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

[Federal Register Volume 64, Number 68 (Friday, April 9, 1999)]
[Notices]
[Pages 17324-17336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8926]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-122-829]


Notice of Final Determination of Sales at Less Than Fair Value--
Stainless Steel Round Wire from Canada

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: April 9, 1999.

FOR FURTHER INFORMATION CONTACT: Thomas Schauer or Robin Gray, Office 
of AD/CVD Enforcement 3, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-4852 or (202) 482-4023, respectively.

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 (``the 
Department'') regulations refer to the regulations codified at 19 
C.F.R. Part 351 (April 1998).

Final Determination

    We determine that stainless steel round wire from Canada 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 Continuation of 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 60402 (November 18, 1998) (``preliminary 
determination''). Since the preliminary determination, the following 
events have occurred.
    In January 1999, we conducted on-site verifications of the 
questionnaire responses submitted by Central Wire Industries Ltd. 
(``Central Wire'') and Greening Donald Co. Ltd. (``Greening Donald'') 
(collectively ``the respondents'').
    We received case briefs from the petitioners 1 and both 
respondents on February 23, 1999, and we received rebuttal briefs from 
the same parties on March 2, 1999. We held a public hearing and a 
proprietary hearing on March 11, 1999.
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    \1\ 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

[[Page 17325]]

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 each 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 
Canada to the United States were made at less than fair value, we 
compared the export price (``EP'') or constructed export price 
(``CEP''), as appropriate, to the normal value. Our calculations 
followed the methodologies described in the preliminary determination 
except as noted below. See also the company-specific analysis memoranda 
dated March 31, 1999, which have been placed in the file.

Export Price and Constructed Export Price

    For the price to the United States, we used EP or CEP as defined in 
section 772 of the Act. We calculated EP and CEP based on the same 
methodology we used in the preliminary determination, with the 
following exceptions:
    1. We calculated and deducted U.S. duties from EP for certain sales 
for which Central Wire did not report the duties. See comment 11, 
below.
    2. We recalculated Central Wire's indirect selling expenses to 
account for the fact that Central Wire's sales were made in mixed 
currencies. See comment 4, below.
    3. We excluded Greening Donald's U.S. consignment sales from our 
analysis. See comment 12, below.

Normal Value

    We used normal value as defined in section 773 of the Act. As in 
the preliminary determination, we excluded certain sales for both 
respondents pursuant to section 773(b) of the Act because we found that 
these sales were made below the cost of production within an extended 
period of time in substantial quantities and were not at prices which 
permit recovery of all costs within a reasonable period of time. We 
calculated normal value based on the same methodology we used in the 
preliminary determination, with the following exceptions:
    1. We revised the list of Central Wire's home-market sales which we 
determined to have been made outside the ordinary course of trade. See 
comment 2, below.
    2. We recalculated Central Wire's indirect selling expenses to 
account for the fact that Central Wire's sales were made in mixed 
currencies. See comment 4, below.

Cost of Production

    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average cost of production (``COP''), by model, based on the 
sum of each respondent's cost of materials, fabrication, general 
expenses, and packing costs. We relied on the submitted COP data except 
in the following specific instances where Greening Donald's submitted 
costs were not quantified or valued appropriately:
    1. We included certain costs which Greening Donald did not report 
in its submitted costs. See comment 13, below.
    2. We calculated Greening Donald's general and administrative 
expenses (``G&A'') in accordance with our normal methodology which is 
based on the producing company as a whole. See comment 14, below.
    3. We calculated Greening Donald's financial expenses based on the 
total operations of the consolidated corporation (i.e., the Thyssen 
Group). See comment 16, below.
    4. We included foreign-exchange gains and losses related to 
Greening Donald's cash accounts and accounts payable accounts in the 
COP and constructed value (``CV''). See comment 16, below.
    5. We relied on Greening Donald's normal books and records kept in 
accordance with Canadian generally accepted accounting principles, and 
we included the year-end depreciation adjustment in the calculation of 
Greening Donald's costs. See comment 20, below.
    6. During the POI, Greening Donald purchased certain major inputs 
from an affiliated supplier and from unaffiliated suppliers. In order 
to follow our normal practice of using the highest of transfer price, 
market price, or the affiliate's cost of production to calculate the 
cost of affiliated-party inputs, we calculated an adjustment which we 
applied to the per-unit direct material cost of all products 
incorporating this input. See comment 18, below.
    7. Greening Donald asserted that its reported variances represented 
the weighted-average cost of fiscal year 1997 and the first quarter of 
fiscal year 1998. It also stated that the denominator it used in the 
calculation of the reported variance rates was based on cost-of-sales 
information rather than cost-of-manufacturing information. For the 
final determination, we used the variance rates based on the POI cost 
of manufacturing to calculate COP and CV.

