsed entity of KISCO/Union should also be based on

the consolidated financial statement of that group. As pointed out by

KISCO/Union, however, Union is not included in the consolidated DSM

statements. Accordingly, we have re-calculated the interest expense on

an entity-wide basis by adding the net interest expense of the DSM

group with that of Union and dividing by the total cost of goods sold

for the combined DSM group and Union. To calculate a collapsed home

market indirect selling expense ratio, we divided the combined indirect

selling expenses of Union and KISCO by the combined total domestic

sales value of both companies. We also have re-calculated all imputed

expenses, including credit expenses and inventory carrying costs, using

the weighted-average interest rate for the collapsed entity.

With respect to other adjustments to price and NV or movement

charges, we used the information provided because such items were

reported properly by KISCO/Union.

Comment 16: Consistency of COP and CV Data

The petitioners argue that KISCO/Union has reported inconsistent

COP and CV data in their collapsed data. In one instance, the

petitioners state that the underlying components of total COM differ

between the COP and CV databases but the total is the same. The

petitioners also note that the production quantities for many products

differ between the two databases. The petitioners assert that KISCO/

Union has not provided sufficient explanation of its methodology to

account for such variations and as such, the Department must base its

final results on facts available.

KISCO/Union acknowledges that the databases do contain differences

but contend that they can be corrected easily. This error occurred when

products were sold only in one market. With respect to the one instance

where the cost fields varied while the total COM remained the same,

KISCO/Union explains that the discrepancy resulted when the conversion

factor for converting from an actual weight basis to a theoretical

weight basis was inadvertently applied twice to the costs but not to

the total COM itself. KISCO/Union argues that because only total

[[Page 32841]]

COM is used in the Department's dumping margin calculation, the error

has no effect on the margin calculation.

Department's Position

We have examined KISCO/Union's collapsed data and are satisfied

that the discrepancies resulted from simple ministerial errors. We also

find that KISCO/Union's error in applying the conversion factor does

not affect the Department's calculations. For these final results, we

corrected the databases and calculated weight-averaged total COMs using

the combined cost components and production quantities.

Comment 17: Interest Expenses

The petitioners contend that KISCO failed to demonstrate that the

``interest from short-term securities,'' reported in DSM financial

statement, was a proper offset to interest expenses. The petitioners

further argue that KISCO/Union failed to show why it did not account

for the foreign exchange and translation gains and losses as reported

in DSM's financial statements. Because KISCO/Union did not provide an

explanation that such gains and losses are unrelated to DSM's purchase

transactions or borrowing cost, petitioners urge that the Department

should include those items in the calculation of interest expenses.

KISCO/Union counters that the petitioners' argument does not apply

because the calculation of its combined interest expense was not based

on the DSM consolidated financial statements. Instead, KISCO/Union

explains that the collapsed data reported a weighted-average interest

expense by product, based on the company-specific interest expense.

KISCO/Union states that the use of interest rates based on the DSM

statements would be inappropriate because Union is not included within

the consolidated DSM statements.

With respect to foreign currency translation gains and losses,

KISCO/Union argues that the Department has previously held that such

items are properly included in G&A expenses, which are calculated at

the level of the operating companies, rather than interest expense,

which may be calculated at the level of the consolidated group of

companies. Accordingly, KISCO/Union contends that because DSM is itself

an operating company, its G&A expenses should be assigned to its own

production alone unless they are shown to be attributable to subject

merchandise or foreign like product.

Department's Position

As discussed in Comment 15, we calculated an entity-wide net

interest expense factor for KISCO/Union by combining Union's net

interest expense with the net interest expense from DSM's consolidated

income statement. Contrary to petitioners' argument, we find no basis

on which to exclude DSM's interest income as a reduction in the

company's interest expense. In fact, DSM's consolidated financial

statements identify the income amounts as having been earned by the

company from its investments in short-term securities. See, Final

Results of Administrative Review of Porcelain-on-Steel Cooking Ware

from Mexico, 61 FR 54,616, 54,621 (October 21, 1996) (describing the

Department's practice, in calculating COP and CV, of reducing

respondent's interest expense by interest income earned from short-term

investments).

With respect to the net foreign currency exchange loss reported in

DSM's consolidated financial statements, we have included this amount

in our calculation of KISCO/Union's combined net interest expense. As

noted by petitioners, KISCO/Union did not explain why it did not

account for any of DSM's foreign exchange gains or losses in

calculating COP and CV. Rather, KISCO/Union stated that it excluded

these amounts from costs because they were properly categorized as G&A

expenses. In past antidumping cases, however, the Department has

treated the gains and losses arising from the restatement of foreign

currency debt as part of the respondent's net financing costs. See,

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

Random Access Memory Semiconductors from Korea, 63 FR 8934, 8940

(February 23, 1998) (where the Department treated foreign exchange

losses on long-term debt as part of interest expense). Here, DSM's

consolidated financial statements report that the group holds loans

denominated in foreign currencies. DSM, however, did not attribute to

its net financing costs any of the foreign exchange gain or loss

resulting from restatement of these loan balances. Therefore, for the

final results, we have recalculated KISCO/Union's financial expense to

include the net foreign exchange loss reported in DSM's consolidated

income statement as non-adverse facts available.

Comment 18: Indirect Selling Expenses

The petitioners argue that Union's indirect selling expense ratio

must be recalculated before being collapsed with KISCO's data.

Specifically, they claim Union has misallocated its home market

indirect selling expenses on the basis of percentage of employees

involved in domestic sales compared to export sales or sales

administration. Instead, the petitioners claim that the Department, in

accordance with its normal practice, should allocate such expenses

based on costs of sales in each market.

KISCO/Union contends that the Department has accepted Union's

allocation methodology in every previous review involving Union and has

no reason to depart from the past practice in the present proceeding.

