Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and Strip in Coils From Germany

DEPARTMENT OF COMMERCE

International Trade Administration

[A-428-825]

Final Determination of Sales at Less Than Fair Value; Stainless

Steel Sheet and Strip in Coils From Germany

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final determination of sales at less than fair value.

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EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Ranado, Stephanie Arthur, or

Robert James at (202) 482-3518, (202) 482-6312, or (202) 482-5222,

respectively, Antidumping and Countervailing Duty Enforcement Group

III, Import Administration, International Trade Administration, U.S.

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

Washington, DC 20230.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Tariff Act), are to the provisions effective

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

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

unless otherwise indicated, all citations to the Department of

Commerce's (the Department's) regulations are to the regulations

codified at 19 CFR Part 351 (April 1, 1998).

Final Determination

We determine that stainless steel sheet and strip in coil

(stainless sheet in coil) from Germany are being, or are likely to be,

sold in the United States at less than fair value (LTFV), as provided

in section 735 of the Tariff Act. The estimated margins of sales at

LTFV are

[[Page 30711]]

shown in the ``Suspension of Liquidation'' section of this notice.

Case History

We published in the Federal Register the preliminary determination

in this investigation on January 4, 1999. See Notice of Preliminary

Determination of Sales at Less Than Fair Value: Stainless Steel Sheet

and Strip in Coils From Germany, 64 FR 92 (Preliminary Determination).

Since the December 18, 1998 disclosure of the Preliminary Determination

the following events have occurred:

On December 28, 1998, KTN timely submitted an allegation of

significant ministerial errors with respect to the preliminary

determination. Petitioners (Allegheney Ludlum Corp., Armco, Inc., J&L

Specialty Steel, Inc., Washington Steel Division of Bethlehem Steel

Corp., United Steelworkers of America, AFL-CIO/CLC, Butler Armco

Independent Union, and Zanesville Armco Independent Organization) also

alleged a single significant ministerial error on December 29, 1998.

Both interested parties requested that we correct the errors and

publish a notice of amended preliminary determination in the Federal

Register. See 19 CFR 351.224(e). After reviewing both parties'

allegations we determined that the errors, considered collectively,

were not significant, as defined at 19 CFR 351.224(g) of the

Department's regulations. See Memorandum For the File; ``Antidumping

Duty Investigation of Stainless Steel Sheet and Strip in Coils From

Germany; Analysis of Ministerial Error Allegations,'' January 15, 1999

(Ministerial Errors Memorandum), on file in room B-099 of the main

Commerce building. We have addressed the specific errors under ``Facts

Available'' and Comment 31, below.

KTN submitted supplemental questionnaire responses on January 6,

1999 (sections B and C), January 15, 1999 (section E), January 22, 1999

(section E), and February 17, 1999 (section C).

The Department verified sections A (General Information), B (Home

Market Sales) and C (U.S. Sales) of KTN's response January 18 through

22, 1999 at KTN's headquarters in Bochum, Germany. See Memorandum for

the File; ``Home Market Sales Verification of Krupp Thyssen Nirosta,

GmbH (KTN)'', March 1, 1999 (KTN Sales Verification Report). Between

January 25 and January 29, 1999, we verified KTN's section D (Cost of

Production) questionnaire response; see Memorandum to Neal Halper,

Acting Director, Office of Accounting; ``Verification of the Cost of

Production and Constructed Value Submissions of Krupp Thyssen Nirosta

GmbH,'' March 15, 1999 (KTN Cost Verification Report). Public versions

of these, and all other Departmental memoranda referred to herein, are

on file in room B-099 of the main Commerce building.

We also conducted verification of KTN's Section C response at the

offices of its wholly-owned U.S. affiliate, Krupp Hoesch Steel

Products, Inc. (KHSP) in Atlanta, Georgia from February 8 through 11,

1999. See Memorandum to the File; ``U.S. Verification of Krupp Thyssen

Nirosta (KTN),'' March 5, 1999 (KHSP Verification Report). Finally, we

verified the Section C and Section E (Further Manufacturing)

information submitted by KTN's affiliated U.S. processor and reseller.

As the firm's identity and location have been afforded business

proprietary status by the Department, we refer to this entity herein as

``U.S. Reseller.'' See Memorandum to the File; ``Verification of the

Information Submitted by * * * (Reseller),'' March 15, 1999 (Reseller

Sales Verification Report), and Memorandum to Neal Halper;

``Verification of the Cost of Further Manufacturing performed by [U.S.

Reseller],'' March 18, 1999 (Reseller Cost Verification Report).

On March 23, 1999, the Department requested historical data on

KTN's monthly shipments of subject stainless sheet in coil into the

United States to assist in rendering our final determination of

critical circumstances (see below). KTN submitted the requested

information on April 2, 1999.

KTN and petitioners both requested a public hearing in this case

(on January 22, 1999, and February 3, 1999, respectively). On March 23,

1999, petitioners and KTN filed their case briefs in this matter; both

parties filed rebuttal briefs on March 30, 1999. The Department

conducted a public hearing on April 9, 1999, a transcript of which is

on file in the Central Records Unit.

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,

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.

[[Page 30712]]

See Chapter 72 of the HTS, ``Additional U.S. Note'' 1(d).

In response to comments by interested parties the Department has

determined that certain specialty stainless steel products are also

excluded from the scope of this investigation. These excluded products

are described below:

Flapper valve steel is defined as stainless steel strip in coils

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

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

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

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

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

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

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

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

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

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

commonly used to produce specialty flapper valves in compressors.

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

specialty steel product used in the manufacture of suspension

assemblies for computer disk drives. Suspension foil is described as

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

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

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

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

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

with no scratches of measurable depth. The material must exhibit

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

over 685 mm length.

Certain stainless steel foil for automotive catalytic converters is

also excluded from the scope of this investigation. This stainless

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

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

structure for use in automotive catalytic converters. The steel

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

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

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

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

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

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

the balance iron.

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

excluded from the scope of this investigation. This ductile stainless

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

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

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

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

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

sensors and is currently available under proprietary trade names such

as ``Arnokrome III.'' 1

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

Company.

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Certain electrical resistance alloy steel is also excluded from the

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

stainless steel manufactured to American Society of Testing and

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

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

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

melting point of 1390 degrees Celsius and displays a creep rupture

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

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

for circuit breakers and industrial furnaces, and in rheostats for

railway locomotives. The product is currently available under

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

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

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Certain martensitic precipitation-hardenable stainless steel is

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

ductile stainless steel product is designated under the Unified

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

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

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

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

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

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

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

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

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

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

manufacture of television tubes and is currently available under

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

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

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Finally, three specialty stainless steels typically used in certain

industrial blades and surgical and medical instruments are also

excluded from the scope of this investigation. These include stainless

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

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

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

steel also contains, by weight, carbon of between 1.0 and 1.1 percent,

sulfur of 0.020 percent or less, and includes between 0.20 and 0.30

percent copper and between 0.20 and 0.50 percent cobalt. This steel is

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

descriptive purposes only.

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

grades of Hitachi Metals America, Ltd.

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Period of Investigation

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

31, 1998.

Critical Circumstances

Section 733(e)(1) of the Tariff Act provides that if a petitioner

alleges critical circumstances, the Department will determine, on the

basis of the information available to it at the time, whether there is

a reasonable basis to believe or suspect that (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

[[Page 30713]]

less than its fair value and that there would be material injury by

reason of such sales (see 733(e)(1)(A)(i) and (ii), and there have been

massive imports of the subject merchandise over a relatively short

period (733(e)(1)(B)).

In the Preliminary Determination we found that both criteria, i.e.,

knowledge of dumping and material injury and massive imports of subject

merchandise, had been met by KTN and preliminarily found that critical

circumstances exist. We have reconsidered our determination of critical

circumstances as set forth in the Preliminary Determination, however.

While we still find reasonable grounds to impute knowledge of less-

than-fair-value sales to the importer, we have amended our calculation

of massive imports from that applied for the Preliminary Determination.

As explained in detail below, for purposes of this final determination

we are no longer relying upon the publicly-available data on imports of

subject merchandise from Germany as a whole supplied by the Census

Bureau. Rather, we have relied upon the company-specific shipment data

supplied by respondent KTN. Based on this information we find that

there were not massive imports and, therefore, that critical

circumstances do not exist. See our response to Comment 4, below.

Affiliation

As explained in the Preliminary Determination and immediately

below, we find that for purposes of this investigation KTN is

affiliated with Thyssen Stahl and Thyssen AG (Thyssen) and, through

them, their affiliated sellers and steel service centers in Germany and

the United States. The Tariff Act defines ``affiliated persons'' at

section 771(33). Included within that definition are family members,

any organization and its officers or directors, partners, and employer

and employee. See section 771(33)(A) through (D). The statute also

considers as affiliated persons--

(E) Any person directly or indirectly owning, controlling, or

holding with power to vote, 5 percent or more of the outstanding

voting stock or shares of any organization and such organization.

(F) Two or more persons directly or indirectly controlling,

controlled by, or under common control with, any person.

(G) Any person who controls any other person and such person.

Id.

``Control'' is defined as one person being ``legally or

operationally in a position to exercise restraint or direction over the

other person.'' The Statement of Administrative Action (SAA) which

accompanied the Uruguay Round Agreements Act (see H. Doc. 316, Vol. 1,

103d Cong., 2d Sess. (1994)) explained that including control in an

analysis of affiliated parties ``permit[s] a more sophisticated

analysis which better reflects the realities of the market place.'' The

SAA continues, ``[t]he traditional focus on control through stock

ownership fails to address adequately modern business arrangements,

which often find one firm `operationally in a position to exercise

restraint or direction' over another even in the absence of an equity

relationship.'' Id. at 838.

Finally, as the Department noted in its ``Explanation to the Final

Rules'' (i.e., its regulations), ``section 771(33), which refers to a

person being `in a position to exercise restraint or direction,'

properly focuses the Department on the ability to exercise `control'

rather than the actuality of control over specific decisions.''

Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295,

27348 (May 19, 1997) (Final Rule) (emphasis added). Thus, the statute

does not require that we find the actual exercise of control by one

person over the other in order to find the parties affiliated; rather,

the potential to exercise control is sufficient for such a finding.

In this final determination we continue to find that KTN is

affiliated with Thyssen Stahl and Thyssen because Thyssen Stahl

indirectly owns and controls, through Krupp Thyssen Stahl (KTS), forty

percent of KTN's outstanding stock (the remaining sixty percent are

controlled by Thyssen's joint-venture partner, Fried. Krupp. AG Krupp-

Hoesch (Fried. Krupp)). Thyssen, which wholly owns Thyssen Stahl,

likewise indirectly owns and controls forty percent of KTN. See

Preliminary Determination, 64 FR at 95 and Memorandum to the File;

``Affiliated Party Sales,'' October 28, 1998 (Affiliation Memorandum).

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

Thyssen's home market and U.S. sales affiliates because the nature and

quality of corporate contact establish this affiliation by virtue of

Thyssen's common control of its affiliates and of KTS. 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's

substantial equity ownership in KTN and Thyssen's other affiliates, in

conjunction with the `totality of other evidence of control' requires a

finding that these companies are under the common control of Thyssen.''

Id. For a full discussion of KTN's affiliations see Comment 2, below,

the Affiliation Memorandum, and Memorandum For the File; ``Antidumping

Duty Investigation on Stainless Steel Sheet and Strip in Coils from

Germany--Final Determination Analysis for Krupp Thyssen Nirosta,

GmbH,'' May, 19, 1999 (Final Analysis Memorandum).

Facts Available

Section 776(a) of the Tariff 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, or provides

information which cannot be verified, the Department shall use, subject

to sections 782(d) and (e), the facts otherwise available in reaching

the applicable determination. See, e.g., Roller Chain, Other Than

Bicycle Chain, From Japan, 63 FR 63671, 63673 (November 16, 1998). In

this investigation the Department has determined, for the reasons

stated in detail below, that KTN or its affiliates failed to provide

necessary information and, in some instances, that the submitted

information could not be verified. Therefore, pursuant to section

776(a) of the Tariff Act, we have determined that the use of the facts

otherwise available is necessary in these instances.

However, the statute requires that certain conditions be met before

the Department may resort properly to the facts available. Where the

Department determines that a response to a request for information does

not comply with the request, section 782(d) of the Tariff Act provides

that the Department will so inform the party submitting the response

and will, to the extent practicable, provide that party the opportunity

to remedy or explain the deficiency. If the party fails to remedy the

deficiency within the applicable time limits, the Department may,

subject to section 782(e), disregard all or part of the original and

subsequent responses, as appropriate. Briefly, section 782(e) provides

that the Department ``shall not decline to consider information that is

submitted by an interested party and is necessary to the determination

but does not meet all the applicable requirements established by [the

Department]'' if the information is timely, can be verified, is not so

incomplete that it cannot be used, and if the interested party acted to

the best of its ability in providing the information. Where all of

these conditions are met, and the Department

[[Page 30714]]

can use the information without undue difficulties, the statute

requires it to do so.

Finally, in selecting from among the facts otherwise available,

section 776(b) of the Tariff Act permits the use of an adverse

inference if the Department also finds that an interested party failed

to cooperate by not acting to the best of its ability to comply with

the request for information. Adverse inferences are appropriate ``to

ensure that the party does not obtain a more favorable result by

failing to cooperate than if it had cooperated fully.'' SAA at 870.

Furthermore, ``an affirmative finding of bad faith on the part of the

respondent is not required before the Department may make an adverse

inference.'' Final Rule, 62 FR at 27340. The statute continues by

noting that in selecting from among the facts available the Department

may, subject to the corroboration requirements of section 776(c), rely

upon information drawn from the petition, a final determination in the

investigation, any previous administrative review conducted under

section 751 (or section 753 for countervailing duty cases), or any

other information on the record.

In accordance with section 776(a) of the Tariff Act, we have

continued to use partial facts available in instances where KTN failed

to provide the Department with requested sales information concerning

certain affiliated resellers in the home market. See Preliminary

Determination, 64 FR at 95 and 96. Further, pursuant to section 776(b)

we find that KTN failed to cooperate to the best of its ability because

it did not supply missing sales data, as demonstrated by its selective

submission of Thyssen affiliates' data. Therefore, as adverse facts

available for this final determination, as in the Preliminary

Determination, we based normal value upon the highest reported gross

unit price for each product sold to the affiliated parties, in lieu of

the missing prices on downstream sales from the affiliated resellers to

unaffiliated customers. We calculated the highest normal value (NV)

reported by control number (CONNUM) in KTN's home market database and

applied it to KTN's sales to its affiliates for which KTN did not

report home market downstream sales. See Memorandum For the File; ``KTN

Preliminary Analysis Memorandum,'' December 17, 1998 (Preliminary

Analysis Memorandum).

