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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-489-501]

Notice of Final Results and Partial Rescission of Antidumping

Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube

From Turkey

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

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SUMMARY: On February 6, 1998, the Department of Commerce published the

preliminary results of its administrative review of the antidumping

duty order on certain welded carbon steel pipe and tube from Turkey.

The review covers shipments of this merchandise to the United States by

one respondent during the period May 1, 1996, through April 30, 1997.

Based on our analysis of comments received, these final results differ

from the preliminary results. The final results are listed below in the

section ``Final Results of Review.''

EFFECTIVE DATE: June 29, 1998.

FOR FURTHER INFORMATION CONTACT: Charles Riggle or Kris Campbell,

Office of AD/CVD Enforcement 2, Import Administration, International

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

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

0650 and (202) 482-3813, respectively.

SUPPLEMENTARY INFORMATION:

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 last codified at 19

CFR part 353. While the Department's revised regulations, as codified

at 19 CFR part 351 (Antidumping Duties; Countervailing Duties, 62 FR

27296 (May 19, 1997) (``revised regulations''), do not govern this

review, they do describe the Department's practice where cited in this

notice.

Background

This review covers one manufacturer/exporter, the Borusan Group

(Borusan), of merchandise subject to the antidumping duty order on

certain welded carbon steel pipe and tube from Turkey. On February 6,

1998, the Department published the preliminary results of this review.

See Notice of Preliminary Results of Antidumping Duty Administrative

Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 63 FR

6155 (Preliminary Results). On March 9, 1998, we received case briefs

from Allied Tube & Conduit Corporation and Wheatland Tube Company

(collectively, ``the petitioners'') and from Borusan. We

[[Page 35191]]

received rebuttal briefs from both parties on March 16, 1998.

Scope of Review

Imports covered by this review are shipments of certain welded

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

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

subject merchandise are currently classifiable under the following

Harmonized Tariff Schedule of the United States (HTSUS) subheadings:

7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40,

7306.30.50.55, 7306.30.50.85, 7306.30.50.90. These products, commonly

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

various American Society for Testing and Materials (ASTM)

specifications, most notably A-120, A-53 or A-135. Although the HTSUS

subheadings are provided for convenience and customs purposes, the

written description of the scope of this proceeding is dispositive.

Partial Rescission

We originally initiated a review of three companies: Borusan,

Yucelboru Ihracat Ithalat ve Pazarlama A.S./Cayirova Boru Sanayi ve

Ticaret A.S. (Yucelboru), and Erbosan Erviyas Boru Sanayii ve Ticaret

A.S. (Erbosan). See Notice of Initiation of Antidumping Duty

Administrative Review, 62 FR 35154 (June 30, 1997). However, as noted

in the preliminary results, Yucelboru and Erbosan notified us that they

had no shipments of subject merchandise during the period of review

(POR). Although we inadvertently did not publish a notice of rescission

at the time of the preliminary results, we did confirm with the Customs

Service that this was correct and so stated in the preliminary results.

See Preliminary Results at 6155. We received no comments concerning

either of these companies for the final results. Therefore, consistent

with our practice (see, e.g., Certain Fresh Cut Flowers From Colombia;

Final Results and Partial Rescission of Antidumping Duty Administrative

Review, 62 FR 53287, 53288 (October 14, 1997), we have rescinded our

review of the two companies with no shipments during the POR. See also

19 CFR 351.213(d)(3) of the Department's revised regulations.

Fair Value Comparisons

We calculated export price (EP) and normal value based on the same

methodology used in the preliminary results. However, as discussed

further below, due to a change in our matching methodology vis a vis

sales disregarded as below cost, we were able to match all U.S. sales

to sales of similar merchandise sold in the home market without

resorting to constructed value (CV).

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

issued a decision in Cemex v. United States, 1998 WL 3626 (Fed. Cir.)

(Cemex). In that case, based on the pre-URAA Act, the Court discussed

the appropriateness of using CV as the basis for foreign market value

(normal value) when the Department finds home market sales to be

outside the ``ordinary course of trade.''

Although this issue was not raised by any party in this proceeding,

in light of the Cemex decision the Department has reconsidered its

practice with respect to any sales found to be outside the ``ordinary

course of trade.'' Under the URAA, such sales now include sales

disregarded as below cost. See Section 771(15). In accordance with

Cemex, the Department has determined that it would be inappropriate to

resort directly to CV, in lieu of comparison market sales, as the basis

for normal value where sales of merchandise identical to, or most

similar to, that sold in the United States are disregarded as below

cost. Instead, we will use sales of similar merchandise, if such sales

exist, and will resort to CV as the basis for normal value only when

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

comparison. Therefore, in this proceeding, when making comparisons in

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

sold in the home market as described in the ``Scope of the Review''

section of this notice, above, that were in the ordinary course of

trade for purposes of determining appropriate product comparisons to

U.S. sales. Where there were no contemporaneous sales of identical

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

compare to U.S. sales, we were able to compare U.S. sales to

contemporaneous sales of the most similar foreign like product made in

the ordinary course of trade, based on the matching characteristics

identified in the preliminary results. See Preliminary Results at 6156.

Cost of Production

As discussed in the preliminary results, we conducted an

investigation to determine whether Borusan made home market sales of

the foreign like product during the POR at prices below its cost of

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

We calculated the COP following the same methodology as in the

preliminary results, with the following exceptions.

1. While we based our calculation of interest expenses on the

interest expenses of the consolidated Borusan Group companies, we have

allocated this expense (which was reported on an annual basis) to each

month of the POR using the ratio of monthly to annual interest expenses

for the four largest of the Borusan Group companies, consistent with

the 1994-95 review. We have also recalculated Borusan's amortized

foreign exchange losses. See Comment 7.

2. We have valued purchases of coil and zinc by Borusan's mills

from affiliated parties at the higher of the cost of producing the

input, the transfer price, or the market price. See Comment 8.

3. We added packing to the cost of manufacturing (COM) in order not

to understate the calculation of general and administrative expenses

(G&A) and interest, because the cost of goods sold (COGS) used in the

denominator to calculate the G&A and interest expense factor includes

packing. See Comment 9.

4. We deducted imputed credit expenses from CV. See Comment 10.

5. We corrected a clerical error regarding indexation of monthly

costs. See Final Results Analysis Memorandum from Case Analyst to File:

Pipe and Tube from Turkey (June 8, 1998) (Final Results Analysis

Memorandum).

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. As noted above, we received comments and rebuttal

comments from the petitioners and from Borusan.

Comment 1: Level of Trade

The petitioners submit the following comments regarding the level-

of-trade analysis in the preliminary results: (1) the Department

incorrectly determined that there are two levels of trade in the home

market without sufficient record evidence that home market sales differ

significantly in terms of the stage of marketing involved (see Comment

1A, below); (2) because there is only one home market level of trade,

the Department incorrectly granted a level-of-trade adjustment when

comparing U.S. sales to one of the two purported home market levels

(see Comment 1A, below); (3) even if the Department finds two home

market levels of trade, no adjustment should be made because Borusan

has not demonstrated a causal

[[Page 35192]]

link between (a) differences in the marketing stages between the two

levels and (b) pricing differences between the two levels, i.e., it has

not shown that marketing differences at the two purported levels have

caused pricing differences at the two levels (see Comment 1B, below);

and (4) if a level-of-trade adjustment is granted, it should be

calculated on a reseller-specific basis (see Comment 1C, below).

Comment 1A--Identification of Home Market Levels of Trade

The petitioners state that there is only one level of trade in the

home market because there are no significant differences in the stage

of marketing for any of Borusan's purported levels of

trade.1 The petitioners contend that, based on an analysis

of the customer class and the selling functions involved, LOT C sales

should not be considered as a separate level of trade.

