Notice of Final Determination of Sales at Less Than Fair Value; Stainless Steel Plate in Coils From South Africa

DEPARTMENT OF COMMERCE

International Trade Administration

[A-791-805]

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

Stainless Steel Plate in Coils From South Africa

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: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John

Kugelman at (202) 482-0649, 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's

regulations are to the regulations codified at 19 CFR part 351 (April

1, 1998).

Final Determination

We determine that stainless steel plate in coil (stainless coil)

from South Africa is being, or is 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 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 November 4, 1998. See Notice of Preliminary

Determination of Sales at Less Than Fair Value; Stainless Steel Plate

in Coils From South Africa, 63 FR 59540 (Preliminary Determination).

Since the publication of the Preliminary Determination the following

events have occurred:

On November 5, 1998, the sole respondent in this investigation,

Columbus Stainless (Columbus), requested postponement of the final

determination, agreeing to the extension of preliminary measures, as

required under section 735(a)(2) of the Tariff Act. Accordingly, we

postponed the final

[[Page 15460]]

determination in this investigation on December 11, 1998. See

Postponement of Final Antidumping Determinations: Stainless Steel Plate

in Coils From Canada, Italy, Republic of Korea, South Africa and

Taiwan, 63 FR 70101 (December 18, 1998).

The Department verified Columbus's section D (Cost of Production)

questionnaire response between November 9 and 13, 1998 at Columbus's

headquarters in Middelburg, South Africa; we then verified sections A

(General Information), B (Home Market Sales) and C (U.S. Sales) of

Columbus's responses on November 16 through 20, 1998. See Memorandum to

Neal Halper, Acting Director, Office of Accounting; ``Verification

Report on the Cost of Production and Constructed Value Data Submitted

by Columbus Stainless,'' January 15, 1999 (Cost Verification Report)

and Memorandum For the File; ``Verification of Columbus Stainless,''

January 14, 1999 (Sales 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.

On December 4, 1998, Armco, Inc., J&L Specialty Steel, Inc.,

Lukens, Inc., North American Stainless, the United Steelworkers of

America, AFL-CIO/CLC, Butler Armco Independent Union and Zanesville

Armco Independent Organization, Inc. (petitioners) requested a public

hearing in this case. However, on December 18, 1998, petitioners

withdrew their request for a hearing and, as Columbus had not requested

a hearing, none was held. On January 25, 1999, petitioners and Columbus

filed case briefs in this matter; we received rebuttal briefs from

petitioners and Columbus on February 1, 1999.

Scope of the Investigation

For purposes of this investigation, the product covered is certain

stainless steel plate 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 plate

products are flat-rolled products, 254 mm or over in width and 4.75 mm

or more in thickness, in coils, and annealed or otherwise heat treated

and pickled or otherwise descaled. The subject plate may also be

further processed (e.g., cold-rolled, polished, etc.) provided that it

maintains the specified dimensions of plate following such processing.

Excluded from the scope of this investigation are the following: (1)

Plate not in coils, (2) plate that is not annealed or otherwise heat

treated and pickled or otherwise descaled, (3) sheet and strip, and (4)

flat bars.

The merchandise subject to this investigation is currently

classifiable in the Harmonized Tariff Schedule of the United States

(HTS) at subheadings: 7219.11.00.30, 7219.11.00.60, 7219.12.00.05,

7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 7219.12.00.55,

7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 7219.31.00.10,

7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,

7219.90.00.80, 7220.11.00.00, 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, 7220.90.00.10,

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

written description of the merchandise under investigation is

dispositive.

Period of Investigation

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

December 31, 1997.

Fair Value Comparisons

To determine whether sales of stainless coil from South Africa to

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

price (EP) to the normal value (NV), as described in the ``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 for comparison to weighted-average NVs

or constructed values (CVs).

Transactions Investigated

For its home market and U.S. sales Columbus reported the date of

invoice as the date of sale, in keeping with the Department's stated

preference for using the invoice date as the date of sale. As explained

in response to Comment 2, below, for this final determination we have

continued to rely upon Columbus's invoice dates in the home and U.S.

markets as the date of sale. However, should this investigation result

in an antidumping duty order, we intend to scrutinize further this

issue in any subsequent segment of this proceeding involving Columbus.

Product Comparisons

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

all products produced by the respondent covered by the description in

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

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

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

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

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

like product on the basis of the characteristics and reporting

instructions listed in Appendix V of the Department's May 27, 1998

antidumping questionnaire.

Level of Trade

In our preliminary determination we agreed with Columbus that one

level of trade (LOT) existed for Columbus in the home market.

Furthermore, we agreed with Columbus that its EP sales in the United

States were at a single LOT, and that sales in both markets were at the

same LOT. No party to this investigation commented on this issue and

the Department has no new evidence to alter its conclusion. Therefore,

as in the preliminary determination, we find that sales within or

between the markets were made at the same LOT and, therefore, a LOT

adjustment pursuant to section 773(a)(7)(A) of the Tariff Act is not

appropriate.

Export Price

We calculated the price of United States sales based on EP, in

accordance with section 772(a) of the Tariff Act, because the subject

merchandise was sold to the first unaffiliated purchasers in the United

States prior to the date of importation and because record evidence did

not support basing price on constructed export price (CEP). We

calculated EP using the same methodology employed in the preliminary

determination with the following exceptions:

Based on information discovered at verification we made deductions

from EP for unreported credit memos issued on certain U.S. sales of

subject merchandise; we have disregarded any such credit memos issued

for home market sales. See Comment 3, below.

We also recalculated Columbus's inventory carrying costs (ICC)

based upon revisions to Columbus's reported cost of manufacture (COM)

arising from verification. See Memorandum to Neal Halper, ``Cost of

production (`COP') and constructed value (`CV') Calculation Memorandum

for Final Determination,'' March 19, 1999 (Cost Calculation Memorandum

(Final)).

Normal Value

Home Market Viability

As discussed in the Preliminary Determination, in order to

determine

[[Page 15461]]

whether the home market was viable for purposes of 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)(C) of the

Tariff Act. As Columbus'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 based NV on home market sales in

the usual commercial quantities and in the ordinary course of trade.

Cost of Production Analysis

In response to a timely allegation by petitioners we conducted an

investigation to determine whether Columbus made sales of the foreign

like product during the POI at prices below its COP. In accordance with

section 773(b)(3) of the Tariff Act we calculated the weighted-average

COP based on the sum of Columbus's cost of materials, fabrication,

general expenses, and packing costs. We relied on Columbus's submitted

COP except in the following specific instances where the submitted

costs were not appropriately quantified or valued:

We added depreciation expense to the reported COP and CV based on

the ratio of depreciation expense to Columbus's variable overhead

expenses. Likewise, we added certain additional depreciation expense to

the reported COP and CV based on the ratio of this depreciation expense

to variable overhead expenses. See Comments 13 and 14, below.

We increased the cost of Columbus's affiliated-party purchases of

the raw material input ferrochrome. See Comment 15.

We increased Columbus's COP by adding the variances Columbus

excluded from its reported costs. See Comment 16.

We reallocated variable overhead expenses based on differences in

the cost of producing the subject merchandise arising from the

differences in physical characteristics of specific plate products. See

Comment 17.

We calculated a single COP for each product sold (i.e., each

CONNUM), weighted by quantity produced during the POI, rather than

quantities sold, as originally reported by Columbus. See Comment 18.

Finally, we excluded certain selling expenses from the submitted

general and administrative (G&A) expense ratio.

We compared the weighted-average COP for Columbus to home market

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

773(b) of the Tariff Act. 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 within an extended period

of time and (ii) at prices which permitted the recovery of all costs

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

compared COP to home market prices, less any applicable movement

charges, early payment and other discounts, and direct and indirect

selling expenses.

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

than twenty percent of a respondent's sales of a given product were at

prices less than the COP, we do not disregard any below-cost sales of

that product because we determine that the below-cost sales were not

made in ``substantial quantities.'' Where twenty percent or more of a

respondent's sales of a given product during the POI were at prices

less than the COP, we determine such sales to have been made in

substantial quantities, in accordance with section 773(b)(2)(C)(i) of

the Tariff Act. In addition, we determine that such below-cost sales

were made within an extended period of time, in accordance with section

773(b)(2)(B) of the Tariff Act. In such cases, pursuant to section

773(b)(2)(D) of the Tariff Act, we also determine that such sales were

not made at prices which would permit recovery of all costs within a

reasonable period of time. Therefore, we disregard the below-cost

sales. Where all sales of a specific product were at prices below the

COP we disregard all sales of that product.

Our cost test for Columbus revealed that for certain products less

than twenty percent of Columbus's home market sales were at prices

below Columbus's COP. We retained all sales of those products in our

analysis. For other products more than twenty percent of Columbus's

sales were at prices below COP. In such cases we disregarded the below-

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

Memorandum For the File, ``Antidumping Duty Investigation on Stainless

Steel Plate in Coils from the Republic of South Africa--Final

Determination Analysis for Columbus Stainless,'' March 19, 1999 (Final

Determination Analysis Memorandum).

Price-to-Price Comparisons

For those products with home market prices at or above the COP, we

based NV on Columbus's sales to unaffiliated home market customers. We

made adjustments, where appropriate, for physical differences in the

merchandise in accordance with section 773(a)(6)(C)(ii) of the Tariff

Act. We continued to make circumstance-of-sale (COS) adjustments in

accordance with section 773(a)(6)(c)(iii) of the Tariff Act, with the

following exceptions.

As Columbus had no short-term rand-denominated borrowings, we

recalculated home market credit expenses (and ICC) using publicly-

available interest rates released by the South African Reserve Bank, as

confirmed in the International Monetary Fund's International Financial

Statistics series. See Comment 5.

We have reclassified certain home market advertising expenses as

indirect selling expenses and, with the exception of direct advertising

expenses incurred on sales of 3CR12 steel, are not deducting Columbus's

advertising expenses from NV as a COS adjustment. See Comment 7.

Finally, we removed computer programming language calculating a

``commission offset'' to NV for commissions on U.S. sales based upon

the conclusions outlined in response to Comment 4.

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. We calculated CV based on the costs of materials

and fabrication employed in producing the subject merchandise, SG&A,

and profit. See section 773(e)(1). In accordance with section

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

amounts incurred and realized by the respondent in connection with the

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

of trade for consumption in South Africa. We calculated the cost of

materials, fabrication, and general expenses based upon the methodology

described in the ``Cost of Production Analysis'' section, above. For

selling expenses, we used the weighted-average home market selling

expenses. 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

from NV and adding U.S. direct selling expenses.

[[Page 15462]]

Currency Conversion

We made currency conversions into U.S. dollars based on the

exchange rates in effect on the dates of the U.S. sales, as certified

by the Federal Reserve Bank, in accordance with section 773A(a) of the

Tariff Act.

Analysis of Interested Party Comments

Issues Relating to Sales

Comment 1: Use of Facts Available. Petitioners press for the use of

partial adverse facts available in calculating Columbus's antidumping

margin for this final determination, insisting that Columbus ``failed

to provide material information requested by the Department,'' and that

much of the information Columbus did provide could not be verified.

According to petitioners, these failures taint a broad range of both

the sales and cost data submitted by Columbus during the course of this

investigation. As examples petitioners charge Columbus with, inter

alia:

Failing to report properly home market and U.S. post-

sale price adjustments;

Failing to provide a verifiable short-term interest

rate for rand-denominated loans for calculating home market credit

and ICC and, further, failing to inform the Department of the nature

of its actual borrowing during the POI;

Improperly omitting certain expenses in its reported

COP and CV data 1;

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\1\ The precise nature of these expenses necessitates reference

to business proprietary information. For a full discussion of these

issues, see the Cost Verification Report.

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For one raw material input, ferrochrome, reporting

prices paid to an affiliated party which do not reflect arm's-length

prices, and refusing to provide either the affiliate's COP for

ferrochrome or its prices to unaffiliated customers for comparison

purposes;

Failing to account for the different work stations and

processing times required in the production of each specific

stainless steel plate product;

Calculating weighted-average COP and CV data on the

basis of sales quantity rather than production quantity, as required

by the Department; and

Failing to reconcile reported COP and CV to Columbus's

audited financial statements.

See Petitioners' Case Brief, January 25, 1999, at 2 and 3.

Considered together, petitioners aver, these deficiencies

necessitate the use of adverse facts available for all missing or

unverifiable data. Further militating for the use of facts available,

petitioners continue, is that each of these deficiencies was only

disclosed during the Department's sales and cost verifications, in

spite of numerous opportunities afforded Columbus by the Department to

submit correct data in the form required. Id. at 4.

