Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Korea

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-830]

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

Stainless Steel Round Wire from Korea

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: April 9, 1999.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell at

(202) 482-1442 or (202) 482-3813, respectively, Group 1, Office of AD/

CVD Enforcement 2, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, DC 20230.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

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

indicated, all citations to Department of Commerce (Department)

regulations refer to the regulations codified at 19 CFR Part 351 (April

1998).

Final Determination

We determine that stainless steel round wire from Korea is being

sold, or is likely to be sold, in the United States at less than fair

value (LTFV), as provided in section 735 of the Act. The estimated

margins are shown in the Suspension of Liquidation section of this

notice.

Case History

The preliminary determination in this investigation was issued on

November 12, 1998. See Notice of Preliminary Determinations of Sales at

Less Than Fair Value and Postponement of Final Determinations--

Stainless Steel Round Wire From Canada, India, Japan, Spain, and

Taiwan; Preliminary Determination of Sales at Not Less Than Fair Value

and Postponement of Final Determination--Stainless Steel Round Wire

From Korea, 63 FR 64042 (November 18, 1998) (preliminary

determination). Since the preliminary determination, the following

events have occurred:

In January and February 1999, we conducted on-site verifications of

the questionnaire responses submitted by respondent Korea Sangsa Co.,

Ltd. (Korea Sangsa) and its affiliate Korea Sangsa America, Inc.

(KOSA).

The petitioners 1 and the respondent submitted case

briefs on February 26, 1999, and rebuttal briefs on March 5, 1999. We

held a public hearing on March 11, 1999.

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\1\ The petitioners are ACS Industries, Inc., Al Tech Specialty

Steel Corp., Branford Wire & Manufacturing Company, Carpenter

Technology Corp., Handy & Harman Specialty Wire Group, Industrial

Alloys, Inc., Loos & Company, Inc., Sandvik Steel Company, Sumiden

Wire Products Corporation, and Techalloy Company, Inc.

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Scope of Investigation

The scope of this investigation covers stainless steel round wire

(SSRW). SSRW is any cold-formed (i.e., cold-drawn, cold-rolled)

stainless steel product of a cylindrical contour, sold in coils or

spools, and not over 0.703 inch (18 mm) in maximum solid cross-

sectional dimension. SSRW is made of iron-based alloys containing, by

weight, 1.2 percent or less of carbon and 10.5 percent or more of

chromium, with or without other elements. Metallic coatings, such as

nickel and copper coatings, may be applied.

The merchandise subject to this investigation is classifiable under

subheadings 7223.00.1015, 7223.00.1030, 7223.00.1045, 7223.00.1060, and

7223.00.1075 of the Harmonized Tariff Schedule of the United States

(HTSUS). Although the HTSUS subheadings are provided for convenience

and customs purposes, the written description of the merchandise under

investigation is dispositive.

Period of Investigation

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

December 31, 1997. This period corresponds to the respondent's four

most recent fiscal quarters prior to the month of the filing of the

petition (i.e., March 1998).

Fair Value Comparisons

To determine whether sales of stainless steel round wire from Korea

to the United States were made at LTFV, we compared the export price

(EP) or constructed export price (CEP), as appropriate, to the normal

value (NV). Our calculations followed the methodologies described in

the preliminary determination, except as noted below and in the sales

analysis memorandum from Valerie Ellis to Kris Campbell, dated April 2,

1999, which has been placed in the file.

Export Price and Constructed Export Price

We used the same methodology to calculate EP and CEP as that

described in the preliminary determination, except in the following

specific instances:

1. We established two separate averaging periods to account for

the precipitous drop of the Korean won at the end of the POI. See

comment 1.

2. We reallocated indirect selling expenses incurred by Korea

Sangsa's U.S. affiliate entirely to CEP sales. See comment 3.

3. We disallowed the CEP offset that was granted at the

preliminary determination. See comment 4.

Normal Value

We used the same methodology to calculate normal value (NV) as that

described in the preliminary determination, with the exception that we

averaged normal value for two separate periods to account for the

precipitous drop of the Korean won at the end of the POI. See comment

1.

Cost of Production

We used the same methodology to calculate cost of production (COP)

as that described in the preliminary determination, except in the

following specific instances:

1. We recalculated the G&A expense ratio to include expenses of

affiliates involved in the production of subject merchandise, and to

exclude certain non-operating income. See comment 11.