Department's Position

Where transaction-specific reporting is not feasible, the

Department's general practice is to allow companies to allocate

expenses, provided that the allocation method used does not cause

inaccuracies or distortions. See Statement of Administrative Action,

(SAA), H.R. Doc. No. 103-316, vol. 1 (1994) at 153-154. Whether a

particular allocation methodology used is reasonable is determined on a

case-by-case basis. In this instance, we find Union's methodology of

allocating its indirect selling expenses based on the number of

employees may cause inaccurate results because a large portion of the

indirect selling expenses were not incurred based on the number of

employees. Therefore, we have recalculated Union's indirect selling

expense by allocating the total expense on the basis of percentage of

domestic sales to total sales.

Comment 19: Union's Freight Forwarder

The petitioners argue that Union failed to demonstrate that its

transactions with Kukje Transportation, Union's affiliated freight

forwarder, were at arm's length prices. The petitioners state that the

sample trucking lists provided by Union do not show that the prices

charged by Kukje were comparable with those charged by an unaffiliated

freight forwarder. Specifically, the petitioners claim that the freight

fee schedule does not show that the prices were based on the same

destination and that schedule does not identify the trucking firm to

which it applies. Accordingly, the petitioners urge the Department to

calculate Union's freight forwarding expenses based on facts available.

KISCO/Union contends that the destination codes in the freight fee

schedule that Union provided show clearly that the rates were based on

the same destination, and demonstrate that identical rates were charged

to affiliated and unaffiliated parties. KISCO/Union also points out

that the name of the

[[Page 32842]]

trucking firm was clearly identified and the higher rate applies to a

later time.

Department's Position

We disagree with the petitioners. Upon a careful examination of the

information submitted by Union regarding its transactions with Kukje,

we find there is sufficient evidence to demonstrate that the

transactions were at arm's length. The sample trucking lists and fee

schedules, which clearly identify the destination codes and the name of

the unaffiliated trucking firm, demonstrate that the prices charged by

Kukje were comparable to that charged by unaffiliated firms.

Comment 20: Home Market Credit Period For Letter-of-Credit Sales

The petitioners argue that the Department should deny KISCO/Union's

claim for credit expenses for ``cash'' sales in the home market for the

time period when Union must submit appropriate shipment documents for

review by the bank before payments can be credited to Union's account.

The petitioners state that the adjustment must be denied because there

is no evidence that the check or local letter of credit is not

negotiable by Union upon receipt. According to the petitioners, Union's

claimed adjustment actually constitutes an imputed credit expense for

that waiting period involved in clearing check or local letter of

credit deposits. The petitioners argue that because there is no

indication that a similar waiting period is included in calculating

Union's credit expenses on US sales, the claim must be rejected.

KISCO/Union asserts that there is no support for the petitioners'

claim that the adjustment represents an imputed credit expense for the

waiting period for clearing check deposits. KISCO/Union clarifies that

``cash'' sales simply refer to local letter of credit sales. KISCO/

Union states that Union has merely calculated the credit expenses

associated with the period from the date merchandise is shipped to the

date that Union actually receives payment by negotiating the shipping

documents. KISCO/Union points out that the Department has previously

adjusted for the credit expense incurred in such sales in the First

Review Final Results and in other cases in which Union was a

respondent.

Department's Position

We agree with KISCO/Union. We normally adjust for imputed credit

expense to account for the opportunity cost associated with the period

of time between shipment and payment. Because payment by the bank is

not made until the required documents are presented by Union, an

adjustment for imputed credit expense for the waiting period is proper.

We have no reason to believe that the letter of credit is actually

negotiable upon receipt.

Comment 21: Union's Warehousing Expenses

The petitioners contend that Union's reported pre- and post-sale

warehousing costs are overstated. They argue that these costs should be

calculated by applying the ratio between the volume of pipe warehoused

for a specific sale and the total volume of all other products

warehoused, whether as inventory or in connection with specific sales.

The petitioners argue that the adjustment must be denied because there

is no information on the record to determine what share of total

warehousing labor and identifiable costs were incurred as direct

warehousing costs.

KISCO/Union counters that pursuant to the URAA, warehousing is

treated as a movement expense without drawing a distinction between

direct and indirect expenses. Further, KISCO/Union contends that the

Department has repeatedly accepted Union's allocation methodology in

the past reviews and there is no evidence that a volume-based

allocation methodology should be used instead.

Department's Position

We agree with KISCO/Union. KISCO/Union is correct in stating under

the URAA, home market movement charges, which include warehousing

expenses, are to be deducted from NV regardless of the direct or

indirect nature of the expenses. See section 773(a)(6)(B)(ii) of the

Act. In general, all warehousing expenses that are incurred after the

merchandise leaves the original place of shipment are considered as

movement expenses. See, e.g., Certain Cold-Rolled and Corrosion

Resistant Carbon Steel Flat Products From Korea: Final Results of

Antidumping Duty Administrative Reviews, 63 FR 13170, 13179 (March 18,

1998). Here, the original place of shipment is Union's Pusan plant and

the warehouse is located in Seoul. Because these warehousing expenses

are incurred after leaving the original place of shipment, we consider

the expenses proper movement charges.

Where transaction-specific reporting is not feasible, the

Department's general practice is to allow companies to allocate

expenses, provided that the allocation method used does not cause

inaccuracies or distortions. See SAA at 153-154. Whether a particular

allocation methodology used is reasonable is determined on a case-by-

case basis. In this instance, we find that there is no evidence to

indicate that the allocation methodology used by KISCO/Union causes

inaccuracies or distortions.

Comment 22: Duty Drawback

The petitioners claim that based on the reported total weight of

hot-rolled coil imported during the POR the amount of duty drawback

reported by KISCO on US sales appears to be excessive when compared to

import duties included in CV. The petitioners argue that in the First

Review Final Results the Department adjusted the US price only by the

amount of duties actually included in the product. Using the same

argument, the petitioners contend that because the CV is intended to

value merchandise exported to the United States, the actual amount of

duties included in the exported product for CV purposes should be equal

to the amount of duties paid on the imported inputs as reported in CV.

Accordingly, the petitioners state that where NV is based on CV, the

Department must reduce the amount of duty drawback to that reported in

CV, or in the alternative, lower CV by the amount of duties and make no

adjustment for duty drawback.

KISCO/Union first points out that duty drawback is received on the

amount of imported coil incorporated into merchandise exported by KISCO

during the POR, rather than the amount of coil imported during the POR.

