Certain Cut-to-Length Carbon Steel Plate From Mexico: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-809]

Certain Cut-to-Length Carbon Steel Plate From Mexico: Final

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On September 9, 1998, the Department of Commerce (the

Department) published the preliminary results of the 1996-97

administrative review of the antidumping duty order on certain cut-to-

length (CTL) carbon steel plate from Mexico. This review covers one

manufacturer/exporter of the subject merchandise. The period of review

(POR) is August 1, 1996 through

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July 31, 1997. We gave interested parties an opportunity to comment on

the preliminary results. Based on our analysis of the comments

received, we have not changed the results from those presented in our

preliminary results of review.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Heather Osborne or Mike Heaney,

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) 482-3019

or 482-4475, respectively.

SUPPLEMENTARY INFORMATION:

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. In addition, unless otherwise

indicated, all references to the Department's regulations are to 19 CFR

Part 351 (1998).

Background

On September 9, 1998, the Department published the preliminary

results of the 1996-97 administrative review of the antidumping duty

order on certain CTL carbon steel plate from Mexico. See Preliminary

Results of Antidumping Administrative Review, Certain Cut-to-Length

Carbon Steel Plate from Mexico, 63 FR 48181 (Preliminary Results). This

review covers one manufacturer/exporter of the subject merchandise,

Altos de Hornos de Mexico (AHMSA). The POR is August 1, 1996 through

July 31, 1997. We gave interested parties an opportunity to comment on

the preliminary results and held a public and closed hearing on

November 4, 1998. The following parties submitted comments and/or

rebuttals: Bethlehem Steel Corporation, Geneva Steel, Gulf Lakes Steel,

Inc., of Alabama, Inland Steel Industries, Inc., Lukens Steel Company,

Sharon Steel Corporation, and U.S. Steel Group (a unit of USX

Corporation) (collectively the petitioners), and AHMSA.

The Department has now completed this administrative review in

accordance with section 751(a) of the Act.

Scope of the Review

The products covered in this review 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 coil and without patterns in relief), of

rectangular shape, neither clad, plated nor 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 nonmetallic 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 Schedule (HTS) under item numbers 7208.31.0000,

7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000,

7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,

7211.12.0000, 7211.21.0000, 7211.22.0045, 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.

These HTS item numbers are provided for convenience and U.S.

Customs purposes. The written descriptions remain dispositive.

Analysis of Comments Received

We invited interested parties to comment on our preliminary

results. We received comments from AHMSA and the petitioners.

Comment 1: Reported Costs

AHMSA contends that the Department's rationale for using adverse

facts available is refuted by statements in the Department's cost

verification report which demonstrate that AHMSA's reported costs

reconciled to its accounting records and financial statements. AHMSA

cites to several statements in the cost verification report where the

Department performed tests of specific cost data and traced that cost

data to AHMSA's accounting records. AHMSA urges the Department to

reexamine its own findings, as set forth in the cost verification

report, and reconsider its conclusions. AHMSA contends that the cost

data is verifiable.

Petitioners claim that the fact that certain of AHMSA's costs in

the aggregate may have reconciled to AHMSA's financial statement does

not suggest that AHMSA's control number (CONNUM)-specific costs were

verified or reconciled to AHMSA's financial statements. Petitioners

note that the verification report identifies specific costs which, in

the aggregate, were verified, including the trace of trial balance

accounts to financial statement line items. Citing to Final Results of

Antidumping Duty Administrative Review) Antifriction Bearings (Other

Than Tapered Roller Bearings) and Parts Thereof from the Federal

Republic of Germany, 56 FR 31692, 31707 (July 11, 1991), petitioners

state that the verification of aggregate costs does not equate to the

verification of CONNUM-specific costs.

Department's Position: We were unable to verify the CONNUM-specific

costs reported by AHMSA. The individual verification procedures cited

by AHMSA are tests of individual elements of the submitted data and do

not, separately or combined, indicate that AHMSA correctly reported its

cost data.

Section 773(f)(1)(A) of the Act specifically requires that costs be

calculated based on the records of the exporter or producer of the

merchandise, if such records are kept in accordance with the generally

accepted accounting principles (GAAP) of the exporting country and

reasonably reflect the costs associated with the production and sale of

the merchandise. In accordance with the statutory directive, the

Department will accept costs of the exporter or producer if they are

based on records kept in accordance with GAAP of the exporting country

and reasonably reflect the costs associated with the production and

sale of the merchandise (i.e., the cost data can be reasonably

allocated to subject merchandise). In determining if the costs were

reasonably allocated to all products the Department will, consistent

with section 773(f)(1)(A) of the Act, examine whether the allocation

methods are used in the normal accounting records and whether they have

been historically used by the company.

Before assessing the reasonableness of a respondent's cost

allocation methodology, however, the Department must ensure that the

aggregate amount of the reported costs captures all costs incurred by

the respondent in producing the subject merchandise during the period

under examination. This is done by performing a reconciliation of the

respondent's

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submitted cost of production (COP) and constructed value (CV) data to

the company's audited financial statements, when such statements are

available. Because of the time constraints imposed on verifications,

the Department generally must rely on the independent auditor's opinion

concerning whether a respondent's financial statements present the

actual costs incurred by the company, and whether those financial

statements are in accordance with GAAP of the exporting country. In

situations where the respondent's total reported costs differ from

amounts reported in its financial statements, the overall cost

reconciliation assists the Department in identifying and quantifying

those differences in order to determine whether it was reasonable for

the respondent to exclude certain costs for purposes of reporting COP

and CV.

Although the format of the reconciliation of submitted costs to

actual financial statement costs depends greatly on the nature of the

accounting records maintained by the respondent, the reconciliation

represents the starting point of a cost verification because it assures

the Department that the respondent has accounted for all costs before

allocating those costs to individual products.

