[Federal Register Volume 62, Number 72 (Tuesday, April 15, 1997)]
[Notices]
[Pages 18476-18486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9427]
[[Page 18476]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-804]
Certain Cold-Rolled Carbon Steel Flat Products From the
Netherlands: Final Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On October 4, 1996, the Department of Commerce (the
Department) published the preliminary results of the administrative
review of the antidumping duty order on certain cold-rolled carbon
steel flat products from the Netherlands. This review covers one
manufacturer/exporter of the subject merchandise to the United States
during the period of review (POR), August 1, 1994, through July 31,
1995. We gave interested parties an opportunity to comment on our
preliminary results. Based on our analysis of the comments received, we
have changed the results from those presented in the preliminary
results of review.
EFFECTIVE DATE: April 15, 1997.
FOR FURTHER INFORMATION CONTACT: Helen Kramer or Linda Ludwig,
Enforcement Group III, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
0405 or (202) 482-3833, respectively.
SUPPLEMENTARY INFORMATION:
Background
On October 4, 1996, the Department published in the Federal
Register (61 FR 51891) the preliminary results of the administrative
review of the antidumping duty order on certain cold-rolled carbon
steel flat products from the Netherlands (58 FR 44172, August 19,
1993). The Department has now completed this administrative review in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to the Tariff Act of 1930,
as amended (the Tariff Act) are references 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 current regulations, as amended by the interim
regulations published in the Federal Register on May 11, 1995 (60 FR
25130).
Scope of this Review
The products covered by this review include cold-rolled (cold-
reduced) carbon steel flat-rolled products, of rectangular shape,
neither clad, plated nor coated with metal, whether or not painted,
varnished or coated with plastics or other nonmetallic substances, in
coils (whether or not in successively superimposed layers) and of a
width of 0.5 inch or greater, or in straight lengths which, if of a
thickness less than 4.75 millimeters, are of a width of 0.5 inch or
greater and which measures at least 10 times the thickness or if of a
thickness of 4.75 millimeters or more are of a width which exceeds 150
millimeters and measures at least twice the thickness, as currently
classifiable in the Harmonized Tariff Schedule (HTS) under item numbers
7209.15.0000, 7209.16.0030, 7209.16.0060, 7209.16.0090, 7209.17.0030,
7209.17.0060, 7209.17.0090, 7209.18.1530, 7209.18.1560, 7209.18.2550,
7209.18.6000, 7209.25.0000, 7209.26.0000, 7209.27.0000, 7209.28.0000,
7209.90.0000, 7210.70.3000, 7210.90.9000, 7211.23.1500, 7211.23.2000,
7211.23.3000, 7211.23.4500, 7211.23.6030, 7211.23.6060, 7211.23.6085,
7211.29.2030, 7211.29.2090, 7211.29.4500, 7211.29.6030, 7211.29.6080,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7215.50.0015,
7215.50.0060, 7215.50.0090, 7215.90.5000, 7217.10.1000, 7217.10.2000,
7217.10.3000, 7217.10.7000, 7217.90.1000, 7217.90.5030, 7217.90.5060,
and 7217.90.5090. Included in this review are flat-rolled products of
nonrectangular cross-section where such cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Excluded from this review is certain
shadow mask steel, i.e., aluminum-killed, cold-rolled steel coil that
is open-coil annealed, has a carbon content of less than 0.002 percent,
is of 0.003 to 0.012 inch in thickness, 15 to 30 inches in width, and
has an ultra flat, isotropic surface. These HTS item numbers are
provided for convenience and Customs purposes. The written description
remains dispositive.
The POR is August 1, 1994, through July 31, 1995. This review
covers entries of certain cold-rolled carbon steel flat products from
the Netherlands by Hoogovens Staal B.V. (Hoogovens).
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received case and rebuttal briefs from the
respondent (Hoogovens) and petitioners (Bethlehem Steel Corporation,
U.S. Steel Company (a Unit of USX Corporation), Inland Steel
Industries, Inc., Geneva Steel, Gulf States Steel Inc. of Alabama,
Sharon Steel Corporation, and Lukens Steel Company). A hearing was held
on November 25, 1996, at which the parties presented their arguments.
Comment 1
Respondent argues that the Department should not have applied the
reimbursement regulation, 19 CFR 353.26, to more than double Hoogovens'
weighted-average margin in the preliminary results of review. Because
no duties have been assessed, reimbursement could not have occurred,
and the Department's determination is premature. Hoogovens claims that
the reimbursement regulation may not be applied prospectively at the
time of the final results, but may only be applied at the time of
liquidation by Customs. Hoogovens has submitted for the record evidence
demonstrating that it has revised its agency agreement with Hoogovens
Steel USA, Inc. (HSUSA) to clarify that no reimbursement will occur.
Respondent argues that the Department lacks the statutory authority
to deduct from U.S. price the amounts of antidumping duties paid or
reimbursed by foreign exporters to affiliated importers. The
Department's authority, Hoogovens alleges, does not extend to
situations where transactions cannot be construed as payments by a
seller to a buyer, and cannot therefore affect U.S. price. Because
there is no sale between Hoogovens and HSUSA, an affiliated selling
agent which neither purchases, takes title to nor resells subject
merchandise, transactions between Hoogovens and HSUSA have no effect on
the price of Hoogovens' U.S. sales. Respondent cites the CIT's decision
in Outokumpu Copper Rolled Products AB v. United States, 829 F. Supp.
1371 (1993) in support of the claim that the reimbursement regulation
only applies to transactions between a seller and a buyer.
Respondent argues that until recently the Department's view was
that the reimbursement regulation is limited to
[[Page 18477]]
situations in which the importers or customers are unaffiliated. Since
the Department ignores transfer prices and all other financial
transactions between affiliated parties, no adjustments to U.S. price
are ever made as a result of these transactions. Hoogovens claims that
the reimbursement regulation is therefore inapplicable in constructed
export price (CEP) situations, citing Antifriction Bearings (Other than
Tapered Roller Bearings) and Parts thereof from France, et. al., 58 FR
39729, 39736 (July 26, 1993). In Color TVs, the Department justified
the extension of the reimbursement regulation to affiliated parties in
CEP transactions on the basis that otherwise the remedial effect of the
antidumping law could be defeated. 61 FR at 4410. In short, the
reimbursement regulation is intended to prevent attempts by foreign
exporters to avoid the impact of an antidumping order by reducing the
effective price to U.S. customers. Hoogovens considers that the
Department's application of the reimbursement regulation to CEP
transactions is without statutory basis. Further, respondent argues
that since transactions between Hoogovens and HSUSA are not CEP sales,
and Hoogovens does not make CEP sales of subject merchandise to
unaffiliated purchasers, antidumping margins cannot be calculated on
transactions between Hoogovens and HSUSA, as these transactions have no
bearing on the effective price to Hoogovens' unaffiliated U.S.
customers.
Finally, respondent claims that in the absence of any possible
effect on U.S. price, the Department's decision to make a deduction in
this case can only be construed as an attempt to expand the
reimbursement regulation to treat duty as a cost. Further, respondent
alleges that the Department's methodology in the preliminary results of
deducting the calculated margin from U.S. price, thereby more than
doubling Hoogovens' dumping margin, violates Article 9.3 of the
Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994 (``WTO Antidumping Code'), which provides that
the amount of any antidumping duties assessed shall not exceed the
calculated dumping margin.
Petitioners support the Department's decision to apply the
reimbursement regulation and to deduct from U.S. price the antidumping
duties that Hoogovens has agreed to reimburse to its affiliated
importer. In Color Television Receivers from the Republic of Korea, 61
FR 4408, 4411 (February 6, 1996), the Department determined that
reimbursement takes place between affiliated parties if the evidence
demonstrates that the exporter directly pays antidumping duties for the
affiliated importer or reimburses the importer for such duties.
