Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Taiwan

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE ADMINISTRATION

[A-583-828]

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

Stainless Steel Wire Rod from Taiwan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 29, 1998.

FOR FURTHER INFORMATION CONTACT: Laurel LaCivita or Alexander Amdur,

Import Administration, International Trade Administration, U.S.

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

Washington, DC 20230; telephone: (202) 482-4740 or (202) 482-5346,

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

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

January 1, 1995, the effective date of the amendments made to the Act

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

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

to the regulations at 19 CFR part 351, 62 FR 27296 (May 19, 1997).

Final Determination

We determine that stainless steel wire rod (SSWR) from Taiwan is

being sold in the United States at less than fair value (LTFV), as

provided in section 735 of the Act. The estimated margins are shown in

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

Case History

The preliminary determination in this investigation was issued on

February 25, 1998. See Notice of Preliminary Determination of Sales at

Less Than Fair Value and Postponement of Final Determination: Stainless

Steel Wire Rod from Taiwan, 63 FR 10836 (March 5, 1998) (Notice of

Preliminary Determination). Since the preliminary determination, the

following events have occurred:

On March 12, 1998, we received a submission from Yieh Hsing

Enterprise Corporation, Ltd. (Yieh Hsing) alleging that the Department

made ministerial errors in the preliminary determination. In response

to Yieh Hsing's ministerial error allegations, we issued an amended

preliminary determination on March 30, 1998. See Notice of Amended

Preliminary Determination of Sales at Less Than Fair Value: Stainless

Steel Wire Rod From Taiwan, 63 FR 16972 (April 7, 1998).

In March 1998, we issued supplemental questionnaires to and

received responses from the respondents in this case, Walsin Cartech

Specialty Steel Corporation (Walsin) and Yieh Hsing (hereinafter

``respondents'').

In March, April, and May 1998, we verified the sales and cost

questionnaire responses of these two respondents. In June 1998, Yieh

Hsing submitted revised sales databases at the Department's request.

The petitioners (i.e., AL Tech Specialty Steel Corp., Carpenter

Technology Corp., Republic Engineered Steels, Talley Metals Technology,

Inc., and the United Steel Workers of America, AFL-CIO/CLC) and the

respondents submitted case briefs on June 8 and 10, 1998, and rebuttal

briefs on June 16 and 17, 1998. We held a public hearing on June 18,

1998.

Scope of Investigation

For purposes of this investigation, SSWR comprises products that

are hot-rolled or hot-rolled annealed and/or pickled and/or descaled

rounds, squares, octagons, hexagons or other shapes, in coils, that may

also be coated with a lubricant containing copper, lime or oxalate.

SSWR is made of alloy steels containing, by weight, 1.2 percent or less

of carbon and 10.5 percent or more of chromium, with or without other

elements. These products are manufactured only by hot-rolling or hot-

rolling, annealing, and/or pickling and/or descaling, are normally sold

in coiled form, and are of solid cross-section. The majority of SSWR

sold in the United States is round in cross-sectional shape, annealed

and pickled, and later cold-finished into stainless steel wire or

small-diameter bar.

The most common size for such products is 5.5 millimeters or 0.217

inches in diameter, which represents the smallest size that normally is

produced on a rolling mill and is the size that most wire-drawing

machines are set up to draw. The range of SSWR sizes normally sold in

the United States is between 0.20 inches and 1.312 inches diameter. Two

stainless steel grades, SF20T and K-M35FL, are excluded from the scope

of the investigation. The chemical makeup for the excluded grades is as

follows:

SF20T

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

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

Carbon.................................... 0.05 max.

Manganese................................. 2.00 max.

Phosphorous............................... 0.05 max.

Sulfur.................................... 0.15 max.

Silicon................................... 1.00 max.

Chromium.................................. 19.00/21.00.

Molybdenum................................ 1.50/2.50.

Lead...................................... Added (0.10/0.30).

Tellurium................................. Added (0.03 min.)

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

K-M35FL

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

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

Carbon.................................... 0.015 max.

Nickel.................................... 0.30 max.

Silicon................................... 0.70/1.00.

Manganese................................. 0.40 max.

Phosphorous............................... 0.04 max.

Sulfur.................................... 0.03 max.

Chromium.................................. 12.50/14.00.

Lead...................................... 0.10/0.30.

Aluminum.................................. 0.20/0.35.

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

The products under investigation are currently classifiable under

subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and

7221.00.0075 of the Harmonized Tariff Schedule of the United States

(HTSUS). Although the HTSUS subheadings are provided for convenience

and customs purposes, the written description of the scope of this

investigation is dispositive.

Period of Investigation

The period of investigation (POI) is July 1, 1996, through June 30,

1997.

Fair Value Comparisons

To determine whether sales of SSWR from Taiwan to the United States

were made at less than fair value, we compared the Export Price (EP)

and/or Constructed Export Price (CEP) to the Normal Value (NV). Our

calculations followed the methodologies described in the preliminary

determination, except as noted below and in company-specific analysis

memoranda dated July 20, 1998.

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

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

In that case, based on the pre-URAA version of the Act, the Court

discussed the appropriateness of using constructed value (CV) as the

basis for foreign market value when the Department finds home market

sales to be outside

[[Page 40462]]

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,

in lieu of foreign market sales, as the basis for NV if 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 sales of similar merchandise,

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. 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 Investigation''

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 sales of identical merchandise in the

home market made in the ordinary course of trade to compare to U.S.

sales, we compared U.S. 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. We have implemented the Court's decision in this case,

to the extent that the data on the record permitted.

We made product comparisons based on the same characteristics and

in the same general manner as that outlined in the preliminary

determination. As in the preliminary determination, in instances where

a respondent has reported a non-AISI grade (or an internal grade code)

for a product that falls within an AISI category, we have used the

actual AISI grade rather than the non-AISI grade reported by the

respondents for purposes of our analysis. In instances where the

chemical content ranges of a reported non-AISI grade (or an internal

grade code) are outside the parameters of an AISI grade, we have used

the non-AISI (or internal) grade code reported by the respondents for

analysis purposes. However, in instances in which an internal grade

matches all the specified chemical content tolerance ranges of an AISI

grade, but the internal grade also contains amounts of chemicals that

are not otherwise specified as being included in the standard AISI

designation, we have used the corresponding AISI grade rather than the

internal grade. For further discussion, see Comment 2 and Comment 16 in

the ``Interested Party Comments'' section of this notice.

Export Price/Constructed Export Price

For Walsin, we used EP and CEP methodology as defined in sections

772(a) and 772(b) of the Act. For certain unreported CEP sales made

during the POI by Carpenter Technology Corp. (Carpenter), Walsin's U.S.

affiliate, we applied facts available in accordance with Section 776(a)

of the Act. For the reasons stated in the DOC Position to Comment 1 in

the ``Interested Party Comments'' section of this notice, we determined

that adverse inferences in selecting among the facts otherwise

available are not warranted in this instance. Therefore, as facts

available, we applied the weighted-average margin calculated for all

reported sales to the unreported CEP sales at issue.

For Yieh Hsing, we used EP methodology as defined in section 772(a)

of the Act. In the preliminary determination, we reclassified some of

Yieh Hsing's U.S. sales of SSWR as CEP sales. Based on the record

developed since the preliminary determination, the Department has

reconsidered its decision and has accepted Yieh Hsing's classification

of all of its U.S. sales of SSWR as EP sales for purposes of the final

determination. For further discussion, see Comment 18 in the

``Interested Party Comments'' section of this notice.

A. Export Price

We calculated EP based on the same methodology used in the

preliminary determination, with the following exceptions:

Walsin

We corrected for certain clerical errors found during verification

with respect to Walsin, including the corrections to the response that

Walsin identified in the course of preparing for verification and

reported in its May 11, 1998 submission.

Yieh Hsing

We made additional deductions from the starting price, where

appropriate, for U.S. handling and other charges, U.S. customs duties,

harbor maintenance and merchandise processing fees (which are included

in U.S. duties), and U.S. entry fees, pursuant to section 772(c)(2)(A)

of the Act.

We corrected for certain clerical errors found during verification

with respect to Yieh Hsing's calculations, including gross unit price,

foreign inland freight, foreign brokerage and handling, U.S.

commission, entry fees, U.S. handling and other charges, and U.S.

credit expenses.