2. We reduced the cost of manufacturing by the sale of scrap.

See comment 12.

3. We reduced the cost of manufacturing by the rental income.

See comment 12.

4. The interest expense ratio was recalculated to create a

combined ratio including all affiliates. See comment 13.

5. We recalculated the net cost of goods sold used in the G&A

and interest expense ratio calculation to include the sales value of

inter-company sales. See comment 13.

Currency Conversions

As explained in the preliminary determination, our analysis of

Federal Reserve data on the U.S. dollar-Korean won exchange rate showed

that the won declined rapidly at the end of 1997, losing over 40

percent of its value between the beginning of November and the end of

December. The decline was, in both speed and magnitude, many times more

severe than any change in the dollar-won exchange rate during the

previous eight years. Had the won rebounded quickly enough to recover

all or almost all of the initial loss, the Department might have

considered the won's decline at the end of 1997 as nothing more than a

sudden but only momentary drop, despite the magnitude

[[Page 17343]]

of that drop. As it was, however, there was no significant rebound.

Therefore, we have not changed our preliminary determination that the

decline in the won at the end of 1997 was so precipitous and large that

the dollar-won exchange rate cannot reasonably be viewed as having

simply fluctuated during this time, i.e., as having experienced only a

momentary drop in value. As a result, in making this final

determination, the Department has continued to use daily rates

exclusively for currency-conversion purposes for home market sales

matched to U.S. sales occurring between November 1, 1997, and December

31, 1997. Further, as discussed in Comment 1, below, we have considered

these two months as a separate averaging period from the first ten

months of the POI.

Interested Party Comments

A. Sales Issues

Comment 1: Averaging Periods. The petitioners argue that the

Department should account for the effect of the severe depreciation of

the Korean won toward the end of the POI by relying on separate

averaging periods corresponding to the pre-and post-depreciation

periods. According to the petitioners, the Department's regulations

provide that average-to-average price comparisons may be performed over

periods shorter than the POI where the normal values, export prices, or

constructed export prices for sales in an averaging group differ

significantly over the POI. The petitioners contend that if the

Department does not rely on two separate averaging periods in this

case, the respondent's dumping throughout the majority of the POI will

be masked by the effect of the devalued Korean currency in the last few

months of the period. The petitioners request that the averaging

periods be divided using fiscal quarters (i.e., the first period

corresponding to the first three quarters of 1997, the second period

corresponding to the last quarter).

Korea Sangsa argues that the Department's established currency

conversion policy fully accounts for the effects of the devaluation of

the Korean won, and that there is no legal basis or rational need for

any additional adjustment. According to the respondent, its pricing

behavior and selling activities in the U.S. and home markets did not

change throughout the POI, and the company should not be penalized for

currency movements outside of its control.

DOC Position: We agree with the petitioners that separate averaging

periods should be used. Under section 777A(d)(1)(A) of the Act , the

Department has wide latitude in calculating the average prices used to

determine whether sales at less than fair value exist. More

specifically, under 19 CFR 351.414(d)(3), the Department may use

shorter averaging periods where normal value varies significantly over

the POI. In the instant case, NV (in dollars) in the last two months of

the POI differs significantly from NV earlier in the POI due primarily

to a significant change in the underlying dollar value of the won. This

significant change is evidenced by the precipitous drop in the won's

value that began in November 1997 and continued through the end of the

POI, without a quick, significant rebound. In the span of two months,

the won's value decreased by more than 40 percent in relation to the

dollar. Consequently, it is appropriate to use two averaging periods to

avoid the possibility of a distortion in the dumping calculation.

Moreover, we disagree with respondent's claim that the use of averaging

periods is dependent upon a change in a respondent's selling practices.

We note that in Notice of Final Determination of Sales at Less Than

Fair Value: Certain Preserved Mushrooms from Indonesia, 63 FR 72268,

72272 (December 31, 1998), the Department stated that ``in addition to

changes in selling practices, we believe that we should also consider

other factors, such as prolonged large changes in exchange rates, in

determining whether it is appropriate to use more than one averaging

period.'' Therefore, we have used two averaging periods for the final

determination, and calculated a weighted average of the resulting

margins. Because the rapid devaluation of the Korean won began in

November 1997, we have defined the first period to extend from January

through October, and the second period from November through December.

