Certain Cut-to-Length Carbon Steel Plate From Romania: Notice of Rescission of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-485-803]

Certain Cut-to-Length Carbon Steel Plate From Romania: Notice of

Rescission of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of rescission of antidumping duty administrative review.

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SUMMARY: In response to a request from one respondent, the Department

of Commerce (the Department) initiated an administrative review of the

antidumping duty order on cut-to-length carbon steel plate from

Romania. This administrative review covers one Romanian exporter of

plate, Windmill International Romania branch (Windmill), for the period

August 1, 1996 through July 31, 1997. We are rescinding this review as

a result of the absence of any bona fide sales of subject merchandise

during the period of review (POR).

EFFECTIVE DATE: September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Fred Baker or John Kugelman,

Enforcement Group III--Office 8, Import Administration, International

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

Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-2924

(Baker), -0649 (Kugelman).

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

references to the provisions codified at 19 CFR Part 351 (62 FR 27296,

May 19, 1997).

Scope of the Review

These products include hot-rolled carbon steel universal mill

plates (i.e., flat-rolled products rolled on four faces or in a closed

box pass, of a width exceeding 150 millimeters but not exceeding 1,250

millimeters and of a thickness of not less than 4 millimeters, not in

coils and without patterns in relief), of rectangular shape, neither

clad, plated, or coated with metal, whether or not painted, varnished,

or coated with plastics or other nonmetallic substances; and certain

hot rolled carbon steel flat rolled products in straight lengths, of

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

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

other non-metallic substances, 4.75 millimeters or more in thickness

and of a width which exceeds 150 millimeters and measures at least

twice the thickness, as currently classifiable in the Harmonized Tariff

Schedules of the United States (HTSUS) under item numbers 7208.40.3030,

7208.40.3060, 7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000,

7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000,

7211.14.0030, 7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000,

and 7212.50.0000. Included in this review are flat-rolled products of

non-rectangular cross-section where such cross-section is achieved

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

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

beveled or rounded at the edges. Excluded from this review is grade X-

70 plate.

Background

Windmill International PTE Ltd. of Singapore, Windmill

International Romania Branch, and Windmill International Ltd. (U.S.A.)

(collectively ``Windmill''), an exporter and importer of Romanian

plate, submitted a request on August 29, 1997, that the Department

review its U.S. sales made during the period August 1, 1996 through

July 31, 1997. The Department initiated the review on September 25,

1997 (62 FR 50292).

SUPPLEMENTARY INFORMATION: In a January 16, 1998, submission Windmill

explained that it made two sales during the POR. The first, shipped via

ocean carrier, was made as a ``test shipment'' for the purpose of

initiating this administrative review. When it became apparent in late

July 1997 that this sale would not enter U.S. customs territory during

the POR, Windmill and the same U.S. customer negotiated another sale,

which was shipped by air, that entered U.S. customs territory on July

31, 1997, the last day of the POR. See Windmill's November 20, 1997

submission, p. C-15.

On July 24, 1998, Bethlehem Steel Corporation and U.S. Steel Group

(a division of USX Corporation) (petitioners) requested that the

Department rescind this review. Petitioners argue that the Department

should disregard Windmill's first U.S. sale because it entered U.S.

customs territory after the POR. They also argue that Windmill's second

U.S. sale was not a bona fide sale. Petitioners claim that, for a sale

to be bona fide, it must:

(1) Be at arm's length, and have a price that is negotiated, not

artificially set;

(2) Be consistent with good business practices; and,

(3) Be sold pursuant to procedures typical of the parties' normal

business practices.

Petitioners base these criteria on Court of International Trade

(CIT) rulings in PQ Corporation v. United States, 652 F. Supp. 724, 729

(CIT 1987) (PQ Corporation) and Chang Tieh Industry Co. v. United

States, 840 F. Supp. 141, 146 (CIT 1993) (Chang Tieh).

Regarding the first criterion, petitioners argue that the sale was

not an arm's-length transaction because both parties were guided by the

same legal counsel in setting the price and the shipping terms. They

further argue that the parties artificially set the price for this sale

because Windmill and the U.S. customer (by their admission) fixed a

price and structured the arrangement ``to protect Windmill from legal

attack in the present proceedings.'' See Windmill's March 3, 1998

submission, p. 5. Finally, petitioners argue that Windmill's U.S.

customer cannot be viewed as an arm's-length buyer because it took a

tremendous loss on the sale when it resold the merchandise. Petitioners

argue that using the criteria outlined in PQ Corporation Windmill's

sale to the U.S. is not an arm's-length transaction. In PQ Corporation

(where the CIT found the sale at issue to be bona fide), the CIT based

its determination in part on the fact that there was no danger of

foreign producers creating fictitious markets in the United States

because to do so a producer would have to raise the price above the

market value. Here, petitioners argue, because Windmill's U.S. customer

sold the merchandise for a lower amount than it paid for it, the

Department cannot determine the market value, and the Department

therefore cannot apply the reasoning of PQ Corporation.