B. Constructed Export Price

We calculated CEP for Walsin based on the same methodology used in

the preliminary determination, with the following exceptions:

We corrected for certain clerical errors found during verification

with respect to Walsin, including the corrections to the response that

Walsin identified in the course of preparing for verification and

reported in its May 11, 1998 submission. We made additional deductions

from starting price for U.S. brokerage expense pursuant to section

772(c)(2)(A) of the Act (see Comment 9 in the ``Interested Party

Comments'' section of this notice).

We recalculated indirect selling expenses incurred in the United

States as a result of our findings at verification (see Comment 1 in

the ``Interested Party Comments'' section of this notice and the July

20, 1998 Memorandum from Laurel LaCivita to the File, Walsin-Cartech

Specialty Steel Corporation: Concurrence Memorandum for the Final

Determination (Walsin Concurrence Memorandum).

Normal Value

We used the same methodology to calculate NV as that described in

the preliminary determination, with the following exceptions:

A. Walsin

We corrected for certain clerical errors found during verification

with respect to Walsin, including the corrections to the response that

Walsin identified in the course of preparing for verification and

reported in its May 11, 1998 submission.

B. Yieh Hsing

We included all of Yieh Hsing's home market sales to affiliated

customers in our analysis because we determined that these sales were

made at arm's-length prices and thus in the ordinary course of trade.

We corrected for certain clerical errors found during verification

with respect to Yieh Hsing's calculations, including interest revenue

and inland freight.

Cost of Production

We calculated the weighted-average cost of production (COP), by

model, based on the sum of each respondent's cost of materials and

fabrication for the foreign like product, plus amounts for

[[Page 40463]]

home market selling, general and administrative (SG&A) expenses and

packing costs in accordance with section 773(b)(3) of the Act. We

relied on the submitted COP except in the following specific instances

where the submitted costs were not appropriately quantified or valued:

A. Walsin

We made changes based on our findings at verification with respect

to Walsin's reported yield loss. (See Comment 11 in the ``Interested

Party Comments'' section of this notice and Memorandum to Christian

Marsh from Stan Bowen and Laurens Van Houten dated July 20, 1998

(``Walsin Cost Memo'')). We revised Walsin's submitted general and

administrative (G&A) expense factor to include idle capacity,

miscellaneous income and expenses, salvage income, and loss on the sale

of equipment. (See Comment 13 in the ``Interested Party Comments''

section of this notice and Walsin Cost Memo). We adjusted the reported

transfer price for copper purchased from an affiliate to reflect the

market price. (See Comment 14 in the ``Interested Party Comments''

section of this notice and Walsin Cost Memo).

B. Yieh Hsing

Yieh Hsing failed to report a unique COP for each of the product

categories it reported on its computer sales listing. Therefore, we

used the COP of the most similar model for each missing product

category. (See Memorandum to Christian Marsh from Stan Bowen and

Laurens Van Houten dated July 20, 1998 (``Yieh Hsing Cost Memo'')). We

adjusted the cost of billets that Yieh Hsing obtained from an

affiliated supplier to reflect the higher of the market price, transfer

price, or COP of the billets. In addition, we adjusted the cost of the

billets that Yieh Hsing obtained from its affiliate to include revised

G&A and interest expenses of the affiliate, bonus payments that the

affiliate paid to its employees, and the cost of billet freight from

the affiliate to Yieh Hsing. We adjusted the cost of sales figure used

to compute Yieh Hsing's G&A and interest expense rates by the amount of

its scrap revenue. This resulted in a revision to reported G&A and

interest expense. We further adjusted the calculation of Yieh Hsing's

G&A expense rate by including bonus payments that Yieh Hsing paid to

its employees, and by excluding certain foreign exchange gains, gains

on the disposal of long-term investments and properties, investment

loss, and rental income. For further discussion, see Comments 24, 25

and 26 in the ``Interested Party Comments'' section of this notice; and

Yieh Hsing Cost Memo.

We also conducted our sales below cost test in the same manner as

that described in our preliminary determination. We found that, for

certain models of SSWR, more than 20 percent of Walsin's and Yieh

Hsing's home market sales within an extended period of time were at

prices less than the COP. Further, the prices did not provide for the

recovery of costs within a reasonable period of time. We therefore

disregarded the below-cost sales and used the remaining above-cost

sales as the basis for determining NV, in accordance with section

773(b)(1) of the Act. For those U.S. sales of SSWR for which there were

no comparable home market sales in the ordinary course of trade, we

compared EPs or CEPs to CV in accordance with section 773(a)(4) of the

Act.

Constructed Value

In accordance with section 773(e) of the Act, we calculated CV

based on the sum of the respondent's cost of materials, fabrication,

G&A, U.S. packing costs, direct and indirect selling expenses, interest

expenses, and profit. We relied on the submitted CVs except for the

specific changes described above in the ``Cost of Production'' section

of the notice.

Price-to-Price Comparisons

We made price-to-price comparisons using the same methodology as

that described in the preliminary determination, with the following

exceptions:

A. Walsin

In making circumstance-of-sale adjustments to NV for comparison to

EP sales under section 773(a)(6)(C)(iii) of the Act and section

351.410(c)(4) of the regulations, we recalculated home market and U.S.

credit expenses as a result of our findings at verification (see

Comment 7 in the ``Interested Party Comments'' section of this notice).

For comparisons to both EP and CEP sales, as a result of our findings

at verification, we also recalculated inventory carrying costs and

indirect selling expenses incurred in the home market that were used in

our calculation of the commission offset (see Comments 7 and 8 in the

``Interested Party Comments'' section of this notice and the Walsin

Concurrence Memorandum).

B. Yieh Hsing

In making circumstance-of-sale adjustments to NV for comparison to

EP sales under section 773(a)(6)(C)(iii) of the Act and section

351.410(c)(4) of the regulations, we made additional adjustments for

interest premium expenses and letter of credit fees. Furthermore,

because we verified that Yieh Hsing properly calculated inventory

carrying costs in its responses submitted subsequent to the preliminary

determination, we included inventory carrying costs in the weighted-

average amount of home market indirect selling expenses used to offset

U.S. commissions in calculating NV. For further discussion, see Comment

21 in the ``Interested Party Comments'' section of this notice.

Price-to-CV Comparisons

For Walsin, we made price-to-CV comparisons using the same

methodology as that described in the preliminary determination.

Currency Conversion

As in the preliminary determination, we made currency conversions

into U.S. dollars based on the exchange rates in effect on the dates of

the U.S. sales as certified by the Federal Reserve Bank in accordance

with Section 773(A) of the Act.

Interested Party Comments

A. Walsin

Comment 1: Treatment of Verification of CEP Sales.

The petitioners claim that the Department's verification report

covering Carpenter's CEP sales outlines serious issues, omissions, and

errors that were discovered at verification. They argue that these

errors and omissions were so material and so pervasive as to make the

response unreliable for purposes of calculating a final antidumping

duty margin. The petitioners note that these errors and omissions

impeded the proceeding and prevented the Department from verifying

Carpenter's questionnaire response. Consequently, the petitioners urge

the Department to use adverse facts available in calculating the margin

for Walsin's CEP sales and to apply the highest rate calculated for

either EP or CEP sales to all of Carpenter's CEP sales for the final

determination.

The petitioners claim that Carpenter did not intentionally fail

verification as suggested by Walsin. Rather, they argue that Carpenter

provided information to Walsin, which was submitted to the Department

in consolidated form in Walsin's questionnaire responses. Carpenter

also provided certifications for that information, and participated in

a verification of CEP sales at Carpenter's headquarters. The

petitioners note that throughout the investigation, Walsin's

[[Page 40464]]

counsel was in the role of assisting Carpenter, including being present

at Carpenter's verification.

The petitioners argue that the Department's inability to verify

Carpenter's CEP information has no connection to Carpenter's intent and

status as one of the petitioners in this investigation. They further

maintain that the statute requires the use of facts otherwise available

in reaching a determination if any of the following circumstances are

present: (1) Necessary information is not available on the record; (2)

someone withholds information requested by the Department; (3) someone

fails to provide such information by the deadlines or in the form and

manner requested; (4) someone significantly impedes a proceeding; or

(5) someone provides information but the information cannot be

verified. The petitioners note that the statute directs the Department

to apply facts otherwise available without making a specific finding of

intent not to cooperate.

Walsin argues that any verification failure by Carpenter, the

principal petitioner in this investigation, should be adverse to

Carpenter's interest and not adverse to Walsin. Walsin notes that some

of the information that was required to be reported on the CEP sales

was in the exclusive possession and control of Carpenter, whose primary

interest during the POI was domestic production of SSWR rather than

importation of SSWR from Taiwan. Consequently, Walsin contends that

Carpenter may not have had an interest in the success of the CEP

verification. In the event that the Department is unable to use the

submitted CEP information and must apply facts available in the final

determination, Walsin argues that the Department should use the lowest

non-aberrant, transaction-specific margin from Walsin's verified EP

sales for all of the CEP transactions.

