Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From Italy

DEPARTMENT OF COMMERCE

International Trade Administration

[A-475-824]

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

Stainless Steel Sheet and Strip in Coils From Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Lesley Stagliano or Rick Johnson,

Import Administration, International Trade Administration, U.S.

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

Washington, DC 20230; telephone: (202) 482-0190; (202) 482-3818

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

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

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

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

unless otherwise indicated, all citations to the Department of Commerce

(``Department'') regulations are to the regulations at 19 CFR part 351

(April 1998).

Final Determination

We determine that stainless steel sheet and strip in coils

(``SSSS'') from Italy are being sold in the United States at less than

fair value (``LTFV''), as provided in section 735 of the Act. The

estimated margins of sales at LTFV are shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the preliminary determination, issued on December 17, 1998

(see Notice of Preliminary Determination of Sales at Less Than Fair

Value: Stainless Steel Sheet and Strip in Coils from Italy

(``Preliminary Determination'') 64 FR 116 (January 4, 1999)), the

following events have occurred:

On December 17, 1998, AST submitted its quantity and value

reconciliation and computer programs for its affiliated U.S. reseller

(``reseller 001''). On December 28, 1999, Acciai Speciali Terni, S.p.A.

(``AST'') submitted its response to the Department's December 7, 1998

supplemental questionnaire. On January 8, 1999, the Department

requested that AST provide additional information for reseller 001's

downstream sales. On January 15, 1999, AST submitted its response to

the Department's January 8, 1999 request. On February 16, 1999, we

issued a supplemental questionnaire to AST regarding its December 11,

1998 reseller 001 submission. On February 23, 1999, we received AST's

response to the Department's supplemental questionnaire.

On February 24, 1999, AST submitted information regarding

additional U.S. sales that it had found in preparation of the home

market verification. On March 5, 1999, the Department rejected AST's

February 24, 1999 submission on the grounds that it was untimely. On

March 8, 1999, at the onset of the verification of AST USA, AST

submitted the additional U.S. sales. The Department rejected these

sales as soon as they were presented to it. On March 10, 1999,

petitioners submitted comments and information pertaining to the

additional U.S. sales. On March 19, 1999, the Department rejected

petitioners' March 10, 1999 submission because it contained untimely

new information which was based on U.S. sales data that were previously

rejected by the Department. On March 16, 1999, AST once again submitted

information regarding the additional U.S. sales. On March 19, 1999, the

Department rejected AST's March 16, 1999 submission because it

contained untimely new factual information, and because it was

submitted in response to petitioners' March 10, 1999 letter, which the

Department rejected in its entirety. On March 22, 1999, AST submitted a

letter stating that according to section 351.104(a)(2)(ii)(A) of the

Department's regulations, the Department must retain a copy of AST's

March 16, 1999 response on the official record. On March 30, 1999, the

Department responded to AST's March 22, 1999 letter stating that

pursuant to section 351.104(a)(2)(iii) of the Department's regulations

we would not retain a copy of AST's response to petitioners' rejected

March 10, 1999 letter, because it was an untimely submission.

During January, February and March 1999, we conducted sales and

cost verifications of AST's and its affiliates' responses to the

antidumping questionnaires in Italy and the United States. On March 15,

1999 and March 25, 1999, we issued our cost and sales verification

reports for AST, AST USA, and reseller 001. Petitioners and respondents

submitted case briefs on April 5, 1999, and April 6, 1999, and rebuttal

briefs on April 9, 1999, and April 13, 1999. On April 19, 1999,

petitioners and respondents withdrew their requests for a public

hearing, dated January 13, 1999 and January 22, 1999, respectively.

On April 1, 1999, the Department requested that AST provide monthly

shipment data for 1996, 1997, and 1998 by April 12, 1999. On April 12,

1999, AST submitted this information.

Scope of the Investigation

We have made minor corrections to the scope language excluding

certain stainless steel foil for automotive catalytic converters and

certain specialty stainless steel products in response to comments by

interested parties.

For purposes of this investigation, the products covered are

certain stainless steel sheet and strip in coils. Stainless steel is an

alloy steel containing, by weight, 1.2 percent or less of carbon and

10.5 percent or more of chromium, with or without other elements. The

subject sheet and strip is a flat-rolled product in coils that is

greater than 9.5 mm in width and less than 4.75 mm in thickness, and

that is annealed or otherwise heat treated and pickled or otherwise

descaled. The subject sheet and strip may also be further processed

(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that

it maintains the specific dimensions of sheet and strip following such

processing.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (HTS) at subheadings:

7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80,

7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05,

[[Page 30751]]

7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36,

7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05,

7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36,

7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05,

7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35,

7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35,

7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,

7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10,

7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05,

7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80,

7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60,

7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60,

7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80.

Although the HTS subheadings are provided for convenience and Customs

purposes, the Department's written description of the merchandise under

investigation is dispositive.

Excluded from the scope of this investigation are the following:

(1) sheet and strip that is not annealed or otherwise heat treated and

pickled or otherwise descaled, (2) sheet and strip that is cut to

length, (3) plate (i.e., flat-rolled stainless steel products of a

thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled

sections, with a prepared edge, rectangular in shape, of a width of not

more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a

flat-rolled product of stainless steel, not further worked than cold-

rolled (cold-reduced), in coils, of a width of not more than 23 mm and

a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5

percent chromium, and certified at the time of entry to be used in the

manufacture of razor blades. See Chapter 72 of the HTS, ``Additional

U.S. Note'' 1(d).

In response to comments by interested parties the Department has

determined that certain specialty stainless steel products are also

excluded from the scope of this investigation. These excluded products

are described below:

Flapper valve steel is defined as stainless steel strip in coils

containing, by weight, between 0.37 and 0.43 percent carbon, between

1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent

manganese. This steel also contains, by weight, phosphorus of 0.025

percent or less, silicon of between 0.20 and 0.50 percent, and sulfur

of 0.020 percent or less. The product is manufactured by means of

vacuum arc remelting, with inclusion controls for sulphide of no more

than 0.04 percent and for oxide of no more than 0.05 percent. Flapper

valve steel has a tensile strength of between 210 and 300 ksi, yield

strength of between 170 and 270 ksi, plus or minus 8 ksi, and a

hardness (Hv) of between 460 and 590. Flapper valve steel is most

commonly used to produce specialty flapper valves in compressors.

Also excluded is a product referred to as suspension foil, a

specialty steel product used in the manufacture of suspension

assemblies for computer disk drives. Suspension foil is described as

302/304 grade or 202 grade stainless steel of a thickness between 14

and 127 microns, with a thickness tolerance of plus-or-minus 2.01

microns, and surface glossiness of 200 to 700 percent Gs. Suspension

foil must be supplied in coil widths of not more than 407 mm, and with

a mass of 225 kg or less. Roll marks may only be visible on one side,

with no scratches of measurable depth. The material must exhibit

residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm

over 685 mm length.

Certain stainless steel foil for automotive catalytic converters is

also excluded from the scope of this investigation. This stainless

steel strip in coils is a specialty foil with a thickness of between 20

and 110 microns used to produce a metallic substrate with a honeycomb

structure for use in automotive catalytic converters. The steel

contains, by weight, carbon of no more than 0.030 percent, silicon of

no more than 1.0 percent, manganese of no more than 1.0 percent,

chromium of between 19 and 22 percent, aluminum of no less than 5.0

percent, phosphorus of no more than 0.045 percent, sulfur of no more

than 0.03 percent, lanthanum of less than 0.002 or greater than 0.05

percent, and total rare earth elements of more than 0.06 percent, with

the balance iron.

Permanent magnet iron-chromium-cobalt alloy stainless strip is also

excluded from the scope of this investigation. This ductile stainless

steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10

percent cobalt, with the remainder of iron, in widths 228.6 mm or less,

and a thickness between 0.127 and 1.270 mm. It exhibits magnetic

remanence between 9,000 and 12,000 gauss, and a coercivity of between

50 and 300 oersteds. This product is most commonly used in electronic

sensors and is currently available under proprietary trade names such

as ``Arnokrome III.'' 1

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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering

Company.

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Certain electrical resistance alloy steel is also excluded from the

scope of this investigation. This product is defined as a non-magnetic

stainless steel manufactured to American Society of Testing and

Materials (``ASTM'') specification B344 and containing, by weight, 36

percent nickel, 18 percent chromium, and 46 percent iron, and is most

notable for its resistance to high temperature corrosion. It has a

melting point of 1390 degrees Celsius and displays a creep rupture

limit of 4 kilograms per square millimeter at 1000 degrees Celsius.

This steel is most commonly used in the production of heating ribbons

for circuit breakers and industrial furnaces, and in rheostats for

railway locomotives. The product is currently available under

proprietary trade names such as ``Gilphy 36.'' 2

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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.

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Certain martensitic precipitation-hardenable stainless steel is

also excluded from the scope of this investigation. This high-strength,

ductile stainless steel product is designated under the Unified

Numbering System (``UNS'') as S45500-grade steel, and contains, by

weight, 11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,

manganese, silicon and molybdenum each comprise, by weight, 0.05

percent or less, with phosphorus and sulfur each comprising, by weight,

0.03 percent or less. This steel has copper, niobium, and titanium

added to achieve aging, and will exhibit yield strengths as high as

1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after

aging, with elongation percentages of 3 percent or less in 50 mm. It is

generally provided in thicknesses between 0.635 and 0.787 mm, and in

widths of 25.4 mm. This product is most commonly used in the

manufacture of television tubes and is currently available under

proprietary trade names such as ``Durphynox 17.'' 3

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\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.

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Finally, three specialty stainless steels typically used in certain

industrial blades and surgical and medical instruments are also

excluded from the scope of this investigation. These include stainless

steel strip in coils used in the production of textile cutting tools

(e.g., carpet knives). 4 This steel is similar to AISI grade

420 but containing, by weight, 0.5 to 0.7 percent of molybdenum. The

steel also contains, by weight, carbon of between 1.0 and

[[Page 30752]]

1.1 percent, sulfur of 0.020 percent or less, and includes between 0.20

and 0.30 percent copper and between 0.20 and 0.50 percent cobalt. This

steel is sold under proprietary names such as ``GIN4 Mo.'' The second

excluded stainless steel strip in coils is similar to AISI 420-J2 and

contains, by weight, carbon of between 0.62 and 0.70 percent, silicon

of between 0.20 and 0.50 percent, manganese of between 0.45 and 0.80

percent, phosphorus of no more than 0.025 percent and sulfur of no more

than 0.020 percent. This steel has a carbide density on average of 100

carbide particles per 100 square microns. An example of this product is

``GIN5'' steel. The third specialty steel has a chemical composition

similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,

molybdenum of between 1.15 and 1.35 percent, but lower manganese of

between 0.20 and 0.80 percent, phosphorus of no more than 0.025

percent, silicon of between 0.20 and 0.50 percent, and sulfur of no

more than 0.020 percent. This product is supplied with a hardness of

more than Hv 500 guaranteed after customer processing, and is supplied

as, for example, ``GIN6''. 5

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\4\ This list of uses is illustrative and provided for

descriptive purposes only.

\5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary

grades of Hitachi Metals America, Ltd.

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Period of Investigation

The period of investigation (``POI'') is April 1, 1997 through

March 31, 1998.

Critical Circumstances

On October 30, 1998, petitioners alleged that there is a reasonable

basis to believe or suspect that critical circumstances exist with

respect to imports of SSSS from Italy. In accordance with 19 CFR

351.206(c)(2)(i), we preliminarily determined that critical

circumstances did not exist with respect to respondent AST, because the

Department found that the estimated dumping margin was not 15 percent

or greater, the threshold for the Department to impute knowledge on the

part of the importer that dumping was occurring when the transactions

are CEP sales. See Preliminary Determination and discussion below.

Section 735(a)(3) of the Act provides that the Department will

determine that critical circumstances exist if: (A)(i) there is a

history of dumping and material injury by reason of dumped imports in

the United States or elsewhere of the subject merchandise; or (ii) the

person by whom, or for whose account, the merchandise was imported knew

or should have known that the exporter was selling the subject

merchandise at less than its fair value and that there would be

material injury by reason of such sales; and (B) there have been

massive imports of the subject merchandise over a relatively short

period.

To determine whether there is a history of injurious dumping of the

merchandise under investigation, in accordance with section

735(a)(3)(A)(i) of the Act, the Department considers evidence of an

existing antidumping order on SSSS from the country in question in the

United States or elsewhere to be sufficient. We are not aware of any

antidumping order in any country on SSSS from Italy.

In determining whether an importer knew or should have known that

the exporter was selling SSSS at less than fair value and thereby

causing material injury, the Department normally considers margins of

15 percent for CEP sales and 25 percent for EP sales sufficient to

impute knowledge of dumping and of resultant material injury. See

Notice of Final Determination of Sales Less than Fair Value: Certain

Cut-to-Length Carbon Steel Plate from the People's Republic of China,

63 FR 61964, 61967 (November 20, 1997); see also Notice of Final

Determination of Sales Less Than Fair Value: Manganese Sulphate from

People's Republic of China 60 FR 52155, 52161 (October 5, 1995).

In this investigation, AST, which the Department has determined has

CEP sales, does not have a margin over 15 percent. Based on these

facts, we determine that the first criterion for ascertaining whether

critical circumstances exist is not satisfied. Therefore, we determine

that critical circumstances do not exist with respect to imports of

SSSS from AST. Because the first criterion is not met, we did not

analyze the respondent's shipment data to examine whether imports of

SSSS have been massive over a relatively short period. See e.g., Notice

of Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Collated Roofing Nails from Korea,

63 FR 25895, 25898 (May 12, 1997).

Regarding all other exporters, an ``All Others'' rate has been

determined (see ``The All Others Rate'', below); because this rate does

not exceed 15 percent, we determine that critical circumstances do not

exist for companies covered by the ``All Others'' rate.

Verification

As provided in section 782(i) of the Act, we verified the sales and

cost information submitted by the respondent for use in our final

determination. We used standard verification procedures, including

examination of relevant sales, accounting, and production records and

original source documents provided by respondent.

Affiliation

As explained in the Preliminary Determination, we find that, for

purposes of this investigation, AST is affiliated with Thyssen AG

(``Thyssen''). Record evidence established that AST is 75 percent owned

by a joint venture company, Krupp Thyssen Stahl (``KTS''). KTS, in

turn, is 40 percent owned by Thyssen Stahl AG (``Thyssen Stahl''),

itself a wholly-owned subsidiary of Thyssen AG (the remaining sixty

percent of KTS is controlled by Thyssen's joint-venture partner, Fried.

Krupp. AG Krupp-Hoesch (Fried. Krupp)). Consequently, Thyssen AG,

indirectly has a 33.75 percent equity holding in AST and, because this

is greater than five percent, Thyssen AG is affiliated with AST within

the meaning of section 771(33)(E) of the Act. See Preliminary

Determination at 64 FR 118 and Memorandum to the File; ``Affiliation of

AST and Thyssen AG, and AST and A Thyssen Affiliate (company A),''

December 17, 1998 (Affiliation Memorandum).

