Certain Corrosion-Resistant Carbon Steel Flat Products From Japan: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-824]

Certain Corrosion-Resistant Carbon Steel Flat Products From

Japan: Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, U.S.

Department of Commerce.

ACTION: Notice of final results of the antidumping duty administrative

review of certain corrosion-resistant carbon steel flat products from

Japan.

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

SUMMARY: On September 8, 1998, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

review of the antidumping duty order on certain corrosion-resistant

carbon steel flat products from Japan. This review covers one

manufacturer/exporter of the subject merchandise to the United States

and the period August 1, 1996 through July 31, 1997. We gave interested

parties an opportunity to comment on our preliminary results. As a

result of these comments, we have changed the results from those

presented in the preliminary results of review.

EFFECTIVE DATE: March 16, 1999.

FOR FURTHER INFORMATION CONTACT: Contact Doreen Chen or Rick Johnson,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th and Constitution Avenue, NW, Washington,DC

20230; telephone: (202) 482-0408 or (202) 482-3818 respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

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

1, 1995, the effective date of the amendments made to the Act by the

Uruguay Round Agreements Act (``URAA''). In addition, unless otherwise

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

part 351 (62 FR 27379, May 19, 1997).

[[Page 12952]]

Background

On September 8, 1998, the Department published in the Federal

Register (63 FR 47465) the preliminary results of its administrative

review of the antidumping duty order on certain corrosion-resistant

carbon steel flat products from Japan (``Preliminary Results''). We

gave interested parties an opportunity to comment on our preliminary

results. We received written comments from respondent Nippon Steel

Corporation (NSC), and from petitioners (Bethlehem Steel Corporation

and U.S. Steel Group (a unit of USX Corporation)) on October 8, and

October 15, 1998, respectively. We have now completed this

administrative review in accordance with section 751(a) of the Act.

Scope of Review

The product covered by this administrative review constitutes one

``class or kind'' of merchandise, certain corrosion-resistant steel.

Certain corrosion-resistant steel includes flat-rolled carbon steel

products, of rectangular shape, either clad, plated, or coated with

corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-,

nickel- or iron-based alloys, whether or not corrugated or painted,

varnished or coated with plastics or other nonmetallic substances in

addition to the metallic coating, in coils (whether or not in

successively superimposed layers) and of a width of 0.5 inch or

greater, or in straight lengths which, if of a thickness less than 4.75

millimeters, are of a width of 0.5 inch or greater and which measures

at least 10 times the thickness or if of a thickness of 4.75

millimeters or more are of a width which exceeds 150 millimeters and

measures at least twice the thickness, as currently classifiable in the

Harmonizing Tariff Schedule of the United States (HTSUS) under item

numbers 7210.30.0030, 7210.30.0060, 7210.41.0000, 7210.49.0030,

7210.49.0090, 7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060,

7210.70.6090, 7210.90.1000, 7210.90.6000, 7210.90.9000, 7212.20.0000,

7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000,

7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.90.3000,

7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000,

7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review are

corrosion-resistant flat-rolled products of non-rectangular cross-

section where such cross-section is achieved subsequent to the rolling

process (i.e., products which have been ``worked after rolling'')--for

example, products which have been beveled or rounded at the edges.

Excluded from this review are flat-rolled steel products either plated

or coated with tin, lead, chromium, chromium oxides, both tin and lead

(``terne plate''), or both chromium and chromium oxides (``tin-free

steel''), whether or not painted, varnished or coated with plastics or

other nonmetallic substances in addition to the metallic coating. Also

excluded from this review are clad products in straight lengths of

0.1875 inch or more in composite thickness and of a width which exceeds

150 millimeters and measures at least twice the thickness. Also

excluded from this review are certain clad stainless flat-rolled

products, which are three-layered corrosion-resistant carbon steel

flat-rolled products less than 4.75 millimeters in composite thickness

that consist of a carbon steel flat-rolled product clad on both sides

with stainless steel in a 20%-60%-20% ratio. Also excluded from this

review are certain corrosion-resistant carbon steel flat products

meeting the following specifications: widths ranging from 10

millimeters (0.394 inches) through 100 millimeters (3.94 inches);

thicknesses, including coatings, ranging from 0.11 millimeters (0.004

inches) through 0.60 millimeters (0.024 inches); and a coating that is

from 0.003 millimeters (0.00012 inches) through 0.005 millimeters

(0.000196 inches) in thickness and that is comprised of three evenly

applied layers, the first layer consisting of 99% zinc, 0.5% cobalt,

and 0.5% molybdenum, followed by a layer consisting of chromate, and

finally a layer consisting of silicate. These HTSUS item numbers are

provided for convenience and Customs purposes. The Department's written

description of the products covered by the scope of the instant order

remains dispositive.

Fair Value Comparisons

To determine whether sales of subject merchandise from Japan to the

United States were made at less than fair value, we compared the Export

Price (EP) to the Normal Value (NV), as described in the ``Export

Price'' and ``Normal Value'' sections of the preliminary results of

review notice.

Interested Party Comments:

Comment 1: Petitioners argue that the Department should reject home

market sales to a certain customer because the sales to this customer

result in unfair and improper margin comparisons between EP and NV.

Petitioners contend that, for a majority of respondent's home market

(HM) sales that are matched to its U.S. sales, either the customer is

the same for both markets or the U.S. and HM customers are related.

Petitioners assert that for all such sales, the U.S. customer was also

the importer of record. Thus, petitioners note that the customer would

have been responsible for the dumping duties. Additionally, petitioners

note that the Japanese parent company of the U.S. customer was involved

in the price negotiations with NSC. Under these circumstances,

petitioners argue, the potential for manipulation of the dumping margin

was especially great.