DOC Position

We discovered at verification that there were certain significant

errors and deficiencies in the information submitted on the record by

Carpenter. The Department's verification report of June 2, 1998, cited

the following important deficiencies in the verification of Carpenter's

information: Carpenter failed to report a significant percentage of

sales and price adjustments to covered merchandise in its computer

sales listing; Carpenter was not able to substantiate the amount of

indirect selling expenses reported in its questionnaire response; and,

for certain sales, Carpenter failed to report all of the freight

expenses that it incurred to transport merchandise from the port and

warehouse to the customer in the United States.

Section 776(a) of the Act provides that the Department may use

facts otherwise available if an interested party withholds information

that has been requested by the Department, fails to provide such

information or in the form requested, significantly impedes a

proceeding under the antidumping statute, or provides information that

cannot be verified. Section 776(b) states that the Department may use

an inference which is adverse to the interest of the party in selecting

from among the facts otherwise available if the party has failed to

cooperate by not acting to the best of its ability to comply with the

Department's request for information.

Our analysis of the information presented on the record indicates

that adverse inferences with respect to Walsin's CEP sales are not

warranted, as suggested by the petitioners. With respect to U.S.

indirect selling expenses and U.S. freight charges, the Department has

verified information to use to correct the deficiencies for these

expense items. As facts available, for indirect selling expenses, we

used the verified selling expenses recorded on Carpenter's audited

trial balance for the specialty steel division and adjusted for freight

and commissions. We derived an indirect selling expense factor by

dividing the amount of indirect selling expenses by the total value of

sales recorded on the audited financial statements for the specialty

steel division. We applied the factor to gross price, and used the

resulting per unit indirect selling expense in our calculations. With

respect to the unreported freight expenses discovered at verification,

we applied the additional verified freight expense to the reported

freight expense for the affected sales, and used the resulting revised

per unit freight charge in our calculations. For further discussion of

these issues, see Walsin Concurrence Memorandum.

With respect to Carpenter's failure to report a significant number

of CEP sales and price adjustments on its computer sales listing, we

have determined not to use adverse inferences in applying facts

available to account for such information. Given the nature of the

relationship between Walsin and Carpenter; Carpenter's participation in

this proceeding as a petitioner; and Carpenter's exclusive control of

the sales and price information at issue, we find that Walsin was not

in a position to report this information. Given these unusual

circumstances, we have not determined that Walsin failed to act to the

best of its ability to comply with the Department's request for

information. Therefore, in applying facts available, we used the

weighted-average margin for all of Walsin's reported sales to the CEP

sales that were not reported to the Department in the course of the

investigation. For further discussion, see the Walsin Concurrence

Memorandum.

Comment 2: Model Match.

The petitioners disagree with the findings at verification, as

outlined in the Department's June 2, 1998 verification report at page

5, that Walsin accurately identified which products fit into AISI codes

in the ``Content and Property Tolerance'' charts submitted in Walsin's

March 22, 1998, second supplemental questionnaire response. The

petitioners contend that Walsin incorrectly coded several grades, and

assigned more than one grade code to the same grade of material. The

petitioners provided a table in their case brief identifying what they

believe to be the most appropriate grade codes identifying the products

sold in the home and U.S. markets.

Walsin contends that the petitioners failed to explain the

methodology used to revise Walsin's grade code system. In addition,

Walsin notes that there are obvious errors in the petitioners' code

designations. Therefore, Walsin argues that the Department should

disregard the petitioners' concordance in its entirety.

DOC Position

We agree with both the petitioners and the respondent in part.

Verification revealed that the six-digit internal chemistry code

contained in Walsin's product model number provides the most accurate

information concerning the chemical content of each grade of steel

identified in exhibit 13 of the October 24, 1997 Section A response. We

found no discrepancies between the information provided in the

questionnaire responses of October 24, 1997; November 12, 1997; January

20, 1998; and March 31, 1998; and the primary source documents used by

the factory to produce and test the chemical specifications of the

subject merchandise.

However, upon further examination, we found that Walsin often

assigned more than one commercial grade name to each six-digit internal

chemistry code in the normal course of business, and that it assigned

grade codes for the Department's product matching purposes to each of

its internal commercial grade names. As a result, in certain instances,

more than one grade code applied to the same grade of

[[Page 40465]]

merchandise. Therefore, we conducted an analysis of Walsin's grade code

designations for all of Walsin's models sold in the U.S. and home

market. We compared the AISI codes identified in the GRADE1 field of

the March 31, 1998 response with the grade code designations in

Walsin's original section B and C response of November 12, 1997. If the

grade code reported for a particular model in the March 31, 1998

response differed from that in the November 12, 1997 response, we

assigned to that model a grade code corresponding to the AISI grade in

the GRADE1 field. These adjustments allowed us to assign a unique grade

code to each AISI grade identified in the GRADE1 field of the March 31,

1998 response. Therefore, all models identified as AISI 304 in the

GRADE1 field, for example, would have the same grade code designation.

We then compared the recommendations presented in the petitioners'

case brief with Walsin's code designations, and our revised grade code

designations. In the event that either the petitioners or the

Department disagreed with Walsin's grade code designations, we compared

the internal chemistry of each model in question with the AISI

standards presented in the Worldwide Guide to Equivalent Irons and

Steels, and followed the methodology outlined in the ``Fair Value

Comparisons'' section of the notice. The results of our analysis are

recorded in the Walsin Concurrence Memorandum.

Comment 3: Level-of-Trade Adjustment.

The petitioners claim that the Department should not change the

level-of-trade analysis performed in the preliminary determination, and

should continue to deny a level-of-trade adjustment in the final

determination. The petitioners note that even with slight differences

in levels of selling expenses, Walsin provided similar selling

functions in both the home and U.S. markets. Thus, there is no reason

for the Department to make any changes regarding level of trade in its

analysis for the final determination.

Walsin notes that it did not request a level-of-trade adjustment

for the preliminary determination.

DOC Position

We conducted a level-of-trade analysis for the preliminary

determination and found that all of Walsin's sales were made at the

same level of trade. We subsequently verified the information on which

our preliminary level-of-trade analysis was based. For a discussion,

see Notice of Preliminary Determination at page 10837, and the

Concurrence Memorandum for Preliminary Determination of Investigation

dated February 25, 1998. No record evidence has been presented since

our preliminary determination that would lead us to change our

analysis. Therefore, we have not made a level-of-trade adjustment for

purposes of the final determination.

Comment 4: Second Quality Merchandise.

The petitioners argue that the Department should exclude sales of

second quality merchandise from the pool of home market sales used to

calculate the margin in the final determination. It notes that Walsin

did not report such sales in its computer sales listing.

Walsin notes that it reported sales of second-quality merchandise

on its computer sales listing as indicated by the letter ``U'' at the

end of the product model number.

DOC Position

We agree with both the petitioners and Walsin. An examination of

the March 31, 1998 computer sales listing reveals that Walsin reported

sales of second-quality merchandise on its computer sales listing as

indicated by the letter ``U'' at the end of the product model number.

We agree with the petitioners that these sales should not be used in

our margin analysis since Walsin made no sales of second-quality

merchandise to the United States. This is consistent with the rationale

outlined in the preliminary determination. (See Notice of Preliminary

Determination at page 10838.)

Comment 5: Affiliation in the Home Market.

The petitioners contend that the Department should regard two of

Walsin's home market customers as affiliated parties for the purposes

of this investigation, and disregard any home market sales that are not

found to be made at arm's length.

The petitioners claim that Walsin had a ``close relationship'' with

one of the customers in question in which Walsin acquired an ownership

stake shortly after the POI, and to which it sold a significant amount

of SSWR during the POI. They claim that the volume of sales and the

knowledge that the acquisition was about to occur would have affected

the price negotiations between Walsin and its customer during the POI.

The petitioners claim that Walsin directly or indirectly owned,

controlled or voted five percent or more of the outstanding shares of

the other customer in question during the POI. Therefore, the

petitioners argue that the Department should consider this customer to

be affiliated with Walsin, conduct an arm's-length test on the sales

between Walsin and the customer at issue, and disregard from its margin

analysis any sales which were not made at arm's length during the POI.