With respect to sales in the United States, we have determined that

in accordance with section 776(b) of the Tariff Act the use of adverse

facts available is appropriate for five previously unreported U.S.

sales KTN disclosed to the Department during the verification of KHSP

(see Comment 10, below). As adverse facts available we assigned the

highest non-aberrational margin (as explained immediately below) to

these transactions.

In addition, as explained in response to Comments 19 and 20, we

have determined that we must resort to the facts available with respect

to the sales and further-manufacturing data submitted by U.S. Reseller.

At verification we discovered numerous and systemic errors, some of

which cannot be corrected, in the data used by U.S. Reseller to report

its costs of further manufacturing of subject merchandise. These errors

included, inter alia, the failure to match properly input coils and

output finished products, the allocation of processing costs to sales

which had undergone no further processing whatever, and cases where the

quantities of output goods exceeded the inputs. The vast majority of

the subject merchandise sold through U.S. Reseller was first further

processed by this company; therefore, the deficiencies in its data

affect a corresponding percentage of U.S. Reseller's submitted sales

data. Furthermore, the mis-allocations not only affected U.S.

Reseller's reported sales which had been subject to further processing,

but through the allocation of processing costs to the non-further-

processed sales tainted this portion of its database as well. In

addition, U.S. Reseller failed to identify the producer of a

significant portion of its sales in the United States, and failed to

report physical criteria vital to our model matching for certain other

transactions. As the breadth and depth of the discrepancies leave us

with no confidence in the underlying further-processing data submitted

by the U.S. Reseller, we have determined that these data cannot serve

adequately as a basis for calculating KTN's overall weighted-average

margin. Further, the information required to correct the flaws in U.S.

Reseller's data is not on the record of this proceeding; therefore, the

use of total facts available is necessary (see section 782(e)).

Finally, the record indicates that U.S. Reseller could readily have

discovered and corrected the majority of these errors prior to

submitting its data to the Department and, at the latest, prior to

verification.

Accordingly, as provided in section 776(b) of the Tariff Act, we

find that U.S. Reseller has failed to cooperate by not acting to the

best of its ability in responding to the Department's requests for

information. Therefore, we have drawn an adverse inference for the

entirety of the data submitted by U.S. Reseller. 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 U.S. Reseller. To determine the highest

non-aberrational margin we examined the frequency distribution of the

margins calculated from KTN's reported data. We found that the margins

for nearly 10 percent of KTN's transactions fell within a specific

range of percentages (see the Final Analysis Memorandum for the exact

figures); we selected the highest of these as reflecting the highest

non-aberrational margin. We then multiplied the resulting unit margin

by the total quantity of resales of subject merchandise by U.S.

Reseller. See the Final Analysis Memorandum. This total quantity

includes that material affirmatively verified as being of KTN origin,

as well as a portion of the merchandise of unidentified origin

allocated to KTN. To apportion the unidentified sales among the

investigations of stainless sheet in coil from Germany, Italy and

Mexico (see Comment 20, below) we have adjusted the quantity for each

of the unidentified sales on a pro rata basis, using the verified

percentages of U.S. Reseller's merchandise supplied by each of the

three respondent mills. We then applied the facts-available margin to

these unidentified sales transactions as explained above.

Finally, as we explained in our Ministerial Errors Memorandum, we

inadvertently relied upon a home market sales data base which did not

include the gross unit prices recalculated as facts available for sales

to certain affiliated home market resellers. Thus, the decision to rely

on facts available with respect to KTN's home market downstream sales

had no effect in the Preliminary Determination. Therefore, we have

corrected the programming language to include the gross unit prices

adjusted for the application of facts available in our final

calculations. See Ministerial Errors Memorandum at 3 and 4.

Fair Value Comparisons

To determine whether KTN's sales from Germany to the United States

were made at less than fair value, we compared the export price (EP) or

constructed export price (CEP) to the NV, as described in the ``Export

Price and Constructed Export Price'' and ``Normal Value'' sections of

this notice, below. In accordance with section 777A(d)(1)(A)(i) of the

Tariff Act, we calculated weighted-average EPs and CEPs for comparison

to weighted-average NVs.

[[Page 30715]]

Transactions Investigated

In the Preliminary Determination we relied upon KTN's invoice date

as the date of sale in both markets, in keeping with the regulatory

preference for using the invoice date as the date of sale and because

there were no facts in this investigation that would warrant selection

of a different date. See 19 CFR 351.401(i). As explained in response to

Comment 1, below, for this final determination we have continued to

rely upon KTN's invoice dates as the date of sale in both the home and

U.S. markets.

Level of Trade

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

as explained in the Preliminary Determination, we determine that one

level of trade (LOT) exists in the home market for KTN's sales. We also

have determined that KTN's U.S. sales take place at two LOTs, one

comprising KTN's factory-direct EP sales, and the other KTN's three

channels of distribution for its CEP sales (i.e., ``back-to-back''

sales through KHSP, consignment sales through KHSP, and sales of

``secondary quality'' merchandise, also through KHSP).

In addition, we continue to find that KTN's EP sales and its home

market sales were at the same LOT, while KTN's CEP sales were at a

different LOT. Because these CEP sales were at a different LOT than

KTN's home market sales, we examined whether a LOT adjustment may be

appropriate. However, as KTN sold to a single LOT in the home market,

we have no basis upon which to determine whether there is a pattern of

consistent price differences between levels of trade. Further, we do

not have the information which would allow us to examine pricing

patterns of KTN's sales of other similar products and there is no other

record evidence upon which such an analysis could be based. Therefore,

we have continued to allow a CEP offset, in accordance with section

773(a)(7)(B) of the Tariff Act. See Preliminary Determination, 64 FR at

97.

Export Price and Constructed Export Price

KTN reported as EP transactions certain sales of subject

merchandise sold to unaffiliated U.S. customers prior to importation

without the involvement of its affiliated company, KHSP. KTN reported

as CEP transactions its sales of subject merchandise sold to KHSP for

its own account. KHSP then resold the subject merchandise after

importation to unaffiliated customers in the United States.

Also, because KTN was unable to demonstrate for the record that it

was not in the position to collect downstream sales information from

its U.S. affiliates, based on record evidence we requested that KTN

report its downstream sales made in the United States (see Memorandum

to Richard Weible, ``Limited Reporting of Home Market and United States

Sales,'' November 13, 1998) (Limited Reporting Memorandum).

We calculated EP in accordance with section 772(a) of the Tariff

Act for those sales where the merchandise was sold to the first

unaffiliated purchaser in the United States prior to importation and

where CEP methodology was not otherwise warranted based on the facts of

record. We based EP on the packed, delivered, tax and duty unpaid price

to unaffiliated purchasers in the United States. We made deductions for

billing adjustments and movement expenses in accordance with section

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

foreign inland freight, foreign brokerage and handling, international

freight and foreign inland insurance.

We calculated CEP, in accordance with subsections 772(b) of the

Tariff Act, for those sales to the first unaffiliated purchaser that

took place after importation into the United States. We based CEP on

the packed, delivered, duty paid or delivered prices to unaffiliated

purchasers in the United States. We made adjustments for price-billing

errors, where applicable. We also made deductions for movement expenses

in accordance with section 772(c)(2)(A) of the Tariff Act; these

included, where appropriate, 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

Tariff Act, we deducted those selling expenses associated with economic

activities occurring in the United States, including direct selling

expenses (credit costs, warranty expenses and other direct selling

expenses), inventory carrying costs (ICCs), and indirect selling

expenses (ISEs). We offset credit expenses by the amount of interest

revenue on sales. For CEP sales, we also made an adjustment for profit

in accordance with section 772(d)(3) of the Tariff Act.

Finally, we made the following changes in our calculation of EP and

CEP in the Preliminary Determination based on information discovered at

verification or after analysis of comments by the interested parties:

We recalculated marine insurance, foreign inland insurance, other

transportation charges, and U.S. duty expenses to reflect corrections

presented at the start of verification. See KTN Verification Report at

2 and KHSP Verification Report at 1 and 2. We also adjusted ocean

transportation for shipments to specific points by an affiliated

carrier to reflect arm's-length freight rates (see Comment 16, below).

In addition, we made a number of changes to our calculation of U.S.

credit expenses and inventory carrying costs to reflect the verified

interest rates, to ensure use of the proper shipment date for certain

CEP re-sales, and to correct the time in inventory to capture the time

the merchandise was at sea (see Comments 12, 13, and 14). We adjusted

indirect selling expenses (ISEs) for certain U.S. sales made through an

affiliated reseller located in Germany (see Comment 11). We also

adjusted ISEs for CEP sales through KHSP to reflect its correction at

verification (see KHSP Verification Report at 2 and Exhibits 1 and 8).

Finally, we reclassified specific observations from KTN's CEP and its

``non-U.S.'' sales listings, as appropriate, to include U.S. sales or

exclude transshipments. Id.

With respect to subject merchandise to which value was added in the

United States by U.S. Reseller prior to sale to unaffiliated customers,

as explained above, we have applied the facts available in accordance

with section 776(b) of the Tariff Act.

Affiliated-Party Transactions and Arm's-Length Test

We excluded from our analysis any sales to affiliated customers in

the home market not made at arm's-length prices because we considered

them to be outside the ordinary course of trade. See 19 CFR 351.102. To

test whether these sales 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 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 calculated 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, e.g., Certain Cold-Rolled

[[Page 30716]]

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

1993). 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

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV

(i.e., the aggregate volume of home market sales of the foreign like

product was equal to or greater than five percent of the aggregate

volume of U.S. sales), we compared the respondent's volume of home

market sales of the foreign like product to the volume of U.S. sales of

the subject merchandise, in accordance with section 773(a)(1)(B)(i) of

the Tariff Act. As KTN's aggregate volume of home market sales of the

foreign like product was greater than five percent of its aggregate

volume of U.S. sales of the subject merchandise, we determined that the

home market was viable. Therefore, we have based NV on home market

sales in the usual commercial quantities and in the ordinary course of

trade.

We made a number of changes to our calculation of NV from the

Preliminary Determination either based upon our findings at

verification or in response to comments by the interested parties. At

verification we found that KTN had understated its home market early

payment discounts; we adjusted the discounts accordingly (see KTN Sales

Verification Report at 1. KTN also indicated that it had inadvertently

understated home market warranty expenses by a factor of 10 (see id.);

we have recalculated these expenses to correct the error. We also

corrected KTN's technical service expenses for sales of precision strip

sales to apply the expense ratio calculated for precision strip

products. In addition, we recalculated rebates for sales by NSC using

the corrected percentage supplied at verification (id., see also

Comment 9, below). NSC also overstated its average days in inventory in

calculating ICCs; we adjusted this calculation appropriately.

Furthermore, we corrected the reported sale dates for certain NSC

transactions. See KTN Sales Verification Report at 1. Finally, we

amended our model-match language to correct a ministerial error in

reading KTN's reported finish and gauge codes (see Comment 31).

Cost of Production (COP) Analysis

Based on a cost allegation filed by the petitioners, the Department

investigated whether KTN's sales of the foreign like product were made

at prices which represent less than the cost of production. In

accordance with section 773(b)(3) of the Tariff Act, we calculated the

weighted-average COP based on the sum of KTN's cost of materials and

fabrication for the foreign like product, plus amounts for selling and

general and administrative (G&A) expenses and packing costs. In

response to comments of the interested parties, we made the following

changes to KTN's COP data:

We adjusted KTN's G&A expense rate by including the costs of

international projects, year-end adjustments, and personnel costs of

KTN's affiliated home market processor and reseller, Nirosta Service

Center (NSC) (see Comment 23). In addition, we based our allocation of

G&A expenses on KTN's total cost of manufacture (TCOM), rather than on

processing costs alone, as reported by KTN (see Comment 24).

In calculating KTN's financial expenses we included exchange rate

losses of Fried. Krupp, while excluding its exchange rate gains; we

also included an offset to total interest expenses of Fried. Krupp's

short-term interest income less the amount attributable to trade

receivables (see Comment 25).

Where KTN's reported transfer prices for purchases of nickel from

an affiliated party were not at arm's length, we increased these prices

to represent prevailing market prices (see Comment 27).

Finally, we disallowed KTN's claim to treat NSC's processing costs

as a direct selling expense, treating these instead as a component of

KTN's fully-captured variable cost of manufacture (VCOM); accordingly,

the processing costs reported for sales by NSC have been included in

KTN's COP, rather than deducted from NV as selling expenses (see

Comment 6).

Where possible, we used KTN's reported COP amounts, adjusted as

discussed above, to compute weighted-average COPs during the POI. We

compared the product-specific weighted-average COP figures to home

market sales of the foreign like product, as required under section

773(b) of the Tariff Act, in order to determine whether these sales had

been made at prices below COP. We compared the COP to the home market

prices, less any applicable movement charges and discounts. In

determining whether to disregard home market sales made at prices less

than the COP, we examined whether such sales were made (i) in

substantial quantities over an extended period of time, and (ii) at

prices which permitted the recovery of all costs within a reasonable

period of time.

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

than twenty percent of KTN'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 twenty percent or more of its

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 within an extended period of time, in accordance with

sections 773(b)(2)(C)(i) and 773(b)(2)(B) of the Tariff Act. Because we

used POI average costs, pursuant to section 773(b)(2)(D) of the Tariff

Act, we also determined that such sales were not made at prices which

would permit recovery of all costs within a reasonable period of time.

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. When there were no home market sales of identical or

similar merchandise in the home market available to match to U.S.

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

of the Tariff Act.

Our cost test for KTN revealed that less than twenty percent of

KTN's home market sales of certain products were at prices below KTN's

COP. Therefore, we retained all such sales in our analysis. For other

products, more than twenty percent of KTN's sales were at below-cost

prices. In such cases we disregarded the sales that failed the cost

test, while retaining the above-cost sales for our analysis. See KTN

Final Analysis Memorandum.

Constructed Value

In accordance with section 773(e)(1) of the Tariff Act, we

calculated CV based on the sum of respondent's cost of materials,

fabrication, SG&A, interest expenses, profit, and U.S. packing costs.

In accordance with section 773(e)(2)(A) of the Tariff Act, we based

SG&A and profit on the amounts incurred and realized by KTN in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in the foreign country. We

used the CV data KTN supplied in its section D supplemental

questionnaire response, except for the adjustments made for COP,

described above.

Price-to-Price Comparisons

We calculated NV based on FOB or delivered prices to unaffiliated

[[Page 30717]]

customers or prices to affiliated customers that we determined to be at

arm's-length prices. We made adjustments for price billing errors,

where appropriate. We made deductions, where appropriate, for foreign

inland freight, pursuant to section 773(a)(6)(B) of the Tariff Act. In

addition, we made adjustments for differences in cost attributable to

differences in physical characteristics of the merchandise pursuant to

section 773(a)(6)(C)(ii) of the Tariff Act, as well as for differences

in circumstances of sale (COS) in accordance with section

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

adjustments for imputed credit 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 Tariff Act.