KISCO/Union explains that because the duty drawback system in Korea

permits refunds of duties for merchandise exported up to two years

after importation, KISCO was entitled to receive duty drawback during

the POR on coil imported before the POR. KISCO/Union argues that the

amount of duties included in the exported product is the actual amount

and cannot be made to vary depending on the comparison NV. Citing

Avesta Sheffield, Inc. v. United States, 838 F. Supp. 608 (CIT 1993),

KISCO/Union states that it is well-established that the duty drawback

adjustment is not limited by the amount of duties included in NV.

Department's Position

Pursuant to section 772(c)(1)(B) of the Act, the Department is

required to adjust the EP and CEP by the amount of duty drawback

received on the imported inputs. As we stated in the First Review Final

Results, the amount of the adjustment is limited to the amount of

duties actually paid on the input of the exported product. Because both

Union and KISCO have received duty drawback under the individual-

[[Page 32843]]

transaction provision of the Korean duty drawback law, there is no

reason to believe that the duty drawback reported reflects an amount

other than the actual duties paid (see comment 5 above).

We disagree with the petitioners' contention that the amount of

duties included in CV should be equal to the amount of actual duties

paid on the imported inputs. As held by the CIT, the Department is not

required to limit the drawback adjustment by an average rate of duty

for all raw materials utilized. See Avesta, 838 F. Supp. at 612 (``As

concerns either raw materials or sales, there is no requirement that

ITA match overall rebates to overall duties to achieve balanced numbers

on both sides of the comparison.''). No changes to the duty drawback

adjustment are therefore necessary for KISCO/Union.

Comment 23: Packing Costs

The petitioners argue that the Department should reject KISCO's

packing costs because they are unexplained and distortive. The

petitioners contend that KISCO did not submit any supporting

documentation for packing costs charged by subcontractors that would

explain how costs were derived. In particular, the petitioners object

to KISCO's calculation of thinner and lacquer costs and suggest that

KISCO has ``simply posit(ed)'' a per-unit cost of thinner and lacquer.

Furthermore, the petitioners assert that KISCO's methodology of

allocating packing costs, including costs for thinner and lacquer, tags

or bands, on the basis of the number of bundles or tonnage packed is

unreasonable because such costs vary depending on pipe thickness or the

surface area of the particular product. The petitioners argue that

these alleged problems provide more reasons to base the final results

on facts available.

With respect to KISCO's allocation methodology, KISCO/Union states

that the petitioners' argument is ``speculative and trivial'' in terms

of costs involved, and also asserts that the same packing cost

methodology was verified and accepted by the Department in the First

Review Final Results. KISCO/Union points out that KISCO was never

requested to provide copies of subcontractor fees schedules or related

documents. KISCO/Union also argues that KISCO's original questionnaire

response clearly shows that the per-unit cost of lacquer and thinner

was calculated by dividing the total cost of materials by the total

quantity packed during the period.

Department's Position

Although KISCO did not submit any supporting documentation for its

packing costs charged by subcontractors, use of facts available would

be clearly inappropriate in this case where the information was never

requested specifically by the Department. Moreover, there is no

evidence on the record that would indicate that the packing costs

provided by KISCO and the allocation methodology used by it are

inaccurate or distortive. With respect to the allocation of lacquer and

thinner costs, KISCO's response clearly shows that the per-unit cost

was properly calculated by dividing the total cost of materials by the

total quantity packed during the period. Moreover, the petitioners have

provided no evidence that variations in the pipe thickness or surface

area of the particular product, if any, would have more than an

insignificant effect on the per-unit cost.

Comment 24: Loading Charges

The petitioners contend that KISCO failed to respond adequately to

the Department's inquiry regarding KISCO's affiliated company, Chunyang

Transportation Company (``Chunyang''). The petitioners assert that

despite the Department's request to provide evidence demonstrating the

arm's length nature of the transactions between KISCO and Chunyang,

KISCO failed to do so by merely submitting Chunyang's fee schedule for

KISCO without any other evidence of comparable fees charged by

unaffiliated parties. Consequently, the petitioners argue that KISCO's

loading charges must be based on facts available.

KISCO/Union counters that KISCO could not provide other evidence of

comparable fees because KISCO and Chunyang dealt exclusively with each

other during the POR. Therefore, KISCO/Union asserts that by providing

Chunyang's fee schedule, KISCO provided all of the information

available to it. Further, KISCO/Union claims that in the First Review

Final Results, the same documentation was accepted by the Department as

evidence of arm's length nature of transactions, without protest by the

petitioners. KISCO/Union also notes that the Department did not find

any indications of less than arm's length dealings in the verification

of the First Review Final Results. As such, KISCO/Union argues that the

use of facts available is unwarranted.

Department's Position

We agree with the petitioners. There is no evidence supporting

KISCO's claim that its transactions with Chunyang for this period of

review were at arm's-length. As such, the Department has no way of

establishing that the prices charged to KISCO are at arm's-length. In

the absence of price information, KISCO should have provided

information relating to the costs of Chunyang. Since KISCO did not

provide this information, we find that the use of facts otherwise

available is appropriate pursuant section 776(a)(1) of the Act. As

facts available, we have used the highest reported rate of loading

charges of all the respondents in the present review, which has

resulted in the use of KISCO's own charges.

Comment 25: Double-Counting of Inventory Carrying Costs

KISCO/Union claims that the Department erroneously double-counted

inventory carrying cost for purposes of the cost test and in the

calculation of CV. According to KISCO/Union, inventory carrying cost is

deducted in the calculation of net price in the cost test of the margin

program but the COP to which the net price is compared includes total

actual interest expense and therefore includes imputed inventory

carrying cost. Consequently, KISCO/Union argues that the Department's

calculations unfairly compares a net price for home market sales that

does not include imputed inventory carrying cost to a COP that does.

KISCO/Union asserts that because the Department's current policy is to

make no deductions for imputed expenses (i.e., imputed credit and

inventory carrying costs) in calculating the net home market price for

the cost test, the program must be corrected so that inventory carrying

cost is not deducted in the calculation of net price to be compared to

COP. Similarly, KISCO/Union argues that the Department double-counted

inventory carrying cost in the calculation of CV by including both

total actual interest with no offset for imputed expenses, and indirect

selling expenses inclusive of inventory carrying cost.