Petitioners argue that the Department's decision to apply the
reimbursement regulation in the preliminary results of this review was
well founded, given the verified record evidence. At verification, the
Department examined HSUSA's role as the importer of record, including
its payment of import duties and fees. The Department examined the
notes to NVW's financial statements, credit notes and the associated
bank statements, and obtained Hoogovens'' agency agreement with NVW
(now known as HSUSA).
Petitioners argue further that respondent's interpretation is
flatly inconsistent with the terms of the regulation and has been
explicitly rejected by the Court of International Trade (CIT). The
regulation provides that the adjustment for the reimbursement of
antidumping duties will be made in calculating the United States price.
See 19 CFR 353.26 (a) (1). As the Department calculates the United
States price at the time of its final results, not some time after
liquidation and the actual payment of antidumping duties, the
regulation plainly anticipates that an adjustment for the reimbursement
of antidumping duties can be made as part of the final results based on
evidence of an agreement to reimburse such duties.
Petitioners cite the CIT's decision in PQ Corp. v. United States,
652 F. Supp. 724, 737 (CIT, 1987), reaffirmed in Federal-Mogul Corp. v.
United States, 813 F. Supp. 856, 872 (CIT, 1993), as approving the
Department's practice of making an adjustment for reimbursed
antidumping duties (1) as part of its calculation of the dumping
margin, (2) based on the actual amount to be assessed, and (3) based on
the producer's agreement to reimburse such duties.
Petitioners argue further that in cases where there is no clear
evidence of an agreement to reimburse, the CIT has looked to whether
there is ``a link between intracorporate transfers and the
reimbursement of antidumping duties.'' See, e.g. Torrington Company v.
United States, Slip. Op. 96-163, CIT (1996). In the present case, the
Department found evidence of both an agreement to reimburse antidumping
duties and actual evidence of such reimbursement in the form of
transfers to cover cash deposits of antidumping duties.
Petitioners urge the Department to reject the amended agency
agreement filed by respondent on September 26, 1996, as untimely. Even
if the Department does not reject the new information, petitioners
argue that at the time the transactions took place, and at the time the
merchandise was imported, respondent had agreed to reimburse
antidumping duties.
Petitioners note that the test for determining whether the
reimbursement regulation applies in a situation where there is an
affiliated importer is not whether there has been a demonstrated impact
upon the U.S. price, but whether the evidence demonstrates that the
exporter directly pays or reimburses the importer for such duties. See
Color Televisions from Korea, 61 FR at 4411; Brass Sheet and Strip from
the Netherlands, 57 FR at 9537 (March 19, 1992); Brass Sheet and Strip
from Sweden, 57 FR at 2708 (January 23, 1992); Brass Sheet and Strip
from Korea, 54 FR at 33258 (August 14, 1989). Petitioners further
observe that even though the regulation does not require some kind of
independent showing of an effect on price, it is clear that where an
exporter reimburses an importer for antidumping duties, the importer,
along with the ultimate purchaser, is relieved of liability of the
duties.
Petitioners argue that Hoogovens' claim that the Department's
application of the reimbursement regulation in this review violates the
WTO Antidumping Code is unfounded. Article 2.4 of the Code specifically
provides for adjustments to be made to ensure a fair comparison between
the export price and the normal value. In petitioners' view, the
Department appropriately made an adjustment to account for the fact
that Hoogovens was reimbursing the importer for antidumping duties, and
was therefore bearing the expense of such duties.
Department's Position
We previously determined that reimbursement, within the meaning of
Sec. 353.26 of the Department's regulations, takes place between
affiliated parties if the evidence demonstrates that the exporter
directly pays antidumping duties for the affiliated importer or
reimburses the importer for such duties. See Color Television Receivers
from the Republic of Korea; Final Results of Antidumping Duty
Administrative Reviews, (``Final Results of Korean Tvs'') (61 FR 4408,
4411, Feb. 6, 1996). This position has been upheld by the Court of
International Trade in Outukumpu Copper Rolled Products AB v. United
States, 829 F. Supp. 1371 (CIT 1993). However, as we also stated in the
Final Results of Korean Tvs, application of the regulation to
affiliated parties does not imply that exporters and producers
automatically will be assumed to have
[[Page 18478]]
reimbursed affiliated U.S. importers for antidumping duties by virtue
of the relationship between them. While we have recognized that all
transactions between affiliated parties must be scrutinized with care,
the relationships between the parties are too complex to justify such
an assumption. Instead we have relied upon evidence of inappropriate
financial intermingling or an agreement to reimburse antidumping duties
between the two affiliated parties. Id at 4411.
Consistent with our practice, in the first administrative review of
this order we stated that an agreement to reimburse antidumping duties
is sufficient to trigger the reimbursement regulation. See Certain
Cold-Rolled Steel Flat Products From the Netherlands; Final Results of
Antidumping Duty Administrative Review; 61 FR 48465, 48470 (Sept. 13,
1996). For the preliminary results of this review, as in the first
review of this order, we based our determination upon evidence that an
agreement was in place for the reimbursement of duties to be assessed.
See Certain Cold-Rolled Steel Flat Products From the Netherlands;
Preliminary Results of Antidumping Duty Administrative Review; 61 FR
51888, 51891 (Oct. 4, 1996). In light of the evidence now on the
record, we have determined that Hoogovens and HSUSA no longer have an
agreement to reimburse antidumping duties to be assessed for this
review and that HSUSA is responsible for the payment of such duties.
See Proprietary Memo to File, April 2, 1997.
Petitioners have argued that Hoogovens continues to reimburse
duties. However, in the Department's view, the evidence on the record
of this review indicates that the respondent has changed its practice
with respect to reimbursement and has refunded cash deposits paid by
Hoogovens.
Further, petitioners seek to invoke the reimbursement regulation
regardless of whether an amended agreement makes HSUSA responsible for
payment of all antidumping duties and requires the U.S. affiliate to
refund cash deposits because, petitioners contend, at the time the
transactions took place, respondent had agreed to reimburse antidumping
duties. We find this argument unpersuasive. The issue is not when the
arrangement to reimburse was abrogated, but rather whether there is an
agreement to reimburse antidumping duties to be assessed at the time of
the final results. As we stated in the first review, the payment of
cash deposits does not, by itself, constitute reimbursement of, or an
agreement to reimburse, antidumping duties to be assessed. In the
preliminary results of this review, as in the first review, we
determined that the payment of cash deposits by the parent company
substantiated the existence of an agreement to reimburse duties to be
assessed. For these final results, HSUSA has presented evidence that
the agreement has been amended to eliminate reimbursement of
antidumping duties. It has substantiated that amendment with evidence
of a refund of cash deposits pertaining to entries in the first review
period. Based upon this evidence, we determined that Hoogovens is no
longer reimbursing, or has an agreement to reimburse, antidumping
duties to HSUSA. Therefore, we have not applied the reimbursement
regulation in the final results of this review.
While we find that, based upon the evidence on the record, the
reimbursement regulation is inapplicable in this review, as noted
above, transactions between affiliated parties must be scrutinized with
care. Because Hoogovens previously had an agreement to reimburse
duties, and continues to advance the funds to cover cash deposits, in
future reviews we will thoroughly monitor the refund of cash deposits,
scrutinize the operation of the agreement, and examine whether there is
any inappropriate financial intermingling, to ensure that reimbursement
does not recur. In addition, we will verify relevant information
submitted on the record, where appropriate.
Comment 2
Hoogovens argues that the Department's method of calculating profit
resulted in an excessive allocation of profit to constructed export
price (CEP) sales. This occurred, respondent alleges, because the
Department calculated the total profit on all reported sales, including
export price (EP) sales and home market (HM) sales that were outside
the actual period of review (POR) of August 1994 to July 1995. The
extended window period for home market sales in this review was
December 1993 to September 1995, whereas Hoogovens was required to
report CEP sales made during the POR. The calculation of profit for a
longer period on EP and HM sales than for the reported CEP sales
results in an increase in the amount of profit allocated to CEP and
hence deducted from U.S. price. This, in turn, artificially inflates
the margins on CEP sales. Hoogovens claims that in calculating the CEP
profit ratio, the Department should calculate the total profit based
only on EP and home market sales made during the actual POR.