To the extent practicable, we based NV on sales at the same level

of trade as the EP or CEP transactions. Finally, because KTN's sales to

its home market affiliates represented more than five percent of its

total home market sales, for certain of its home market affiliates we

requested that KTN report its affiliates' downstream sales (i.e., sales

made by the affiliate). See Limited Reporting Memorandum.

Price-to-CV Comparisons

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

on CV if we were unable to find a home market match of identical or

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

accordance with section 773(a)(8) of the Tariff Act. For comparisons to

EP, we made COS adjustments by deducting home market direct selling

expenses and adding U.S. direct selling expenses. Where we compared CV

to CEP, we deducted from CV the weighted-average home market direct

selling expenses.

Currency Conversion

We made currency conversions into U.S. dollars in accordance with

section 773A(a) of the Tariff Act based on the exchange rates in effect

on the dates of the U.S. sales, as certified by the Federal Reserve

Bank.

Analysis of Interested Party Comments

Comment 1: Date of Sale

In the Preliminary Determination the Department relied upon KTN's

invoice date as the date of sale in both the home and U.S. markets, in

keeping with the Department's regulatory preference for using the

invoice date as the sale date absent evidence ``that a different date

better reflects the date on which the exporter or producer establishes

the material terms of sale.'' 19 CFR 351.401(i). Petitioners and KTN

both presented direct arguments in their respective case briefs

concerning the proper date of sale for this final determination.

KTN urges the Department to continue using the invoice date as the

date of sale. Such a position, KTN submits, would be consistent with

the Department's clear policy to rely upon the invoice date, a policy

articulated in several cases including Carbon Steel Pipes and Tubes

From Thailand, 63 FR 55578, 55587 (October 16, 1998) (Pipes From

Thailand). KTN insists that it has provided compelling data in support

of using the invoice date as date of sale. According to KTN, these data

include precise figures on the frequency of changes to the essential

terms of sale (including price and quantity) following the order

confirmation date. KTN insists further that it provided supporting

documentation of these claims during the Department's home market and

U.S. verifications, and asserts that the Department reviewed this

documentation at verification noting no discrepancies. ``In contrast,''

KTN concludes, ``[p]etitioners have failed to provide any evidence to

support their argument that order confirmation date would be a more

appropriate date to use for the date of sale.'' KTN's Case Brief at 40.

Petitioners assert that the proper date of sale is the order

confirmation or, if available, the change order date. Petitioners

insist that KTN has not established that the invoice date should serve

as the date of sale in this proceeding, relying instead upon an ``over-

simplification'' of the Department's regulations on this issue.

Petitioners Case Brief at 3. Citing Pipes From Thailand and Circular

Welded Non-Alloy Steel Pipe From the Republic of Korea, 63 FR 32833

(June 16, 1998) (Korean Steel Pipe), petitioners note that the

Department is afforded great latitude in selecting a sale date other

than the invoice date if ``the record evidence demonstrates that the

material terms of sale, i.e., price and quantity, are established on a

different date.'' Id., quoting Pipes From Thailand. In an industry

where merchandise is produced to order, petitioners argue, and where

significant lag times separate the order date and the subsequent

invoice date, the Department's date-of-sale determination can have a

critical impact upon the dumping calculations. The vast majority of

KTN's sales, petitioners note, were produced to order.

Petitioners dismiss KTN's documentation supporting the use of

invoice date as either unsubstantiated or indefensible. Id. at 5. For

example, petitioners dismiss as unsupported by record evidence KTN's

claims concerning changes in quantity between the original order date

and the invoice date. As a preliminary matter, petitioners accuse KTN

of concealing its practices with respect to ``delivery tolerances''

(i.e., pre-determined levels by which the weight of a shipment may fall

above or below the ordered quantity and still satisfy the contractual

terms of sale) in order to exaggerate the frequency of changes in

quantity between the original order date and invoice date. According to

petitioners, KTN first denied its use of delivery tolerances

altogether, only to acknowledge at the Department's various sales

verifications that, in fact, it relies upon an ``industry standard''

delivery tolerance of plus or minus ten percent of the ordered mass.

Petitioners' Case Brief at 7. More to the point, petitioners aver, a

standard ten percent tolerance cannot serve as a meaningful benchmark

for measuring changes in quantity because common practice in the steel

industry allows for negotiated tolerances in excess of the standard ten

percent. Petitioners point to a statement by KTN's sister company

Mexinox, a respondent in the companion investigation of stainless steel

sheet and strip in coils from Mexico (investigation number A-201-822)

that customers may agree to accept quantities above or below those

called for under the nominal delivery tolerance. Id. at 8, citing

Mexinox's October 29, 1998 supplemental questionnaire response at 17.

Petitioners suggest that because KTN uses both standard and special

negotiated delivery tolerances in its normal course of business, any

claims concerning quantity changes which fail to account for the latter

are without merit, as such changes were clearly anticipated in the

original sales agreement. Petitioners' Case Brief at 10.

That issue aside, petitioners continue, KTN's purported analysis of

data from its U.S. sales affiliate KHSP concerning changes in the

essential terms of sale does not withstand scrutiny. Petitioners accuse

KTN of building its case by means of data riven with a ``lack of proven

representativeness, internal inconsistencies, citation to changes in

items other than essential terms of sale, missing documentation, and a

complete lack of discussion regarding the role of change orders.''

Petitioners' Case Brief at 10. First, petitioners aver, the Department

did not select the January

[[Page 30718]]

1998 sales used by KTN for its analysis and did not select any other

month for comparison. Therefore, the Department cannot accept KTN's

sample as representative of the entire POI. Second, claim petitioners,

the data include numerous internal discrepancies including conflicting

or truncated order and invoice numbers that preclude tying the

proffered order documentation to specific reported transactions. Third,

petitioners contend, KTN's analysis included changes that, by

definition, did not affect the essential terms of sale, i.e., price and

quantity, including changes in payment terms. Further, petitioners

maintain that other so-called changes included in KTN's analysis do not

represent changes to an existing order but, rather, entirely new orders

for completely different products. Petitioners Case Brief at 13.

Fourth, petitioners suggest that many of KTN's claimed changes lack

critical documentation, with conflicting order numbers and invoice

numbers. Petitioners accuse KTN of mixing the orders and invoices

between and among various sales to build its case that changes, in

fact, took place. Id. at 14. More fundamentally, suggest petitioners,

KTN's analysis of KHSP's January 1998 transactions inexplicably

includes sales which are not included in KTN's CEP sales listing; other

January 1998 transactions reported in KTN's CEP sales data are

curiously absent from KTN's date-of-sale analysis. Petitioners accuse

KTN of submitting an incomplete listing of its U.S. sales, further

undermining the credibility of KTN's data. Id. at 15.

Citing a list of KTN's claimed changes in quantities, petitioners

assert that the data indicate that these variances stemmed not from

changes between order and invoice, as claimed by KTN but, rather, (i)

previously-negotiated delivery tolerances in excess of the standard ten

percent, (ii) partial shipments made whole by a subsequent shipment of

the balance of the order, or (iii) unreported change orders which

served to modify and, thus, supercede the original order. Petitioners

point to the Department's KHSP Sales Verification Report as

demonstrating that KTN often met customer orders by shipping a portion

of the order under one invoice number and completing the original order

with a subsequent shipment issued under a second invoice. Petitioners

suggest that KTN has represented as changes in quantity what, in fact,

were merely partial or multiple shipments of the originally-ordered

quantity, ``a pervasive and industry-wide practice.'' Petitioners' Case

Brief at 19.

Petitioners further insist that without any explanation or

quantification of change orders, KTN's statistics concerning the

frequency of changes between order and invoice dates are meaningless.

Id. at 20, citing Certain Hot-Rolled Carbon Steel Flat Products,

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

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

Steel Plate From Belgium, 58 FR 37083, 37090 (July 9, 1993) (Belgian

Carbon Steel Flat Products). Despite KTN's efforts to gloss the role of

change orders, petitioners continue, the record clearly indicates that

KTN relies upon change orders in its normal course of business and that

KTN failed to consider these in pressing its case that the invoice date

represents the only date when the essential terms of sale are

conclusively known. According to petitioners, the Department recently

addressed the importance of change orders in Certain Corrosion-

Resistant Carbon Steel Flat Products From Japan, 64 FR 12951, 12957

(March 16, 1999) (Flat Products From Japan). In that case, petitioners

suggest, the Department relied upon the respondent's order confirmation

date as the date of sale, noting that any changes in the essential

terms of sale were memorialized through the subsequent issuance of a

revised order confirmation.

Even if one accepts KTN's self-selected and incomplete data for

January 1998, petitioners aver, for a majority of these transactions

the essential terms were, in fact, set at the order date; thus, ``the

order confirmation date, and not the shipment date, best reflects when

material terms of sale usually are established.'' Id. at 25, quoting

Flat Products From Japan, 64 FR at 12958. As in Korean Steel Pipe,

petitioners contend, KTN produces merchandise to order in the vast

majority of cases; subsequently, there are significant lags between the

order date and the eventual invoice date. Reliance upon KTN's reported

invoice date, assert petitioners, would result in the Department's

``comparing home market sales in any given month to U.S. sales whose

material terms were set months earlier--an inappropriate comparison for

purposes of measuring price discrimination in a market with less than

very inelastic demand.'' Id., quoting Korean Steel Pipe.

Petitioners point to other perceived problems with KTN's reported

sales, accusing KTN of including in its home market sales data

transactions with ``impossibly old'' order dates, some of which

preceded the POI by many years. Petitioners insist that such

transactions arose from long-term or ``periodic requirements''

contracts. However, as the record does not include any detail

concerning KTN's contractual obligations, petitioners argue, the

Department ``should resolve the confusion caused by KTN by concluding

that order date, not invoice date, should serve as the date of sale * *

*''. Petitioners blame KTN for sowing this confusion by reporting

improperly the date of the original order as its order date, rather

than the final order confirmation issued by KTN. Id. at 32 and 33.

Further distorting the Department's sales analysis, petitioners

contend, is KTN's basing order dates on disparate events in the home

and U.S. markets, relying upon the date of the customer's original

purchase order for home market transactions, while using the later

confirmation date for purposes of reporting U.S. order dates. This has

the effect of further exaggerating the alleged lag between home market

order date and confirmation date.

Once aberrant transactions, partial shipments, and changes

involving non-essential terms of sale are disregarded, petitioners

argue, KTN's own data indicate that changes occur in far fewer

transactions than originally claimed by KTN. Given the gaps in the

record, petitioners insist, the Department cannot accept KTN's

proffered data as bona fide evidence that the invoice date should serve

as date of sale. Petitioners' Case Brief at 26. Petitioners list the

perceived failures in KTN's date-of-sale arguments, contending that the

lack of credibility inherent in KTN's reporting requires the use of

total adverse facts available. In the alternative, petitioners suggest,

KTN's order confirmation date in both the home and U.S. markets should

serve per se as the date of sale for this final determination. Id. at

37 through 40.

In rebuttal, KTN accuses petitioners of relying upon ``fabricated

theories'' and mischaracterizations of KTN's business practices in

their effort to undermine the integrity of the data provided by KTN to

substantiate the use of invoice date as the date of sale. See

``Rebuttal Brief of Krupp Thyssen Nirosta GmbH, Krupp Hoesch Steel

Products Inc.'' (KTN Rebuttal Brief), March 30, 1999, at 7. According

to KTN, petitioners' arguments do not hold up in light of the record

evidence; even if they did, KTN avers, the record would still support

the use of invoice date as the date of sale. KTN insists that it has

provided reliable and compelling evidence that the

[[Page 30719]]

material terms of sale change frequently prior to the issuance of the

invoice.

While stating that the burden of proof on this issue rests with

petitioners, KTN nevertheless maintains that its sales data demonstrate

that either price or quantity changed in a significant percentage of

the U.S. sales included in its analysis of January 1998 transactions.

The Department, KTN notes, reviewed these data at the verification of

KHSP and noted no discrepancies. In their efforts to attack the

credibility of the January 1998 analysis, KTN contends, petitioners

cited examples of discrepancies without providing any context and have

stretched these ``piecemeal arguments'' to substantiate spurious

conclusions. KTN Rebuttal Brief at 10. As a preliminary matter, KTN

insists that throughout this investigation it has not relied upon

changes in alloy surcharges or quantities falling within the industry

standard plus-or-minus 10 percent in its arguments for using the

invoice date, thus rendering petitioners' comments both inaccurate and

irrelevant. KTN also defends its use of KHSP's January 1998 sales data

as especially suitable, claiming that it provided the largest sample

for any month of the POI and because it fell late in the POI, thus

allowing analysis of transactions where both the invoice and the order

confirmation fell within the POI.

Furthermore, KTN continues, many of the perceived inconsistencies

in KHSP's information stem from the latter's installation of a new

computer system which became operational on January 1, 1998. Thus, all

sales prior to January 1 reflect a customer invoice number identical to

the invoice number issued by KTN's German affiliate Krupp Nirosta

Export, GmbH (KNE) to KHSP, whereas order confirmation numbers

reflected certain product codes. KTN's Rebuttal Brief at 15. Once

KHSP's new SAP software was in place, KTN submits, all invoices bore a

sequential number unique to KHSP; order confirmations numbers issued

prior to January 1, but invoiced after January 1, would have the old

numbering protocol overwritten by the new sequential SAP numbering

system. KTN argues that ``[t]he numbering mechanisms, while different,

are internally consistent and permit the tracing of sales

transactions.'' Id. at 16 and 17.

KTN also rejects petitioners' charge that it included partial

shipments against a single order in its reporting of changes in

quantity. According to KTN, while the weights for individual coils

posited by petitioners approximate the weight of coils shipped by KHSP

to customers, the input master coil produced by KTN in Germany is twice

as heavy. Thus, if available material to fill an order was short by as

much as 10,000 pounds, KTN suggests, KHSP would negotiate with the

customer to consider the order filled, rather than forcing KTN to roll

an entire master coil to make up such a small difference. KTN Rebuttal

Brief at 18 and 19.

With respect to KHSP's use of change orders, KTN contends that it

has provided a copy of each existing change order applicable to any

sale traced at verification or included in the January 1998

transactions (see KHSP Verification Exhibit 23). More importantly,

claims KTN, not every change in the material terms of sale is

memorialized through issuance of a new order confirmation. In some

cases, changes in the terms of sale made after the order confirmation

date are simply reflected in the invoice without the issuance of a

change order. KTN Rebuttal Brief at 21. According to KTN, the sole case

cited by petitioners as addressing the importance of change orders,

Belgian Carbon Steel Flat Products, involved a fact pattern that was

the polar opposite of KHSP's, where the Department only discovered at

verification that where the essential terms of sale were altered after

the initial confirmation, the respondent routinely issued change orders

firmly establishing the terms of sales. Id. In contrast, argues KTN, at

its U.S. verification the Department reviewed KHSP's ``compelling

evidence'' concerning quantity and price changes and noted no

discrepancies. Id.