In addition, we continue to find that AST is affiliated with

Thyssen's home market and U.S. sales affiliates. Section 771(33)(F) of

the Act authorizes the Department to find companies to be affiliated

where two or more companies are under the common control of a third

company. Section 771(33) of the statute defines ``control'' as one

person being ``legally or operationally in a position to exercise

restraint or direction over the other person.'' The actual exercise of

control by one person over the other is not required in order to find

the parties affiliated. In this investigation the nature and quality of

corporate contact necessitate a finding of affiliation by virtue of

Thyssen's common control of its affiliates and of AST. The record

demonstrates that Thyssen, as the majority equity holder in, and

ultimate parent of, its various affiliates, is in a position to

exercise direction and restraint over the affiliates' production and

pricing. As we stated in the Preliminary Determination, ``Thyssen

retained the ability to control the production and pricing decisions of

AST through the joint venture of KTS. Because both company A and AST

are controlled by Thyssen AG within the meaning of section 771(33)(F),

we have found that AST and company A are affiliated.'' See 64 FR 119.

For a discussion of AST's affiliated parties,

[[Page 30753]]

see Comment 3 below, the Affiliated Party Memorandum, and Memorandum

For the File; ``Antidumping Duty Investigation on Stainless Steel Sheet

and Strip in Coils from Italy--Final Determination Analysis for Acciai

Speciali Terni SpA'' (Final Analysis Memorandum) May 19, 1999.

Transactions Investigated

As in the preliminary determination, the Department has determined

that for U.S. and home market sales the date of invoice is the

appropriate date of sale because this is the date on which the material

terms of sale are set. For further discussion see Comment 6.

Product Comparisons

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

products produced by the respondent covered by the description in the

``Scope of the Investigation'' section, above, and sold in the home

market during the POI, to be foreign like products for purposes of

determining appropriate product comparisons to U.S. sales. Where there

were no sales of identical merchandise in the home market to compare to

U.S. sales, we compared U.S. sales to the next most similar foreign

like product on the basis of the characteristics and reporting

instructions listed in the Department's questionnaire.

As discussed in Comment 8, the Department has considered that sales

of side-cuts and pup coils to be sales of prime merchandise for the

purposes of this final determination. For matching purposes, we have

matched AST's sale of prime merchandise in the home market to sales of

prime merchandise in the U.S. market. We have also matched sales of

non-prime merchandise in the home market to sales of non-prime

merchandise in the U.S. market.

Fair Value Comparisons

To determine whether sales of SSSS from Italy to the United States

were made at less than fair value, we compared the constructed export

price (``CEP'') to the normal value (``NV''), as described in the

``constructed export price'' and ``normal value'' sections of this

notice, below. In the preliminary determination, we calculated

weighted-average EP for some of AST's U.S. sales. However, as discussed

in Comment 5, the Department has found that all of AST's U.S. sales,

which were made through AST USA, constitute CEP sales and we have

therefore compared CEP to NV for those sales. In accordance with

section 777A(d)(1)(A)(i) of the Act, we calculated weighted-average

CEPs for comparison to weighted-average NVs.

Level of Trade

In accordance with section 773(a)(1)(B)(i) of the Act, to the

extent practicable, we determine NV based on sales in the comparison

market at the same level of trade (``LOT'') as the EP or CEP

transaction. The NV LOT is that of the starting price comparison sales

in the home market or, when NV is based on constructed value (``CV''),

that of the sales from which we derive selling, general and

administrative expenses (``SG&A'') and profit. For EP, the LOT is also

the level of the starting price sale, which is usually from the

exporter to the importer. For CEP, it is the level of the constructed

sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP

sales, we examine stages in the marketing process and selling functions

along the chain of distribution between the producer and the

unaffiliated customer in the comparison market. If the comparison-

market sales are at a different LOT, and the difference affects price

comparability, as manifested in a pattern of consistent price

differences between the sales on which NV is based and comparison

market sales at the LOT of the export transaction, we make a LOT

adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP

sales, if the NV level is more remote from the factory than the CEP

level and there is no basis for determining whether the differences in

the levels between NV and CEP sales affects price comparability, we

adjust NV under section 773(A)(7)(B) of the Act (the CEP offset

provision). See Certain Cut-to-Length Carbon Steel Plate from South

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

62 FR 61731 (November 19, 1997).

In order to determine whether NV was established at a different LOT

than CEP sales, we examined stages in the marketing process and selling

functions along the chains of distribution between AST and its home

market customers. We compared the selling functions performed for home

market sales with those performed with respect to the CEP transaction,

after deductions for economic activities occurring in the United

States, pursuant to section 772(d) of the Act, to determine if the home

market levels of trade constituted more advanced stages of distribution

than the CEP level of trade.

In this investigation, AST did not request a LOT adjustment. To

ensure a LOT adjustment was not necessary and in accordance with

principles discussed above, we examined information regarding the

distribution systems in both the United States and Italian markets,

including the selling functions, classes of customer and selling

expenses for each respondent.

For its home market sales, AST reported: (1) three customer

categories--industrial end-users, white goods manufacturers, and

service centers/distributors; and (2) two channels of

distribution'direct factory sales (sales of prime merchandise) and

warehouse sales (the majority of which are sales of non-prime

merchandise). AST claimed two levels of trade in the home market based

solely on the quality of subject merchandise, i.e., prime vs. non-

prime.

In reviewing AST's LOT in the home market, we asked AST to identify

the specific differences and similarities in selling functions and/or

support services between all phases of marketing to customers in the

home market and the United States. As mentioned above, AST identified

two channels of distribution in the home market based entirely on

whether the sale to the customer was of prime or non-prime merchandise.

For sales of prime merchandise, AST sold to all three of the types of

customers mentioned above, and provided the same selling functions to

each of the customer types. Specifically, AST provided freight and

delivery, credit, technical services, and warranties. For sales of

mostly non-prime merchandise sold from AST's warehouse, AST performed

the same selling functions (except for providing warranties) as for

sales of its prime merchandise, but AST also engaged in the additional

selling activities of advertising for its mostly non-prime merchandise

and maintaining inventory of this merchandise at AST's warehouse.

Because the selling activities engaged in by AST were identical for

each customer when selling prime merchandise and were identical for

each customer when selling mostly non-prime from inventory, and because

the selling activities for both groups of sales were very similar, we

continue to determine, as we did in the preliminary determination, that

there exists one level of trade for AST's home market sales.

For its U.S. sales, AST reported that its affiliated importer, AST

USA, made sales to two customer categories--industrial end-users and

service centers, and through three channels of distribution--direct

factory sales, warehouse sales, and consignment sales. AST claimed two

levels of trade in the U.S. market based solely on the quality of

subject merchandise: (1) non-prime; and (2) prime. We examined the

claimed selling functions performed by AST and its U.S. affiliate, AST

USA, for

[[Page 30754]]

all U.S. sales. For back-to-back sales made directly to the

unaffiliated U.S. customer, AST performed the following selling

functions: it provided technical and warranty services; arranged for

freight and delivery; and extended credit. For sales which AST reported

as CEP sales, AST engaged in identical selling activities, providing

technical and warranty services, freight and delivery and credit.

Based on a comparison of the selling activities performed in the

U.S. market to the selling activities in the home market, we conclude

that there is not a significant difference in the selling functions

performed in both markets. The Department confirmed this information at

the verification (see Verification Of Sales of Acciai Speciali Terni

S.p.A., dated March 25, 1999 (``Verification Report of AST'')).

Therefore, for the final determination, we determine that there is one

LOT in the U.S. and that sales to these customers constitute the same

LOT in the comparison market and the United States. Therefore, a LOT

adjustment for AST is not appropriate.

Additionally, as noted in Comment 5, we have classified all of

AST's U.S. sales as CEP sales. Because we determine that there exists

only one level of trade for all of AST's sales in both markets, we

conclude that no CEP offset is warranted for the final determination.

Constructed Export Price

As discussed in Comment 5, we determine that all of AST's U.S.

sales are CEP. We calculated CEP based on the packed, duty paid or

delivered prices to unaffiliated purchasers in the United States. We

made adjustments to the starting price for price-billing errors, where

applicable. In addition, we made adjustments to the starting price by

adding alloy surcharges, and skid charges where appropriate. We also

made deductions for movement expenses in accordance with section

772(c)(2)(A) of the Act; these included, where appropriate, freight

equalization charges, foreign inland freight, marine insurance, U.S.

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

international freight, foreign inland insurance, and U.S. warehousing

expenses. In accordance with section 772(d)(1) of the Act, we deducted

those selling expenses associated with economic activities occurring in

the United States, including direct selling expenses (credit costs and

warranty expenses), inventory carrying costs, and other indirect

selling expenses. We also added insurance revenue by allocating it

across all U.S. sales of subject merchandise. We also made an

adjustment for profit in accordance with section 772(d)(3) of the Act.

Affiliated-Party Transactions and Arm's-Length Test

To test whether sales to affiliated parties were made at arm's-

length prices, we compared, on a model-specific basis, the starting

prices of sales to affiliated and unaffiliated customers, net of all

movement charges, direct selling expenses, and packing. Where, for the

tested models of subject merchandise, prices to the affiliated party

were on average 99.5 percent or more of the price to the unaffiliated

parties, we determined that sales made to the affiliated party were at

arm's length. See 19 CFR 351.403(c). In instances where no price ratio

could be constructed for an affiliated customer because identical

merchandise was not sold to unaffiliated customers, we were unable to

determine that these sales were made at arm's-length prices and,

therefore, excluded them from our LTFV analysis. See Final

Determination of Sales at Less Than Fair Value: Certain Cold-Rolled

Carbon Steel Flat Products from Argentina (``Certain Cold-Rolled Carbon

Steel Flat Products from Argentina''), 58 FR 37062, 37077 (July 9,

1993); Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Emulsion Styrene-

Butadiene Rubber from Brazil, 63 FR 59509 (November 8, 1998), citing to

Certain Cold-Rolled Carbon Steel Flat Products from Argentina. Where

the exclusion of such sales eliminated all sales of the most

appropriate comparison product, we made a comparison to the next most

similar model.

Normal Value

After testing home market viability and whether home market sales

were at below-cost prices, we calculated NV as noted in the ``Price-to-

Price Comparisons'' and ``Price-to-CV Comparison'' sections of this

notice.

1. Home Market Viability

As discussed in the preliminary determination, we determined that

the home market was viable and no parties have contested that decision.

For the final determination, we based NV on home market sales.

2. Cost of Production Analysis

As discussed in the preliminary determination, we conducted an

investigation to determine whether AST made sales of the foreign like

product in the home market during the POI at prices below its cost of

production (``COP''). In accordance with section 773(b)(3) of the Act,

we calculated COP based on the sum of AST's cost of materials and

fabrication for the foreign like product, plus amounts for home market

SG&A, interest expenses, and packing costs. We used the information

from AST's December 2, 1998 supplemental questionnaire response to

calculate COP. As noted in Comment 25, we have reduced AST's financial

expenses by Fried. Krupp's short-term income from investments.

Additionally, we recalculated AST's G&A rate, adding the ``other

operating expense'' to G&A and removing the expenses that AST had

reported in other fields. See Comment 26. Lastly, we used the corrected

variance in the COP calculation for the final determination. See

Comment 28.

3. Test of Home Market Prices

As in our preliminary determination, we compared the weighted-

average COP for AST, adjusted where appropriate, to home market sales

of the foreign like product as required under section 773(b) of the

Act. In determining whether to disregard home market sales made at

prices less than the COP, we examined whether (1) within an extended

period of time, such sales were made in substantial quantities, and (2)

such sales were made at prices which permitted the recovery of all

costs within a reasonable period of time. On a product-specific basis,

we compared the COP to home market prices, less any applicable movement

charges, billing adjustments, alloy surcharges, skid charges, rebates,

and direct and indirect selling expenses.

4. Results of the COP Test

Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20

percent of a respondent's sales of a given product were at prices less

than the COP, we did not disregard any below-cost sales of that product

because we determined that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a respondent's

sales of a given product during the POI were at prices less than the

COP, we determined such sales to have been made in ``substantial

quantities'', pursuant to section 773(b)(2)(c)(i) of the Act, within an

extended period of time, in accordance with section 773(b)(2)(B) of the

Act. In such cases, because we compared prices to weighted-average COPs

for the POI, we also determined that such sales were not made at prices

which would permit recovery of all costs within a reasonable period of

time, pursuant to section 773(b)(2)(D) of the

[[Page 30755]]

Act. Therefore, we disregarded the below-cost sales. Where all sales of

a specific product were at prices below the COP, we disregarded all

sales of that product. For those U.S. sales of SSSS for which there

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

we compared the CEP to CV in accordance with section 773(a)(4) of the

Act. See Analysis Memorandum.

Calculation of Constructed Value

As in our preliminary determination, we calculated CV based on the

sum of AST's cost of materials, fabrication, selling, general, and

administrative expenses (SG&A), interest expenses, profit, and packing.

We calculated the COP included in the calculation of CV as noted above,

in the ``Calculation of COP'' section of this notice. In accordance

with section 773(e)(2)(A) of the Act, we based SG&A and profit on the

amounts incurred and realized by AST in connection with the production

and sale of the foreign like product in the ordinary course of trade

for consumption in Italy. For CV, we made the same adjustments

described in the COP section above.

Price-to-Price Comparisons

As in our preliminary determination, for AST's home market sales of

products that were above COP, we calculated NV based on FOB or

delivered prices to unaffiliated customers or prices to affiliated

customers that we determined to be at arm's-length. We made adjustments

for price billing errors, discounts, and rebates where appropriate. We

made deductions, where appropriate, for foreign inland freight,

warehousing, and foreign inland insurance expenses, pursuant to section

773(a)(6)(B) of the Act. In addition, we made adjustments for

differences in circumstances of sale (COS) in accordance with section

773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS

adjustments, where appropriate, for imputed credit, warranty expenses,

and technical expenses. Finally, we deducted home market packing costs

and added U.S. packing costs in accordance with section 773(a)(6) (A)

and (B) of the Act.

Price-to-CV Comparisons

In accordance with section 773(a)(4) of the Act, we based NV on CV

if we were unable to find a home market match of such or similar

merchandise. Where appropriate, we made adjustments to CV in accordance

with section 773(a)(8) of the Act. For comparisons to CEP, we deducted

from CV the average home market direct selling expenses.

Currency Conversion

As in our preliminary determination, we made currency conversions

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

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

with section 773A(a) of the Act.

Facts Available

We determine that the use of partial facts available is appropriate

for AST in accordance with section 776(a) of the Act, because it failed

to report all of its U.S. sales made during the POI, and its U.S.

affiliated reseller's (company A) downstream sales are unreliable. See

Comments 1 and 2 below.

Where necessary information is missing from the record, the

Department must use the facts otherwise available, in accordance with

section 776 of the Act. Further, where that information is missing

because a respondent has failed to cooperate to the best of its

ability, section 776(b) of the Act authorizes the Department to use an

inference adverse to the interests of that respondent when selecting

from the facts available. An adverse inference may include reliance on

information derived from the petition, the final determination, a

previous administrative review, or other information placed on the

record. For AST's unreported U.S. sales, we have chosen the highest

non-aberrational margin from the rest of AST's U.S. sales as partial

facts available. See Comment 1 below. For company A's downstream sales,

we have also selected the highest non-aberrational margin from the rest

of AST's U.S. sales. See Comment 2 below.

The All Others Rate

For this final determination, since AST was the only respondent,

the all other's rate is simply the calculated rate for AST.

Interested Party Comments

Comment 1: Application of Facts Available to Additional U.S. Sales

Respondent argues that the Department should ignore additional U.S.

sales that AST attempted to report prior to verification. Respondent

maintains that, in preparing for verification, it discovered additional

U.S. sales that it had previously failed to report to the Department.

Respondent argues that its first attempt to file this new

information, on February 24, 1999, effectively allowed the Department

eleven days to review the information prior to the beginning of the

U.S. sales verification at AST U.S.A. Respondent notes that the

verification team for the sales verification at AST U.S.A. was

different than the team attending the verification of AST in Italy, and

argues that this allowed adequate time to review the new information.