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\1\ Borusan initially claimed three home market levels of

trade--sales shipped directly from the mill to distributors/

wholesalers (LOT A, ``mill direct''), sales made by affiliated

resellers that also involve direct shipment from the mill to the

customer (LOT B, ``reseller back-to-back''), and sales made by

affiliated resellers out of locally maintained forward inventory

(LOT C, ``reseller inventory sales''). As in the 1994-95 review, we

collapsed LOTs A and B in the preliminary results, but found that

LOT C sales were made at a level of trade separate from LOT A/B

sales. Contrary to the 1994-95 review, however, we found a pattern

of consistent price differences between the two levels, and made a

level-of-trade adjustment when comparing U.S. sales with LOT C

sales. See Preliminary Results at 6158; see also Notice of Final

Results of Antidumping Duty Administrative Review: Certain Welded

Carbon Steel Pipe and Tube from Turkey, 61 FR 69067, 69068-69069

(December 31, 1996) (1994-95 Final Results).

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The petitioners first emphasize that the type of customer is an

important factor in the level-of-trade analysis. Referencing the

preamble to the Department's revised regulations (Preamble to

Antidumping Duties; Countervailing Duties, 62 FR 27296, 27371, (May 19,

1997) (Preamble)) and Gray Portland Cement and Clinker from Mexico:

Final Results of Antidumping Duty Administrative Review, 62 FR 17148,

17156 (April 9, 1997) (Mexican Cement), the petitioners state that

different levels of trade necessarily involve purchasers at different

places in the chain of distribution. According to the petitioners,

Borusan's mill direct sales at LOT A, back-to-back sales through

resellers at LOT B, and reseller inventory sales at LOT C all involve

sales to end users. The petitioners submit that Borusan has shown only

that there are sales to different types of end users at all three

claimed levels of trade, and argue that distinctions among types of end

users are not relevant to a determination regarding whether such

customers occupy different places in the chain of distribution.

Regarding selling functions, the petitioners contend that four of

the 12 claimed selling functions as reported by Borusan are not selling

functions at all, and maintain that the remaining eight do not show any

material difference in the nature or level of selling function being

provided. The petitioners claim that inventory maintenance is the only

significant selling function present in LOT C and not in LOT A/B. Even

here, however, the petitioners contend that LOT A/B sales also involve

maintaining inventory at the mill, and argue that any difference in the

inventory maintenance at the two levels is not significant in terms of

the level-of-trade analysis. Citing Notice of Final Determination of

Sales at Less Than Fair Value: Certain Pasta from Italy, 61 FR 30326,

30337 (June 14, 1996) (Pasta from Italy), the petitioners assert that

mere differences in the degree to which a particular selling function

is performed are given little weight in establishing separate levels of

trade. The petitioners add that it is rare that the Department would

find that any single selling function is so significant as to warrant a

finding of different levels of trade, citing Preamble to Antidumping

Duties; Countervailing Duties; Proposed Regulations, 61 FR 7308, 7348

(February 27, 1996) (Proposed Regulations). The petitioners conclude

that, since LOT C sales are not made at a level of trade separate from

LOT A/B, no adjustment should be made for comparisons involving LOT C

sales.

Borusan responds that, although it disagrees with the Department's

determination to collapse LOTs A and B, the Department should continue

to find at least two levels of trade (LOT A/B and LOT C) because

Borusan has adequately demonstrated the existence of separate and

distinct levels of trade in the home market. Borusan characterizes its

home market channels of distribution as follows: LOT A involves made-

to-order sales direct from the mill to sophisticated, unaffiliated

distributor/resellers at high volumes; LOT B sales are made through

affiliated resellers primarily to unaffiliated distributors, on an FOB-

mill basis where the merchandise is shipped directly to the customers

without the merchandise entering the resellers' inventory; and, LOT C

sales are made by the resellers out of locally maintained forward

inventory to small local retailers and end users.

Borusan argues that its sales at LOT C involve several

qualitatively and quantitatively different selling functions than those

involved in LOT A/B. Principally, Borusan claims, LOT C sales are made

out of pre-positioned inventory from regional warehouses instead of

directly from the mill. According to Borusan, this sales process does

not involve only inventory maintenance, but also requires the

performance of a number of additional functions (and the incurrence of

certain additional selling expenses) at the LOT C level, including

forecasting of regional demand for different products, inventory

planning, placing orders with the mill, making arrangements for

shipping from the mill, and incurring inventory carrying costs during

the holding period. Borusan argues further that, since LOT C sales are

routinely made to small, local retailers and end-users, LOT C resellers

are involved in customer education and problem-solving, and providing

advice on suitability, uses, and characteristics of Borusan's products.

Finally, with respect to the petitioners' argument that inventory

maintenance occurs at both LOT A/B and LOT C, Borusan notes that LOT C

involves the pre-positioning of forward inventory, a selling function

that the Department has recognized as both significant in and of

itself, and distinct from the inventory maintenance that occurs at the

mill, citing Pasta from Italy at 30341-30342.

DOC Position: We continue to find that there are two home market

levels of trade, LOT A/B and LOT C. We also find that LOT C involves a

more remote level than LOT A/B. For these final results, we have

continued to match U.S. sales first to LOT A/B; where we matched U.S.

sales to LOT C, we have granted a level-of-trade adjustment, as

discussed further in our response to Comments 1B and 1C below.

In order to find that sales are made at different levels of trade,

we must determine that such sales involve different stages of

marketing. See 19 CFR 351.412(b)(2). As a threshold matter, we analyze

selling functions to determine if the levels of trade identified by a

party are meaningful. Preamble at 27371. Our examination of the record

evidence in this case confirms that, consistent with our preliminary

results and with the final results of the 1994-95 review,2

there are significant differences in the selling functions involved in

LOT A/B sales in comparison with those involved in LOT C sales.

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\2\ No review was conducted with respect to the 1995-96 period.

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At LOT A/B, Borusan makes home market sales directly from the mill

to large, sophisticated customers or, in a

[[Page 35193]]

`back-to-back' manner, where the sale is made by an affiliated reseller

who does not take the merchandise into its inventory. In both

instances, sales are made on an FOB-mill basis, and Borusan's customers

make their own transportation arrangements regarding delivery of the

merchandise from the mill. At LOT C, Borusan: (1) makes low-quantity

sales to smaller customers through affiliated resellers who take the

merchandise into inventory prior to the sale; (2) provides delivery

services once the sale is made; and (3) maintains more intensive and

frequent interactions with the customer. Thus, contrary to the

petitioners' assertions, we find that there is more than one

significant selling function that occurs at LOT C and not at LOT A/B.

We discuss each in turn, below.

First, while it is not the only difference between LOT C sales and

LOT A/B sales, inventory maintenance is a principal selling function

that distinguishes these levels. Since LOT C sales are made out of

stock, the affiliated resellers at LOT C have the responsibility of

storing merchandise before purchasers have been found. The additional

responsibility of maintaining merchandise in inventory also gives rise

to related selling functions that are performed at LOT C. These include

forecasting of regional demand for different products, inventory

planning, placing orders with the mill, and incurring inventory

carrying costs during the holding period. We also note that, in taking

merchandise into inventory at LOT C, Borusan's affiliated resellers

perform delivery-related functions that are not performed at LOT A/B,

including: (1) arranging for shipment of merchandise involved in LOT C

sales from the mill to the affiliated reseller's warehouse; and (2)

providing immediate local delivery of such pre-positioned inventory

once the sale is made to the final customer. See Borusan Questionnaire

Response Section A (Borusan section A response) at 14 (resellers making

LOT C sales ``specialize in providing immediate local delivery of

standard grades which they keep in inventory'').