AHMSA, however, was unable to perform such a reconciliation. As

discussed in Comment 8 below, the Department found that AHMSA had

failed to include costs incurred in its coke plants, sinter plant,

blast furnaces, basic oxygen furnaces, and continuous casters. AHMSA

incurred all of these costs in the production of the subject

merchandise. These unreported costs were substantial and raise serious

concerns about whether there are additional cost center costs related

to the plate production process which were not reported by AHMSA and

not discovered by the Department at verification.

Moreover, even if AHMSA had been able to reconcile its submitted

costs to its financial statements, it still would have failed

verification due to its failure to use its normal cost accounting

system in developing its COP and CV data. AHMSA indicated in its

questionnaire response that its normal cost accounting system, which

AHMSA used to prepare its financial statements, is not maintained on

the product-specific level requested by the Department. See AHMSA's

Cost Questionnaire Response at D-46, D-47. Therefore, AHMSA claimed

that it was necessary to use a separate costing model to develop such

grade-specific COP and CV data. In an effort to verify AHMSA's

statements that its normal cost accounting system did not capture costs

at the product-specific level, the Department was obligated to review

and evaluate AHMSA's normal cost accounting system. As explained in the

preliminary results, AHMSA withheld its normal cost accounting system's

product-specific cost records until the end of verification. See

Preliminary Results, 63 FR at 48182, September 9, 1998. AHMSA's

withholding of this data precluded us from verifying AHMSA's COP/CV

data. However, we were able to determine that AHMSA's normal cost

accounting system included grade-specific slab cost data (the process

preceding the plate rolling process). This data was more detailed than

and significantly different from the data submitted by AHMSA. Based on

the foregoing, we determined that the data submitted by AHMSA was not

based on the allocation methods AHMSA historically used in its normal

cost accounting system, even though such data was available to AHMSA.

Comment 2: Verification

AHMSA argues that the purpose of the Department's verification is

to verify the information submitted on the record. AHMSA claims the

Department verifiers refused to examine the information that was

prepared in advance by AHMSA to support its COP/CV information. AHMSA

states the Department verifiers mistakenly concluded that AHMSA

maintains only standard costs in its normal accounting system, and

claims that the Department verifiers misunderstood its cost accounting

system and the submitted data. AHMSA maintains that it used actual

costs recorded in its normal accounting system to prepare its cost

response, and that the Department's insistence on examining its

standard costs was based upon a misunderstanding of AHMSA's accounting

system.

Petitioners state that there is no basis for AHMSA's claim that the

Department verifiers misunderstood its cost accounting system.

Petitioners assert that the Department's verification report clearly

indicates that it fully understood that AHMSA's normal accounting

records included both actual and standard costs. Petitioners note that

at verification the Department found that AHMSA has both a standard

cost report and a version of the report that adjusts standard costs to

actual costs. See Memorandum from Michael Martin to Christian Marsh,

Verification Report on the Cost of Production and Constructed Value

Data Submitted by Altos Hornos de Mexico, S.A. de C.V. (Cost

Verification Report) at 21 (August 27, 1998). A public version of this

report is available in Room B099 of the Main Commerce Building. (AHMSA

references these reports in its brief to indicate that it maintains

both standard and actual costs.)

Petitioners also note that in its questionnaire responses AHMSA

described its normal cost accounting system as being based on standard

costs which were adjusted to actual costs through the application of

variances. Petitioners contest AHMSA's assertion that because AHMSA

used actual average plate cost and not its standard costs in reporting

CONNUM-specific costs, the Department was not obliged to examine

AHMSA's standard cost build-ups during verification. Petitioners argue

that without substantiation, the standard input factors could be

manipulated to improperly shift plate costs to non-subject merchandise.

Further, petitioners argue, the only way to rule out mis-allocations to

non-subject merchandise was for the Department to review the standard

usage factors compared to the actual consumption for AHMSA's steel

grades. Accordingly, petitioners conclude that the standard cost build-

ups were crucial to the verification because they identify the types of

costs included in AHMSA's average plate cost calculation.

Department's Position: We agree with AHMSA that the purpose of

verification is to verify the accuracy of information submitted on the

record, and note that the Department verifiers adhered to this basic

tenet during verification. However, as discussed in our response to

Comment 1, it was necessary for the Department verifiers to fully

understand AHMSA's normal cost and financial accounting systems before

they could evaluate the reported product-specific costs. Therefore, it

was crucial for the verifiers to review the costs as maintained in the

normal cost accounting system. It was also essential that the

Department verify AHMSA's claim that it had to resort to a system

outside its normal cost accounting system to prepare the reported

grade-specific COP and CV data because, as explained by AHMSA, its

normal cost accounting system did not include grade-specific cost

information at the level of specificity required by the Department. As

noted in the verification report, we found that AHMSA's normal cost

accounting system cost build-ups did in fact distinguish between the

grades of product produced.

Additionally, the Department verifiers clearly understood AHMSA's

normal accounting system and realized that it included both standard

and actual costs. Moreover, it was clear from AHMSA's responses that

AHMSA's normal cost

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accounting system (used in the preparation of AHMSA's financial

statements) is based on standard costs adjusted to actual costs through

the application of variances. Thus, because the normal cost accounting

system was based on standards, the Department was obliged to review the

build-up of AHMSA's standard costs. Because AHMSA's normal cost

accounting system was based on standard costs, there is no basis for

AHMSA's assertion that it had to prepare the requested standard cost

data for the first time during verification.

At verification the Department must review the normal financial and

cost accounting systems before reviewing the reported cost allocation

methodologies. The cost questionnaire and verification agenda are

organized and presented so that the respondent is aware that it must

use its normal books and records in preparing its response. Both the

cost questionnaire and the verification agenda start with the

explanation of the normal financial accounting system, then progress to

the normal cost accounting system, and finally to the reported cost

methodology. In this case the verifiers attempted to proceed in this

fashion; however, they were hampered by AHMSA's refusal to provide the

standard cost build-ups used to prepare the financial statements until

late in the verification process.