Respondent also notes that the Department did not return the February

24, 1999 submission until nine days later. Respondent asserts that

during this period of time the Department had the opportunity to review

the new information.

Respondent further argues that petitioners would not have been

prejudiced by the acceptance of this new information given the timing

of the February 24, 1999 submission, the verification of AST U.S.A.,

and the deadlines for submission of case briefs.

Respondent maintains that the additional U.S. sales would not have

materially affected AST's final margin. Respondent argues that the

record, as supported through verification, shows that the additional

U.S. sales constitute a relatively small percentage of AST's total U.S.

sales during the POI. Respondent asserts that this relatively small

percentage would have an even more negligible effect if the Department

were to accept petitioners' argument that order date should be used to

determine date of sale in the U.S. market.

Respondent continues that, under established Department precedent

for investigations, the Department should ignore these additional U.S.

sales. Respondent points out that the Department's margin calculation

in an investigation will be used only to determine an estimated dumping

margin for cash deposit purposes, and also notes that the statute

requires the Department to use weighted-average U.S. prices rather than

individual U.S. prices to determine dumping margins. Therefore,

according to respondent, the Department need not consider every U.S.

sale in calculating the final dumping margin. Respondent cites several

cases in which, respondent argues, the Department has either accepted

and verified similar data or has simply excluded additional sales from

consideration in determining the margin (citing, e.g., Final

Determinations of Sales at Less than Fair Value: Antifriction Bearings

(Other than Tapered Roller Bearings) and Parts Thereof from the Federal

Republic of Germany (``Antifriction Bearings''), 54 FR 18992, 19039

(May 3, 1989); Final Determination of Sales at Less Than Fair Value:

Bicycles from the People's Republic of China (``Bicycles''), 61 FR

19026 (April 30, 1996); and Final Determination of Sales at Less Than

Fair Value: Gray Portland Cement and Clinker from Japan (``Gray

Portland

[[Page 30756]]

Cement and Clinker from Japan''), 56 FR 12156 (March 22, 1991)).

Respondent argues that if the Department decides not to ignore

these additional sales and apply facts available, it would be

inappropriate for the Department to apply adverse facts available in

this case because respondent argues that it has cooperated fully

throughout the proceeding. To support its argument, respondent cites to

Allied-Signal, 996 F.2d at 1188, and Final Results of Antidumping

Administrative Review: Color Picture Tubes from Japan (``Color Picture

Tubes''), 62 FR 34201, 34209 (June 25, 1997), where the respondent

``substantially cooperated'' but simply failed to supply some of the

information in a timely manner or in the form required.

Moreover, respondent argues that it did not withhold this

information, but rather, disclosed this information to the Department

as soon as it discovered these additional sales and sought repeatedly

to submit this and more detailed information regarding these sales

before, during, and after verification. Respondent cites Notice of

Final Determination of Sales at Not Less Than Fair Value: Stainless

Steel Bar from Italy (``Stainless Steel Bar''), 59 FR 66921, 66924

(December 28, 1994) as an analogous situation in which the Department

in fact was not aware of additional U.S. sales until verification, but,

nevertheless, the Department still verified that the gross unit prices

for the unreported sales were comparable to those for reported sales of

the same products. In that case, respondent notes that the Department

determined that ``it is reasonable to fill this gap with a neutral

surrogate'' and ``assigned (the respondent's) overall weighted-average

calculated margin to these unreported sales.''

Petitioners contend that, contrary to respondent's assertions,

substantial evidence on the record demonstrates that AST failed to

cooperate to the best of its ability to provide information requested

by the Department and the use of total facts available is therefore

warranted. First, petitioners claim that respondent has relied

primarily on ``old law'' cases to support its contention that the

Department should not apply facts available with an adverse inference.

However, under the current adverse facts available standard,

petitioners argue that the Department ``shall'' apply facts available

when necessary information is not on the record, or a respondent

withholds information requested by the Department, fails to provide

such information by the deadline for its submission, significantly

impedes a proceeding, or provides information that cannot be verified.

Petitioners maintain that the record demonstrates that respondent has

withheld information that has been requested by the Department.

Petitioners argue that the critical question in this case is

whether the reporting failures by respondent surpass the Department's

standard for the use of an adverse inference in applying facts

otherwise available. Petitioners contend that respondent's failure to

provide complete sales information, while stating ``without detail''

that the reporting failure was ``inadvertent'', constitutes a failure

on the part of respondent to act to the best of its ability to respond

to the Department's request for information.

Petitioners assert that the data withheld by respondent is crucial

to the Department's investigation. Petitioners cite to Notice of Final

Determination of Sales at Less Than Fair Value: Certain Cut-to-Length

Carbon Steel Plate From South Africa (``CTL Steel Plate''), 62 FR

61731, 61747 (November 19, 1997), Florex v. United States, 705 F. Supp.

582, 588 (CIT 1988), and Tatung Co. v. United States, 18 CIT 1137

(1994) in support of the proposition that the Department and the CIT

have recognized that the failure to report U.S. sales data is one of

the most serious errors, if not the most serious error, a respondent

can commit.

Petitioners maintain that although AST attempted to submit new

information on the record, the Department properly rejected the new

information, citing several cases supporting the rejection of

information not submitted within regulatory guidelines, including NSK,

Ltd. v. United States, 798 F.Supp. 721 (CIT 1992). Petitioners take

issue with respondent's interpretation of Allied Signal. Petitioners

point out that, in that case, respondent was unable to provide the

requested data. Petitioners note that AST does not argue that it was

unable to provide the requested U.S. sales data.

In rebutting respondent's claim that the Department does not need

to consider every U.S. sale in calculating the final dumping margin,

petitioners argue that, given the Department's calculation methodology

in investigations, in which weighted average prices by the U.S. and

home market are compared on a control number-specific (``product-

specific'') basis, there could indeed be a significant effect on the

calculated margin for certain control numbers by excluding a

``significant'' quantity of U.S. sales.

Petitioners take issue with respondent's interpretation of certain

cases in which the Department has not applied an adverse inference when

information is not submitted. In Antifriction Bearings (54 FR 18992,

19039), petitioners note that the Department found that respondent had

not reported sales of one tenth of one percent (by volume) of 33

percent of the U.S. sales it was required to report. Moreover, the

Department found, in that case, that the unit prices of the unreported

sales were nearly three times greater than the unit prices for the same

products to other customers which were reported in the sales listing.

According to petitioners, this fact pattern is not present in the

instant proceeding.

In Bicycles (61 FR 19026, 19041), petitioners argue, the Department

allowed the exclusion of a ``minor'' amount of U.S. sales in certain

extenuating circumstances not present in this investigation. First, in

Bicycles, respondent had believed the excluded sales to be of non-

subject merchandise. Second, the record in that case permitted the

Department to calculate a margin on those excluded sales. Third, the

sales in question represented a minor amount of U.S. sales. Finally,

the sales at issue in Bicycles were of a higher-priced model.

Petitioners contend that none of these facts are present in this

investigation.

Petitioners state that in Gray Portland Cement and Clinker from

Japan (56 FR 12156, 12165), the Department determined that respondent's

sales of bagged cement represented an insignificant portion of total

U.S. sales. Again, according to petitioners, the same is not true in

this proceeding.

In Color Picture Tubes (62 FR 34201), petitioners note that

respondent Mitsubishi stated that a ``very small number of U.S. sales

were made of models for which COM data was not available.'' Petitioners

argue that this is not tantamount to a decision by the Department that

it ignores unreported U.S. sales and does not resort to facts available

when U.S. sales data are not reported. In addition, Mitsubishi was

unable to provide the COM data because they were not available. Again,

according to petitioners, AST has never claimed that this sales data

was unavailable.

In Stainless Steel Bar from Italy (59 FR 66921), petitioners claim,

the Department's decision not to apply adverse BIA turned ``entirely''

on the unique circumstances noted during verification. Moreover, in

that case, the Department determined that the unreported sales were

limited in number, and the gross unit prices of the

[[Page 30757]]

unreported sales were comparable to those for reported sales of the

same products. In contrast, petitioners argue that in this

investigation the sales were not limited, and also note that the

Department did not verify the gross unit prices of the unreported

sales.

Petitioners maintain that the discrepancies in the company's U.S.

sales volume found at verification and the company's inability to

explain the exclusion of several U.S. sales from its response is

sufficient evidence of AST's lack of cooperation. Petitioners argue

that both the Department and the courts consider the omission of U.S.

sales a serious error (citing Tatung Co. v. United States, 18 CIT 1137,

1141 (1994)), and that such an omission warrants the use of adverse

facts available (citing CTL Steel Plate, 62 FR 61731, 61747 (November

19, 1997). Petitioners also cite to Persico Pizzamiglio, S.A. v. United

States, 18 CIT 299, 304 (1998), noting that the Department used best

information available, in large part due to respondent's failure to

report U.S. sales accurately.

Department's Position: We agree with petitioners, in part, and have

applied partial adverse facts available with respect to the additional

U.S. sales that AST omitted from its response.

Although we repeatedly gave AST the opportunity to submit data

pertaining to its sales database, AST did not submit its additional

U.S. sales until three days prior to the start of the verification of

AST in Terni, Italy, well after the deadlines for responding to our

questionnaires. Therefore, contrary to respondent's assertion, there

can be no reasonable argument that this information was timely

submitted. Pursuant to section 351.301(c)(2)(ii) of the Department's

regulations, failure to submit requested information in the requested

form and manner by the date specified for questionnaire responses may

result in the use of facts available under section 776 of the Act and

section 351.308 of the Department's regulations.6

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

\6\ In initially rejecting AST's submission of additional U.S.

sales, we erroneously cited section 351.301(b)(1) of the

Department's regulations because AST submitted them later than seven

days before the date on which the verification of any person is

scheduled to begin. The relevant regulation is 351.301(c)(2). We

subsequently rejected other attempts that AST made to submit this

information, pursuant to section 351.302(d) of the Department's

regulations, because it was untimely filed.

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

Nevertheless, respondent argues that we should have accepted the

additional U.S. sales information, pursuant to section 782(e) of the

Act, which provides that the Department shall not decline to consider

such information if all of the following requirements are met: (1) the

information is submitted by the established deadline; (2) the

information can be verified; (3) the information is not so incomplete

that it cannot serve as a reliable basis for reaching the applicable

determination; (4) the interested party has demonstrated that it acted

to the best of its ability; and (5) the information can be used without

undue difficulties. However, section 782(e) is not applicable in this

case, because this section only applies to information that is

submitted by the established deadline. Indeed, timely submission by the

established deadline is the first requirement for this section to

apply. As discussed above, AST did not submit this information by the

deadline for the questionnaire response, and therefore, section 782(e)

is not applicable.

According to section 776(a)(2)(B), if an interested party fails to

provide information in a timely manner or in the form or manner

requested, the Department shall use facts otherwise available in

reaching the applicable determination. As explained above, AST failed

to provide the information for the additional U.S. sales in a timely

manner. Therefore, pursuant to section 776(a), the Department must use

facts otherwise available to assign margins to these additional U.S.

sales.

Finally, AST argues that if we rely on facts otherwise available,

an adverse inference is not appropriate. Section 776(b) of the Act

provides that, if the administering authority ``finds that an

interested party has failed to cooperate by not acting to the best of

its ability to comply with a request for information,'' then in

selecting from the facts available it ``may use an inference that is

adverse to the interests of that party in selecting from among the

facts otherwise available.'' We find, based on the evidence set out

below, AST did not act to the best of its ability in complying with our

request for sales data. Because AST submitted these sales only three

days prior to verification, this information was not provided by the

deadline set for AST's responses to Section C of the Department's

questionnaire.

Failure to report significant amounts of import data, such as U.S.

sales data, indicates a lack of best efforts, unless there are

extenuating circumstances that explain the failure. There is no

evidence of such circumstances in this case. As noted in the

Verification Report of AST USA, AST stated at verification that it did

not know the reasons why these sales were excluded. See Verification

Report of AST USA at 2. Furthermore, we note that AST submitted its

sale reconciliation package on November 12, 1998, the deadline for

responding to the supplemental questionnaire. If AST had acted to the

best of its ability, it is reasonable to assume that it would have

discovered these additional U.S. sales when preparing the

reconciliation package. Therefore, pursuant to section 776(b) of the

Act, we have used an adverse inference in selecting a margin for the

U.S. sales that AST omitted from the response because AST did not act

to the best of its ability in providing U.S. sales information to the

Department. As adverse facts available for these unreported U.S. sales,

we have applied the highest non-aberrational margin calculated from the

rest of the U.S. sales. See Comment 2 below, and Analysis Memorandum.

The cases cited by respondent where the Department either accepted

and verified additional sales data or excluded it from consideration in

determining the margin are distinguishable from this case. Unlike this

investigation, the Department, in Antifriction Antifriction Bearings,

Bicycles and Gray Portland Cement and Clinker from Japan, had

sufficient time to analyze the additional data submitted by the

respondent, and determined that the additional sales had no effect, or

a negligible effect, on the calculated margin. As noted by petitioners,

Color Picture Tubes concerned a situation where COM data was not

available for some U.S. sales, not a situation of unreported U.S.

sales. AST's reference to Stainless Steel Bar also does not apply to

this case because it concerns a unique circumstance in which the

Department noted at verification that the gross unit prices of the

unreported sales were comparable to those for reported sales of the

same products, and that the unreported sales were limited in number.

Therefore, respondent's reliance on these cases is misplaced. Moreover,

as noted in CTL Steel Plate, the Department believes that the failure

to report U.S. sales data is one of the most serious errors a

respondent can commit.

Comment 2: Application of Facts Available to Downstream Sales of

Reseller 001

Petitioners note that at verification of reseller 001, and contrary

to AST's claim, the Department found that a portion of its affiliated

reseller's sales previously identified as having an untraceable

supplier, were in fact traceable. In addition, petitioners note that

the number of significant errors found at the reseller's verification,

including its failure to report early-

[[Page 30758]]

payment discounts and the improper application of prime and non-prime

designations to its reported sales, warrant the use of adverse facts

available. Finally, petitioners note that under section 782(e) of the

Act, AST's reporting of the ``unidentified supplier'' sales by its

affiliated reseller should be considered untimely, and that, under

section 776(a), the Department should use facts otherwise available in

reaching the applicable determination.

Petitioners argue that AST had the burden to create a complete and

accurate record and failed to meet this burden, citing Pistachio Group

of the Ass'n of Food Indus. v. United States, 11 CIT 668, 671 F.Supp.

31, 39-40 (1987). Petitioners also maintain that respondent in this

case is not just AST: the investigation directly involves AST's

affiliates, as well. Thus, contend petitioners, AST's efforts to

``absolve itself from any responsibility for its affiliates'' reporting

efforts' should also be rejected.

Petitioners contend that AST has withheld requested information and

failed to cooperate to the best of its ability, and that the Department

should apply total adverse facts available. Petitioners argue that this

is an investigation of AST and its affiliates as a collective entity

selling to the United States, not just an investigation of AST's main

plants. Petitioners cite Koyo Seiko v. United States, 905 F. Supp.

1112, where the CIT stated that, when parties are affiliated, as AST is

with reseller 001, the burden of producing information sought by the

Department rests with the manufacturer, even if the respondent alleges

that the affiliate is unwilling to cooperate. Petitioners assert that

AST's affiliate Thyssen, under whose common control AST and reseller

001 operate, was also affiliated with and controlled reseller 001 and

could have added its influence to encourage reseller 001 to comply and

provide the requested information to the best of its ability, which it

did not do.