The additional forward warehousing and related activities performed

by the affiliated resellers in making LOT C sales, as described above,

constitute a distinct set of selling activities separate from any

inventory maintenance performed at the mill. Thus, we disagree with the

petitioners' contention that, since some form of inventory maintenance

is conducted at each level of trade, any differences in this selling

function are insufficient to support a finding of different levels of

trade. Considering the additional selling functions associated with

maintaining inventory at the affiliated reseller's warehouse for LOT C

sales, we do not accept the petitioners' claim that the inventory

maintenance performed at Borusan's mills is so similar to the reseller

forward warehousing performed by affiliated resellers making LOT C

sales as to render the differences in inventory maintenance between LOT

A/B and LOT C sales insignificant for our analysis.

In addition to the inventory-and delivery-related selling

activities described above, LOT C sales, which are typically smaller-

volume sales, involve customer-based selling activities specific to the

customers involved in such sales, which, as further discussed below,

differ in the aggregate from the customers served by LOT A/B. These

include customer education and advice on the suitability, uses, and

characteristics of Borusan's products.

Based on the above analysis of selling activities, we have

determined that there are meaningful distinctions between LOT A/B and

LOT C. Aside from selling functions, we also consider the type of

customer and the level of selling expenses in determining whether sales

are made at different stages of marketing. See Preamble at 2731.

Regarding the petitioners' arguments with respect to customer class,

while we agree with the petitioners that the type of customer is an

important indicator in identifying levels of trade (id.), we disagree

with their assertion that the fact that both levels of trade involve

some sales to end-users requires a finding that there are no customer

differences between these levels. First, as a point of clarification,

Borusan's LOT C sales are made not only to end users, but also to local

distributors and small retailers. Second, the relevant standard,

regardless of customer labels, is whether the customers involved at

each purported level of trade constitute purchasers at different stages

in the chain of distribution. See Antifriction Bearings from France et

al.; Final Results of Antidumping Duty Administrative Reviews, 62 FR

54053, 54055 (October 17, 1997) (AFBs 1995-96).

The record evidence before us indicates that LOT C customers occupy

a different place in the chain of distribution than do LOT A/B

customers. At LOT C, the affiliated resellers tend to make sales in

small quantities (``sometimes just a few pieces of pipe at a time'') to

these customers. Borusan section A response at 13. In contrast, Borusan

makes mill direct sales only to the following customers: affiliated

companies, customers requiring special technical services, or customers

located in Istanbul that purchase at high volume. Id. at 12.

Finally, with respect to the level of selling expenses involved at

each channel of distribution, our examination of the expenses reported

on home market sales indicates that, as Borusan claims, the per-unit

indirect selling expenses are higher for sales made through LOT C than

for those made at LOT A/B. Consistent with the Department's practice

and regulations, we have considered this as an additional factor in our

determination that LOT C is separate from, and more advanced than, LOT

A/B.

Comment 1B--Price Differences Between Levels of Trade

The petitioners contend that, even if the Department correctly

determined that Borusan's LOT C sales were made at a different level of

trade than its LOT A/B sales, the Department erred in granting a level-

of-trade adjustment with respect to comparisons made to LOT C sales.

According to the petitioners, Borusan has not demonstrated that any

price differences that exist between LOT A/B and LOT C are due to the

difference in level of trade. The petitioners note that the Statement

of Administrative Action accompanying the URAA (SAA) provides that the

Department will grant a level-of-trade adjustment only where there is a

difference in level of trade and the difference affects price

comparability. Therefore, the petitioners claim, the burden is on

Borusan to demonstrate a ``causal link'' between the difference in

selling functions and the difference in prices.

The petitioners argue that, in this case, one likely reason that

prices for sales at LOT C are higher than at LOT A/B is because of the

smaller volumes involved in LOT C sales. In this respect, the

petitioners reference the SAA (at 830) for the proposition that the

Department must ``ensure that a percentage difference in price is not

more appropriately attributable to differences in the quantities

purchased in individual sales.'' The petitioners also suggest that

another factor in higher LOT C prices is the fact that trade discounts

are offered at LOT A/B but not at LOT C. The petitioners conclude that,

because Borusan has made no effort to discount the impact of non-level-

of-trade factors that account for the difference in prices, it is not

entitled to a level of trade adjustment.

Borusan responds that there is no provision in the statute or

regulations that requires that there be a causal link

[[Page 35194]]

between different selling functions and differences in prices. Rather,

Borusan asserts, after finding separate levels of trade, the Department

need only find that a pattern of price differences exists at different

levels of trade, which allows the presumption that the price

differences are attributable to different levels of trade. Borusan

agrees in part that the price differences here arise because of a

difference in quantities sold at each level; however, Borusan disagrees

with the petitioners' interpretation of the SAA's provision regarding

quantities and level-of-trade adjustments. Borusan argues that the

petitioners have taken this quote out of context, as it is only

intended to be illustrative of the Department's concern against double-

counting when a party claims both a level-of-trade adjustment and an

adjustment for differences in quantities.

DOC Position: We agree with the petitioners that we may adjust for

differences in levels of trade only when such a difference is

``demonstrated to affect price comparability,'' as provided at section

773(a)(7)(A)(ii) of the Act. However, this sub-section also explicitly

provides for how any such effect on price comparability is to be

determined, i.e., based on ``a pattern of consistent price differences

between sales at different levels of trade in the country in which

normal value is determined.'' Id. In this case, as stated in the

preliminary results, we determined that a pattern of consistent price

differences existed because we found the monthly average prices were

higher at one level of trade for virtually all models and months as

well as for virtually all sales. See Preliminary Results at 6158.

Therefore, we cannot accept the petitioners' argument that Borusan must

otherwise demonstrate a ``causal link'' between the difference in

selling functions and prices in order to receive a level-of-trade

adjustment for comparisons involving LOT C sales.

The Department ruled definitively on this issue in Antifriction

Bearings from France et al., 62 FR 2081, 2108 (January 15, 1997) (AFBs

1994-95). In addressing an argument made by the petitioner in that case

that various respondents had failed to demonstrate that differences in

prices were due to differences in the selling functions performed at

each level of trade, the Department stated:

The adoption of [the petitioner's] ``due to'' standard would

impose an independent causation requirement upon both the level-of-

trade adjustment and CEP-offset provisions. Such a requirement is

neither required by the statute nor administratively feasible.

Id.

We also note the following regarding the petitioners' arguments

concerning the effect on prices of (1) Borusan's discount policy and

(2) the quantities sold at each level of trade. First, regarding the

argument that the lower net prices at LOT A/B are caused in part by

greater discounts granted at this level versus those granted at LOT C,

while we agree that such differences in Borusan's discount policy

between levels of trade may result in lower net prices at LOT A/B, this

does not change that fact that such differences in net prices between

levels of trade exist. Regarding the petitioners' argument concerning

differences in quantities sold, the SAA provision cited by the

petitioners regarding quantity differences vis a vis the level-of-trade

analysis concerns the importance of not double-counting any quantity

adjustment already granted (no quantity adjustment was made in this

case). In this respect, the SAA provides:

Commerce will isolate the price effect, if any, attributable to

the sale at different levels of trade, and will ensure that expenses

previously deducted from normal value are not deducted a second time

through a level of trade adjustment.