Regarding the second criterion, petitioners argue that Windmill's

sale was not consistent with good business practices. They argue that

there is no reasonable commercial justification for the U.S. customer

to have participated in this transaction. First, the U.S. customer

resold the merchandise for substantially less than what it paid

Windmill. Second, the U.S. customer paid more to warehouse the

[[Page 47233]]

merchandise than it received from the resale of the merchandise to its

customer. Third, there was no commercial reason for the U.S. customer

to pay the high shipping charges it paid to obtain the industry's

cheapest and most common product.

Regarding the third criterion, petitioners argue that the U.S.

customer's sales procedures with respect to this sale were atypical of

its normal business practices. First, Windmill's responses indicate

that the U.S. customer functions as a trading company that typically

purchases large quantities of steel in response to buyers' inquiries,

and does not take physical possession of the merchandise. For this

sale, however, the U.S. customer did not have an order until after it

had purchased the product from Windmill and imported the plates into

the United States. Additionally, the U.S. customer took possession of

the steel plates for two weeks and paid the warehousing fees before the

subsequent customer purchased the merchandise. Finally, petitioners

argue that the U.S. customer would normally not resell products at a

substantial loss.

In an August 13, 1998 letter to Windmill, the Department explained

that it intended to review Windmill's first sale (if a review is

requested) in the review of the period covering the date on which the

sale entered U.S. customs territory. The Department also explained that

it considered Windmill's second sale to be not a bona fide sale. The

Department gave the following reasons for this determination:

a. The cost of the air freight, customs fees, brokerage expenses,

warehousing, and miscellaneous expenses (which were borne by the U.S.

customer, and not Windmill) was significantly greater than the total

value of the sale.

b. By Windmill's own admission, the decision to send the shipment

by air, rather than by ocean, was based solely on the need to enter the

merchandise into the United States before the end of the POR. There was

no customer emergency or particular need for costly air shipment rather

than the usual surface shipment.

c. The quantity of the sale was atypical of that which Windmill

normally sells to the U.S. customer, which was a trading company and

not an end-user.

d. The U.S. customer's purchase of the merchandise prior to

receiving an order for it from a customer was atypical of its normal

business practice.

e. The same legal counsel guided both Windmill and the U.S.

customer through the sales process, and by its admission helped

negotiate a price for the sale solely for the purpose of obtaining for

Windmill a lower cash deposit rate. There is no evidence that any

commercial factors that normally influence price negotiations played

any role in setting the price for this sale.

f. The U.S. customer resold the merchandise at a substantial loss.

We stated that we found these factors significant in light of the

fact that the grade involved in this sale was one of the cheapest and

most common grades of steel. Based on these factors we determined the

sale was not commercially reasonable, and involved selling procedures

atypical of Windmill's and the U.S. customer's normal selling

procedures. We therefore concluded that it was not bona fide. Based on

this determination, we indicated in our letter that we intended to

rescind the review. We invited Windmill to comment on this

determination. On August 20, 1998, we received comments from Windmill.

Windmill argues that until now existing precedents have permitted

the Department to rescind reviews only where the test shipment or sale

to the United States was fraudulent. See PQ Corporation, Chang Tieh,

Fresh and Chilled Atlantic Salmon from Norway, 62 FR 1430 (1997)

(Salmon), and IPSCO, Inc., v. United States, 10 ITRD 1392, 1398, 687 F.

Supp. 633, 641 (CIT 1988). The Department's determination, Windmill

argues, creates a new, ``opaque'' standard which in effect changes the

definition of bona fide to mean ``commercially reasonable,'' rather

than its dictionary definition of ``legitimate.'' This new standard,

Windmill argues, requires an artificially high standard of commercial

and practical reasonableness. It would also require a test sale to be

structured as if the antidumping order and high cash deposit rate did

not exist before it could be accepted as bona fide.