We note that, as explained above in Currency Conversions, we have

continued to use daily exchange rates for the period November through

December 1997.

Comment 2: Correction of Errors at Verification. The petitioners

allege that the errors identified by Korea Sangsa at the outset of

verification were so extensive that the Department should not accept

these corrections without penalty. Korea Sangsa claims that the

Department found no significant errors at verification and should

continue to rely on the company's verified data.

DOC Position: We do not agree that Korea Sangsa's errors were so

pervasive as to warrant the application of adverse facts available. It

is standard Department practice to accept corrections of minor errors

identified by a respondent at the outset of verification. See Notice of

Final Determination of Sales at Less Than Fair Value: Static Random

Access Memory Semiconductors from Taiwan, 63 FR 8909, 8929 (February

23, 1998). The errors identified by Korea Sangsa affected only a few

variables (e.g., invoice number, credit expenses) with respect to a

small percentage of sales. See Korea Sangsa sales verification report,

dated February 19, 1999, at 2. Based on established verification

procedures, we are satisfied that the revised information presented at

the outset of verification was correct, and have relied on this

information for this final determination.

Comment 3: Allocation of Indirect Selling Expenses to CEP Sales.

The petitioners argue that the Department should allocate U.S. indirect

selling expenses incurred by the respondent's U.S. affiliate (KOSA)

entirely to CEP sales, and not EP sales, since KOSA performs negligible

activities in connection with EP sales.

Korea Sangsa asserts that while KOSA plays a limited role with

respect to EP sales, at least a portion of the indirect selling

expenses are properly allocable to these sales, and provided separate

EP and CEP ratios to support its proposed allocation.

DOC Position: We agree with the petitioners that U.S. indirect

selling expenses should be allocated only to CEP sales. The record

indicates that KOSA's role with respect to EP sales is limited to the

transmittal of purchase orders to its parent company in Korea and the

occasional receipt of payment, whereas KOSA plays a much more active

role with respect to CEP sales. The methodology advanced by the

respondent allocates slightly more expenses to CEP sales than to EP

sales, but this result reflects merely that the company's reported

sales had a higher ratio of CEP to EP sales than did the company's

total sales, and does not capture the fact that, in terms of selling

activities, KOSA also plays a significantly more active role with

respect to CEP sales. Since the respondent has not isolated the

expenses associated with the negligible role played by the affiliate

with respect to the EP sales, we have allocated the expenses in

question entirely to CEP sales.

Comment 4: CEP Offset. The petitioners argue that Korea Sangsa

should not be granted a CEP offset, given findings at verification

confirming that there is no difference in selling functions in the home

and U.S. markets.

[[Page 17344]]

Korea Sangsa asserts that the Department should continue to grant

the CEP offset. The respondent claims that normal value in this case

includes several selling functions not found in the adjusted CEP,

including the arrangement of freight and warehousing, as well as direct

selling expenses such as the arranging of bank transactions for local

letter of credit sales.

DOC Position: We agree with the petitioners that a CEP offset is

not appropriate given the facts of this case. The record indicates that

the respondent's selling functions in the home market are very limited,

and do not extend significantly beyond those performed with respect to

its U.S. affiliate. Although Korea Sangsa arranges for movement of the

merchandise on behalf of its home market customers, it also arranges

for movement of the merchandise to its U.S. affiliate. Korea Sangsa

does arrange banking transactions for local letter of credit sales as

well as cutting services, but such functions were performed for only a

small percentage of all home market sales during the POI. Given that

the selling functions performed with respect to home market customers

do not differ significantly from those performed with respect to the

U.S. affiliate, we find that sales to both home market and U.S.

customers are made at the same level of trade, so that a CEP offset is

not necessary. This is consistent with similar determinations in recent

cases. See, e.g., Industrial Nitrocellulose From the United Kingdom;

Notice of Final Results of Antidumping Duty Administrative Review, 64

FR 6609, 6614 (Feb. 10, 1999).

Comment 5: U.S. Credit. The petitioners argue that the Department

should impute a credit expense for all sales in which reported payment

date occurred after the reported ship date.