As to the methods and techniques of verification, the Court of

International Trade (CIT), in Koenig & Bauer-Albert AG, et al., v.

United States, 15 F. Supp. 2d 834 (CIT 1998), acknowledged that

``[c]ongress has afforded ITA a degree of latitude in implementing its

verification procedures'' and that ``[t]he decision to select a

particular method of verification rests solely within the agency's

sound discretion. * * * If a reasonable standard is applied and the

verification is supported by substantial evidence, the court will

sustain the methodology.'' Consistent with its practice, the Department

first attempted to review AHMSA's normal financial and cost accounting

system. The problems encountered at this crucial first step were

significant (see Cost Verification Report at 2) and resulted in AHMSA's

failure of the cost verification. See Preliminary Results, 63 FR at

48182-84 (describing AHMSA's failure of the cost verification).

Contrary to AHMSA's arguments, the Department cannot simply verify

reported information in a vacuum. If reported cost information is not

verifiably grounded in a respondent's normal books and records, it is

meaningless to ``verify'' the reported information. This is because

deviating from the product-specific costs recorded in a respondent's

normal books and records can significantly distort reported COP and CV

data. AHMSA's failure to use the product-specific costs recorded in its

normal books and records prevents us from quantifying the magnitude of

the distortions which exist in its submitted data. Under these

circumstances, the Department's conduct of verification and

verification findings are reasonable.

Comment 3: Use of Normal Cost Accounting System

AHMSA claims that, contrary to the statements in the Department's

cost verification report, it did rely on its ``normal'' cost accounting

system to prepare its COP and CV data. AHMSA states that it maintains

both actual and standard costs in its normal cost accounting system.

The actual costs tie to the cost of goods sold on the income statement,

while the standard costs tie to the inventory value on the balance

sheet.

For purposes of preparing its COP and CV information, AHMSA

maintains that it reported the actual cost of producing plate, and then

used its quarterly cost model to determine the costs of specific grades

of plate. According to AHMSA, the Department incorrectly concluded that

AHMSA did not rely on its ``normal'' cost accounting system because it

failed to report standard costs.

AHMSA asserts it is being unfairly and improperly penalized because

of the Department's misunderstanding of AHMSA's normal cost accounting

system. AHMSA maintains that its normal cost accounting system

comprises both actual and standard costs. AHMSA contends that the

result is identical whether using standard costs adjusted for variances

or actual costs. However, to comply with the verifiers' requests for

standard cost build-ups, AHMSA claims it had to manually calculate

these standard costs, delaying the verification. AHMSA contends that

the Department's misunderstanding of its cost accounting system and the

verifiers' insistence on reviewing AHMSA's standard costs resulted in

the failed cost verification.

Petitioners note that AHMSA's method of deriving CONNUM-specific

COPs and CVs involves two major steps. First, petitioners claim AHMSA

derived an average cost for all plate based on standard costs adjusted

for variances. Second, according to petitioners, AHMSA calculated the

cost of specific plate grades using its costing model. In petitioners'

view this resulted in CONNUM-specific costs that are significantly

different than those recorded in its normal accounting records.

Petitioners contend that there is no basis for AHMSA's claim that

the Department misunderstood its normal cost accounting system.

Petitioners assert that the Department's verification report clearly

indicates that AHMSA normally maintains both actual and standard costs.

Petitioners claim that the Department's statement that AHMSA did not

use its normal cost accounting system to prepare the submitted COP and

CV data refers to AHMSA's use of a ``sales pricing model'' which AHMSA

admittedly does not use in its normal accounting system. Regardless of

the model's nomenclature, petitioners allege that it is disingenuous of

AHMSA to suggest that the Department's statement refers to anything but

AHMSA's cost/pricing model.

Department's Position: We disagree with AHMSA. The cost

verification report accurately reflected the procedures performed and

issues found during the verification. While AHMSA's reporting

methodology may have relied on certain total actual costs from its

accounting system in calculating the aggregate average cost of all

plate, AHMSA did not rely on the allocation methodologies used in its

normal cost accounting system, which are used to prepare the GAAP-based

financial statements to calculate the reported product-specific costs.

AHMSA concedes this point in its case brief at page 20.

Additionally, we disagree with AHMSA's assertion that the verifiers

misunderstood its normal cost accounting system. To the contrary, the

verifiers were fully aware that a standard cost accounting system and

financial accounting system includes both the standard costs and actual

costs. See response to Comment 2 above. We also disagree with AHMSA's

assertion that it is being unfairly and improperly penalized for the

Department's misunderstanding of its normal cost accounting system.

AHMSA did not use its normal cost allocation methodology as the basis

for its COP and CV submissions, as required by the Department.

Therefore, we were obligated to reject in its entirety the cost data

submitted by AHMSA.

Moreover, we disagree with AHMSA's claim that its methodology leads

to the same result as would adjusting AHMSA's standard costs for

variances. The Department's questionnaire requires respondents to

report product-specific costs as defined by product characteristics

identified by the Department. While AHMSA's contention that standard

costs plus

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variances are the same as actual costs may be true on an overall basis,

it does not hold true in this instance for the CONNUM-specific cost

data. The methodology used by AHMSA started with certain plate

production costs in total, from which AHMSA calculated an average plate

cost for all steel grades. AHMSA's cost model then attempted to

differentiate grade-specific cost differences. The costs derived from

the model were not representative of the more detailed costs maintained

in AHMSA's normal cost accounting system, which includes grade-specific

costs for different grades of steel slab.