Petitioners assert that a margin based on such comparisons violates

the statutory requirement that the comparisons be ``fair,'' and on this

basis alone, the Department should reject the HM sales to the

particular customer because they result in ``unfair and improper''

comparisons. Petitioners argue that it is a fundamental principle of

the antidumping law that ``in determining whether subject merchandise

is being, or is likely to be, sold at less than fair value, a fair

comparison shall be made between the export price or constructed export

price and normal value.'' Petitioners argue that a ``fair comparison''

cannot exist where most of the U.S. sales are compared with sales to

the same customer in the home market. Petitioners argue that such

comparisons are inherently unreliable because the seller and buyer can

simply agree to increase prices on merchandise destined for the U.S.

and, at the same time, decrease prices on merchandise purchased in the

home market. Petitioners assert that the antidumping statute and the

Department's regulations and practice go to great lengths to ensure

that the prices in the home market and the prices in the U.S. market

are reliable and representative of sales in each market. To support

this contention, petitioners refer to section 773(a)(1)(B) of the Act

(19 U.S.C. 1677b(a)(1)(B)) (requiring that normal value be based on

sales made in the ordinary course of trade); section 773(a)(2) of the

Act (19 U.S.C. 1677b(a)(2)) (providing that sales intended to establish

a fictitious market shall not be used in determining normal value);

section 773(f)(2) and (3) of the Act (19 U.S.C. 1677b(f)(2) and (3)

(ensuring that the cost of a major input not be valued at the transfer

price if such price is below market value or less than cost); section

772(d) of the Act (19 U.S.C. 1677a(d)) (requiring certain adjustments

to U.S. price where the

[[Page 12953]]

merchandise is sold through an affiliated U.S. supplier); and 19 CFR.

Sec. 351.403 (c) (providing that sales to affiliated parties that are

not at arm's length prices not be used in determining normal value).

Petitioners further assert that it is not necessary for the

Department to find evidence of price manipulation in order to conclude

that the comparisons in the margin calculation are unfair and improper.

Petitioners assert that a finding of a ``potential for price

manipulation'' is sufficient to warrant a finding of an ``unfair and

improper'' margin comparison, citing Koening & Bauer-Albert AG, et al.

v. United States, No. 96-10-02298, Slip Op. 98-83 (CIT 1998) at 5-6 and

Koyo Seiko Co. v. United States, 936 F. Supp. 1040, 1048 (CIT 1996).

Thus, petitioners claim that under the present facts, the Department

need not conduct any further investigation to determine whether price

manipulation has occurred. Moreover, petitioners assert that in this

case the Department has the authority to reject such comparisons. In

support of this assertion, petitioners cite Mistubishi Electric Corp.

v. United States, 700 F. Supp. 538, 555 (CIT 1988), aff'd 898 F.2d 1977

(Fed. Cir. 1990); see also Koening & Bauer-Albert AG v. United States,

No. 96-10-02298, Slip Op. 98-83 (CIT 1998) at 6; and Queen's Flowers de

Columbia v. United States, 981 F. Supp. 617, 622 (CIT 1997).

Respondent claims that petitioners' allegations concerning its

sales to the customer at issue are untimely and unsubstantiated and

should therefore be dismissed. First, respondent argues that

petitioners first raised these claims in their case brief, and thus

failed to raise these allegations until long after the deadline for

submission of factual information in this review. Respondent cites 19

CFR Sec. 351.302(d) and contends that the Department has refused to

allow petitioners to dispute the validity of a NV calculation at such a

late stage in the proceedings. Respondent claims that in previous

cases, the Department rejected as untimely a fictitious market

allegation which was first raised at the time of filing of case briefs

following the preliminary results of the review, citing Carbon Steel

Wire Rope From Mexico: Final Results of Antidumping Duty Administrative

Review, 63 FR 46753, 46754-55 (September 2, 1998); and Dynamic Random

Access Memory Semiconductors of One Megabyte or Above from the Republic

of Korea: Final Results of Antidumping Duty Administrative Review, 62

FR 39809 (July 24,1997). Respondent argues that the prior Department

decisions rejecting fictitious market claims based on untimeliness

apply equally to petitioners' claims regarding ordinary course of trade

and fair value comparisons. Respondent argues that all three of

petitioners' claims relating to the customer at issue arise from

section 773 of the Act (calculating normal value). Respondent further

cites the preamble to the Department's regulations, arguing that a

timely and adequately substantiated allegation is necessary, since an

investigation of these types of claims requires information that is

quantitatively and/or qualitatively different from the information

normally gathered by the Department as part of its standard AD

analysis. See Antidumping Duties; Countervailing Duties: Final Rule, 62

FR 27296, 27357 (May 19, 1997) (``Final Rule''). Consequently,

respondent argues that a proper analysis of the allegations would

require the gathering of information that is not currently in the

administrative record for this review.

Second, respondent contends that the factual record does not

support petitioners' assertions regarding a potential for price

manipulation. Respondent argues that the challenged sales are

comparable in terms of price to other sales. Respondent contends that

the percentage difference between NSC's average home market net sales

price to the customer at issue and NSC's average net price to other

customers in the home market purchasing similar merchandise is minimal.

Moreover, respondent argues that the allegation that NSC and the

customer artificially lowered NSC's home market prices does not comport

with commercial reality. In so arguing, respondent claims that NSC's

U.S. sales to the customer at issue were very small in volume in

relation to NSC's sales to the same customer in the home market.

(Citing Tubeless Steel Disc Wheels from Brazil, 56 FR 14083, 14085

(April 5, 1991) (``[T]here is no commercial incentive for the

respondent to suppress the prices of its comparatively higher volume

home market sales to eliminate hypothetical margins in the much smaller

U.S. market.))'' Thus, respondent argues that it would be impractical

to manipulate the substantially larger set of sales in the home market

in order to raise the price of the relatively small set of U.S. sales.

Respondent contends that the Department has acknowledged that ``the

purpose of the antidumping duty statute is to offset the effect of

discriminatory pricing between the U.S. and home markets. * * * Thus,

while there is no statutory requirement that a firm must act to

eliminate price discrimination, if it decides to do so, how it does so

is within its own discretion. * * * A firm may also choose to increase

its U.S. prices and lower its home market prices at the same time.''

See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products form the

United Kingdom; Final Results of Antidumping Duty Administrative

Review, 60 FR 44009 (Aug 24, 1995). Respondent argues that the fact

that NSC's U.S. and home market selling prices do not involve

significant dumping margins is the intended result of the antidumping

laws.