The petitioners counter that the Department was correct to add

imputed inventory carrying costs in COP and CV. The petitioners contend

that the actual net interest expense included in COP and CV does not

include imputed interest expenses for inventory carrying costs, which

represents an opportunity cost that is not reflected in the actual

interest expenses of the company. Therefore, the petitioners state that

the Department correctly deducted inventory carrying costs from net

price before comparison to COP and correctly included inventory

carrying costs in CV.

[[Page 32844]]

Department's Position

We agree with KISCO/Union and have corrected our program to remove

the deduction of inventory carrying cost from the net price to be

compared with COP and in from the build up of CV. As for the

petitioners argument that inventory carrying costs are not included in

a company's interest expense, we note that a company's ``interest''

expenses will include, among other items, cost that it incurs in

financing its inventory. While such costs are not directly calculated

as imputed expenses and directly entered into the company's books, they

are, nonetheless, costs that are covered by its financing expenses.

SeAH

Comment 26: Duty Drawback Adjustment

The petitioners contend that SeAH can report duty drawback on a

sales-specific basis, but point out that SeAH has asked for the duty

drawback adjustment to be made on the basis of an average amount

allocated across all US sales. The petitioners request that this duty

drawback adjustment be denied.

SeAH states that it provided transaction-specific data in general,

but could only provide an average for CEP sales because these sales

could not be linked to individual shipments. SeAH notes that in the

LTFV investigation and in the Preliminary Results, the Department

accepted the average as a reasonable methodology for calculating duty

drawback.

Department's Position

We find that where a respondent cannot report transactions-specific

adjustments, reasonable allocations are acceptable. Here, SeAH has

calculated average POR amounts for duty drawback on its CEP sales since

it is unable to link shipments to subsequent sales. For CEP sales, we

find SeAH's methodology to be reasonable.

Comment 27: US Duty, Brokerage, and Handling on CEP Sales

The petitioners argue that SeAH should not be allowed to allocate

US Duty, Brokerage, and Handling on CEP sales. Because SeAH has

reported these foreign charges on an average weight basis, rather than

the value basis in which they were incurred, and because the statute

requires that margins be calculated on a sale-specific basis (see 19

U.S.C. Sec. 1675(a)(2)(A)), the petitioner contends that we should not

accept the allocations. The petitioners suggest a facts available rate

of the highest rate for any EP sale of that product or the highest rate

reported for any sale for each expense where EP sales data is not

available.

SeAH states that it is not able to link inventory sales to original

shipments and therefore must report the charges in question on an

average basis. SeAH emphasizes that while it may be theoretically

possible to link imports of subject merchandise with the reported sale,

neither SeAH nor its affiliates maintain their sales data in this way.

A link could only be found if done manually. SeAH insists that this

methodology was used in the LTFV investigation and has not been further

questioned by the Department.

Department's Position

We find that SeAH's reporting of US Duty, Brokerage, and Handling

as allocations on CEP sales is reasonable, in that CEP sales can not be

linked to shipment-specific information for these expenses. We agree

with the petitioner, however, in that the allocation for US Duty and

Brokerage on volume is distortive because it is not on the same basis

in which it is incurred. For these final results, we have reallocated

US Duty and Brokerage based on value for CEP sales because these

expenses are incurred on a value basis. We will continue to accept the

allocation of Handling because it is incurred on a weight basis.

Comment 28: International Freight

The petitioners suggest that SeAH's international freight expenses

should be based on facts available because SeAH has failed to support

its ocean freight expenses and the information in the responses is

inconsistent. The petitioners suggest that the Department use an

adverse facts available rate based on the highest rate charged for any

single shipment.

SeAH reexamined its response and found that though their source

documents and data presented are correct, several of their sample

calculations were incorrectly presented. SeAH insists that this was an

error only in the sample calculation attachments and not in the sales

databases. In addition, SeAH has provided in an attachment to the

rebuttal brief a sales trace showing the correct amounts.

Department's Position

While there were several clerical errors in the sample

calculations, the source documents and data support the amounts

reported by SeAH for international freight expenses. Accordingly, we

have not made any changes to SeAH's reported international freight

expenses.

Comment 29: US Packing Costs

The petitioners suggest that SeAH's US packing costs should be

based on facts available because SeAH has ignored the Department's

requests to provide information on the type of packing materials used,

as well as the average labor hours by packing type and the average

labor cost per hour. The petitioners also point out that SeAH has

failed to provide a list of overhead expenses incurred in packing or to

demonstrate how these expenses were allocated in each packing type. The

petitioners insist that SeAH should have provided a better explanation

of why it cannot calculate the amount of packing material used for each

product as well as the methods used to derive the packing labor costs.

The petitioners suggest a facts available rate of the highest packing

cost for any product reported by SeAH for US sales and the lowest

reported for home market sales.

SeAH contends that it has provided in its responses the basis for

each packing calculation by calculating the packing costs on a metric

ton basis, distinguishing between domestic and export markets, black

and galvanized pipe, outside diameter dimension categories, and

standard and conduit pipe. SeAH argues that because packing labor costs

were consistent with the fee schedule of its subcontractors, they

should be acceptable. SeAH insists that the allocation of material

costs on a metric-ton basis is appropriate because these costs were

based on the actual average per metric ton of materials used during the

POR, depending on the type of pipe and its destination.

Department's Position

We agree with SeAH that its methodology for reporting packing costs

is reasonable because it has allocated the costs on the basis on which

they are incurred. This methodology has been accepted in prior segments

of this review. We have no reason to believe, based on the information

on the record, that the reported costs are unreliable.

Comment 30: Affiliated Producers' Costs

The petitioners find that SeAH's reported costs should be rejected

because it has failed to report the costs of certain affiliated

producers. The petitioners describe the decision by SeAH not to report

these costs as ``unilateral'', and suggest that SeAH has not reported

direct materials, labor, and other costs incurred to produce the

merchandise under review. The petitioners find that products

[[Page 32845]]

manufactured by affiliated producers are a significant portion of the

total merchandise produced and sold in the home market, and would have

been a more significant portion if home market sales reporting had not

be limited to merchandise comparable to that sold in the United States.