As described in Comment 1 above, the underlying basis for

formatting AHMSA's COP/CV response should have been AHMSA's normal cost

accounting system. The Department allows a respondent to deviate from

its normal cost accounting system only if the normal cost accounting

system does not allocate product-specific costs to the level of detail

required or does not appropriately allocate costs to products, and only

after consulting with representatives from the Department (see

Questionnaire, Section D-III, Response Methodology). AHMSA deviated

from its normal accounting system, and never discussed the deviation

with the Department prior to filing its cost response. In its response,

AHMSA claimed that it did not account for grade-specific cost

differences in its accounting records; yet at verification, the

Department found that in fact it did account for such differences.

Therefore, the Department found AHMSA's reported product-specific costs

were based on a methodology that was completely separate from AHMSA's

normal cost accounting system.

Comment 4: Grade-Specific Slab Costs

AHMSA argues that it did not withhold information about its grade-

specific slab costs from the verifiers. AHMSA insists that its

questionnaire response at pages D-46 and D-47 indicated that the

company maintains grade-specific costs for slab, but does not maintain

grade-specific costs for plate. According to AHMSA, if the Department

had wanted AHMSA to recalculate grade-specific plate costs using the

grade-specific slab costs as the starting point, then it was incumbent

upon the Department to notify AHMSA of this requirement prior to the

verification. AHMSA argues that the methodology it employed to report

its costs should not be considered unreasonable and inappropriate

simply because the Department believes there is a more appropriate

methodology for reporting costs.

Petitioners claim that AHMSA's failure to provide the standard cost

build-ups prevented verification of its submitted CONNUM-specific

costs. Petitioners argue that the average plate cost is a function of

the standard costs that are used to produce the plate. Petitioners

contend that it was imperative for the Department to review the

underlying standard costs of slab to determine if the reported CONNUM-

specific costs were consistent with costs actually incurred to produce

the merchandise. Because AHMSA did not provide the standard cost build-

ups until very late in the verification, petitioners argue the

Department was deprived of its opportunity to examine the grade-

specific slab costs normally maintained by AHMSA.

Department's Position: We agree with petitioners that AHMSA

withheld from the Department information concerning its grade-specific

slab costs. There is no record evidence supporting AHMSA's claim that

AHMSA explained in its questionnaire response that grade-specific slab

costs were maintained in its normal accounting system. The evidence

cited to by AHMSA at pages D-46 and D-47 of its questionnaire response,

where AHMSA asserts it ``notified'' the Department that the normal cost

accounting system included grade-specific slab costs, reads:

These actual costs are the costs recorded in AHMSA's plate mill

cost center and include all costs incurred in prior production

processes. Given AHMSA's accounting system, it is most appropriate

to cost product at this level since slab is used to produce a number

of different products, including many types of non-subject

merchandise. Thus, the most accurate measure of the amount of slab

(which is the compilation of all materials and other inputs up to

that point in the production process) used to produce a ton of plate

occurs at the plate mill cost center.

This cannot reasonably be construed as notification that AHMSA's normal

cost accounting system included grade-specific slab costs. In fact,

AHMSA's response arguably gave no indication that its normal cost

accounting system was more detailed with respect to grade-specific slab

costs. Had AHMSA provided the Department with a clear, complete, and

accurate response to the questionnaire regarding its normal cost

accounting system, we would have been able to address these concerns in

a supplemental questionnaire.

Because AHMSA had described its normal cost accounting system as a

standard cost system which was adjusted to actual costs through the

application of variances, the verification agenda sent to AHMSA prior

to the verification indicated that the Department would review the

normal accounting system. This verification agenda included standard

cost build-ups. The data withheld by AHMSA, and used by AHMSA in its

normal accounting records, is clearly more detailed than the data

submitted by AHMSA in its cost questionnaire response. Accordingly,

there is no basis for AHMSA's assertion that it was obligated to use a

methodology which was outside the normal cost accounting system to

develop product-specific costs.

Comment 5: Reconciliation of Costs

AHMSA contends that the Department reconciled AHMSA's reported

costs to its accounting system and to the audited financial statements.

AHMSA explains that when the Department verifiers requested the general

ledger in order to trace amounts from the trial balances, AHMSA did not

understand what the Department wanted, because those specific amounts

could not be seen directly in the general ledger. AHMSA acknowledges

that the Department has the authority to review documentation other

than that specified in the verification outline. However, AHMSA claims

that it was wrong for the Department to conclude that AHMSA failed to

reconcile its costs when it was able to tie its reported costs to the

company's trial balances. AHMSA states that the Department's

verification outline does not require that the trial balances be

reconciled to the general ledger. Moreover, AHMSA contends that the

statement in the verification report that the Department reconciled the

total cost, which AHMSA identified as plate cost per the accounting

system, to the total reported cost of manufacture (COM), refutes the

Department's conclusion that AHMSA's costs could not be reconciled to

its accounting records.

Petitioners disagree with AHMSA's claim that a reconciliation of

its financial statement to its trial balances would be sufficient for

its reported costs to verify. According to the petitioners, the

verification of certain aggregate costs neither constitutes

reconciliation of costs nor constitutes verification of AHMSA's CONNUM-

specific plate costs.

Responding to AHMSA's claim that the agenda did not require the

Department to trace the amounts from the trial balance to the general

ledger, petitioners note that a company's general ledger links the

individual trial balance amounts to the source documentation that

substantiate the trial balance amounts. Additionally,

[[Page 81]]

petitioners note that in Toyota Motor Sales U.S.A., Inc. v. United

States, Slip Op. 98-95 (CIT July 2, 1998) the CIT upheld the

Department's practice of using facts available when a respondent fails

to provide basic accounting documentation such as expense ledgers.

Department's Position: We disagree with AHMSA's claim that a

general ledger does not include amounts shown on a trial balance. To

the contrary, the trial balance is simply a summary of the account

balances from the general ledger. The general ledger contains

transactions, and is the connection between the trial balance and the

underlying source documents. Because AHMSA did not provide the general

ledger, we were unable to make the connection between total amounts

shown on the trial balance and the source documents.