Currency Conversions

    As in the preliminary determination, we made currency conversions 
in accordance with section 773A of the Act. The Department's preferred 
source for daily exchange rates is the Federal Reserve Bank.

Verification

    As provided in section 782(i)(1) of the Act, we verified the 
information submitted by the respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records, as well as 
original source documents provided by the respondents.

Interested Party Comments

    Comment 1: Substantial Transformation. The respondents argue that 
the Department's preliminary determination that wire rod is 
substantially transformed in the production of round wire yields a 
fundamentally unfair result. The respondents contend that they must pay 
both ``non-NAFTA'' tariff duties and estimated dumping duties on the 
same wire used to produce stainless steel round wire because this wire 
is classified both as ``Canadian'' and as ``foreign'' under essentially 
identical Customs and Department of Commerce substantial-transformation 
tests. The respondents contend that the rod imported (into Canada) is 
not physically or chemically substantially transformed in Canada such 
that it merits classification as a Canadian product subject to dumping 
duties. The respondents observe that the Court of International Trade 
(``CIT'') has ruled that wire rod is not substantially transformed into 
round wire in the context of a Customs case, citing Superior Wire v. 
United States, 669 F. Supp. 472 (CIT 1987) (``Superior Wire''), 
affirmed 867 F. 2d 1409 (Fed. Cir. 1989). The respondents contend that 
the CIT, in Superior Wire, noted that the end use of wire is determined 
by the rod input.
    The respondents also contend that wire rod constitutes an essential 
active component which defines the key chemical and physical parameters 
of the finished wire and that the level of accuracy required for 
accurate model

[[Page 17326]]