The petitioners point out that excluding some costs from reporting can

cause a large number of additional sales to fall below cost and result

in a substantial increase in the use of CV, which can have a

significant effect on the margin calculated. The petitioners suggest

that the Department reject SeAH's CV and COP information.

SeAH responds by claiming that the decision not to report the costs

in question was not ``unilateral'' because the Department agreed that

SeAH did not have to report these costs. SeAH reiterates that the costs

of the affiliated producers are minimal compared to SeAH's total costs

and would have no impact on the reported COM. SeAH also notes that the

petitioners' suggestion that not all of the merchandise produced by

affiliated producers has been reported is unsubstantiated. According to

SeAH, comparison merchandise has been distinguished from non-comparison

merchandise in it responses. As for the inclusion of the affiliated

producers' general expenses in calculating general expenses for SeAH,

SeAH argues that these expenses apply to very few models and would have

no impact on the CV.

Department's Position

In the course of this proceeding, we informed SeAH that it need not

report costs for its affiliated producers pending the examination of

information on their percentage of SeAH's production by model type (see

Memorandum to the File, from IA analyst/Marian Wells, November 18,

1997). Upon examining information submitted by SeAH on the percentage

of production by the affiliated producer, we decided not to request

these costs for purposes of this review. For any given model, the

affiliated producer's percentage of production was small compared to

SeAH's production; as a result; including the costs of this affiliated

producer would have had almost no effect on our calculations.

Comment 31: Indirect Selling Expenses and ISE Ratio

The petitioners claim that SeAH did not include several expenses in

its reporting of indirect selling expenses. The petitioners provide

specific examples of indirect selling expenses for SeAH's affiliated

resellers that were not fully explained or appear to be inconsistent

with SeAH's financial statements.

SeAH responds to the petitioners' allegations by stating that it

has reported all incurred expenses either as SG&A or, if they fit the

criteria, as movement expenses reported as outbound freight or direct

selling expenses. SeAH notes that the Department has accepted its

reporting methodology since the beginning of the case.

Department's Position

All of SeAH's expenses are identified and there is nothing on the

record to indicate that these expenses have been mischaracterized.

Comment 32: Inland Freight Costs and Plant-To-Warehouse Freight Costs

in G&A

The petitioners argue that SeAH did not adequately report its

inland freight costs concerning freight from the plant to the warehouse

and from the plant to the distribution point in its initial submission.

When SeAH responded to supplemental questionnaires, the petitioners

point out, freight costs and warehousing costs were inconsistent with

estimates described in SeAH's initial response. For example, SeAH

initially stated that it shipped pipe from the factory to the Pohang

warehouse only occasionally. Later, SeAH found that it actually shipped

much more frequently than previously reported. Because of

inconsistencies like this one, the petitioners suggest that SeAH's

freight and warehousing costs are incomplete and unreliable. According

to the petitioners, SeAH has also failed to report inland freight costs

on a shipment-by-shipment basis and should therefore be considered non-

responsive.

The petitioners maintain that because certain delivery charges have

been taken out of SeAH's G&A accounts and there is no indication that

they have been accounted for elsewhere, the use of facts available is

required. As facts available, the petitioners state that these expenses

should be returned to the calculation of G&A, and inland freight costs

should be based on facts available and SeAH's plant-to-warehouse

freight costs should be added to SeAH's reported G&A expense.

SeAH states that the petitioners used the last reported home market

sales database based on the revised date of sale methodology to

calculate the total number and volume of warehoused sales and then

compared these figures to the total sales volume in the earlier

response with a smaller home market database. This overstated the

proportion of domestic sales that were warehoused. This same error by

the petitioners led them to overestimate the number of warehoused sales

of comparison merchandise. Also, SeAH argues that the calculation of

average per metric ton cost was necessary because there is no link

between shipments to the warehouse and the sales from the warehouse

inventory. Regarding the calculation of the average factory-to-

warehouse freight charges, SeAH states that the petitioners were in

error when they divided (for the sample months) sales shipped by truck

only by the total quantity shipped by truck and rail, thus understating

the per-ton freight charge. SeAH did this calculation correctly and

found that the variance between the annual average and the monthly

average was relatively small. Monthly freight charges may contain some

variance because freight charges per ton vary by the size/type of truck

used. Regarding SG&A charges, SeAH clarifies that the inland freight

charge is recorded in its books as an indirect selling expense but was

not ``included'' as an indirect selling expense for purposes of

responding to the antidumping questionnaire. SeAH maintains that it has

excluded all freight from its calculation of indirect selling expenses.

Department's Position

We agree with SeAH that the petitioners made errors in their

calculations by mixing together information from earlier HM datasets

not used for these final results with newer information that was used.

We find that SeAH has explained sufficiently how their calculation was

performed in regards to each of the petitioner's claims, and its

reporting was reasonable. Where possible, i.e., for EP sales, SeAH has

reported shipment-by-shipment freight costs. Because SeAH is unable to

link shipments to the warehouse and sales from the warehouse for CEP

sales, we consider the average per-metric ton costs to be the most

reasonable methodology available for reporting CEP sales.

We have also found that while SeAH recorded these plant-to-

warehouse expenses as selling expenses in its books, this does not mean

that they must be reported for the Department's purposes as selling

expenses. SeAH's plant-to-warehouse freight costs should not be added

to SeAH's reported G&A expense because plant-to-warehouse freight costs

are considered movement expense for antidumping calculation purposes.

Comment 33: Foreign Brokerage Charges

The petitioners find that SeAH's foreign brokerage charges have

been calculated incorrectly because they are

[[Page 32846]]

based on the FOB value of each shipment divided by the number of tons

in each shipment. The petitioners find that this calculation results in

distortions because it does not account for variance in value. The

petitioners suggest that the Department recalculate foreign brokerage

charges by multiplying, for each observation, the per-unit value by the

ad valorem charges for foreign brokerage. For brokerage on CEP sales,

the petitioners suggest the use of on facts available because SeAH has

not acted to the best of its ability in reporting expenses on a

transaction-specific basis.