Korea Sangsa asserts that for a number of sales involving letters

of credit, it presented the sales documents to its bank upon shipment

and immediately obtained from the bank the invoice value of the

transaction. The respondent further claims that the bank levied a

discount charge for the period between shipment and estimated customer

payment to the bank, which Korea Sangsa reported as a bank charge.

Korea Sangsa contends that the Department should not impute an

additional credit expense for these sales. The respondent also contends

that it reported imputed credit expenses for all other sales.

DOC Position: We agree with Korea Sangsa that, for EP sales where

the respondent receives payment from its bank immediately upon

shipment, there is no need to impute a credit expense. For such sales,

as in the preliminary determination, we have made an adjustment for the

charges levied by the bank, which constitute actual interest expenses

arising from the lag between the date of shipment and the date of

customer payment. For all other sales, to the extent that the date of

payment follows the date of shipment, we have made adjustments for

imputed credit expenses.

Comment 6: Clarification of Matching Methodology. The petitioners

request that the Department clarify its policy with respect to

situations where there are two equally similar home market products (in

terms of physical characteristics) that could serve as comparison

merchandise for a given U.S. product. The petitioners note that the

Department has in the past either (1) relied on an average of the

prices of the two products, or (2) selected the home market product

with the more similar variable cost. The petitioners note that the

Department followed the latter approach in the preliminary

determination, and contend that the former approach is more sensible.

Korea Sangsa argues that the Department should continue to find the

most similar home market match as in the preliminary determination.

DOC Position: In situations where, based on the reported product

characteristics, there are two or more ``equally similar'' home market

products, we have in the past relied on the home market product with

the closest variable cost of manufacture to that of the U.S. product.

See, e.g., Certain Welded Carbon Steel Pipes and Tubes From India;

Final Results of Antidumping Duty Administrative, 63 FR 32825 (June 16,

1998). We have followed this methodology for the final determination.

Comment 7: Packing Form/Model Matching. The petitioners suggest

that the Department may want to consider the appropriateness of

including packing form in the model matching criteria for the purpose

of making price to price comparisons.

Korea Sangsa claims that, given the lack of any findings at

verification suggesting that form affects price comparability, the

Department should not incorporate packing form into the model match

methodology.

DOC Position: We agree with Korea Sangsa that packing form should

not be incorporated into the model match methodology. The petitioners

have not provided evidence that packing form is a consideration in

pricing in the wire industry generally, and our analysis of the

respondent's pricing data suggests no clear correlation between wire

prices and packing form. Therefore, the Department has determined that

there is no basis for including these criteria in our model matching.

Comment 8: Grade Comparisons. Korea Sangsa argues that the

Department erred in comparing U.S. sales of grade 302 wire to home

market sales of grade 303 wire, rather than to sales of more similar

grade 304 wire. According to Korea Sangsa, it is commonly accepted in

the wire industry that grade 302 and 304 wire are generally

interchangeable and used in non-free-machining applications, whereas

the grade 303 wire sold by Korea Sangsa contains significant amounts of

copper, sulfur, and other chemical elements (which the other two grades

lack), and is used for free-machining applications. Korea Sangsa

suggests that the Department can correct this error with a revision to

the results of the program used to determine similarity of grades, by

modifying the values assigned to the specific grades in question.

According to the petitioners, the Department should consider

general comments on matching methodologies, and not consider requests

for ad hoc revisions to the results of those methodologies. The

petitioners argue that the respondent's objection to the Department's

model matching is based on a limited comparison of two specific grades,

and does not advance a comprehensive approach to matching of grades.

DOC Position: We agree with the petitioners. Although Korea Sangsa

has provided evidence that in certain respects grade 302 wire is more

similar to grade 304 wire than to grade 303 wire (for instance, that

grades 302 and 304 contain little or no copper or sulfur, while grade

303 contains significant amounts of those elements), the respondent has

not addressed the methodology used in the preliminary determination for

purposes of determining grade similarity. This methodology relied on

the standard chemical composition of each grade, and ranked four

chemical elements (nickel, molybdenum, chromium, and carbon) in a

hierarchy. Rather than propose a systematic revision to this hierarchy

with respect to copper, sulfur, and other elements, the respondent has

identified a specific unfavorable result of the Department's

methodology, and proposed an ad hoc change to this result. Absent

comments from interested parties on the relative importance of copper,

sulfur, and other elements, we have no way of gauging what other grade

comparisons might be affected by consideration of those elements.