According to petitioners, ``Columbus's behavior in this

investigation cannot be characterized as a good faith effort to comply

with the Department's investigation.'' Petitioners' Case Brief at 5.

For example, petitioners contend that despite the Department's initial

and supplemental requests for information on post-sale price

adjustments in the home and U.S. markets, Columbus submitted no such

data; however, petitioners note, at verification Columbus ``was able to

provide . . . `a complete listing of all credit and debit notes issued

during calendar 1997.' '' Id. at 5, quoting the Department's Sales

Verification Report at 35. Similarly, petitioners insist, the

Department repeatedly requested that Columbus submit its average COP

and CV data weighted on the basis of production quantities, as required

by the Department. Instead, petitioners charge, Columbus used sales

quantity as the weighting factor, withholding the production quantity

until Columbus provided it in the course of the Department's cost

verification (i.e., over a month after the Department's preliminary

determination). Petitioners charge Columbus with repeatedly failing to

supply requested information in a timely manner, only to produce the

information ``with no apparent difficulty'' once the Department

uncovered the omissions during the sales and cost verifications. Id. at

6.

In light of what petitioners characterize as incomplete, untimely,

and unverifiable sales and cost information, petitioners urge the

Department to find that Columbus ``failed to satisfy the requirements

of section 782(e) of the (Tariff) Act.'' 2 Id. Following the

statutory language, petitioners detail these alleged failings: first,

according to petitioners, Columbus untimely submitted its COM. Second,

petitioners charge Columbus with failing to provide cost data which

could be reconciled with Columbus's audited financial statements.

Third, petitioners allege, Columbus's responses are so incomplete they

cannot reliably serve as a basis for reaching the final determination

in this investigation. Fourth, petitioners suggest that the sales and

cost verifications proved that Columbus failed to act to the best of

its ability in responding to the Department's requests for information.

Finally, petitioners aver, the Department cannot use the data as

submitted by Columbus without undue difficulty, arguing, for example,

that it would be ``unduly burdensome'' for the Department to search out

appropriate arm's-length short-term interest rates as surrogates for

the rates reported by Columbus. Petitioners' Case Brief at 6 and 7.

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\2\ Briefly, section 782(e) of the Tariff Act 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, and the Department can use the information without

undue difficulties.

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According to petitioners, the numerous material discrepancies in

Columbus's questionnaire responses require the Department to make the

adverse inferences called for in section 776(b) of the Tariff Act.

Petitioners view these deficiencies, affecting such ``core'' issues as

the cost test, calculation of CV, differences-in-merchandise (difmer)

adjustments, and other sales adjustments, as clear demonstration that

Columbus failed to act to the best of its ability by cooperating with

the Department's requests for information. Citing the Statement of

Administrative Action (SAA) accompanying the URAA, petitioners note

that the Department ``may employ adverse inferences about missing

information to ensure that a party does not obtain a more favorable

result by failing to cooperate than if it had cooperated fully.''

Petitioners' Case Brief at 8, quoting the SAA, as reprinted in H.R.

Doc. No. 103-316 (1994). Therefore, petitioners conclude, the

Department must apply adverse facts available ``to situations where

Columbus was unable to provide any evidence in support of its

response.'' Id.

Columbus objects to these characterizations of its behavior in this

proceeding, accusing petitioners of ``occasional lapses of reason.''

Columbus's Rebuttal Brief at 1. Petitioners' sole end, Columbus

maintains, is to persuade the Department to disregard verified

information and to ``punish'' Columbus through the use of

``unreasonable adverse inferences.'' Columbus rejects petitioners'

efforts to ``paint Columbus in the blackest of colors, making wild

claims of `non-cooperation' that have absolutely no basis in fact.''

This proceeding, Columbus suggests, is an investigation, not ``a math

test, for which the student is taken to task for every mistake.'' Id.

Columbus denies each of petitioners' contentions that it acted in

bad faith, submitted untimely or incomplete information, or failed to

cooperate by acting to the best of its ability in this proceeding.

Petitioners' charges, Columbus maintains, ``are either

[[Page 15463]]

demonstrably false or are so distorted as to be unreconcilable with the

facts.'' Columbus's Rebuttal Brief at 2.

Each claim of verification ``failures'' posited by petitioners,

Columbus insists, is either untrue or represents an ``inadvertent

omission.'' Id. at 3. However unfortunate, Columbus submits, Columbus

corrected these omissions immediately upon discovery. In Columbus's

view there is no justification for disregarding Columbus's submitted

and verified information in favor of facts available. In fact, Columbus

maintains, petitioners attempt to use Columbus's responsiveness in

identifying and correcting problems at verification as evidence that

Columbus was uncooperative. Such a view, Columbus argues, ``perversely

twists'' Columbus's cooperation, especially when considering that

Columbus was undergoing a simultaneous countervailing duty

investigation before the Department and a separate antidumping

proceeding brought by the European Union. Id. at 4.

Columbus maintains that under the terms of sections 776 and 782 of

the Tariff Act the Department must clear several statutory hurdles

prior to resorting to facts available. Section 776(a), Columbus notes,

limits the use of facts available to those situations where (i)

necessary information is not on the record, (ii) an interested party

withheld or refused to provide requested information, (iii) an

interested party significantly impeded the proceeding, or (iv) the

submitted information cannot be verified. Further, section 776(b)

allows the use of adverse inferences only where ``an interested party

has failed to cooperate by not acting to the best of its ability to

comply with a request for information.'' Columbus's Rebuttal Brief at 5

and 6. Finally, Columbus argues, even in cases where a respondent's

submitted information fails to meet all of the Department's

requirements section 782(e) of the Tariff Act provides that the

Department will ``not decline'' to use that information if:

(1) The information is submitted by the deadline established for

its submission,

(2) The information can be verified,

(3) The information is not so incomplete that it cannot serve as

a reliable basis for reaching the applicable determination,

(4) The interested party has demonstrated that it acted to the

best of its ability in providing the information and meeting the

requirements established by the administering authority or the

Commission with respect to the information, and,

(5) The information can be used without undue difficulties.

Columbus's Rebuttal Brief at 6, quoting section 782(e) of the

Tariff Act.

The use of adverse facts available in the instant case, Columbus

avers, would meet none of these statutory requirements. According to

Columbus, the record demonstrates that all necessary information was on

the record, that Columbus responded in a timely manner by providing

requested information, that Columbus did not impede the investigation,

and that the Department was able to verify the submitted information.

Any use of facts available, let alone adverse facts available, Columbus

argues, would be ``illegal.'' Id.

Columbus contends that the ``punitive'' use of facts available has

been rejected by the courts. Id. at 7, citing Magnesium Corporation of

America v. United States, 938 F. Supp. 835, 903 (CIT 1996), and Taiwan

International Standard Electronics, Ltd. v. United States, 899 F.2d

1185, 1190 (Fed. Cir. 1990). Further, Columbus maintains, the use of

adverse inferences is especially unwarranted here, as Columbus ``never

refused to cooperate.'' Id. (original emphasis). The use of adverse

facts available in this case, Columbus continues, would also be

contrary to Departmental practice in cases where a cooperative

respondent nevertheless provided a deficient response. Columbus's

Rebuttal Brief at 9, citing Final Determination of Sales at Less Than

Fair Value: Certain Pasta From Italy, 61 FR 30326, 30329 (June 14,

1996). Columbus also cites Circular Welded Non-Alloy Steel Pipe From

South Africa, (61 FR 24271, 24272, May 14, 1996), where the Department

found a respondent's questionnaire response ``unusable for purposes of

margin calculations,'' yet did not draw adverse inferences in assigning

facts available. Id.

Columbus concludes by asserting that ``there is no justification or

support whatsoever for the use of `facts available' against Columbus,''

and urges the Department to incorporate Columbus's verified data into

this final determination. Columbus's Rebuttal Brief at 11.

Department's Position: While the Department uncovered several

deficiencies in Columbus's sales and cost data during the two

verifications conducted at Middelburg, we believe petitioners'

characterization of Columbus's cooperation throughout this proceeding

is overdrawn. We agree with petitioners that Columbus, as described in

the comments that follow, committed a number of errors in compiling its

responses and in certain cases failed to follow the instructions

provided in the Department's questionnaires. We have addressed each of

these alleged shortcomings below and have, where appropriate, resorted

to facts otherwise available, including adverse facts available, when

faced with irreparable shortcomings in Columbus's responses. Overall,

however, we find that Columbus attempted to cooperate in this

proceeding and that the deficiencies in its responses, considered

either singly or collectively, do not merit the application of adverse

facts available in every instance.

Petitioners appear to portray Columbus's alacrity at verification

in identifying and correcting problems at verification as evincing bad

faith as, in petitioners' telling, Columbus had the correct information

in its possession all along yet withheld it from the Department. We

agree that Columbus clearly failed to respond completely to each item

in the Department's questionnaire (by not reporting credit memos, for

example) and we have treated these shortcomings appropriately. However,

Columbus, a first-time respondent to our questionnaires, attempted to

comply with our requests for information. The record indicates that for

the most part the errors and omissions in Columbus's responses were

inadvertent in nature. In certain instances Columbus readily conceded

errors in its response, such as its failure to include depreciation

costs in its COP and CV data.

For the purpose of this final determination, therefore, we have

continued to rely upon Columbus's submitted sales and cost data,

adjusted appropriately for any errors or omissions on Columbus's part.

Comment 2: Date of Sale. Both petitioners and Columbus offer

arguments concerning the proper date of sale for this investigation. In

the Preliminary Determination the Department relied upon the invoice

date as the date of sale, in keeping with the Department's regulatory

preference for using the invoice date as the date of sale 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 argue that in this case all material terms of sale are

set at the time Columbus issues its order acceptance, a document

confirming the quantity, price, grade, dimensions, and payment and sale

terms of each order, to its customer. Petitioners further note that

nothing in the regulations requires the Department to accept the

invoice date as the date of sale in all cases. Citing

[[Page 15464]]

Certain Welded Carbon Steel Pipes and Tubes From Thailand, 63 FR 55578

(October 16, 1998) (Carbon Steel Pipes From Thailand), petitioners

argue that the Department accepts the invoice date as date of sale

``unless the record evidence demonstrates that the material terms of

sale, i.e., price and quantity, are established on a different date.''

Petitioners' Case Brief at 10, quoting Carbon Steel Pipes From Thailand

at 63 FR 55587 and 55588. Even more on point, petitioners suggest, is

the Department's ruling in Circular Welded Non-Alloy Steel Pipe From

the Republic of Korea, 63 FR 32833 (June 16, 1998) (Korean Non-Alloy

Steel Pipe) which cites the Department's discretion to ``abandon the

use of invoice date'' if doing so prevents ``inappropriate comparisons

via the strict use of invoice date as the date of sale.'' Id., quoting

Korean Non-Alloy Steel Pipe at 63 FR 32835.

According to petitioners, the situation with respect to Columbus

closely mirrors that found by the Department in Korean Non-Alloy Steel

Pipe. Referring to the Department's findings during the sales

verification of Columbus, petitioners note that upon receipt of an

order Columbus conducts certain internal technical and credit checks

and then issues an order acceptance reflecting the customer's purchase

order number, customer information, payment and sales terms, quantities

and prices. This demonstrates clearly, petitioners maintain, that the

essential terms of sale are established upon issuance of the order

acceptance. Such a conclusion, petitioners continue, is supported by

Columbus's technical manager, who opined during a plant tour conducted

as part of verification that changes to a production order are

extremely rare once the order acceptance has been issued.

Columbus in its Case Brief argues, contra petitioners, that the

invoice date represents the only appropriate date of sale for purposes

of the final determination because ``there can be changes to the price,

volumes, specifications, or delivery terms (including partial non-

delivery) up until that date.'' Columbus's Case Brief at 17. Further,

Columbus avers, use of the invoice date is consistent both with

Columbus's internal records kept in its ordinary course of business,

and also with generally-accepted accounting principles (GAAP) in South

Africa. Columbus suggests that, contrary to petitioners' assertions,

the Department's sales verification found specific examples during the

POI of changes to the material terms of sale occurring at points

between the order acceptance date and the invoice date. Columbus's Case

Brief at 18, citing the Sales Verification Report at 7 through 9.

``This discussion,'' Columbus insists, ``should settle the matter.''

Id.