Assuming that each of petitioners' contentions has merit, KTN

continues, the remaining percentage of sales exhibiting changes in the

material terms of sale would still be more than sufficient to warrant

relying on the invoice date as date of sale. In Certain Internal

Combustion Industrial Forklift Trucks From Japan, 62 FR 5592, 5611

(February 6, 1997), KTN suggests, the Department found that the invoice

date best approximated the point at which material terms of sale were

set in light of evidence of changes in only 4.3 to 7.5 percent of the

respondent's transactions. KTN argues that even given petitioners'

adverse assumptions the essential terms of KTN's sales changed with far

greater frequency in the instant investigation. Furthermore, continues

KTN, the Department cited the mere potential for changes as militating

for the use of the invoice date. Therefore, KTN maintains, even if each

of petitioners' arguments are on point, the Department's precedent

favors continued reliance on the invoice date.

With respect to home market date of sale, KTN dismisses the

allegedly aberrational lag times found in its home market sales

listing, noting that for a significant majority of KTN's home market

sales less than six months passed between the customer's order and the

invoice date. KTN asserts that in a business where a customer places an

order for shipments to be made at different times during the year, such

lag times should be expected. KTN's Rebuttal Brief at 25.

In addition to its factual arguments, KTN contends that case

precedent similarly supports the use of invoice date. For example,

continues KTN, in Korean Steel Pipe, a case cited by petitioners, the

Department noted the markedly different sales processes for U.S. and

home market sales as supporting the use of the contract date over

invoice date. KTN suggests that the instant case is easily

distinguishable from Korean Steel Pipe; unlike the latter case, KTN's

sales practices in both markets are essentially the same, with most

transactions in both markets involving made-to-order merchandise. KTN's

Rebuttal Brief at 27. KTN claims that other case precedent similarly

supports use of invoice date. In Certain Corrosion-Resistant Carbon

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

Canada, 64 FR 2173 (January 13, 1999) (Flat Products From Canada), the

Department opted for invoice date in light of quantity changes for a

number of sales. The Department reached the same conclusion in Pipes

From Thailand, KTN notes, owing once again to quantity changes between

order and invoice dates. These precedents, KTN concludes, support the

use of KTN's reported invoice date as the date of sale.

Department's Position: After a thorough review of the record we

conclude that while petitioners raise a number of cogent arguments for

using the order confirmation date as the date of sale, the weight of

the record evidence supports using KTN's reported date of invoice as

the date of sale for purposes of this final determination. The

Department's regulations state that the invoice date will serve as the

date of sale unless record evidence demonstrates ``that a different

date better reflects the date on which the exporter or producer

establishes the material terms of sale.'' 19 CFR 351.401(i). ``Our

current practice, in a nutshell, is to use the date of invoice as the

date of sale unless there is a compelling reason to do otherwise.''

Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From

Korea, 63 FR 13170, 13194 (March 18, 1998)

[[Page 30720]]

(Flat Products From Korea II). Furthermore, as the Department has

noted, ``price and quantity are often subject to continued negotiation

between the buyer and the seller until a sale is invoiced. * * * [a]s a

practical matter, customers frequently change their minds and sellers

are responsive to those changes.'' Final Rule, 62 FR at 27348. The

Department further recognized that the buyer and seller themselves will

often disagree as to when, precisely, the terms of sale were set:

``this theoretical date usually has little, if any, relevance. From

their perspective, the relevant issue is that the terms be fixed when

the seller demands payment (i.e., when the sale is invoiced).'' Id. at

27349.

Petitioners note correctly that the respondent is a mill which

largely produces the merchandise under investigation to fill specific

orders. Therefore, as petitioners see it, once the mill has scheduled

the casting of stainless slab for rolling to a given stainless coil,

little room remains for altering the essential terms of sale.

Furthermore, as detailed below, petitioners point to lacunae in the

evidence KTN has introduced to support the use of invoice date.

KTN, in turn, has provided evidence that the material terms of sale

are subject to change at any time between the order confirmation and

invoice dates and has indicated that not all such changes would be

reflected in KTN's order confirmation. This is especially true of home

market sales, where KTN's computerized production control system allows

for entry of corrections to orders without generating new order

confirmations. In addition, KTN has submitted for the record evidence

of actual changes in the essential terms of sale between its written

order confirmation and the subsequent invoice date.

We conclude that the record evidence in the instant proceeding

supports use of the invoice date. First, it is clear that KTN's records

and financial statements kept in its normal course of business do not

recognize a sale until the invoice is issued and payment is demanded.

See, e.g., the quantity and value sections of the KTN Sales

Verification Report and KHSP Verification Report. Further, and perhaps

more to the point, KTN presented numerous examples during the POI where

either quantity or price or both changed after the order confirmation

had been issued, but prior to the invoice date. See Home Market

Verification Report at 32 and Exhibit 6-IV-A, and KHSP Verification

Report at 17 and Exhibit 23. Thus, as we concluded in Flat Products

From Korea II, ``there is no record evidence indicating that a date

other than the invoice date is the date after which the essential terms

of sale could not be changed.'' Id., 63 FR at 13195 (emphasis added).

Although petitioners have raised various concerns about KTN's date-

of-sale data (see immediately below), we find, however, that even after

considering these issues the totality of record evidence still suggests

that KTN's invoice date is the appropriate date of sale, as it best

represents the point at which the essential terms of sale ``are firmly

established and no longer within the control of the parties to alter

without penalty.'' Large Newspaper Printing Presses and Components

Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166,

38182 (July 23, 1996).

Turning now to the parties' specific comments, we do not subscribe

to petitioners' views concerning the alleged ``unrepresentativeness''

of respondent's data. In our October 9, 1998 section A supplemental

questionnaire we asked that KTN ``indicate the frequency of price,

quantity, material specification, delivery terms and alloy surcharge

changes between confirmation and final invoice.'' \6\ When KTN

responded it elected to rely upon a sampling of its home market and

U.S. sales, describing its sampling methodology in detail. See KTN's

October 23, 1998 section A supplemental response at 14. Sampling was

necessary, KTN explained, given the burden of tracking each line item

of each incoming order to its corresponding final invoice. To this end

KTN selected the first quarter of 1998 for both home market and U.S.

sales, and presented a further detailed analysis of each specific

change involving its U.S. sales during the sample month of January

1998. We reviewed the documentation for both the U.S. and home market

sales samples at verification and noted no discrepancies. See, e.g.,

KHSP Verification Report at 17.

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

\6\ Although the Department customarily equates ``essential

terms of sale'' with price and quantity, it should be noted that

this questionnaire included within the meaning of ``essential terms

of sale,'' inter alia, delivery and payment terms.

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

Having raised no objections to the methodology adopted by KTN to

address this issue, and having accepted and verified the proffered

samples, it would be inappropriate for the Department at this point to

reject these data and make assumptions adverse to KTN's interests

because the Department failed to request that KTN provide an analysis

of a different universe of transactions. Furthermore, and more

importantly, we have no reason in this case to suspect that an analysis

of a full quarter's sales in the home and U.S. markets, coupled with

the line-item-by-line-item analysis of one month's sales in the U.S.

market would not capture accurately KTN's experience throughout the

POI. There are no factors such as, for example, a period of hyper-

inflation during the POI, or an analysis of an industry subject to

sharp seasonal fluctuations in sales, which would call into question

the representativeness of the samples.

Petitioners assail the reliability of KTN's evidence of claimed

quantity changes. In response to our direct question concerning the use

of delivery tolerances KTN responded unequivocally that ``KTN's sales

orders in the United States and KHSP's sales orders in the United

States do not include pre-determined weight tolerances.'' KTN's October

23, 1998 section A supplemental response at 15 (emphasis added).

However, record evidence indicates that KTN does, in fact, rely upon

specific delivery tolerances which are subject to negotiation. KTN has

consistently affirmed, and the Department has verified, that it did not

include any quantity deviations falling within the standard plus-or-

minus 10 percent range as constituting a change in quantity for

purposes of its date-of-sale analysis. Nevertheless, the significance

of that fact is attenuated if the negotiated tolerances for KTN's sales

exceeded the 10 percent mark.

That said, however, because the record also does not indicate

whether any sales analyzed for changes in quantity did involve

negotiated tolerances in excess of the 10 percent standard, we have no

evidentiary basis to disregard KTN's verified data or to assume that

the claimed quantity changes arose, in whole or in part, from

specially-negotiated quantity tolerances exceeding the standard plus-

or-minus 10 percent threshold.

Petitioners' argument that at least some of the claimed changes in

quantity arose from partial shipments against an order, rather than a

change in quantity, has merit. KTN's rebuttal brief fails to address

this charge head on. KTN points to a specific order-invoice combination

drawn from its U.S. sales during the POI and suggests that the customer

would agree to accept less than one half of the ordered quantity as

fully satisfying the contractual terms of the original sales agreement.

However, KTN does not claim that this is what happened with the

specific transaction. Rather, KTN concludes that ``[t]his is precisely

the

[[Page 30721]]

type of situation where KTN would agree with the customer to view the

order as filled.'' KTN's Rebuttal Brief at 19 (emphasis added). KTN has

presented no evidence of any transaction where a customer actually

released KTN from its obligation to supply the contractually agreed-

upon quantity of merchandise, as stipulated in the original sales

agreement. KTN's assertion that a customer would order a large quantity

of merchandise, presumably in anticipation of its needs, and then

accept less than half that amount as fully satisfying the original

sales contract, is unsupported by record evidence. Furthermore, KTN's

comments with respect to master coils versus slit coils are entirely

inapposite with respect to the question of partial shipments by KHSP.

The sales subject to our analysis involve the smaller coils cited by

petitioners in their case brief, i.e., ``the coils that are sent to

customers,'' not the much larger master coils produced by KTN in

Germany. See KTN's Rebuttal Brief at 18. Thus, KTN's assertion that KTN

in Germany would not roll a new master coil to fill an under-shipment

of as much as 8,000 or 10,000 pounds sheds no light at all on whether

or not KHSP would make good the shortfall by means of a second shipment

of the outstanding quantity. This distinction is critical to KTN's

rebuttal argument that the evidence supplied at Exhibit 23 did not

include instances wherein KHSP filled an order by means of two or more

shipments issued under separate invoices.

With respect to the role of change orders, however, we find

petitioners' assertions are not borne out by the record evidence in

this case. Petitioners' reliance upon Flat Products From Japan as

supporting the use of order confirmation dates is misplaced. In Flat

Products From Japan, the petitioners, in supporting the Department's

use of respondent NSC's order confirmation date, noted that ``the

record clearly shows that to the extent NSC and its customer made a

significant revision to any material term of sales, there is an

established mechanism for accomplishing the revision; specifically, * *

* NSC issues a new or revised order confirmation.'' The Department

agreed: ``[v]erification results indicate that the material terms of

sale were established on the date of the order confirmation.

Additionally, among the sales examined, we found no material changes to

the order confirmation terms.'' Flat Products From Japan, 64 FR at

12958.

In contrast, in the instant investigation the Department confirmed

at verification that many changes to the terms of KTN's sales,

including changes involving price and quantity, are not memorialized

through the generation of a new order confirmation or change order; KTN

``will not generate a second order confirmation unless (i) the customer

requests it, or (ii) the change was ``substantial'.'' KTN Sales

Verification Report at 32. Given the fluid nature of KTN's ordering

system, which often allows changes to simply over-write the original

terms, the record of this investigation does not suggest any discrete

event, be it the original order confirmation or some other event prior

to invoice date, where the essential terms of sale are conclusively

known. Rather, the record indicates that the essential terms of sale

can and do change subsequent to KTN's issuance of the original order

confirmation, and that KTN employs no systematic means of capturing and

documenting changes to its customers' orders. Contrast Belgian Carbon

Steel Flat Products, 58 FR at 37090 (``[f]or only two of the 20

selected sales was there no order confirmation, thus calling into

question Sidmar's claim that order confirmation records are not

maintained''). As the Department has noted, ``the negotiation of a sale

can be a complex process in which the details often are not committed

to writing. In such situations, the Department lacks a firm date on

which the terms became final.'' Final Rule, 62 FR at 27349. A similar

situation obtains here where terms of sale are subject to changes which

are not necessarily documented through issuance of an amended

confirmation order.

Finally, even accepting petitioners' assertions and disregarding

all claimed quantity changes as unsupported by the record evidence, the

record evidence still supports the use of invoice date as the date of

sale. KTN has presented evidence--impeached neither by petitioners nor

by the Department's verifications--that price changes can and did occur

with some regularity between the order confirmation date and the

invoice date. Thus, while we agree with petitioners that not each

instance cited by KTN as representing a change in the essential terms

of sale is borne out by the record evidence, the Department did verify

a significant number of instances of changes in price or quantity

between the order confirmation and the invoice date. As we concluded in

Flat Products From Korea II ``[t]he Department has no basis to conclude

that essential terms of sale were set and not subject to change at the

initial contract date.'' Id., 64 FR at 12956. Thus, the totality of the

evidence in this case militates against petitioners' suggestion that we

abandon the presumptive date of sale identified in the Department's

regulations in favor of using KTN's order acceptance date. Rather, the

record indicates that the essential terms of sale can and do change

subsequent to KTN's issuance of its original order confirmation, and

that KTN employs no systematic means of capturing and documenting these

changes. For this reason, and because KTN's internal records kept in

its normal course of business do not recognize a sale until the invoice

is issued, we have continued to rely upon KTN's reported invoice dates

in both markets as the dates of sale for this final determination. In

the event this investigation should result in the publication of an

antidumping duty order we intend to re-examine this issue thoroughly in

any subsequent review involving KTN, especially with respect to

quantity tolerances and change orders.

Comment 2: Affiliation

KTN contends that the Department incorrectly concluded that it was

affiliated with Thyssen and its U.S. and home market affiliates

pursuant to section 771(33)(F) of the Tariff Act based on the

conclusion that Thyssen is in the position to exercise direction and

restraint over both KTN and Thyssen's own affiliates. KTN argues that

in order for KTS to be affiliated with Thyssen and its subsidiaries

within the meaning of 771(33), both parties must have either a direct

relationship with each other (as described in paragraphs 771(33)(A)

though (E) and (G)), or an indirect relationship ``through which one

party, though not directly related, is nevertheless in the position to

control the other (as described in paragraph (F)).'' KTN's Case Brief

at 7.

Under the terms of the statute, asserts KTN, Thyssen's subsidiaries

and the KTS companies cannot be deemed affiliated on the basis of a

direct relationship for they share no family relationships, board

members or officers, partnership relations, or hold equity positions in

one another. See section 771(33)(A) through (E). KTN also argues that

Thyssen's subsidiaries and the KTS companies are not affiliated under

771(33)(G), for Thyssen's subsidiaries are not in the direct bilateral

control relationship envisioned in this section. Citing Certain Cold-

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

62 FR 18404 (April 15, 1997) (Flat Products From Korea I), KTN contends

that POSCO, a respondent in the review, participated with DSM in a

[[Page 30722]]

joint-venture firm, POCOS. DSM, in turn, wholly-owned a subsidiary

company, Union (also a respondent in the review). KTN notes that in

Flat Products From Korea I the Department concluded that POSCO and

Union were not affiliated under section 771(33)(G) because the two

companies were separate operational entities with no overlapping stock

ownership and that nothing in the record indicated that either Union or

POSCO was legally or operationally in a position to control the other

party. As in Flat Products From Korea I, KTN maintains, Thyssen's

subsidiaries and the KTS companies have neither overlapping stock

ownership nor operational or legal control over each other. KTN's Case

Brief at 9.