SAA at 830. See also Senate Report on the Uruguay Round Agreements Act,

which provides as follows:

[S]ection 224 first creates section 773(a)(7)(A) providing for

level of trade adjustments. Under this new provision, Commerce is

directed to increase or decrease normal value to make due allowance

for any difference (or lack of difference) between normal value and

export price or constructed export price that is shown to be wholly

or partly due to a difference in level of trade. To avoid double

counting, however, this new section expressly precludes level of

trade adjustments to account for differences for which an allowance

has already otherwise been made.

Joint Report of the Committee on Finance et al., Uruguay Round

Agreements Act, S. Rep. No. 103-412, at 70 (1994) (emphasis added).

Comment 1C--Reseller-Specific Level-of-Trade Adjustment

The petitioners contend that, in the event the Department continues

to grant a level-of-trade adjustment for comparisons involving home

market sales made at LOT C, it should make the adjustment on a

reseller-specific basis. The petitioners argue that this is a more

accurate methodology because it reflects the average amount of

additional inventory maintenance performed by the specific reseller

involved in each transaction.

Borusan responds that there is no legal basis for making the level-

of-trade adjustment on a reseller-specific basis. Borusan states that

the Department's revised regulations regarding level of trade state

that the Department will normally calculate the amount of a level-of-

trade adjustment by: (1) calculating the weighted-averages of the

prices of sales at the two home market levels of trade; (2) calculating

the average of the percentage differences between those weighted-

average prices; and (3) applying this average percentage difference to

normal value. See 19 CFR 351.412(e). Thus, Borusan concludes, the

adjustment is to be made using a combined weighted-average of all sales

at a particular level of trade.

DOC Position: We agree with Borusan that the revised regulations

provide for a weighted-average adjustment. Further, the SAA states that

``any adjustments under section 773(a)(7)(A) will be calculated as the

percentage by which the weighted-average prices at each of the two

levels of trade differ in the market used to establish normal value.''

See SAA at 830. Accordingly, we have not changed the manner in which we

have calculated the adjustment for these final results.

Comment 2: Home Market Indirect Selling Expenses

The petitioners argue that, because Borusan failed to follow the

instructions in the Department's initial questionnaire regarding one of

its two reported home market indirect selling expense fields, the

Department should re-calculate these expenses based on adverse facts

available. The petitioners' comments concern the INDIRSH1 expense, for

which Borusan calculated separate factors based on the indirect selling

expenses of each company that makes the final sale to the unaffiliated

customer (i.e., expenses incurred by the mills--Borusan Boru (BBBF),

Kartal Boru, and Bosas--for LOT A sales, and expenses incurred by

resellers for LOT B 3 and LOT C sales), allocated across

home market sales made by each company. Borusan's specific deficiencies

with respect to the Department's instructions include the following,

according to the petitioners: (1) the failure to provide a list of

overhead expenses itemizing the specific elements of each company's

expenses, and (2) the submission of worksheets that are meaningless

because they do not demonstrate either the amount of each type of

expense or

[[Page 35195]]

the manner in which it was derived and allocated.

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\3\ Although, as noted above, we consider Borusan's claimed LOT

A and LOT B sales to be made at the same level of trade, we continue

to refer to sales made through the back-to-back reseller channel as

`LOT B' sales for ease of reference and in keeping with the

terminology used by the interested parties in this case.

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The petitioners also list a number of indirect selling expense and

sales values that purportedly do not reconcile with Borusan's financial

statements. Due to the proprietary nature of this list of selling

expenses and sales values, we are unable to summarize or address the

petitioners' specific comments in this regard. We address these claims

further in the Final Results Analysis Memorandum.

Noting that the Department did not conduct a verification of

information provided by Borusan in this review, the petitioners assert

that the accuracy of the Department's margin calculation depends almost

entirely on Borusan's cooperation and responsiveness, and maintain that

Borusan's disregard of the Department's instructions is tantamount to

failing verification. The petitioners claim that Borusan should,

therefore, be deemed an uncooperative respondent, and its indirect

selling expenses should be calculated using adverse facts available,

based on the precedent established in Olympic Adhesives, Inc. v. United

States, 899 F.2d 1565, 1571 (Fed. Cir. 1990). The petitioners recommend

that the Department apply the highest indirect selling expense factor

calculated for any member of the Borusan Group to each producer and

reseller in the Borusan Group.

Borusan responds that its indirect selling expenses were adequately

documented and, therefore, should not be modified. First, Borusan

explains that, in response to the Department's instructions, it

provided a complete explanation of how indirect selling expenses were

calculated for BBBF, the largest pipe producer in the Borusan Group,

and for Bozoklar, an affiliated reseller. Second, Borusan explains

that, for this review, it used the same methodology that was verified

and accepted by the Department in the 1993-94 and 1994-95 reviews.

DOC Position: Consistent with the past two reviews involving this

company, we have accepted Borusan's methodology for reporting indirect

selling expenses.

Section 776 of the Act provides, inter alia, that the Department

shall apply facts available if an interested party withholds

information that has been requested by the Department. In this case,

there is no basis upon which to apply facts available as Borusan has

provided the necessary information requested.

First, we do not agree with the petitioners regarding the adequacy

of the supporting documentation submitted by Borusan concerning its

INDIRSH1 expense. In its response to our supplemental questionnaire,

Borusan provided detailed support for indirect selling expenses

incurred by the largest pipe producer (BBBF) and by one of its largest

resellers (Bozoklar). See Borusan sections A-D supplemental

questionnaire response (December 19, 1997) (Borusan supplemental

response), at Exhibits 13-14. As we explain further in the Final

Results Analysis Memorandum, this documentation supports the reported

expense and is in accordance with the company's normal books and

records.

Regarding the petitioners' proposal that we treat Borusan as if it

had failed verification due to the failure to provide information

requested by the Department, as noted above, we have no basis for that

decision; accordingly, we have not changed the calculation of Borusan's

indirect selling expenses. In addition, we note that: (1) we conducted

successful verifications of this company in the past two administrative

reviews; (2) no verification was required for Borusan in this

administrative review; and (3) the petitioners did not request that we

verify Borusan's data in this review.

Comment 3: Allocation of Home Market Inland Freight From Plant to

Warehouse, Warranty, and Interest Revenue

The petitioners contend that Borusan's calculations of home market

inland freight from plant to warehouse, warranty expenses, and interest

revenue on an annual basis are distortive and should have been

calculated on a monthly basis. Citing Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, from Japan and Tapered Roller

Bearings, Four Inches or Less in Outside Diameter, and Components

Thereof, from Japan (TRBs from Japan), 63 FR 2565 (January 15, 1998),

the petitioners state that the Department's practice is to accept

allocations only if they are not distortive and the respondent is fully

cooperative but unable to report the information in a more specific

manner.

With respect to inland freight from plant to warehouse, the

petitioners argue that the allocation of freight charges across the

entire POR is distortive, and maintain that Borusan has not shown that

it is unable to report this expense on a monthly basis. Regarding

warranty expenses, the petitioners assert that in addition to

allocating this expense on an annual basis, Borusan has failed to

comply with the Department's instructions to report such expenses on a

model-specific basis, or on the most product-specific basis possible.

Regarding interest revenue, the petitioners claim that Borusan's

customer-specific allocations are insufficient because, as with inland

freight and warranty, allocating this revenue on a yearly basis does

not properly account for inflation in Turkey. The petitioners request

that the Department base freight charges and warranty expenses on

adverse facts available by not deducting these expenses from normal

value; for interest revenue, the petitioners recommend the highest

revenue reported for any customer during the POR.