With respect to the comments of Columbus's Technical Manager,

Columbus dismisses the importance of these statements. According to

Columbus the key to this passage in the Sales Verification Report is

the qualifying phrase ``to (his) knowledge . . .'' Columbus insists

that ``many changes to the order . . . have nothing to do with the

technical specifications of the product ordered. The technical manager

would have no way of knowing about--and would not care about--such

changes.'' Columbus's Case Brief at 18. Furthermore, Columbus avers, a

customer's change in technical specifications could be satisfied by

drawing merchandise from another order or from stock on hand; clearly,

such changes in the material terms of sale would have no effect

whatever upon Columbus's production schedule. Id. Columbus suggests

that the resolution to this controversy over date of sale lies in

Columbus's sales documentation and the Department's discussions with

sales rather than production personnel. Accordingly, Columbus

concludes, the Department should continue to use the date of invoice as

the date of sale.

Department's Position: Petitioners have presented cogent arguments

in this case in support of using the order confirmation date as the

date of sale. They have pointed out 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 a specific stainless slab for rolling to a given

stainless coil, little room remains for altering the essential terms of

sale.

Columbus, for its part, has presented arguments that the material

terms of sale are subject to change at any time between the order

acceptance and invoice dates and has indicated that not all such

changes would be reflected in the production department's order

acceptance (for example, in cases where Columbus satisfied a changed

order by either drawing merchandise from a different order already in

production or from inventory, or in any cases involving price changes).

Further, Columbus has noted that changes in prices ``may be influenced

by a number of factors, such as a change in market circumstances, a

delay in production and therefore delivery, a non-conformance to

quality, or a change in the circumstances of the buyer.'' Columbus's

November 2, 1998 supplemental response at 3. Indeed, we observed

evidence of each of these types of changes during the Department's

sales verification. When pressed at verification Columbus was able to

produce specific examples involving both subject stainless coil and

non-subject cut-to-length stainless steel where the material terms of

sale did, in fact, change after the order acceptance date and before

final shipping and invoicing. See, e.g., the Sales Verification Report

at 7 through 9 and Appendix III.

The Department's regulations establish a rebuttable presumption

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) (Korean Cold-Rolled Flat Products). After reviewing

the evidence of record in this proceeding we have reached several

conclusions. First, we agree with Columbus's assertion, borne out at

verification, that its internal records and financial statements do not

recognize a sale until dispatch and invoicing. For example, in an

exchange with the Department over this issue Columbus noted that no

merchandise leaves the mill (and, hence, no invoice will be issued)

until Columbus has in hand a guarantee of payment, be it an irrevocable

letter of credit or the extension of credit backed by an insurance

policy against non-payment. Columbus stressed that ``[i]t is that

clear--no payment, no sale.'' Columbus's November 2, 1998 supplemental

response at 4. Second, we find that Columbus has presented evidence

that the material terms of sale are, in fact, subject to change after

the order confirmation date. As noted, Columbus presented examples from

the POI where either quantity or price or both changed after the order

acceptance had been issued, but prior to the invoice date, including

one reported U.S. transaction selected at random by the Department for

a ``surprise'' sales trace. Thus, as we concluded in Korean Cold-Rolled

Flat Products, ``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

[[Page 15465]]

not be changed.'' Id. at 13195 (emphasis added).

Petitioners' citation to Carbon Steel Pipes From Thailand is

instructive in this matter. In that case petitioners argued for use of

the respondent's contract date as the date of sale noting that by using

the invoice date ``(1) a different set of sales will be evaluated, (2)

in a country subject to currency devaluation or inflation, the sales

value may be distorted, and (3) incorrect dates lead to incorrect

matching, all of which ultimately distorts the antidumping duty

margin.'' Id. at 55587. The Department disagreed with petitioners in

that case concluding that ``[p]etitioners'' claim that the contract

date fixes prices and quantities is not supported by record evidence.''

Id. at 55588. As to the specific objections raised in Carbon Steel

Pipes From Thailand to relying upon the invoice date as opposed to the

order confirmation date, Columbus has adduced evidence that shifting to

one or the other date of sale will not effect a substantive change in

the Department's analysis. While a change to order acceptance date

would mean that some transactions currently listed as taking place

early in the POI would be omitted from our analysis, whereas other

transactions presently considered as falling after the POI would be

included, the resultant overall volumes under either scenario are

comparable. See Columbus's November 2, 1998 supplemental response at 6

and Appendix 1. Furthermore, the relative lag between order acceptance

and invoice dates on home market and U.S. sales do not differ to a

significant degree.3 Thus, the universe of sales subject to

our analysis would not change substantially were we to opt for the

order date as the date of sale. As for the second point noted in Carbon

Steel Pipes From Thailand, the South African rand was stable against

the U.S. dollar throughout our POI, as were interest rates in South

Africa. Thus, concerns about devaluation and inflation are not at

issue. As for the third point concerning model matching, the evidence

of record indicates that Columbus sold the same limited number of

grades of stainless steel in both the home and U.S. markets, thus

attenuating fears that our model matches have been skewed by reliance

on invoice date. As we concluded in Stainless Steel Wire Rod From

Italy, ``(g)iven the circumstances and the fact that we compared POI-

average NVs to POI-average EPs, we find that no material distortion

exists in our price-to-price comparisons.'' Notice of Final

Determination of Sales At Less Than Fair Value: Stainless Steel Wire

Rod From Italy, 63 FR 40422, 40425 (July 29, 1998).4

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

\3\ The exact numbers of days for the respective markets is

business proprietary information. See Columbus's November 2, 1998

submission.

\4\ It must be noted that in making this argument the Department

agreed with petitioners that the customer's purchase order date,

rather than respondent CAS's invoice date, represented the

appropriate date of sale; that said, the point is no less relevant

to the instant proceeding.

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

The record does not indicate that changes in the essential terms of

sale between order acceptance and invoice dates occur with high

frequency. However, there is sufficient evidence of record that changes

can and do occur to militate against petitioners' contention that we

must abandon the presumptive date of sale identified in the

Department's regulations in favor of using Columbus's order acceptance

date. Therefore, because Columbus's internal records kept in its normal

course of business do not recognize any sale until the invoice is

issued, and because Columbus has presented evidence that the essential

terms of sale can and do change between issuance of the order

acceptance and subsequent invoicing, we have continued to rely upon

Columbus's reported invoice dates as the dates of sale for this final

determination. In the event this investigation should result in the

publication of an antidumping duty order, however, we intend to re-

examine this issue thoroughly in any subsequent review involving

Columbus.

Comment 3: Post-Sale Price Adjustments. Columbus and petitioners

both comment in their case and rebuttal briefs upon the Department's

findings at verification concerning certain unreported post-sale price

adjustments. During the POI Columbus issued credit notes (i.e., credit

memos) adjusting prices on certain transactions either as a result of

price discrepancies or quality complaints. However, Columbus's

questionnaire responses did not include a claim for home market credit

notes, nor did Columbus report any credit notes for its U.S. sales. At

verification the Department discovered a limited number of these credit

notes relating to Columbus's home market and U.S. sales of stainless

coil.

Columbus insists that the failure to report credit notes on sales

of subject stainless coil stemmed from an inadvertent oversight. In

Columbus's view, these omissions ``were minor, were not to the benefit

of Columbus, did not impede the investigation, and were remedied as

soon as they were discovered.'' Columbus's Case Brief, Executive

Summary at page i. Columbus attributes its failure to include these

credit notes in its sales database to an absence of any direct link in

Columbus's accounting system between the credit notes and the

applicable invoice.

Columbus urges the Department to consider these credit notes in

reaching its final determination in this case. However, Columbus

asserts that the credit notes warrant differing treatment depending

upon the market in which they were issued. Credit notes issued for home

market sales, Columbus insists, should be treated as direct adjustments

to price, as these represent corrections to incorrect price surcharges.

In contrast, Columbus argues that credit notes issued for U.S. sales of

subject coil should be afforded treatment as indirect selling expenses,

as they represent voluntary ``goodwill payments'' arising from quality

complaints. According to Columbus, credit notes on U.S. sales do not

represent price adjustments, as the original price had been agreed upon

and paid. Further, they do not arise from warranty payments since,

Columbus insists, subject plate is not sold under warranty. Columbus's

Case Brief at 2. Therefore, Columbus notes, it is under no legal

obligation to issue these credits. Id. at 3. Citing Dry Cleaning

Equipment From West Germany; Preliminary Results of Antidumping Duty

Administrative Review, 52 FR 2124 (January 20, 1987), Columbus

maintains that it is the Department's practice to treat voluntary

goodwill payments as indirect selling expenses.

Petitioners argue to the contrary that Columbus did, in fact, have

a means of linking all credit notes issued during the POI to the

original sales invoices. Petitioners assert that Columbus ``admitted''

that it could tie these credit notes to their applicable invoices

through the Mill Production Order (MPO), a document generated for each

order in Columbus's normal course of business. Petitioners' Case Brief

at 13, citing the Sales Verification Report at 35. Petitioners argue

that Columbus ``was aware that it had debit and credit notes that could

and should have been reported to the Department in its home and U.S.

market sales files.'' However, petitioners continue, Columbus

``unilaterally decided not to report these data to the Department.''

Id. Accordingly, petitioners suggest that as partial facts available

the Department should make adjustments only for debit notes issued in

the home market and for credit notes issued on U.S. sales.

In its rebuttal brief petitioners reject Columbus's

characterization of this omission as ``minor and inadvertent.'' The

Department's analysis, petitioners

[[Page 15466]]

argue, hinges on determining the prices actually paid for the

merchandise in the respective markets. According to petitioners,

Columbus cannot rely upon the ``excuse'' that it has no direct link

between its credit notes and the original invoices, suggesting that

this is ``true of many adjustments to price required by the statute.''

Petitioners'' Rebuttal Brief at 13. Petitioners renew their proposal

that the Department as adverse facts available consider only credit

notes issued on U.S. sales and disregard those reported on home market

sales. Further, in adjusting for the U.S. credit notes, petitioners

urge the Department to disregard Columbus's ``invitation'' to treat

these as indirect selling expenses: ``[c]redit and debit notes are

properly regarded as adjustments to gross price.'' Id. Petitioners also

dismiss Columbus's suggestion that its U.S. credit notes were not price

adjustments ``since the price had been agreed to and paid.'' Id. at 14,

quoting Columbus's Case Brief at 2 and 3. Rather, petitioners continue,

by issuing a credit note Columbus was agreeing to a modification of the

original price in response to customer complaints; in keeping with the

Department's practice, petitioners conclude, these credit notes must be

applied to particular sales.

Department's Position We agree with petitioners. The Department

routinely asks respondents for information concerning billing

adjustments and post-sale price adjustments during antidumping

proceedings. For example, the Department's original antidumping

questionnaire in this investigation asked Columbus to ``[r]eport any

price adjustments made for reasons other than discounts or rebates.

State whether these billing adjustments are reflected in your gross

unit price.'' Antidumping Questionnaire, May 27, 1998, at page B-20

(home market) and C-18 (United States). Columbus's response for the

home market: ``This field is not applicable. No price adjustments were

done after invoicing. The price as reflected on the invoice is the

price paid by the customer.'' Columbus's July 20, 1998 questionnaire

response at B-27. Likewise for its U.S. sales Columbus reported that

``(n)o price adjustments were made after invoicing.'' Id. at C-27. For

both markets Columbus stated that it did not offer any discounts other

than home market early payment and distributor discounts. Columbus also

reported that it granted no rebates and incurred no warranty or

technical service expenses in either market. Id. at B-30, B-41, B-42,

and C-29 and C-46.

The Department's supplemental questionnaire asked several follow-up

questions concerning both discounts and rebates in the home market. In

its September 8, 1998 supplemental questionnaire response Columbus

reiterated that it granted no rebates during the POI and noted that its

export-promotion discounts did not apply to POI sales of subject

merchandise. See Columbus's September 8, 1998 response at 26 and 27;

see also the Department's Sales Verification Report at 51 (``Columbus

did not include technical or warranty expenses in its home market or

U.S. sales listings.'').

At commencement of the Department's sales verification on November

16, 1998, consistent with our standard practice, we provided Columbus

with the opportunity to submit any corrections of minor errors

discovered while preparing for verification. Columbus submitted a

single correction pertaining to its indirect selling expenses; Columbus

again did not report any credit notes or price adjustments on either

U.S. or HM sales. However, several days into the verification, during a

lengthy discussion of quantity and value, Columbus produced a list of

home market and U.S. credit notes. Columbus acknowledged that it ``had

made no provisions for credit or debit notes or returns,'' and further

allowed that it could link any such credit or debit notes to the

original invoices through the MPO, a document generated in its ordinary

course of business. See Sales Verification Report at 35.

The findings at verification amply demonstrate that Columbus not

only issued credit notes pertaining to sales of subject plate in coil

during the POI, but had the means to link each credit note to the

appropriate invoice through the MPO. The record is also clear that

Columbus reported none of these notes in spite of our manifest

instructions that it do so. In view of the evidence of record we find

that Columbus failed to act to the best of its ability in responding to

this portion of the Department's original antidumping questionnaire.