Petitioners counter that this suggestion conflicts with the plain
language of section 772 (f) (2) of the Act. Under the statute, only
normal value and CEP sales are considered in the calculation of CEP
profit. EP sales do not enter into the calculation. The Department's
program erroneously included the profit from EP sales. The statute
defines total actual profit as the total profit earned by the foreign
producer, exporter and affiliated parties (in the United States) for
which total expenses are determined. In turn, total expenses are
defined as those ``incurred with respect to the subject merchandise
sold in the United States and the foreign like product sold in the
exporting country if such expenses were requested by the administering
authority for the purpose of establishing normal value and constructed
export price.'' The Department requested home market information for
the extended window period challenged by Hoogovens; therefore under the
statute the Department must calculate profit using this same
information.
Department's Position
We disagree with respondent. The expenses requested by the
Department for the purpose of establishing the normal value of the
foreign like product sold in the Netherlands were those incurred during
the extended window period. Consequently, the statute provides that
these expenses are to be used in the calculation of the CEP profit
ratio. We disagree with petitioners' argument that EP sales should be
excluded from the total profit calculation. The calculation of total
actual profit under section 772(f)(2)(D) includes all revenues and
expenses resulting from the respondent's EP sales, as well as from its
CEP and home market sales. The basis for total actual profit is the
same as the basis for total expenses under section 772(f)(2)(C). The
first alternative under this section states that for purposes of
determining profit, the term ``total expenses'' refers to all expenses
incurred with respect to the subject merchandise, as well as home
market expenses. Where the respondent makes both EP and CEP sales to
the United States, sales of the subject merchandise would encompass all
such transactions.
Comment 3
Petitioners argue that in the preliminary results, the Department
improperly excluded imputed expenses (i.e., credit expenses and
inventory carrying costs) from the calculation of
[[Page 18479]]
total United States expenses for the purpose of determining profit on
CEP sales. Section 772(d) of the Act provides that the price used to
establish CEP shall be reduced by an amount for profit allocated to
U.S. selling expenses and costs of further manufacturing. Section
772(f) further provides that the profit shall be determined by
multiplying total actual profit by the ``applicable percentage,'' i.e.,
the percentage determined by dividing ``total United States expenses''
by the total expenses. The statute defines ``total United States
expenses'' as the total expenses described in sections 772(d) (1) and
(2). These sections refer to the direct and indirect selling expenses
incurred in the United States and the cost of any further manufacturing
in the United States.
Petitioners argue that CEP is calculated by deducting credit
expenses and inventory carrying costs (``ICC'') (from the selling price
to the first unaffiliated customer) under section 772(d)(1).
Accordingly, these amounts must be considered a part of ``total United
States expenses'' and must be included in the allocation factor for
such expenses. In Certain Stainless Wire Rods from France, the
Department indicated that this is its practice (61 FR 47874, 47882
(September 11, 1996)):
When the Department allocates a portion of the actual profit to
each U.S. CEP sale, we have included imputed credit and inventory
carrying costs as part of the total U.S. expenses allocation factor.
This methodology is consistent with section 772(f)(1) of the statute
which defines ``total United States Expenses'' as the total expenses
described under section 772(d) (1) and (2). Such expenses include
both credit and inventory carrying costs.
Petitioners conclude that the Department should correct its margin
program to include imputed expenses in the calculation of total United
States expenses.
Respondent argues that the Department should not include imputed
expenses in its allocation of profit to CEP sales. In the preliminary
determination, while the Department excluded the imputed expenses from
CEPSELL, it also excluded imputed expenses on EP and home market sales
from both the calculation of total profit and the allocation of the
profit. While petitioners argue that the Department should include the
imputed expenses in the numerator for this allocation (CEPSELL), they
fail to mention that these expenses should also be included in the
denominator (TOTEXP) for this calculation. Hoogovens argues that the
petitioners' methodology would artificially inflate the allocation
ratio, which would overstate the amount of profit allocated to the CEP
sale.
Hoogovens takes no position on whether the imputed expenses should
be included or excluded from the CEP allocation. Its sole concern is
that these expenses be treated consistently in all aspects of the CEP
profit allocation. In the event that the Department decides to include
the imputed expenses in the CEP selling expenses used to allocate
profit, Hoogovens argues the Department should ensure consistency by
including the imputed expenses in all aspects of the profit allocation.
Thus, in calculating the ratio of U.S. selling expenses to total
selling expenses, Hoogovens argues the Department should include the
imputed expenses on CEP sales in the numerator (CEPSELL), and should
include the imputed expenses on all U.S. and home market sales in the
denominator (TOTEXP).
Department's Position
We agree with petitioners that imputed credit and inventory
carrying costs should be included in the definition of total United
States expenses used in the allocation of profit to CEP sales,
consistent with section 772(f)(1), and have revised our methodology for
these final results. The Statement of Administrative Action (SAA) of
the URAA states that: ``The total U.S. expenses are all of the expenses
deducted under section 772(d) (1) and (2) in determining the
constructed export price.'' SAA at 154. The SAA also explains section
772(d)(1)(D) as providing for the deduction from CEP of indirect
selling expenses. These typically include imputed inventory carrying
costs, which represent the opportunity costs of the capital tied up in
inventories of the finished merchandise. (Id.) Section 772(d)(1)(B)
explicitly includes credit expenses as among the direct selling
expenses to be deducted from CEP.
We disagree with respondent that imputed credit and inventory
carrying costs should be added to the total expenses used in the
denominator in the CEP profit allocation. In determining the amount of
profit to allocate to each CEP sale, the Department first computes the
total profit earned by the foreign producer. This amount is based on
the producer's actual profits calculated in accordance with section
772(f)(2)(D) of the Act and includes any below cost sales but excludes
sales made to affiliates at non-arm's length prices. Because it is the
``actual'' profit, the amount reflects the actual interest expense
incurred by the producer.
A portion of the total actual profit is then allocated to the U.S.
expenses incurred for each CEP sale. This is done based on the
applicable percentage described in section 772(f)(2)(A) of the Act. In
calculating this percentage, the statute directs us to include in the
numerator the CEP expenses deducted under 772(d), which includes
imputed credit and inventory carrying costs. In contrast, the total
expenses in the denominator are those used to compute total actual
profit. See section 772(f)(2)(D). As discussed above, ``actual'' profit
is calculated on the basis of ``actual'' rather than imputed expenses.
Although the actual and imputed amounts may differ, if we were to
account for imputed expenses in the denominator of the CEP allocation
ratio, we would double count the interest expense incurred for credit
and inventory carrying costs because these expenses are already
included in the denominator.
Comment 4
Petitioners argue that the Department should reject Hoogovens'
claim that it sells to only one level of trade (LOT). In respondent's
initial Section A response in this review, Hoogovens stated that it
sold to two categories of customers, which constituted distinct levels
of trade: service centers and end-users. However, when it submitted its
Section B response, Hoogovens claimed that all its customers were at a
single LOT and that it was unable to distinguish between the selling
functions performed for different customers. Hoogovens did not complete
the chart identifying selling functions requested in a supplemental
questionnaire until verification, and petitioners argue the Department
should have rejected it as untimely.