Borusan responds generally that: (1) its responses to the

Department's information requests concerning these expenses were

complete; (2) while the Department requested further explanation

regarding how Borusan calculated these charges, it never instructed

Borusan to recalculate the expenses once Borusan supplied these

explanations; and (3) the petitioners have provided no evidence for

their assertion that Borusan's methodology with respect to these

expenses is distortive.

Regarding inland freight expenses, Borusan cites to its

supplemental questionnaire response, wherein the company provides an

explanation regarding why it would be extremely burdensome to tie

particular freight invoices to particular sales invoices. Borusan

argues that its approach is reasonable given the large number of home

market sales. In addition, Borusan notes that it based its reporting of

freight charges on calendar year 1996, which the company maintains is

conservative since, in so doing, it applied an average 1996 charge per

ton to POR sales, including those made in 1997. According to Borusan,

it is the Department's practice to accept values from the fiscal year

that most closely approximates the POR when the POR spans two fiscal

years.

Regarding the warranty expense, Borusan states that the

Department's supplemental questionnaire focused on inquiring into why

Borusan had calculated warranty expenses on a calendar-year basis

instead of on a POR basis. Borusan states that it explained in its

responses the calculation of warranty on a fiscal year basis is

appropriate because it most closely reflects the POR. Borusan adds

that, as with inland freight, it is conservative to calculate home

market warranty expenses on a calendar-year (1996) basis given the high

inflation rate in Turkey.

Finally, regarding interest revenue, Borusan states that, as

explained in its supplemental response, it is unable to tie these

charges to individual

[[Page 35196]]

transactions. Borusan adds that calculating this item on an annual

basis is less distortive than a monthly calculation because interest

collected in one month generally relates to invoices from a prior

month.

DOC Position: We do not agree with the petitioners' claim that,

because Borusan's home market inland freight expense, warranty expense,

and interest revenue were not reported on a monthly basis, we should

base these items on adverse facts available. However, we have

determined that Borusan incorrectly reported home market inland freight

expenses for certain LOT B sales, because the terms of sale indicate

that these expenses were not incurred on such sales. We have not

adjusted for inland freight with respect to LOT B sales.

We first address the petitioners' claims regarding monthly versus

annual expense allocations. In our supplemental questionnaire, we asked

Borusan for further clarification regarding a number of aspects of its

reporting of these items, including requests for further descriptions

of the allocation methodologies used in calculating the per-unit

amounts reported in Borusan's home market sales database. Our questions

concerned primarily: (1) the allocation of the inland freight expense

to subject versus non-subject merchandise; (2) the feasibility of

reporting the inland freight expense on a transaction-specific basis;

(3) the direct versus indirect nature of the warranty expense; and (4)

the rationale for reporting the warranty expense on a calendar-year, as

opposed to POR, basis. See, e.g., questions 34-36, and 39, of the

Department's supplemental questionnaire (November 21, 1997). Borusan

addressed each of our questions in turn in its supplemental response.

See Borusan Supplemental Response at 29-33. Borusan's initial

questionnaire response also addressed the basis for its reporting of

interest revenue using a customer-specific methodology. See Borusan

Questionnaire Response for sections B-D (September 8, 1997) (Borusan

sections B-D response).

While we requested further information regarding various aspects of

Borusan's allocation methodologies, we did not request the company to

report these items on a monthly basis in either the initial or the

supplemental questionnaire. Given that we did not request that Borusan

report these items in this manner, it would be inappropriate to resort

to adverse facts available as requested by the petitioners.4

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

\4\ In the event that future reviews of this order are

requested, we will reconsider whether to request certain selling

expense information on a monthly basis.

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

However, we did not deduct freight expenses reported in the home

market sales listing for LOT B sales, because Borusan has clearly

indicated that such sales are made on an FOB-mill basis. Borusan

allocated its freight expenses on a reseller-specific basis, allocating

total freight expenses across all sales by each reseller, regardless of

whether the sale was made at claimed LOT B or at LOT C. In response to

our request that it report inland freight expenses on a transaction-

specific basis, Borusan explained in its supplemental response (at 30-

31) that it was unable to do so due to the large number of transactions

involved, and, instead, continued to allocate these expenses across all

sales by reseller. Thus, if a reseller made both LOT B and LOT C sales,

Borusan reported per-unit freight expenses (Inland Freight, Plant to

Distribution Warehouse; Inland Freight, Plant/Warehouse to Customer)

for both LOT B and LOT C sales made by that reseller. In providing this

explanation, Borusan referred to delivery expenses incurred on ``back-

to-back'' sales. However, Borusan has clearly indicated, in a number of

places in its questionnaire responses and in its case briefs, that the

terms of sale for LOT B sales do not include delivery. See Borusan

section A response at 13 (describing the delivery process on LOT B

sales: ``The customer arranges for the transportation of the

merchandise from the mill to the intended destination.''); see also

Borusan sections B-D response at B-15, regarding terms of delivery for

each channel of distribution; see also Borusan rebuttal brief at 5:

(``LOT B sales involve shipment of the merchandise on an FOB-mill basis

directly to the customers without the merchandise entering into the

resellers' inventory.'') Although one element of the inland freight

from plant to warehouse expense (truck loading expense) is reportedly

incurred on all domestic shipments of merchandise produced by one mill

(BBBF), Borusan provided no means of isolating this expense from the

other inland freight expenses that it did not in fact incur on LOT B

sales. Accordingly, for these final results, we have not made a

deduction for inland freight expenses with respect to sales made at LOT

B.

Comment 4: Pre-Sale Warehouse Expenses

The petitioners assert that the Department should deny any

adjustment to normal value for Borusan's pre-sale warehouse expenses

based on Borusan's failure to quantify these expenses properly.

According to the petitioners, Borusan did not take the following

actions, as required by the initial questionnaire: (1) Borusan did not

list all warehouse locations used to distribute the foreign like

product; (2) Borusan did not follow the instructions that it report as

pre-sale warehouse expenses direct warehouse expenses only, and that it

include indirect expenses for pre-sale warehousing among its reported

indirect selling expenses; and (3) Borusan did not describe how the

indirect and the direct costs of warehouse operations were separated.

The petitioners state that, instead, Borusan simply calculated the

reported pre-sale warehouse expense for each reseller by dividing the

total warehouse expense incurred during 1996, including indirect

expenses, by the total quantity of goods sold out of stock in 1996. In

light of these alleged failures to comply with the Department's

instructions, the petitioners assert that the Department should deny

any deduction to normal value for pre-sale warehouse expenses.

Borusan responds that it properly documented its pre-sale warehouse

expenses incurred in connection with home market sales. First, Borusan

claims, the Department's policy, pursuant to section 773(a)(6) of the

Act, is to make an adjustment to normal value for warehouse expenses,

such as these, that are incurred at remote selling locations, citing

Certain Porcelain-on-Steel Cookware From Mexico: Final Results of

Administrative Review, 62 FR 42496 (August 7, 1997) (Cookware from

Mexico). Borusan adds that its calculation of pre-sale warehouse

expenses was prepared according to the methodology that was verified

and accepted by the Department during the two most recent reviews.

Finally, Borusan states, the Department did not ask in a supplemental

questionnaire for additional information regarding Borusan's

calculation of pre-sale warehouse expenses and, because the petitioners

have provided no evidence to serve as a basis for the denial of an

adjustment for Borusan's pre-sale warehouse expenses, the Department

should continue to make this adjustment to normal value.