Moreover, we disagree with AHMSA's assertion that its reported

costs were reconciled to the financial statements. See complete

discussion of this issue in Comment 1 above. When we discovered that a

significant percentage of costs were excluded from the reported costs,

AHMSA attempted to distinguish total costs recorded for all products

from total costs allocated to plate. See Comment 8 below. The statement

cited by AHMSA simply indicates that the total costs AHMSA allocated to

plate were reconciled to the total reported COM (i.e., multiplication

of the reported per-unit COM and the production quantity).

Comment 6: Physical Characteristics Cost Differences

AHMSA claims that it informed the Department long before the start

of the verification that its reported COP and CV amounts do not capture

cost differences arising from products that undergo different levels of

rolling or slitting. AHMSA contends that characteristics such as

overruns vs. non-overruns, prime vs. non-prime, painted vs. non-

painted, checkered vs. non-checkered, and scaled vs. non-scaled, are

the same for all plate products produced by AHMSA. With respect to

products of different widths and thicknesses, AHMSA contends that these

cost differences are accounted for because its reported costs are

calculated on a per-ton basis.

Petitioners contend that AHMSA's cost reporting methodology is

inadequate because it did not reflect the level of CONNUM-specificity

requested by the Department. Citing the cost verification report,

petitioners state that thinner plates should incur greater costs

because they require more processing. Noting that AHMSA's normal cost

accounting system distinguished grade-specific slab costs, petitioners

claim that AHMSA could have provided costs with greater product

specificity if it had used its normal cost accounting system rather

than its quarterly costing model. Additionally, petitioners state that

AHMSA's failure to disclose accurately the level of product specificity

maintained in its normal accounting system prevented the Department

from notifying AHMSA of its response deficiency.

Department's Position: We agree with petitioners that AHMSA's cost

reporting methodology inadequately accounted for CONNUM-specific cost

differences. For steel grade differences, AHMSA used its cost model

rather than its normal cost accounting system. See Comment 3. Moreover,

we disagree with AHMSA's claim that its per-ton cost allocation

reasonably accounts for cost differences attributable to differing

widths and thicknesses. AHMSA's assertion that products with different

width and thicknesses both share the same processing cost is contrary

to our verification findings that thinner plate requires more

processing than thicker plate. By allocating processing costs equally

to all types of plate, regardless of its thickness, AHMSA significantly

understated the processing cost on its thinner plate sizes.

Comment 7: Raw Material Consumption

AHMSA contends that, contrary to the conclusion of the cost

verification report, the Department did in fact verify the actual

materials consumption upon which AHMSA's reported costs are based.

AHMSA claims that the monthly production reports included in one of the

verification exhibits contains information on actual consumption of all

raw material inputs used to produce plate.

Petitioners claim that AHMSA's refusal to provide the normal

accounting system cost build-ups prevented the Department from

verifying material costs.

Department's Position: We do not support AHMSA's claim that any

number appearing on a verification exhibit is a verified number.

Because AHMSA withheld standard cost build-ups which include standard

usage and standard prices, we were unable to verify the consumption

included in the reported costs to the consumption amounts reflected in

AHMSA's normal cost accounting system.

Comment 8: Unreported Costs

In a letter submitted to the Department on June 8, 1998, AHMSA

explained it found that certain depreciation and other expenses related

to processes occurring prior to the plate mill cost center had been

inadvertently omitted from the reported costs. AHMSA claims that the

Department's verification finding of additional unreported depreciation

costs was not discovered by the verifiers. Instead, AHMSA holds that

the identified costs were submitted to the Department at the

commencement of verification.

AHMSA maintains that it also inadvertently omitted certain fixed

costs associated with these same processes. AHMSA declares that these

additional unreported cost center costs were not found by the

verifiers. AHMSA claims that it discovered these unreported cost

centers, quantified them, and informed the Department verifiers of the

missing additional fixed costs on the morning of the second day of

verification. Additionally, AHMSA claims that its position is

substantiated by record evidence. AHMSA contends that the omitted costs

are shown in Verification Exhibit B14, AHMSA Total Cost Reconciliation,

on the line ``additional fixed costs.''

Petitioners contend that the cost verification report clearly

establishes that AHMSA failed to include a substantial portion of plate

manufacturing costs.

Department's Position: AHMSA did not identify the cost centers in

question at the onset of verification. While the Department verifiers

were reviewing the cost center list and the corrections presented by

AHMSA at the beginning of verification, the verifiers identified

several cost centers which AHMSA had excluded from the reported costs.

These cost centers relate to plate production incurred prior to the

plate mill, and should have been included by AHMSA. During our review

of AHMSA's cost centers, we asked AHMSA to quantify the costs incurred

in those cost centers and to provide an allocation of those costs to

plate. Only after we identified the cost centers and requested AHMSA to

quantify the amounts, did AHMSA provide the data. The cost centers

identified by the verification team were in addition to the cost

centers AHMSA identified at the beginning of verification.

Comment 9: Possible Unreported Costs

AHMSA claims that the Department's assumption that there may be

additional cost centers related to the production of plate which were

neither included in the reported costs nor identified at verification

is unwarranted. AHMSA contends that the Department could not have

reconciled these costs to its accounting system if there were

[[Page 82]]

additional missing fixed costs. AHMSA cites to the verification reports

which states, ``We reconciled the total costs which AHMSA identified as

plate cost per the accounting system, to the total reported COM (B14) *

* *'' AHMSA concludes that the Department's statement that there could

be other missing costs is illogical given that the Department verified

its total reported COM.

Petitioners cite the verification report which states that the

Department could not determine whether there were additional cost

centers related to plate which were not included in the reported costs.

Department's Position: We disagree with AHMSA's statement that we

performed an overall reconciliation of its total costs. As discussed in

Comment 5 above, the statement in the verification report only

indicates that the total reported COMs (i.e., multiplication of the

per-unit COM and the production quantity) reconciled to the amounts

AHMSA allocated to plate. However, it does not indicate that we were

able to reconcile the total costs for all products to the total costs

allocated to plate. See Comment 1 above.