Walsin claims that the petitioners presented no support for the

contention that Walsin had a ``close supplier relationship'' with its

two customers during the POI. Walsin notes that the Department

confirmed at verification that Walsin did not have any long-term

investments in these two companies during the POI. In addition, Walsin

points out that in the Department's long-standing practice, the ``close

supplier'' relationship alone is insufficient to support conducting an

arm's-length test, even when the sales at issue are subject to a 100%

exclusive buy-sell arrangement between the parties.

DOC Position

We conducted extensive tests at verification to determine whether

Walsin had any ownership of these two companies during the POI and

found that Walsin had no ownership of either of these two companies

during the POI.

In light of the issues raised by the parties, we considered whether

Walsin was affiliated with these companies within the meaning of

section 771(33) of the Act and section 351.102(b) of the Department's

regulations. An analysis of the verified information on the computer

sales listing demonstrates that the sales that Walsin made to these

customers account for only a small portion of its total sales during

the POI, and that a significant portion of the customers' purchases of

SSWR come from producers other than Walsin (see Walsin Concurrence

Memorandum). Based on these facts, we cannot conclude that Walsin has

close supply relationships with the parties at issue in the home market

within the meaning of section 351.102(b) of the Department's

regulations. Based on the foregoing analysis, we have not considered

these parties to be affiliated for the purposes of the final

determination.

Comment 6: Home Market Sales of Merchandise Produced in France.

The petitioners argue that the Department should include in its

final determination home market sales of a certain grade of merchandise

which Walsin claimed was produced in France and which Walsin failed to

report in its computer sales listing. The petitioners argue that Walsin

was not able to document at verification that this merchandise was

actually manufactured in France, as claimed in the

[[Page 40466]]

questionnaire response. Consequently, the petitioners argue that the

Department should make adverse inferences concerning these sales by not

making any adjustments for selling expenses incurred on these sales in

the calculation of NV.

Walsin claims that it provided the Department a clear documentary

trail establishing that this merchandise was produced in France and not

produced during the POI. Walsin further notes that its sales of this

merchandise were not made in the ordinary course of trade, as they

consisted of sales of either second-quality or trial-grade merchandise.

Therefore, Walsin argues that the use of such sales would have a

distortive effect on the determination of NV and should be excluded

from the Department's final analysis.

DOC Position

We agree with the petitioners in part. Verification revealed that

Walsin made a significant number of home market sales of the grade of

merchandise at issue which Walsin claimed was produced in France and

which it had not previously reported to the Department. At

verification, Walsin was not able to provide documentary evidence that

this merchandise was produced in France, as it claimed in its

questionnaire responses. Therefore, we have included these sales in our

final analysis. However, because Walsin made no sales of this

merchandise in the United States during the POI, and this merchandise

has not been identified as one of the most similar grades of steel for

comparison to any products sold in the United States, the application

of adverse facts available is unnecessary in reaching our final

determination.

Comment 7: The Interest Rate Used for Credit Expense and Inventory

Carrying Cost.

The petitioners argue that the Department should recalculate the

interest rate used for credit expenses and inventory carrying costs in

the United States and home market using adverse facts available, since

verification revealed that Walsin's interest rate was based on the

theoretical interest rate on all short-term loans that were outstanding

on the last day of the fiscal year, rather than on the actual interest

rate obtained by the company on its short-term loans.

Walsin disagrees, claiming that it reported a figure for the total

value of loans which ties directly to the company's financial

statements. It maintains that this figure is a reliable indicator of

the interest rate because it ties to the financial statements. Walsin

argues that the figure is reasonable and should be used in the final

determination.

DOC Position

We agree with the petitioners. We found at verification that Walsin

improperly reported both the value of its loans and interest payments

during the POI. Walsin's reporting methodology did not allow the

Department to determine prior to verification that any problems existed

in the company's method for determining its interest rate, and to

request that Walsin revise its methodology accordingly.

Section 776(a)(1) of the Act provides that the Department may use

facts available in situations in which the necessary information is not

available on the record. Section 776(b) states that the Department may

use an inference which is adverse to the interest of the party in

selecting from among the facts otherwise available if the party has

failed to cooperate by not acting to the best of its ability to comply

with a request for information from the administering authority.

Since Walsin did not provide the information that was required by

the Department in order to determine the appropriate interest rates to

be used in the calculation of U.S. and home market credit expenses and

inventory carrying costs incurred in the home market, and since the

provision of this information was within its control, we determined

that Walsin has failed to cooperate by not acting to the best of its

ability to comply with the Department's request for information.

Therefore, we determined that it is appropriate to make adverse

inferences in this case. Therefore, as adverse facts available for

credit expense, we used the lowest short-term interest rate obtained in

the home market and reported in verification exhibit 18 to recalculate

short-term credit expenses for home market sales. For EP sales, we used

the prime interest rate as defined by the Federal Reserve Bank to

recalculate short-term credit expenses. For inventory carrying cost

incurred in the home market, we have used in our final calculations the

highest per-unit expense reported in the May 11, 1998 submission for

U.S. sales and the lowest per-unit expense reported in the May 11, 1998

submission for home market sales.

Comment 8: Indirect Selling Expenses in the Home Market.

The petitioners contend that the Department must recalculate home

market indirect selling expenses to exclude direct selling expenses,

foreign inland freight and travel expenses to foreign countries in

accordance with our verification findings.

Walsin agrees that the reported home market indirect selling

expenses included export expenses, inland freight, marine freight and

royalty expenses that had already been included in direct selling

expenses, and thus the amount of home market indirect selling expenses

reported on the computer sales listing was overstated.

DOC Position

We agree with both the petitioners and Walsin that the reported

home market indirect selling expenses incorrectly included certain

direct selling expenses and export-related expenses that were reported

elsewhere in Walsin's response. In order not to double-count these

expenses in our calculations, we have adjusted the figures accordingly

for use in the final determination.

Comment 9: The Inclusion of U.S. Brokerage and Handling in Movement

Expenses.

The petitioners argue that the Department erroneously neglected to

deduct U.S. brokerage and handling from Walsin's gross U.S. price.

Walsin did not comment on this issue.

DOC Position

We agree and have corrected the error.

Comment 10: Minor Corrections to the Response.

Walsin submitted a number of corrections at the start of the sales

and cost verification. It claims that the Department reviewed those

corrections as a part of its regular verification process, and

therefore requests that the corrections be accepted for the purposes of

the final determination.

DOC Position

We examined the corrections presented at the beginning of

verification and have accepted them with the exception of those

relating to inventory carrying costs (see Comment 7 for the treatment

of inventory carrying costs).

Comment 11: Yield Loss.

Walsin argues that it accurately reported the yield loss incurred

throughout the entire SSWR manufacturing process. To support its

position, Walsin states that the Department should reexamine several

accounting worksheets that the verifiers took as cost verification

exhibits 14, 15, and 16. According to Walsin, these exhibits, which

calculate the company's cumulative yield loss, demonstrate that

[[Page 40467]]

it accurately reported its yield loss. Thus, Walsin argues that there

is no basis to make any further adjustment in this regard. Walsin

states further that if the Department does adjust its reported yield

loss, it cannot rely on certain production reports taken as cost

verification exhibit 30. According to Walsin, these reports only show

the realized yield of its first grade products and not the accumulated

yield of both first and second grade products. Therefore, Walsin claims

that the yield rate reported on this exhibit is inaccurate for

calculating the cost associated with its yield loss.

The petitioners contend that the Department should adjust Walsin's

reported costs to reflect the fact that they do not adequately account

for the company's yield loss. The petitioners argue that the Department

cannot accept Walsin's reported costs because the company has

understated its reported cost of manufacturing. Thus, the petitioners

suggest that the Department should either adjust Walsin's reported

costs according to verification findings, substitute costs based on

facts available, or completely reject Walsin's costs.