Petitioners argue the record shows that Hoogovens' customers are at
two levels of trade. First, petitioners claim that service centers,
which function as distributors, and end users are at different phases
of marketing. See Certain Corrosion-Resistant Carbon Steel Flat
Products from Canada and Certain Cut-to-Length Carbon Steel Plate from
Canada; Preliminary Results of Antidumping Administrative Reviews, 61
FR 51891, 51896 (October 4, 1996). In its Section A response at 13
(Public Version), Hoogovens stated:
The basis for distinguishing steel service centers from end-
users is that the former do not consume the steel they purchase from
Hoogovens, but rather function in a manner similar to distributors
(although * * * some provide processing services). Steel service
centers/distributors, in turn, sell cold-rolled steel to the same
types of end-user customers
[[Page 18480]]
as Hoogovens. Thus, the end-user customers are further ``removed''
from Hoogovens' factory than are the steel service centers.
Petitioners argue that the differences in the selling functions
performed for each group are well-documented, citing Hoogovens'
statement that it provided ``far greater sales assistance, such as
quality and product development support'' to its end-user customers
than to its service center customers. Hoogovens also stated that it had
just-in-time (JIT) delivery arrangements with many of its end-user
customers, but not with service centers. (Section A response at 14.)
Petitioners ask the Department to consider service centers and end-
users as distinct levels of trade for the final determination, and to
make LOT adjustments, as appropriate. Finally, petitioners ask the
Department to deny Hoogovens the capped CEP adjustment, because
Hoogovens has failed to provide complete or timely LOT data in this
review.
Hoogovens responds that at the time it submitted its Section A
response in this review, the Department had not yet published any
determinations explaining and applying the URAA LOT provisions.
Hoogovens continued to rely on the levels of trade used in the
investigation and the first administrative review, which were based on
the market function of the customer, rather than on selling functions
performed by Hoogovens. While Hoogovens stated that it provides more
``sales assistance'' to end-user customers, the basic distinction was
the nature of the customer's business rather than the selling functions
performed by Hoogovens.
To the best of Hoogovens' knowledge, the supplemental questionnaire
issued by the Department in the investigation of Certain Pasta Products
from Italy and Turkey, of which Hoogovens received a copy before it
submitted its Section B response, was the first time that the
Department had developed a series of questions designed to assist in
making determinations of LOT under the URAA LOT provisions. After
reviewing the questionnaire, Hoogovens determined that it could not
substantiate the previously-claimed LOT based on the selling functions
it performed for sales to the two categories of customers.
Petitioners are wrong, Hoogovens argues, to say that identifying
sales ``at different phases of marketing'' represents ``the first prong
of the test to demonstrate two different levels of trade.''
Petitioners' Brief at 5. On the contrary, Hoogovens claims, it is well-
established that under the URAA and as stated in ADDENDUM I to the
Department's questionnaire, ``the selling functions that a customer
performs do not establish that different LOTs exist * * * '' Although
the petitioners rely on the Department's preliminary determination in
the 1994/95 administrative reviews of the Canadian flat-rolled steel
cases as support for their interpretation, in those results, Hoogovens
argues, the Department stressed that ``even substantial'' differences
in selling functions are not alone sufficient to establish different
LOTs. Certain Corrosion-Resistant Carbon Steel Flat Products from
Canada and Certain Cut-to-Length Carbon Steel Plate from Canada;
Preliminary Results of Antidumping Administrative Reviews, 61 FR 51891,
51896. Respondent points out that even where it found customers at
different phases of marketing, the Department did not necessarily find
different LOTs.
Hoogovens argues that the petitioners have failed to point to any
evidence in the record showing that Hoogovens provides different levels
of selling functions to automotive versus other customers. In the
investigation, the Department concluded that automotive customers did
not constitute a separate LOT. At that time, petitioners argued that
Hoogovens had ``totally failed to demonstrate significant differences''
between automotive and other sales. Final Determinations of Sales at
Less than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products and
Certain Cold-Rolled Carbon Steel Flat Products from the Netherlands, 58
FR 37199, 37203 (July 9, 1993).
In its supplemental response dated January 19, 1996, Hoogovens
explained (on page 5) that it had not filled out the chart on LOT,
because it had determined that there were no quantifiable differences
between LOTs for any of the listed selling functions. Hoogovens points
out that during verification, the Department sought to verify the
statement contained in the supplemental response by interviewing the
Senior Sales Executive and reviewing the chart with him. For that
purpose, Hoogovens prepared the chart contained in Verification Exhibit
12. Hoogovens believes that the verified evidence in the record
confirms the Department's conclusion that there are no differences in
LOT in either the EP or home markets resulting from differences in
selling functions performed by Hoogovens. Moreover, in Hoogovens' view,
this conclusion is consistent with the Department's analysis of
respondents in other steel reviews.
Department's Position
Neither the statute nor the SAA defines LOT. The relevant provision
in the statute, section 773(a)(7)(A), allows for a LOT adjustment where
there is a difference in LOTs between the EP or CEP and normal value,
if that difference involves the performance of different selling
activities, and it is demonstrated to affect price comparability, based
on a pattern of consistent price differences between sales at different
LOTs in the foreign comparison market. This adjustment may either
increase or decrease normal value. SAA at 829.
Although the identity of the customer (e.g., end-user or service
center) is an important indicator in identifying differences in LOT,
the existence of different classes of customers, as well as different
functions performed by such customers, is not sufficient to establish a
difference in the LOTs. Accordingly, we consider the class of customer
as one factor, along with the producer/exporter's selling functions and
the selling expenses associated with these functions, in determining
the stage of marketing, i.e., the LOT associated with the sales in
question.
For CEP sales, the relevant customers in our LOT analysis are
Hoogovens'' U.S. affiliates, i.e., the customers at the level of the
CEP. The CEP represents a price exclusive of all selling expenses and
profit associated with economic activities occurring in the United
States. SAA at 823. The adjustments we make to the starting price
pursuant to section 772(d) of the Act normally change the LOT.
Accordingly, we must determine the LOT of CEP sales exclusive of the
expenses (and concomitant selling functions) that we deduct pursuant to
this subsection. This approach does not result in a reliance on an ex-
factory transfer price to the U.S. affiliate in our LOT analysis.
Transfer prices do not enter into our analysis because the CEP is a
calculated price derived from the resale price to the first
unaffiliated customer. CEP is not a price exclusive of all selling
expenses, because it contains the same type of selling expenses as a
directly observed export price. See Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof from France, et al., Final
Results of Antidumping Duty Administrative Reviews, 62 FR 2081, 2107
(January 15, 1997) (AFBs VI).
We agree with petitioners that end-users and service centers/
distributors constitute different phases of marketing. However, as
respondent notes, this is not sufficient for the Department to find
that different LOTs exist. In order to determine whether sales in the
[[Page 18481]]
comparison market are at a different level of trade than the export
price or CEP, we examine whether the comparison sales were at different
stages in the marketing process than the export price or CEP. We make
this determination on the basis of a review of the distribution system
in the foreign comparison market, including selling functions, class of
customer, and the level of selling expenses for each type of sale.
Different stages of marketing necessarily involve differences in
selling functions, but differences in selling functions, even
substantial ones, are not alone sufficient to establish a difference in
the LOT. Similarly, while customer categories may be useful in
identifying different levels of trade, they are insufficient in
themselves to establish that there is a difference in the level of
trade. See AFBs VI at 2105.
Initially, Hoogovens stated that there were multiple levels of
trade and that it performed different selling functions for its end-
user customers than for its service center customers. However, the LOT
chart provided by respondent at verification indicated that the selling
functions provided to all customers, in both markets, are identical.
Hoogovens explained that after more in-depth examination, it was unable
to distinguish among the selling functions provided to different
categories of customers. See Verification Report, p. 10. Based upon the
results of our verification, we find that there are no differences in
LOT. See the comment below on CEP offsets.