Respondent further objects to petitioners' interpretation of the

term ``fair'' in the statute. Respondent claims that petitioners'

interpretation of a ``fair'' comparison is inapposite, arguing that

under section 773 of the Act, ``fair comparison'' is a term of art that

refers solely to the technical calculations that produce the essential

terms--EP or constructed export price (CEP) and NV--of such a

comparison. Respondent argues that ``fair'' signifies that calculations

were made according to the relevant statutory criteria set forth in

sections 772 and 773. Thus, respondent contends that a challenge as to

whether a comparison is ``fair'' must allege that the Department has

not followed the methodological approach set forth under the Act.

Respondent argues that petitioners make no allegation that the

Department has failed to follow the requirements set forth in sections

772 and 773. Respondent argues that petitioners instead referenced the

Department's limited discretion under section 781, a section related to

scope issues that respondent argues is not relevant to the calculation

of NV. As stated above, respondent asserts that if petitioners seek to

challenge the Department's fair comparison methodology, they must do so

by citing a failure to carry out the calculations mandated by sections

772 and 773. Respondent submits that because petitioners have not done

so, their challenge must fail.

Department's Position: We disagree with petitioners that the sales

in question should be rejected as ``unfair comparisons'' under section

773 of the Act. Petitioners are correct that section 773(a) of the Act

requires that a fair comparison shall be made between EP or CEP and NV.

Petitioners are also correct that the Department has a certain amount

of discretion to act ``with the purpose in mind of preventing the

intentional evasion or circumvention of the antidumping duty law.''

Dastech Int'l, Inc. v. ITC, 963 F. Supp. 1220, 1229 (CIT 1997);

Mitsubishi Elec. Corp. v. United States, 12 CIT 1025, 1046, 700 F.

Supp. 538, 555 (1988).

[[Page 12954]]

However, the mere fact that the customer in question purchased NSC

product in both the U.S. and home markets does not provide sufficient

grounds to establish that the calculation based upon these sales is

inappropriate. That the customer in question purchased the identical

product in both markets is not, in itself, unusual, nor suggestive of

an intentional evasion or circumvention of the antidumping duty law.

Furthermore, as acknowledged by the Department in previous cases, it is

permissible for a respondent to reduce or eliminate dumping either by

raising its U.S. prices or by lowering its home market prices of

merchandise subject to the order. Furfuryl Alcohol from the Republic of

South Africa: Final Results of Antidumping Duty Administrative Review,

62 FR 61084, 61085 (November 14, 1997). (For further discussion

involving proprietary information, see Memorandum to the File: Analysis

of Nippon Steel Corporation (``NSC'') in the Final Results of Corrosion

Resistant Steel Flat Products from Japan (January 6, 1998)(``Analysis

Memo''). Therefore, we did not reject the sales in question on the

basis that they would lead to ``unfair comparisons.''

We disagree with respondent's argument that petitioners'

allegations are untimely. In order to address this claim, it is not

necessary for the Department to seek new factual information and

petitioners have not submitted new factual information in their

allegation.

Comment 2: Petitioners claim that the sales made to the customer at

issue should be rejected because they constitute sales that are outside

the ordinary course of trade. Petitioners argue that both the statute

and the Department's practice authorize the Department to disregard

sales (1) that are below cost; (2) that are not made at arm's length;

and (3) that are not ordinary when compared to sales generally made in

the market, particularly where the use of such sales in the margin

calculation would lead to irrational or unrepresentative results.

Petitioners argue that the Department could disregard sales for these

reasons even where those sales constitute a majority of respondent's

home market sales. Further, as discussed in Comment 1, petitioners note

that the U.S. sales are compared to sales to the same customer in the

home market. Petitioners assert that the potential for price

manipulation is enormous, given the economic incentive to minimize the

dumping margin. (For further discussion involving proprietary

information, see the Analysis Memo).

Petitioners assert that these circumstances are so extraordinary

that NSC's home market sales to the customer at issue should be

rejected as outside the ordinary course of trade. Additionally,

petitioners charge that the inclusion of these sales in the home market

would lead to ``irrational'' and ``unrepresentative'' results because

of this great potential for manipulation of prices.

Petitioners submit that under the statute, the Department may

reject various categories of home market sales because they are found

to be outside the ordinary course of trade. Petitioners contend that

although the Statement of Administrative Action (``SAA'') sets forth a

variety of examples of sales that are outside the ordinary course of

trade, the Department has the express authority to ``consider other

types of sales or transactions to be outside the ordinary course of

trade when such sales or transactions have characteristics that are not

ordinary as compared to sales or transactions generally made in the

same market.'' See SAA, reprinted in 1994 U.S.C.C.A.N., 4040, 4171

(``SAA'').

Respondent refutes NSC's claim that the challenged sales were

outside the ordinary course of trade. Respondent points out that the

burden of proving that sales are outside the ordinary course of trade

lies with the party making the assertion, citing Final Rule, at 27299.

Respondent argues that petitioners make no allegation that NSC has

engaged in any of the enumerated list of practices that are

presumptively deemed to constitute conditions and practices outside the

ordinary course of trade as prescribed in section 771 (15) of the Act,

nor have petitioners alleged that the sales at issue are characterized

by factors similar to those that have been found to constitute sales

outside of the ordinary course of trade in other cases. See, e.g.,

CEMEX, S.A. v. United States, 133 F.3d at 901-2 (Fed. Cir. 1998);

Sulfur Dyes, Including Sulfur Vat Dyes, From the United Kingdom: Final

Results of the Antidumping Administrative Review, 58 FR 3253, 3256

(January 8, 1993); Manganese Metal from the People's Republic of China:

Final Results of the Antidumping Administrative Review, 60 F.R. 56045,

56046 (November 6, 1995); Color Television Receivers, Except for Video

Monitors from Taiwan: Final Results of the Antidumping Duty

Administrative Review (``Color Television Receivers''), 55 FR 47093,

47100 (Nov. 9, 1990) (challenging the Department's comparison of sales

to the United States and a third country, where, in some cases, the

matching sales had the same customer order number, contract date, and

sales price.) Respondent argues that petitioners have an obligation to

point to specific evidence that the challenged sales are not normal

when compared to NSC's other sales of corrosion-resistant steel during

a reasonable period of time prior to the exportation of the subject

merchandise. Respondent also argues that a mere potential for price

manipulation is not enough to justify excluding home market sales.