Respondent refutes petitioners' claim that AST and other parties

have been uncooperative and have not fully participated during the

investigation, and states that it made every effort to comply with the

Department's numerous requests for additional information. Respondent

argues that it does not have operational control over reseller 001, and

thus, cannot compel, or participate in, the preparation and submission

of the requested data over which it exercises no control. With regard

to the unattributed sales, respondent claims that it had no direct

involvement in the preparation of reseller 001's data and had no

knowledge of their contents.

Respondent argues that despite the fact that some errors were

identified at verification, reseller 001 did not fail verification

because the errors were isolated and do not undermine the basic

integrity of the data. Respondent states that the Department should

consider that reseller 001 developed the cost allocation program

specifically to respond to the Department's highly detailed reporting

requirements. Respondent argues that as a service center distributor

rather than a steel producer, reseller 001 has no need for, and

therefore had never developed, a computer system linking each and every

coil or sheet that it sells to a particular input metal product (coil

or sheet) purchased from a supplier. Respondent asserts that at

verification reseller 001 demonstrated that the programming problems

that were encountered were not widespread, but instead were extremely

isolated. Respondent notes that Exhibit 18 of reseller 001 Cost

Verification Report, including the complete description of the

programming errors and a list of the problematic transactions, was

presented to the Department at the start of the third day of the cost

verification. Respondent states that had the verifiers truly been

interested in further testing this listing or learning more about how

it was generated, they had adequate time to do so.

Respondent argues that even if, despite evidence to the contrary,

the Department were to determine that AST had failed to comply with

requests for information, the Court of International Trade's decision

in Ferro Union, Inc. v. United States, Slip Op. 99-27 ( CIT March 23,

1999) (``Ferro Union'') precludes the application of adverse facts

available in this case. Respondent argues that under the standards set

by Ferro Union, ``sufficiently impeding the review'' is not a

sufficient ground to warrant an application of adverse facts available,

but that the Department must also find that a party failed to ``comply

to the best of its ability.'' Respondent asserts that if the Department

determines that the data submitted by reseller 001 is not complete or

verifiable, it was not due to AST's deliberate recalcitrance.

Respondent argues that the Department should not use adverse facts

available because AST simply lacks the ability to respond any more

completely than it already has.

Department's Position: We agree with petitioners and find that

adverse facts available is warranted with regard to sales through AST's

affiliated U.S. reseller. 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 the instant case the use of facts available is warranted for the

sales in question. The computer programming used by reseller 001 to

identify its products' physical characteristics and to match each of

these products with its associated costs were found at verification to

be accomplishing neither end consistently or accurately. Moreover, both

the frequency of the errors and the absence on the record of

information necessary to correct certain of these errors serve to

undermine the overall credibility of the further-manufacturing response

as a whole, thus compelling the Department to rely upon total facts

available for further-manufactured sales by reseller 001. Reliance upon

facts available is required for these further manufactured sales

because the submitted data do not permit calculation of the adjustments

required under section 782(d)(2) of the Act for ``the cost of any

further manufacture or assembly (including additional material and

labor) * * *''.

Although the Department will correct some errors in reported costs

or will adjust incorrect data with facts otherwise available when the

errors are relatively minor and easily corrected based on verified data

on the record (see e.g., Notice of Final Determination of Sales at Less

Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336,

17337 (April 9, 1999), correction of the database is not a viable

option in this case because of the high percentage of errors found

through our testing at verification (nearly 40 percent of the items

tested were found to be in error). In addition, some of these errors

cannot be corrected using information on the record. More importantly,

the fundamental and pervasive nature of these errors raises concerns as

to the validity not only of the data subjected to direct testing, but

of the remainder of the response as well.

The Department's antidumping questionnaire put interested parties

on notice that all information submitted in this investigation would be

subject to verification, as required by section 783(i) of the Act, and,

further, that pursuant to section 776 the Department may use the facts

otherwise available if

[[Page 30759]]

all or any portion of the submitted information could not be verified.

In addition, in letters dated February 17 and 23, 1999, the Department

provided reseller 001 with the sales and cost verification agendas it

intended to follow, both of which repeated the warning that any failure

to verify information could result in the application of facts

available. The cost verification agenda identified nine transactions

that the Department intended to test. Reseller 001 had a full week to

gather supporting documentation for these nine transactions and to test

for itself the accuracy of the further manufacturing data. Clearly,

reseller 001 did not avail itself of these opportunities, since our

testing at verification revealed that costs for three of the nine

selected transactions were in error. When the Department then selected

nine additional transactions for review, four of these were found to

contain errors. The first step identified in the Department's

verification agenda calls for the respondent, at the outset of

verification, to present any errors or corrections found during its

preparation for the verification. None of the errors discussed here

were presented by reseller 001 at the outset of verification.

We disagree with AST's assertion that the numerous errors

identified by the Department affect only a small number of products out

of the possible universe of transactions and that the effect of the

errors is minuscule. As mentioned above, reseller 001 created a

computer program to respond to the Department's questionnaire which

sought to match an input coil to each output coil sold and to assign a

cost for each processing step through which the finished coil

supposedly passed. As noted, at verification we tested this computer

program to assess its accuracy and reliability and found that seven of

eighteen transactions tested contained errors in either the allocation

of processing costs or in the matching of input coils to output coils.

In two of these cases reseller 001 had assigned processing costs to

products which had, in fact, undergone no processing whatever. We note

that this discrepancy arose from the input coils and output coils

identified by reseller 001's own computer program. In another

transaction the combined widths of the finished products were greater

than the original width of the input coil as identified by the system,

an obvious physical impossibility that should have been identified by

reseller 001 as an error. The nature of these errors raises serious

doubts as to the accuracy of the overall program used to match input

master coils to output slit coils as sold. Further, several of these

errors served to understate the costs of further processing by shifting

portions of these costs to non-further-processed merchandise. Since

these errors affect the entire population of products sold (i.e., both

processed and unprocessed products), it is not possible for the

Department to isolate the problems and adjust for the errors

accordingly.

The program also failed to assign properly certain finishing costs.

Certain coils with a pre-buff finish applied to the underside had no

finishing costs reported for the additional processing. Finally, other

transactions contained errors in the application of surcharges for

processing small quantity orders. In the samples tested reseller 001

had reported quantity extra charges in excess of what should have been

reported. This error led to an understating of the variance between the

costs as allocated for purposes of the response and the costs as

maintained in the reseller 001's financial accounting system. Once

again, both errors reduced the costs allocated to further processed

products, thus creating further doubts as to the accuracy of the

underlying reporting methodology.

We also find unpersuasive AST's suggestion that because reseller

001 had to develop the computer program as a result of the Department's

highly detailed questionnaire it should therefore be held blameless for

any errors arising from its implementation of its chosen computer

logic. The surfeit of errors in reseller 001's data was not the result

of any unduly burdensome reporting requirements imposed by the

Department; rather, these shortcomings resulted in their entirety from

reseller 001's reliance on faulty computer programming and data which

reseller 001 apparently failed to review prior to verification.

Finally, we disagree with AST's assertion that reseller 001 was

able to quantify the extent of the cost errors on the final day of

verification. First, we note that reseller 001 made no attempt to

explain or quantify two of the errors discovered by the Department, the

allocation of processing costs to unprocessed material and the

misreporting of the small-quantity surcharge. More importantly, due to

the volume of information that must be verified in a limited amount of

time, the Department does not look at every transaction, but rather

samples and tests the information provided by respondents. See, e.g.,

Bomont Industries v. United States, 733 F. Supp. 1507, 1508 (CIT 1990)

([v]erification is like an audit, the purpose of which is to test

information provided by a party for accuracy and completeness.'') and

Monsanto Company v. United States, 698 F. Supp. 275, 281

(``[v]erification is a spot check and is not intended to be an

exhaustive examination of a respondent's business.''). It has been the

Department's long-standing practice that if no errors are identified in

the sampled transactions, the untested data are deemed reliable.

However, if errors are identified in the sample transactions, the

untested data are presumed to be similarly tainted. This is especially

so if, as here, the errors prove to be systemic in nature. The fact

remains unchallenged that for two days of a scheduled three-day

verification we tested a number of further-manufactured transactions to

assess the reliability of reseller 001's methodology for reporting

costs and discovered numerous errors. Reseller 001 claimed on the last

day of verification that it had reviewed its further-manufacturing data

and isolated the magnitude of these errors. AST's assertion that

reseller 001 succeeded in identifying all of the errors is

unsubstantiated, and could not be verified in the time remaining. The

only way to test this eleventh-hour claim would have been to re-verify

the entire further-manufacturing database. Moreover, the proper time

for reseller 001 to check the accuracy of its reported data was before

these data were submitted, or, at the latest, prior to the start of the

verification. We presented reseller 001 with the cost verification

agenda one week in advance precisely to allow it to prepare properly

for verification. Had reseller 001 reviewed the accuracy of the

computer program used to report its further manufacturing costs prior

to verification, it could have identified the errors and presented them

to the Department on the first day of verification. We consider it

inappropriate for respondents to expect the Department to retest the

entire further manufacturing database on the last day of verification

after the Department uncovers numerous errors as a result of its

routine testing. Furthermore, the requirements of section 782(d) that

the Department provide a respondent the opportunity to remedy such

errors is inapplicable. Rather, as we stated in Certain Cut-to-Length

Carbon Steel Plate from Sweden,

[w]e believe [respondent] SSAB has misconstrued the notice

provisions of section 782(d) of the [Tariff] Act. Specifically, we

find SSAB's arguments that the Department was required to notify it

and provide an opportunity to remedy its verification failure are

unsupported. The provisions of section 782(d) apply to instances

where ``a response

[[Page 30760]]

to a request for information'' does not comply with the request.

Thus, after reviewing a questionnaire response, the Department will

provide a respondent with notices of deficiencies in that response.

However, after the Department's verifiers find that a response

cannot be verified, the statute does not require, nor even suggest,

that the Department provide the respondent with an opportunity to

submit another response.

Certain Cut-to-Length Carbon Steel Plate from Sweden, 62 FR 18396,

18401, April 15, 1997.

In this case a partial correction is not a viable option, because

of both the high percentage of errors found through our sample testing

and the fact that some of the errors cannot be corrected with

information on the record. Therefore, pursuant to section 776(a) of the

Act, facts otherwise available are applicable to the downstream sales

of reseller 001.

Respondent, in citing Ferro Union, argues that if the data

submitted by reseller 001 is not complete or verifiable, it was not due

to AST's deliberate recalcitrance, and therefore, adverse facts

available are not applicable because AST complied to the best of its

ability and could not respond any more completely than it already had.

However, not only do such fundamental errors as found at verification

raise concerns as to the validity of the data not directly tested, but

they also demonstrate that the respondent failed to act to the best of

its ability to report such information. Indeed, a reasonable check by

company officials could have shown that (1) products that underwent no

further processing were being assigned further-processing costs, (2)

further-processed products were not being assigned further-processing

costs, (3) coils passing through certain processes were not being

allocated any cost for the process, and (4) the output width of slit

coils generated by a given master coil exceeded the original width of

that input coil.

Where CEP transactions (in this case, the downstream sales) are

involved, respondents are required, in accordance with section 772 of

the Act, to report sales data for the sales to the first unaffiliated

purchaser. As discussed above, we find that AST, as the respondent, did

not cooperate by failing to comply to the best of its ability to

provide the CEP sales information requested by the Department.

Therefore, pursuant to section 776(b) of the Act, we have used an

adverse inference in calculating the margin for reseller 001's

downstream sales (see below).

With respect to the unattributed downstream sales reported by

reseller 001, we determine, pursuant to section 776(a) of the Act, that

it is appropriate to apply facts otherwise available to these sales,

because these sales were unverifiable. In addition, pursuant to section

776(b) of the Act, where an interested party has failed to cooperate by

not acting to the best of its ability to comply with a request for

information from the administering authority, the Department may use an

inference that is adverse in selecting from among the facts otherwise

available. At verification, we found that reseller 001 could have

supplied the Department with the supplier names for these unattributed

sales. As discussed above, where CEP transactions, (in this case, the

unattributed downstream sales) are involved, respondents are required,

in accordance with section 772 of the Act, to report sales data for the

sales to the first unaffiliated purchaser. Therefore, we determine that

pursuant to section 776(b), the use of adverse facts available is

appropriate for the entirety of the data submitted by reseller 001. As

adverse facts available, we have assigned the highest non-aberrational

margin calculated for this final determination to the weighted-average

unit value for sales reported by reseller 001. To determine the highest

non-aberrational margin we examined the frequency distribution of the

margins calculated from AST's reported data. We found that roughly 28

percent of AST's transactions fell within a reasonably narrow range of

20 to 29 percent; we selected the highest of these as reflecting the

highest non-aberrational margin. Further detail on our selection of the

facts-available margin is contained in the Analysis Memorandum. We then

multiplied the resulting unit margin by the total quantity of resales

of subject merchandise by reseller 001. This total quantity includes

that material affirmatively verified as being of AST origin, as well as

a portion of the merchandise of unidentified origin allocated to AST.

See Analysis Memorandum. Since we are relying on verified data for use

as adverse facts available for these unattributed sales, corroboration

under 776(c) is not necessary.

Comment 3: Affiliation Between AST and Reseller 001

Respondent argues that the Department should not consider AST to be

affiliated with a certain U.S. reseller (``reseller 001'') which is

indirectly wholly-owned by Thyssen AG, and therefore, reseller 001's

downstream sales should not be included in the margin calculation for

the purposes of the final determination. Respondent argues that, for

the purposes of assessing whether the requisite direct relationship

exists, the appropriate inquiry in this case is whether AST and

reseller 001 (and not AST and Thyssen) are affiliated under the

statute, because during the POI AST did not sell subject merchandise or

the foreign like product to Thyssen or any Thyssen affiliate other than

reseller 001. In this regard, respondent maintains that neither AST nor

reseller 001 directly or indirectly owns, controls, or holds the power

to vote 5% or more of the other company's outstanding voting shares,

and the two companies do not share a direct bilateral control

relationship that allows one company to control the other company.

Respondent asserts that the Department did not find affiliation under

19 USC 1677(33)(G) (section 771(33)(G) of the Act) in a case involving

what respondent believes to be similar relationships (see Certain Cold-

Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea:

Final Results of Antidumping Duty Administrative Reviews (``Certain

Cold-Rolled and Corrosion Resistant Carbon Steel Flat Products from

Korea''), 62 FR 18404-01 (April 15, 1997).

Respondent asserts that AST and reseller 001 cannot be deemed to be

affiliated unless they directly or indirectly control, are controlled

by, or are under common control with another party. Respondent argues

that the Department improperly concluded, in the preliminary

determination, that Thyssen has the ability to control AST. Respondent

argues that, in this case, it is Krupp, not Thyssen, which controls the

operations of KTS and AST. Thus, according to respondent, Thyssen does

not have the potential to impact AST's production, pricing, and cost

decisions. Respondent asserts that record evidence supports this

``market reality.'' Specifically, respondent notes that, by its terms,

the KTS Shareholders Agreement ensures that Thyssen does not have the

ability to control KTS' operational decisions, and that the ability to

make such decisions rests solely with Krupp. Moreover, respondent

argues that Krupp's industrial control over KTS is also reflected in

the financial structure of the company.

Respondent maintains that, similarly, Krupp controls AST, and

Thyssen does not have the ability to control AST. Respondent points to

the composition of AST's Board of Directors during the POI in support

of this argument.

