Notice of Court Decision: Certain Corrosion-Resistant Carbon Steel Flat Products From Canada

DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-822]

Notice of Court Decision: Certain Corrosion-Resistant Carbon

Steel Flat Products From Canada

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of court decision

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SUMMARY: On July 23, 1998, the United States Court of International

Trade (``CIT'') affirmed the determination made by the Department of

Commerce (``the Department'') pursuant to a remand of the final results

of administrative review in the case of certain corrosion-resistant

carbon steel flat products from Canada. AK Steel Corp. et al. v. United

States, Slip Op. 98-106 (CIT, July 23, 1998) (``AK Steel''). In its

remand determination, the Department corrected ministerial errors in

the calculation of Stelco Inc.'s (``Stelco'') margin, eliminated the

credit for partial reversal of prior period charges from Dofasco

Inc.'s/Sorevco's (``Dofasco'') cost calculation, and determined that

Continuous Colour Coat's (``CCC'') post-invoicing price adjustment

methodology for credit and debit notes allocated to multiple sales was

acceptable.

EFFECTIVE DATE: August 3, 1998.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski (Dofasco), Carrie Blozy

(CCC), N. Gerard Zapiain (Stelco) or Rick Johnson, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W. Washington, D.C.

20230; telephone: (202) 482-1385, 482-0165, 482-1395, or 482-3818,

respectively.

SUPPLEMENTARY INFORMATION: On March 28, 1996, the Department published

its final results of administrative review of the antidumping order on

corrosion-resistant steel from Canada. See Certain Corrosion-Resistant

Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate

From Canada; Final Results of Antidumping Duty Administrative Reviews,

61 FR 13815 (March 28, 1996) (``Final Results''). The review covered

three manufacturers/exporters, CCC, Dofasco, and Stelco, of the subject

merchandise for the period February 4, 1993, through July 31, 1994.

On November 14, 1997, in its Memorandum Opinion in the case of AK

Steel Corp. et. al. v. United States, Slip Op 97-152 (CIT, November 14,

1997) (``Memorandum Opinion''), the CIT remanded three issues to the

Department. For CCC, the Department was ordered to reconsider post-

invoicing adjustments to price and indicate where on the record the

adjustments in question are shown to be properly related, either

directly or through allocation, to specific sales transactions.

Memorandum Opinion at 58. For Dofasco, the Department was ordered to

reconsider Dofasco's partial reversal of restructuring charges. The CIT

determined that the Department must ``eliminate the credit for the

reversals unless it can articulate a rational reason for abandoning its

past practice.'' Memorandum Opinion at 32. Finally, for Stelco, the

Department requested, and was granted, a remand to correct ministerial

errors in Stelco's final margin calculation.

I. CCC

A. Background

In its final results of administrative review, the Department

determined that CCC's price adjustment methodology regarding credit or

debit notes for sales in both the home market and United States was

acceptable. Specifically, the Department determined that the allocation

of a credit or debit note over multiple invoices was reasonable and

accepted these notes as direct adjustments. Final Results at 13822.

B. Post-Invoicing Price Adjustments

Through an examination of the record, the Department determined

that of the twenty home market and U.S. sales examined during

verification, only four home market and zero U.S. sales involved post-

invoicing adjustments. For the first two home market sales, the

Department found an acceptable level of price specificity in CCC's

price adjustment methodology. The third home market sale involved a

credit note which referenced one work-order. The work-order contained

multiple invoices and CCC allocated the credit note to all transactions

made pursuant to the work-order on a weighted average basis. Because of

CCC's inability to match the returned merchandise to the coil

identified on the internal complaint

[[Page 49079]]

form, the Department determined that CCC's allocation of the credit

note across sales made pursuant to the work-order identified on the

internal complaint form was sufficiently specific. Finally, the fourth

home market sale involved a debit note issued to a customer that did

not reference a specific invoice or work-order. The Department

concluded that a more specific allocation was not feasible, and that

CCC's methodology does not distort the normal value and in turn the

dumping margin.

Therefore, the Department determined that CCC's post-invoicing

price adjustment methodology for credit and debit notes allocated to

multiple sales was acceptable.

II. Dofasco

A. Background

In calculating Dofasco's Cost of Production (``COP'') and

Constructed Value (``CV'') during the less-than-fair value (``LTFV'')

investigation, the Department included in their entirety certain

estimated expenditures related to restructuring of the corporation.

Final Results, 61 FR at 13825 (citing Final Determination of Sales at

Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products,

Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-

Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon

Steel Plate from Canada, 58 FR 37099, 37108 (July 9, 1993)). The

Department determined that estimated expenditures related to

restructuring should be included in their entirety as part of Dofasco's

COP and CV, because these expenditures were on Dofasco's financial

statements and were considered ordinary expenses that Dofasco charged

against its 1992 income.

In the final results of this administrative review, the Department

determined that Dofasco's prior period reversal of a portion of

restructuring estimates should be allowed because Dofasco's financial

statements include certain partial reversals of those earlier

restructuring estimates (the reductions were included in Dofasco's

financial statements in 1993 and 1994 as a credit to costs).