Comment 5
Hoogovens argues that the Department should make a CEP offset
adjustment to normal value pursuant to section 773(a)(7)(B) of the Act
when comparing the reported CEP sales to normal value. Respondent
claims the Department's practice is to compare the ex-factory CEP price
to the price of the home market sale, including all selling functions
that are provided to home market customers. Hoogovens argues that the
Department has repeatedly concluded that a CEP offset is appropriate
where it finds, following this comparison, that the unadjusted home
market price is at a more advanced level of trade (LOT) than the
adjusted CEP price. In the preliminary results, the Department
concluded that there were no differences between the adjusted CEP price
and the unadjusted home market price. Hoogovens claims that this
results in a comparison of sales at different levels of trade, because
the starting price of the home market sales allegedly reflects many
selling activities not reflected in the adjusted CEP price. These
include indirect selling activities, indirect technical service and
warranty expenses, and inventory carrying costs incurred on home market
sales. All of these types of expenses have been deducted from the net
CEP used to establish the LOT for CEP sales. Accordingly, Hoogovens
concludes, the home market LOT must be deemed to be at a different,
more advanced LOT than the adjusted CEP LOT.
Hoogovens claims there were no sales in the home market at a LOT
equivalent to the CEP LOT. Moreover, all home market sales were at the
same LOT. There are no data available to quantify a LOT adjustment to
account for the difference between the CEP LOT and the home market LOT.
Accordingly, Hoogovens concludes, the Department should make a CEP
offset adjustment to normal value for indirect selling expenses up to
the amount of indirect selling expenses deducted from CEP, as required
by 19 U.S.C. 1677b(a)(7)(B).
Petitioners point out that the CEP offset is not automatic. The
respondent bears the burden of demonstrating that such an offset is
warranted. See Mechanical Transfer Presses from Japan, 61 FR 52910,
52915 (October 9, 1996); Large Newspaper Printing Presses and
Components Thereof, Whether Assembled or Unassembled, from Japan, 61 FR
38139, 38143 (July 23, 1996). Petitioners argue that to qualify for a
CEP offset, a respondent must first establish that there are different
levels of trade between home market and U.S. sales. Then, if the data
on the record do not provide an adequate basis for a LOT adjustment and
normal value is established at a more advanced stage of distribution
than the CEP, the Department is required to reduce normal value by the
CEP offset.
Petitioners argue that Hoogovens has failed to meet the
prerequisites for such an adjustment, because it has provided no
evidence that its CEP sales are at a distinct LOT from its home market
sales. In response to the Department's request at verification for LOT
data, Hoogovens' Senior Sales Executive stated that the company
``provides the same types of services to all customers in all
markets.'' (Sales Verification Report at 10 (Public Version).)
Department's Position
Respondent's claim for a CEP offset is inconsistent with its
position that its sales are to only one LOT in both markets. (See
Comment 4.) In submitting its LOT chart at verification, Hoogovens did
not identify any differences in selling functions and selling expenses
between its home market sales and CEP sales after deductions of the
U.S. expenses pursuant to section 772(d) of the Act. In accordance with
section 773(a)(7)(B) of the Act, a CEP offset is granted where normal
value is established at a LOT which constitutes a more advanced stage
of distribution than the LOT of the CEP sale and the data available do
not provide an appropriate basis to determine a LOT adjustment.
Hoogovens failed to meet any of these requirements under section
773(a)(7)(B). Indeed, Hoogovens failed to make a LOT claim and has
failed to substantiate any claim.
The instructions regarding LOT in ADDENDUM I to the Department's
questionnaire explained:
When the U.S. sale is classified as a constructed export price
(CEP) sale, the LOT for that sale is based upon the selling
functions provided by the seller (i.e., the exporter and its
affiliates) to the first unaffiliated party, less those selling
functions related to expenses which are deducted under section
772(d) of the Act. Thus, for CEP sales, the selling functions used
to establish the LOT cannot include selling functions related to
expenses deducted under section 772(d). For comparison market sales,
the LOT is based upon the selling functions provided by the seller
(and its affiliates) to the first unaffiliated customer.
Respondent failed to respond to the Department's supplemental
questionnaire on LOT by the due date. The instructions for preparing
the LOT chart specifically asked respondents not to include in the
chart those expenses deducted from U.S. price. These deductions include
direct selling expenses (credit expense), indirect selling expenses
(warranties, inventory carrying costs) and further manufacturing costs.
In filling out the chart submitted at verification, Hoogovens did not
distinguish between its CEP sales, which are all further manufactured,
and its EP sales. Despite being given every opportunity to demonstrate
on the record that its CEP sales and home market sales are at different
levels of trade, Hoogovens has failed to establish that normal value is
at a different LOT than CEP sales. Rather, to the contrary, Hoogovens
insisted that there were no differences in the services provided to
customers in the two markets. The SAA states:
Only where different functions at different levels of trade are
established under section 773(a)(7)(A)(i), but the data available do
not form an appropriate basis for determining a level of trade
adjustment under section 773(a)(7)(A)(ii), will Commerce make a
constructed export price offset adjustment under section
773(a)(7)(B). (SAA at 160.)
Thus, the adjustment is not automatic and the burden is on the
respondent to
[[Page 18482]]
demonstrate that normal value is at a different LOT than the CEP, and
that the normal value LOT is at a more advanced stage of distribution
(i.e., more remote from the factory). Hoogovens has failed to establish
the basis for any CEP offset. Accordingly, we have not granted a CEP
offset adjustment in the final results of this review.
Comment 6
Respondent argues that the Department should not match U.S. sales
of secondary merchandise (``seconds'') to constructed value (CV) for
prime merchandise. The Department's policy in the steel cases is to
match sales of prime merchandise to other sales of prime merchandise,
and to match sales of seconds in the U.S. market to sales of seconds in
the comparison market. In the preliminary results, where there were no
matching home market sales of seconds within the ``90/60 window''
period, the Department matched the U.S. secondary sale to the CV of
sales of prime merchandise. Hoogovens disagrees that the Department is
compelled by the decision of the Court of Appeals in IPSCO, Inc. v.
United States, 965 F.2d 1056, 1060 (Fed. Cir. 1992), to use this
approach, and alleges that this comparison results in unfair and
artificially inflated margins on U.S. sales of seconds. Hoogovens
argues that this allegedly unfair approach could be avoided by the
expedient of matching U.S. sales of seconds to home market sales of
seconds that pass the difmer test, without considering whether they
fall within the ``90/60 window'', to calculate margins for seconds.
Petitioners argue that the Department should reject Hoogovens''
proposed change in methodology, which fails to recognize that the
Department's methodology is consistent with past practice and in
accordance with IPSCO, in which the Court upheld the Department's
practice of allocating production costs equally between secondary and
prime merchandise. Petitioners also point out that the reason the
Department uses the ``90/60 window'' is that it satisfies the statutory
requirement (section 773 (a) (1) (A)) that normal value be compared
with contemporaneous EP or CEP sales. See also Certain Circular Welded
Carbon Steel Pipes and Tubes from Thailand, 61 FR 1328, 1332 (January
19, 1996).
Department's Position
We agree with the petitioners. Seconds are merchandise which has
suffered some sort of defect either in the production process or in
subsequent handling, and does not meet the customer's specifications.
In this review, we have continued to follow the policy with respect to
comparisons of sales of seconds set forth in the first review of this
order. (See Cold-rolled Carbon Steel Flat Products from the
Netherlands; Final Results of Antidumping Duty Administrative Review,
61 FR 48465, 48466-7 (September 13, 1996).) We only resorted to CV when
there were no contemporaneous matches of seconds.
Hoogovens' suggestion that we use home market sales outside the
``90/60 window'' period is inconsistent with the requirement in section
773 that we use contemporaneous sales as the basis for normal value.
In Decision Memorandum from Roland L. MacDonald to Joseph A.