[[Page 17345]]

Therefore, we have continued to rely on the methodology for

determination of grade similarity that was used in the preliminary

determination.

Comment 9: Overdraft Rates. Korea Sangsa asserts that the

Department should include the company's overdraft rate in the

calculation of short-term lending rates during the POI. According to

Korea Sangsa, in the preliminary determination the Department deviated

from its practice of basing the interest rate for the calculation of

imputed credit on all short-term borrowing, including overdraft loans.

The respondent cites to two determinations in which the Department

relied on overdraft rates: Preliminary Affirmative Countervailing Duty

Determination and Alignment of Final Countervailing Duty Determination

With Final Antidumping Duty Determination: Stainless Steel Plate in

Coils From Italy, 63 FR 47246 (Sept. 4, 1998), and Extruded Rubber

Thread From Malaysia: Final Results of Countervailing Duty

Administrative Review, 62 FR 48985 (Sept. 18, 1997).

The petitioners do not specifically address the issue of overdraft

rates, stating that the Department has discretion to determine the

appropriate basis for calculating the respondent's home market

borrowing rate. However, the petitioners note that the rate reported by

Korea Sangsa appears to be overstated. The petitioners point out that

the interest rate reported by the respondent is above the range of

rates listed in the company's audited financial statements.

DOC Position: We disagree with Korea Sangsa that the reported

overdraft rates should be included in the calculation of imputed

credit. For purposes of calculating imputed credit expenses, it is the

Department's policy to use a short-term interest rate tied to the

currency in which the sales are denominated. We will base this interest

rate on the respondent's weighted-average short-term borrowing

experience in the currency of the transaction. See Policy Statement 98-

2. In this case, the overdraft rate in question is several times higher

than the respondent's regular short-term borrowing rate, and does not

appear to bear any relation to normal commercial borrowing by the

respondent (the total POI amount of overdraft borrowing, when compared

to the total amount of regular short-term borrowing, indicates that

overdraft borrowing is exceptionally rare).

The countervailing duty cases cited by the respondent are

inapposite, in that they did not involve the calculation of imputed

credit. (For example, in Stainless Steel Plate in Coils from Italy, we

used overdraft rates to calculate benchmarks on long-term (rather than

short-term) loans, in connection with the valuation of subsidies in

Italy.) The respondent has not identified any precedent establishing

that the Department's practice is to include overdraft rates

(especially aberrationally high overdraft rates) in the calculation of

short-term interest rates for purposes of calculating imputed credit.

Given this, we have continued to exclude these rates from the

calculation of the home market short-term interest rate. Regarding the

petitioners' claim that the reported interest rate is inconsistent with

the range of rates in the notes to the financial statements, we found

at verification that the reported rate was consistent with the

respondent's books and records.

B. Cost Issues

Comment 10: Inflation/Cost Averaging. The petitioners argue that

there was significant inflation in Korea during the POI, as evidenced

by the increase in Korea Sangsa's cost in won for one grade of wire

rod, the principal input used in the production of round wire. The

petitioners contend that, given such inflation, the Department should

index Korea Sangsa's monthly costs and perform monthly cost and price

comparisons.

Korea Sangsa claims that Korea did not suffer significant inflation

during the POI. The respondent contends that neither the Korean

consumer price index nor the producer price index for the period

indicate a rate of inflation even approaching the level at which the

Department will normally consider making an adjustment. The respondent

also asserts that the petitioners' allegations regarding Korea Sangsa's

wire rod purchases are misleading, and that in fact, the price of at

least one grade of wire rod actually decreased for some months of the

POI. Finally, while the respondent concedes that there may have been

some inflationary pressure on the company in the final month of the

POI, the respondent asserts that such pressure could not have been

reflected in the costs of production of merchandise sold during the

POI.

DOC Position: We disagree with the petitioners that monthly costs

should be indexed for inflation and that we should perform monthly cost

and price comparisons. Based on our assessment of information on the

record, we find that the inflation rate in Korea during the POI was not

significant enough to warrant any adjustment to our calculation

methodology. The Department uses a different calculation methodology

for economies experiencing high inflation. This is because money can

lose purchasing power at such a rate that comparison of transactions

that have occurred at different times, even within the same POI, are

misleading. The annualized inflation rate during the POI did not reach

such levels in this case. Therefore, we have continued to rely on the

methodology for price and cost comparisons that was used in the

preliminary determination.