DOC Position

We disagree with Walsin that it has adequately accounted for its

yield loss incurred in manufacturing SSWR. For the calculation of COP

and CV, we found that Walsin applied the yield loss of each production

stage only to the costs incurred in that stage. This methodology,

however, fails to properly account for yield costs incurred in previous

stages which are input into the subsequent stages. Thus, the reported

yield loss amounts do not accurately capture the actual overall yield

loss incurred by the company in producing SSWR. Walsin should have

calculated its reported yield loss amount by applying each production

stage's yield loss rate to the sum of each stages's preceding and

current production costs. In fact, Walsin calculates its overall yield

loss in the ordinary course of business in the same manner by combining

its previous production stage's costs with the current production

stage's costs. Walsin then divides the total costs by finished output

to calculate a yielded cost (see the last three pages of cost

verification exhibit 14). As referenced by Walsin in its case brief,

cost verification exhibit 14 contains worksheets that depict the

company's normal recognition of its overall yield loss for a single

model on a per-unit basis. We note, however, that the fully yielded

material costs at the final stage of manufacturing are different from

the material costs reported in Walsin's cost database. For its reported

costs, Walsin only reported a material cost that it yielded at the

billet manufacturing stage. This results in a yield loss that is less

than the actual overall yield loss of the fully processed product. For

the final determination, we adjusted Walsin's reported billet costs for

the yield loss rate experienced in the rolling, annealing, and pickling

production processes. We computed the yield loss rate for these

production processes based on the information used by Walsin in the

ordinary course of business to compute a fully yielded material cost.

Walsin provided this information in cost verification exhibit 8.

Comment 12: Flood Damage Loss.

Walsin asserts that the Department should not consider the

company's flood damage loss component of COP. Walsin explains that in

its normal course of business it treated the loss as an extraordinary

item and not a manufacturing or general expense item because it was the

result of an unusual and infrequent occurrence. According to Walsin,

this treatment is in accordance with Taiwanese Generally Accepted

Accounting Principles (GAAP) and, thus, the Department should accept

it. Moreover, the respondent argues that the exclusion of this cost

reasonably reflects the costs associated with producing SSWR and it

avoids aberrant cost fluctuations. Walsin also notes that in Certain

Fresh Cut Flowers From Columbia 62 FR 19772, 19778 (April 8, 1997), the

Department allowed the respondent a similar exclusion for severe water

damage and consequent loss of production.

The petitioners argue that the Department should include the loss

from the flood in Walsin's calculation of COP and CV. According to the

petitioners, Walsin incurred the expenses associated with the flood

during normal operations. Thus, it is appropriate that the Department

include this expense in the calculation of COP and CV.

DOC Position

We agree with Walsin that it is appropriate in this case to exclude

its flood damage loss from the calculations of COP and CV. Walsin

reported that during the POI, the area in which Walsin's manufacturing

plant is located received a historically high amount of rainfall over a

short period of time. The excessive amount of rainfall caused the local

levy to break and flood the surrounding area. Because of the flood,

Walsin incurred out-of-the-ordinary cleanup expenses and losses

associated with the write-off of damaged equipment and supplies.

Consistent with our position in the Final Determination of Sales at

Less Than Fair Value: Large Newspaper Printing Presses and Components

Thereof, Whether Assembled or Unassembled From Japan; 61 FR 38139,

38153 (July 23, 1996) (``LNPP from Japan''), it is the Department's

practice to allow respondents to exclude out-of-the-ordinary losses if

such losses stem from an accident that constitutes an unforeseen

disruption in production which is beyond the management's control. See

Uruguay Round Agreements Act Statement of Administrative Action (SAA)

at 162. In such instances, we rely on the actual costs incurred for

production exclusive of the costs associated with the unforeseen event.

At verification, we confirmed that the flood and the damages

resulting from the flood were unforseen and beyond management's

control. Therefore, for the final determination, we did not include any

of the additional expenses incurred as a result of the flood in the

calculation of COP and CV.

Comment 13: Idle Capacity Loss.

Walsin argues that the Department should not include its idle

capacity loss in the calculation of COP and CV because it is an

extraordinary loss. According to Walsin, this loss consists of the idle

depreciation expense on plant and equipment that was not in use or was

underutilized during the POI. Walsin maintains that because the company

is a relatively new producer it determined that it was reasonable to

classify this type of cost as extraordinary until the company reaches a

normal production level. Moreover, Walsin emphasizes that classifying

this cost as extraordinary is appropriate and acceptable under

Taiwanese GAAP. Therefore, Walsin requests that the Department follow

Taiwanese GAAP which considers the idle capacity loss charge as

extraordinary, and exclude the loss from the calculation of COP and CV.

The petitioners disagree, stating that the Department should

include Walsin's idle capacity loss, which the company reported on its

audited income statement, in the calculation of COP and CV. According

to the petitioners, the Department is directed to adjust a respondent's

cost if it determines that the respondent has shifted costs away from

production of the subject merchandise as stated in the SAA.

DOC Position

We disagree with Walsin that we should exclude its idle capacity

loss from the calculation of COP and CV. As

[[Page 40468]]

Walsin has noted, the idle capacity loss consisted of depreciation

expense that the company incurred on holding idle production assets.

For this type of expense, it is our normal practice to include it as

part of G&A. For instance, in the Final Results of Antidumping Duty

Administrative Review: Silicomanganese From Brazil, 62 FR 37869, 37871

(July 15, 1997) and Final Determination of Sales at Less Than Fair

Value: Extruded Rubber Thread From Malaysia, 61 FR 54773, 54772

(October 22, 1996), we considered ``idle depreciation to be period

costs (i.e., costs that are more closely related to the accounting

period rather than the current manufacturing costs) and included the

expense in our calculation of G&A expenses.'' As for Walsin's

contention that its idle capacity loss is an extraordinary expense

under Taiwanese GAAP and should therefore be excluded from the

company's reported costs, we disagree. Simply because a company

characterizes certain expenses as extraordinary in the ordinary course

of business in accordance with its home market GAAP does not mean the

cost automatically is the result of an unforeseen disruption in

production that is beyond management's control and should therefore be

excluded from COP and CV (see LNPP from Japan at 38153). In this

instance, we see nothing unusual or unforeseen about depreciation

expense incurred on idle assets for a manufacturing company. Thus, for

the final determination we have included Walsin's idle capacity loss in

the calculation of its COP and CV.

Comment 14: Transfer Price for Copper.

The petitioners state that the Department should revise the

reported transfer price for copper obtained from affiliates to reflect

the market value paid to non-affiliates. According to the petitioners,

the reported transfer price is less than the purchase price of

comparable copper obtained from non-affiliates. Based on these facts,

the petitioners maintain that the Department should revise the reported

transfer price for copper to reflect the market value.

Walsin contends that the transfer price for copper included in its

reported costs should not be revised. According to Walsin, there is no

evidence to support that the affiliated-party copper sales were not

made on an arm's-length basis. Therefore, Walsin states that the

Department should not revise the transfer price of copper in Walsin's

reported section D database.

DOC Position

We agree with the petitioners. We compared the reported transfer

price paid for copper purchased from an affiliated supplier to reported

market prices and the affiliated suppliers' cost, and found that the

average market price was the highest. We performed this comparison in

accordance with section 351.407(b) of the Department's regulations,

which sets forth the method by which the Department will determine

value under the major input rule for the purposes of section 773(f)(3)

of the Act. This provision, which applies to the calculation of both CV

and COP, states that the Department will determine the value of a major

input purchased from an affiliated person based on the higher of: (1)

the price paid by the exporter or producer to the affiliated person for

the major input; (2) the amount usually reflected in sales of the major

input in the market under consideration; or (3) the cost to the

affiliated person of producing the major input. We have relied on this

methodology in the Final Results of Antidumping Duty Administrative

Review; Certain Corrosion-Resistant Carbon Steel Flat Products and

Certain Cut-to-Length Carbon Steel Plate From Canada, 62 FR 18449,

18457 (April 15, 1997), Final Results of Antidumping Duty

Administrative Review; Antifriction Bearings (Other Than Tapered Roller

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

Singapore, and the United Kingdom, 62 FR 2081, 2115 (January 15, 1997),

and the Final Results of Antidumping Duty Administrative Reviews and

Revocation in Part of an Antidumping Finding; 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, 61 FR 57629, 57644 (November 7, 1996).

In this case, we found the market price to be higher than the reported

transfer price and the affiliated suppliers' cost. Thus, for the final

determination, we have increased Walsin's affiliated supplier's copper

cost to reflect the market value paid by non-affiliates.

B. Yieh Hsing

Comment 15: Modification of Control Numbers.

Yieh Hsing argues that the Department should not modify Yieh

Hsing's reported control numbers (CONNUMs) as Yieh Hsing reported in

its March 31, 1998 submission. Yieh Hsing claims that the Department

verified that Yieh Hsing correctly assigned the CONNUMs in accordance

with AISI grades, and in accordance with the Department's instructions.

The petitioners agree with the respondent, except in two cases: 1)

if the Department decides to reclassify grades for all respondents

based on any general model-match decisions, and 2) if the Department

decides to reclassify one of Yieh Hsing's steel grades based on its

verification findings (see Comment 16 below).