Section 776(a)(2) of the Tariff Act holds that if an interested party

withholds information that has been requested by the Department or

fails to provide such information by the deadlines for submission, the

Department shall use the facts otherwise available in reaching its

final determination. See Section 776(a)(2)(A) and (B). Further,

pursuant to section 776(b) of the Tariff Act, if the Department finds

that an interested party failed to cooperate by not acting to the best

of its ability to comply with a request for information, the Department

``may use an inference that is adverse to the interests of that party

in selecting from among the facts otherwise available.''

Furthermore, we find that the caveats set forth in section 782

governing the use of facts otherwise available are inapplicable in the

instant case. In response to our direct requests that Columbus report

home market and U.S. billing adjustments, rebates, and technical and

warranty expenses, Columbus answered specifically that none of these

applied to Columbus's sales during the POI. At no time prior to

verification did Columbus acknowledge that it did, in fact, issue

credit notes pertaining to quality complaints involving subject

merchandise, nor did Columbus ever plead that it was unable to submit

information regarding these ``inapplicable'' price adjustments.

Furthermore, subsection 782(e) is inapposite as the Department is not

``declin[ing] to consider information that is submitted'' by Columbus.

Columbus failed to submit this information in response to our requests.

However, the information was belatedly provided by Columbus during the

November 1998 verification and verified by the Department at that time.

Accordingly, as facts available in the instant case we have

allocated each U.S. credit note to its applicable invoice and have

deducted a transaction-specific per-ton amount for those credit notes.

Furthermore, as an adverse inference, we are disallowing all credit

notes claimed by Columbus for sales in the home market. As the SAA

makes clear, the Department ``may employ adverse inferences about

missing information to ensure that a party does not obtain a more

favorable result by failing to cooperate than if it had cooperated

fully.'' SAA, as reprinted in H.R. Doc. No. 103-316 (1994). Columbus

ignored our specific instructions that it report billing adjustments,

including ``any price adjustments made for reasons other than discounts

or rebates.'' Thus, to insure that Columbus does not ``obtain a more

favorable result,'' we are allowing the U.S. credit notes while

adopting the adverse inference that Columbus issued no credit notes in

the home market. See, e.g., Gray Portland Cement and Cement Clinker

From Mexico, 62 FR 17148, 17166, (April 9, 1997) (home market freight

expenses disallowed because respondent's ``reported data (were)

inconsistent with the Department's explicit instructions'').

Comment 4: U.S. Commissions. Claiming that it pays commissions in

the U.S. market but none in the home market, Columbus notes that the

Department's practice in such situations is to make an adjustment to

NV--the

[[Page 15467]]

``commission offset''--to account for the U.S. commission. Columbus's

Case Brief at 1, citing section 19 CFR 351.410(e) of the Department's

regulations. The Department, in fact, described this offset in its

October 27, 1998 Preliminary Analysis Memorandum. However, Columbus

maintains, Columbus's reported gross unit prices for its U.S. sales do

not include the commission amounts. Accordingly, Columbus asks that the

Department add U.S. commissions to the gross unit U.S. prices before

making price-to-price comparisons. Columbus notes that although the

Department discovered at verification that Columbus had made ``a small

overstatement'' of the commissions, nevertheless, Columbus concludes,

``the Department was able to verify the correct calculation of this

commission.'' Id. at 2 and n. 1.

Petitioners ``do not disagree with Columbus's suggestion'' to add

U.S. commissions to the gross unit U.S. price. Petitioners' Rebuttal

Brief at 1. However, petitioners assert that if the Department does so,

it must also add U.S. commissions to the calculation of NV and CV to

ensure the proper consideration of U.S. commissions in the Department's

final determination.

Department's Position: We disagree with both Columbus and

petitioners. Columbus's position notwithstanding, we do not find the

adjustments claimed as U.S. commissions are commissions at all for

purposes of an antidumping analysis. As instructed in the Department's

questionnaire, Columbus reported in its U.S. sales listing its first

sales to unaffiliated customers in the United States. See, e.g.,

Columbus's June 24, 1998 section A response at 17 through 19. In its

supplemental response Columbus, noting that it considers these

unaffiliated customers as its agents, nonetheless stated that it

invoices and sells the merchandise to these customers and receives

payment from them. These companies then resell the product to their

unaffiliated customers. See Columbus's September 8, 1998 supplemental

response at 47 and 48. Thus, throughout this investigation the U.S.

sales prices which have been subject to our analysis have been those

reported by Columbus to its named EP customers.

The amounts claimed as ``commissions'' for these transactions are

not related in any way to the reported sales to Columbus's EP

customers. Columbus has not reported any commissions paid in connection

with its first sale to an unaffiliated party in the United States.

Regardless of whether the amounts claimed by Columbus are commissions,

or simply mark-ups passed on to the subsequent end-user customer, they

are related to the resales by Columbus's EP customers, not the sales

upon which our dumping analysis is based. We have accordingly limited

our analysis of Columbus's EP transactions to those involving

Columbus's first sales in the United States to unaffiliated parties and

have not considered further the additional amounts claimed as

commissions by Columbus.

Comment 5: Home Market Short-Term Interest Rates. Petitioners urge

the Department to treat Columbus's home market short-term interest rate

as ``unverified'' and to disallow entirely Columbus's claimed

adjustments for home market credit expenses and ICC. Petitioners point

to statements made by Columbus officials at verification that it had no

short-term rand-denominated borrowing; Columbus claimed, therefore, to

have used ``call'' rates, or interest rate quotes supplied by

Columbus's banks, in calculating home market credit expenses and ICC.

Petitioners' Case Brief at 15, quoting Columbus's Section B response at

pages 38 and 46. Petitioners note Columbus's admission at verification

that it solicits these ``call'' rates via telephone and maintains no

documentation to support these numbers. ``Without independent

verification,'' petitioners insist, ``the Department is not in a

position to confirm the accuracy of the submitted data.'' As a result,

petitioners conclude, the Department must treat Columbus's home market

interest rates as ``unverified'' and deny the claimed adjustments for

credit expenses and ICC.

Columbus argues in its case brief that rather than disregarding its

claimed credit expense and ICC adjustments, the Department should rely

upon the verified prime overdraft rates available in South Africa in

the absence of any short-term rand-denominated borrowing by Columbus.

Columbus insists that the Department verified fully that Columbus had

no short-term borrowing in the home market currency; the Department's

practice in such instances, Columbus maintains, is to base home market

credit and ICC calculations upon the short-term interest rates

generally available in the home market. Columbus's Case Brief at 6,

citing Final Determination of Sales at Less Than Fair Value; Certain

Pasta From Turkey, 61 FR 30309, 30324 (June 14, 1996), and Final

Determination of Sales at Less Than Fair Value: Canned Pineapple Fruit

From Thailand (Canned Pineapple Fruit), 60 FR 29553, 29557 (June 5,

1995). Therefore, Columbus concludes, the Department should rely upon

the verified prime overdraft rates submitted by Columbus at

verification. Id.

In rebuttal petitioners assert that the sales verification report

clearly states that ``no existing documentation supports these

numbers.'' Petitioners' rebuttal brief at 2, quoting the Sales

Verification Report at 46. Petitioners likewise describe as unavailing

Columbus's attempts during verification to substantiate its prime

overdraft rates, insisting that Columbus's short-term interest rates

were not verified.

Columbus, in turn, argues in its rebuttal brief that its short-term

interest rates were fully verified. Columbus acknowledges that its

original response used ``call'' rates obtained by telephone by the

Columbus official responsible for preparing Columbus's response.

However, Columbus asserts, that official left the company and Columbus

could not subsequently locate the underlying documentation for these

rates. Therefore, in responding to the Department's October 15, 1998

supplemental questionnaire, and well prior to verification, Columbus

provided prime overdraft rates ``which represent the available short-

term rand interest rates in South Africa.'' Columbus's Rebuttal Brief

at 17. Columbus insists that these prime overdraft rates were

documented and verified. Therefore, Columbus avers, these rates should

be used in calculating home market credit expenses and ICC.

Department's Position: We agree with Columbus that the short-term

prime overdraft rates available in South Africa should serve as the

basis of Columbus's credit and ICC calculations in the absence of

short-term borrowing in the home market. While petitioners note

correctly that the Department could not verify the ``call'' rates used

to calculate Columbus's credit and ICCs, as we will explain below, we

do not believe this ``failure'' warrants application of adverse facts

available. Columbus claimed at verification that the official

responsible for compiling the ``call'' rates had since left Columbus's

employ and that this individual's interest rate worksheets were no

longer available. Thus, in response to our specific request, Columbus

collected and presented information to substantiate the prime overdraft

rates available to commercial borrowers in South Africa. We were able

to document and verify these rates through records Columbus keeps in

its normal course of business. Furthermore, we confirmed these rates

using publicly-available data on interest rates in South Africa as

published by the International Monetary Fund (the IMF) in its

International Financial Statistics for September 1997, January

[[Page 15468]]

1998 and June 1998 (we selected all three volumes to capture monthly

prime overdraft rates for each of the twelve months of calendar 1997).

According to Columbus, it originally obtained the ``call'' rates

used in calculating credit and ICC expenses by telephoning its leading

commercial bank and inquiring about the interest rates that would be

available to Columbus if it were seeking short-term rand-denominated

loans. The bank, after considering prevailing interest rates and

Columbus's history with the institution, responded with the ``call''

rates originally submitted by Columbus on July 20, 1998. Thus, these

``call'' rates represented the interest rates available on rand-

denominated loans specifically to Columbus from this bank. These were

the rates we referred to in our verification report when we noted that

``no existing documentation supports these numbers.'' Sales

Verification Report at 46.

Once Columbus admitted during verification that it could not

substantiate its credit expenses as reported using the ``call'' rates,

it presented documentation on interest rates drawn from its internal

cash management system. These rates coincide with those released by

both the South African Reserve Bank and the IMF's International

Financial Statistics. As discussed in the Sales Verification Report at

pages 46 and 47, Columbus operates an internal system to manage daily

cash flows which tracks the various interest rates available from

certain commercial banks. This prime overdraft rate was constant from

November 1996 5 through October 20, 1997, at which point it

changed once for the duration of the POI. See the Sales Verification

Report and Exhibit 15 thereto.

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

\5\ The reference to ``November 1997'' at page 47 of the Sales

Verification Report is a typographical error.

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

The record establishes that Columbus had no short-term rand-

denominated loans from unaffiliated lenders. The Department's

antidumping duty questionnaire at page B-27 asked Columbus for

information on its short-term interest expenses and instructed Columbus

to ``use a published commercial short-term lending rate'' if it had no

short-term borrowings during the POI. With no actual home-market short-

term loans to serve as a basis for its interest rate, Columbus

attempted to respond to this question by telephoning its bank and, in

effect, asking this bank what interest rates would have been available

to Columbus had it borrowed during the POI. In our October 15, 1998

supplemental questionnaire the Department subsequently asked Columbus

to substantiate the rates quoted by this bank and to ``provide South

African interest rates for the POI obtained from publicly-available

sources (such as those published on a monthly basis in business

publications or released by the South African Reserve Bank).'' October

15, 1998 supplemental questionnaire at 2. Columbus's response, while

failing to indicate that its original interest rates could not be

substantiated, nevertheless complied with our request for information

on short-term interest rates available from the South African Reserve

Bank.6

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

\6\ Columbus submitted information on prime overdraft rates

drawn from the South African Reserve Bank's Worldwide Web site

(www.resbank.co.za) at Exhibit 3 of its November 2, 1998

supplemental response. Columbus did not indicate that its reported

short-term interest rates could no longer withstand verification,

however, stating cryptically that ``[t]he final credit expenses may

have to be calculated based on the attached.'' Id. at 8.

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

While it is true that we could not verify the ``call'' rates used

in Columbus's original and revised home market sales listings, we must

point out that these ``call'' rates bear no relationship to any actual

short-term loans taken by Columbus, nor did Columbus fail to disclose

any home market borrowing or otherwise misstate its short-term interest

expenses. This is not a case where Columbus had short-term loans in the

home market, incurred actual short-term interest expenses, and then was

unable to substantiate these expenses at verification. Rather, in

response to a direct question from the Department, Columbus attempted

to respond to the best of its ability by determining precisely what

rates it could have obtained had it actually borrowed money in the home

market. Petitioners' suggested response would have the Department

penalize Columbus for failing to provide substantiation for interest

rates which, in effect, never existed outside of an informal inquiry

from Columbus to its bank.