Spetrini, Deputy Assistant Secretary for Compliance, ``Treatment of
Non-Prime Merchandise for the First Administrative Review of Certain
Carbon Steel Flat Products,'' (April 19, 1995) at 4, we stated: ``In
past cases the Department has held that the cost of production (COP) of
seconds is the same as the COP of the prime merchandise it was intended
to be because seconds have undergone the same production processes as
prime merchandise.'' The Department's methodology for calculating the
COP for primary and secondary merchandise has been upheld by the Court
of Appeals. See IPSCO. Similarly, there is no basis on the record for
distinguishing between the CV of primary and secondary merchandise.
Comment 7
Hoogovens argues that the Department should use the Customs
Service's quarterly exchange rates to make currency conversions in its
final determination. At the time it made the sales under review,
Hoogovens expected that their antidumping duty liability would be
determined on the basis of these rates. However, on March 8, 1996, the
Department published a notice that it intended to change its practice
for determining the exchange rate, and would use Federal Reserve daily
exchange rates for one year, and then evaluate the model computer
program's performance. Notice: Change in Policy Regarding Currency
Conversions, 61 FR 9434 (March 8, 1996). Despite the fact that the
change was announced over seven months after the end of the POR, and
after verification in the current review, the Department used the
proposed program to make currency conversions in the preliminary
results. Hoogovens argues that the effect of this change is that its
margins were determined using different exchange rates than those
Hoogovens had reasonably expected would be used at the time it made the
sales under review, resulting in considerable increases in Hoogovens''
antidumping duty liability. Respondent further claims that the
Department's change of policy created dumping margins on a considerable
number of sales for which Hoogovens reasonably expected that there
would be no dumping margin found, and increased margins on many other
sales. Hoogovens relied on the Department's consistent prior practice
of using the Customs rates to set its prices so as to avoid dumping.
Respondent argues that the Department should not apply retroactively
such basic changes in methodology as the proposed currency conversion
policy. According to Hoogovens, the Department must, under its duty to
administer the law fairly, ``be bound by its prior actions so that
parties have a chance to purge themselves of antidumping liability.''
Shikoku Chemicals Corp. v. United States, 795 F. Supp. 417, 421 (CIT
1992).
Section 773A of the Uruguay Round Agreements Act (URAA) provides
that the Department shall convert currencies using ``the exchange rate
in effect on the date of sale of the subject merchandise.'' 19 U.S.C.
1677b--1(a). Hoogovens argues that this section does not specify which
rate the Department shall use or in any way mandate or prohibit the use
of exchange rates obtained from any given source. Hoogovens claims that
use of the Customs rates in this review would therefore be fully
consistent with the mandate of section 773A to use the exchange rate in
effect on the date of sale.
Petitioners argue that the Department's use in the preliminary
determination of this review of the daily exchange rates in effect on
the dates of sale, as certified by the Federal Reserve, is in
accordance with the plain language of section 773A. The SAA also
unequivocally states that the Department must adopt a new practice of
applying a daily exchange rate, in the place of its previous practice
of using a quarterly rate, as follows: ``Under new section 773A, the
general rule will be to convert foreign currencies based on the dollar
exchange rate in effect on the date of sale.'' SAA at 172. Petitioners
note that the new law has taken effect and the Department is bound by
it. Petitioners argue that Hoogovens had ample warning that a change in
methodology was dictated by new section 773A. Therefore, in
petitioners' view, the Department should continue to apply the daily
exchange rate for the final results of review.
[[Page 18483]]
Department's Position
We agree with petitioners. This review was conducted in accordance
with the URAA. Section 773A(a) requires the Department to ``convert
foreign currencies into United States dollars using the exchange rate
in effect on the date of sale of the subject merchandise.''
Consequently, the Department has modified its methodology in various
respects to conform to the new provisions in the law.
Comment 8
Petitioners claim that Hoogovens incorrectly calculated its
inventory carrying costs (``ICC'') applicable to CEP sales. For these
sales, Hoogovens reported the ICC from the time production was complete
at IJmuiden until the time the merchandise cleared Customs at the U.S.
port of entry in the field DINVCARU. ICC incurred by Hoogovens' U.S.
affiliated companies prior to shipment to the U.S. customer were
reported in the field INVCARU. In calculating both variables,
petitioners allege Hoogovens failed to use the actual, product-specific
cost of the merchandise. Instead Hoogovens used the price of the
merchandise, deflated by the ratio of total cost of goods sold to total
sales revenue to simulate the cost-based value of the merchandise in
inventory. Petitioners argue that Hoogovens' methodology is flawed
because it applies the ICC factor to the transfer price, rather than
the cost of production. Petitioners claim that this is inconsistent
with the Department's practice, which is to calculate ICC by dividing
the number of days that the goods remain in inventory by 365 and then
multiplying the result by the appropriate interest rate and the actual
cost of the unit, i.e., the product-specific costs. Petitioners argue
that the Department should recalculate Hoogovens' ICC using Hoogovens'
reported constructed value (CV) according to the following formula:
DINVCARU/INVCARU = (COMCV + GNACV + INTEXCV) (interest rate) (number of
days in inventory/365)
Hoogovens responds that the Department rejected the petitioners'
argument with respect to the same methodology in the final results of
Hoogovens' 1993/94 administrative review. Certain Cold-Rolled Carbon
Steel Flat Products from the Netherlands, 61 FR 48465, 48470 (September
13, 1996). Moreover, the Department also verified the reported data in
the current review. Hoogovens argues that its methodology is in fact
cost-based because after multiplying the ICC factor by the transfer
price to its U.S. affiliates, it then multiplies the result by the
ratio of Hoogovens' average cost of production to average sales price.
Hoogovens states that this results in an ICC amount that is in effect
based on the cost of production.
Hoogovens argues that the petitioners' proposed methodology
contains several flaws. First, the petitioners propose to use the
constructed value of manufacturing costs (COMCV) in their equation,
which is inherently less accurate, because COMCV includes the product
mix for sales to all markets of each CONNUM (i.e., EP, home market and
CEP), whereas Hoogovens' methodology is based solely on the costs of
material actually sold by the U.S. affiliates. Second, petitioners did
not convert the values used in their proposed calculation (COMCV,
GNACV, AND INTEXCV) , which are reported in guilders, to U.S. dollars.
This correction would substantially reduce the amount of ICC calculated
under their methodology. Hoogovens argues that petitioners have failed
to show that there is anything unreasonable or inaccurate in Hoogovens'
ICC methodology, and that the Department should accordingly continue to
use the reported ICC amounts in the final results.
Department's Position
We agree with the respondent that the methodology Hoogovens used is
reasonable, and have accepted the verified reported ICC amounts.
Hoogovens' accounting system used in the normal course of business is
based upon standard costs. Consequently, the costs carried in the
company's accounts are not product (or CONNUM)-specific. While CV is
CONNUM-specific for the products sold in the United States, general,
selling and administrative expenses and profit are calculated as if the
merchandise were sold in the home market. Hoogovens' use of the ratio
of average costs of cold-rolled carbon steel flat products to the
average sales price during the POR as a deflator for the transfer price
to its affiliates in the United States is therefore a reasonable
approximation of a product-specific, cost-based ICC calculation.
Comment 9
Petitioners claim that Hoogovens incorrectly reported yield losses
associated with its U.S. affiliate's further manufacturing operations.
Hoogovens determined the yield loss per machine by dividing the total
scrap generated during processing by the starting weight processed at
each machine. Petitioners argue that Hoogovens omitted to take into
account ``unrecovered scrap'' in the numerator of this calculation, and
that the Department should resort to facts otherwise available under
section 776 of the Act. Petitioners further assert that the Department
should make an adverse inference in its selection of facts available,
because of Hoogovens' alleged failure to comply with a request for
information from the administering authority. See 19 U.S.C. 1677e(b).