SeAH states that its foreign brokerage methodology based on volume

has not been questioned by the Department. SeAH conducted a sample

value allocation of 50 observations (27 sales) and found it made little

difference to the calculation. SeAH argues that its methodology is

sound and that there is no reason for a change in methodology for the

final results. If, in fact, the Department finds reason for a change in

methodology, SeAH provides several suggestions for the revised

calculation.

Department's Position

We agree with the petitioners. We have reviewed SeAH's responses

and found that foreign brokerage should be reallocated based on value

because it is incurred based on value. We have made this reallocation

in our final results.

Comment 34: SG&A Expenses

The petitioners state that SeAH has erred in reducing the SG&A

component of CV by the amount of expenses in its books for factory-to-

warehouse freight. In addition, the petitioners claim that SeAH is not

clear in explaining whether the credit expenses, container stuffing

charges and postage expenses recorded in its books that were not

included in SG&A have been included elsewhere.

SeAH states that credit expenses, container stuffing charges and

postage, as documented in its response, were incurred on exports of

non-subject merchandise. As for the factory-to-warehouse freight, SeAH

explained that this was reported as a movement expense in the response

to the questionnaire.

Department's Position

SeAH used the accounts for SG&A from its books and then deducted

various costs from those accounts when appropriate (i.e., costs not

associated with subject merchandise and freight costs which were

reported separately). Therefore, we have not changed SeAH's SG&A

component of CV.

Comment 35: Selling Expenses of Affiliated Importers

The petitioners point out that regardless of how selling expenses

of SeAH's affiliated importers are characterized, they should be

deducted from CEP. Each of these companies incurs SG&A expenses in

performing selling functions that have been relocated from Korea,

including shipping arrangements, arranging for entry of the

merchandise, issuing invoices, inventory maintenance, and collecting

payment. Whether they are considered direct or indirect selling

expenses, the petitioners find that they should be deducted from the

price used to establish CEP.

SeAH does not disagree that indirect selling expenses should be

deducted from CEP sales. SeAH stated that indirect selling expenses

were deducted from CEP sales in the Preliminary Results margin

calculation program. SeAH believes that there is no reason to change

this portion of the programming for the final results.

Department's Position

We deducted indirect and direct selling expenses from CEP sales for

the Preliminary Results of this review and have continued to do so for

these final results.

Comment 36: Marine Insurance Costs

The petitioners suggest that based on information provided in

SeAH's response, SeAH is able to calculate its marine insurance costs

on a product-specific basis. The petitioners also find that SeAH's

method of calculating marine insurance is distortive because it is an

average over all products and not based on a per-transaction basis.

Because SeAH is able to determine the marine insurance premium rate

applicable to all reported shipments of subject merchandise, and can

trace the C&F value of each product for each shipment, the petitioners

claim that it should have calculated an average per-metric ton

insurance expense on a transaction-specific basis. The petitioners

state that SeAH has further proven itself uncooperative by not at least

reporting average marine insurance on a product-specific basis. The

petitioners suggest that SeAH's marine insurance costs be based on

facts available.

SeAH argues that the Department should reaffirm the methodology

used in the first reviews of this case. SeAH maintains that it has

explained adequately why it cannot calculate marine insurance on a

transaction-specific basis in its response.

Department's Position

We agree with SeAH that it has used a reasonable and appropriate

methodology to report their marine insurance costs. SeAH has calculated

the reported amount of marine insurance on the same basis that it is

incurred by applying the insurance premium rate to the C&F value of the

shipment as shown on the commercial invoice. We are accepting SeAH's

methodology for these final results.

Comment 37: Transaction-specific Entered Values for CEP Sales

The petitioners suggest that SeAH is able to calculate the average

entered value during the POR for sales on a product-specific basis. The

petitioners maintain that SeAH's reporting of an average per-unit

entered value by surface finish rather than a transaction-specific

entered value proves that SeAH has not responded to the best of its

ability. The petitioners suggest entered values for CEP based on facts

available.

SeAH argues that its methodology is consistent with that used in

the First Review, but has provided information if the Department

chooses to calculate an approximate entered value.

Department's Position

Since we are calculating assessment rates on a per-volume, as

opposed to value, basis, this issue is moot.

Shinho

Comment 38: Basis of Indirect Selling Expense Allocations

The petitioners argue that Shinho failed to justify its allocation

of indirect selling expenses by the number of employees in its various

divisions. The petitioners note that the Department stated in a

supplemental questionnaire that its preferred methodology is to

allocate such expenses on the basis of sales volume. Furthermore, the

petitioners cite the Notice of Final Determination of Sales Less Than

Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa,

(Carbon Steel Plate) 62 FR 61731, 61736 (November 19, 1997), as stating

that the Department normally allocates G&A expenses based on the cost

of sales because an allocation ``based on a single factor (e.g., head

counts, fixed costs) is purely speculative.'' The petitioners also

point to Carbon Steel Plate which it states that to deviate from this

methodology requires ``evidence that our normal G&A allocation

methodology unreasonably states G&A costs.'' Therefore, the petitioners

conclude that the Department should allocate

[[Page 32847]]

Shinho's indirect expenses based on the cost of sales.

Shinho states that its accounting records do not separately record

(SG&A) expenses. Thus, in order to assign costs to each of these

functions, Shinho allocated those expenses not directly assignable to

each division on the basis of a headcount. Shinho claims that its

allocation methodology for indirect selling expenses is consistent with

its practice in the original investigation, which was verified and

accepted by the Department. Furthermore, Shinho asserts that while the

Department prefers to allocate such expenses based on sales volume, it

will accept alternatives that are reasonable and fully explained.

Shinho states that it adequately explained its methodology and that it

is reasonable because many such expenses are related to the number of

employees in each division.

Department's Position

Contrary to the petitioner's assertions, we note that Shinho did

allocate some indirect selling expense items by value. As for the items

that Shinho allocated by number of employees, we find its methodology

to be reasonable because these items vary according to the number of

employees. This methodology is consistent with that used in the

original investigation (see, LTFV at 57).