Comment 10: Comparison of Reported Costs to Standard Costs

AHMSA claims that the cost verification report incorrectly

concluded that the actual costs AHMSA reported to the Department

differed significantly from the standard costs reviewed by the

Department at verification. Specifically, AHMSA contends that the

Department's conclusion that AHMSA had understated its reported costs

was erroneous based on the fact that the Department incorrectly

compared the inventory cost for one discrete product to the reported

average cost for all plate products. AHMSA maintains that it actually

overstated its reported costs based on a comparison of the company's

December 1996 average inventory value to the reported average POR plate

cost.

Petitioners did not comment on this issue.

Department's Position: We disagree with AHMSA's claim that the

actual costs it reported to the Department did not differ significantly

from the standard costs reviewed by the Department at verification. A

comparison of AHMSA's product-specific standard costs of production, as

recorded in its normal accounting records for ten sampled products, to

the reported per-unit costs for the same ten products, reveals

significant differences in the per-unit costs between the reporting

methodology and AHMSA's normal books and records (see Cost Verification

Report at 2). This inconsistent difference in per-unit costs between

its reporting methodology and its normal books and records supports the

Department's contention that the cost model used by AHMSA to determine

product-specific costs for its COP and CV response generated per-unit

costs that differed significantly from those maintained in its normal

accounting records.

Comment 11: Use of Facts Available

AHMSA contests the Department's characterization of the company as

uncooperative and claims it did not withhold information. AHMSA claims

to have complied with every request for information made by the

Department. AHMSA notes that it submitted sales and expense data on

over 25,000 home market plate sales during a 14-month period, and that

it also submitted information indicating that it reported all home

market plate sales of all plate products sold during the 12-month

period of review and the two months following the last month in which

AHMSA had sales.

As evidence of its cooperation, AHMSA notes that it reported the

COP for every plate product sold in the home market during the 14-month

period, which totaled over 200 different products, as well as CV

information for merchandise exported to the United States.

AHMSA also notes that it allowed the Department to spend two full

weeks at its Monclova, Mexico facility to verify its reported sales and

cost data. AHMSA emphasizes that the submitted sales data was verified

without any problems or discrepancies. AHMSA objects to the

Department's statement that AHMSA failed to cooperate to the best of

its ability, given the amount of information that it compiled and

reported to the Department. Because AHMSA claims to have cooperated to

the best of its ability, it disputes the Department's decision to apply

adverse facts available in this case. Finally, as an alternative to

total adverse facts available, AHMSA suggests that the Department use

data contained in petitioners' sales-below-cost allegation to determine

normal value. AHMSA further suggests that the Department base CV on the

highest cost reported for any single plate product, and calculate a

margin using the verified sales information and the highest reported

cost.

Petitioners contend that the Department's practice is to use total

adverse facts available in cases in which the absence of reliable cost

data renders a respondent's entire response unusable. Petitioners argue

that the Department's use of facts available in this case is consistent

with its position in Certain Cut-to-Length Carbon Steel Plate from

Sweden: Final Results of Antidumping Administrative Review, 62 FR

18396, 18398 (April 15, 1997).

Department's Position: Section 776(a) of the Act provides that, if

an interested party withholds information that has been requested by

the Department, fails to provide such information in a timely manner or

in the form or manner requested, significantly impedes a proceeding

under the antidumping statute, or provides information which cannot be

verified, the Department shall use, subject to sections 782(d) and (e),

facts otherwise available in reaching the applicable determination. In

this review AHMSA had described its normal cost accounting system as a

standard cost system which was adjusted to actual costs through the

application of variances. The verification agenda sent to AHMSA prior

to the verification indicated that the Department would review the

normal accounting system including the standard cost build-ups. As

noted in the Cost Verification Report, AHMSA withheld from the

Department this data which clearly indicated that its normal cost

accounting system maintained more detailed costs than claimed in the

cost questionnaire response (i.e., the normal cost accounting system

did include grade-specific costs). Therefore, AHMSA's claim that it had

to use its model (a methodology which was outside the normal cost

accounting system) to develop product-specific costs, was incorrect.

Since AHMSA failed to provide the necessary information in the form and

manner requested, and in some instances the submitted information was

found to be inaccurate, we conclude that, pursuant to section 776(a) of

the Act, use of facts otherwise available is appropriate.

Section 782(d) of the Act provides that, if the Department

determines that a response to a request for information does not comply

with the request, the Department will inform the person submitting the

response of the nature of the deficiency and, to the extent

practicable, shall provide that person the opportunity to remedy or

explain the deficiency. If that person submits further information that

continues to be unsatisfactory, or this information is not submitted

within the applicable time limits, the Department, subject to section

782(e), may disregard all or part of the original and subsequent

responses, as appropriate. In this case, we were unable to inform AHMSA

of its deficiency of not using its normal

[[Page 83]]

accounting system to report grade-specific costs because, until

verification, we relied upon AHMSA's claim that its normal standard

cost accounting records did not account for grade-specific cost

differences. At verification, after significant delays in providing its

standard cost build-ups, we noted that AHSMA's standard cost accounting

system did in fact account for grade-specific cost differences.

The Department rejects AHMSA's suggestion that we should determine

normal value by relying on the data contained in the petitioners's

sales-below-cost allegation. Although this information was sufficient

to warrant a cost investigation, we have no assurance that petitioners'

alleged costs capture all of AHMSA's costs. Because we could not

confirm that the petitioners' cost allegation fully reflected AHMSA's

costs, we could not determine whether sales were made above or below

COP in this review. Similarly, we could not base CV on the highest cost

reported by AHMSA for any single plate product because, as shown at

verification, we could not verify the full extent of AHMSA's costs.