DOC Position: We have accepted as a movement expense the pre-sale

warehouse expenses claimed by

[[Page 35197]]

Borusan. With respect to the petitioners' concern regarding the listing

of warehouse locations, we note that Borusan did provide, in its

initial questionnaire response (at Exhibit B-7), a list of locations

for warehouses leased by its affiliated resellers. (Borusan incurred

this expense for sales involving such leased warehouses but not with

respect to warehouses owned by its affiliates.) With respect to the

petitioners' concern regarding direct versus indirect warehouse

expenses, first, we consider warehousing expenses that are incurred

after the foreign like product leaves the original place of shipment as

movement expenses. See 19 CFR 351.401(e)(2). Second, Borusan properly

isolated this expense to only those sales on which it was incurred,

i.e., sales of merchandise stored in leased warehouses. Accordingly, we

have accepted Borusan's reporting of this expense.

Comment 5: Packing Costs

The petitioners argue that Borusan failed to create a factual

record supporting its calculation of packing costs for both the

comparison market and the United States market and, therefore, the

Department should calculate Borusan's packing costs using adverse facts

available.

First, the petitioners claim that sections B and C of the

Department's questionnaire instructed Borusan to do the following: (1)

Describe the packing types used in the comparison market and those used

to prepare merchandise for shipment to the United States; (2) submit

worksheets listing the packing materials used, the average cost of each

material, how much of each material was used, the average labor hours

by packing type and the average per-hour labor cost, including

benefits; and, (3) provide a list of overhead expenses incurred in

packing and demonstrate how those expenses were allocated by packing

type.

Instead, the petitioners argue, Borusan merely stated that: (1) It

packs standard pipe for shipment in both the export and the domestic

markets by tying bundles of pipes together with metal straps; and, (2)

the reported packing cost includes the costs of labor, materials and

overhead incurred during each month allocated over the total metric

tons packed.

The petitioners argue further that, while section D of the

Department's questionnaire requests a complete and detailed description

of each stage of the production process, Borusan's description of the

packing stage merely states that the pipe is marked and bundled for

final shipment. While acknowledging that Borusan lists some packing

materials in response to this item, the petitioners maintain that

Borusan neglected to explain whether all bundles are packed in the same

manner, or to report the quantities and costs of each packing material

used. Likewise, the petitioners argue, Borusan failed to provide

average labor hours and average labor costs per hour for packing, and

provided no explanation for its allocation of packing overhead

expenses. Finally, the petitioners challenge Borusan's methodology for

allocating packing costs by weight, and insist that packing costs in

the pipe industry are largely a function of the number of pieces being

packed, not the weight.

For these reasons, the petitioners suggest that, consistent with

Circular Welded Non-Alloy Pipe and Tube From Mexico: Final Results of

Antidumping Duty Administrative Review, 62 FR 37014, 37020 (July 10,

1997) (Pipe and Tube from Mexico), the Department should double the

average reported home market packing costs and use that as the U.S.

packing cost as adverse facts available.

Borusan responds that the petitioners' arguments are without merit,

and maintains that the petitioners have overlooked important

information contained in Borusan's response. First, Borusan asserts

that varnishing costs are materials costs (and were fully discussed in

Borusan's sections B-D response at D-41-42) and not packing costs as

argued by the petitioners. Second, Borusan claims that it provided

allocation worksheets (at Exhibit D-13) that clearly explain the

derivation of the reported per-unit costs for each month of the POR.

With respect to the petitioners' argument that Borusan failed to

provide a list of variable overhead expenses incurred in packing,

Borusan points out that it reported (at D-8) a list of the packing

material used to bundle the pipes for shipment, plus the amount and

description of each overhead expense incurred in packing.

Finally, Borusan claims that, while the petitioners objected to

Borusan's allocation of packing costs based on weight, they offered no

evidence to support a claim that Borusan's allocation methodology is

distortive or inaccurate. Instead, Borusan argues, the methodology is

reasonable and, furthermore, is consistent with the methodology

verified and accepted by the Department during the two most recent

reviews.

DOC Position: The petitioners' argument in favor of calculating

Borusan's packing costs by use of adverse facts available is

essentially two-pronged: (1) That Borusan has failed to act to the best

of its ability to provide the complete information requested, and (2)

that Borusan's chosen methodology, which allocates packing costs on the

basis of weight, instead of pieces, is not reflective of actual

practice in the pipe industry.

Regarding the first point, Borusan listed (at D-8) its material

inputs by type, including packing materials. Further, Borusan's product

brochure (at Exhibit A-27) explains that the merchandise is packaged as

``bare bundles.'' The petitioners have provided no evidence to indicate

that Borusan has neglected to report all packing materials by type.

In addition, in response to our questionnaire, Borusan provided (at

Exhibits D-13, D-14 and D-15) monthly transformation cost tables for

its three production facilities. Borusan also provided (at Exhibits D-

21 and D-23, respectively) worksheets illustrating the cost

calculations for the highest volume U.S. product and the highest volume

home market product. Borusan explained in its questionnaire response

(at D-44) that all of the costs used in Exhibits D-13, D-14 and D-15

were taken from data contained in the company's internal monthly

ledgers.

Regarding the second point, we note that in Pipe and Tube From

Mexico, the petitioners' suggested model by which we use adverse facts

available to calculate packing costs, the packing costs were calculated

on a weight basis, the same methodology challenged as unreliable by the

petitioners in this review. Furthermore, our acceptance of Borusan's

methodology, which was verified and accepted by the Department in the

two most recent reviews, is consistent with prior segments of this

proceeding.

Comment 6: Allocation of Domestic Brokerage and Handling on U.S. Sales

The petitioners argue that Borusan should not have reported Turkish

lashing charges, customs charges, loading charges, and port fees based

on the weight of each U.S. shipment, since such charges are actually

incurred on an ad valorem basis. The petitioners explain that basing

such charges on weight results in a distortion when entries cover

merchandise of varying values. Therefore, the petitioners assert, the

Department should apply the highest domestic brokerage and handling

amount reported for any U.S. transaction to all U.S. sales as facts

available.

Borusan responds that the petitioners assertion that brokerage and

handling

[[Page 35198]]

costs are incurred on an ad valorem basis is incorrect. Borusan asserts

that a percentage charge contained in Borusan's response, which is

cited by the petitioner in support of its claim that these expenses are

incurred on an ad valorem basis, is in fact simply the value-added-tax

rate collected on the customs charges and does not relate to the amount

of the customs charges in any way.

DOC Position: The information on the record supports Borusan's

position that the brokerage and handling charges, which Borusan

reported on a shipment-specific basis, reflect the actual charges

incurred by Borusan in connection with its U.S. shipments. See Borusan

sections B-D response at Exhibit C-5. Therefore, we have not accepted

the petitioners' arguments.

Comment 7: Interest Expense Factor

The petitioners make the following comments regarding Borusan's

reported interest expense factor. First, they raise a general

allocation claim, i.e., that Borusan incorrectly calculated this factor

by taking the Borusan Group companies' annual expense amounts and

dividing by 12. The petitioners propose that, as in the 1994-95 review,

the Department should allocate the annual interest expense reported by

Borusan to each month of the POR using the ratio of monthly-to-annual-

interest expenses for the four largest of the Borusan Group firms.

Regarding the specific items that comprise Borusan's reported

interest expense, the petitioners comment on the calculation of this

item in the preliminary results as follows: (1) The Department

correctly denied the claim made by Borusan in its supplemental response

that foreign exchange losses should be excluded because they are due to

inflation; (2) Borusan incorrectly included foreign exchange gains

related to sales; (3) Borusan incorrectly amortized foreign exchange

losses; and (4) Borusan incorrectly included various income items as

offsets to its financial expenses, while improperly excluding a

miscellaneous ``other financial expenses'' item. Regarding each of

these items, the petitioners also claim that it is not possible to

reconcile Borusan's breakout of reported income and expense items with

the totals reported in Borusan's financial statements.