The Department has over time developed a policy to address

specifically situations such as the instant case where a respondent has

no short-term borrowing from unaffiliated parties in the currency of

either the export market or the United States. On February 23, 1998,

the Department promulgated Import Administration Policy Bulletin 98.2,

``Imputed Credit Expenses and Interest Rates.'' As we explain in this

document, the Department at one time calculated imputed interest

expenses to reflect the ``opportunity cost of money'' incurred in

extending credit by using the actual short-term interest rates incurred

in the home market to calculate both home market and U.S. credit and

ICC (except in exporter's sales price (now, CEP) situations, where we

would use the short-term dollar-denominated interest rates for

transactions in the United States). However, in 1990 the Court of

Appeals for the Federal Circuit overturned this practice, stating that

the cost of credit ``must be imputed on the basis of usual and

reasonable commercial behavior,'' and that the short-term interest

rates used should conform with ``commercial reality.'' LMI-La Metalli

Industriale S.p.A. v. United States, 912 F.2d 455, 460 (Fed. Cir.

1990). Our policy bulletin concluded that ``[i]n cases where a

respondent has no short-term borrowings in the currency of the

transaction, we will use publicly available information to establish a

short-term interest rate applicable to the transaction.'' The bulletin

further noted that in the rare cases where a respondent has no short-

term loans from unaffiliated parties in the home market currency we

will establish interest rates on a case-by-case basis ``with a

preference for published average short-term lending rates.'' Policy

Bulletin 98.2 at 6.

As Columbus had no short-term rand-denominated loans from

unaffiliated parties, the alternative, and the Department's stated

preferences in such cases, is to use publicly-available interest rate

information. Thus, for purposes of this final determination we have

recalculated Columbus's home market credit expenses and ICC using the

publicly-available rates of the South African Reserve Bank as confirmed

by the IMF's International Financial Statistics.

Comment 6: Marketing and Market Development Costs. Petitioners urge

the Department to recalculate Columbus's indirect selling expenses by

deducting those expenses relating to ``sales and marketing'' and

general market development. Petitioners note that the Department's

Sales Verification Report described the cost centers identified by

Columbus to determine the pool of expenses for use in calculating its

indirect selling expenses. According to petitioners, Columbus added to

its indirect selling expenses those costs relating to ``general

expenses and salaries pertaining to its market development cost

centers.'' Petitioners' Case Brief at 14, quoting the Sales

Verification Report at 53 and 54. However, petitioners insist that

general expenses not related to sales of such or similar merchandise do

not qualify for treatment as indirect selling expenses.

[[Page 15469]]

Id. and n. 58, citing Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, et al., 58 FR 39729, 39749

(July 26, 1993) (Antifriction Bearings). Rather, petitioners assert,

the marketing and market development expenses at issue are by

definition ``general expenses,'' which should be included in the

general and administrative (G&A) expenses used to adjust COP and CV.

Id. Petitioners further accuse Columbus of including in its G&A

calculation certain costs and revenue they characterize as ``non-

operating items.'' Petitioners' Case Brief at 25. Columbus's G&A ratio,

petitioners insists, must be adjusted by excluding all such items.

Columbus argues that all expenses incurred by its sales department

in ``marketing, selling and promoting sales of subject merchandise are

plainly selling expenses'' which, Columbus maintains, should not be

considered part of its G&A. Columbus's Rebuttal Brief at 15. Further,

Columbus avers, in the sole case cited by petitioners to support the

reclassification of its sales and marketing expenses, Antifriction

Bearings, the Department concluded just the opposite, that the

marketing and market development expenses at issue were, in fact,

indirect selling expenses. ``Expenses incurred to market and to expand

and develop the market for Columbus's products,'' Columbus insists,

``are plainly associated with sales of those products.'' Columbus's

Rebuttal Brief at 16.

Treating these expenses as indirect selling expenses, Columbus

argues, is consistent with the Department's own antidumping

questionnaire. Further, Columbus asserts, petitioners' claim that these

expenses should be classified as general expenses related to cost of

production runs contrary to the Department's section D questionnaire,

which defines ``general expenses'' as ``period expenses which relate

indirectly to the general production operations of the company.''

Columbus's Rebuttal Brief at 16, quoting the Department's questionnaire

at D-25. According to Columbus, marketing and market development

expenses intended to promote sales ``do not belong in this category of

expenses.'' Id. at 17.

Department's Position: We agree with Columbus. We reviewed the

expenses at issue during both the sales and cost verifications in this

case (see, e.g., the Sales Verification Report at 53 and 54--``we

examined the various expenses and noted no discrepancies''). As noted

in the Sales Verification Report, Columbus has established cost centers

for its export marketing and for each of its local sales offices. In

addition, Columbus relies on a separate cost center to accrue expenses

relating to its market development efforts in South Africa. Because

these costs are related, albeit indirectly, to promoting sales in the

home market, as opposed to Columbus's general operation or its

production of stainless steel, we have continued to treat these costs

as indirect selling expenses for this final determination.

With respect to the amounts claimed by petitioners to be ``non-

operating items,'' our review of the relevant expenses and revenues

indicates that these items relate to the general operations of the

company as a whole and, therefore, are properly considered as part of

Columbus's G&A.

Comment 7: Home Market Advertising Expenses. Columbus reported

adjustments for home market advertising expenses claiming these were

``assumed'' on behalf of the buyer, thus warranting treatment as direct

selling expenses pursuant to the COS provision of 19 CFR 351.410(d).

These expenses fell into three categories: print advertising expenses,

maintenance of a stadium box at the Ellis Park Stadium, and expenses

arising from Columbus's sponsorship of an annual ``3CR12 Squash

Tourney.''

Petitioners maintain that Columbus's various claimed advertising

expenses qualify as indirect rather than direct selling expenses.

According to petitioners, Columbus has failed to demonstrate that any

of the expenses relating to its magazine advertisements, as well as

those stemming from the publication of Contact, an in-house newsletter,

qualify as direct selling expenses. Further, petitioners argue,

Columbus uses the hospitality suite at Ellis Park Stadium to entertain

Columbus's customers, including distributors, at rugby matches, not to

entertain its customers' customers. Similarly, the 3CR12 Squash Tourney

fails to qualify as a direct advertising expense because the tourney

was open to users of stainless steel generally, and not limited to

specifiers of the specialty 3CR12 product (or, for that matter, subject

stainless steel plate in coil). Petitioners' Case Brief at 17.

Therefore, petitioners conclude, the Department must disallow any

adjustment for advertising as a direct selling expense and instead

treat the expenses as indirect selling expenses in their entirety.

In their rebuttal brief petitioners note that to qualify for an

adjustment as a direct selling expense, 19 CFR 351.410(d) requires

advertising expenses to ``bear a direct relationship to (a) particular

sale'' or to be ``assumed by the seller on behalf of the buyer.''

Petitioners' Rebuttal Brief at 3, quoting 19 CFR 351.410(d).

Petitioners point to the findings in the Department's Sales

Verification Report as demonstrating that ``all of Columbus'(s) claimed

direct advertising expenses are general in nature, and fail to meet the

criteria for consideration as an assumed selling expense.'' Id. at 4.

Columbus argues that its advertising expenses incurred in the home

market are assumed on behalf of the buyer and merit adjustment under

the COS provision. For example, Columbus asserts, expenses relating to

the corporate box at the Ellis Park Stadium and those connected to the

squash tournament sponsored by Columbus qualify as direct advertising

expenses. Conceding that ``some portion'' of the magazine advertising

purchased by Columbus, as well as an unspecified portion of the Ellis

Park Stadium expenses, may appropriately be considered indirect in

nature, Columbus nonetheless urges the Department to either treat

advertising costs as direct expenses in their entirety or to

``apportion them reasonably between `assumed' and `indirect'

expenses.'' Columbus's Case Brief at 7.

In addition, Columbus notes that during the sales verification the

Department discovered that some of the reported advertising expenses

had been based upon budgeted, rather than actual, costs. Columbus urges

the Department, therefore, to base any adjustment for advertising

expenses upon the actual verified expenses in lieu of the incorrect

budgeted amounts originally reported.

Finally, Columbus disagrees with petitioners' contention that these

advertising expenses cannot be considered as direct selling expenses

because the advertising at issue may reach a broader audience than

purchasers of subject stainless steel plate in coil; Columbus asserts

that in many cases the customers of Columbus's customers are purchasing

merchandise which has been further processed so as to no longer

constitute the foreign like product. Columbus's Rebuttal Brief at 18.

Columbus maintains that whether the downstream sale comprises subject

or non-subject merchandise has no bearing on the proper treatment of

the advertising expenses assumed by Columbus on behalf of the buyer

(i.e., Columbus's customers).

Department's Position: We agree in part with petitioners. We

reviewed Columbus's claimed advertising expenses exhaustively at

verification and found that most, if not all, of these

[[Page 15470]]

promotional expenses were incurred either in marketing to Columbus's

customers, as in the case of the Ellis Park Stadium box, or as general

corporate promotion in the case of Columbus's print advertising.

With respect to this last category of expenses, we reviewed

numerous samples of Columbus's print advertising which reflected high-

quality glossy art and copy suitable for publication as full-page

advertisements. These advertisements are intended to promote either the

benefits of stainless steel generally, or Columbus's image as a

reliable supplier of high-quality stainless steel; by Columbus's own

admission, most of these advertisements, including advertisements

promoting sales of coiled hot-bands, are aimed at distributors;

``Columbus acknowledged that end-users are not purchasing stainless

coils, or large quantities of cut stainless sheet.'' Sales Verification

Report at 49. Likewise, as petitioners note, Columbus's in-house

publication Contact is addressed ``to you, our valued customers.''

Columbus's September 8, 1998 supplemental response at Exhibit K. Thus,

we conclude that Columbus's print advertising expenses are aimed

primarily at Columbus's customers, with the remaining expenses

promoting Columbus's general corporate image. As such, these expenses

do not represent expenses assumed by Columbus on behalf of its

customers, and do not merit treatment as a COS adjustment.

Similarly, the record indicates that the Ellis Park Stadium box is

used primarily to entertain Columbus' customers at rugby matches. As

Columbus noted, 13 of the 15 seats in the box are devoted to use by the

local sales department. ``Columbus claims that employees of catalytic

converter companies, tanktainer manufacturers, and Columbus'

distributors were the most common recipients of passes to the box.''

Sales Verification Report at 49. Thus, we find that these expenses

represent indirect selling expenses incurred by Columbus in marketing

stainless steel products to its customers, not direct selling expenses

assumed by Columbus on behalf of its customers.

Finally, as regards the 3CR12 Squash Tourney, we discussed this

tournament at verification with the public relations officials at

Columbus and reviewed the list of participants included in the

tourney's brochure. We confirmed that virtually all of the contestant

teams represented mining companies or other end users of 3CR12 steel

products. While Columbus acknowledged that ``the scope of the tourney

extended beyond end users of 3CR12,'' the very name of the tournament

coupled with the makeup of the tournament's competitors makes it clear

that these expenses were incurred to promote sales of 3CR12 stainless

to end-user customers. The Court of International Trade addressed a

similar issue in Smith Corona Group v. United States, 540 F. Supp. 1341

(CIT 1982), aff'd 713 F.2d 1568 (Fed. Cir. 1983). There, the Court

found that

[w]hile the challenged ads were not exclusively directed to the

relevant merchandise, a portion of each advertising effort was. In a

purely metaphysical sense, Smith Corona is correct in that the ad

expense cannot be directly correlated with specific sales. Yet, the

statute does not deal in imponderables.

In a later case involving the same parties, Smith Corona v. United

States, 771 F. Supp. (CIT 1991), the Court likewise concluded that

``(e)ven if the evidence that the advertisements contained

institutional or corporate themes were substantial, it would still not

undermine the agency's determination, for the existence of such themes

does not necessarily diminish direct promotion therein of particular

products.''

As with Smith Corona's advertisements, so too Columbus' 3CR12

Squash Tourney is directed towards end users of 3CR12 steel, i.e., the

customers of Columbus' customers. That Columbus realizes some measure

of general corporate promotion at the same time ``does not necessarily

diminish direct promotion therein of particular products.''

Accordingly, while we have disallowed the balance of Columbus' claimed

advertising expenses as COS adjustments, treating these instead as

indirect selling expenses, we have treated the actual costs of

sponsoring the 3CR12 Squash Tourney as direct selling expenses assumed

by Columbus on behalf of its customers and have allocated these

expenses over home market sales of 3CR12 steel only.

Comment 8: Other Direct Selling Expenses for 3CR12 Steel.

Petitioners, noting that Columbus incurs certain expenses in the United

States in selling 3CR12 stainless steel, argue that the Department must

calculate an amount for ``other direct'' selling expenses for sales of

this product. Petitioners' Case Brief at 17. These expenses,

petitioners argue, include those relating to sales visits paid by

employees of a wholly-owned Columbus subsidiary to its customer's

customers. As such, petitioners insist, the costs relating to these

visits represent direct expenses Columbus has assumed on behalf of its

customer, an unaffiliated distributor.