DOC Position

For purposes of the final determination, we have continued to

employ the same general model-match methodology as that outlined in the

preliminary determination (see ``Fair Value Comparison'' section of

this notice for further discussion.) Therefore, there is no need to

generally reclassify the grades reported by Yieh Hsing and verified by

the Department. (See also DOC Position to Comment 16 below).

Comment 16: Classification of An Internal Grade.

The petitioners disagree with Yieh Hsing's classification of one of

its internal grades as AISI grade 304. The petitioners argue that this

internal grade is more appropriately classified as another AISI grade,

and request that the Department reclassify this internal grade

accordingly. The petitioners base their argument on the chemical

specifications listed on the mill certificate for this grade that were

discussed in the Department's verification report.

Yieh Hsing argues that the Department should not reclassify this

steel grade. Yieh Hsing contends that the Department verified that Yieh

Hsing correctly classified this grade as AISI 304. Yieh Hsing also

states, based on the chemical specifications of this grade that it

reported to the Department, that this grade may not be classified as

the AISI grade suggested by the petitioners. Yieh Hsing also notes that

the Department verified for one selected home market transaction that

the grade at issue met the specifications for AISI grade 304. Yieh

Hsing also argues that if, notwithstanding these facts, the Department

still decides to reclassify this grade as the AISI grade requested by

the petitioners, the Department should recalculate COP and CV for the

latter grade to reflect the reclassification.

DOC Position

We agree with Yieh Hsing. Based on our review at verification of a

mill certificate for the grade at issue, we found that this grade meets

the specifications of AISI grade 304, and does not meet the

specifications of the grade proposed by the petitioners, or of

[[Page 40469]]

any other AISI grade of which we are aware. Furthermore, we note that

in instances in which an internal grade matches all the specified

chemical content tolerance ranges of an AISI grade, but that the

internal grade also contains chemicals that are not otherwise specified

as being included in the standard AISI designation, it is appropriate

to classify the internal grade as the AISI grade. We therefore have

accepted Yieh Hsing's classification of this grade as AISI grade 304 in

the final determination. For further discussion, see Memorandum from

Alexander Amdur to Holly Kuga on Yieh Hsing Enterprise Corporation,

Ltd.: Analysis of Issues Raised in the Case and Rebuttal Briefs for the

Final Determination (Yieh Hsing Concurrence Memorandum).

Comment 17: Model Matching Program.

Yieh Hsing argues that the Department should modify its SAS program

to correctly match Yieh Hsing's U.S. sales with home market sales. Yieh

Hsing claims that the SAS program that the Department used for the

preliminary determination, by comparing the absolute values of the

control numbers, would result in improper matches of the most similar

grades identified in Yieh Hsing's March 31, 1998 submission.

The petitioners argue that the Department should continue to use

the model-match program from the preliminary margin calculation. The

petitioners state that this program accurately identified the most

similar grades based on the comparison of the absolute values of the

control numbers, and this program is more accurate than Yieh Hsing's

reported most similar models.

DOC Position

We agree in part with both the respondent and the petitioners. In

the preliminary determination, the model-match program correctly

identified matches of identical grades by comparing the absolute values

of the control numbers. In cases where no matches of identical grades

existed, we inserted language into the model-match program to correctly

identify the most similar grades based on Yieh Hsing's reported most

similar grades. For the final determination, we have continued to use

this program, and have made any necessary modifications to ensure that

this program correctly identifies the most similar grades as reported

by Yieh Hsing in its March 31, 1998 submission, and clarified in its

June 8, 1998 case brief.

Comment 18: Classification of Sales as EP or CEP.

Yieh Hsing argues that the Department incorrectly determined in the

preliminary determination that Yieh Hsing's sales to one of its U.S.

customers were CEP sales. Yieh Hsing claims that the Department, in

reclassifying these sales as CEP sales, incorrectly determined that

Yieh Hsing's sales agent acted as more than a ``processor of sales-

related documentation'' and a ``communication link'' with this

customer. Yieh Hsing notes that it explained in its March 31, 1998

submission (submitted after the preliminary determination) that its

sales agent refaxed messages received from Yieh Hsing to this customer,

and that the sales agent was not required to, and did not, make any

sales promotion efforts during the POI. Yieh Hsing argues that a letter

examined by the Department at verification shows that its U.S. sales

agent acted as a communication link between Yieh Hsing and this

customer, and shows that the sales agent did not negotiate sale terms.

Citing to the Department's verification report, Yieh Hsing also argues

that the Department verified that Yieh Hsing correctly explained its

sales agent's role in its March 31, 1998 submission.

Yieh Hsing further claims that the Department improperly cited Yieh

Hsing's January 13, 1998 submission for the conclusion that Yieh

Hsing's U.S. sales agent performed various selling functions on behalf

of Yieh Hsing. Yieh Hsing states that it reported that its sales agent

acted on behalf of Yieh Hsing to distinguish the sales agent from

working on behalf of Yieh Hsing's customer. Yieh Hsing also states that

it reported that it gave a quotation to the sales agent because Yieh

Hsing communicated with its customer through the sales agent. Yieh

Hsing states that it never stated that the sales agent negotiated sales

terms with the customer, or that it instructed its sales agent to

solicit customers on its behalf.

The petitioners argue that the Department properly concluded that

Yieh Hsing's sales to this U.S. customer meet the statutory definition

of CEP sales. The petitioners further argue that the Department's

preliminary conclusion is further supported by documents found at

verification. The petitioners state that a letter examined by the

Department at verification (also referred to by Yieh Hsing)

demonstrates that Yieh Hsing's sales agent negotiates price and seeks

out customers on its own, and thus is more than a ``paper-pusher'' and

a ``communications link'' between Yieh Hsing and Yieh Hsing's customer.

DOC Position

We agree with the respondent that its U.S. sales to this customer

should be treated as EP sales. In the preliminary determination, in

order to determine whether sales made prior to importation through Yieh

Hsing's sales agent in the United States were EP or CEP transactions,

we analyzed whether Yieh Hsing's U.S. sales to this customer met the

Department's three criteria for EP sales: (1) whether the merchandise

in question is shipped directly from the manufacturer to the

unaffiliated buyer without being introduced into the physical inventory

of the selling agent; (2) whether direct shipment from the manufacturer

to the unaffiliated buyer is the customary channel for sales of the

subject merchandise between the parties involved; and (3) whether the

selling agent in the United States acts only as a processor of sales-

related documentation and a communication link with the unaffiliated

U.S. buyer.

Based on the information on the record at the time of the

preliminary determination, we determined that Yieh Hsing's U.S. sales

to this customer during the POI met the first two of the Department's

three criteria for EP sales. We further determined that Yieh Hsing's

U.S. sales to this customer did not meet the Department's third

criterion for EP sales since the reported sales-related

responsibilities (including seeking out customers on its own and

negotiating sales terms) of Yieh Hsing's sales agent in the United

States demonstrated that the sales agent functioned as more than a

``paper-pusher'' in the U.S. sales process.

The record, as it has been developed since the preliminary

determination, continues to show, and both parties do not contest, that

Yieh Hsing's U.S. sales to this customer meet the first two criteria.

In reexamining whether the third criterion (i.e., whether the selling

agent acts as more than a document processor), is satisfied, we

considered whether the U.S. sales agent's involvement in making the

sale is incidental or ancillary. See Certain Cold-Rolled and Corrosion-

Resistant Carbon Steel Flat Products from Korea: Final Results of

Antidumping Duty Administrative Review, 63 FR 13170 (March 18, 1998).

See also Viscose Rayon Staple Fiber From Finland: Final Results of

Antidumping Duty Administrative Review, 63 FR 32820 (June 16, 1998).

The record now shows that Yieh Hsing's U.S. sales agent's role was

incidental or ancillary in making the sales to this customer during the

POI. Yieh Hsing clarified in its March 31,

[[Page 40470]]

1998 response, and we verified, that the role of Yieh Hsing's sales

agent in Yieh Hsing's sales to this customer during the POI mainly

involved refaxing messages between Yieh Hsing and this customer,

communicating Yieh Hsing's price quotations to this customer, and

assisting Yieh Hsing in handling U.S. Customs clearance of Yieh Hsing's

merchandise. We also verified that all sales were initiated by this

customer based on its production requirements. We further agree with

the respondent that the letter examined at verification that is

referenced by both the respondent and the petitioners shows that Yieh

Hsing's U.S. sales agent acted as a communication link between Yieh

Hsing and this customer, and that the sales agent did not negotiate

sale terms. We also note that other letters examined at verification

show the following: that Yieh Hsing and this customer communicated with

each other through Yieh Hsing's U.S. sales agent; that Yieh Hsing, and

not its agent, determined the terms of sale with this customer; and

that Yieh Hsing, and not its agent, accepted or rejected all sales to

this customer.