Comment 12: Use of Adverse Facts Available (FA)

AHMSA claims the Department's assertion that AHMSA failed to

cooperate to the best of its ability is not supported by record

evidence. Citing to the Notice of Final Determination of Sales at Less

than Fair Value: Grain-Oriented Electrical Steel from Italy, 59 FR

33952 (July 1, 1994), AHMSA claims the Department's prior precedent

suggests that despite a failed cost verification, AHMSA should not be

considered uncooperative. Like the respondent in Grain Oriented

Electrical Steel from Italy, AHMSA claims it responded to all

information requests from the Department and permitted verification of

its sales and cost data. Due to its degree of cooperation, AHMSA

considers a determination based on total adverse FA to be unwarranted

in this case.

Petitioners argue that the statute gives the Department ample

discretion to draw an adverse inference where a respondent has failed

to cooperate by not acting to the best of its ability. Petitioners

claim that the Department could not verify AHMSA's information because

AHMSA failed to provide necessary supporting documentation in a timely

fashion, failed to provide CONNUM-specific costs, and omitted a

significant portion of its total cost of manufacturing. Additionally,

petitioners note that AHMSA submitted incomplete and erroneous

responses to the Department's questionnaire.

Regarding whether the highest rate from the petition is the most

appropriate adverse FA rate, petitioners cite section 776(b) of the

Act, which allows the Department to use as FA information derived from

a petition, a final determination, any previous administrative review,

or any other information placed on the record.

Petitioners distinguish Grain Oriented Electrical Steel from Italy

from the present case because the respondent in that case was

considered cooperative, while AHMSA was determined not to have acted to

the best of its ability.

Finally, citing Notice of Final Results and Partial Rescission of

Antidumping Administrative Review of Roller Chain, Other than Bicycle,

from Japan, 62 FR 60472 (November 10, 1997), petitioners note that when

considering whether the FA selected are sufficiently adverse, a factor

to consider is the extent to which a party may benefit from its own

lack of cooperation.

Department's Position: We disagree with AHMSA's argument that the

Department should not use an adverse inference in selecting FA. Section

776(b) of the Act provides that adverse inferences may be used when a

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

ability to comply with requests for information. As discussed in our

positions in the comments above and in the verification report, AHMSA

failed to use its normal cost accounting system to report the submitted

COP and CV data and, as a result, failed to reconcile the reported

costs to its normal cost accounting system. Moreover, the Department

was unable to reconcile AHMSA's submitted costs to its financial

statements because, among other issues, AHMSA failed to report costs

from a number of relevant cost centers. Reporting of costs based on a

respondent's normal books and records and reporting of all relevant

costs are both central to the Department's cost questionnaire. By

failing to comply with the information requests in the questionnaire

and by failing to notify the Department or request assistance on these

issues as instructed in the questionnaire, the Department finds that

AHMSA failed to cooperate to the best of its ability. Furthermore, in

certain instances, AHMSA failed to cooperate with even minimal requests

for information at verification (such as presentation of its general

ledger). Hence, an adverse inference is warranted.

The statute provides no clear obligation or preference for relying

on a particular source in choosing information to use as adverse FA. In

this case, as adverse FA we have used the highest rate from any prior

segment of the proceeding, 49.25 percent. This rate was used as the

best information available rate in the LTFV investigation and was based

on information in the petition. As determined in Certain Cut-to-Length

Carbon Steel Plate from Sweden: Final Results of Antidumping Duty

Administrative Review, 62 FR 18396, 18398 (April 15, 1997), the

Department may use as FA the final determination in the less-than-fair-

value (LTFV) proceeding, even when the LTFV determination is based on

best information available.

When making adverse inferences, the Statement of Administrative

Action (SAA) authorizes the Department to consider the extent to which

a party may benefit from its own lack of cooperation (SAA at 870).

Because AHMSA's current cash deposit rate is 49.25 percent, the

Department believes that assigning a 49.25 percent rate will prevent

AHMSA from benefitting from its failure to respond to the Department's

requests for information. Anything less than the current cash deposit

rate would effectively reward AHMSA for not cooperating to the best of

its ability. The cash deposit rate at the time AHMSA requested this

review was 49.25 percent and we presume that the 49.25 percent rate is

sufficiently adverse to induce cooperation in future segments of this

proceeding. Generally in cases resulting in adverse determinations the

assigned rate is greater than the current cash deposit rate. In this

case, however, the only rate comparable to AHMSA's current cash deposit

rate is the highest rate from the petition.

In Grain Oriented Electrical Steel from Italy the Department

indicated that as best information available it would have used the

higher of (1) the average of the margins alleged in the petition or (2)

the calculated dumping margin for another respondent; however, it would

not make an adverse inference that resulted in a rate lower than the

current cash deposit rate for the company. Although in Grain Oriented

Electrical Steel from Italy the Department deemed the respondent to be

cooperative, despite a failed cost verification, it rejected in full

the information submitted during the review and relied on the margin

alleged in the petition. In this review, we also are rejecting in full

the information submitted during the course of the review and instead

are using the margin alleged in the petition. In contrast to Grain

Oriented Electrical Steel from Italy, we do not consider AHMSA's

efforts to comply with the

[[Page 84]]

Department's requests, reflective of its ability to provide the

information or its willingness to cooperate. It is not our practice to

use dumping margins based on adverse FA that effectively reward a

respondent's failure to cooperate to the best of its ability. Because

we will not use a dumping margin based on adverse FA that is less than

the current cash deposit rate, we determine the most appropriate rate

to apply as adverse FA in this review is the rate from the LTFV

investigation of 49.25 percent.

Comment 13: Corroboration

AHMSA states that if the Department maintains its position in the

preliminary results and applies adverse FA, the Department must

adequately corroborate the information. AHMSA claims that the

Department took no affirmative action in the preliminary results to

corroborate the information in the 1992 petition.