Respondent asserts that the Department, in its affiliation

memorandum of December 15, 1998, erred in relying upon the ``now-

repealed

[[Page 30761]]

`related parties' provision'' in the pre-URAA statute to posit that

``arguably a minority equity interest of over 20 percent would be

tantamount to control under the statute.'' Respondent argues that 19

U.S.C. 1677(33)(F) (section 771(33)(F) of the Act) replaces the

`related parties'' provision with the ``affiliated persons'' provision.

According to respondent, the fact that Congress might have intended the

Department to consider a broader range of relationships under the

relevant portion of the new statute does not ipso facto mean that

Congress intended for the Department to apply the ``repealed `related

parties' '' provision standards in resolving affiliation issues.

Respondent also asserts that the Department erred in relying on

Queen's Flowers and Asociacion Colombiana de Exportadores de Flores v.

United States, because neither of these cases addressed whether two

companies' respective subsidiaries were affiliated by virtue of their

parent companies' participation in a joint venture.

With regard to the KTS Shareholders Agreement between Krupp and

Thyssen Stahl, respondent argues that, in its affiliation memorandum,

the Department ignored the provisions in the KTS Shareholders Agreement

which, according to the respondent, establish Krupp's control over KTS.

For example, AST asserts that there is nothing in the preamble, in

which the purpose of the KTS joint venture is defined, to suggest that

Thyssen Stahl has the actual or potential ability to control KTS.

Respondent also argues that the Department draws an erroneous inference

by equating the ability to affect a party with the ability to control

that party. Respondent objects to the Department's statement that

Thyssen Stahl retains the authority to control KTS operations based on

Paragraph 2 of the Shareholders Agreement. In addition, respondent

argues that the Department incorrectly focused on the corporate

structure of KTS, as opposed to the operational structure, in

concluding that ``Thyssen Stahl's 40 percent holding in KTS is

critical'' to certain appointments at KTS. Finally, respondent asserts

that the Department fails to note that Paragraph 5 of the Shareholders

Agreement allows only for minority representation of Thyssen.

Respondent argues that the KTS joint venture's existence does not,

in and of itself, establish affiliation between the joint venture

partners' respective subsidiaries. Respondent asserts that petitioners

have incorrectly argued that Mitsubishi Heavy Industries, Ltd. v.

United States (15 F. Supp. 2d 807, 831 (CIT 1998)) stands for the

proposition that it is ``impossible'' for the respective subsidiaries

of two companies participating in a joint venture not to be affiliated.

In fact, respondent maintains that the court did not address the issue

presented in this case: namely, whether the two companies' respective

subsidiaries were affiliated by virtue of their parent companies'

participation in a joint venture. In the instant proceeding, respondent

argues that even if Krupp and Thyssen were deemed to be affiliated with

each other, such affiliation would not necessarily flow through to the

companies' respective subsidiaries ``merely'' by virtue of the KTS

joint venture.

Petitioners argue that the Department has correctly evaluated AST's

affiliations in this investigation. First, petitioners assert that

because Thyssen owns 100 percent of reseller 001, the Department should

find that reseller 001 is essentially an operating arm of Thyssen and

that the reseller 001 is affiliated with AST just as Thyssen is

affiliated with AST. Therefore, petitioners conclude that, because

reseller 001 is an ``operating arm'' of the Thyssen ``family''

including Krupp Thyssen Stainless GmbH (``KTS''), which indirectly owns

more than 5 percent of AST, AST and reseller 001 are affiliated

pursuant to 19 U.S.C. 1677(33)(E) (section 771(33)(E) of the Act).

Second, petitioners contend that respondent has confused the

discussion by misusing the terms ``direct'' and ``indirect'' ownership.

Petitioners argue that the direct relationship referred to by

respondent in fact clearly may be achieved through the indirect

ownership of 5 percent of another company. Moreover, petitioners argue

that the indirect relationship referred to by respondent analogously

may involve direct control.

Third, petitioner argues that the fact that AST did not sell

stainless steel sheet or strip to Thyssen or any other Thyssen

affiliate other than reseller 001 is irrelevant in considering the

affiliation relationships at issue here.

Petitioners believe that Thyssen's large ownership share in AST, as

well as other factors, demonstrate its potential to impact business

decisions. Petitioners assert that the Department properly recognized

that Thyssen need not be a majority shareholder in a company for the

Department to determine that control exists. Petitioners cite to the

Final Determination of Certain Cut-to-Length Carbon Steel Plate from

Brazil, 62 FR 18486, 18490 (April 15, 1997) as support for the

Department's position that ``even a minority shareholder interest,

examined within the totality of other evidence of control, can be a

factor that (the Department) consider(s) in determining whether one

party is in a position to control another.''

Petitioners also claim that evidence of actual control is not

required under the statute: instead, the ability to control is

sufficient, where the company has ``the potential to impact decisions

concerning the production, pricing, or cost of the subject merchandise

or foreign like product'' (citing 19 CFR 351.102(b)). In this regard,

petitioners point to other indicators of Thyssen's control over AST,

beyond the ``substantial'' shareholdings in AST through KTS by Thyssen

Stahl AG and Thyssen AG. According to petitioners, another indicator is

that AST is publicly described and well-known as a member of both the

Krupp and Thyssen ``groups.'' Furthermore, petitioners claim that the

record demonstrates that the two industrial groups have had a high and

increasing degree of cooperation and coordination.

Petitioners claim that the agreement's nominal structure to give

Krupp ``operational and industrial control over KTS'' is not

dispositive. Petitioners argue that the preamble to the regulations

makes clear that the proper inquiry is whether one firm is ``in a

position to exercise restraint or direction,'' regardless of whether

such control is actually exercised. In this regard, petitioners argue

that the very nature of a joint venture agreement is to operate a

business for mutual benefit, and with a large degree of consensus. It

would be unreasonable, according to petitioners, for Thyssen to enter

into such a joint venture if it did not expect that venture to be

responsive to Thyssen's own commercial interests to some extent.

Furthermore, petitioners conclude that it would also be reasonable to

expect that Thyssen would be able to insist that KTS would undertake

its own operations in a manner consistent with Thyssen's interests.

Also, petitioners contend that the recent merger of Krupp and Thyssen

confirms the closely allied interests of the two firms.

Petitioners argue that respondent's reliance on Certain Cold-Rolled

and Corrosion Resistant Carbon Steel Flat Products from Korea is

misplaced. Petitioners assert that the situation in the Korean case

shows only that Krupp is not necessarily affiliated with reseller 001.

Department's Position: We disagree with AST. As we discussed in our

Preliminary Determination and the accompanying Affiliation Memorandum,

we have determined that

[[Page 30762]]

AST is affiliated with Thyssen Stahl and Thyssen. Section 771(33)(E) of

the Act provides that the Department shall consider companies to be

affiliated where one company owns, controls, or holds, with the power

to vote, five percent or more of the outstanding shares of voting stock

of the other company. Where the Department has determined that a

company directly or indirectly holds a five percent or more equity

interest in another company, the Department has deemed these companies

to be affiliated. Respondent's reference to Certain Cold-Rolled and

Corrosion Resistant Carbon Steel Flat Products from Korea is not

applicable in this case because in that case, the Department found no

record evidence indicating that either POSCO (supplier) or Union

(respondent), directly or indirectly, own or control five percent or

more of any of the other party's securities, and are not under the

common control of any party.

We examined the record evidence to evaluate the nature of AST's

relationship with Thyssen Stahl and Thyssen and have determined that

AST is affiliated with Thyssen and Thyssen Stahl. Evidence establishes

that AST is 75 percent owned by a joint venture company, Krupp Thyssen

Stahl (``KTS''). KTS, in turn, is forty percent owned by Thyssen Stahl

AG (``Thyssen Stahl''), itself a wholly-owned subsidiary of Thyssen AG

(the remaining sixty percent of KTS is controlled by Thyssen's joint-

venture partner, Fried. Krupp. AG Krupp-Hoesch (Fried. Krupp)).

Consequently, Thyssen AG has a 33.75 percent equity holding in AST. On

December 17, 1998 we placed publicly available data on the record for

this investigation that confirmed both the foregoing shareholding

interests and that Thyssen Stahl is a wholly-owned subsidiary of

Thyssen. This information was submitted on October 20, 1998 by

petitioners in the concurrent stainless steel sheet and strip case from

Germany. Consequently, AST, as the 75 percent owned subsidiary of KTS,

is affiliated Thyssen Stahl and its parent company Thyssen pursuant to

section 771(33)(E). See Stainless Steel Wire Rod From Sweden, 63 FR

40449, 40453 (July 29, 1998).

In addition, we have determined that AST is affiliated with

reseller 001. Contrary to respondent's claim that the Department relied

upon the ``now-repealed ``related parties'' provision,'' we have found

that AST is affiliated with reseller 001 under section 771(33)(F) of

the Act. See Affiliation Memorandum. Section 771(33)(F) of the Act

provides that the Department shall consider companies to be affiliated

where two or more companies are under the common control of a third

company. The statute defines control as being in a position legally or

operationally to exercise restraint or direction over the other entity.

See 771(33) of the Act. Actual exercise of control is not required by

the statute. See ADD, CVD; Final Rule, 62 FR 27295, 27348 (May 19,

1997). In this investigation, the nature and quality of the

relationship between corporations require a finding of affiliation by

virtue of Thyssen's common control of reseller 001 and of KTS. Such a

finding is consistent with the Department's determinations in Carbon

Steel Plate From Brazil, 62 FR at 18490, and Stainless Steel Wire Rod

From Sweden, 63 FR at 40452.

We also agree with petitioners that record evidence demonstrates

that Thyssen, as the majority equity holder and ultimate parent company

of reseller 001, is in a position to exercise direction and restraint

over this affiliate. Thyssen also holds indirectly a substantial equity

interest in AST, plays a significant role in AST's operations and

management and, thus, enjoys several avenues for exercising direction

or restraint over AST's business activities (see the Affiliation

Memorandum).

In sum, Thyssen's substantial equity ownership in AST and reseller

001, along with other reasons based on information which is proprietary

(see Affiliation Memorandum), supports a finding that AST and reseller

001 are under the common control of Thyssen.

Comment 4: Home Market Selling Expenses

Petitioners argue that if the Department does not resort to facts

available for AST's unreported home market downstream sales in the

final determination, the Department should not allow the selling

expenses that AST has claimed for these sales. Petitioners maintain

that AST claimed expenses relating to the downstream sales

notwithstanding the fact that AST did not report the prices for those

downstream sales. For example, petitioners contend that the technical

service expense claimed by AST on it sales to affiliated resellers was

most likely incurred as a result of services provided to the reseller's

customers rather than the reseller.

Respondent argues that the Department should reject petitioners'

request to disallow AST's reported selling expenses for sales to

affiliated resellers in the home market. Respondent asserts that this

claim is unsupported by fact or law because it implies that the

Department should disregard the conclusions drawn from the Department's

arm's-length test.

Department's Position: We disagree with petitioners. The Department

continues to find that it is appropriate to calculate normal value

based on AST's sales to the affiliated resellers rather than the

affiliates' resales as long as AST's sales to the home market resellers

pass the Department's arm's length test. Section 351.403(d) of the

Department's regulations states that, ``the Secretary normally will not

calculate normal value based on the sale by an affiliated party if

sales of the foreign like product by an exporter or producer to

affiliated parties account for less than five percent of the total

value (or quantity) of the exporter's or producer's sales of the

foreign like product in the market in question or if sales to the

affiliated party are comparable.'' Since AST's sales through all of its

affiliated resellers except one are made at arm's length (i.e., are

``comparable''), and since the circumstances surrounding this lone

exception are such that the Department determines it is most

appropriate to simply exclude these sales from our margin calculation

(see Final Analysis Memorandum), we determine that it is appropriate to

calculate normal value based on AST's sales to its affiliates. As part

of this calculation, the Department reviewed AST's claimed direct

selling expenses for its home market sales to the affiliated resellers

during the home market verification (i.e., credit, warranty, and

technical service expenses) and found that the expenses were properly

reported (that is, the expenses ``result from, and bear a direct

relationship to, the particular sale in question'' (section 351.410(c)

of the Department's regulations (emphasis added)). See Verification

Report of AST at pg. 28. Regardless of petitioners' assertion

(unsupported by record evidence) that AST's reported technical service

expenses were likely incurred as a result of services provided to the

resellers' customers, the fact remains that these technical service

expenses were directly related to the sales in question. Therefore,

based on the Department's verification findings and the fact that

petitioners have not cited to any tangible evidence to support their

assertion, we have continued to make a circumstance of sale adjustment

for AST's claimed direct selling expenses for it sales to home market

affiliated resellers.

Comment 5: CEP/EP

Petitioners assert that the Department should determine that all of

AST's U.S. sales were constructed export price

[[Page 30763]]

transactions. Petitioners state that AST's description of its sales

procedures indicates that AST USA is involved in every aspect of the

sales process for AST's direct U.S. sales: AST USA is contacted by the

U.S. customer; AST USA negotiates orders with the U.S. customers; AST

USA negotiates with AST concerning the purchase order and the order

confirmation; AST USA negotiates with AST concerning the purchase order

and the order confirmation; AST USA issues the order confirmations to

the U.S. customers; AST USA invoices the U.S. customers; and AST USA

provides technical and warranty services to the U.S. customers.

Petitioners argue it is the Department's policy that, if the U.S.

affiliate had more than an incidental involvement in making sales or

performed other selling functions, the sales should be treated as CEP

sales. In support of this, petitioners cite Certain Cold-Rolled and

Corrosion Resistant Steel from Korea: Final Results of Antidumping Duty

Administrative Review 63 FR 13170, 13172 (March 18, 1998) (``Carbon

Steel Products from Korea''), where the Department determined that the

respondent's sales were CEP sales because the U.S. affiliate was first

contacted by interested customers and because the U.S. affiliate signed

the sales contracts and engaged in other sales support functions.

Petitioners assert that similar to this case, in Carbon Steel Products

from Korea, the respondent claimed that the U.S. sales were EP sales

because the respondent, not the U.S. affiliate, approved all sales

prices. Petitioners point out that the Department determined that this

approval process does not make the U.S. affiliate's role in the sales

process incidental or ancillary. In addition, petitioners cite Extruded

Rubber Thread from Malaysia: Final Results of Antidumping Duty

Administrative Review, 63 FR 12752 (March 16, 1998); Small Diameter

Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure

Pipe from Germany: Preliminary Results of Antidumping Duty

Administrative Review, 62 FR 47446, 47448 (September 9, 1997); Notice

of Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Brake Drums and Brake Rotors from

the People's Republic of China, 61 FR 53190, 53194 (October 10, 1996);

Certain Cut-to-Length Carbon Steel Plate from Germany: Final Results of

Antidumping Duty Administrative Review, 62 FR 18390, 18392 (April 15,

1997); and Oil Country Tubular Goods from Mexico: Final Results of

Antidumping Duty Administrative Review, 64 FR 13962, 13966 (March 23,

1999); and Sebacic Acid from the People's Republic of China; Final

Results of Antidumping Duty Administrative Review, 62 FR 10530, 10532

(March 7, 1997), in which, petitioners claim, the Department

reclassified respondents' U.S. sales as CEP transactions because

significant selling functions were performed in the United States.

Petitioners argue that information obtained by the Department

during verification showed that AST USA, rather than AST, is contacted

by the U.S. customers, negotiates the terms of sales to the U.S.

customers, sets the prices to these customers, and performs support

activities related to the U.S. sales. Additionally, petitioners state

that the verification report explains that there is no interaction

between AST and the U.S. customers regarding specific sales

transactions, and that AST's activities with U.S. customers is limited

to participation in a biannual golf outing that is arranged by AST USA.