Hoogovens replies that petitioners have simply misread or
misunderstood the yield loss reports from which Hoogovens calculated
its affiliate's yield loss ratios. Hoogovens argues that a proper
reading of the yield loss reports reveals that there was no such
``unrecovered scrap.'' Petitioners incorrectly assumed that several
headings listed on the yield reports refer to material that vanished as
``unrecovered scrap'' during or after processing. Hoogovens explains
that none of these categories, however, refer to actual scrap or
material otherwise lost or damaged in processing that was not accounted
for in Hoogovens' calculation. Hoogovens argues that the verified
evidence in the record does not support petitioners' claim that any
unsalvaged material losses were omitted from Hoogovens' reported
ratios. See RBC Verification Report at 17. Hoogovens urges the
Department to use the reported yield loss ratios in the final results.
Department's Position
We agree with respondent. The Department verified the reported
yield losses and found no discrepancies. Petitioners' allegations are
based on a misinterpretation of certain column headings in the yield
loss report. See RBC Verification Exhibit 27.
Comment 10
Petitioners argue that Hoogovens failed to include the costs of
certain outside processing in RBC's reported cost of materials.
Hoogovens instead added these costs to the further manufacturing cost
reported in FURMANU. Because these outside processing costs were part
of RBC's direct material costs, petitioners argue that these costs and
the freight expenses for transporting these goods to RBC, should have
been reported as material costs and should have been subject both to
the application of yield loss and the allocation of G&A and interest
expenses. The Department's questionnaire instructs respondents at page
E-7 to include in the direct materials component of further
manufacturing costs ``transportation charges and other expenses
normally associated with
[[Page 18484]]
obtaining the materials that become an integral part of the finished
product sold in the United States.'' Petitioners calculated an amount
they propose that the Department add to the relevant sales to account
for additional yield loss, interest and G&A expenses.
Hoogovens replies that it added the cost of further processing paid
to the outside processor, increased by the yield loss associated with
outside processing, to the reported further manufacturing costs for the
relevant sales. It reported G&A and interest expenses for the
appropriate sales as part of the costs of processing this material at
RBC. Some of RBC's overhead and administrative costs were allocated to
the material processed by the outside processor. Hoogovens argues that
this material does not cost more to process because of the processing
it has undergone prior to arrival at RBC. Accordingly, to allocate more
processing and administrative costs to these sales would appear to be
double-counting. Moreover, there are two errors in the petitioners'
proposed correction, one in the proposed yield loss and the other in
the G&A factor.
Department's Position
We agree in part with the petitioners. The transportation charges
associated with bringing the steel processed by the outside processor
to RBC's plant should have been included in direct materials cost and
an amount added to the relevant sales to account for additional yield
loss, interest and G&A expenses. However, since we disagree with
petitioners' calculation of the yield loss (as discussed in Comment 10)
and petitioners used the wrong G&A factor, we have modified the
petitioners' suggested programming code to correct further
manufacturing costs for outside processed sales using the values for
yielded outside processing costs, SG&A and interest expense shown in
Exhibit 1 of respondent's rebuttal brief. (See the Department's margin
calculation program.)
Comment 11
Petitioners argue that Hoogovens should have included U.S. port-to-
plant freight costs and repacking expenses incurred in the United
States in further manufacturing costs. Instead, they were reported in
the Section C (CEP) data base in the fields ``INLFPWU'' and
``REPACKU.'' Petitioners cite the Department's questionnaire, which
states that further manufacturing costs include ``any costs involved in
moving the product from the U.S. port of entry to the further
manufacturer'' and ``additional U.S. packing expenses.'' Petitioners
point out that inclusion of these expenses is important because of the
effect on the allocation of profit for CEP sales. To correct this
error, petitioners urge the Department to add the amounts reported in
INLFPWU and REPACKU to FURMANU for each CEP (further manufactured)
sale.
Hoogovens notes that it followed the Department's instructions in
its questionnaire in reporting these expenses in the Section C (CEP)
fields, ensuring that these expenses are properly deducted from U.S.
price. Hoogovens argues that the alternative methodology proposed by
the petitioners is pointless, as reporting these expenses in the
Section E file would achieve the same result. To the extent that the
Department considers it appropriate to include these expenses in the
CEP profit allocation, Hoogovens proposes that the Department do so by
means of a simple correction to the program. Hoogovens urges the
Department to take great care that it does not double count these
expenses.
Department's Position
We agree that these expenses should be included in total United
States expenses for the purpose of calculating the CEP profit
allocation, and have modified the computer program for the final
results. We note that the Department's questionnaire contains
conflicting instructions, and will take steps to clarify them in the
next administrative review.
Comment 12
Petitioners observe that the Department's computer program makes
several errors with respect to the currency of U.S. packing costs.
Petitioners propose programming language to make the appropriate
currency conversions.
Hoogovens comments that there are several errors in the
petitioners' proposed language and proposes alternative corrections.
Hoogovens points out that the petitioners erred in proposing to include
the costs of repacking in the United States in the calculation of
constructed value (CV).
Department's Position
We agree with petitioners that there were currency conversion
errors in the treatment of packing expenses in the program used for the
preliminary results of review. We also agree with Hoogovens that U.S.
repacking should not be included in CV, because CV includes only costs
incurred in the Netherlands. We have corrected the program for the
final results of review.
Comment 13
Petitioners point out that Hoogovens added an extra category
(``F'') to the thickness tolerance categories laid out in the
Department's questionnaire. The Department's model match program,
however, does not account for sales with a thickness tolerance of
``F.'' Petitioners propose programming language to correct this
oversight. Hoogovens agrees with the proposed correction.
Department's Position
We have incorporated the proposed correction in the model match
program for the final results.
Comment 14
If the Department decides not to apply the reimbursement regulation
in its final results, petitioners urge that the antidumping duties be
deducted as ``United States import duties'' or ``additional costs,
charges, or expenses'' under section 772(c)(2)(A) of the Tariff Act of
1930, as amended. Petitioners argue that the plain language of the
statute requires that the Department deduct antidumping duties paid by
the respondent or its related party from the price used to establish EP
or CEP. Specifically, petitioners state that the phrase ``import
duties,'' as used in 19 U.S.C. 1677a(c), includes AD and Countervailing
duties, as such duties are plainly ``incident to bringing the subject
merchandise from the original place of shipment in the exporting
country to the place of delivery in the United States.'' Petitioners
argue that U.S. courts and agencies charged with administering the
customs and unfair trade laws have long recognized that ``Congress
desired and intended that {AD/CVD} duties * * * should be considered as
duties for all purposes.'' C.J. Tower & Sons v. United States, 71 F.2d
438, 445 (C.C.P.A. 1934). See also Imbert Imports, Inc. v. United
States, 331 F. Supp. 1400, 1406 (Cust. Ct. 1971) and PQ Corp. v. United
States, 652 F. Supp. 724, 736 n. 15 (CIT 1987). Petitioners assert that
there is nothing in the language or legislative history of section
772(c) to indicate that Congress intended a meaning for the phrase
``import duties'' other than the ``natural and accepted'' meaning
established by the courts. Petitioners further argue that under
accepted canons of statutory construction, the items to be deducted in
calculating EP and CEP pursuant to section 772(c)(2)(A) must be read to
include AD/CVD duties. The cited section requires a deduction for
import duties and other expenses ``except as provided in paragraph
1(C).'' This paragraph, in turn, refers to certain
[[Page 18485]]
countervailing duties imposed to offset export subsidies. If AD/CVD
duties were not intended to be included in the items deducted under
section 772(c)(2)(A), petitioners claim the exception provided by
Congress for certain countervailing duties would be superfluous.
Petitioners hold it is a fundamental precept of statutory construction
that ``a statute should be construed so that effect is given to all its
provisions, so that no part will be inoperative or superfluous, void or
insignificant, and so that one section will not destroy another.''
Sutherland Stat Const Sec. 46.06 (5th Ed).