Comment 39: Allocation of Packing Expenses

The petitioners maintain that Shinho misallocated the cost of

packing clips and bands by allocating their cost by metric ton rather

than by bundle. The petitioners argue that Shinho has not shown that

its per-bundle usage rate approximates its calculated weight basis.

Additionally, the petitioners state that Shinho has not been

cooperative in reporting its packing costs by (1) failing to report the

average cost of each packing material as requested by the Department,

(2) not reporting a cost for the white steel bands noted in their

response, (3) providing packing cost worksheets that are inconsistent

and irreconcilable, (4) not identifying the composition of ``common''

packing material costs, (5) not fully explaining the derivation of the

allocated coating materials costs, and (6) using an improper

methodology for calculating packing labor costs. Thus, the petitioners

argue that the Department should double Shinho's reported home market

packing costs for use as facts available for its U.S. packing costs. In

support of this recommendation, the petitioners cite Circular Welded

Non-Alloy Steel Pipes and Tubes from Mexico: Final Results of

Antidumping Duty Administrative Review, 62 FR 37014, 37020 (July 10,

1997), where the Department followed such a methodology when the

respondent had been uncooperative.

With regard to the manner in which it allocated its packing bands

and clips, Shinho asserts that the distinction drawn by the petitioners

between a per-bundle and a per-metric ton allocation is a ``distinction

without a difference.'' Next, Shinho states that ``white'' steel bands

do not refer to a separate packing material but rather to the bands

used to bind galvanized pipe (internally referred to as ``white'' pipe)

and are included already in the reported costs. Additionally, Shinho

disputes the petitioners' claim that the worksheets it provided with

its response are inconsistent. According to Shinho, its worksheets

contain the information necessary to calculate the average cost of each

packing material, including coating materials, on a product-specific

basis and that these product-specific costs reconcile with the total

material usage. Moreover, Shinho states that its allocation of packing

labor expenses is consistent with its normal accounting methodology.

Shinho further asserts that a per-metric ton allocation of packing

labor expense is appropriate because Shinho's operation of a crane

accounts for a substantial amount of the packing labor expense.

According to Shinho, the capacity of the crane used for packing is

measured in tons, the same basis used to allocate the expense. For the

aforementioned reasons, Shinho argues that the Department should reject

the petitioners' call for the use of adverse facts available for

Shinho's home market packing costs.

Department's Position

For purposes of this review, we find Shinho's allocation of the

cost of bands and clips to be reasonable. With regard to the

petitioners' other points, we find that the information submitted by

Shinho with regard to packing costs supports the reported amounts.

Therefore, we find no reason to apply facts available with regard to

Shinho's packing costs.

Comment 40: Home Market Credit Period

The petitioners assert that it is unclear whether Shinho calculated

its customer-specific average credit period on a monthly or annual

basis because Shinho stated that it maintains its accounts receivables

on a monthly basis and its notes receivables on an annual basis.

Additionally, the petitioners cite the example Shinho prepared

comparing a specific customer's monthly average accounts receivable

period to the year-end accounts receivable for the same customer. The

petitioners state that this example, based on a customer that Shinho

hand-picked, shows that Shinho overstated its home market credit

period. Given these apparent discrepancies, the petitioners request

that the Department not adjust NV for home market credit expenses.

Shinho states that, in this review, it reported its home market

credit period on an annual, customer-specific basis. According to

Shinho, this method most closely approximates the invoice-specific

credit period, which is the Department's preferred methodology. Shinho

states the Department has accepted customer-specific reporting in other

cases. See Final Results of Antidumping Duty Administrative Reviews and

Revocation in Part of an Antidumping Duty Order: Antifriction Bearings

and Parts thereof from France, Germany, Italy, Japan, Romania,

Singapore, Sweden, Thailand, and the United Kingdom, 58 FR 39729, 39747

(July 29, 1993) and Industrial Belts and Components and Parts Thereof,

Whether Cured or Uncured from Japan: Final Results of Antidumping

Administrative Review, 58 FR 30018, 30023 (May 25, 1993).

Department's Position

We find that Shinho's use of average annual customer-specific home

market credit periods is reasonable giving the limitations of its

accounting system. Therefore, we are using Shinho's reported customer-

specific home market credit periods for these final results with the

exception of one customer. We agree with the petitioners that the

supporting documentation Shinho provided comparing the customer-

specific monthly average to the year-end average credit period for this

one customer showed that the reported credit period is overstated.

Therefore, we have adjusted the home market credit period for this

customer.

Comment 41: Reliability of Home Market Short-term Interest Rate

The petitioners argue that the Department should not make an

adjustment for home market credit expenses because Shinho's reported

home market interest rate is unreliable. The petitioners assert that

Shinho's trial balance, used by Shinho to support its claim for its

reported US interest rate, refutes Shinho's home market credit

calculation. The petitioners state that if the Department does not

reject Shinho's home market credit expense adjustment in its entirety,

as facts available, it

[[Page 32848]]

should instead calculate the expense using the US interest rate.

Shinho states that the Department should not reject the firm's

calculation of its home market short-term interest rate based on a

document provided to support its calculation of its corresponding US

interest rate. Shinho argues that the Department did not request that

the company reconcile its home market credit expense calculation to

supporting company accounting records, including its trial balance.

Shinho contends, however, that had the Department made such a request,

the company could easily have shown how it had derived the figures used

in its home market credit calculation. Furthermore, Shinho states that

the same methodology was accepted and verified by the Department in the

prior review.

Department's Position

We agree with Shinho that we should not reject or adjust its

reported home market interest rate. We requested a reconciliation of

Shinho's reported US interest rate; however, we did not request such a

reconciliation for its home market interest rate. Thus, we have no

reason to believe that the reported home market interest rate is

inaccurate.

Comment 42: Interest Expense Factor

The petitioners state that it is the Department's policy to require

that interest income used to offset interest expense for the purpose of

calculating CV be related directly to production and short-term in

nature. See, First Review Final Results at 55583 and Flowers from

Colombia, at 42833, 42843.