Respondent claims that petitioners ignore the Department's final

determination in Notice of Final Determination of Sales at Less Than

Fair Value: Stainless Steel Wire Rod from Italy, 63 FR 40422 (July 29,

1998), where the respondent (Cogne Acciai Speciali S.r.L, ``CAS'')

produced and sold subject merchandise in the U.S. market through a

channel of distribution similar to that of AST's back-to-back (EP)

sales. Respondent argues that in this case, the Department determined

that CAS's sales through AST USA were EP sales because the sales

process for these sales was nearly identical to that of CAS's sales

through CAS USA.

Respondent asserts that the determination of classifying sales as

EP or CEP depends on more than a U.S. affiliate's involvement in the

transactions, and that it additionally depends on the following three

criteria: whether (1) the merchandise is shipped directly to the

unaffiliated buyer without entering the affiliate's inventory; (2) this

procedure is the customary sales channel between the parties; and (3)

the affiliate in the United States acts only as a processor of

documentation and a communications link between the foreign producer

and the unaffiliated buyer. Respondent maintains that AST's back-to-

back sales meet all of these criteria, and should therefore be

classified as EP sales. Moreover, respondent argues that the Court of

International Trade has affirmed the Department's finding of EP

(formerly purchase price ``PP'') classification where the U.S.

affiliate engaged in activities that were at least equal to, if not

greater than, those undertaken by AST USA in the following cases:

Outokumpu Copper Rolled Products v. United States; E.I. DuPont de

Nemours & Co. v. United States; Zenith Electronics Corp. v. United

States; and Independent Radionic Workers v. United States.

Respondent asserts that, as mentioned in the AST USA verification

report, AST gives the final approval of a sale which is outside of the

pricing guidelines that AST has approved is done by AST. Citing

Preliminary Results of Antidumping Duty Administrative Review: Small

Diameter Circular Seamless Carbon and Alloy Steel Standard Line and

Pressure Pipe from Germany, 62 FR 47446, 47448 (September 9, 1997),

respondent contends that knowledge of and influence over final price

terms for U.S. sales has played an important and decisive role in

determining whether such U.S. sales are properly treated as EP or CEP

sales.

Respondent concludes by stating that the Department should reject

petitioners' argument to change AST's EP sales to CEP sales because it

would go against the Department's three-part test, mentioned above, and

it is not consistent with the distinction between EP and CEP sales set

forth in the statute.

Department's Position: We agree with petitioners. Section 772(b) of

the Act defines CEP as ``the price at which the subject merchandise is

first sold (or agreed to be sold) in the United States before or after

the date of importation by or for the account of the producer or

exporter of such merchandise or by a seller affiliated with the

producer or exporter, to a purchaser not affiliated with the producer

or exporter, as adjusted.'' Based on the Department's practice, when an

affiliate in the United States is involved in the sales process, as is

the case here, the Department presumes the sales to be CEP unless the

following three criteria are met: (1) the merchandise was shipped

directly from the manufacturer to the unaffiliated U.S. customer; (2)

this was the customary commercial channel between the parties involved;

and (3) the function of the U.S. selling agent was limited to that of a

``processor of sales-related documentation'' and a ``communications

link'' with the unaffiliated U.S. buyer. Where all three criteria are

met, indicating that the activities of the U.S. selling agent are

ancillary to the sale, the Department has determined the sales to be EP

sales. Where one or more of these conditions are not met, indicating

that the U.S. sales agent is substantially involved in

[[Page 30764]]

the U.S. sales process, the Department has classified the sales in

question as CEP sales (see, e.g., Viscose Rayon Staple Fiber from

Finland: Final Results of Antidumping Duty Administrative Review, 63 FR

32820, 32821 (June 16 1998); Certain Cold-Rolled and Corrosion-

Resistant Carbon Steel Flat Products from Korea: Final Results of

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

In this case, the crucial distinction lies in the last factor, i.e.,

whether the entity in the United States acted only as a processor of

documentation and a communication link. This factor entails a fact-

based analysis to determine whether the entity in the United States is

actually engaged in significant selling activities, in which case CEP

applies, or is merely performing ancillary functions for a foreign

seller, in which case EP is appropriate.

Our analysis of the facts indicates that, while AST's U.S. sales

meet the first two conditions, they fail to meet the third one. AST USA

is substantially involved in the process of selling AST merchandise in

the United States. The Department looks at the totality of the evidence

to determine whether an agent's role in the sales process is beyond an

ancillary role. See e.g. Final Determination at Less Than Fair Value:

Extruded Rubber Thread from Malaysia, 64 FR 12967-01 (March 16, 1999),

and Final Determination at Less Than Fair Value: Stainless Steel Plate

in Coils from the Republic of Korea, 64 FR 15444-01, (March 31, 1999).

At verification, we found that AST USA is contacted by the U.S.

customer; AST USA negotiates the order with the U.S. customers; AST USA

negotiates with AST concerning the purchase order and the order

confirmation; AST USA issues the order confirmations to the U.S.

customers; AST USA invoices the U.S. customers; and AST USA provides

technical and warranty services to the U.S. customers. Additionally,

although CEP treatment may still be appropriate even if AST has final

approval authority, we note that AST was unable to provide any evidence

at verification that it did anything other than accept purchase orders

(without altering the essential terms of sales). See Verification

Report of AST at 13. Additionally, at verification, we found that there

was substantial AST USA involvement in developing clients, for example,

through its lead role in organizing the golf tournaments. See

Verification Report of AST at 14. Therefore, even if the agent's role

is not autonomous with respect to the final sales terms as respondent

claims, this does not mean that its role in the process is ancillary.

(See Carbon Steel Products from Korea, 63 FR 13170 (March 18, 1998);

and Final Results of Administrative Review: Industrial Nitrocellulose

from the United Kingdom, 64 FR 6609, 6612, (February 10, 1999).)

Because the selling activities of AST USA were more than ancillary to

the sales process in the U.S., i.e., the function of AST USA is not

limited to that of a ``processor of sales-related documentation'' and a

``communications link'' with the unaffiliated U.S. buyer, we determine

that in accordance with section 772(b) of the Act, CEP methodology is

required.

Comment 6: Order Date/Invoice Date

Petitioners claim that the Department should use the order date as

the date of sale for all of AST's U.S. sales. Petitioners state that

the facts of this case parallel Final Results of Antidumping Duty

Administrative Review: Circular Welded Non-Alloy Steel Pipe from the

Republic of Korea, 63 FR 32833, 32835 (June 16, 1998) (``Circular WNASP

from Korea'') a case in which the Department determined the order date

to be the proper date of sale. Petitioners claim that information

contained in AST's questionnaire response and from AST's verification

reports supports the proposition that the material terms of sale (i.e.,

price and quantity) are set on the order date for both AST's warehouse

sales and back-to-back sales that are made to order and, therefore,

that the order date is the proper date of sale for those U.S. sales.

Petitioners assert that even if the Department determines that the date

of sale for simple CEP sales out of inventory can be determined by

invoice date, consistent with the Department's practice, the nature of

further-manufactured sales orders and the additional time lag

engendered by the sales process requires that the date of sale be

determined as the date of the confirmation or change order.

Respondent argues that for the final determination, the Department

should use the invoice date for all home market sales and for CEP

sales, and the shipment date for EP sales, as it did in the Preliminary

Determination. Respondent cites section 351.401(i) of the Department's

Final Antidumping Regulations, (1998), noting that the Department's

stated practice is to ``use invoice date as the date of sale unless the

record evidence demonstrates that the material terms of sale, i.e.,

price and quantity, are established on a different date.'' Respondents

argue that if a date other than the invoice date is to be used for the

final determination, petitioners bear the burden of demonstrating that

another date is more appropriate.

Respondent claims that AST demonstrated that in a large percentage

of its home market sales (based on quantity) during the POI, the price

and/or quantity changed between order and invoice date. Respondent

argues that petitioners have offered no evidence to support their

assertions that ``an allowance of plus or minus ten percent of the

quantity order is common in the industry for sales of stainless steel

sheet and strip'' and that ``adjusting the agreed upon price by an

alloy surcharge formula is generally accepted as part of the sales

process for sales of stainless steel products.'' Respondent adds that

petitioners have not demonstrated that AST's sales adhere to these

industry-wide practices. Respondent contends that at verification, AST

demonstrated that large-volume customers will not accept a quantity

that is ten percent higher or lower than the ordered quantity.

Respondent also argues that AST demonstrated that, irrespective of

alloy surcharges, the negotiated price may change between order

confirmation date and invoice date.

Respondent argues that petitioners offer no legal authority

supporting their position that the Department should ignore post-order

confirmation changes because such changes are common in the industry.

Respondent argues that the existence of an industry practice to accept

changes in price and/or quantity up until the date of invoice

establishes that invoice date is the appropriate date of sale.

Additionally, respondents contend that at verification, the Department

verified that for a certain percentage of its reported POI home market

sales (based on quantity), the price changed between order confirmation

date and invoice date for reasons unrelated to the alloy surcharge.

Respondent asserts that AST's inability to perform an analysis of

the frequency of price and quantity changes between order and invoice

date for the U.S. market does not indicate that order date or

confirmation date is the appropriate date of sale for AST's U.S. sales.

Respondent points out that in all of the U.S. sales that the Department

verified, either the quantity invoiced was different from the quantity

set forth in both the order and order confirmation, the price changed

between order confirmation date and invoice date for reasons unrelated

to the alloy surcharge, or both.

Department's Position: We agree with respondent. We found no

evidence on the record to indicate that order date is the appropriate

date of sale. As noted by

[[Page 30765]]

respondent, under the Department's regulations, we normally use date of

invoice as the date of sale unless record evidence shows that the

material terms of sale are established prior to that date. See 19 CFR

351.401(i). However, we may use another date, such as date of order

confirmation, if that date better reflects the date on which the

material terms of the sale were established. In adopting this

regulation, we explained that the purpose was, whenever possible, to

establish a uniform event which could be used as the date of sale.

Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296,

27348-49 (May 19, 1997). We further explained that we do not

automatically treat an initial agreement as establishing the material

terms of sale between the buyer and seller when changes to such an

agreement are common, even if, for a particular sale, the terms did not

actually change. See Final Determination of Sales at Less Than Fair

Value: Stainless Steel Plate in Coils (``SSPC'') from the Republic of

Korea, 64 FR 15450 (March 31, 1999). Consequently, our analysis focuses

on whether changes are sufficiently common to allow us to conclude that

initial agreements should not be considered to finally establish the

material terms of sale. At verification of AST USA, we found that the

price and/or quantity (excluding price changes resulting from changes

in the alloy surcharge) changed from the order date to the invoice date

for all of the sales traces, thus supporting AST's contention that

certain material terms of sale (e.g., price and quantity) are subject

to change until the invoice date. See Verification Report of AST USA,

Exhibits 7-10.

Petitioners' reference to Circular WNASP from Korea is misplaced,

because in that case, evidence showed that the material terms of sale

in the United States were set on the contract date, and subsequent

changes rarely occurred. In this case, based on the Department's

findings at verification and the record evidence indicating that the

material terms of sale often change up to invoice date, the Department

is satisfied that the date of invoice is the most appropriate measure

of when AST establishes the material terms of sale. Accordingly, we

have continued to use invoice date as the date of sale for AST's CEP

sales for the final determination. As stated above, the Department has

determined that all of AST's U.S. sales are CEP. Therefore, we have

used the invoice date for all of AST's home market and U.S. sales

(unless invoice date is after shipment date, in which case the

Department will use shipment date). See section 351.401(i) of the

Department's regulations.

Comment 7: CEP Offset

Respondent argues that AST's final margin calculation should

include a CEP offset, based on respondent's assertion that the

Department failed to consider that AST's sales to its affiliated U.S.

distributor, AST USA, are at a less advanced level of trade than the

level of trade (LOT) of AST's home market sales.

First, respondent argues that its home market sales are made at a

more remote level of trade than its CEP sales. Respondent claims that

most home market sales are direct factory sales which AST manufactures

to order. Respondent argues that in the home market, AST is responsible

for the entire chain of distribution for the foreign like product, from

production in the plant through delivery to the local distributor, end-

user, or service center. Respondent notes that in this regard, AST

S.p.A. has established a large, complex distribution system.

Respondent argues that, by contrast, AST's CEP sales are warehouse

sales. Respondent asserts that the LOT for these sales is properly

based on the transaction between AST and AST USA, not AST USA and the

first unrelated U.S. customer. Respondent continues by asserting that,

in order to identify different levels of trade, the Department compares

starting prices in the U.S. and home markets. Respondent asserts that,

in this case, the requisite comparison reveals that the starting prices

in Italy and the United States are vastly different. In support of its

argument, respondent notes that AST's U.S. and home market sales to the

first unaffiliated customer are at the same level or trade because: (1)

AST S.p.A's home market sales and AST USA's CEP sales are at the same

point in the chain of distribution; (2) AST S.p.A's Italian customer

and AST USA's U.S. customers are in the same customer categories; and

(3) AST S.p.A and AST USA provide the same selling services for CEP

sales. Respondent argues that the CEP adjustments made under 19 USC

1677a(d) (section 772(d) of the Act) remove all of AST USA's marketing,

sales and distribution expenses, thereby altering the LOT of its CEP

sales to a less remote link in the chain of distribution.

Finally, respondent argues that, in applying the CEP offset, the

Department should deduct AST's indirect selling expenses and technical

services expenses from normal value, since available data do not

indicate whether the purported difference in LOT affect price

comparability.

Petitioners maintain that the Department should reject respondent's

request that the Department apply a CEP offset to respondent's final

margin calculation, based on the fact that the Department preliminarily

concluded that there was no difference in LOT between AST's sales in

the U.S. and home markets.

Petitioners argue that respondent did not request a LOT adjustment

or a CEP offset prior to the preliminary determination, and that

respondent's request for a CEP offset is not supported by substantial

evidence, including evidence of differences in selling functions.

Petitioners argue that the burden was on respondent to prove its

entitlement to a LOT adjustment or CEP offset, and to have provided the

Department new evidence to demonstrate the appropriateness of such an

adjustment, citing section 773(f)(1)(A) and the Statement of

Administrative Action accompanying H.R. 5110 (H.R. Doc. No. 316, Vol.

1, 103d Cong., 2d Sess. (1994), at 829 (``SAA'')); Final Rule, 62 FR

27370; and Mitsubishi Heavy Industries, Ltd. v. United States, Slip Op.

98-82 (CIT 1998). Petitioners maintain that AST did not provide such

new evidence.

Petitioners argue that the Department examined the LOT that existed

following the adjustments specified under 19 U.S.C. 677a(d) (section

772(d) of the Act), and properly determined that those adjustments to

the price at which AST USA sold subject merchandise did not alter the

channels of trade or selling functions upon which a determination

regarding level of trade difference is based in this investigation.

Petitioners also argue that the Department's verifications confirmed

that essentially the same selling functions were offered by AST for

both its home market and U.S. sales.

Petitioners continue that the Department clearly stated in its

preliminary determination that it made the adjustments called for by 19

U.S.C. section 1677a(d) prior to examining LOT. Finally, because a

difference in LOT must exist prior to granting a CEP offset,

petitioners assert that no CEP offset may be granted in this

investigation.