There is also no evidence that Yieh Hsing's U.S. sales agent

otherwise had substantial involvement in the sales process. Based on

these facts, we have concluded for purposes of the final determination

that EP treatment is appropriate for all of Yieh Hsing's U.S. sales to

this customer, as these sales were made by the producer, Yieh Hsing,

prior to importation to a purchaser in the United States not affiliated

with the producer (see section 772(a) of the Act). For further

discussion, see Yieh Hsing Concurrence Memorandum.

Comment 19: The Classification of Sales to Another U.S. Customer.

The petitioners argue that the Department should treat Yieh Hsing's

sales to another U.S. customer as CEP sales. The petitioners state that

information obtained at verification shows that this customer holds

inventory of Yieh Hsing's SSWR which the customer sells after it enters

the United States. The petitioners further state that this customer,

based on documents found at verification, is more than a ``paper

pusher.''

Yieh Hsing contends that the Department should continue to treat

Yieh Hsing's sales to this customer as EP sales. Yieh Hsing argues that

the petitioners' arguments are based on a false presumption that this

customer, a U.S. distributor, is a sales agent, and notes that it sold

its SSWR to this customer, and not through this customer. Yieh Hsing

further maintains that the petitioners' arguments are irrelevant to

sales made to an unaffiliated U.S. distributor, since the Act defines

EP sales as sales to an unaffiliated purchaser in the United States.

Yieh Hsing also contends that this customer's status as a distributor

is insufficient to conclude that Yieh Hsing and this customer are

affiliated, and that the verified facts show that there is no close

relationship between Yieh Hsing and this customer that would

characterize them as affiliated parties.

DOC Position

We agree with the respondent. The main factors in analyzing whether

U.S. sales are EP or CEP sales are whether they are first sold to an

unaffiliated purchaser before or after importation, and if such sales

are made before importation, whether such sales are made outside or in

the United States. See sections 772(a) and 772(b) of the Act. In this

case, the record indicates that the U.S. sales at issue were made prior

to importation by Yieh Hsing in Taiwan to the unaffiliated U.S.

purchaser. We also agree with Yieh Hsing that there is no evidence on

the record to suggest that this customer was acting on Yieh Hsing's

behalf or is affiliated with Yieh Hsing. Therefore, since Yieh Hsing

sold SSWR to this unaffiliated U.S. customer before the date of

importation, Yieh Hsing's sales to this customer meet the statutory

criteria of EP sales. For further discussion, see Yieh Hsing

Concurrence Memorandum.

Comment 20: Weight-Averaging of U.S. Prices.

Yieh Hsing argues that the Department should weight-average all

U.S. prices of identical SSWR to calculate Yieh Hsing's dumping margin,

rather than calculating dumping margins separately for EP and CEP

sales, as the Department did for the preliminary determination. Yieh

Hsing states that the Act and the Department's regulations do not

permit the separate averaging of EP and CEP sales in calculating the

weighted-average U.S. prices. Yieh Hsing further argues, citing the

``plain meaning'' rule, that the relevant sections of the Act and the

regulations, which discuss comparing the weighted average of the normal

values to the ``weighted average of the export prices and constructed

export prices'' (emphasis added), should be interpreted as stated, and

should not be interpreted as ``the weighted average of the export

prices or constructed export prices.'' Yieh Hsing also contends that

even though the Department rejected Yieh Hsing's ministerial error

allegation on the same issue, the Department has not yet addressed

whether the methodology used in the preliminary determination was

legally correct.

The petitioners argue that the Department should calculate the

final antidumping margin in the same manner as that done for the

preliminary margin analysis. The petitioners note that the Department

stated, in response to Yieh Hsing's comment on the same subject in Yieh

Hsing's ministerial error allegation, that ``the Department followed

its normal methodology to calculate Yieh Hsing's dumping margins in

this investigation.'' The petitioners also note that the SAA and the

Department's antidumping manual support the Department's position, as

both specifically mention comparing the weighted average of the normal

values with ``a weighted average of export prices or constructed export

prices.''

DOC Position

Given that the Department has now classified all of Yieh Hsing's

U.S. sales as EP sales, we need not make a determination on this issue.

See Comments 18 and 19 above for further discussion of the Department's

classification of Yieh Hsing's U.S. sales.

Comment 21: Home Market Inventory Carrying Costs.

Yieh Hsing argues that the Department should include Yieh Hsing's

reported home market inventory carrying costs in the dumping margin

analysis in the final determination. Yieh Hsing notes that the

Department did not include Yieh Hsing's reported home market inventory

carrying costs in the calculations for the preliminary determination

because the Department concluded that Yieh Hsing did not correctly

calculate these costs. Yieh Hsing also notes that the Department

verified the inventory carrying costs as reported in Yieh Hsing's March

31, 1998 submission.

DOC Position

We agree with the respondent. We verified that Yieh Hsing correctly

calculated its inventory carrying costs in its March 31, 1998

submission. Therefore, we have included Yieh Hsing's reported inventory

carrying costs in our final margin analysis, where appropriate.

Comment 22: Home Market Sales of Second-Quality Merchandise.

The petitioners argue that the Department should exclude sales of

second quality merchandise from the home market database as was done in

the preliminary margin analysis. The petitioners state that it is not

appropriate to compare sales of non-prime quality or seconds in the

home

[[Page 40471]]

market to U.S. sales of prime quality merchandise.

DOC Position

We agree with the petitioners. In the preliminary determination,

given the limited home market sales quantity of non-prime and defective

merchandise and the fact that no such sales were made to the United

States during the POI, we excluded sales of non-prime and defective

merchandise from our analysis in accordance with our past practice.

Since these facts have not changed from the preliminary determination,

we have continued to exclude sales of non-prime and defective

merchandise from our analysis in the final determination.

Comment 23: Corrections to the Response.

Yieh Hsing argues that the Department should incorporate the

corrections to minor errors that Yieh Hsing submitted at verification

in the calculations for the final determination. Yieh Hsing states that

these corrections were timely submitted and verified by the Department.

The petitioners argue that the Department must incorporate all

clerical errors discovered at verification in its final margin

calculation. In particular, the petitioners note that the Department

found at verification that Yieh Hsing incorrectly labeled its

corrections submitted at verification for U.S. brokerage and letter of

credit expenses.

DOC Position

We agree with both the respondent and the petitioners, and have

made the appropriate corrections to all clerical errors that Yieh Hsing

submitted and/or that we found at verification in our final

calculations. See ``Export Price/Constructed Export Price'' and

``Normal Value'' sections of this notice.

Comment 24: Treatment of Costs of Billets Purchased from An

Affiliate.

Yieh Hsing claims that the Department should not adjust its

reported billet costs for purchases from its affiliated supplier to

reflect an imported market price. According to Yieh Hsing, its reported

affiliated supplier billet costs are based on the higher of COP,

transfer price or market value, in accordance with section 773(f)(2)

and (3) of the Act. Moreover, Yieh Hsing states that it appropriately

used the price for physically comparable billets that its affiliate

sold to non-affiliates as the market price for comparison purposes. The

respondent emphasizes that the price it paid to non-affiliated

suppliers for imported billets is not an appropriate basis to determine

market price because the imported billets are of a higher quality, most

do not require grinding, and the processing time they require is

substantially less than those obtained from the affiliate. Yieh Hsing

argues further that because it can demonstrate that the imported

billets are qualitatively different, the Department should reject the

petitioners' assertion that it rely on the market price of such raw

material, as it did in the Final Results of Antidumping Duty

Administrative Review: Silicomanganese from Brazil, 62 Fed. Reg. 37869,

37874 (July 15, 1997).

If the Department finds it necessary to adjust its reported billet

costs for purchases from its affiliated suppliers, Yieh Hsing argues

that the Department should not use the same methodology that it used in

the preliminary determination. According to Yieh Hsing, the preliminary

adjustment incorrectly increased the billet cost for purchases from its

non-affiliated suppliers which were already reported at a market price.

In addition, Yieh Hsing claims that the Department distorted costs by

not making the adjustment more grade-specific. Therefore, Yieh Hsing

recommends that the Department calculate more accurate grade-specific

adjustment factors and apply these factors to only the billet costs for

purchases from its affiliated supplier. Yieh Hsing asserts that the

Department has the necessary information to make these calculations and

provided several examples of such calculations in its case brief.