In response Columbus avers that its expenses relating to U.S. sales

of 3CR12 steel are indirect in nature, arising primarily from general

market promotion for this specialty product. ``[T]here is no

indication,'' Columbus insists, ``that the visits to the customers were

an `assumed' expense.'' Columbus' Rebuttal Brief at 18 and 19. Further,

Columbus argues, the customer visits were just one of a range of

activities of these employees. Even if the attendant expenses qualify

as `assumed' expenses, Columbus submits, the resulting adjustment

``would plainly be de minimis,'' and could not support treating all

fixed expenses in the U.S. as direct selling expenses. Id.

Department's Position. During our verification in Middelburg we

reviewed the activities of personnel stationed in the United States and

agree with Columbus that the expenses arising from these activities

represent indirect selling expenses. Columbus maintains a wholly-owned

subsidiary in the United Kingdom whose ``sole function is the sale and

distribution of 3CR12 and the development of the market for 3CR12,

primarily in Europe.'' Columbus' September 8, 1998 supplemental

response at 9. As Columbus explained at verification, the personnel

maintained by Columbus' subsidiary have technical expertise necessary

to develop the market for 3CR12, a unique, corrosion-resistant

``utility'' steel ``which is used extensively in the mining, sugar, and

coal industries, and in the manufacture of railway wagons, bus bodies

and automobile frames.'' Columbus' June 24, 1998 section A response at

8, n.1. According to Columbus, it developed this grade of steel and

currently holds patents and trademarks on it.

After successfully introducing the steel in South Africa, Columbus

noted, it is now attempting to promote this grade in the export market,

focusing on the same industry sectors. However, Columbus maintains,

because of 3CR12's unique properties, for example, its weldability, it

required individuals with specific technical expertise to promote sales

of Columbus' 3CR12 products to its customers. See, e.g., Columbus'

September 8, 1998 supplemental response at 9. At verification we

confirmed that all sales and distribution of 3CR12 steel in the United

States are the responsibility of an unaffiliated distributor which

purchases the material from Columbus' wholly-owned subsidiary in the

United Kingdom. The individuals stationed in the United States, on the

other hand, act only to distribute technical information about 3CR12's

characteristics to potential customers and to promote new

[[Page 15471]]

applications for a grade of steel that is relatively little-known in

the United States.

Because there is no evidence of record that the expenses associated

with the personnel stationed in the United States by Columbus' U.K.

subsidiary are direct in nature or that these expenses were assumed by

Columbus on behalf of its U.S. customers the expenses are properly

considered indirect selling expenses, and have been so reported by

Columbus. We have continued to treat these expenses as such for this

final determination.

Comment 9: Inland Insurance Expenses Incurred In South Africa for

U.S. Sales. According to petitioners, the Department should apply

partial facts available to calculate inland insurance expenses incurred

in South Africa for sales to the United States. Petitioners note that

Columbus reported these insurance premiums using the policies' formula

of multiplying a stated premium factor by 110 percent of the invoice

value. However, petitioners accuse Columbus of: (i) Reporting an

incorrect amount for inland insurance, (ii) reporting the premiums in

the wrong currency, and (iii) failing to offset its premium expenses

with a rebate Columbus received for overpayments of its premiums.

Further clouding the issue, petitioners maintain, is that Columbus's

insurance broker ``was originally founded specifically to provide

insurance underwriting for Columbus Joint Venture.'' Petitioners' Case

Brief at 18, quoting the Sales Verification Report at 44. For these

reasons petitioners insist that the Department should disregard

Columbus' reported inland insurance, applying instead the highest

reported insurance expense to all U.S. sales whose terms were either

CFR or FOB.

Columbus accuses petitioners of distorting the Department's

findings at verification with respect to its foreign inland insurance,

asserting that it is ``flatly wrong'' that Columbus mis-reported this

expense, used the inappropriate currency, or failed to account for a

substantial rebate. According to Columbus, the company reported this

expense ``exactly as it is incurred,'' multiplying the premium rate by

110 percent of the invoice price. The reason Columbus is unable to

trace specific insurance payments for specific shipments, Columbus

explains, is that it pays these premiums in advance against anticipated

shipments. The exact amount is adjusted after the fact to reconcile the

pre-paid premiums based upon estimated shipments to those based upon

actual shipments during the period. ``It is absurd,'' Columbus

complains, ``to claim that this is a verification failure.'' Columbus'

Rebuttal Brief at 19. Columbus also dismisses petitioners' insinuations

that its insurance provider is affiliated with Columbus. The insurance

brokerage's name was chosen, Columbus maintains, when the company was

founded to provide insurance underwriting for Columbus Joint Venture

and the name was thought to lend status to the new concern. There is no

relationship, Columbus insists, between Columbus and its insurance

broker. Id. at 20.

Department's Position. Petitioners' objections to Columbus' inland

insurance expenses appear to arise from a misreading of the

Department's Sales Verification Report. We verified fully Columbus'

inland insurance expenses and noted no discrepancies in these expenses

or the reporting methodology employed by Columbus. Calculating this

insurance is simply a matter of multiplying the invoice value by 1.1

and multiplying that product by the premium rate specified in Columbus'

insurance policy. As to petitioners' contention that Columbus reported

this expense in the ``wrong'' currency, although Columbus remits its

prospective payments in rand, the insurance premiums are based upon the

value in U.S. dollars of each shipment and are properly reported in

U.S. dollars. Further, as this expense is calculated as a fixed

percentage of value multiplied by a fixed premium rate, whether

Columbus reports it in dollars or in rand converted to dollars has no

effect on our calculations. Finally, with respect to the rebate for

overpayments of premiums, the Sales Verification Report failed to make

clear that this represented monies paid in advance by Columbus but

subsequently refunded by the insurance brokerage when Columbus'

prospective payment based upon anticipated shipments exceeded the

premium charges based upon actual shipments. This refund did not

reflect a price concession by the insurance broker. Thus, the refund

had no effect upon the inland insurance expenses reported by Columbus

in its sales listings. Therefore, we have accepted Columbus' reported

inland insurance amounts for this final determination.

Comment 10: Recalculation of Inventory Carrying Costs. Columbus

points out that the COM used as the basis for calculating Columbus's

ICC in its home market and U.S. databases has been subjected to several

revisions as a result of supplemental cost questionnaires and the

Department's cost verification. These ``various adjustments to COM,''

Columbus asserts, explain why ``Columbus was unable to reconstruct the

reported ICC'' at verification. Columbus's Case Brief at 5, quoting the

Sales Verification Report at 53. Reconstructing the original ICC would

not be helpful, Columbus insists, because changes resulting from the

supplemental cost questionnaires and verification would necessitate a

recalculation in any event. The only outstanding verification issue

relating to ICC, Columbus maintains, is a discrepancy of one day

between the weighted-average days in inventory. ``Such a small

difference does not mean,'' Columbus avers, ``that Columbus'' inventory

carrying costs could not be verified.'' Id.

Department's Position: We agree with Columbus, and have used the

revised COM calculated for this final determination as the basis for

calculating Columbus's ICC. As explained in the comments under ``Cost

Issues,'' below, we have made a number of adjustments to Columbus's COP

data as a result of either findings at the Department's cost

verification or comments by the interested parties or both. See the

Cost Verification Report and the Cost Calculation Memorandum (Final).

Just as we have determined that it would be inappropriate to use

Columbus's reported COM as the basis for its COP and CV data, it would

likewise be inappropriate to use demonstrably inaccurate COM data as

the basis for Columbus's ICC expenses. Accordingly, we are using

Columbus's COM, as adjusted for this final determination, in

calculating ICCs.

Comment 11: Other Corrections. Columbus, noting that the Department

conducted separate sales and cost verifications, requests that any

changes in Columbus's data arising from one verification be reflected

in the data verified at the other. This is necessary, Columbus insists,

to avoid double-counting any expenses. For example, Columbus continues,

the Department found that certain public relations expenses had been

included both as a general overhead cost in Columbus's COP data and as

a direct selling expense in Columbus's home market sales data.

Similarly, certain marketing expenses were reported as G&A in both the

sections B and D responses. When adding these expenses to Columbus's

indirect selling expenses, Columbus urges the Department to make an

offsetting deduction from G&A in Columbus's reported COP to avoid

double-counting.

Petitioners suggest without further elaboration that the Department

correct a number of errors in Columbus's response, referring to various

points in the Department's Sales Verification

[[Page 15472]]

Report. Petitioners' Case Brief at 19, citing pages 34 and 42, and

Appendices IV, II and III of the Sales Verification Report.

Department's Position: As noted in the comments herein, we have

attempted to adjust expenses appropriately to reflect any revaluations

or recalculations performed on Columbus's sales and cost data. Wherever

a recalculation has affected one set of data we have, as appropriate,

made the corresponding adjustments to Columbus's other data.

As to petitioners' contentions, we are unable to find any specific

errors needing remedy in the first two cites offered. The third

citation involved installment payments for one home market sale; we

have continued to rely upon the reported date of payment, as this

represented the date of receipt of the customer's final payment. The

fourth item related to wharfage expenses incurred on U.S. sales and we

have adjusted this expense to reflect the actual verified amount. The

final item concerns the reported date of payment for one U.S.

transaction; we find that Columbus reported properly the payment date

and no correction is necessary for this transaction.

Issues Relating to Cost of Production

Comment 12: Revaluation of Raw Material Costs. Columbus explains

that its accounting system kept in its normal course of business

records raw material costs as of the date the finished product is sold.

These costs, in turn, form Columbus's cost of sales. Columbus will then

adjust its raw material costs back to their ``cost as purchased'' by

means of a revaluation adjustment. Columbus's Case Brief at 8. Columbus

claims that the Department erred in its Cost Verification Report when

it stated that Columbus's internal system for accounting for variances

in raw material costs has no impact on Columbus's reported COP. Id.,

citing the Cost Verification Report at 8. It would be wrong, Columbus

insists, for the Department to disregard the revaluation adjustment

when calculating Columbus's COP.

Columbus notes that section 773(f)(1)(A) of the Tariff Act calls

for the Department normally to calculate COP on the basis of the

records of the exporter or producer, provided these records i) are kept

in accordance with GAAP in exporting country, and ii) ``reasonably

reflect the costs associated with the production and sale of the

merchandise.'' Columbus's Case Brief at 8, quoting section 773 of the

Tariff Act. The company's records are kept in accordance with GAAP,

Columbus submits, and include the provision for revaluation of raw

material costs as part of its COP for sales made during the POI. By

means of the revaluation adjustment, Columbus argues, Columbus's

records ``precisely track the actual costs incurred with respect to the

subject merchandise.'' Id. at 9. Columbus asserts that stainless steel

sold in, e.g., January would have been produced from raw materials

purchased in a prior month; thus, valuing the raw material costs based

upon the date of sale has the effect of distorting these costs. ``It

would be wrong,'' Columbus submits, ``to assert that a sale is below

cost because its price fails to cover, not the actual raw material cost

of the product, but the cost of raw materials being purchased in

January for production later in the year.'' Id. at 9.

Even if the Department concludes that only costs incurred during

the POI (calendar 1997) should serve as the basis for COP for sales

during the POI, disregarding the revaluation adjustment will not

accomplish this end. As reported, Columbus argues, Columbus's

revaluation adjustment includes not only adjustments between the last

quarter of 1996 and the first quarter of 1997, but also the adjustments

applied for each quarter of 1997 (i.e., during the POI). Thus, such a

calculation would inappropriately include in Columbus's COP costs it

did not incur with respect to producing the subject merchandise.

Columbus's Case Brief at 10.

Petitioners suggest that Columbus has incorrectly included an

accounting adjustment made to its cost of sales in its reported cost of

production. ``As we understand it,'' petitioners submit, Columbus's

revaluation adjustments are applied to its finished goods inventory and

its cost of goods sold (COGS), but not to its COP. The COP, petitioners

aver, is ``unaffected by this revaluation process.'' Petitioners'

Rebuttal Brief at 7. Therefore, petitioners conclude, Columbus's

revaluation adjustments must be excluded from Columbus's reported COP.