Furthermore, Windmill argues that because this new standard is

discretionary and capricious, it violates the URAA's purpose of making

antidumping procedures more transparent. It also violates the URAA's

purpose of expanding access to administrative reviews of antidumping

orders, because no sale by a new shipper (which Windmill claims it is)

can be commercially reasonable and typical of normal business practices

when there have been no sales because of high dumping margins.

Moreover, there is nothing in the URAA or in section 772 of the

applicable U.S. statute that suggests that ``unusual,'' ``strange,''

``atypical,'' or ``commercially unreasonable'' sales were to be

excluded from antidumping calculations.

Additionally, Windmill argues that this new standard would severely

undermine the solely remedial purpose of the U.S. antidumping law

because it would turn antidumping orders into exclusion orders by

increasing tenfold the difficulties foreign exporters face in lowering

antidumping margins and cash deposit rates. This result, Windmill

argues, is essentially punitive.

Furthermore, Windmill argues that the CIT and the Department have

consistently declined to apply any ``ordinary course of trade''

requirement to U.S. sales. The Department's determination with regard

to its sale in this review, Windmill argues, in effect reverses this

practice. Windmill states that there is nothing commercially normal

about any test shipment; by definition it differs from the normal

course of business if only because it is the first sale in what the

respondent hopes to establish as a major new market.

Additionally, Windmill argues that because its sale was sold at

arms length and at a market price, it was by definition bona fide.

In addition to the above arguments, Windmill attempts a point-by-

point rebuttal of each of the six factors the Department cited in its

August 13, 1998, letter as the bases for its determination. First, with

respect to its movement expenses relative to the value of the sale,

Windmill argues that this point is irrelevant because the terms of sale

were ex-works, loaded on truck. By citing this factor, Windmill states,

the Department is essentially dismissing the sale because it is

inconsistent with good business practices or is outside the ordinary

course of trade. Windmill argues that the fact that the sale may not

have been commercially viable or normal in some or all respects cannot

in itself make it not bona fide for purposes of qualifying as a test

shipment. Moreover, Windmill states, freight costs often exceed the

cost of the goods; particularly in the steel trade, steel is often

flown via air freight to meet a deadline. Additionally, both Windmill

and the U.S. customer found it commercially reasonable for the U.S.

customer to pay higher transportation costs in order to complete a test

sale and to get the current cash deposit rate lowered.

Second, as for Windmill's decision to send the shipment by air

being based solely on the need to have it enter the United States

before the end of the POR, Windmill argues that the Department is again

criticizing the sale as inconsistent with good business practices.

Windmill states that there is nothing fraudulent about these

circumstances, which is the

[[Page 47234]]

correct standard to be applied. Furthermore, Windmill states that,

contrary to the Department's assertion, there was a commercial need,

namely, Windmill's need to have the sale enter U.S. customs territory

by July 31, 1997.

Third, with respect to the quantity of the sale being atypical,

Windmill argues that there is no ``typical quantity'' because it was a

test shipment.

Fourth, with respect to the U.S. customer's purchase of the

merchandise prior to receiving an order for it from a customer being

atypical of its normal business practices, Windmill argues that, based

on the CIT's determination in Chang Tieh, the issue is not whether the

test shipment was ``atypical'' but whether the transaction was tainted

by fraud. Furthermore, because the sale was a test shipment, it is

irrelevant whether the selling procedures were typical. Moreover,

Windmill did not learn the identity of the U.S. customer's buyer except

in the context of these proceedings.

Fifth, with respect to the Department's statement that the same

legal counsel helped negotiate a price for the sale, Windmill argues

that the Department's information is incorrect. Windmill states

Windmill itself negotiated the price, and that its legal counsel ``only

advised Windmill to land a shipment in the United States by the end of

July and to make the sale a bona fide arm's-length transaction at a

market price.'' Furthermore, it argues that petitioners have submitted

no evidence of what the market price was at the time of the sale. The

standard reference for such price, Windmill states, is the journal

Metals Bulletin. Windmill argues that Metals Bulletin substantiates

that its price was a market price.

Finally, with respect to Windmill's U.S. customer having sold the

merchandise at a substantial loss, Windmill argues that this loss is

irrelevant because only Windmill's price to its U.S. customer is

relevant to the new cash deposit rate.

We disagree with Windmill and find that its U.S. sale is not bona

fide. In conducting an administrative review, section 751(a)(2) of the

statute instructs the Department, in general, to determine a dumping

margin for each entry. The CIT has, however, recognized that the

Department has the authority to disregard a sale to the United States

that is not bona fide. See Chang Tieh at 146. Therefore, we are

disregarding the sale in question; moreover, because this sale is

associated with the only entry during the period of review and there

are no other entries to review, we are rescinding the review.