In addition, KTN claims that Thyssen's subsidiaries and the KTS

companies are not under the common control of Thyssen, and therefore

are not indirectly affiliated pursuant to section 771(33)(F) of the

Tariff Act. KTN argues that under section 771(33)(F), a determination

of control ``calls for a comprehensive and multi-factored analysis of

the particular facts of each case in the context of the industry at

issue, including the history of the parties, and the course of their

dealings with one another.'' KTN's Case Brief at 10. Further, KTN

points out that in accordance with 19 CFR 351.102, in order to find

affiliation the Department must first determine that one party is in a

position to exercise control over the ``production, pricing, or cost of

the subject merchandise or foreign like product'' of the other party.

Id., quoting 19 CFR 351.102. KTN contends that the Thyssen

subsidiaries, and KTS or the KTS companies, are not in a position to

exercise such control over each other.

According to KTN, the reality of the KTS shareholders' agreement is

that Thyssen does not control KTS or the KTS companies. The

shareholders' agreement, KTN insists, was structured ab initio to place

the ability to influence KTS's operational decisions solely with Fried.

Krupp, with the intention of consolidating Fried. Krupp's stainless

steel operations. KTN asserts that Fried. Krupp's operational control

over KTS is further reflected by the provision in the shareholders'

agreement for Fried. Krupp to buy out Thyssen's interests in the firm

in the event Fried. Krupp's and Thyssen's interests diverge. Therefore,

KTN claims, KTS's production, pricing, and cost decisions are

controlled by Fried. Krupp, not Thyssen. KTN's Case Brief at 12.

Further, KTN contends that petitioners have cited incorrectly

Mitsubishi Heavy Industries, Ltd. v. United States, 15 F. Supp. 2d 807

(CIT 1998) (Mitsubishi) as supporting the proposition that ``when two

companies participate in a joint venture, it is `impossible' that the

respective subsidiaries of those two companies are not affiliated.''

Id., citing petitioners' September 25, 1998 submission on affiliation

(KTN's emphasis). Even if petitioners' interpretation of this case is

accurate, KTN argues, Mitsubishi does not reach the facts before the

Department in this investigation. KTN asserts that in Mitsubishi the

Court of International Trade (the Court) did not address whether

subsidiaries of companies that participate in a joint venture were in

turn affiliated but, rather, held that the two parent companies were

affiliated under section 771(33)(F) by virtue of their joint-venture

ownership of a third party. KTN notes that the issue in this proceeding

is not whether the ultimate parent companies, Fried. Krupp and Thyssen,

are affiliated, but whether various Thyssen affiliates in Germany and

the United States are affiliated with the KTS companies. ``Contrary to

petitioners' assertion,'' contends KTN, ``the Department has clearly

stated that affiliation between parent companies by virtue of a joint

venture is not a `vehicle' through which the Department will find

affiliation between other companies that are controlled by those parent

companies.'' Id. Any affiliation between Fried. Krupp and Thyssen,

asserts KTN, would not reach the companies' respective subsidiaries.

Id. citing Flat Products From Korea I, 62 FR at 18418. Therefore, KTN

concludes that Thyssen's subsidiaries cannot be considers affiliated

with the KTS companies controlled by Fried. Krupp merely by virtue of

the joint venture between Fried. Krupp and Thyssen.

Petitioners maintain that the Department properly determined that

KTN is affiliated with Thyssen and Thyssen Stahl AG, one of KTN's two

joint-venture parents, and with the member companies of the Thyssen

Corporate Group. In addition, petitioners support the Department's

decision to use adverse facts available in those instances where the

respondent failed to cooperate fully in providing the sales data

requested of these various affiliates by the Department.

Petitioners note that section 351.102(b) of the Department's

regulations provides that in finding affiliation based on control, the

Department will consider (i) corporate or family groupings, (ii)

franchise or joint venture agreements, (iii) debt financing, and (iv)

close supplier relationships, among other factors. Petitioners note

further that under this same regulatory provision control will not be

found to exist using these factors unless ``the relationship has the

potential to have an impact on decisions concerning production,

pricing, or cost of the subject merchandise or foreign like product.''

Petitioners' Rebuttal Brief at 6 and 7, citing 19 CFR 351.102(b).

Applying each of these factors in turn to this case, petitioners

contend that a general pattern of corporate groupings between Fried.

Krupp and Thyssen suggest that these persons are affiliates within the

meaning of section 771(33). Petitioners assert that the ``massive

cooperation'' between Fried. Krupp and Thyssen is recognized in the

parent's respective annual reports. For example, petitioners argue,

Thyssen's September 1997 annual report at note 23 states that ``[i]n

the year under review, the income/loss from associated affiliates is

mainly due to the transfer of only a one-digit million DM prorated

profit from Krupp Thyssen Stainless.'' Thus, petitioners contend that

Thyssen and its affiliates recognize that the group's consolidated

stainless steel flat products activities are centered in KTS and its

manufacturing company, KTN. According to petitioners, the establishment

of KTS and Thyssen Krupp Stahl (TKS) represents an arrangement whereby

the two corporate groups have intertwined their steel production and

marketing activities well in advance of the pending merger between

Fried. Krupp and Thyssen. Id. at 9.

Petitioners also argue that KTN's advertising and marketing

strategies also recognize the interconnections between Fried. Krupp and

Thyssen. Petitioners maintain that KTN was conceived with the express

intent of both Fried. Krupp and Thyssen to establish one unified

speciality steel producer that customers worldwide would perceive as

being both a Krupp and Thyssen company. Further, petitioners assert

that Thyssen and Krupp opened their respective channels of distribution

to KTN's stainless steel products, a fact recognized in the

marketplace. Petitioners' Rebuttal Brief at 9.

Second, petitioners allege that KTN, as a joint venture owned by

the Krupp and Thyssen groups is both a party controlled by two other

parties pursuant to 771(33)(F) and a joint venture per se as defined at

19 CFR 351.102(b). Citing Certain Cut-to-Length Carbon Steel Plate from

Brazil, 63 FR 18486, 18490 (April 15, 1997) (Carbon Steel Plate From

Brazil), petitioners assert that Thyssen's 40 percent ownership in KTS

is more than sufficient to place it in a position of control over KTN.

As in that case, petitioners contend, ``[e]ven a minority

[[Page 30723]]

shareholder interest, examined within the totality of other evidence of

control, can be a factor that we [the Department] consider in

determining whether one party is in the position to control another.''

Petitioners' Rebuttal Brief at 11, quoting Carbon Steel Plate From

Brazil. Additionally, petitioners argue that contrary to KTN's

arguments, evidence of actual control is not required under the statute

in order to make a finding of control. Rather, control is defined as

merely the ability to control, i.e., the power to restrain or direct a

company's activities. Id.

According to petitioners, KTN's reliance upon Flat Products From

Korea I is misplaced. Petitioners assert that KTN's argument that the

Department found that POSCO and Union were not affiliated in the

absence of direct equity ownership or a finding of control, in essence,

negates section 771(33)(F), which defines as affiliated persons two or

more persons directly or indirectly controlling any person. Petitioners

contend that the issue is not whether two parties who control a third

party are affiliated to each other, but whether a person jointly

controlled by two parties is affiliated with the parent companies'

subsidiaries. Instead, petitioners argue that the pattern of

affiliations in this case mirrors that found in Stainless Steel Plate

in Coils From Belgium, 64 FR 15476 (March 31, 1999) (Belgian Stainless

Plate in Coils) in which the Department determined that because ALZ and

TrefilARBED were two persons established to be directly or indirectly

controlled by ARBED, ALZ's sales through TrefilARBED were treated as

affiliated-party sales. Thus, pursuant to 771(33)(F), petitioners claim

that where KTS is under common control by Krupp, and Thyssen Stahl and

Thyssen, KTS is affiliated with both Krupp and Thyssen. Also, pursuant

to 771(33)(G), petitioners argue that because KTS controls KTN, KTN is

affiliated to Thyssen through KTS and that because Thyssen controls its

affiliates, then KTN is affiliated to those affiliates through Thyssen.

Therefore, petitioners contend that KTS and KTN and the Thyssen

subsidiaries are two or more persons directly or indirectly controlled

by Thyssen, and so, are affiliated.

Further, petitioners argue that as recognized by the Department in

its December 16, 1998 Affiliation Memorandum, the shareholders'

agreement between the Krupp and Thyssen groups indicates that Thyssen,

through Thyssen Stahl, has the indirect ability to control the

activities of KTN through KTS. Petitioners assert that by means of the

shareholders' agreement Fried, Krupp, and Thyssen (i) committed their

respective families of companies to having all stainless activities

reside in KTS and KTN, (ii) set forth the parties' power to amend or

supplement the Industrial Concept governing KTS's operations, (iii)

recognized the sales and distribution functions of the Thyssen

affiliates, (iv) afforded Thyssen the ability to direct KTS through the

operation of the Supervisory Board, (v) provided for Thyssen's

participation in the activities of KTS and KTN through membership in

the KTS Management Board, (vi) afforded Thyssen an additional avenue of

direction or restraint of KTS (and thus KTN) through the Shareholder

Committee, (vii) established a ``super-majority'' requirement for votes

involving certain business transactions, including appointments to

KTS's managerial board, giving Thyssen effective veto power over

critical KTS activities, and (viii) established an arbitration

committee to mediate any disputes between Fried. Krupp and Thyssen over

KTS's activities. Petitioners' Rebuttal Brief at pages 17 through 22.

Therefore, petitioners assert, the shareholders' agreement clearly

articulates Thyssen's ability to exercise indirect control over KTN via

KTS.

Third, petitioners contend that the legal framework established by

the shareholders' agreement provides both de jure and de facto bases

for a close supplier relationship between KTN and a certain Thyssen

affiliate. In fact, according to petitioners, KTN is entirely dependant

upon this Thyssen entity for the hot-rolling of the stainless steel

cast in KTN's melt shop. Similarly, petitioners note, this entity

``does not provide stainless steel hot-rolling services to any entity

other than KTN.'' Petitioners' Rebuttal Brief at 24, quoting KTN's

December 17, 1998 section D supplemental response at D-3. Petitioners

argue that this level of mutual dependency clearly qualifies as a

``close supplier relationship'' within the meaning of both 19 CFR

351.102(b) and the SAA at 838 which refers to a ``close supplier

relationship in which the supplier or buyer becomes reliant upon the

other.'' Id.

Therefore, petitioners conclude, these facts leave ``no reasonable

room for any doubt that KTN is affiliated with Thyssen within the

meaning of [section 771(33) of the Tariff Act].'' Id. Thus, as Thyssen

is affiliated with its subsidiaries and has the ability to control

those subsidiaries, KTN is affiliated with the Thyssen subsidiaries as

well under the combined provisions of sections 771(33)(F) and (G).

Department's Position: We disagree with KTN. As we stated at length

in our Preliminary Determination and the accompanying Affiliation

Memorandum, we have determined that KTN is affiliated with Thyssen

Stahl and Thyssen. Section 771(33)(E) 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.

We examined the record evidence to evaluate the nature of KTN's

relationship with Thyssen Stahl and Thyssen and have determined that

KTN is affiliated with Thyssen and Thyssen Stahl. Thyssen Stahl

indirectly owns and controls, through KTS, forty percent of KTN's

outstanding stock and Thyssen, which wholly owns Thyssen Stahl,

likewise indirectly owns and controls a forty percent interest in KTN.

KTN's section A questionnaire response acknowledges that KTN is a

wholly-owned subsidiary of KTS. KTS formed KTN in 1997 to handle its

stainless steel production and sales. The supporting exhibits to this

submission further confirm Thyssen Stahl's interest in KTS and KTS's

100-percent interest in KTN. In a submission dated October 20, 1998,

petitioners placed on the record publicly available data that confirmed

both the foregoing shareholding interests and that Thyssen Stahl is a

wholly-owned subsidiary of Thyssen. Consequently, KTN, as the wholly-

owned subsidiary of KTS, is affiliated with the joint venture partner

Thyssen Stahl and its parent company Thyssen pursuant to section

771(33)(E) of the Tariff Act. See Stainless Steel Wire Rod From Sweden,

63 FR 40449, 40453 (July 29, 1998).

In addition, we have determined that KTN is affiliated with Thyssen

and its U.S. and home market affiliates. Section 771(33)(F) 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. Actual

exercise of control is not required by the statute. 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 KTS. See Preliminary Determination, 64 FR at 95 and

the Affiliation Memorandum. Such a finding is

[[Page 30724]]

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 its various affiliates, is in a position to exercise direction and

restraint over these affiliates' production and pricing. Thyssen also

holds indirectly a substantial equity interest in KTN, plays a

significant role in KTS's operations and management and, thus, enjoys

several avenues for exercising direction or restraint over KTN's

production, pricing and other business activities (see the Affiliation

Memorandum). In sum, Thyssen's substantial equity ownership in KTN and

Thyssen's other affiliates, in conjunction with the ``totality of other

evidence of control'' requires a finding that these companies are under

the common control of Thyssen. Accordingly, for this final

determination we continue to find KTN is affiliated with Thyssen,

Thyssen Stahl, and Thyssen's U.S. and home market affiliates.

Comment 3: Facts Available for Unreported Downstream Sales

If the Department persists in finding affiliation between the two,

KTN avers, the use of adverse facts available is, nevertheless,

inappropriate, as was the Department's method of applying adverse facts

available for sales involving Thyssen's subsidiaries in the home

market. The Department, notes KTN, used the highest normal value

reported by control number in KTN's home market database. KTN claims

that under section 776(b) prior to relying upon adverse facts

available, the Department ``must produce substantial evidence that

respondents refused to cooperate or significantly impeded its review.''

KTN's Case Brief at 15, quoting Queen's Flowers de Columbia v. United

States, 981 F. Supp. 617,629 (CIT 1997). KTN contends that it

cooperated with the Department to the best of its ability and

substantially responded to the Department's request for information,

and that any failure to supply data arose not from an unwillingness to

cooperate, as suggested in the Preliminary Determination, but from

KTN's inability to secure the requested data from the Thyssen

affiliates. KTN cites, inter alia, Usinor Sacilor v. United States, 872

F. Supp. 1000 (CIT 1994) (Usinor), in which the Court remanded the

Department's final determination applying adverse facts available to

certain unreported downstream sales, stating that:

[i]f Commerce finds that Usinor did not have operational

control, Commerce is directed to select the weighted average

calculated margin as BIA. If Commerce finds Usinor maintained

operational control, Commerce may reapply the highest non-aberrant

margin as BIA in a manner consistent with the court's decision in

National Steel Corp. v. United States.