Department's Position: We disagree with Columbus that the

revaluation adjustment should be included in reported COP and CV. The

Department's long-standing practice is to calculate COP and CV based on

the COM of the subject merchandise produced during the POI, rather than

on the COGS during the POI, because the COM represents the costs

incurred in manufacturing the product during the relevant period. The

Department does not use the COGS because it includes the value of

merchandise held in inventory at the beginning of the period and

excludes the value of merchandise produced but not sold during the

period. The value of the merchandise sold from beginning inventory

reflects the COM of the previous period. Additionally, COGS may include

inventory values that have been adjusted (e.g., through inventory

write-down) to the lower of cost or market value and, therefore, do not

reflect the actual production costs. This methodology is supported by

section 773(b)(2)(D) of the Tariff Act, which states that the recovery

of costs is provided for ``(i)f prices which are below the per unit

cost of production at the time of sale are above the weighted average

per unit cost of production for the period of investigation or

review.'' (emphasis added). Sections 773(b)(2)(D) and 773(e)(1) of the

Tariff Act state that the cost of the products shall be determined

``during a period which would ordinarily permit the production of the

merchandise in the ordinary course of business.'' In the instant case

using the COM during the POI covers the period needed to produce the

subject merchandise just prior to export and excludes the changes in

inventory. See Notice of Final Determination of Sales at less Than Fair

Value: Certain Preserved Mushrooms from Indonesia, 63 FR 72268, 72273

(December 31, 1998).

We have used the reported COM incurred during the POI to calculate

COP and CV because it was never revalued to current prices, and

therefore does not need to be adjusted back to the original cost. The

revaluation adjustment proposed by Columbus does not affect the

reported COPs and CVs which are based on COM because, as Columbus

notes, the revaluation adjustment is recorded as part of the COGS, not

the COM. Therefore, we have not considered the revaluation adjustment

in calculating COP and CV.

Comment 13: Inclusion of Depreciation Expenses in Cost of

Production. Petitioners aver that Columbus's reported costs of

manufacture must be adjusted to account for certain depreciation

expenses excluded from the original COP data.7 Petitioners

note Columbus's suggestion at the cost verification that this amount be

added to G&A expenses; however, petitioners argue, ``depreciation

expense is one component of COM,'' which in turn serves as the basis

for calculating G&A

[[Page 15473]]

and interest expenses. Petitioners' Case Brief at 19 (original

bracketing omitted). If the calculation of COM is flawed, petitioners

note, any subsequent calculations based on that number will suffer the

same defect. Petitioners recommend that the Department correct the

error by including the omitted depreciation in Columbus's COM, thereby

increasing the total costs.

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

\7\ Petitioners bracketed the word ``depreciation'' as business

proprietary information subject to protection from disclosure under

administrative protective order. However, Columbus in its Rebuttal

Brief publicly disclosed the specific nature of the expenses;

therefore, we are free to discuss the expense in this public forum.

See Columbus's Rebuttal Brief at 20.

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

Columbus acknowledges that it inadvertently excluded depreciation

from its reported COP. Columbus attributed the oversight to a

misunderstanding between Columbus officials as to the proper

classification of the expense. Accordingly, Columbus points out, it

presented its correction of this error at the start of the Department's

cost verification. As to its suggestion that depreciation be included

in the pool of G&A expenses, Columbus insists it offered this proposal

``for simplicity's sake;'' Columbus has no objection to including

depreciation in COM as long as G&A and other adjustments to COP are

calculated using the corrected COM. Columbus's Rebuttal Brief at 21.

Department's Position: We agree with petitioners and Columbus and

have included Columbus's depreciation expenses in its COP and CV. See

Comment 14, immediately below.

Comment 14: Inclusion of Additional Depreciation Expenses.

Petitioners insist that Columbus's COP and CV data must also include

additional depreciation expenses omitted by Columbus.8

Petitioners insist that these expenses, attributable to a new

production facility, are properly included in COP, arguing that

Columbus's internal accounting system so treats these costs. Therefore,

in accordance with Columbus's own accounting policies, the depreciation

expenses at issue must be factored into the calculation of Columbus's

COP.

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

\8\ The precise nature of these expenses involves discussion of

business proprietary information. See Cost Calculation Memorandum

(Final).

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

Columbus notes that the Department's Cost Verification Report

implies that the Department will add this depreciation to COP, and

argues that it would be incorrect to include expenses not recognized by

either Columbus's audited financial statements or South African GAAP.

Citing section 773(f)(1)(a) of the Tariff Act, Columbus notes that COP

will normally be calculated using the records kept by the exporter or

producer if the records are kept in accordance with local GAAP and

``reasonably reflect the costs associated with the production and sale

of the merchandise.'' Further, the Department

shall consider all available evidence on the proper allocation of

costs * * * if such allocations have been historically used by the

exporter or producer, in particular for establishing appropriate

amortization and depreciation periods, and allowances for capital

expenditures and other development costs.

Columbus's Case Brief at 13, quoting section 773 of the Tariff

Act.

Columbus avers that its cost accounting system, in full accordance

with South African GAAP, does not consider the depreciation at issue a

cost of production, but instead allocates the depreciation of assets

over their average useful life. Accordingly, Columbus notes, it did not

take the full charge for depreciation during its build-up to full

design production capacity, but instead has spread its depreciation

over the span of the useful life of the facility. Further, Columbus has

historically treated these expenses in precisely this fashion.

Consistent with the Department's determinations in Certain Preserved

Mushrooms From Chile (63 FR 56613, 56620, October 22, 1998) and Static

Random Access Memory Semiconductors From the Republic of Korea, (63 FR

8934, February 23, 1998), Columbus suggests, the Department must not

adjust for these depreciation expenses.

In its rebuttal Columbus suggests that petitioners ``completely

misconstrue Columbus's financial statements'' in arguing that

Columbus's internal accounting policies support petitioners' proposed

treatment of these expenses. Columbus's Rebuttal Brief at 21. Columbus

accuses petitioners of quoting from the incorrect and irrelevant

passage from Columbus's accounting policies and asserts that the

depreciation expenses at issue are not properly considered part of

Columbus's COP.

Petitioners reject Columbus's contention that its accounting for

these expenses is either in accordance with South African GAAP or

``reasonably reflect[s] the cost of producing the subject

merchandise,'' citing Final Determination of Sales at Less Than Fair

Value: Steel Wire Rod From Canada, 63 FR 9182, 9187 (February 24,

1998), and Final Determination of Sales at Less Than Fair Value:

Furfuryl Alcohol From South Africa, 60 FR 22520, 22526 (May 8, 1995).

Petitioners note that Columbus stated in its section A questionnaire

response that it employs a straight-line method for depreciating

assets. This, petitioners assert, is consistent with South African

GAAP, which provides for the depreciation of plant and equipment ``on a

systematic basis over its useful life.'' Petitioners' Rebuttal Brief at

8, quoting South African GAAP, AC 123.44 (December 1994). The problem,

petitioners maintain, is that South African GAAP defines ``useful

life'' as either a specified period of time or the number of production

units expected to be obtained. ``Thus, the useful life can either be a

period of time or a number of production or similar units, not a hybrid

of the two.'' Id. at 9. Further, petitioners insist, under South

African GAAP ``straight-line depreciation results in a constant charge

over the useful life of the asset.'' Id., quoting South African GAAP at

AC 123.51 (petitioners' emphasis omitted). Petitioners suggest that

U.S. GAAP further stipulates that straight-line depreciation ``is a

function of the passage of time and * * * is not affected by asset

productivity, efficiency, or degree of use.'' Id., quoting Seidler, Lee

J., and D.R. Carmichael, Accountant's Handbook, (New York, Ronald

Press, 1981) (petitioners' emphasis omitted).

Petitioners conclude that Columbus's chosen method of accounting

for its depreciation expenses significantly understates Columbus's COM.

This ``distortive'' methodology, petitioners aver, should be rejected

by including the additional depreciation in Columbus's costs.

Department's Position: We agree with petitioners that these

depreciation amounts should be included in Columbus's cost of producing

merchandise during the POI. In accordance with section 773(f)(1)(A) of

the Tariff Act, the Department normally relies on data from a

respondent's books and records if those records are prepared in

accordance with the home country's GAAP, and where they reasonably

reflect the costs of producing the merchandise. Typically, GAAP

provides both respondents and the Department with a reasonably

objective and predictable basis by which to compute costs for the

merchandise under investigation. However, in those instances where the

Department finds that a company's normal accounting practices result in

a mis-allocation of production costs, the Department will adjust the

respondent's costs or use alternative calculation methodologies that

more accurately capture the actual costs incurred to produce the

merchandise. See, e.g., New Minivans from Japan: Final Determination of

Sales at Less Than Fair Value, 57 FR 21937, 21952 (May 26, 1992)

(adjusting a respondent's U.S. further manufacturing costs because the

company's normal accounting methodology did not result in an accurate

measure of production costs).

[[Page 15474]]

In the instant case we have determined that the exclusion of this

depreciation expense would result in an understatement of the actual

costs of producing the subject merchandise. We have therefore included

this item in Columbus's COP. Further discussion of the precise nature

of these depreciation expenses necessitates reference to business

proprietary information. For a full discussion of this depreciation

adjustment see the Department's Cost Calculation Memorandum (Final).

Comment 15: Columbus's Costs for Ferrochrome. Both petitioners and

Columbus make affirmative arguments on Columbus's reported costs for

input ferrochrome used in producing stainless steel. Petitioners,

noting that Columbus purchases ferrochrome from an affiliated party,

submit that Columbus should have reported the supplier's cost of

production for ferrochrome and the supplier's prices for ferrochrome

sold to unaffiliated customers. Despite the Department's specific

requests (and petitioners' comments on this specific issue),

petitioners maintain that Columbus failed to provide this information,

relying instead upon the transfer prices between the affiliated

supplier and Columbus to value its ferrochrome inputs. Petitioners

argue that, consistent with the findings of the Department's cost

verification, the Department must disregard the transfer prices between

Columbus and its affiliated supplier and instead use market prices as

quoted in the Metal Bulletin to value ferrochrome.

Conversely, Columbus argues that the Department should rely upon

the ferrochrome prices it reported in its COP response. Columbus

maintains that the reason it did not submit the cost and price data of

its affiliated supplier is because it does not have access to the

affiliated supplier's cost data, not due to any lack of willingness or

diligence on its part. In any event, Columbus asserts, verification

demonstrated that the prices Columbus paid the affiliate for

ferrochrome were at arm's length, as required by the terms of the joint

venture agreement. Columbus insists that the international benchmark

price data it provided at verification further attest to the

reasonableness of its reported ferrochrome costs. While claiming that

Columbus has no access to its affiliated supplier's cost data, Columbus

avers that it is clear that the supplier is a profitable concern. The

supplier's financial statements, reviewed at the cost verification,

reveal that ferrochrome production is a major business activity for the

supplier and that Columbus was one of the supplier's largest purchasers

of ferrochrome. According to Columbus, the supplier ``is a profitable,

successful supplier of ferrochrome, and it could not be so if it were

selling ferrochrome below its cost of production.'' Columbus's Case

Brief at 17. Further, Columbus charges, the suggestion that the

supplier would sell ferrochrome at below-cost prices to an affiliate in

which it has only a one-third share is ``contrary to all evidence and

to logic,'' as any such below-cost sales would redound to the benefit

primarily of the other shareholders, and not to the supplier. Columbus

closes by asserting that there is no evidence that the ferrochrome

prices are not at arm's length or that these prices are below the

supplier's cost of production. Therefore, Columbus insists, there are

no grounds for disregarding the affiliated supplier's prices in valuing

this input.

In rebuttal petitioners suggest Columbus's direct presentation

``makes no new arguments, only repeat[ing] the ones the Department has

rejected in the past.'' Petitioner's Rebuttal Brief at 10. In fact,

petitioners continue, Columbus admits in its case brief that the so-

called arm's-length prices it pays are then adjusted for certain

expenses. Id. at 11 and n.38. ``These adjustments,'' petitioners aver,

``are exactly the kinds of things the Department wants and needs to

scrutinize but could not because Columbus has not provided the

necessary information.'' Further, in petitioners' view Columbus failed

to demonstrate that it had no access to its affiliated supplier's cost

data, and ``totally disregarded petitioners' suggestion'' that the

affiliated supplier provide its cost data directly to the Department

(thus bypassing its customer Columbus and protecting these data from

disclosure). Petitioners also reject Columbus's argument that it would

be neither reasonable nor logical for its affiliated supplier to

provide Columbus ferrochrome at less than its cost of production.

Rather, petitioners insist, ``these intertwining relationships are

exactly the reason the Department has requested the information'' on

the affiliate's cost and pricing to unaffiliated customers. Id. at 12

(original emphasis). Petitioners point to Columbus's ``nebulous'' price

adjustments, inconsistent statements, and lack of documentation as

bases for disregarding Columbus's acquisition prices for ferrochrome.

As petitioners frame it, ``Columbus has said, in effect, `trust us.' ''

Id. The Department cannot do so, petitioners argue, and must therefore

base ferrochrome costs on published market prices.