B. Prior Period Reversal Credit

In defendant's memorandum dated April 15, 1997, the Department

requested a remand to clarify its policy with respect to the reversal

charges and to determine if the adjustments made for Dofasco were

consistent with that practice and policy. The court did not grant

immediate remand, but ordered the Department to explain and describe

its policy and past practice. As articulated before the court, the

Department's past practice regarding reversal of charges for a prior

period has two components. As a first step, the Department will rely

upon a respondent's books and records prepared in accordance with the

home country's Generally Accepted Accounting Principles (``GAAP'')

unless those accounting principles do not reasonably reflect the costs

of producing the merchandise. See Certain Cut-to-Length Carbon Steel

Plate from Germany: Final Results of Antidumping Administrative Review,

61 FR 13834, 13837 (March 28, 1996), in which the Department did not

allow a reversal of prior period costs because to do so would be to

distort the costs in the subsequent period; see also Final

Determination of Sales at Less Than Fair Value: Small Diameter Circular

Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe from

Italy, 60 FR 31981, 31991 (June 19, 1995), in which the Department

noted that reducing a subsequent year's costs because of the reversal

in that year of a prior year's estimate would mean distorting the

actual production costs incurred in a subsequent year.

As a second step in the analysis, the Department may recognize an

exception to its general rule in cases such as this one. The Department

stated that the matching principle of accounting may be superseded by

the concept of conservatism (the concept that certain expenses relating

to liabilities for current and future periods be accrued in the first

accounting period in which they can be estimated) in certain situations

such as this one. Because in the LTFV investigation the Department

included, in its entirety, the amount of estimated expenditures in the

COP/CV calculation and because implementation of the multi-year

restructuring plan was still in progress during the review, the

Department determined that it was reasonable to allow Dofasco to

include in its COP/CV calculation certain adjustments or reversals to

the estimated expenditures accrued in 1992.

In response, the court stated that first, the concept of

conservatism does not supersede the concept of matching, but should be

incorporated into it. Secondly, the court stated that corrections to

the financial records in one period should be made only in that same

period; it is respondent's responsibility to correct estimates promptly

and in the same proceeding to which they are applicable. Third, the

court said that although it may not have been appropriate for the

Department to include all costs for a multi-year restructuring in the

LTFV investigation cost calculation, that proceeding is not before the

court. Finally, the court stated that allowing a credit against costs

accounted for years earlier when they were estimated but not incurred

may result in a double distortion and may impact the company in the

current period. The court also said that the Department's

rationalization, that it ``must abide by its long standing policy''

(see Final Results, 61 FR 13825), does not stand scrutiny because its

practice is the opposite of what it did in the instant case. As such,

the Court remanded this issue to the Department with the instruction

that the Department was to eliminate the credit for the reversals

unless it could articulate a rational reason for abandoning its past

practice.

In its redetermination on remand, the Department eliminated the

credit for the partial reversal of a prior period charge from the

calculation of Dofasco's costs, as instructed by the Court. In

addition, in reviewing the margin calculation, the Department

identified and corrected ministerial errors in the calculation of

interest expenses, general and administrative expenses, and variable

and total cost of manufacturing for model match purposes. See Analysis

Memorandum dated January 28, 1998, for more information concerning this

issue.

III. Stelco

A. Background

In its final results, the Department calculated a margin for

Stelco's imports of corrosion resistant product using our standard

calculation programs. On April 19, 1996, petitioners alleged that there

were three ministerial errors in the Department's margin calculation

program for this product. The Department agreed with petitioners but

was unable to correct these errors prior to jurisdiction vesting with

the CIT.

B. Ministerial Errors

The ministerial errors at issue consist of the following:

1. In the Final Results, 61 FR 13816, the Department stated that it

intended to follow the ``Zenith footnote 4'' methodology for adjusting

United States Price (``USP'') for home market consumption taxes.

Pursuant to this methodology, when merchandise exported to the United

States is exempt from home market consumption taxes, the Department

adds to USP the absolute amount of such taxes charged on comparison

sales in the home market. Inadvertently, the Department

[[Page 49080]]

failed to calculate USP in accordance with this methodology.

2. The Department intended to correct an adjustment to certain

sales that resulted in double counting. Final Results at 13832.

However, the Department failed to recalculate USP in accordance with

this methodology.

3. In the Final Results at 13832, the Department stated that it

intended to treat Stelco's slitting expenses as further manufacturing

costs for purposes of calculating exporter's sales price. Nevertheless,

the Department neglected to make these adjustments in the calculations

for the final results.

In its redetermination on remand, the Department corrected these

ministerial errors in Stelco's margin calculation.

Results of Redetermination on Remand: The Department filed its

redetermination with the CIT on January 28, 1998. See Final Results of

Redetermination on Remand, AK Steel Corp. et al. v. United States,

Court No. 96-05-01312. On July 23, 1998, the CIT affirmed the

Department's remand determination.

As a result of the remand determination, the Department re-

calculated the weighted average margins for Dofasco and Stelco. The

final dumping margins for the period February 4, 1993, through July 31,

1994 are as follows:

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

Margin

Manufacturer/exporter (percent)

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CCC........................................................ 1.96

Dofasco.................................................... 1.72

Stelco..................................................... 5.62

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In its decision in Timken Co. v. United States, 893 F.2d 337 (Fed.

Cir. 1990) (``Timken''), the United States Court of Appeals for the

Federal Circuit held that, pursuant to 19 U.S.C. section 1516a(e), the

Department must publish a notice of a court decision which is not ``in

harmony'' with a Department determination, and must suspend liquidation

of entries pending a ``conclusive'' court decision. The CIT's July 23,

1998 decision in AK Steel constitutes a decision not in harmony with

the Department's final results of review. Publication of this notice

fulfills the Timken requirement. Accordingly, the Department will

continue to suspend liquidation pending the expiration of the period of

appeal, or, if appealed, until a ``conclusive'' court decision.

Dated: September 4, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-24599 Filed 9-11-98; 8:45 am]

BILLING CODE 3510-DS-P