KTN's Case Brief at 17 (original citation omitted).

KTN argues that, as Usinor suggests, KTN's failure to provide

information regarding its downstream resellers was not the result of

deliberate recalcitrance but, rather, KTN's lack of operational control

over those affiliates and its inability to obtain the information. KTN

points out that it was able to gain the complete cooperation of three

Thyssen affiliates located in the United States despite the absence of

any operational control over these companies. KTN submits that while

the Department's preliminary determination that KTN was affiliated with

Thyssen's resellers because of Thyssen's potential control over both

KTN and its own affiliates may be sufficient as a legal standard, it

does not support the obverse conclusion that KTN had the ability to

control the activities of Thyssen's affiliates and could demand their

proprietary sales data. According to KTN, it had to ``rely on

persuasion, not control, to access the information requested by the

Department.'' KTN's Case Brief at 19.

In addition, KTN objects to the Department's characterization in

the Preliminary Determination of KTN's cooperation with the Department

during October and early November 1998. KTN claims that the

Department's November 17, 1998 request for the reseller sales

information ``mischaracterizes, and in some cases misstates, the dialog

between the Department and KTN.'' Id. at 20. KTN asserts that the

Department acknowledged as much by the significant deletion of the

reference to the Department's ``three official requests'' for the

information included in the November 17, 1998 letter's original

language as this letter was paraphrased in the Preliminary

Determination. KTN complains that the November 17 letter, which

included a warning that adverse facts available might be used, preceded

the Department's November 18 memorandum which set forth the

Department's reporting requirements for downstream sales by Thyssen

affiliates. Therefore, KTN argues, while ultimately KTN was unable to

provide all of the requested downstream sales data, the Preliminary

Determination fails to consider the overall cooperation shown by KTN

throughout this proceeding, including its numerous timely responses to

questionnaires, and participation in two home market and three U.S.

verifications. Accordingly, KTN submits, should the Department

determine that Thyssen's affiliates are affiliates of KTN, the

Department must use non-adverse facts available for the two Thyssen

resellers, rather than adverse facts available, as in the Preliminary

Determination. KTN's Case Brief at 21 and 22.

Assuming that the Department proceeds with its use of facts

available, KTN recommends that the Department apply facts available for

sales to the home market resellers by adjusting these prices upward to

reflect arm's length prices. KTN claims that in determining NV the

Department's practice is to accept a respondent's home market sales to

its affiliates, rather than sales by its affiliates, where the

Department determines that the affiliated-party sales were made at

arm's-length prices. KTN's Case Brief at 22, citing Antifriction

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

France, et al. (AFBs), 63 FR 33320, 33341 (June 18, 1998). If KTN's

prices to its two German resellers had passed the arm's length test,

the Department might have accepted those sales in lieu of sales by the

affiliates to unaffiliated customers. Id. Therefore, KTN claims that

rather than calculating an ``arbitrary price,'' the Department could

apply facts available for the missing sales by simply adjusting KTN's

prices to its affiliates upward to a level which would satisfy the

Department's arm's-length test.

That failing, KTN continues, the Department may not use facts

available that are excessively punitive or aberrant and ``demonstrably

less probative of current conditions.'' KTN's Case Brief at 23, quoting

National Steel Corp. v. United States, 913 F. Supp. 593, 596 (CIT 1996)

(National Steel). While KTN concedes that the Department has not

established a bright-line test for identifying and selecting non-

aberrant data, KTN insists the Department articulated two guidelines in

response to National Steel:

(1) the data should be sufficiently adverse so as to effectuate

the statutory purposes of inducing respondents to provide the

Department with complete and accurate information in a timely

manner;

(2) the data should be indicative of the respondent's customary

selling practices and rationally related to the transactions to

which the adverse facts available are being applied.

See National Steel at 913 F. Supp. 596.

[[Page 30725]]

KTN believes that in its Preliminary Determination the Department

applied aberrant facts available to KTN's sales to the two home market

resellers by replacing KTN's prices to these two customers with prices

that are not remotely related to a vast majority of these transactions.

KTN cites where, in KTN's view, the Department's methodology causes

aberrant results by, for example, applying prices that are double the

average price and, in some cases, exceed the average price by 500

percent. KTN's Case Brief at 25 through 27. Therefore, KTN argues, if

the Department chooses to apply adverse facts available it must alter

its approach to exclude the use of aberrant data.

First, KTN proposes adjusting an arm's-length price factor upward

by 2.65 percent to account for the potential additional profit earned

by the two Thyssen resellers. KTN's Case Brief at 28, basing the profit

calculation on Thyssen's 1997-1998 Annual Report. In the alternative,

KTN argues, the Department may rely on its own calculation of KTN's

profit on home market sales of the foreign like product. By using the

CEP profit rate calculated for the Preliminary Determination, KTN

claims that the Department can incorporate an additional adverse

element into its application of adverse facts available. KTN maintains

that either of these two methods is adverse while remaining indicative

of profit levels in the German steel industry. If the Department

determines that neither of these profit calculations is sufficiently

``punitive,'' the Department could rely upon the profit level

calculated in the Preliminary Determination for calculating constructed

profit (based on KTN's sales made in the normal course of trade). KTN's

Case Brief at 31.

If the Department insists on finding KTN affiliated with the

Thyssen affiliates as it did in the Preliminary Determination, KTN

argues, it must apply facts available for the missing home market

downstream sales by selecting prices for each CONNUM which exclude

aberrant prices. KTN believes that this would have the dual effect of

employing data that is adverse to KTN while at the same time avoid

using aberrant data. According to KTN, this methodology would employ a

``well-accepted statistical principle'' that for a normal distribution,

more than 95 percent of all observations will fall within two standard

deviations of the mean. KTN's Case Brief at 32. This ``95 percent

confidence interval,'' KTN suggests, would serve to cap the permissible

highest price applicable to each CONNUM, thereby foreclosing the

application of outlier prices.

Additionally, KTN argues that the Department should not apply

adverse facts available to sales by KTN's wholly-owned home market

subsidiary, Nirosta Service Center (NSC), to one of Thyssen's resellers

(Reseller 2) because those sales pass the arm's-length test. Based on

the Department's own results from the preliminary determination arm's-

length computer program, KTN maintains that the weighted-average prices

for sales from NSC to Reseller 2 was 105.276 percent of the weighted-

average prices to unaffiliated customers. KTN asserts that this ratio

is well above the Department's threshold of 99.5 percent for finding

sales at arm's length; therefore, the Department should use these

arm's-length prices rather than facts available. Finally, KTN alleges

that the Department calculated adverse facts available prices for

certain sales to the two German resellers that were ordered but not

invoiced during the POI; assuming the Department uses KTN's reported

invoice dates as the date of sale, it should therefore remove these

transactions from its margin analysis.

Petitioners agree with the Department's application of adverse

facts available for those home market downstream sales unreported by

KTN. KTN's suggestion that its participation in this proceeding thus

far demonstrates that it cooperated to the best of its ability is not,

petitioners insist, persuasive. Petitioners point to KTN's ability to

report the its U.S. resellers' downstream sales as evidence that it

should and could have reported its home market resellers' downstream

sales as well. Petitioners' Rebuttal Brief at 25.

KTN's ``second line of defense,'' continue petitioners, is

similarly unavailing. Accepting KTN's suggestion that it should not be

subject to facts available because it could not secure requested

information from an affiliate, petitioners caution, ``is not an axiom

that should be embraced by the Department.'' Petitioners' Rebuttal

Brief at 27. Petitioners point to, inter alia, Helmerich & Payne, Inc.

v. United States, in which, petitioners suggest, the Court sustained

the Department's application of adverse facts available where requested

information was controlled by an uncooperative unrelated company.

Furthermore, petitioners suggest that KTN's argument is misplaced, for

the question at hand is not KTN's direct control over Thyssen's

affiliates but Thyssen's role as a parent company over both its own

affiliates and KTN. According to petitioners, KTN's submission of the

U.S. resellers' downstream sales is, at the least, evidence of

Thyssen's control of these affiliates; otherwise, this represents prima

facie evidence of KTN's control of these parties. Petitioners suggest

that it is obvious that Thyssen chose to direct compliance only of its

U.S. affiliates in an attempt to distort the dumping analysis. By

capturing U.S. transactions further along the distribution chain, but

withholding this same information regarding home market sales,

``Thyssen managed to cap normal value while incorporating U.S.

transactions that, by their very nature, should incorporate price-

markups that increase U.S. price.'' Petitioners' Rebuttal Brief at 28.

Petitioners also disagree with KTN's suggestion that the Department

could effectively apply facts available to the unreported downstream

sales by adjusting the prices of KTN's sales to the affiliated

resellers upward to prices which would pass the arm's length test.

Petitioners contend that this approach might have some merit if the

Department were using non-adverse facts available. Rather, petitioners

believe that the Department has correctly determined that KTN's failure

to report home market downstream sales warrants an adverse assumption;

``KTN's suggestion would be a de facto concession to its incorrect

premise that the arm's-length test makes unnecessary the collection of

downstream home-market data.'' Petitioners Rebuttal Brief at 29.

Petitioners argue that KTN's failure to report the downstream sales by

two of Thyssen's home market affiliates in response to the Department's

repeated requests calls for the application of adverse facts available.

These requests, petitioners note, were based on the statutory and

regulatory provisions governing the collection of sales data. Id. at

31.

After detailing the history and regulatory backing for the

Department's various decisions both to excuse KTN from reporting

certain home market sales and to require certain home market and U.S.

downstream sales data, petitioners then turn to KTN's comments

concerning the application of adverse facts available. Petitioners

dismiss KTN's complaint that the preliminary application of adverse

facts available used data that are excessively punitive and aberrant as

specious. Rather, insist petitioners, the chosen facts available

reflect data that are both sufficiently adverse to encourage future

cooperation from the respondent, and indicative of that respondent's

customary selling practices.

First, petitioners maintain that KTN confuses the necessary level

of adverse inference imputed to missing data.

[[Page 30726]]

Citing Certain Helical Spring Lock Washers from the People's Republic

of China, 58 FR 48833, 48839 (September 20, 1993) (Lock Washers),

petitioners note that where a respondent cooperated generally but

inadvertently failed to provide a relatively insignificant amount of

data, the Department often assigns the highest non-aberrational margin

calculated for a single sale to the missing data. However, petitioners

insist, in the instant case the failure by KTN was one of cooperation,

not an inadvertent failure, and that the data requested were critical

due to the magnitude of missing downstream sales data and the

importance of comparing U.S. downstream sales to a complete and

accurate set of home market downstream sales. Petitioners' Rebuttal

Brief at 43. '

Second, petitioners allege that KTN's argument fails to consider

that adverse facts available in the instant case is not a corrective

measure among sales within KTN's and NSC's home market databases, but a

surrogate for entirely missing downstream sales. Petitioners concede

that KTN's elimination of so-called ``outliers'' among the reported

sales could, potentially, be applicable if the task were simply to

correct for missing data within a given universe of sales. However,

petitioners contend, KTN fails to recognize that, once appropriate

distinctions are made, the general conclusions in National Steel

support the Department's current approach in this investigation.

According to petitioners, in National Steel the Court addressed the

appropriateness of determining ``the highest non-aberrational margin''

calculated. This ruling, petitioners insist, did not challenge the

Department's criteria, nor even its selection of adverse data per se.

Rather, the decision questioned the Department's failure to provide

reasoned explanation as to how and why the particular adverse data were

used. Petitioners' Rebuttal Brief at 44, citing National Steel 913 F.

Supp. at 596.

Here, petitioners claim, the Department is not using the highest

margin calculated to correct for a missing segment of the first-level

sales by KTN and NSC but, rather, the highest NVs as surrogates, with

appropriate adverse inferences, for the entirely missing downstream

sales. Petitioners suggest that it is reasonable to expect that the

pricing patterns for these missing transactions would be significantly

higher in contrast to the affiliated-party transfer prices between KTN

and NSC and the respective affiliated resellers. KTN's failure to

report the relevant downstream sales has deprived the Department of the

means of testing precisely how much greater the downstream sales prices

would be, petitioners continue. Thus, petitioners argue KTN's

benchmarks for finding ``outliers'' pertain to the wrong universe of

sales, and the correct set of sales from which potential benchmarks

could be determined are missing due to KTN's lack of cooperation in the

first place. Petitioners' Rebuttal Brief at 45.

One available alternative benchmark the Department could use,

suggest petitioners, is the measurable percentage difference between

the transfer prices and downstream prices reported for KTN's downstream

U.S. sales. While those sales are in the United States, rather than the

comparison market, argue petitioners, they become the best information

reasonably available to suggest what the difference should be in the

home market, in light of KTN's failure to provide repeatedly requested

downstream sales information. Petitioners claim that, based on KTN's

own information, KTN exaggerates the magnitude of the markups from

average to highest home market prices; KTN's actual experience in the

United States indicates the difference would be significantly less. If

anything, petitioners continue, the divergence between transfer and

downstream prices in the home market would be even higher than in the

United States, given Fried, Krupp's and Thyssen's ascendency as the

only primary steel manufacturers in Germany and given the history of

anticompetitive practices in the domestic stainless steel markets by

Fried, Krupp and Thyssen. Petitioners' Rebuttal Brief at 46.

Petitioners also dismiss KTN's claim that so-called aberrational

prices arise from sales of relatively smaller quantities. Petitioners

note that the nature of downstream sales is such that larger quantities

sold to an affiliate typically result in smaller discrete sales made

from that reseller to its downstream customers. As evidence of this

phenomenon, petitioners point to the transformation of a relatively

small set of sales to U.S. resellers that evolved into a much larger

set of resales through U.S. resellers to unaffiliated customers. Id.

Finally, petitioners take issue with KTN's contention that transfer

prices from NSC to Reseller 2 are at arm's-length and that the

Department should therefore not apply adverse facts available to sales

made through that reseller. Irrespective of whether a particular subset

of sales may or may not be at arm's-length, petitioners aver, KTN's

failure to provide requested resale data through affiliated parties

caused the Department to apply adverse facts available for the missing

downstream sales. Therefore, petitioners insist that the Department

acted appropriately in the Preliminary Determination, and that no

changes are necessary for the final determination.