The petitioners contend that the Department should adjust Yieh

Hsing's reported billet cost to reflect the market price for billets by

using the imported price. In determining the higher of COP, transfer

price, and market value, the petitioners state that the Department

should use the imported price when possible and, when no import price

is available, it should use the higher of the affiliated supplier's

revised COP, the transfer price to Yieh Hsing, or the affiliated

supplier's sales price to unaffiliated parties. As for differences in

physical characteristics, the petitioners maintain that the fact that

Yieh Hsing grinds a higher percentage of billets purchased from its

affiliate does not constitute a ``significant difference in product

characteristics.'' Therefore, they conclude that imported billets are

comparable merchandise.

DOC Position

We disagree with Yieh Hsing that its reported COP and CV amounts

properly reflect the cost of billets consumed. Although Yieh Hsing

provided the transfer prices, its affiliated supplier's cost of

production, and market values for billets used to produce SSWR, it

failed to use the higher of these three amounts in accordance with

Section 773(f)(3) of the Act. Therefore, for the final results we have

adjusted Yieh Hsing's cost of billets purchased from its affiliated

supplier to reflect a market price.

As for which market price to use in making the adjustment, we agree

with Yieh Hsing that the appropriate market price to use in our

comparison is the price at which the company's affiliated supplier sold

comparable billets to non-affiliates. In determining a market price for

an input acquired from an affiliated supplier, the Department may rely

on sales transactions for a comparable input between the affiliated

supplier and an unaffiliated customer in the home market, or purchase

transactions for a comparable input between an unaffiliated supplier

and the respondent company. In this case, however, we do not consider

it appropriate to rely on Yieh Hsing's purchases of billets from its

non-affiliated suppliers as a market price because of the non-

comparability of the billets. The imported billets Yieh Hsing purchased

from non-affiliates are physically different from those obtained from

the affiliate. For instance, Yieh Hsing receives the imported billet in

such fashion that it does not require grinding. However, the billets

purchased from its affiliated supplier require grinding. At

verification, we confirmed that there were differences between the

imported billets and those obtained from the affiliate supplier. On a

sample basis we examined daily grinding reports, such as those

contained in cost verification exhibit 28, which show that the imported

billets did not require grinding, whereas the affiliate's billets

required grinding.

As for making our billet cost adjustment for the final

determination, we first computed a market price for those grades which

have no market price (i.e., those grades which Yieh Hsing's affiliated

supplier did not sell to non-affiliates). We did this by calculating a

weighted-average adjustment factor based on those grades that had a

market price. On a grade-specific basis, we then used the higher of

transfer price, market value, and revised COP for billets purchased

from affiliated suppliers (see Comment 25) in accordance with section

773(f)(3) of the Act.

Comment 25: Adjustments to the COP of Billets from the Affiliate.

The petitioners state that the reported COP of the billets obtained

from Yieh Hsing's affiliate needs to be adjusted to include an

appropriate amount of G&A expenses, financing costs, and bonus

[[Page 40472]]

payments. According to the petitioners, the method used by the

affiliate to allocate these costs to its billets is not consistent with

the Department's normal practice. Specifically, the petitioners claim

that the affiliate allocated its G&A and interest expenses based on

production tonnages. The petitioners, however, claim that the

Department's normal practice is to allocate G&A and interest expense on

a company-wide basis as a percentage of cost of sales. As for the bonus

payments, the petitioners state that the affiliate excluded this cost

from its calculation of the billet COP. According to the petitioners,

these payments represent compensation to employees which should be

included in the calculation of the billet COP.

Yieh Hsing asserts that recalculating its affiliate's COP for the

alleged G&A and financing expense adjustments at issue would not affect

the reported billet costs contained in the section D database.

According to Yieh Hsing, these adjustments do not increase the

affiliate's COP to be above the billet's reported transfer price. Thus,

Yieh Hsing claims that adjusting the affiliate's COP is not necessary.

DOC Position

We agree with the petitioners that we should compute G&A and

interest expenses on a company-wide basis as a percentage of cost of

sales. In addition, we agree with the petitioners that the bonus

payments represent compensation to employees that should be included in

the billet COP. Accordingly, we adjusted the reported billet COP of

Yieh Hsing's affiliate to include the revised G&A expense, revised

financing costs, and bonus payments in order to properly compare the

transfer price, market price and COP of billets purchased from

affiliated suppliers in accordance with section 773(f)(3) of the Act

(see Comment 24).

Comment 26: Adjustments to the Cost of Sales Figure.

The petitioners claim that the Department should adjust Yieh

Hsing's cost of sales figure that was used to compute the G&A and

interest expense rates in order to ensure it is on the same basis as

the reported cost of manufacturing (COM) to which the rate is applied.

Specifically, the petitioners state that the Department should reduce

Yieh Hsing's cost of sales figure by the scrap revenue amount reported

on its income statement. According to the petitioners, this adjustment

is necessary to avoid the understatement of G&A and financing costs

because the COM figure to which the G&A and interest expense rates are

applied has been reduced by scrap revenue.

Yieh Hsing disagrees that such an adjustment is necessary because

the resulting effect on its COP and CV is insignificant. Because of its

insignificance, Yieh Hsing requests that the Department disregard the

adjustment in accordance with section 777A(a)(2) of the Act. In

addition, Yieh Hsing disagrees with the petitioners that its scrap

sales revenue figure should reduce its cost of sales. Instead, the

company recommends reducing its cost of sales figure by the

manufacturing cost used to make the scrap it sold.

DOC Position

We agree with the petitioners that the cost of sales figure used to

compute Yieh Hsing's G&A and interest expense rates should be reduced

by the scrap revenue amount reported on its income statement. To

calculate its reported G&A and financing expense ratios, Yieh Hsing

used its cost of sales figure as reported on its audited financial

statements. However, we note that this cost of sales figure is not on

the same basis as the reported COM because the company offset its

reported COM with the revenues it generated from the sale of scrap.

Consistent with our findings in the Final Determination of Sales at

Less Than Fair Value of Certain Pasta From Italy, 61 FR 30326, 30349

(June 14, 1996) and Final Results of Antidumping Duty Administrative

Review of Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat

Products From Korea, 62 FR18404, 18447 (April 15, 1997), we have

reduced Yieh Hsing's cost of sales figure by its scrap revenue to

obtain a cost of sales figure that is on the same basis as the reported

COM. We then used this adjusted cost of sales amount to calculate

revised G&A and financial expense ratios. Consequently, we disagree

with Yieh Hsing that the correct method to adjust the cost of sales

figure is to reduce its cost of sales by the cost of producing the

scrap. We note that reducing its cost of sales figure by the cost of

producing the scrap would be inconsistent with the method by which COM

is calculated (i.e., COM less scrap revenue). Furthermore, in

accordance with section 777A(a)(2) of the Act, our normal practice is

to make corrections when an error is significant in relation to the

value of the merchandise.

Continuation of Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to continue to suspend liquidation of all entries of

SSWR from Taiwan, except those produced/exported by Yieh Hsing

Enterprise Corporation, Ltd., that are entered, or withdrawn from

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

notice in the Federal Register. The Customs Service shall continue to

require a cash deposit or posting of a bond equal to the estimated

amount by which the normal value exceeds the U.S. price as shown below.

These suspension of liquidation instructions will remain in effect

until further notice. The weighted-average dumping margins are as

follows:

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

Weighted

Exporter/manufacturer average margin

percentage

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

Walsin Cartech Specialty Steel Corporation.............. 8.24

Yieh Hsing Enterprise Corporation, Ltd.................. .02

All Others.............................................. 8.24

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

Pursuant to section 735(c)(5)(A) of the Act, the Department has

excluded any de minimis margins from the calculation of the ``All

Others Rate.''

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

International Trade Commission (ITC) of our determination. As our final

determination is affirmative, the ITC will, within 45 days, determine

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry. If the ITC determines that material

injury, or threat of material injury does not exist, the proceeding

will be terminated and all securities posted will be refunded or

canceled. If the ITC determines that such injury does exist, the

Department will issue an antidumping duty order directing Customs

officials to assess antidumping duties on all imports of the subject

merchandise entered for consumption on or after the effective date of

the suspension of liquidation.

This determination is published pursuant to section 777(i) of the

Act.

Dated: July 20, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-20022 Filed 7-28-98; 8:45 am]

BILLING CODE 3510-DS-P