Department's Position: We disagree with respondent. For the

preliminary determination, the Department thoroughly reviewed the

channels of distribution and selling functions performed for sales in

the home and U.S. market and determined that all sales were made at one

level of trade (including its analysis whether NV was

[[Page 30766]]

established at a different LOT than CEP sales). See Preliminary

Determination (64 FR 120-121), and Notice of Final Determination of

Sales at Less Than Fair Value: Stainless Steel Round Wire from Korea,

64 FR 17342, 17344 (April 9, 1999), specifically, AST provided freight

and delivery, credit, technical services, and warranties for its home

market sales of prime merchandise. Also, for sales of mostly non-prime

merchandise sold from its warehouse, AST performed essentially the same

selling functions. While it did not provide warranties for non-prime

merchandise, it did perform other selling functions for those sales

(advertising and maintaining inventory of this merchandise at AST's

warehouse), which were not performed for sales of prime merchandise.

For the preliminary determination (and as upheld in this final

determination, see discussion in ``Level of Trade'' section above), the

Department found that there was one LOT for AST's home market sales

because the selling activities for both groups of sales were very

similar. See Preliminary Determination (64 FR 120). For all of its U.S.

sales, AST engaged in identical selling activities, providing technical

and warranty services, freight and delivery and credit. As explained

above, the Department compared the selling functions performed for home

market sales with those performed with respect to the CEP transaction,

after deductions for economic activities occurring in the United

States, pursuant to section 772(d) of the Act, to determine if the home

market levels of trade constituted more advanced stages of distribution

than the CEP level of trade. Based on our analysis of the chains of

distribution and selling functions performed for sales in the home

market and CEP sales in the U.S. market, we continue to find that both

are made at the same stage in the marketing process and involve

substantially similar selling functions.

Absent significant differences in selling functions, we do not

determine that there are different LOTs, and therefore, we do not even

reach the issue of a LOT adjustment or CEP offset. Furthermore, AST has

not provided any substantial evidence which would counter the

Department's preliminary determination, but rather only stated that the

starting prices between home market sales, which are direct factory

sales, and AST's CEP sales, which are warehouse sales, are notably

different. Because the Department has found there to be just one LOT,

the difference in prices is irrelevant to our LOT analysis.

Moreover, in the original questionnaire, the Department requested

that respondent ``explain why you believe a level of trade adjustment

is appropriate and provide worksheets demonstrating the calculation of

the adjustment as attachments to your response.'' See Questionnaire at

pg. B-23, dated August 3, 1998. AST did not claim any LOT adjustment or

CEP offset in its questionnaire response, nor provide any explanation

for such a claim.

Comment 8: Side Cuts/Pup Coils

Respondent asserts that side cuts and pup coils are non-prime

merchandise, and therefore sales of this merchandise should not be

compared with sales of prime merchandise. First, respondent argues that

it has submitted record evidence demonstrating that the U.S. steel

industry, including petitioners, markets and sells side cuts and pup

coils as non-prime merchandise. Therefore, respondent argues that the

burden is with petitioners to demonstrate that such products are not

legitimately classified as non-prime merchandise.

Second, respondent argues that side cuts and pup coils suffer

defects during the production process and at other times prior to

delivery to the customer.

Third, respondent states that side cuts and pup coils are not

produced to order and do not otherwise meet customers' specifications,

such as finish, width and/or weight specifications.

Fourth, respondent argues that side cuts and pup coils are used in

applications for which knowledge of certain of the product's

characteristics is unimportant. These applications would include such

non-prime applications as strappings, bands, brackets and washers for

side cuts, and hog feeders, pig pens, fertilizers, spreaders and

roofing and siding for pup coils.

Fifth, respondent asserts that the sales process for side cuts and

pup coils differs significantly from sales of prime merchandise. For

example, respondent notes that its side cut and pup coil sales are all

done from inventory (as opposed to its direct factory sales that were

produced for a specific customer to that customer's specifications).

Finally, respondent maintains that side cuts and pup coils are sold

at a discount, with no warranties.

Petitioners respond that AST has not provided any information to

support its claim that all of its sales of pup coils and side cuts were

sales of non-prime merchandise. Petitioners argue that the only

difference between pup coils and a regular coil is the size of the

coil, not the quality of the product. Similarly, petitioners argue that

making a coil narrower does not convert that merchandise into secondary

material simply because it was separated from the mother coil.

Petitioners argue that respondent did not identify any physical

defect in pup coils and side cuts in AST's record description of non-

prime merchandise, and furthermore, that the submitted description

distinguished pup coils and side cuts from ``second quality

merchandise.''

Petitioners further submit that the Department's investigation of

respondent's classification of secondary merchandise at verification

does not support a finding that side cuts and pup coils are of

secondary quality.

Petitioners also take issue with respondent's claim that pup coils

and side cuts are second quality material because they were not

produced to order, but instead were inventory sales from the warehouse,

given the percentage of respondent's U.S. sales which were warehouse

sales. Petitioners also argue that the limited applications of pup

coils and side cuts cannot define these products as secondary, given

that prime merchandise is also produced within certain weight and size

tolerances and therefore is also ``limited to certain uses.''

Petitioners further argue that the absence of a warranty does not

mean that the product is defective. Likewise, petitioners believe that

the fact that these sales were made at a discount does not demonstrate

that these sales are of secondary merchandise, especially given the

fact that, according to petitioners, one would expect discounts on

merchandise for which there is no warranty.

Department's Position: We agree with petitioners that AST's sales

of pup coils and side-cuts should be considered sales of prime

merchandise. As noted in the Department's April 19, 1995 Memorandum

from Roland L. MacDonald to Joseph A. Spetrini, the Department defines

non-prime (or secondary merchandise) as ``steel which has suffered some

defect during the production process, or at any time before delivery to

the customer.'' In its submissions to the Department, AST identified

side-cuts and pup coils as secondary merchandise, but did not identify

the physical defect or damage associated with each sale of pup coils

and side-cuts, as specifically requested by the Department. See

Supplemental Questionnaires dated October 23, 1998 and December 7,

1998, in which we requested that AST create a separate computer field

that would identify the specific reason why each sale was designated

non-prime merchandise. AST submitted its offering list of

[[Page 30767]]

secondary merchandise (see Exhibit 18, November 12, 1998 response);

however, the defects of the merchandise were not identified for many of

the coils on this list. At verification, we examined AST USA's invoices

to its unaffiliated U.S. customers for sales of pup coils and side-

cuts, and noted that there was no indication that the merchandise

listed on the invoice was damaged or defective. See Verification Report

of AST USA, Exhibit 20.

With respect to respondent's argument that side cuts and pup coils

are not produced to order and do not otherwise meet customers'

specifications, such as finish, width and/or weight specifications, we

believe that respondent is confusing the issue. Specifically, as

respondent has noted, side cuts and pup coils are not produced to

order, and are sold from inventory. Therefore, the customers that

respondent is referring to are, in fact, the purchasers of side cuts

and pup coils from inventory. Record evidence taken from verification

reveals that certain information such as the dimensions of the product,

is provided to these customers for the merchandise sold from inventory.

See Verification Report of AST USA, at pg. 7, and Exhibit 20. There is

no evidence on the record which would support a finding that these

specifications, i.e., those provided in the inventory list, are

inaccurate or otherwise do not meet the specifications of these

customers.

Regarding respondent's assertion that it has submitted record

evidence demonstrating that the U.S. steel industry, including

petitioners, markets and sells side cuts and pup coils as non-prime

merchandise, whether side cuts and pup coils are sold in the ``seconds

market'' is in no way dispositive with regard to the Department's

ultimate classification of this merchandise. We note that for example,

the same exhibit offered by AST is in support of its claim that side

cuts and pup coils are secondary merchandise, also shows that ``excess

prime'' is sold by that particular company as a ``secondary product.''

See AST's November 12, 1998 submission, Exhibit 10. In this regard, the

Department has clearly stated its position that excess prime also known

as prime overruns is treated by the Department as prime merchandise.

This is precisely because this merchandise contains no defects. (See,

e.g., Certain Corrosion-Resistant Carbon Steel Flat Products From

Australia; Final Results of Antidumping Duty Administrative Reviews, 61

FR 14049-01 (March 29, 1996)). Therefore, we determine that side-cuts

and pup coils be considered prime merchandise for the final

determination.

Comment 9: Floor Plate

Respondent argues that floor plate should be excluded from the

scope of this investigation. Respondent maintains that, to the best of

its knowledge, the U.S. industry does not manufacture this product (and

has not done so for at least two years), and furthermore, this product

does not compete with any product manufactured in the United States.

Petitioners argue that the Department should reject respondent's

request to exclude floor plate from the scope of this investigation.

First, petitioners argue that respondent's ``apparent belief'' that the

domestic industry must be currently producing a particular type of

product in order for that product to remain within the scope of the

case is wrong. Petitioners point out that one possible reason for

opposing an exclusion request is that a domestic producer previously

manufactured the product and may have ceased production due to the

competitive impact of unfairly traded imports, or a domestic producer

may be interested in producing the product but is unable to enter the

market due to the low prices of the unfairly traded imports.

Petitioners argue that one domestic producer was producing floor plate

until recently, and assert that another is considering manufacturing

floor plate in the future.

Department's Position: We uphold our preliminary determination to

include floor plate as part of the scope of subject merchandise.

Despite AST's arguments, the plain language of the petition's scope

covers merchandise described as floor plate if it is less than 4.75 mm

in thickness. The scope specifically describes the subject merchandise

as a ``flat-rolled product in coils that is greater than 9.5 mm in

width and less than 4.75 mm in thickness.'' We also note that the

Department's model match criteria place significant emphasis on both

the rolling process (hot-versus cold-rolled) and surface finish

(including ``patterns in relief,'' such as the diamond pattern

characteristic of floor plate). See page 8 of the Memorandum to Joseph

A. Spetrini from Robert James regarding the Antidumping Duty

Investigations on Stainless Steel Sheet and Strip in Coils from France,

Germany, Italy, Japan, Mexico, South Korea, Taiwan, and the United

Kingdom; Scope Issues, dated December 14, 1998.

In a similar case where a respondent requested an exclusion for a

particular type of SSWR from the scope, the Department determined not

exclude this merchandise because petitioners did not agree to the

exclusion. See Final Determination of Sales at Less Than Fair Value:

Stainless Steel Wire Rod from Canada, 63 FR 9182 (February 24, 1998).

In the Final Determination of Sales at Less Than Fair Value: Stainless

Steel Wire Rod from Japan, 63 FR 40434-01 (July 29, 1998), the

respondent asserted that a particular grade of SSWR should be excluded

from the scope because it had not been sold it in the United States

during the POI or at any other time, and that this grade of SSWR

allegedly was not, and could not be, manufactured in the United States.

The Department determined that the fact that a specific grade of SSWR

is not currently produced in the United States does not constitute

grounds for exclusion from the scope of the investigation, and

therefore did not exclude it from the scope. Therefore, consistent with

the Department's current practice, we will continue to include floor

plate in the scope of this investigation for purposes of the final

determination.

Comment 10: REBATE2H

Petitioners state that the adjustments reported in field REBATE2H

should be rejected because the expenses included in this field do not

qualify as rebates. Petitioners assert that the verification results

demonstrate that the Department should disallow AST's claim for

REBATE2H for several reasons. First, petitioners state that respondent

has used an inappropriate period for calculating REBATE2H, since the

period begins two months after the start of the POI and finishes two

months after the POI. Second, petitioners state that this field

includes credit notes granted for sales of non-subject merchandise and

for sales that were outside the POI. Third, petitioners argue that when

AST stated that its claimed REBATE2H amounts included expenses for

returns and for technical claims for defective merchandise, it did not

explain whether these claims involved double counting of its claimed

home market warranty expenses or home market technical service expenses

as it should have. Fourth, petitioners contend that certain price

adjustments, including alloy surcharges, were accounted for in AST's

home market sales listing, and therefore, should not be accounted for

as part of AST's rebates. Finally, petitioners argue that AST included

all credit notes in its calculation of the REBATE2H amounts, and did

not evaluate the credit notes to determine whether the credit notes

applied to sales during the POI or to sales of SSSS. Therefore,

petitioners

[[Page 30768]]

claim that AST overstated the rebates that may have been provided for

sales of SSSS during the POI instead of excluding credit notes that

were not related to such sales. In conclusion, petitioners argue that

the Department should, therefore, not allow AST's claimed REBATE2H for

its final analysis.

Respondent argues that as explained in AST's Section B Response,

the expenses reported in REBATE2H represent post-sale price adjustments

other than claims reported in other fields. Although AST states that

the expenses reported in REBATE2H may alternatively be classified as

billing adjustments rather than rebates, the expenses are appropriately

deducted from the home market price.

Citing Final Results of Antidumping Duty Administrative Review:

Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-

to-Length Carbon Steel Plate from Canada (``Carbon Steel Flat Products

and Carbon Steel Plate from Canada''), 61 FR 13815, 13822, (March 28,

1996), respondent states that the Department recognizes that

adjustments such as those included in REBATE2H are not always granted

on an invoice-specific basis, and accepts such adjustments if they are

tied to a specific group of invoices. AST claims that REBATE2H was

calculated on a customer-specific basis, and as such, was calculated

and reported on the specific group of invoices associated with AST's

stainless steel sheet and strip customers. AST contends that therefore

AST properly calculated REBATE2H in accordance with Departmental

policy.

Respondent asserts that petitioners' argument that AST double

counted technical and warranty claims is factually inaccurate because

AST provided the Department with revised REBATE2H calculations at

verification (see Verification Report of AST at 1-2) which eliminated

any potential double counting. Respondent states that exhibit 16 of the

verification report was an exhaustive list of different types of credit

notes issued by AST, not the credit notes included in the calculation

of REBATE2H; therefore, there is no basis for petitioners' argument

that credit notes were double counted in the calculation of REBATE2H.

Respondent argues that the Department must reject petitioners'

claim that the calculation of REBATE2H was based on an incorrect time

period. Respondent maintains that, as explained to the Department at

verification, there is a lag period of two months between shipments and

the issuance of credit notes. Respondent contends that it was necessary

to shift the period forward by two months to ensure that credit notes

associated with sales during the POI were captured.

Respondent asserts that for all of the reasons mentioned above, the

Department should reaffirm its preliminary determination with respect

to REBATE2H and subtract this amount in the calculation of normal

value.

Department's Position: We agree with respondents that REBATE2H is

more properly considered as price adjustments rather than rebates, and

that the expenses are appropriately deducted from the home market

price. At verification, we reviewed substantial information to conclude

that REBATE2H consisted of after-sale price adjustments. See

Verification Report of AST pp. 1,2 & 24. Furthermore, we determine that

AST's methodology for reporting credit notes for the period beginning

two months after the start of the POI, and ending two months after the

end of the POI is reasonable, as there is no evidence on the record

which contradicts AST's claim regarding a two-month lag period, and

there is no reason to believe that respondent's methodology is in any

way distortive. The information gathered in Exhibit 39 of the

Verification Report of AST confirmed the reasonableness of using the

two-month period. Furthermore, we determine that AST's reporting

methodology by customer groupings is also reasonable. While the

Department prefers that discounts, rebates and other price adjustments

be reported on a transaction-specific basis, the Department has long

recognized that some price adjustments are not granted on that basis.

This case is similar to situations in which the Department has

permitted as direct adjustments, rebates granted on a customer-specific

basis. See Carbon Steel Flat Products and Carbon Steel Plate from

Canada, 61 FR 13815, 13822. We reviewed the revised calculations at

verification and noted no discrepancies. See Verification Report of AST

at 24. Therefore, for the final determination, we have deducted

REBATE2H from the home market price.

Comment 11: Home Market Freight

Petitioners argue that the Department should make corrections for

AST's overstatement of freight costs for its sales in Italy.