Comment 11: Calculation of G&A Expenses. The petitioners claim that

the Department should revise its calculation of G&A expenses to reflect

findings at verification, namely to include: (1) exchange losses

experienced by collapsed affiliate Korea Welding Electrode Co., Ltd.

(Koweld) in connection with accounts payable, (2) amounts for actual

payments of severance indemnities, and (3) amounts for ``special'' and

extraordinary depreciation.

Korea Sangsa contends that, to the extent that the Department finds

it necessary to include Koweld's exchange losses in the G&A ratio, the

Department should also adjust the G&A ratio to reflect Koweld's

offsetting exchange gains. With respect to severance payments and

depreciation, the respondent claims that all such costs were correctly

reported and verified, and therefore, no revisions are necessary for

the final determination.

DOC Position: We agree with petitioner that the foreign exchange

losses realized in connection with loans and accounts payable should be

included in the COP and CV calculations. It is the Department's

practice to distinguish between exchange gains and losses generated by

sales transactions and those generated by loans payable and the

purchases of production inputs. See Notice of Final Results and Partial

Recission of Antidumping Duty Administrative Review: Certain Welded

Carbon Steel Pipe and Tube from Turkey, 63 FR 35190, 35198 (June 29,

1998). The Department typically excludes from the COP and CV

calculation those foreign exchange gains and losses generated by sales

transactions because we do not consider them to relate to the

manufacturing activities of the company. See Notice of Final

Determination of Sales at Less Than Fair Value: Steel Wire Rod from

Trinidad and Tobago, 63 FR 9177, 99182 (February 24, 1998). We also

agree with respondents that the offsetting foreign exchange gains

realized in connection with accounts payable and loans should be

included in the COP and CV calculations. Thus, we

[[Page 17346]]

have included both exchange gains and losses in our calculation of COP

and CV.

We disagree with the petitioners that the actual payments for

severance indemnities should be included in the calculation of G&A

expenses. Annually, the respondent accrues in its accounting books and

records amounts for severance indemnities. The actual severance

payments to employees are not recorded as expenses to Korea Sangsa.

Rather, the annual accrual is recorded as an expense in the books and

records of the company. We agree with Korea Sangsa that it correctly

reported the provision for severance payments in its reported costs.

Accordingly, we made no adjustment for actual severance payments in

Korea Sangsa's G&A expense calculation.

We disagree with the petitioners that respondents have not included

``special and extraordinary'' depreciation expenses in the reported

costs. We note from our verification that Korea Sangsa included regular

and special depreciation in its calculation of the cost of

manufacturing. In addition, depreciation expense related to assets used

in the general operations of the company were included in the reported

G&A expenses. See cost verification exhibit 9. Thus, we made no

adjustment to Korea Sangsa's reported costs.

Comment 12: Offset to Costs for Rental Income and Scrap Revenues.

Korea Sangsa asserts that the Department should allow an offset to

reported costs for income from the rental of machinery to affiliated

parties, as well as from revenues from the sale of scrap.

The petitioners contend that Korea Sangsa has not shown that the

machinery in question was related to production activities, and

therefore no offset should be granted in connection with the rental of

that machinery. The petitioners also assert that to the extent that the

Department allows an offset for revenue from the sale of scrap, it

should also reduce the respondent's cost of sales by any revenue from

the sale of scrap in order to ensure that the interest and G&A expense

ratios are calculated on the same basis as the cost of manufacture

figure to which they are applied.

DOC Position: We agree with Korea Sangsa that in this instance the

rental income that represents amounts paid by collapsed affiliate Myung

Jin. Co. (MJC) to Korea Sangsa should be allowed as an offset to the

cost of manufacture. It has been determined for this proceeding that

MJC and Korea Sangsa should be collapsed into a single entity for cost

and sales reporting purposes. Thus, if the income from the rental of

the equipment is not used to offset the cost incurred by Korea Sangsa,

costs would be double counted, first as maintenance and depreciation

costs to Korea Sangsa, and second as a rental expense included in

factory overhead for MJC's Daesong Factory. Therefore, for the final

determination, we have reduced the cost of manufacture for the rental

income.