The petitioners' primary arguments concerning each of these issues

are as follows. With respect to (1), the petitioners state that

Borusan's own financial statement treats foreign exchange losses as an

expense, not as an inflation adjustment. Regarding (2), while the

petitioners acknowledge that gains on financial assets such as cash

balances are appropriate offsets to financing costs, they maintain that

Borusan has not explained sufficiently why its reported gains are

appropriate offsets, particularly in light of the fact that the

Department excluded Borusan's foreign exchange gains in the past two

reviews (finding that Borusan's reported foreign exchange gains were

related to sales, not production operations). Regarding (3), the

petitioners state that exchange rate losses should not be amortized

but, instead, all period losses should be included in the interest

expense factor, and maintain that Borusan has not reported this expense

in accordance with its normal books and records. Finally, with respect

to (4), the petitioners state that the Department should not allow

Borusan's claimed offsets for various categories of interest income

(which concern offsets other than the exchange rate gain offset

discussed in item 2, above), but should include the ``other financial

expenses'' item because Borusan did not explain sufficiently why this

should be excluded.

While Borusan does not address the petitioners' general comment

that the Department should allocate interest expenses to each month of

the POR using the ratio of monthly-to-annual-interest expenses for the

four largest of the Borusan Group firms, it does respond to each of the

other comments raised by the petitioners.

First, Borusan contends that, as claimed in the supplemental

questionnaire, exchange rate losses are caused by inflation and should

not be included in interest expense. Second, Borusan states that,

consistent with the two most recent reviews, it did not make any offset

for exchange gains related to sales. Third, Borusan disagrees with the

petitioners' contention that there is no precedent for Borusan's

amortization of exchange rate losses on foreign currency debt. In fact,

Borusan claims, it is the Department's practice to amortize such

translation losses over the life of the loan. Fourth, Borusan disputes

the petitioners' suggestion that it did not substantiate its claimed

interest income offsets, and maintains that its ``other financial

expenses'' item should be excluded because it concerns bank

commissions, which are reported in a separate field.

DOC Position: We first note that, consistent with prior segments of

this proceeding and with the petitioners' arguments in this segment of

the proceeding, we have allocated Borusan's interest expenses to each

month of the POR using the ratio of monthly-to-annual-interest expenses

for the four largest of the Borusan Group companies. See 1994-95 Final

Results at 69074.

Regarding the petitioners' comments on the calculation of the

interest factor, we agree with the petitioners that exchange losses on

foreign currency debt represent a cost of borrowing and, therefore,

should be included in the financial expense calculation. See 1993-94

Final Results at 51632 (``The Department has clearly established that

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

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

production because they reflect an actual increase in the amount of

local currency that will have to be paid to settle these loans.'') We

have continued to include such losses in the interest expense

calculation.

We disagree, however, with the petitioners' assertion that none of

Borusan's reported exchange rate gains should be allowed. Our practice

is to include foreign exchange gains as an offset to finance expenses

if they are related to the cost of acquiring debt for purposes of

financing production operations, and to exclude this item if it relates

to sales. See Notice of Final Determination of Sales at Less Than Fair

Value: Certain Steel Concrete Reinforcing Bars from Turkey (Rebar from

Turkey), 62 FR 9737, 9741 (March 4, 1997); see also Notice of Final

Determination of Sales at Less Than Fair Value: Certain Pasta from

Turkey, 61 FR 30309, 30324 (June 14, 1996). In applying this standard

in the prior two segments of this proceeding, we did not allow any of

Borusan's reported exchange rate gains as an offset, finding that such

gains ``were not debt-related, but rather involved export sales

activities (i.e., the gains arising from foreign-currency denominated

export receivables).'' 1994-95 Final Results at 69074; see also 1993-94

Final Results at 51632 (``In this case, we find that foreign exchange

gains are related to sales, not production; therefore, they should not

be used as an offset for calculating home market interest expenses.'')

However, unlike prior reviews, in the instant proceeding Borusan

has included in its interest expense calculation only those exchange

rate gains related to cash balances and inventory, while excluding

those related to sales (accounts receivable). See Borusan sections B-D

response at Exhibit D-20 (separating exchange rate gains ``earned on

accounts receivable'' from those earned on ``cash balances and other,''

and demonstrating that these two items equal ``total foreign exchange

gains''); see also Borusan

[[Page 35199]]

supplemental response, Attachment J 5). Exchange rate gains

on cash balances and inventory are short-term in nature and do not

constitute a separate investing activity. Accordingly, we have accepted

these exchange gains as an offset to finance expenses.

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

\5\ The petitioners argue, based on proprietary information,

that the information provided in this exhibit is insufficient to

allow the Department to change its position from the past two

reviews and grant an offset for exchange gains. We address this

aspect of the petitioners' argument in the Final Results Analysis

Memorandum.

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

We also disagree with the petitioners' contention that Borusan

should not be permitted to amortize its exchange rate losses. For

purposes of our analysis, it is appropriate to amortize the foreign

exchange losses over the life of the associated debt, since the gain or

loss is realized only as the loans are paid. See, e.g., Rebar from

Turkey at 9743. However, we also disagree with Borusan's proposed

weighted-average amortization of the foreign exchange losses. Instead,

we have amortized the foreign exchange loss incurred on each loan over

the life of the associated loan.

Finally, regarding Borusan's claimed ``other income'' offsets and

its rationale for not including its ``other financial expenses'' item,

we note the following. First, as a general matter, we disagree with the

petitioners' contention that it is not possible to substantiate the

breakout of reported income and expense items from the totals reported

in the financial statements. In fact, other than an amount called

discount on term transactions, Borusan provided a detailed breakdown of

the items listed in its financial expense calculation and a brief

description of each item included therein. See Borusan sections B-D

response at D-20.

It is the Department's practice to allow a respondent to offset

financial expenses with short-term interest income earned from the

general operations of the company. See, e.g., Timken v. United States,

852 F. Supp. 1040, 1048 (CIT 1994). The Department does not, however,

offset interest expense with interest income earned on long-term

investments because long-term investment does not relate to current

operations. See Notice of Final Determination of Sales at Less Than

Fair Value: Small Diameter Circular Seamless Carbon and Alloy Steel,

Standard, Line and Pressure Pipe From Italy, 60 FR 31981, 31991 (June

19, 1995). Therefore, we have included income offsets that Borusan

demonstrated were short-term in nature. We note in particular that the

largest such offset, Borusan's `other financial income,' relates to

short-term bank interest; the absence of long-term notes receivable on

Borusan's financial statements indicates that this amount is from

short-term sources. We did not allow one claimed offset, `discount on

term transactions,' for which Borusan failed to explain either the

source of the income or the short or long-term nature of the item.

We also agree with Borusan that `other financial expenses' concern

bank commissions, which were reported separately. Accordingly, we have

not added such expenses to Borusan's interest expense calculation, as

requested by the petitioners.

Comment 8: Purchases From Affiliated Suppliers

The petitioners argue that the Department should revalue the costs

of coil and zinc purchased by Borusan's mills (BBBF, Kartal Boru, and

Bosas) from affiliated parties. The petitioners state that the

following data in Borusan's response indicate below-market pricing of

such inputs: (1) BBBF's coil purchases from an affiliated party covered

only the cost of production, plus transportation, exclusive of the

affiliated party's selling, general and administrative expenses or

profit; and (2) proprietary information in Borusan's response (as

further described in the Final Results Analysis Memorandum) indicates

that Kartal Boru's and Bosas' coil purchases, and BBBF's zinc purchases

also were not made at market prices.