Department's Position: We agree with petitioners that our use of

adverse facts available was appropriate in the instant case. In

accordance with section 776 of the Tariff Act, we have used partial

adverse facts available where KTN failed to provide us with certain

sales information concerning two of KTN's resellers sales in the home

market. In contrast to KTN's attempts to portray itself as a

cooperative respondent which was never adequately apprised of the

Department's requirements, we offer the following narrative history of

this proceeding:

On August 3, 1998, the Department issued to KTN its antidumping

questionnaire, which instructed KTN to report affiliates' resales to

unaffiliated customers in both the home and U.S. markets. We also

directed KTN to contact the agency official in charge if sales to

affiliated parties represented a ``relatively small part'' of its total

sales, or if KTN was unable to collect the necessary information. Our

October 9, 1998 section A supplemental questionnaire reiterated this

instruction (see question 1.c) and further directed KTN to report the

sales of subject merchandise in the home and U.S. market by the

specific subsidiaries of Thyssen identified in KTN's section A

questionnaire response. Finally, on October 27, 1998, Department

personnel contacted KTN's counsel and once again requested a detailed

explanation of KTN's reporting of sales to affiliated and unaffiliated

customers. During that conversation we instructed KTN to report the

downstream sales of certain affiliates and, if it was unable to do so,

to provide the Department with a detailed explanation as to why it was

unable to report such sales (see Memorandum to the File, ``Affiliated

Party Sales,'' October 28, 1998).

On October 28, and November 4, 1998, KTN submitted comments and

additional information regarding its downstream sales. KTN indicated in

both of these submissions that, in accordance with the Department's

instructions, it intended to report downstream sales information by

certain home market affiliates and U.S. affiliated resellers, but for

assorted other reasons, it did not intend to report its remaining

affiliates' resales.

[[Page 30727]]

After a thorough review of the record the Department notified KTN

that it was still required to report downstream and reseller sales by

additional home market and U.S. affiliates (see Memorandum to the File,

``Downstream Sales,'' November 6, 1998). In addition, the Department

granted in full KTN's request for an extension of time to submit the

required data.

KTN's November 16, 1998, section B and C supplemental responses

failed to include the requested reseller sales information requested by

the Department. On November 17, 1998, we issued a letter to KTN stating

the Department would apply adverse facts available to the missing sales

information if we did not receive it by November 23, 1998. On that

date, KTN submitted additional affiliated reseller sales information,

but again failed to provide the Department with a majority of the

requested downstream and reseller sales information.

Therefore, as explained in detail in the ``Affiliation'' portion of

the Preliminary Determination, we also agree with petitioners that it

is appropriate to make inferences adverse to KTN's interests pursuant

to section 776(b) of the Tariff Act because KTN did not cooperate by

responding fully to the Department's repeated requests for specific

sales information. We have examined whether KTN acted to the best of

its ability in responding to our requests for information. As the

chronology presented above and the Preliminary Determination suggest,

KTN was instructed in the original questionnaire to contact the

official in charge immediately if it had downstream sales to affiliated

parties. Therefore, KTN's failure to comply with the Department's

instructions led it to report one home market database which included

sales to NSC instead of sales by NSC. Based on the facts presented

above we determine that KTN had sufficient time to prepare the

requested information. Both our original August antidumping

questionnaire and our subsequent supplemental questionnaires explicitly

directed KTN to report its downstream sales by named affiliates in the

home market. While we did eventually conclude that KTN was not required

to report certain resales by certain affiliates, from the time of our

initial questionnaire, KTN was required to gather all affiliated

reseller information.

In addition, KTN posits erroneously the standard that because KTN

was unable to convince Thyssen's home market resellers to comply with

the Department's request for information it is somehow exempt from the

application of facts available. However, based on the fact that we have

found KTN to be affiliated with Thyssen (as stated above), it is

unreasonable to assume that Thyssen was unable to compel its own

resellers to provide the Department with the specific information

requested. In addition, we note, as do petitioners in their case brief,

that Thyssen encountered no apparent difficulty in persuading its U.S.

affiliates to comply with these same requests for reseller information.

It is reasonable to assume that Thyssen could have prevailed upon its

home market resellers to comply in like fashion with the Department's

requests for downstream sales information. Thus, KTN's contention that

it acted to the best of its ability and, thus, should not be subject to

adverse facts available is unconvincing.

Further, we disagree with KTN's proposed alternatives to the

Department's application of adverse facts available. We find misplaced

KTN's reliance on National Steel to support its claim that the

Department's use of adverse facts available in the Preliminary

Determination produced aberrant results. Rather, we agree with

petitioners that in citing National Steel KTN confuses the necessary

level of adverse inference imputed to missing data and fails to

consider that adverse facts available in the instant case are not

applied as a corrective measure among sales within KTN's and NSC's

properly-reported home market databases, but represent an adverse

surrogate for downstream sales data that are missing in their entirety

owing solely to KTN's failure to respond.

In National Steel the Department applied adverse facts available to

certain sales unreported by the respondent in the case, Hoogovens. The

Court sustained the criteria used by the Department in selecting among

the facts available, i.e., that the margin be sufficiently adverse to

induce future cooperation yet also be indicative of current conditions,

but reversed the Department's application of these criteria to

Hoogovens absent a more reasoned explanation. While the instant case

bears superficial resemblance to National Steel, the fact patterns for

the two cases are quite different. In National Steel Hoogovens failed

to report a small number of sales while in the instant case KTN failed

to report entire databases for two of its home market affiliates,

thereby sharply limiting the record information from which to select

among adverse facts available. KTN's failure to report fully the

requested downstream sales data serves to undercut whatever merit its

argument might carry precisely because this failure precluded an

independent analysis which would allow the Department to establish

current conditions for either of the resellers in question. The missing

data in this case are of greater significance to our analysis than was

the case in National Steel for they represent a large volume of KTN's

home market sales and would allow us to compare home market downstream

sales with U.S. reseller sales. Therefore, by failing to report such

sales, the respondent has limited the information available to the

Department for review in applying adverse facts available. Thus, as

articulated in National Steel, because KTN should not be rewarded for

providing inaccurate or incomplete data when it is to its advantage to

do so, we have selected the only reasonable means available in our

application of adverse facts available. As in the Preliminary

Determination, we have selected the highest NVs per control number

located in either the KTN or NSC databases, and have applied these

model-specific NVs to the appropriate sales to the two resellers in

question. While KTN contends that our application of adverse facts

available produces aberrant results, by failing to report the

downstream sales requested KTN has precluded the Department's testing

the missing downstream sales prices and, possibly, selecting a

different benchmark. As petitioners note, given the market realities of

advancing through a chain of affiliated resellers, the prices for

downstream sales from the affiliates to the first unaffiliated customer

would be higher than the reported transfer prices from KTN or NSC to

the affiliated parties. Thus, KTN's arguments that our application of

adverse facts available produced aberrant results are based on

conjecture, given the absence of the requested and relevant downstream

sales data. Therefore, for these final results we have continued to

apply adverse facts available in the same manner as our Preliminary

Determination.

In addition, we also disagree with KTN's assertion that the

transfer prices from NSC to Reseller 2 are at arm's length and that the

Department should therefore not apply adverse facts available to sales

made through that reseller. Our Limited Reporting Memorandum indicated

that we would require the requested downstream sales data for the

resellers in question since we had determined that they were not at

arm's length. We based this decision on our analysis of KTN's home

market database which included KTN's sales to

[[Page 30728]]

NSC. It was not until KTN's November 16, 1998 supplemental response

that it first reported NSC's downstream sales information and, thus,

NSC's sales to Reseller 2. However, the question is not whether a

specific subset of KTN's sales to NSC are or are not at arm's length;

rather, it is KTN's failure to provide requested data on downstream

sales through affiliated parties which caused us to apply adverse facts

available. Therefore, because our original decision was based on

available record evidence and because we do not conduct our arm's-

length test on subsets of sales to any specific customer, we have

continued to apply adverse facts available for sales by NSC to Reseller

2.

We agree with KTN, however, that as we have determined that the

invoice date is the appropriate date of sale for this final

determination (see Comment 1), we incorrectly calculated adverse facts

available prices for certain sales to two resellers in the home market

which were ordered during the POI, but invoiced after the POI. Thus, we

have removed from our calculations all sales with invoice dates falling

outside the POI.

For this final determination we have continued to calculate the

highest NV reported by control number in KTN's and NSC's home market

database and have applied these to KTN's and NSC's sales to its

affiliates for which KTN did not report home market downstream sales.

Comment 4: Critical Circumstances

According to KTN, the Department erred in concluding in the

Preliminary Determination that critical circumstances exist. KTN claims

that the Department (i) examined an inappropriate period in finding

``massive imports,'' (ii) based the pre-and post-petition periods on

the incorrect months, (iii) relied upon data drawn from an incomplete

list of HTS item numbers, thus inappropriately excluding certain

imports of subject stainless sheet in coil, and (iv) did not review

import trends over a sufficient period of time.

KTN notes that in making its critical circumstance decision the

Department compared the volume of imports during the pre-petition

period of April through June 1998 to the post-petition period of July

through September 1998. KTN contends that, as in Certain Steel Concrete

Reinforcing Bars from Turkey 62 FR 9737, 9746 (March 4, 1997) (Re-Bar

From Turkey), the date on which the petition is filed determines

whether the month of filing will be included in the pre- or post-

petition period, and that where the petition is filed during the first

half of a month, the month of filing is treated as part of the post-

petition period. KTN's Case Brief at 42, citing the Department's

Antidumping Manual, Chapter 10 at 4. KTN argues that since the petition

was filed on June 10, 1998 (i.e., the first half of the month), June

should be included in the post-petition period.

Furthermore, in making a final determination as to whether an

increase in imports since the filing of the petition is massive, KTN

argues, the Department must utilize all of the data reasonably

available. KTN asserts that it is the Department's well-established

practice to base its analysis on the longest period for which

information is available, beginning at the date the petition was filed

and ending with the effective date of the preliminary determination.

KTN's Case Brief at 43, citing, e.g., Re-Bar From Turkey, 62 FR at 9746

and Brake Drums and Brake Rotors From the People's Republic of China,

62 FR 9160, 9165 (February 28, 1997) (Brake Drums II), both of which

used comparison periods of seven months. Thus, KTN avers, while the

Department's regulations state only that the period of comparison must

be at least three months in duration, the Department has frequently

utilized a comparison period of up to seven months. Therefore, KTN

maintains that the Department must utilize a seven-month comparison

period of June through December 1998 (based on the publication of the

preliminary determination on January 4, 1999). Using this comparison

period, KTN claims that imports of subject merchandise from Germany

increased by only 7.85 percent during the post-petition period over a

similar seven-month pre-petition period of November 1997 through May

1998. KTN's Case Brief at 44 and Exhibit 6, citing data drawn from the

Census Bureau's ``Trade Information On-Line Service.''

In addition, KTN asserts that in determining whether critical

circumstances exist, the Department must examine trends over a period

of time to determine whether import volumes are subject to seasonal

fluctuations which could taint the results. KTN acknowledges that while

there may not be a direct correlation between the volume of stainless

steel imports and the season, historical data clearly indicate that the

level of imports fluctuates greatly from one month to the next.

Therefore, KTN maintains, the Department's findings are likely to be

significantly skewed if it considers a brief post-petition period of

just three months.

Finally, KTN argues in a footnote to its case brief that the

Department failed to review the full range of HTS numbers which include

subject merchandise. KTN takes issue with the Department's

characterization of this methodological choice as producing

conservative estimates, because the so-called clean HTS numbers (those

restricted by definition to subject stainless sheet in coil) do not

capture all imports of subject merchandise. That the HTS numbers used

``are under-inclusive,'' KTN notes, ``provides no indication as to the

direction in which the flaw will skew the critical circumstances

estimate.'' KTN's Case Brief at 41, n. 43.

Petitioners argue that in its Preliminary Determination the

Department justifiably concluded that there was a reasonable basis to

believe or suspect that (i) the importer knew or should have known that

the exporter was selling subject merchandise at less than fair value

and (ii) there had been massive imports over a relatively short period,

thus satisfying both the second and third criteria of section 733(e)(1)

of the Tariff Act. Accordingly, petitioners maintain, the Department

appropriately made an affirmative preliminary determination of critical

circumstances as to KTN.

In analyzing whether imports of subject merchandise had been

massive over a relatively short period of time, petitioners aver, the

Department correctly calculated that subject imports had increased by

67.74 percent during the post-petition period scrutinized at the time

of the Preliminary Determination. Further, and contrary to KTN's

assertions, petitioners contend that the Department correctly excluded

certain HTS items which might cover some quantity of in-scope

merchandise from its calculations of massive imports, and properly

included the month of June 1998 in the pre-petition period. Petitioners

argue that the Department made a conservative estimate in calculating

whether imports were massive by scrutinizing imports falling under HTS

categories that only include sheet and strip in coil form, and by

excluding those HTS basket categories which do not indicate whether or

not the sheet and strip are in coils. In so doing, petitioners claim,

the Department acted properly to exclude potentially out-of-scope

merchandise, such as cut-to-length stainless sheet and strip, from its

analysis. Moreover, petitioners contend that the excluded HTS

categories account, on average, for less than 20 percent of total

imports in 1998 of all in-scope merchandise. By including the HTS

categories in question, argue petitioners, the critical circumstances

analysis would be skewed, and would lead to imprecise

[[Page 30729]]

results. Petitioners' Rebuttal Brief at 66 and 67.

Petitioners also insist that the Department properly included the

month of June in the pre-petition period. Petitioners maintain that

June should be included in the pre-petition period since entries of

subject merchandise from Germany during June were almost certainly

exported from Germany prior to the petition's filing on June 10.

Therefore, suggest petitioners, since the entries in June were the

result of KTN's commercial behavior before the petition was filed, June

should be included as part of the pre-petition period. Petitioners aver

that 19 CFR 351.206(h)(2)(i) allows for such an adjustment of the base

and comparison periods where the data are available and the commercial

realities of the marketplace so dictate. Petitioners' Rebuttal Brief at

68 and n. 5, citing Uranium From Ukraine and Tajikistan, 58 FR 36640,

36645 (July 8, 1993).

Further, petitioners disagree with KTN's assertion that the

Department must use data through December 1998 in making its final

critical circumstances determination, arguing that each case must be

decided according to its own facts, as suggested by the Department's

regulations at section 351.206(h)(2) and (i). However, petitioners

maintain, if Census Bureau data again serve as the basis for the final

determination, consideration of the months through December 1998 as

well as the inclusion of June 1998 in the post-petition period, still

indicates that imports of subject merchandise during the relevant

periods were massive (i.e., an increase of 21.46 percent). Petitioners'

Rebuttal Brief at 69. Therefore, petitioners conclude, irrespective of

the periods analyzed, the Department must continue to find that

critical circumstances exist with respect to KTN.

Department's Position: We agree in part with KTN and find, pursuant

to section 735(a)(3) of the Tariff Act, that critical circumstances do

not exist with respect to KTN. While we do find that 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 (see Preliminary Determination 64 FR at 99), we

have determined that imports for KTN have not been massive.

Consequently, the second of the two criteria required for a finding of

critical circumstances has not been met.

On March 23, 1999, we requested that KTN provide the Department

with monthly shipment data for 1996 through 1998. In response KTN

submitted monthly shipment data for October 1995 through December 1998.