Petitioners consider the rate from the petition to be sufficiently

probative, citing the Final Results of Administrative Review in Certain

Welded Stainless Steel Pipe from Taiwan, 62 FR 37543 (July 13, 1997),

where the Department determined that the highest margin is the most

probative evidence of current margins because, if it were not so, the

importer, knowing of the rule, would have produced current information

showing the margin to be less.

Department's Position: We disagree with AHMSA's contention that the

Department has not corroborated the facts available rate assigned to

AHMSA. The 49.25 percent rate is based on the LTFV final determination,

which in turn was based on information in the petition. Section 776(b)

of the Act authorizes the Department to use as adverse FA information

derived from, among other places, the petition or the final

determination from the LTFV investigation. This type of information is

considered secondary information. See SAA at 870; 19 CFR 351.308(c)(1).

Section 776(b) of the Act mandates that the Department, to the

extent practicable, shall corroborate that secondary information from

independent sources reasonably at its disposal. In accordance with the

law, the Department, to the extent practicable, will examine the

reliability and relevance of the information used. However, in an

administrative review the Department will not engage in updating the

petition to reflect the prices and costs that are found during the

current review. Rather, corroboration consists of determining that the

significant elements used to derive a margin in a petition are reliable

for the conditions upon which the petition is based. With respect to

the relevance aspect of corroboration, the Department will consider the

information reasonably at its disposal as to whether there are

circumstances that would render a margin not relevant.

To corroborate the LTFV rate of 49.25 percent, we examined the

basis of the rates contained in the petition. The U.S. price in the

petition was based on actual prices from invoices, quotes to U.S.

customers, and IM-145 import statistics. Additionally, the foreign

market value was based on actual price quotations to home market

customers, home market price lists, and published reports of domestic

prices. Home market price quotations were obtained through a market

research report. (See Initiation of Antidumping Duty Investigations and

Postponement of Preliminary Determinations: 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 Various Countries, 57 FR 33488

(July 29, 1992).)

We were able to corroborate the 1991 fourth quarter average unit

values listed in the petition by comparing these values to publicly

available information compiled by the U.S. Census Bureau and made

available by the International Trade Commission (ITC). The ITC reports

quantity and value by HTS numbers. Using the same HTS numbers as listed

in the petition (HTS 7208.42 and 7208.43), we divided the total

quantity by the total volume for the fourth quarter 1991 and noted the

average unit values were very similar to those reported in the original

petition. In addition, export prices which are based on U.S. import

statistics are considered corroborated. Price lists and published

reports of domestic prices which support the petition margin are

independent sources. With regard to the normal values contained in the

petition, the Department was provided no useful information by the

respondent or other interested parties and is aware of no other

independent sources of information that would enable us to further

corroborate the margin calculation in the petition. Furthermore, with

respect to the relevance of the margin used for adverse FA, the

Department stated in Tapered Roller Bearings from Japan; Final Results

of Antidumping Duty Administrative Review, 62 FR 47454 (September 9,

1997), that it will consider information reasonably at its disposal as

to whether there are circumstances that would render a margin

irrelevant. Where circumstances indicate that the selected margin is

not appropriate as adverse FA, the Department will disregard the margin

and determine an appropriate margin. See also Fresh Cut Flowers from

Mexico; Preliminary Results of Antidumping Duty Administrative Review,

60 FR 49567 (September 26, 1995). We have determined that there is no

evidence on the record that would provide a more appropriate adverse FA

rate than the petition rate.

Finally, we note that the SAA at 870 specifically states that where

``corroboration may not be practicable in a given circumstance,'' the

Department may nevertheless apply an adverse inference. The SAA at 869

emphasizes that the Department need not prove that the facts available

are the best alternative information. Therefore, based on our efforts,

described above, to corroborate information contained in the petition,

and mindful of the legislative history discussing FA and corroboration,

we consider the petition margin we are assigning to AHMSA in this

review as adverse facts available to be corroborated to the extent

practicable.

Final Results of the Review

As a result of this review, we have determined that the following

weighted-average dumping margin exists for the period August 1, 1996

through July 31, 1997:

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

Margin

Manufacturer/exporter Period (percent)

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

AHMSA.................................... 8/1/96-7/31/97 49.25

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

The Department shall determine, and the U.S. Customs Service shall

assess, antidumping duties on all appropriate entries. The Department

shall issue appraisement instructions directly to the Customs Service.

For assessment purposes, we normally calculate importer-specific duty

assessment rates for the merchandise based on the ratio

[[Page 85]]

of the total amount of antidumping duties calculated for the examined

sales during the POR to the total entered value of sales examined

during the POR. Because we could not calculate a margin based on sales

during the POR, and had to base the margin on adverse FA, we have

determined that importer-specific duty assessments rates are not

necessary for this review.

Furthermore, the following deposit requirements shall be effective

upon publication of this notice of final results of review for all

shipments of certain CTL carbon steel plate from Mexico, entered, or

withdrawn from warehouse, for consumption on or after the publication

date, as provided for by section 751(a)(1) of the Tariff Act: (1) the

cash deposit rate for the reviewed company will be the rate stated

above; (2) for previously investigated companies not listed above, the

cash deposit rate will continue to be the company-specific rate

published for the most recent period; (3) if the exporter is not a firm

covered in these reviews, or the original LTFV investigation, but the

manufacturer is, the cash deposit rate will be the rate established for

the most recent period for the manufacturer of the merchandise; and (4)

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

review, the cash deposit rate for this case will continue to be 49.25

percent, the ``All Others'' rate in the LTFV investigation. These

deposit requirements shall remain in effect until publication of the

final results of the next administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f) to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective orders (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34 (1997). Timely written

notification of the return or destruction of APO materials, or

conversion to judicial protective order, is hereby requested. Failure

to comply with the regulations and terms of an APO is a sanctionable

violation.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.

Dated: December 22, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-34799 Filed 12-31-98; 8:45 am]

BILLING CODE 3510-DS-P