Respondent argues that the court in Zenith Electronics determined that

there can be no basis for excluding home market sales without evidence

of actual price manipulation. See Zenith Electronics v. United States,

865 F. Supp. 890 (CIT 1994). Respondent argues that petitioners rely on

a series of vague assertions that do not meet the legal standard

enunciated in the statute, regulations, and case law in support of

their contention that the challenged sales were outside the ordinary

course of trade.

Respondent asserts that the Department has, in fact, previously

ruled that comparisons between sales to the same customer in two

markets may be valid. See Color Television Receivers, 55 FR 47093,

47100 ( November 9, 1990) (holding that ``nothing in the antidumping

law or in the Department's regulations directs or authorizes the

Department to ignore a valid third-country purchaser who is related to

the U.S. purchaser'').

Respondent contends that the ``ordinary course of trade'' provision

applies only to sales used in the calculation of NV under section 773.

Thus, respondent argues that petitioners' claim that the sales are

extraordinary because they comprise a great percentage of its U.S.

sales, is inappropriate under section 773. Additionally, respondent

cites Chang Tieh Ind. Co. v. United States, 840 F. Supp. 141, 145 (CIT

1993), for the proposition that it is unusual, if not improper, to

refer to the entire corpus of a party's U.S. sales as

``unrepresentative,'' as they must be representative of that seller's

behavior.

Department's Position: We agree with respondent. The statute and

SAA are clear that a determination of whether sales (other than those

specifically addressed in section 771(15)) of the Act are in the

ordinary course of trade must be based on an analysis comparing the

sales in question with sales of merchandise of the same class or kind

generally made in the home market. An ordinary course of trade

determination requires evaluation of sales in each review on ``an

individual basis taking in to account all of the relevant facts of each

case.'' See Nachi-Fujikishi Corp. v.

[[Page 12955]]

United States, 798 F. Supp. 716, 719 (CIT 1992). This means that the

Department must review all circumstances particular to the sales in

question. See Gray Portland Cement and Clinker from Mexico: Final

Results of the Antidumping Administrative Review, 62 FR 17148, 17153

(April 9, 1997).

The particular facts of this case do not support a finding that the

sales to the customer at issue were extraordinary transactions in

relation to other sales transactions. There is no record evidence

demonstrating any significant distinctions between the sales at issue

and other home market sales. In particular, there is no evidence of a

discernible pattern of lower sales prices to this customer as compared

to NSC's other customers who purchased similar merchandise. Moreover,

we agree with respondent that the small number of sales to the customer

at issue in the U.S. in comparison to the number of sales to the same

customer in the home market lessens any commercial incentive for the

respondent to suppress the prices of its comparatively higher volume

home market sales in order to eliminate hypothetical margins in the

much smaller U.S. market. See Tubeless Steel Disc Wheels from Brazil,

56 FR 14083, 14085 (April 5, 1991) (``Disc Wheels''). In addition, the

mere facts that the customer is the same for both the U.S. and home

market sales and that the parent company of the customer was involved

in the sales negotiations do not warrant a finding of extraordinary

sales transactions. For the above reasons, we have determined that the

home market sales in question were made in the ordinary course of

trade.

With respect to respondent's argument regarding the timeliness of

petitioners' allegations, as stated above, because no new factual

information has been submitted, nor is new factual information

necessary for the analysis of this claim, we find that this allegation

is not untimely.

Comment 3: Petitioners allege that NSC's home market sales to the

customer at issue should be rejected on the basis that such sales

constitute a fictitious market under section 773(a)(2) of the Act.

Petitioners note that as a general rule, the Department's practice in

analyzing whether there is evidence of a fictitious market is to

``require evidence that {a} decrease in price of home market sales of

the foreign like product was accompanied by an increase in the price of

sales of ``different forms of the foreign like product'.'' Furfuryl

Alcohol from the Republic of South Africa: Final Results of the

Antidumping Duty Administrative Review, 62 FR 61084, 61085 (November

14, 1997). Petitioners assert that the Department has acknowledged,

however, that the ``price movements within a foreign like product are

{but} one example of a fictitious market,'' and that ``we may determine

in the future that a fact pattern other than price movements within a

foreign like product constitutes a fictitious market.'' Id. Petitioners

note that in Zenith Electronics Co. v. United States, the CIT ordered a

remand for the Department to investigate allegations of a fictitious

market. See Zenith, 770 F. Supp. at 659, appeal after remand, 812 F.

Supp. 228 (1993), vacated in part on other grounds, 865 F. Supp. 890

(CIT 1994). According to petitioners, the plaintiffs, in Zenith,

claimed that the basis for the remand was a ``small proportion'' of

sales where the purchaser in the U.S. market was affiliated with the

purchaser in the comparison market. Petitioners argue that Zenith

compels the Department to investigate a potential fictitious market

where sales of the same merchandise within a close time frame are made

to related purchasers in both the U.S. and home markets. (For further

discussion involving proprietary information, see the Analysis Memo.)

Petitioners claim that the court's finding of a potential fictitious

market under such circumstances overruled the Department's previous

holding in Color Television Receivers that ``nothing in the antidumping

law or in the Department's regulations directs or authorizes the

Department to ignore valid third-country sales for purposes of

calculating FMV simply because those sales are made to a third-country

purchaser who is related to the U.S. purchaser.'' Color Television

Receivers, 55 FR 47093, 47100 (November 9, 1990). Petitioners also,

however, distinguish Zenith from this case, claiming that no further

investigation is warranted since the present record sufficiently

supports a finding of a fictitious market. On this basis, petitioners

claim that their allegation is timely.