Because it is the Department's practice to use company-specific

information where available (see, e.g., Re-bar From Turkey, and Certain

Cased Pencils From the People's Republic of China, 59 FR 55625

(November 8, 1994)), we have based our final determination on KTN's

monthly shipment data, rather than the Census Bureau data used for the

Preliminary Determination.

We also agree with KTN that we incorrectly included June in the

pre-petition period. As stated in Re-bar From Turkey, where the

petition is filed during the first half of a month, the month of filing

is treated as part of the post-petition period. Since the petition in

this case was filed on June 10, 1998, we have concluded that June

should be included in the post-petition period. Further, we agree with

respondent that it is our normal practice to include in our analysis

data concerning the respondent's imports of subject merchandise up to

the date of the preliminary determination, where such data are

available. See, e.g., Aramid Fiber of Poly-Phenylene Terephthalamide

From the Netherlands, 59 FR 23684 (May 6, 1994). In the instant

investigation the most reliable data available concern KTN's shipments

of subject merchandise, rather than imports into the United States,

because the former are limited to the respondent KTN and, unlike the

Census data, are limited to merchandise subject to this investigation.

However, we disagree with KTN that it would be appropriate to

broaden our analysis to include data through December 1998. Although

the ``effective date'' of the Preliminary Determination fell on January

4, 1999, the date of its publication in the Federal Register, the

actual date of this determination is December 17, 1998. Because the

Preliminary Determination fell in the middle of the month of December,

we believe it would be inappropriate to include data for the full month

of December in our analysis, as this would mean including data on

imports after the Preliminary Determination in our analysis of

``massive imports.'' Accordingly, we have determined that for the

purpose of our critical circumstances determination it is appropriate

to compare KTN's shipment data for a six-month pre-petition period of

December 1997 through May 1998 to a six-month post-petition period of

June 1998 through November 1998. Based on this comparison we have

concluded that imports of subject merchandise decreased by 2.5 percent.

Clearly, then, there was no increase in KTN's imports of subject

merchandise during the post-petition period.

With respect to all other exporters who were not subject to this

investigation, it is the Department's normal practice to conduct its

analysis based on the experience of the investigated companies. See,

e.g., Re-bar From Turkey. In Re-bar From Turkey the Department found

critical circumstances for the ``All Others'' category because it found

critical circumstances for three of the four companies investigated.

However, as we recently determined in Hot-Rolled Flat-Rolled Carbon-

Quality Steel Products From Japan, 64 FR 24329 (May 6, 1999) (Hot-

Rolled Steel From Japan), we are concerned that a literal application

of this approach could produce anomalous results given certain

circumstances. Therefore, we believe it is appropriate in this case to

apply the traditional critical circumstances criteria to the ``All

Others'' category. First, in determining knowledge of dumping, we look

to the ``All Others'' rate, which is based on the weighted-average

margins of all investigated companies. In this case such a weighted-

average rate must, of needs, be based on the individual rate of KTN,

the sole respondent in this investigation. KTN's rate applied to ``All

Others'' is 25.84 percent. In addition, the Department normally

considers a preliminary International Trade Commission (Commission)

determination of material injury sufficient to impute knowledge of

likelihood of resultant material injury. The Commission preliminarily

found material injury to the domestic industry due to imports of

stainless sheet in coil from Germany and, on this basis, the Department

may impute knowledge of likelihood of injury to all other exporters.

See Preliminary Determination of the Commission of Certain Stainless

Steel Sheet and Strip from France, Germany, Italy, Japan, the Republic

of Korea, Mexico, Taiwan, and the United Kingdom, 63 FR 41864 (August

5, 1998). However, while we have sufficient evidence to impute

knowledge of dumping and material injury to the ``All Others''

category, we also must also evaluate the second criterion required by

the statute in making a critical circumstances determination: whether

there have been ``massive imports'' for the ``All Others'' category. In

making this determination we examined the company-specific shipment

data provided by KTN, which, as noted, indicate a decrease of 2.5

percent during the post-petition period.

[[Page 30730]]

We found, accordingly, that KTN's data provide no evidence of massive

imports. Based on that finding we likewise determine that imports from

uninvestigated exporters were also not massive during the relevant

comparison periods. We also examined U.S. Customs data in an attempt to

analyze overall imports from Germany of the subject merchandise.

Contrary to our approach in the Preliminary Determination, we examined

entries classified under the full range of HTS items which are listed

in the ``Scope of the Investigation'' section, above. These data

indicate that imports of subject stainless sheet in coil for Germany as

a whole increased by 8.9 percent, still well below the 15 percent

threshold for an affirmative finding of ``massive imports.'' However,

since the full range of HTS items includes both subject and non-subject

merchandise, we believe it is inappropriate to base our critical

circumstances finding on these data which are overly broad. We are

relying, therefore, upon the scope-specific data supplied by KTN. We

find, therefore, that imports from all other exporters were not massive

during the relevant period. Based on these factors the Department

determines that there are no critical circumstances with regard to

imports of subject merchandise from all other exporters in Germany.

Adjustments to Normal Value

Comment 5: Proper Application of Facts Available

Petitioners suggest that the series of customer codes the

Department used in its preliminary margin program to identify sales

through Thyssen and Krupp affiliates is not complete. With respect to

sales through NSC, petitioners identify several customer codes used by

NSC which, petitioners assert, the Department did not include in its

preliminary margin program. In addition, petitioners argue, certain of

KTN's customer codes are reported as Thyssen and Krupp affiliates which

were not identified by the Department in its preliminary margin

program.

KTN counters that petitioners have cited erroneously to the model-

match program whereas the customers are coded correctly in the separate

arm's-length test program. According to KTN, the program language cited

by petitioners applies only to the application of adverse facts

available to unreported downstream sales. KTN concludes that, aside

from what KTN terms the inadvertent inclusion of affiliated-party sales

that passed the arm's-length test, the model match program is correct

and need not be changed.

Department's Position: We disagree with petitioners. To apply

adverse facts available with respect to two home market resellers for

which KTN failed to provide downstream sales data (see Comments 2 and

3), we included language in our model match program that aggregated all

customer codes used by KTN or NSC for sales to these two resellers in

their respective sales databases. Although petitioners argue that our

list is not exhaustive based on an analysis of customer codes

identified in the home market sales files as pertaining to ``Thyssen''

affiliates (i.e., where CUSRELH equals 3), we determined that no

additional codes need to be added to the program, as the additional

codes cited by petitioners identify Thyssen affiliates for whom we did

not request downstream sales information. Thus, no modification is

necessary to this programming language for the final determination. See

Limited Reporting Memorandum for further information.

Comment 6: Adjusting for NSC's Processing Costs

Petitioners point out that in the KTN Sales Verification Report the

Department indicated that it ``[was] unable to trace any expenses

related to slitting for FY 1997 because NSC stated that it did not

produce cost center reports during this period'' and that ``NSC was

unable to provide any supporting documentation for either the slitting

cost or total slitting tonnage.'' Petitioners' Case Brief at 77,

quoting the KTN Sales Verification Report at 56 and 57. Petitioners

assert that the Department should accordingly deny KTN's claimed direct

adjustments for NSC's slitting costs.

KTN responds that the Department should accept as direct selling

expenses NSC's reported slitting costs for 1998 for slitting master

coils to customers' orders, and adjust home market prices accordingly.

According to KTN, the Department was able successfully to verify these

expenses.

Department's Position: We disagree with petitioners and KTN. With

respect to NSC's slitting operations, we have determined that the

claimed expenses represent direct processing costs which are accurately

treated as components of KTN's variable cost of manufacture and COP for

the finished products sold to the first unaffiliated customers.

Accordingly, for this final determination we have increased COP by

NSC's 1998 slitting costs as described in our Final Results Analysis

Memorandum and have denied KTN's claim that these costs are direct

selling expenses. Because we were unable to verify NSC's fiscal 1997

slitting costs, we have used the verified figures for fiscal 1998 for

all relevant slitting costs during the POI.

Comment 7: Early Payment Discounts

Petitioners argue that many of KTN's home market sales appear not

to have warranted early payment discounts based on the reported terms

of sale. According to petitioners, the time between invoicing and

payment for many transactions seemingly precludes such discounts.

Petitioners suggest that this fact pattern is contrary to the

discussion of early payment discounts in the Department's KTN Sales

Verification Report, wherein the Department observed that ``KTN stated

that as a policy it does not allow customers to take early payment

discounts where they fail to meet stated terms, but that on rare

occasions, early payment discounts will be granted even though a

customer pays late.'' Petitioners' Case Brief at 78, quoting the KTN

Sales Verification Report at 33 (petitioners' emphasis). Petitioners

assert that the Department should disallow all home market early

payment discounts as adverse facts available or, at a minimum, disallow

those early payment discounts where reported dates of invoicing and

payment did not qualify KTN's customer for such a discount.

KTN responds that the Department successfully verified its

calculation of early payment discounts and argues that the application

of facts available is not warranted. KTN argues that in each case in

which KTN reported early payment discounts in its sales file, the sales

documentation confirmed that the customer had in fact taken the

discount. KTN asserts that while the customer may not have qualified

for the discount for three of the five sales traces which indicated a

discount was given, the actual terms of payment were verified in each

case. KTN argues that, as verified by the Department, the date of

payment was the date that KTN booked the payment into its accounts

receivable system. Therefore, argues KTN, it is possible that a

customer sent a payment within the time allowed for qualifying for an

early payment discount, but that the payment was not booked into KTN's

accounting system for several days.

Department's Position: We agree with respondent. During our home

market verification of KTN we conducted thorough sales traces which

included ensuring the accuracy of KTN's reported payment and invoice

dates. We found no discrepancies in any of KTN's reported payment or

invoice dates.

[[Page 30731]]

Furthermore, while the time lag between the verified invoice and

payment dates might not have appeared to warrant an early payment

discount for these transactions, we were satisfied that for those

transactions reviewed which included early payment discounts, the

customer in fact claimed these discounts and KTN granted them. See,

e.g., KTN Sales Verification Report at 59. Therefore, we have continued

to allow an adjustment to NV for KTN's reported early payment

discounts.

Comment 8: Advertising Expenses

In its opening-day correction letter presented at the KTN sales

verification KTN noted that it had incorrectly double-counted expenses

attributable to advertising by including them in its ISEs and also

reporting them as direct expenses. KTN suggested removing advertising

expenses from its ISEs to correct this error. Petitioners claim,

however, that information on the record establishes that the remedy

suggested by KTN is unacceptable. Petitioners point to the discussion

of advertising activities in the KTN Sales Verification Report,

specifically the description of these expenses:

[f]or advertising expenses, KTN explained that

Informationsstelle Edelstahl Rostfrei (ISER) is the industry

association which conducts a variety of activities to study and

promote the uses of stainless steel. KTN presented a list of the

association's activities in 1997 and 1998, including brochures and

publications, seminars, fairs * * *

Petitioners' Case Brief at 80, quoting the KTN Sales Verification

Report at 45.

Petitioners argue that ISER's activities are directed at KTN's

current and prospective customers of stainless steel products, not at

the customer's customers. Accordingly, claim petitioners, any expenses

incurred by KTN related to its membership in ISER (i.e., the

association dues) are correctly accounted for as part of ISEs, both for

the home market and the United States. Petitioners further assert that

if the Department instead decides to take the approach suggested by KTN

(i.e., to reduce ISEs by the amount of ISER dues), these expenses

should also be reported as direct expenses in the United States.

KTN counters that the Department should continue to treat KTN's

reported home market advertising expenses as direct selling expenses.

ISER, KTN asserts, undertook promotional and advertising campaigns

directed at KTN's customers' customers in the German market. KTN argues

that, accordingly, home market advertising expenses qualify as direct

selling expenses.

Department's Position: We agree with petitioners that KTN's home

market advertising expenses are properly classified as ISEs. The

Department has articulated its views with respect to the proper

treatment of advertising expenses in, e.g., Gray Portland Cement and

Clinker from Mexico, 64 FR 13148, 13169 (March 17, 1999) and Fresh

Atlantic Salmon from Chile, 63 FR 31411, 31424 (June 9, 1998). The

Department normally considers as direct selling expenses those expenses

that result from, and bear a direct relationship to, the particular

sales in question. In the case of advertising expenses, to qualify as a

direct adjustment, these expenses must also be assumed on behalf of a

customer and must be associated specifically with sales of subject

merchandise. ISER's activities, however, are aimed at promoting the use

of stainless steel in general but not subject merchandise specifically.

The expenses incurred for KTN's membership in ISER are not directly

related to particular sales by KTN of subject merchandise. As indicated

in our KTN Sales Verification Report at 45, ISER conducted activities

to study and promote the use of stainless steel generally (i.e., the

activities were not limited to stainless steel sheet and strip which is

the subject of this investigation). Furthermore, there is no record

evidence supporting KTN's claim that ISER's activities give rise to

expenses assumed by KTN on behalf of its customers. Therefore, for this

final determination, we consider KTN's home market advertising expenses

to be indirect in nature. We have denied KTN's claim that these are

direct selling expenses, but we have included these expenses in KTN's

home market ISEs.

Comment 9: Rebates

As indicated in the KTN Sales Verification Report, NSC's rebates to

a particular customer were granted at a given percentage even though

NSC had initially reported a different figure in its response.

Petitioners urge the Department to apply the corrected rebate

percentage for 1998 sales (NSC noted that the rebates at issue applied

only to sales in 1998) and to allow no rebates for the items invoiced

to this customer during 1997.

Department's Position: For this final determination we have applied

the corrected rebate percentage to NSC's eligible 1998 sales, as

suggested by petitioners.

Adjustments to United States Price

Comment 10: Unreported U.S. Sales

Petitioners urge the Department to apply partial adverse facts

available to five previously unreported U.S. sales discovered by the

Department during the verification of KHSP. Petitioners argue that KHSP

never included these sales in its list of corrections, nor did it

provide the total quantity and value of these missing transactions in

its opening-day corrections letter. The unreported U.S. sales,

petitioners maintain, do not constitute minor corrections but instead

new information that should be rejected by the Department and removed

from the record of this investigation.

As stated in Lock Washers (58 FR at 48835), aver petitioners, the

Department's policy concerning unreported sales discovered at

verification is to accept for the record only that information

necessary to establish the magnitude of any omissions. In Lock Washers,

petitioners point out, the Department returned sales documentation

concerning the unreported sales identified at verification. Petitioners

also point to the investigation on Belgian Stainless Plate in Coils, in

which the Department refused to take or even review complete sales data

(other than the invoice) for a single unreported sale.

Petitioners assert that it is the Department's established practice

to apply total facts available to missing sales information if the

missing data constitute five percent or more of a sales database, or

partial facts available when the missing or unreported data make up

less than five percent of a given sales database. Petitioners suggest

that the Department, in a manner consistent with Lock Washers (in which

it resorted to partial facts available for the respondent's unreported

sales data), sh

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