Columbus, in turn, claims it provided ``everything it could'' to

support its contention that its ferrochrome costs reflected arm's-

length and above-cost prices. The sole reason Columbus failed to

provide the affiliated supplier's cost of production, Columbus avers,

is that it simply did not have access to the information. Thus,

Columbus insists, Columbus did not ``choose not to, but could not

supply'' the requested data. Columbus's Rebuttal Brief at 23 (original

emphasis). Columbus characterizes petitioners' comparison of its

ferrochrome costs to international prices as spurious, accusing

petitioners of comparing Columbus's ex-works price per metric ton of

ferrochrome to the published delivered price per pound of chrome

(ferrochrome is 52 percent chrome). If one converts Columbus's price

appropriately and adjusts for commissions, international freight and

delivery expenses, Columbus suggests, one arrives at a price ``entirely

in line with international prices.'' Id. Columbus reiterates that there

is no evidentiary basis for the Department to believe or suspect that

the affiliated supplier's prices for ferrochrome are below either its

cost of production or arm's-length prices. The Department, therefore,

must use Columbus's reported ferrochrome prices in calculating COP.

Department's Position: We agree with petitioners that, in

accordance with section 776 of the Tariff Act, we should use the facts

available to determine Columbus's ferrochrome costs. Sections 773(f)(2)

and (3) of the Tariff Act specify the treatment of transactions between

affiliated parties for purposes of reporting cost data (used in

determining both COP and CV) to the Department. Section 773(f)(2)

states that the Department may disregard such transactions if the

amount representing that element (the transfer price) does not fairly

reflect the amount usually reflected (typically the market price) in

the market under consideration. Under these circumstances the

Department may rely on the market price to value inputs purchased from

affiliated parties.

Section 773(f)(3) states that if transactions between affiliated

parties involve a major input, then the Department may value the major

input based on its COP if the cost is greater than the amount that

would be determined under 773(f)(2) (i.e., the higher of the transfer

or market price). Additionally, section 773(f)(3) applies if the

Department ``has reasonable grounds to believe or suspect that an

amount represented as the value of such input is less than the COP of

such input,'' the Department may disregard that price. See also, 19 CFR

351.407(b) (the Department will determine the value of a major input

purchased from an affiliate based upon the higher of

[[Page 15475]]

transfer price, market price, or the affiliate's cost of producing the

input). The Department generally finds that such ``reasonable grounds''

exist where it has initiated a COP investigation of the subject

merchandise (see, e.g., 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, 13218

(March 18, 1998), and Silicomanganese from Brazil; Final Results of

Antidumping Duty Administrative Review, 62 FR 37869, 37871 (July 15,

1997).

Because petitioners timely filed an allegation of sales below cost

providing ``reasonable grounds to believe or suspect'' that Columbus

made sales of the foreign like product in South Africa at prices below

its COP, on August 24, 1998, we directed Columbus to respond to section

D of our original antidumping questionnaire. See Letter from Richard

Weible to Columbus, August 24, 1998. That questionnaire explicitly

instructed Columbus to report the unit COP incurred to produce the

major inputs obtained from affiliated suppliers. Our October 7 and

October 23, 1998, supplemental questionnaires reiterated this

instruction specifically for the affiliated purchases of ferrochrome

(see questions 13 and 8, respectively). Columbus asserted that it did

not have access to the affiliate's COP of ferrochrome and argued that

it was sufficient that the affiliated party transactions were at arm's

length. However, Columbus failed to provide evidence that the prices it

paid the affiliate for ferrochrome were at arm's length. Moreover,

Columbus's argument that its purchases of ferrochrome from its

affiliate were at arms's length prices does not satisfy the requirement

that the transfer price be above the affiliated supplier's actual COP.

In the absence of COP for the major input ferrochrome, the

Department was unable to perform an analysis to determine whether the

transfer prices were at or above the affiliated supplier's COP. Section

776(a) of the Act requires that the Department use the facts otherwise

available when necessary information is not on the record or an

interested party withholds requested information, fails to provide such

information in a timely manner, significantly impedes a proceeding, or

provides information that cannot be verified.

Due to Columbus's failure to provide the affiliated party's

ferrochrome COP we cannot determine whether the reported transfer

prices are at or above COP. As a result we find that we must rely upon

the facts otherwise available for the cost of ferrochrome purchased

from the affiliate. In this case Columbus did not provide any evidence

indicating that it even attempted to obtain the affiliate's COP data,

or otherwise supporting its claim that it could not obtain the

requested data. Therefore, we determine that Columbus failed to act to

the best of its ability to comply with these requests for information;

accordingly we are making an adverse inference in selecting among the

facts otherwise available, as provided in section 776(b) of the Tariff

Act.

Columbus's ferrochrome transfer price is below the international

market price as published in the Metals Bulletin submitted by Columbus

for the record of this investigation. We have therefore increased

Columbus's prices for ferrochrome by adding the difference between

Columbus's transfer price plus estimated freight and the market price

(delivered, customer's works, major European destination) as published

in the Metals Bulletin. We have not included the other adjustments

proposed by Columbus (e.g., commissions) since it is not clear from the

record to what extent these other items are included in the Metals

Bulletin price. Finally, we note that, contrary to Columbus's

assertion, a net profit reflected in the affiliated supplier's

financial statements does not provide evidence that its transfer prices

were above COP, since such aggregated revenue and cost-of-sales data

would include all products sold by the affiliated supplier to all

customers.

Comment 16: Allocation of Variances. Petitioners accuse Columbus of

failing to allocate properly two specific variances by including these

variances in its reported COP. ``Since the amount should be included in

Columbus's costs, and since the amount is known, the Department should

adjust Columbus's COM by adding the (specific) variance(s) to it.''

Petitioners' Case Brief at 22 and 23.

Columbus agrees that it inadvertently omitted one variance and

slightly understated another when preparing its COP response, and that

both variances should be accounted for in correcting Columbus's COP.

Columbus's Rebuttal Brief at 24.

Department's Position: We agree with Columbus and petitioner that

these variances should be applied to the reported COM. Therefore, we

have included both variances in the COM for this final determination.

Comment 17: Allocation of Costs Based on Product Characteristics.

According to petitioners, Columbus failed to account for differing

physical characteristics of its products in allocating its costs of

production. Petitioners maintain that factors such as the processing

steps (e.g., the number of passes through a given rolling mill) and

processing times 9 will vary for different stainless steel

products with these differences reflected in the costs of manufacture.

Petitioners suggest that the Department can recalculate Columbus' COP

by backing out certain costs associated with the different production

cost centers (roughing mill, Steckel mill, annealing and pickling) and

allocating them back on the basis of product specifications. For

example, roughing and Steckel mill costs could be allocated on the

basis of production quantities and either the number of passes,

processing time, or both. It would be clearly wrong, petitioners

insist, for merchandise with different specifications to have the same

COP; the Department, therefore, must recalculate Columbus' COM to

account for these differences.

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

\9\ Petitioners bracketed this information in keeping with the

draft copy of the Cost Verification Report they had at the time they

prepared their case and rebuttal briefs. Columbus, however,

discusses this issue publicly. See, e.g., Columbus' Rebuttal Brief

at 25.

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

Columbus argues that any significant cost differences attributable

to physical differences have been captured by its normal cost

accounting system. As for differences which are not captured, Columbus

insists these differences are both insignificant and unquantifiable.

Columbus' Rebuttal Brief at 25. For example, the number of passes

required at the Steckel mill depends on such factors as the temperature

and condition of the steel, and not just the final physical

characteristics as the product passes to the next work station. Thus,

Columbus submits, ``[t]here is no straight correlation'' between the

product's physical characteristics and the processing time required at

each station. Columbus maintains that it quite properly did not report

cost differences which could not be substantiated through empirical

observation or through Columbus' normal cost accounting system. Id. at

26.

Department's Position: We agree with petitioners that differences

in the cost of producing the subject merchandise due to differences in

physical characteristics should be accounted for in the reported COP

and CV. While we have determined in this case that the cost differences

due to certain physical characteristics are either insignificant or are

adequately taken into account by Columbus' reporting methodology, we

have adjusted the reported costs for certain other physical

characteristics. A full

[[Page 15476]]

discussion of this issue necessarily involves a discussion of business

proprietary information; see the Cost Calculation Memorandum (Final).

Comment 18: COP Allocated on the Basis of Sales Volumes Rather than

Production Volumes. Petitioners note that Columbus reported its

weighted-average costs based on sales quantities rather than production

quantities, as requested by the Department. Since the Department has

data on Columbus' production quantities, petitioners insist, the

Department should recalculate Columbus' weighted-average COP on that

basis.

Columbus counters that its records kept in the normal course of

business track costs based on tons sold, not tons produced. Further,

Columbus avers, the Department is investigating sales during the POI,

not production during the POI. To avoid distorting Columbus' costs,

Columbus argues, the Department should calculate COP on the same basis

as does Columbus in its ordinary course of business. Columbus' Rebuttal

Brief at 26.

Department's Position: We agree with petitioners that costs should

be weight-averaged using production quantities. As noted in Comment 12,

above, it is the Department's long-standing practice to calculate COP

and CV based on the cost of manufacturing the subject merchandise

produced during the POI, rather than on a COGS figure and its

associated sales quantity, which includes inventory changes during the

POI. Moreover, since the costs the Department is relying upon only

include the costs for products produced during the POI, the

corresponding production quantities must also serve as the appropriate

base for allocation. Therefore, we have used the quantities produced

during the POI (i.e., the quantities corresponding to the submitted

COM) rather than quantities sold to calculate weighted-average COP and

CVs.

Continuation of Suspension of Liquidation

In accordance with section 735(c)(1)(B) of the Tariff Act, we are

directing the Customs Service to suspend liquidation of all imports of

subject merchandise that are entered, or withdrawn from warehouse, for

consumption on or after November 4, 1998, the date of publication of

the Preliminary Determination in the Federal Register.

Article VI.5 of the General Agreement on Tariffs and Trade (GATT

1994) provides that ``[n]o product . . . shall be subject to both

antidumping and countervailing duties to compensate for the same

situation of dumping or export subsidization.'' This provision is

implemented in section 772(c)(1)(C) of the Tariff Act. Since

antidumping duties cannot be assessed on the portion of the margin

attributed to export subsidies there is no reason to require a cash

deposit or bond for that amount. The Department has determined in its

Final Affirmative Countervailing Duty Determination: Stainless Steel

Plate in Coils From South Africa that the product under investigation

benefitted from export subsidies. Normally, where the product under

investigation is also subject to a concurrent countervailing duty

investigation, we instruct the Customs Service to require a cash

deposit or posting of a bond equal to the weighted-average amount by

which the NV exceeds the EP, as indicated below, minus the amount

determined to constitute an export subsidy. See, e.g. Notice of

Antidumping Duty Order: Stainless Steel Wire Rod From Italy, 63 FR

49327 (September 15, 1998). Accordingly, for cash deposit purposes we

are subtracting from Columbus' cash deposit rate that portion of the

rate attributable to the export subsidies found in the countervailing

duty investigation involving Columbus (i.e., 3.84 percent). We have

made the same adjustment to the ``All Others'' cash deposit rate by

subtracting the rate attributable to export subsidies found in the

countervailing duty investigation of Columbus.

We will instruct the Customs Service to require a cash deposit or

the posting of a bond for each entry equal to the weighted-average

amount by which the NV exceeds the EP, adjusted for the export subsidy

rate, as indicated below. These suspension-of-liquidation instructions

will remain in effect until further notice. The weighted-average

dumping margins are as follows:

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

Bonding/Cash Deposit Rate

Exporter/Manufacturer Weighted-Average Margin (percent)

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

Columbus Stainless.................................. 41.63% 37.79

All Others.......................................... 41.63% 37.79

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

International Trade Commission Notification

In accordance with section 735(d) of the Tariff Act, we have

notified the International Trade Commission (the Commission) of our

determination. As our final determination is affirmative, the

Commission will determine within 45 days after our final determination

whether imports of stainless steel plate in coils are materially

injuring, or threaten material injury to, the U.S. industry. If the

Commission determines that material injury, or threat thereof, does not

exist, the proceeding will be terminated and all securities posted will

be refunded or canceled. If the Commission determines that such injury

does exist, the Department will issue an antidumping duty order

directing Customs officials to assess antidumping duties on all imports

of the subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the effective date of the suspension of

liquidation.

This determination is issued and published in accordance with

sections 735(d) and 777(i)(1) of the Tariff Act.

Dated: March 19, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-7536 Filed 3-30-99; 8:45 am]

BILLING CODE 3510-DS-P