Respondent argues that petitioners' fictitious market allegation

should be rejected because NSC's home market sales to the customer at

issue are ``bona fide arm's length transactions'' that reflect the

``actual market price.'' Respondent asserts that a fictitious market

analysis is ``extraordinary'' and will be undertaken by the Department

only upon receipt of a timely and adequately substantiated allegation,

citing Carbon Steel Wire Rope from Mexico: Final Results of the

Antidumping Duty Administrative Review, 63 FR 46753, 46755 (Sept. 2,

1998); Preamble to Final Rule, 62 FR at 27357.

Respondent argues that only sales which are not bona fide arm's

length transactions are subject to the fictitious market provision, and

that such sales must be ``pretended,'' citing PQ Corp. v. United

States, 652 F. Supp. 724 (CIT 1987); Furfuryl Alcohol, 62 FR at 61085.

Respondent asserts that in order to prove that NSC's home market sales

to the customer at issue are ``pretended'' sales with ``artificial''

prices that ``do not reflect actual market price,'' petitioners would

have to show that NSC ``artificially suppressed'' its home market

prices to the customer at issue. Respondent contends that the

Department has rejected fictitious market allegations where the

petitioner has failed to submit information indicating that

respondent's lower home market prices ``were other than actual market

price,'' citing Porcelain-on-Steel Cooking Ware from Mexico: Final

Results of the Antidumping Administrative Review, 58 FR 32096 (June 8,

1993). Respondent argues that petitioners failed to provide such data.

Respondent argues that NSC's sales to the customer in question are

``bona fide arm's length transactions'' at prices that reflect ``actual

market price.'' As discussed earlier, respondent claims that the

average net sales price to the customer at issue is comparable to NSC's

average net sales to other customers purchasing similar merchandise,

differing by a minimal percentage.

Respondent further argues that petitioners' fictitious market

allegation should be rejected because NSC had no commercial incentive

to suppress prices, which respondent believes is evidenced by the fact

that the home market sales volume to the customer at issue is

significantly larger than U.S. sales volume to the same customer. Disc

Wheels, 56 FR at 14085.

Respondent argues that even if NSC were to lower its prices in the

home market, this does not constitute a fictitious market. Respondent

asserts that the Department's general practice requires that a

fictitious market allegation must be supported by evidence of

``different movements in the prices at which different forms of the

subject merchandise have been sold in the home market.'' Furfuryl

Alcohol, 62 FR at 61085; Disc Wheels, 56 FR at 14095. Respondent argues

that petitioners have not identified any ``different forms,'' nor have

they alleged any ``different movements'' in the prices of any such

forms. Respondent notes that in Furfuryl Alcohol, the Department found

that a claim ``centering around a

[[Page 12956]]

single supplier selling at low prices in the home market does not

justify an expansion'' of the Department's ``normal practice of

determining the existence of a fictitious market based on a comparison

of prices of different forms of the foreign like product.'' Furfuryl

Alcohol, 62 FR at 61085. Additionally, respondent notes that in

Furfuryl Alcohol, the Department acknowledged a respondent's right to

``reduce or eliminate dumping by either raising its U.S. prices or by

lowering its home market prices of merchandise subject to the order.''

Id.

Respondent also argues that a ``mere potential'' for price

manipulation does not satisfy the legal standard for establishing a

fictitious market. Rather, respondent contends that a finding of

``actual'' price manipulation must be shown in order for sales to be

excluded. Respondent asserts that the court in Zenith acknowledged this

requirement when it ordered the Department to determine whether

manipulation ``had taken place,'' citing Zenith, 770 F. Supp. at 659.

Respondent further notes that petitioners' assertion about the

challenged sales is based on the order date as the date of sale.

Respondent argues that the Department must use the shipment date as the

date of sale since it is the date when the material terms of sale were

established. (See Comment 4 below for further details.) Respondent

claims that the percentage of matched sales to the same customer in

both markets is lower if the date of shipment is used as the date of

sale.

Department's Position: An allegation involving fictitious markets

requires investigation and analysis by the Department of factors that

are not always considered during the ordinary course of a review.

Petitioners failed to raise their fictitious market allegation until

the filing of their case brief following the preliminary results of

review. Therefore, petitioners' allegation was untimely filed and not

adequate to warrant determining that NSC's home market sales constitute

a fictitious market. As stated in prior determinations by the

Department, a fictitious market analysis is extraordinary. In the

Preamble to the Department's Final Regulations implementing the URAA,

the Department explained that it typically does not engage in a

fictitious market analysis under section 773(a)(2) of the Act, or a

variety of other analyses called for by section 773, ``unless it

receives a timely and adequately substantiated allegation from a

party.'' Antidumping Duties: Countervailing Duties; Final Rule, 62 FR

27296, 27357 (May 19, 1997) (Final Rule) (citing Disc Wheels, 56 FR at

14083 (April 15, 1991)); and Porcelain-on-Steel; Cooking Ware from

Mexico: Final Results of the Antidumping Duty Administrative Review, 58

FR 32095 (June 8, 1993). The various provisions of section 773,

including section 773(a)(2) of the Act, ``call for analyses based on

information that is quantitatively and/or qualitatively different from

the information normally gathered by the Department as part of its

standard antidumping analysis.'' See Final Rule, 62 FR at 27357. If a

timely and adequately substantiated allegation is submitted in a future

review, we will examine this issue in that review.

Comment 4: Respondent argues that the Department's preliminary

decision to use date of order confirmation as date of sale is not in

accordance with law and inconsistent with the Department's regulations

on date of sale. Respondent argues that the Department should instead

use shipment date as the date of sale. Respondent first argues that the

intent of the date-of-sale regulation is to select the date that most

accurately reflects the date on which the material terms of sale are

established. Respondent argues that for that purpose, the regulation

instructs the Department to use the invoice date unless there is

evidence on the record indicating that another date more accurately

reflects the date on which the material terms of sale are established,

citing 19 CFR 351.401(i). Respondent notes that the Department has

previously held that the reason for using a date other than the invoice

date as the date of sale must be ``compelling,'' citing Certain Cold

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

Final Results of Antidumping Duty Administrative Reviews, 63 FR 13170,

13194 (March 18, 1998).