We disagree with Windmill's argument that the Department has

improperly established a new, ``opaque'' standard which equates the

term bona fide with ``commercially reasonable.'' In determining whether

Windmill's sale is bona fide in this case, as in past cases, we have

looked to whether the transaction has been so artificially structured

as to be commercially unreasonable. The CIT has agreed, stating that

where a transaction is an orchestrated scheme involving artificially

high prices, the Department may disregard the sale as not resulting

from a bona fide transaction. Chang Tieh at 146. Thus, evidence

concerning whether the transaction is commercially reasonable is

relevant to whether a sale is bona fide. Moreover, such evidence has

been examined by the Department in past cases. For example, in

Manganese Metal from the Peoples' Republic of China, 60 FR 56045

(November 6, 1995) (Manganese Metal), based on the timing of the single

sale by one respondent relative to the filing of the petition, the

price, which was significantly higher than the market price, and other

commercially unusual facts about the transaction (these were

proprietary), the Department found that the sale was not bona fide and

disregarded it. Thus, judicial precedent and agency practice

demonstrate that the standard applied by the Department in this case is

neither new nor opaque.

In the present case Windmill has acknowledged that its ``test''

shipment was structured to address what it views as a commercial

problem presented by the existence of the antidumping order and the

high ``all others'' rate. The Department recognizes that exporters may

make only a single sale in order to establish their own antidumping

duty rate, particularly where the ``all others'' rate is high. We have,

in fact, conducted reviews of single shipments. See, e.g., Salmon;

Chang Tieh; PQ Corp. However, in all of those cases the evidence

indicated that the sales were commercially reasonable. Salmon at 1432

(no evidence to indicate sale was not bona fide; no unusual sales

procedures; price was consistent with the market at the time); Chang

Tieh at 146 (no evidence that price was outside the appropriate market

range); PQ Corp. at 729 (no evidence of dealings or relationship

between exporter and buyer to indicate sale was other than bona fide;

price was lower than that of U.S. supplier, therefore, consistent with

good business practice). In contrast, in Manganese Metal, discussed

above, where the evidence indicated that the sale was orchestrated to

manipulate the margin calculation and was not commercially reasonable,

we excluded it. To do otherwise would be a fraud upon the proceeding.

See Chang Tieh at 144; American Permac, Inc. et al., v. United States,

783 F. Supp. 1421 (Ct. Int'l Trade 1992) (noting that ``although

periodic reviews set final duty rates for certain sales, they also set

deposit rates for future years'').

The evidence in the present case leads us to conclude that

Windmill's ``test'' sale was made solely for the purpose of obtaining a

separate rate for Windmill. Such a purpose does not render a sale non-

bona fide as long as the sale itself is at least arguably commercially

reasonable. Here, although the price charged by Windmill does not

appear to be unreasonable, the reasonableness of the transaction must

be judged by the total costs borne by the U.S. importer. The

extraordinarily high transportation costs incurred by the importer,

combined with other expenses borne by the importer in connection with

this sale and the fact that the merchandise was subsequently resold at

a significant loss (excluding transportation and other costs) lead us

to conclude that there is no basis upon which it could be found that

the sale was commercially reasonable. Therefore, we find that the sale

is not bona fide.

The fact that Windmill has not acted fraudulently, in the sense

that it has not attempted to deceive the Department about the nature of

the transaction, is irrelevant. That Windmill may have acted out of an

erroneous interpretation of the law and the agency's practice, rather

than an intent to deceive, does not change the nature of the

transaction itself.

Moreover, on the facts of this case, finding that the sale is not

bona fide does not, as respondent asserts, equate antidumping orders

with exclusion orders. As noted above, single sales, even those

involving small quantities, are not inherently commercially

unreasonable and do not necessarily involve selling practices atypical

of the parties' normal selling practices. Thus, we do not believe that

the determination in this case violates the statute's remedial purpose

or acts to exclude the respondent from the market.

For the foregoing reasons, we are rescinding this administrative

review in accordance with section 751(a)(1) of the Tariff Act (19

U.S.C. 1675(a)(1)) and section 351.213(d)(3) of the Department's

regulations.

[[Page 47235]]

Dated: August 31, 1998.

Joseph A. Spetrini,

Deputy Assistant Secretary for Import Administration

[FR Doc. 98-23910 Filed 9-3-98; 8:45 am]

BILLING CODE 3510-DS-P