While petitioners admit that the CIT has never explicitly held that
the language of section 772(c)(2)(A) covers actual antidumping duties,
they claim it has assumed so implicitly. Petitioners cite Federal-Mogul
Corp. v. United States, (813 F. Supp. 856, 872 (CIT 1993)) in which the
plaintiff challenged the Department's refusal to deduct estimated
antidumping duty deposits. According to petitioners, the CIT affirmed
the Department's refusal to deduct the estimated AD duties, relying on
the fact that the duty deposits were only estimates. However,
petitioners claim, the Court did not adopt the Department's reasoning
that section 772 applied only to ``normal'' import duties, and that
antidumping duties were not normal duties within the meaning of the
statute. This case, according to petitioners, requires the Department
to deduct from U.S. price any import duties that can be accurately
determined at the time the Department is calculating the current
dumping margins.
Petitioners insist the legislative history of the URAA in no way
suggests that Congress rejected the petitioners'' construction of
section 772 (c)(2)(A). Petitioners claim that the Senate Finance
Committee specifically recognized that the issue of whether antidumping
duties must be deducted as a cost was being considered by the CIT, and
directed the Department to abide by the outcome of that litigation.
Accordingly, petitioners argue it is clear that Congress did not intend
to ratify the Department's failure to treat duties as a cost in the
URAA, but instead recognized that the issue would be resolved through
the judicial process.
Petitioners conclude by stating that treatment of antidumping
duties as a cost would be accomplished in the same manner as the
adjustment for reimbursement of antidumping duties in the preliminary
margin program. The actual difference between normal value and EP or
CEP on each sale is calculated by the margin program. This difference
is equal to the antidumping duties to be paid by the importer and
referred to in section 772 (c)(2)(A). Once this difference is
calculated, it must then be deducted from EP or CEP for use in
calculating the final margin on each transaction.
Hoogovens claims that the petitioners' argument is flatly erroneous
and is based either on a failure to acknowledge or a misinterpretation
of statements by all three branches of government on this issue. In
past cases the Department has repeatedly rejected the argument that
antidumping duties should be deducted as a cost. In fact, the
Department dealt with this issue and rejected petitioners' argument in
the final results of the first administrative review of the order
governing Hoogovens' imports of cold-rolled carbon steel. (61 FR at
48469.) See also Certain Hot-Rolled Lead and Bismuth Carbon Steel
Products from the United Kingdom; Final Results of Antidumping Duty
Administrative Review, 60 FR 44009 (August 24, 1995) and Certain
Corrosion-Resistant Carbon Steel Flat Products from Korea; Final
Results of Antidumping Duty Administrative Review, 61 FR 18547, 18553
(April 26, 1996). No reviewing court has ever reversed the Department's
interpretation of the statute on this point. None of the cases cited by
petitioners dealt with the issue at hand. For example, C.J. Tower
described antidumping duties as ``duties'' for the purpose of
distinguishing them from ``penalties'' that would require compliance
with the due process guarantees of the Fifth Amendment to the U.S.
Constitution. Hoogovens claims it did not remotely consider the issue
whether antidumping duties are to be included among the ``United States
import duties'' referred to in 19 U.S.C. 1677a (c)(2)(A).
Hoogovens points to the petitioners' acknowledgment that the
Department's position before the CIT in Federal Mogul was that the
statute's ``import duty'' language applied to neither antidumping
deposits nor actual assessed duties, and Hoogovens asserts there have
been no legal developments since the Department stated its position in
that case to cause it to reconsider; to the contrary, all developments
have been in favor of the Department's approach.
Hoogovens argues that petitioners have misinterpreted the
legislative history of this issue, citing the Final Results of the
1993/94 administrative review, in which the Department stated that
Congress put to rest the issue of AD/CVD duties as a cost in arduous
debates during the passage of the URAA. (61 FR. at 48469.) Hoogovens
also cites the House Ways and Means Committee's Report accompanying the
URAA, which stated that the new duty absorption provision ``would not
affect the calculation of margins in administrative reviews. This new
provision of law is not intended to provide for the treatment of
antidumping duties as a cost.'' H. Rep. No. 826 (I), 103rd Cong., 2d
Sess. 60-61. Hoogovens concludes by asking the Department to reaffirm
its conclusion regarding duty as a cost in the final results of this
review.
Department's Position
It is the Department's longstanding position that antidumping and
countervailing duties are not a cost within the meaning of 19 U.S.C.
1677a(d). See Certain Cold-Rolled Carbon Steel Flat Products from the
Netherlands, 61 FR 48465, 48469 (September 13, 1996). Antidumping and
countervailing duties are unique. Unlike normal duties, which are an
assessment against value, antidumping and countervailing duties derive
from the margin of dumping or the rate of subsidization found.
Logically, antidumping and countervailing duties cannot be part of the
very calculation from which they are derived. This logical rationale
for the Department's interpretation of the statute is consistent with
prior decisions of the Court of International Trade. See Federal-Mogul
v. United States, 813 F. Supp. 856, 872 (1993) (deposits of antidumping
duties should not be deducted from USP because such deposits are not
analogous to deposits of ``normal import duties'').
In contrast, petitioners'' reasoning is circular rather than
logical: in calculating the dumping margin the Department must take
into account the dumping margin. Such double counting, i.e., including
the same unfair trade practice twice in a single calculation, is
unjustifiable, except in the limited circumstances provided for in
Sec. 353.26.
Moreover, the treatment of antidumping and countervailing duties
(already paid or to be assessed) as a cost to be deducted from the
export price is an issue that was arduously debated during passage of
the Uruguay Round Agreements Act (URAA) and ultimately rejected by
Congress. See, H.R. 2528, 103rd Cong., 1st Sess. (1993). Alternatively,
Congress directed the Department to investigate, in certain
circumstances, whether antidumping duties were being absorbed by
affiliated U.S. importers. 19 U.S.C. 1675(a)(4). Thus, Congress put to
rest the issue of antidumping and countervailing duties as a cost. URAA
Statement of Administrative Action at 885 (``The duty absorption
inquiry would not
[[Page 18486]]
affect the calculation of margins in administrative reviews. This new
provision of the law is not intended to provide for the treatment of
antidumping duties as a cost.''); see also H. Rep. No. 103-826(I),
103rd Cong., 2nd Sess. (1994) at 60.
Final Results of Review
As a result of our review, we determine that the following
weighted-average margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Period of review (percent)
------------------------------------------------------------------------
Hoogovens Staal B.V........................ 8/1/94-7/31/95 4.33
------------------------------------------------------------------------
The Department shall determine, and the Customs service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and foreign market value may
vary from the percentages stated above. The Department will issue
appraisement instructions directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of cold-rolled carbon steel flat products from the
Netherlands entered, or withdrawn from warehouse, for consumption on or
after the publication date, as provided for by section 751(a)(1) of the
Act: (1) The cash deposit rate for the reviewed company will be the
rate for that firm as stated above; (2) if the exporter is not a firm
covered in this review, or the original less than fair value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (3) if neither the exporter nor the manufacturer
is a firm covered in this review, the cash deposit rate will be 19.32
percent. This is the ``all others'' rate from the amended final
determination in the LTFV investigation. See Amended Final
Determination Pursuant to CIT Decision: Certain Cold-Rolled Carbon
Steel Flat Products from the Netherlands, 61 FR 47871. These deposit
requirements, when imposed, shall remain in effect until publication of
the final results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under Sec. 353.26 of the Department's regulations to
file a certificate regarding the reimbursement of antidumping duties
prior to liquidation of the relevant entries during this review period.
Failure to comply with this requirement could result in the Secretary's
presumption that reimbursement of antidumping duties occurred and the
subsequent assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with Sec. 353.34(d) of the Department's regulations.
Timely notification of return/destruction of APO materials or
conversion to judicial protective order is hereby requested. Failure to
comply with the regulations and the terms of an APO is a sanctionable
violation.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 353.22 of
the Department's regulations.
Dated: April 2, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-9427 Filed 4-14-97; 8:45 am]
BILLING CODE 3510-DS-P