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

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** June 8, 1999
- **Citation:** 64 FR 30750

## Text

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.
---------------------------------------------------------------------------

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

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

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

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

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

\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.
---------------------------------------------------------------------------

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-13676. Public record. Not legal advice.