Second, respondent argues that the Department's regulations state a

preference for establishing a date of sale on the basis of data

maintained by the respondent in the ordinary course of business. See 19

CFR 351.401(i). Respondent argues that these regulations establish a

rebuttable presumption that the invoice date is the appropriate date of

sale, because it: (1) most accurately reflects the date on which the

material terms are set; and (2) is the date that is generally

maintained in the ordinary course of business.

Respondent notes that in previous cases, the Department held that

the date of invoice could not be used because the date of invoice was

later than the shipment date. See Small Diameter Circular Seamless

Carbon and Alloy Steel Standard, Line and Pressure Pipe from Germany:

Final Results of Antidumping Duty Administrative Review, 63 FR 13217,

13226 (March 18, 1998). Respondent contends that under no circumstances

may a date after the date of shipment be used as the date of sale,

regardless of when the material terms are set. Therefore, respondent

argues that where the invoice date most accurately reflects the date on

which the material terms of sale are established, but may not be used

because it falls after the date of shipment, the Department must select

a proxy for the invoice date. In this situation, respondent argues, the

proxy date should be the shipment date, because it is the closest

permissible ``date of sale'' to the invoice date.

Respondent further argues that the Department's use of the order

confirmation date of NSC's sales of subject merchandise as the date of

sale is not in accordance with the Department's regulations. Respondent

asserts that the order confirmation date is an inappropriate date of

sale because the order confirmation date does not accurately reflect

the date on which the material terms of sale are ``finally

established.'' Respondent contends that the order confirmation date

occurs prior to the date of shipment of the subject merchandise, and

that the material terms of sale can (and routinely do) change up to,

and even after, the date of shipment.

Respondent contends that the use of the shipment date as date of

sale fully accords with the Department's date-of-sale rules. Respondent

argues that the invoice date is the date that most accurately reflects

the date on which the material terms of sale are established. However,

respondent asserts that NSC's invoice date always occurs on, or after,

the shipment date. Therefore, the Department may not rely on invoice

date since the Department's rules do not permit the use of any date

after the shipment date as the ``date of sale.'' Respondent argues that

because the shipment date is the closest permissible ``date of sale''

to the invoice date, the shipment date is the best proxy for the

invoice date and, as such, is the date that reflects most accurately

the date on which the material terms of sale are established.

Petitioners argue that the Department properly selected the order

confirmation as the date of sale. Petitioners argue that if the record

shows that the material terms of sale are usually established on a date

other than the invoice date, the Department will select such other date

as the date of sale. Petitioners assert that the Department prefers to

use the invoice date as the date of sale because in many cases, ``price

and quantity are

[[Page 12957]]

often subject to continued negotiation between the buyer and seller

until a sale is invoiced.'' See Final Rule, at 27348. However,

petitioners contend that the Department will not use the invoice date

where the evidence shows that ``for a particular respondent, the

material terms of sales usually are established on some date other than

the invoice date,'' citing Canned Pineapple Fruit from Thailand, 63 FR

43661, 43668 (August 14, 1998), quoting Final Rule, at 27349.

Petitioners assert that if the invoice date does not ``reasonably

approximate the date on which the material terms of sale were made in

either of the markets under consideration,'' the Department has

determined that ``its blanket use as the date of sale in an antidumping

analysis is untenable.'' Circular Welded Non-Alloy Steel Pipe from the

Republic of Korea, 63 FR 32833, 32835 (June 16, 1998).

Petitioners argue that the record fully supports the Department's

finding that the order confirmation date, and not the invoice date or

the shipment date, is the date that best reflects the date on which the

material terms of sale are set. Petitioners point out that, as

indicated by NSC's questionnaire response and also confirmed by the

verification results, the order confirmation establishes all essential

aspects of the sale, including the product specifications, price and

quantity. Petitioners note that NSC produces merchandise to order.

Petitioners assert that the Department confirmed at verification that

in instances where the parties decide to modify the terms following the

initial order confirmation, NSC either receives a revised order and

issues a revised order confirmation, or it internally modifies the

previously issued order confirmation. Petitioners argue that where

these minor variations existed between the quantity ordered and the

quantity shipped, such variances were immaterial and clearly

attributable to NSC's practice of manufacturing the subject merchandise

to order, as opposed to simply selling from inventory. Petitioners note

that the sales traces conducted at verification showed that NSC made

several shipments in order to supply the customer with the quantity

specified in the order confirmation, and the sales traces demonstrated

that the total quantity shipped in the multiple shipments conformed to

the total quantity in the order confirmation. Petitioners conclude that

these sales traces, in which several shipments satisfied the terms of a

single order, constitute clear and concrete proof that it was the order

confirmation date, and not the shipment date (or the invoice date),

that best reflects when the ``material terms of sales usually are

established.'' Petitioners contend that given NSC's practice of

multiple shipping dates where the terms were consistent with the order

confirmation, the use of the shipment date as the date of sale would be

arbitrary and distort the calculations. Petitioners argue that it would

result in two shipments, both of which were intended to satisfy the

terms of a single order made on one day, having different dates of

sale. Petitioners assert that the Department confirmed at verification

that the terms of the revised order confirmation then supersede the

terms initially established. Petitioners contend that it is the order

confirmation, as originally agreed to or as modified--and not the

invoice or the shipment--that establishes the material terms of the

sale.

Petitioners argue that NSC's claim that the invoice/shipping date

is the proper date of sales is based entirely on claims that the use of

the order confirmation date is improper. Petitioners assert that NSC's

claims that the order confirmation is not the correct date of sale are

meritless. Petitioners claim that respondent's claim that the material

terms of sales ``can--and routinely do--change up to and even after the

date of shipment'' is not an accurate characterization of the record.