Petitioners state that at verification, the Department compared the

freight charges that AST reported in its questionnaire response to the

freight charges in AST's freight contracts and discovered that the

freight costs in the questionnaire response were higher than the

freight rates shown in the freight contracts, and that AST claimed that

the costs were higher because of the accruals that AST made at the end

of the year. Petitioners maintain that because AST was given the

opportunity to prove this claim at verification, and failed to do so,

the Department should correct AST's overstatement of its freight costs

by reducing the freight costs reported by AST for its home market sales

by an amount verified by the Department at verification.

Respondent argues that petitioners' argument reflects a

misunderstanding of this expense, and explains that in reporting its

home market freight expense, AST first calculated the contract freight

charge associated with deliveries to various destinations, then

adjusted the contractual freight expense to reflect the difference

between the contractual per-kilogram freight expense and the actual

per-kilogram freight expense. AST states that for shipments less than

28 tons, it incurs the same fixed freight charge as it would for a

shipment weighing 28 tons, and for shipments over 28 tons, it is

charged the negotiated rate per-kilogram. AST argues that it adjusted

AST's contractual freight expense to account for the incremental

freight charge associated with shipment weights that are less than the

minimum weight called for in the contract.

Department's Position: We agree with petitioners. At verification,

we traced the freight expense reported in AST's response to AST's

contractual agreements, and found that the two were different. See

Verification Report of AST at 26. We do not accept AST's claim that it

adjusts its contractual freight expense to account for the incremental

freight charge associated with shipment weights that are less than the

minimum contract weight called for in the contract, because when we

gave AST the opportunity to provide the year-end reconciliation of

actual and accrued freight expenses at verification, AST failed to do

so. See Verification Report of AST at 26 and 28. Therefore, the

Department considers these additional amounts unverified, and we have,

for the final determination, reduced the freight costs reported by AST

for its home market sales by an amount examined by the Department at

verification (see Final Analysis Memorandum).

Comment 12: Technical Service Expenses

Respondent argues that the Department should not deduct technical

service expenses incurred in Italy from CEP. Respondent argues that the

technical service expenses reported in its response are indirect

selling

[[Page 30769]]

expenses associated with its Technical Services Department in Italy,

and are therefore not an appropriate adjustment to CEP.

Petitioners argue that the Department should treat respondent's

technical service expenses in the home market and in the U.S. market in

the same manner (i.e., either both as direct, or both as indirect

selling expenses), because respondent calculated these expenses in the

same manner. Furthermore, petitioners argue that the verification of

AST USA shows that economic activity occurred in the U.S. with regard

to technical service expenses, and therefore, the costs for the

activities should be deducted from the price for respondent's CEP

sales.

Department's Position: Contrary to AST's claim that all technical

service expenses reported in its response are associated with its

Technical Services Department in Italy, we found at the verification of

AST USA that a portion of technical service expenses relate to economic

activity in the United States and are, in fact, incurred in the United

States by AST USA. Specifically, at verification we found that AST USA

partially paid for the salary of an AST USA employee who was

responsible for providing customers with technical advice. See

Verification Report of AST USA at 23. However, there is insufficient

data to allocate these additional technical expenses because AST failed

to provide it. Therefore, for purposes of the final determination, we

are continuing to deduct technical service expenses as reported in

AST's December 28, 1998 response from AST's CEP sales.

We note that AST's technical service expenses, as reported for both

markets, are more appropriately considered to be indirect selling

expenses, because they are fixed expenses that are incurred whether or

not a particular sale is made. See The Department's AD Manual, page 34,

35. For example, we note that a portion of these reported expenses are

payroll expenses, which are typically an indirect selling expense.

Therefore, for purposes of the final determination, we have allocated

AST's technical service expenses over sales of subject merchandise in

the home market as indirect selling expenses.

Comment 13: U.S. Warranty

Respondent argues that the Department, in its preliminary

determination, incorrectly double-counted warranty expenses for U.S.

sales. Respondent asserts that, by treating expenses reported in two

separate fields (BILLADJU and WARRU) as direct selling expenses, the

Department double-counted warranty by counting both the amount credited

to the customer by AST USA and the amount credited to AST USA by AST.

Petitioners reply that information on the record shows that

treatment of billing adjustments and warranty expenses as direct

selling expenses does not involve double-counting of warranty expenses.

Specifically, petitioners argue that respondent's November 12, 1998

submissions indicate that AST had separated its warranty expenses from

the amounts reported in the billing adjustment field of its U.S. sales

listing. Petitioners also argue that the verification reports do not

substantiate respondent's claim that the Department verified that the

expenses reported in the U.S. warranty expense field of its U.S. sales

listing represent AST's payments to AST USA for claims made by U.S.

customers.

Department's Position: We agree with respondent. As stated in AST's

original response, U.S. warranties, if incurred, are included in the

billing adjustment field (see pg. C-37 of AST's Section C Response,

dated September 28, 1998). This is confirmed by the fact that, in

comparing AST's original and supplemental U.S. sales databases, we note

that the BILLADJU field remained the same after AST reported WARRU in

the supplemental questionnaire. Therefore, it is clear that (1) AST

reported warranty expenses in the BILLADJU field; and (2) AST did not

transfer the expense included in BILLADJU for warranties to the WARRU

field. At verification we examined the BILLADJU field for each sales

trace and, with the exception of one clerical error, we found no

discrepancies. See Verification Report of AST USA, Exhibits 7-10.

Additionally, at verification, we confirmed that AST reimburses AST USA

for the credit issued to AST USA's customers for warranties.

Specifically, we examined documentation showing that AST USA issues a

credit to its customer, and then deducts the claim amount credited to

the customer from its payment to AST. See Exhibit 6A of the

Verification Report of AST USA. Therefore, to ensure that we do not

double count warranties, we have only deducted BILLADJU from the U.S.

price for purposes of the final determination.

Comment 14: Insurance Revenue

Respondent argues that the Department incorrectly failed to add

transaction-specific insurance revenue to U.S. price in its preliminary

determination. First, respondent argues that the Department incorrectly

characterized insurance claim sales as ``merchandise destined for sale

as prime material.'' Respondent claims that, to the contrary, because

the merchandise was damaged in transit, the sale reported to the

Department was a sale of damaged second quality material. Second,

respondent claims that the Department's statement that AST ``still

incurred a loss on prime merchandise'' is incorrect, as respondent

claims that any loss associated with these sales is a loss associated

with sales of second quality merchandise, given that it was damaged in

transit. Respondent adds that any question of whether a loss or profit

was incurred is in any event irrelevant to the Department's

determination of sales at less than normal value.

Respondent maintains that, conversely, transaction-specific

insurance proceeds are directly relevant here. Respondent argues that

the insurance proceeds reported in the response relate directly to the

specific transactions identified as insurance claim sales. Respondent

cites the Department's preliminary results of review in Ferrosilicon

from Brazil (62 FR 54085, upheld in principle in the final) as a case

in which the Department ``added the amount of marine insurance revenue

which was collected by Minasligas with regard to one U.S. sale'' as

support for its argument.

Petitioners assert that the Department correctly treated the costs

associated with the damaged sales as indirect selling expenses.

Petitioners argue that the expenses incurred for the damaged

merchandise were associated with the shipment and sale of prime

merchandise, as the Department preliminary determined.

Department's Position: We agree with respondent in part. For the

claims that AST reported in its original response, we have added the

transaction-specific insurance revenue to AST's U.S. sales' price. At

verification, we reviewed the actual final settlement amount for an

insurance claim that AST reported as ``pending'' in its responses to

the Department. See Verification Report of AST USA, pp. 2-3. Since we

confirmed this amount, and found no discrepancies, we have used the

actual final settlement amount received for this insurance claim to

calculate the total insurance revenue applied to these transactions.

Regarding the additional insurance revenue amount that AST

presented the Department at the onset of verification, we do not agree

with petitioners. We consider this additional insurance revenue to be

directly applicable to all sales of subject merchandise, because in the

absence of these sales, the claim

[[Page 30770]]

would not have been made, and the revenue would not have been received.

At verification, we examined the receipts of AST's claim reimbursements

and found no discrepancies. We also examined an invoice of subject

merchandise for which AST received part of this additional insurance

revenue and found no discrepancies. See Verification Report of AST USA

at 3. Therefore, petitioners' assertion that these insurance proceeds

must relate to sales that occurred prior to the POI is unfounded, as

there is no record evidence to support this assertion, and the record

evidence which does exist supports a different finding. We note that

unlike our treatment of insurance revenue as discussed above, we must

treat this additional insurance revenue differently based on the

verified fact that AST was unable to tie this insurance revenue to

specific transactions. Therefore, since this additional claim was

received during the POI, and was found to be satisfactory at

verification, we determine that it is relevant to use for purposes of

calculating total insurance revenue. For purposes of the final

determination, we have allocated this additional insurance revenue over

all sales of subject merchandise.

Comment 15: Revised Credit Calculations

Petitioners contend that the Department should use the revised

shipment dates presented by AST at verification to calculate imputed

credit expenses for some of AST's U.S. sales. Citing Carbon Steel

Products from Korea at 63 FR 13173, petitioners argue that the

Department's general practice is that the date of sale should not occur

after the date the merchandise was shipped to the customer. Moreover,

petitioners state that the Department generally calculates imputed

credit expenses based on the period from the date of shipment to the

date of payment. Therefore, petitioners maintain that the Department

should calculate revised imputed credit expenses for the sales where

respondent reported incorrect shipment dates. See Verification Report

of AST USA, Exhibit 1.

Respondent did not comment on this issue.

Department's Position: As noted in Exhibit 1 of the Verification

Report of AST USA, AST USA incorrectly reported, as the shipment date,

the shipment date from AST USA to its customer, instead of the shipment

date from AST to AST USA for certain sales. We reviewed the corrected

information for these sales at verification and found it to be

accurate. According to Departmental policy, we calculate imputed credit

based on the period of date of shipment to the date of payment. See

Policy Bulletin No. 98.2: ``Imputed Credit Expenses and Interest

Rate,'' dated February 23, 1998. Therefore, for the final

determination, we will use the corrected information to calculate

imputed credit for the sales where AST incorrectly reported incorrect

shipment dates.

Comment 16: Mill Edge Discount

Petitioners argue that the Department should adjust AST's U.S.

sales database to include the mill edge discount that was reviewed at

the U.S. sales verification of AST USA.

Respondent did not comment on this issue.

Department's Position: We agree with petitioners, and have used the

mill edge discount that was reviewed at the U.S. sales verification of

AST USA for purposes of the final determination. See Final Analysis

Memorandum.

Comment 17: U.S. Packing

Petitioners argue that the Department should make an adjustment for

AST's failure to report packing costs on a transaction-specific for its

U.S. sales. Noting that for its U.S. sales AST calculated a weighted-

average packing cost for all U.S. sales, petitioners claim that the

Department's verification findings indicate that AST could have

reported the actual packing costs for its U.S. sales on a transaction-

specific basis as the packing list and the packing code were listed on

the confirmation for each U.S. sale. Petitioners state that in its

antidumping questionnaire the Department requested that AST provide the

unit cost of packing for each packing type and report this unit cost

for each U.S. sale. Petitioners claim that because AST maintained this

information but failed to report it, the Department should substitute

the highest U.S. packing cost reported by AST during verification for

the average packing cost reported by AST for its U.S. sales.

Respondent argues that it properly reported a weighted-average

packing cost for its U.S. sales. Respondent maintains that the section

of the AST U.S. sales verification report cited by petitioners in their

case brief does not support petitioners' claim that AST could have

reported actual packing costs for U.S. sales. Respondent notes that in

its U.S. sales listing it reported the invoiced transaction between AST

USA and the customer and that the order confirmation between AST USA

and the customer does not contain a packing material code. Respondent

contends that the fact that the order confirmation between AST and AST

USA contains a transaction-specific packing material code does not ipso

facto mean that it can track packing expenses related to U.S. sales on

a transaction-specific basis. On the contrary, respondent asserts that

it cannot track this information.

Respondent claims that U.S. sales made from warehouses may consist

of either multiple or partial shipments from AST to AST USA and are not

linked to specific order confirmations sent from AST when the material

was originally imported. Similarly, respondent contends that its

consignment sales in the United States consist of multiple shipments

from AST, thereby reflecting multiple order confirmations, and that

back-to-back sales in the United States may be dispatched to multiple

customers, but are listed on a single confirmation sheet issued by AST

to AST USA. Thus, respondent argues that the fact that packing type is

specified on the order confirmation issued by AST to AST USA has no

bearing on AST USA's ability to report a packing type on a transaction-

specific basis. Respondent claims that upon loading the coils for

shipments to the United States, coil types are often mixed, which

limits its ability to relate individual shipments with the original

order confirmation.

Respondent also maintains that the petitioners' argument ignores

the fact that in an investigation the Department is required to base

U.S. price on average rather than transaction-specific prices, which

limits the need for transaction-specific adjustments. Finally, citing

Ferro Union Slip Op. 99-27 (CIT March 23, 1999), respondent holds that

the supplemental information relied upon as facts available must have

probative value. In this case, respondent argues that the facts

available adjustment proposed by petitioners fails to meet this

standard as the proposed packing expense is based on a packing type

used by less than three percent of export shipments and must therefore

be rejected.

Department's Position: We agree with respondent. At verification,

we reviewed AST's calculation methodology and found no discrepancies

with what it reported to the Department. See Verification Report of AST

USA at 3-4. Although we found that AST was able to identify the packing

materials code on the confirmation that AST sent back to AST USA for

each proposed sale, evidence we gathered at verification does not

support a finding that the packing material code appears on the invoice

from AST USA to the customer, or that

[[Page 30771]]

AST can reasonably track and report the information. Therefore, for

purposes of the final determination, we accept AST's reported packing

cost for its U.S. sales.

Comment 18: International Freight

Petitioners contend that the Department should use partial facts

available for AST's failure to submit correct amounts for ocean freight

charges on U.S. sales. Petitioners argue that AST submitted a table

showing a range of shipment-by-shipment ocean freight charges, but only

reported one international freight charge in its original U.S. sales

listing. Petitioners state that AST attempted to justify its failure to

submit the detailed portion-by-portion movement expenses requested in

the Department's questionnaire (i.e., an amount for factory to port

costs, an amount for port charges, an amount for ocean freight, etc.),

by stating that its freight broker charged AST a total movement expense

that reflects the costs associated with moving the SSSS from the

factory to the port, loading the SSSS onto the ship, shipping the

merchandise, and insuring the merchandise. Petitioners contend that

although AST stated that the broker charged AST a fixed percentage of

the expense incurred as a service fee, AST did not identify the fixed

percentage or provide an amount for this service fee. Petitioners argue

that in its November 12, 1998 submission, AST stated that it revised

its reported freight costs for U.S. sales to reflect transaction

specific international freight expenses, however, AST reported only one

amount to cover all of the international freight costs for its

individual U.S. sales in Italian Lira per pound in the U.S. sales

database. Additionally, petitioners argue that during verification, the

Department discovered that the transaction-specific freight costs in

AST's November 12, 1998 U.S. sales listing misstate the actual freight

costs because AST failed to include freight costs for transport from

the factory to the port, and AST's freight costs contained other

errors.

Petitioners state that there are several problems with AST's

attempt to resubmit the freight costs reported in AST's initial U.S.

sales listing. (1) Because AST failed to provide the detailed freight

cost information requested by the Department's antidumping

questionnaire (i.e., cost for shipment from factory to port, cost for

port charges and handling fees, costs for ocean freight, etc.), it is

unclear whether the freight costs reported in AST's September 28, 1998

questionnaire resp

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