Borusan responds that the petitioners' allegation regarding prices

paid to suppliers selectively ignores information provided in Borusan's

supplemental response that demonstrates that the mills paid market

prices for affiliated party coil and zinc inputs. Borusan claims that

the petitioners distort the administrative record by characterizing

BBBF's coil purchases from its affiliated supplier as `substantial.'

DOC Position: We consider the inputs in question (coil and zinc) to

be major inputs with respect to the production of subject merchandise.

Accordingly, we have valued purchases of coil and zinc by Borusan's

mills from affiliated parties at the higher of the cost of producing

the input, the transfer price, or the market price. See section

773(f)(3) of the Act; see also 19 CFR 351.407(b). We describe our

methodology for doing so in the Final Results Analysis Memorandum.

Comment 9: G&A and Interest Expense

The petitioners argue that the G&A and interest expense factors

must be recalculated because the denominator (COGS) includes packing,

which, when the factors are applied to COMs exclusive of packing,

understates the G&A and interest expense calculations. The petitioners

suggest that the Department should add packing to COM to correct the

understatement of G&A and interest expenses, citing Circular Welded

Non-Alloy Steel Pipe from the Republic of Korea, 62 FR 55574, 55581

(October 27, 1997).

Borusan responds that it has used the same methodology in the two

most recent reviews and that this methodology was verified and accepted

by the Department. Borusan contends that packing represents an

insignificant portion of the understatement and is more than offset by

applying historical G&A and interest expense factors to replacement

costs.

DOC Position: We agree with the petitioners and have added packing

to COM when calculating the G&A and interest expenses. Although Borusan

asserts that the distortion is negligible, there is still an

understatement of these expenses. As for Borusan's claim that we are

applying a historical G&A and interest expense factor to replacement

costs, both G&A and interest have been adjusted to account for

inflation before calculating the G&A and interest expense factors.

Comment 10: Circumstance-of-Sale Adjustment for Imputed Credit

Borusan claims that the Department failed to make a circumstance-

of-sale (COS) adjustment to normal value for imputed credit expenses

when normal value was based on CV. Borusan argues that, pursuant to

section 773(a)(8) of the Act, the Department's well-established

practice dictates that it make such an adjustment, citing, e.g., Notice

of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod

From Canada, 63 FR 9182, 9195 (February 24, 1998); TRB's From Japan at

2583; Amended Final Results of Antidumping Duty Administrative Review:

Fresh Kiwi Fruit From New Zealand, 62 FR 47440 (September 9, 1997)).

The petitioners respond that: (1) due to Borusan's failure to

quantify the COS adjustment it seeks, no such adjustment is warranted,

and (2) if the Department does grant a COS adjustment, such adjustment

should be based on a proper calculation of Borusan's net prices.

Regarding the adequacy of Borusan's credit calculation, the petitioners

claim that Borusan calculated a POR-average home market interest rate,

and maintain that Borusan's failure to provide monthly interest rates

makes it impossible to properly calculate home market credit expenses

for purposes of

[[Page 35200]]

the COS adjustment. The petitioners assert that the various interest

rates charged to Borusan during the POR vary widely, and suggest that,

due to the high inflation in Turkey, it would be unfair to calculate

interest expense on an average basis. Further, the petitioners add, it

is the Department's practice to calculate costs on a monthly basis,

citing Pipe and Tube from Mexico at 37016.

The petitioners argue in the alternative that, if the Department

does make the COS adjustment requested by Borusan, imputed home market

credit expenses must be based on a proper calculation of Borusan's net

prices. Specifically, the petitioners argue, Borusan's calculation of

net price does not include a deduction for the quantity rebate granted

to certain customers by Borusan, thereby overstating the net price to

which the credit expense is applied.

DOC Position: Pursuant to section 773(a)(8) of the Act, a COS

adjustment for home market imputed credit expenses should be made when

CV is the basis for normal value. We use imputed credit expenses to

measure the effect of a specific respondent's selling practices in the

United States and in the comparison market. Because Borusan's U.S.

sales were export price sales, the adjustment entails adding U.S.

imputed credit to the CV, and subtracting home market imputed credit

from the CV. Although we added the U.S. imputed credit for the

preliminary results, we neglected to deduct the home market imputed

credit. We have made this correction for the final results.

We disagree with the petitioners' assertion that, because Borusan

did not calculate its home market credit expense using monthly interest

rates, we should disallow this adjustment. Borusan calculated this

expense on a weighted-average basis, i.e., the total principle times

the number of days utilized for each short-term loan. This methodology

is consistent with that used in calculating interest for both the 1993-

94 and the 1994-95 reviews of this proceeding, and we did not request

that Borusan recalculate this expense using monthly interest rates.

Under these facts, it would be inappropriate to deny this adjustment.

We also disagree that a deduction for the quantity rebate, as

proposed by the petitioners, is appropriate, because the quantity

rebate is not part of the opportunity cost of the use of money in each

sale. Instead, the quantity rebate is given after payment has been made

by Borusan's customer.

Final Results of Review

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

exists for the period May 1, 1996, through April 30, 1997:

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

Margin

Manufacturer/exporter (percent)

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

The Borusan Group.......................................... 0.02

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

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. As discussed above,

because the number of transactions involved in this review and other

simplification methods prevent entry-by-entry assessments, we have

calculated importer-specific assessment rates. We divided the total

dumping margins for the reviewed sales by the total entered value of

those reviewed sales. We will direct Customs to assess the resulting

percentage margin against the entered customs values for the subject

merchandise on each of that importer's entries under the relevant order

during the review period.6 While the Department is aware

that the entered value of the reviewed sales is not necessarily equal

to the entered value of entries during the POR, use of entered value of

sales as the basis of the assessment rate permits the Department to

collect a reasonable approximation of the antidumping duties which

would have been determined if the Department had reviewed those sales

of merchandise actually entered during the POR.

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\6\ We note that, in the preliminary results, we erroneously

indicated that if the assessment rates that we calculated for the

final results were de minimis, we would not instruct Customs to

assess duties. However, section 353.6 (b) of our regulations

requires the assessment of duties for any importer-specific

assessment rates greater than zero. Accordingly, we have not

disregarded de minimis rates for assessment purposes.

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Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise 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)

of the Act: (1) the cash deposit rate for Borusan will be zero; (2) for

merchandise exported by manufacturers or exporters not covered in this

review but covered in a previous segment of this proceeding, the cash

deposit rate will continue to be the company-specific rate published in

the most recent final results in which that manufacturer or exporter

participated; (3) if the exporter is not a firm covered in this review

or in any previous segment of this proceeding, but the manufacturer is,

the cash deposit rate will be that established for the manufacturer of

the merchandise in these final results of review or in the most recent

final results in which that manufacturer participated; and (4) if

neither the exporter nor the manufacturer is a firm covered in this

review or in any previous segment of this proceeding, the cash deposit

rate will be 14.74 percent, the all others rate established in the

less-than-fair-value investigation. These deposit requirements shall

remain in effect until publication of the final results of the next

administrative review.

This notice also serves as final reminder to importers of their

responsibility to file a certificate regarding the reimbursement of

antidumping duties prior to liquidation of the relevant entries during

this review period. Failure to comply with this requirement could

result in the Secretary's presumption that reimbursement of antidumping

duties occurred, and in the subsequent assessment of double antidumping

duties.

This notice also is the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d). Failure to

comply is a violation of the APO.

This determination is issued and published in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 18, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-17250 Filed 6-26-98; 8:45 am]

BILLING CODE 3510-DS-P