Petitioners allege 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, petitioners assert that NSC issues a new or

revised order confirmation. Petitioners claim that the ``routine

changes'' to the order confirmation referenced by respondents involve

slight variances between the quantity ordered and the quantity shipped

and are distinctly not material changes as evidenced by these sales

traces. Petitioners contend that the Department has repeatedly refused

to base date of sale determinations on these types of insignificant

changes, citing Circular Welded Non-Alloy Steel Pipe from Korea: Final

Results of the Antidumping Administrative Review, 63 FR 32833, 32836

(June 16, 1998).

Furthermore, petitioners assert that respondent's claim of a lag

time between the date of the order confirmation to the date of shipment

does not mandate that the date of shipment be used instead of the order

confirmation date as the date of sale. Petitioners argue that the

Department's requirement in the questionnaire that the invoice date not

be used for the date of sale if there is an ``exceptionally long period

of time between the date of the invoice and the date of the shipment''

refers to the discussion in the Preamble to the Department's

regulations relating to manipulation of the invoice date and pertains

solely to the length of time between the invoice date and shipping

date. See Final Rule, at 27349. Petitioners argue that since the issue

raised by NSC concerns the lag time between the order confirmation and

the date of shipment, the requirement in the questionnaire and

discussion in the Preamble are not relevant.

Petitioners charge that respondent mischaracterizes the record by

its statement that the Department verified that the material terms of

sales were not set until shipment, and the quantity shipped ``varied

significantly'' from the quantity ordered. Petitioners note that the

Department did not reach these findings. Further, petitioners assert

that respondent's argument that it was untimely for the Department to

reject NSC's reported date of sale for the first time in the

preliminary results is misplaced. Petitioners argue that there was

simply no opportunity for the Department, prior to verification, to

examine the order confirmations for specific sales and compare terms in

those orders to what was shipped and reported in the response.

Petitioners argue that the Preamble explicitly recognizes that date of

sale issues cannot always be resolved at an early stage in the

proceedings. Final Rule, at 27349-50.

Department Position: As in the preliminary results, we have

continued to use order confirmation date as the date of sale. The

Department normally uses invoice date as the date of sale ``absent

satisfactory evidence that the material terms of sale were finally

established on a different date.'' See Canned Pineapple Fruit from

Thailand: Notice of Final Results and Partial Rescission of Antidumping

Duty Administrative Review, 63 FR 43661, 43668, citing Antidumping

Duties; Countervailing Duties, 62 FR 27296, 27348 (May 19, 1997).

Accordingly, ``[i]f the Department is presented with satisfactory

evidence that the material terms of sale are finally established on [a]

date other than the date of invoice, the Department will use that

alternative date as the date of sale.'' Id. Verification results

indicate that the material terms of sale were established on the date

of order confirmation. Additionally, among the sales traces examined,

we found no material changes to the order confirmation terms. As noted

by petitioners, the sales verification results

[[Page 12958]]

showed that the total quantity shipped in the multiple shipments

conformed to the quantity in the order confirmation. NSC also reported

that if there were revisions in the sales terms, the revised order

would be issued. Thus, the order confirmation date, and not the

shipment date or the invoice date, best reflects when the material

terms of sale usually are established. Accordingly, consistent with our

current practice, we have determined that order confirmation date is

the appropriate date of sale for NSC's sales, as it most accurately

represents the date on which the essential terms of sale are

established.

Comment 5: Petitioners argue that the Department should reject

NSC's claimed adjustments for post-sale rebates where the rebate

amounts were not fixed at the time of sale. Petitioners contend that it

is the Department's long standing practice to require a respondent to

show that the terms of a rebate were fixed at or before the time of the

sale in order to be entitled to a rebate adjustment, citing, e.g.,

Department's Antidumping Questionnaire at I-11; Certain Corrosion-

Resistant Carbon Steel Flat Products from Canada: Final Results of

Antidumping Administrative Review, 63 FR 12725, 12741 (March 16,

1998)(``Canadian Steel''). Petitioners contend that the purpose of this

rule is to protect against manipulation of prices with the intent of

minimizing or masking dumping, citing Antifriction Bearings and Parts

thereof from France: Final Results of Antidumping Administrative

Review, 60 FR 10900, 10930 (Feb. 28, 1995). Petitioners note that NSC

reported rebates where the rebate amount was not fixed until after

shipment. Petitioners argue that although the post-sale revisions to

rebates might be part of NSC's normal business practices, this does not

mitigate against the potential for manipulation. Petitioners argue that

following shipment, the respondent has the ability to analyze the

merchandise that it sold to United States, and then decide to alter the

amount of the rebate based on which sales match to the U.S. shipments.

Petitioners argue that where post-sale adjustments to the rebate are

part of the respondent's normal business practice, the potential for

manipulation is even greater because the very mechanism for

manipulation is already in place.

Petitioners stress that it is not necessary for the Department to

determine whether manipulation did or did not occur. Petitioners argue

that the mere potential for manipulation is sufficient to warrant

rejection of rebates, citing Koening & Bauer, No. 10 96-10-02298, Slip

Op. 98-93 (CIT 1998) at 6 (stating that ``Commerce's decision to reject

price amendments that present the potential for price manipulation was

a permissible interpretation of the statute''). Petitioners argue that

the fact that the Department did not find in this case any evidence of

manipulation at verification is not determinative. Petitioners contend

that if a respondent were permitted to adjust rebates after the sale,

it would be virtually impossible to verify that manipulation would not

occur, particularly if rebates are also granted on non-subject

merchandise sold to the same customer.

Petitioners argue that the potential for manipulation in this case

was great. Petitioners assert that NSC was in a position to eliminate

or reduce rebates on non-subject merchandise sold to the same home

market customers in return for higher rebates on home market subject

merchandise. Petitioners stress that in this case, the Department's

normal safeguards with respect to rebates-i.e., that the terms be

``fixed at or before the time of sale''-be strictly enforced.