According to the petitioners, Shinho estimated its short-term

interest income by calculating its ratio of short-term to long-term

deposits. Shinho applied this ratio to the total interest earned to

calculate the amount of short-term interest it earned. The petitioners

assert that this ratio overstates the short-term interest earned

because short-term deposits typically earn less interest than similar

long-term deposits. Furthermore, the petitioners claim, Shinho did not

identify the short-term deposits that earned interest income or show

that its accounting records do not track separately short-term interest

income. Finally, the petitioners argue that Shinho did not show that

the interest earned from securities was related to production. For each

of these reasons, the petitioners state that the Department should

reject Shinho's claimed interest income as an offset to its interest

expense.

Shinho argues that the Department should continue to offset the

firm's interest expense with the short-term interest income that it

reported. Shinho asserts that its methodology of calculating short-term

interest income is reasonable given that short-term interest income

earned is not recorded separately from long-term interest income in its

financial statements. Shinho states that the Department accepted a

similar approach in the Final Determination of Sales at Less Than Fair

Value: Certain Stainless Steel Wire Rods from France, 58 FR 68865,

68872 (December 29, 1993). Shinho maintains that the petitioners'

citation of the previous review is erroneous because, in that review,

the Department rejected the inclusion of a particular investment

because it was not short-term, rather than rejecting the full offset

because it was calculated by applying a ratio of short-term to total

deposits. Finally, Shinho states that the Department did not question

the company's methodology and that the petitioner, prior to its briefs,

did not raise the issue.

Department's Position

We agree with the petitioners' assertion that Shinho's methodology

for calculating the interest income offset to interest expense would be

distortional when short-term and long-term deposits earn interest at

different rates. Given that the records of interest income earned by

Shinho maintained in the normal course of business do not track

interest income vis-a-vis the term of the deposit, we have adjusted

Shinho's reported interest income offset based on the difference

between the short-term deposit rate and the long-term government bond

rate in Korea. Additionally, with respect to petitioners' argument that

we reject the nature of Shinho's interest income from securities, there

is no information on the record which indicates that this income earned

from securities was other than short-term in nature. Therefore, we have

retained this income in our calculation of Shinho's interest expense

for COP and CV.

Comment 43: Exchange Rate Gains & Losses

The petitioners assert that Shinho failed to account for its

foreign exchange gains and losses in its cost calculations. The

petitioners state that it is the Department's standard practice to

account for these gains and losses when they are related to production.

Therefore, the petitioners state that the Department should make the

appropriate adjustment to Shinho's net interest expense factor.

Shinho agrees that it did not adjust its interest factor for

foreign exchange gains and losses. However, Shinho states that it did

provide the Department with the information necessary to make the

adjustment. Shinho notes that the requested adjustment is relatively

insignificant.

Department's Position

It is the Department's standard policy to adjust for foreign

exchange gains and losses in a respondent's net interest expense

factor. We have made this adjustment for these final results.

Comment 44: Control Number Uniqueness

The petitioners state that the Department should consolidate

several of Shinho's control numbers that have identical matching

criteria.

Shinho agrees that two of the control numbers at issue are

identical under the Department's concordance hierarchy, but that this

discrepancy did not have an impact on the margin calculations in the

Prelimary Results. Shinho disagrees with the petitioner that a third

product is identical under the Department's hierarchy because one of

the matching characteristics is different.

Department's Position

We have combined the two products that have identical matching

criteria. We agree that the third product differs in one of the

matching criteria; therefore, we have not reclassified this product.

Currency Conversion

We made currency conversions in accordance with section 773A of the

Act based on the rates certified by the Federal Reserve Bank. Section

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

foreign currencies into U.S. dollars unless the daily rate involves a

``fluctuation.'' It is our practice to find that a fluctuation exists

when the daily exchange rate differs from a benchmark rate by 2.25

percent. See Preliminary Results of Antidumping Duty Administrative

Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR

35188, 35192 (July 5, 1996). The benchmark rate is defined as the

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

Final Results of the Review

As a result of this review, we find that the following margin

exists for the period November 1, 1995, through October 31, 1996:

[[Page 32849]]

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

Margin

Manufacturer/exporter (percent)

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

Hyundai..................................................... 4.01

KISCO/Union................................................. 0.71

Shinho...................................................... 3.34

SeAH........................................................ 3.51

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

Parties to the proceeding may request disclosure within five days

of the date of publication of this notice. In accordance with the

methodology in First Review Final Results we calculated exporter/

importer-specific assessment values by dividing the total dumping

duties due for each importer by the number of tons used to determine

the duties due. We will direct Customs to assess the resulting per-ton

dollar amount against each ton of the merchandise entered by these

importers' during the review period.

Furthermore, the following deposit requirements will be effective

for all shipments of welded non-alloy steel pipe from Korea entered, or

withdrawn from warehouse, for consumption on or after the publication

date of these final results of administrative review, as provided by

section 751(a)(1) of the Act: (1) The cash deposit rate for the

reviewed companies will be the rates established in the final results

of this administrative review (except no cash deposit will be required

for those companies whose weighted-average margin is de minimis, i.e.,

less than 0.5 percent); (2) for merchandise exported by manufacturers

or exporters not covered in this review but covered in the original

less-than-fair-value investigation or a previous review, the cash

deposit will continue to be the most recent rate published in the final

determination or final results for which the manufacturer or exporter

received an individual rate; (3) if the exporter is not a firm covered

in this review, the previous review, or the original investigation, but

the manufacturer is, the cash deposit rate will be the rate established

for the most recent period for the manufacturer of the merchandise; and

(4) if neither the exporter nor the manufacturer is a firm covered in

this or any previous reviews, the cash deposit rate will be 4.80

percent, the ``all others'' rate established in the less-than-fair-

value investigation. See LTFV at 42942.

This notice serves as a preliminary reminder to importers of their

responsibility to file a certificate regarding the reimbursement of

antidumping duties prior to liquidation of the relevant entries during

this review period. Failure to comply with this requirement could

result in the Secretary's presumption that reimbursement of antidumping

duties occurred and the subsequent assessment of double antidumping

duties.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 8, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-15874 Filed 6-15-98; 8:45 am]

BILLING CODE 3510-DS-P