With respect to the issue of scrap, we also agree with Korea

Sangsa. It is Department practice to allow an offset to cost of

manufacturing by revenue generated from sales of scrap. See, e.g.,

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

Stainless Steel Wire Rod from Taiwan, 63 FR 40461, 40472 (July 29,

1998). In keeping with this practice, we will allow this offset for the

final determination. Further, we agree with the petitioners that the

interest and G&A ratios should be calculated on the same basis as the

cost of manufacturing figure to which they are applied. Therefore,

since we have reduced cost of manufacturing by the revenue generated

from the sales of scrap and rental income, we have also reduced the

denominator used in the G&A and interest expense calculation.

Comment 13: Elimination of Inter-Company Sales. Korea Sangsa

asserts that it has correctly eliminated inter-company sales from the

cost-of-goods sold (COGS) denominator used to calculate the G&A and

interest ratios. The respondent contends that it is appropriate to

reduce that denominator by the cost of those sales (i.e., the price

paid by the respondent to an unaffiliated supplier for merchandise that

the respondent resold to an affiliate), rather than by the sales value

of those transactions (i.e., the price paid by the affiliate to the

respondent for that merchandise).

The petitioners claim that COGS denominator should be reduced by

the cost of the inter-company sales to the respondent's affiliate,

which is based on the sales value realized by Korea Sangsa.

DOC Position: We agree with the petitioner that the COGS

denominator should be reduced by the transfer price between affiliates.

If the Department reduced the denominator by only the amount paid by

the respondent to an unaffiliated supplier for the purchase of the

merchandise in question, it would leave in that denominator an element

of profit or loss realized by the respondent upon resale of the

merchandise to its affiliate, thus not fully eliminating the effect of

the inter-company sales. Therefore, we have used the sales value of the

inter-company sales to calculate net COGS used in the G&A and interest

ratio calculations.

Comment 14: Allocation of Packing Labor Costs. The petitioners

contend that the Department determined that packing for the U.S. and

home markets was identical, but that at verification the Department

found that packing labor had been allocated disproportionately to U.S.

products. According to the petitioners, this discrepancy calls into

question the general reliability of the reported packing costs,

warranting the application of facts available.

Korea Sangsa asserts that it has correctly allocated packing labor

costs to home market and U.S. products, and that no adjustment to this

allocation is necessary for the final determination.

DOC Position: We disagree with the petitioners that the application

of facts available is appropriate. At verification, we confirmed that

the pool of packing costs allocated to round wire sold in the U.S. and

home markets included all appropriate costs. We also observed that

labor involved in packing merchandise for both the U.S. and home

markets did not appear to vary, and noted that the respondent appeared

to have slightly over-allocated packing labor cost to U.S. products.

Upon review, we have determined that the allocation of packing labor

costs appears reasonable. Accordingly, no adjustment was necessary.

Suspension of Liquidation

In accordance with section 735(c)(1)(C) of the Act, we are

directing the Customs Service to suspend liquidation of all entries of

stainless steel round wire from Korea, that are entered, or withdrawn

from warehouse, for consumption on or after the date of publication of

the final determination in the Federal Register. The Customs Service

shall require a cash deposit or the posting of a bond equal to the

weighted-average amount by which the normal value exceeds the EP or

CEP, as indicated in the chart below. These instructions suspending

liquidation will remain in effect until further notice.

The weighted-average dumping margins are as follows:

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

Weighted-

average

Exporter/manufacturer margin

percentage

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

Korea Sangsa............................................... 3.07

All Others................................................. 3.07

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

International Trade Commission (ITC) of our determination. As our final

determination is affirmative, the ITC

[[Page 17347]]

will, within 45 days, determine whether these imports are materially

injuring, or threaten material injury to, the U.S. industry. If the ITC

determines that material injury or threat of material injury does not

exist, the proceeding will be terminated and all securities posted will

be refunded or canceled. If the ITC determines that such injury does

exist, the Department will issue an antidumping duty order directing

the Customs Service 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 published pursuant to sections 735(d) and

777(i)(1) of the Act.

Dated: April 2, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-8928 Filed 4-8-99; 8:45 am]

BILLING CODE 3510-DS-P