Petitioners rebut NSC's claim that if the Department decides to

reject NSC's post sale price adjustments, it should only reject rebates

where there is a difference between the amount of the ``initial

rebate'' and the rebate that was ultimately paid. Petitioners argue

that all sales where the rebate amount was not firmly established by

the date of sale were subject to manipulation, whether the rebate

amount changed or not. Petitioners find it unacceptable to substitute

the amount of the initial rebate for the amount reported by NSC as the

actual rebate paid. Petitioners point out that respondent acknowledged

that such amounts did not represent the complete agreement between NSC

and its customer. Petitioners conclude that the Department should

disallow all home market rebates where the terms were not fixed at or

before the time of the sale.

Respondent argues that the Department's decision to accept NSC's

rebates, and the post-sale adjustments to those rebates, was consistent

with Department practice where, as here, the Department has verified

that the rebates were made in the normal course of business on a

transaction-specific basis. Respondent argues that the Department's

finding in the preliminary results that NSC had not engaged in the

manipulation of dumping margins through the use of rebates is

consistent with the Department's ``prior knowledge'' requirement.

Respondent contends that in determining whether rebates have been

improperly used by the respondent to manipulate the dumping margins,

the Department considers whether ``the buyer {is} aware of the

conditions to be fulfilled and the approximate amount of the rebates at

the time of sale.'' Canadian Steel, 61 FR 13815, 13823 (March 28,

1996). Respondent argues that the record demonstrates, and the

Department confirmed at verification, that NSC's customer had knowledge

of the conditions of its ``rebate program'' at or before the time of

sale, thus fulfilling the requirement that the buyer has ``prior

knowledge'' of the conditions and the approximate amount of the

rebates. Respondent asserts that in cases where the rebate agreement

for the period was in the process of its negotiation at the time of

sale, NSC granted the end user the rebate amount in the rebate

agreement for the prior period with the understanding that this rebate

would be adjusted to reflect the final outcome of the negotiations.

Respondent argues that its customers were aware that the rebate amount

based on the existing agreement would be adjusted depending on the

final outcome of the final rebate negotiations for the new agreement.

Department's Position: We allowed the rebates in accordance with 19

CFR 351.401(c) and (g). The regulations collectively refer to rebates

under the umbrella term ``price adjustment.'' See definition of ``Price

Adjustment'' in 19 CFR 351.102(b). A ``price adjustment'' as defined by

the regulations represents ``change[s] in the price charged for subject

merchandise or the foreign like product . . . that are reflected in the

purchaser's net outlay.'' Id. Where a change in the price meets this

definition of a ``price adjustment,'' and is ``reasonably

attributable'' to the subject merchandise or foreign like product,

Sec. 351.401(c) the Department's regulations state that the Department

will use a price net of the price adjustment in calculating export

price, constructed export price and normal value.

The Department allows post-sale price adjustments if they reflect

the respondent's normal business practice and were made on a

transaction-specific (or properly allocated) basis. See Antifriction

Bearings from France, et al. Final Results of Antidumping

Administrative Review, 60 FR 10900, 10930 (February 28, 1995); and

Canadian Steel, 61 FR at 13815. The price adjustments in this review

reflect NSC's normal business practice. Moreover, we verified the price

adjustments given in the course of the sales traces, and traced them to

the sales journal and supporting documentation. Information on the

record of this review

[[Page 12959]]

indicates that these adjustments were made and reported on a

transaction-specific basis. Therefore, we allowed the rebates since

they meet the requirements for ``price adjustments'' under 19 CFR

351.401 (c) and (g).

Comment 6: Petitioners note the following errors in the model match

program: (1) incorrect modification of values in the DIFFCODE field;

(2) incorrect characteristic value in the ROLLU/H field; (3) incomplete

assignment of values for the additional product characteristics

reported by respondent for CWEIGHTU/H; (4) improper inclusion of home

market credit expense in the calculation of net cost of production; (5)

incorrect concatenation of the home market control numbers for certain

resales; (6) multiple matches to U.S. product characteristics based

upon the home sales source; and (7) failure to retain invoice field.

Petitioners noted the following errors in the margin program: (1)

incorrect recalculation of credit expense; (2) incorrect conversion of

U.S. packing expense; (3) failure to account for indirect expenses in

offset for home market commission.

Respondent notes the following clerical errors: (1) incorrect

inclusion of the inventory carrying cost date in the MOVECOP field; (2)

incorrect linking of cost records to sales records for certain control

numbers; and (3) incorrect assignment of certain variable costs to home

market control numbers selected as matches. Respondent also notes a

further correction to petitioners' proposed correction to the

recalculation of credit expenses.

Department's Position: We agree with both petitioners and

respondent and have modified the calculations for the final results of

review accordingly.

Final Results of Review

As a result of our review, we determine that the following

weighted-average dumping margin exists for the period June 30, 1996,

through July 1, 1997:

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

Margin

Manufacturer/exporter (percent)

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

Nippon Steel Corporation................................ 12.51

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

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

assess, antidumping duties on all appropriate entries. We will

calculate importer-specific duty assessment rates on a unit value per

metric ton basis. To calculate the per metric ton unit value for

assessment, we summed the dumping margins on U.S. sales, and then

divided this sum by the total metric tons of all U.S. sales examined.

The Department will issue appraisement instructions directly to the

Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of these final results for all shipments of the

subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the publication date provided by section

751(a)(1) of the Act: (1) the cash deposit rate for the reviewed

company will be the rate listed above; (2) if the exporter is not a

firm covered in this review, a prior review, or the original less than

fair value (LTFV) investigation, but the manufacturer is, the cash

deposit rate will be the rate established for the most recent period

for the manufacturer of the merchandise; and (3) the cash deposit rate

for all other manufacturers or exporters will continue to be the ``all

others'' rate of 36.41 percent, the all others rate established in the

LTFV investigation. These deposit requirements, when imposed, shall

remain in effect until publication of the final results of the next

administrative review.

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f)(2) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of the antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective orders (APOs) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d)(1), that continues to govern

business proprietary information in this segment of the proceeding.

Timely written notification of the return/destruction of APO materials

or conversion to judicial protective order is hereby requested. Failure

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

sanctionable violation.

This determination is issued and published in accordance with

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

Dated: March 8, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-6290 Filed 3-15-99; 8:45 am]

BILLING CODE 3510-DS-P