matching in a dumping analysis is not necessary in a substantial-
transformation analysis. The respondents contend that the substantial-
transformation test requires a substantial change in the physical and 
chemical properties, not small differences which may be implicated in 
applying the model-matching criteria.
    The respondents contend further that the Department's analysis of 
the end-uses of stainless steel wire is too specific. Citing Final 
Determination of Sales at Less than Fair Value: Static Random Access 
Memory Semiconductors from the Republic of Korea, 63 FR 8934 (February 
23, 1998), the respondents argue that the Department rarely considers 
changes in specific end-uses as opposed to general end-use categories 
sufficient to qualify as substantial transformation.
    In addition, the respondents contend that the Department, lacking 
contrary evidence from the petitioners, should base its determination 
of relative investment for rod production versus wire drawing on 
uncontested evidence provided by the respondents. Citing Brass Sheet 
and Strip from Canada, 58 FR 6615, 6617 (February 1, 1993), Granular 
Polyetrafluoroethylene Resin from Italy, 58 FR 26100, 26102 (April 30, 
1993), and section 351.402(c)(2) of the Department's regulations, the 
respondents contend that the value added in the wire-drawing process is 
insignificant and, according to Departmental policy, it does not 
qualify as a substantial transformation of the product. Alternatively, 
the respondents suggest, the Department should classify those wire 
products found to have particularly low value-added transformations as 
a product of the country from which the rod was purchased and, 
therefore, not subject to this investigation.
    The respondents argue further that the substantial-transformation 
test the Department applied constitutes an ``administrative 
determination of general application,'' as defined by Article 1 of the 
World Trade Organization (``WTO'') Agreement on the rules of origin 
and, therefore, subject to that agreement. The respondents request that 
the Department explain its rationale behind its belief that Article 2 
of the WTO Agreement on Rules of Origin does not require the Department 
to apply the country-of-origin determinations made by Customs. 
Considering the totality of the factors on the record in this case, the 
respondents request that the Department reverse its decision and 
terminate the investigation of SSRW from Canada.
    The petitioners agree with the Department's preliminary 
determination that stainless steel wire rod is substantially 
transformed into round wire. According to the petitioners, the 
respondents have not made any significantly different arguments than 
they did prior to the preliminary determination and, moreover, the 
information they have submitted in support of their arguments only 
serves to confirm that the Department's preliminary determination is 
correct.
    The petitioners argue that the scope of an antidumping 
investigation is not based on Customs rules of origin nor on the WTO 
rules of origin. The petitioners assert that there is nothing in the 
current rules that requires the Department to apply Customs country-of-
origin determinations for purposes of antidumping or countervailing 
duty proceedings. The petitioners, citing the WTO Agreement on Rules of 
Origin, Article 1 n.1, contend that the respondents ignore the plain 
language of the WTO Rules of Origin Agreement that says its provisions 
do not apply to ``those determinations made for purposes of defining 
`domestic like product' or `like products of the domestic industry' or 
similar terms wherever they apply.'' Moreover, the petitioners argue, 
even if the WTO Agreement on Rules of Origin were applicable to 
antidumping proceedings, there is no existing agreement on the actual 
origin for specific products.
    The petitioners also argue that Customs Service determinations on 
classification or origin of a product are not binding on the 
Department. The petitioners assert that there are important policy 
reasons why the Department should not be bound by Customs Service 
rulings, claiming that, because of the difficult standards that have 
been established regarding claims of circumvention, industries that 
rely on a single major raw material input might not be able to obtain 
any relief from dumping or unfair subsidization of the downstream 
product.
    The petitioners assert further that the respondents are not 
disproportionately affected by the Department's substantial-
transformation ruling. The petitioners observe that both respondents 
use U.S.-origin wire rod to make wire that they import to the United 
States and that this wire qualifies for a NAFTA tariff. Furthermore, 
the petitioners claim that, even when the respondents use wire rod 
imported from countries other than the United States, they are not any 
different than the respondents in the other stainless steel round wire 
investigations.
    The petitioners also assert that the respondents' reliance on 
Superior Wire is misplaced. The petitioners observe that Superior Wire 
concerned carbon steel wire, which is a different product than the one 
covered in this investigation. Citing The Making, Shaping and Treating 
of Steel, a standard industry reference, the petitioners claim that 
carbon steel and stainless steel products are quite different. The 
petitioners also observe that the Superior Wire ruling was made in the 
context of a voluntary restraint agreement, which is completely 
different from the context of an antidumping investigation. The 
petitioners conclude that the factual analysis of Superior Wire is 
limited to the facts of that case alone and is of no precedential value 
in this case. The petitioners also note that, for its preliminary 
determination in this investigation, the Department determined that the 
characteristics of stainless steel round wire are not predetermined by 
the rod input but, rather, that the wire rod is altered in the process 
of making it into round wire. The petitioners also observe that, 
although the respondents argue that the Department's end-use analysis 
is too specific, they do not suggest any alternatives.
    Finally, the petitioners argue that the respondents' reliance on 
the data they presented regarding the value added to wire rod by the 
cold-drawing process is misplaced. Since these data are unverified 
estimates. The petitioners also assert that, based on the Greening 
Donald's cost data, the record indicates that the value added to wire 
rod by the cold-drawing process is significant.
    Department's Position: We continue to find, as we stated in the 
Memorandum to Richard W. Moreland dated November 12, 1998 (``November 
12 memorandum''), that stainless steel wire rod cold-drawn in Canada to 
produce stainless steel round wire is substantially transformed into a 
Canadian product and is within the scope of this investigation, 
regardless of the origin of the stainless steel wire rod input. The 
cold-drawing process results in a product with physical properties and 
end-uses that are distinct from those of the stainless steel wire rod 
input, thus transforming the rod into a new and different article. The 
stainless steel round wire industry is distinct from the stainless 
steel wire rod industry and the value added by the cold-drawing process 
is significant.
    Furthermore, the respondents' reliance on Superior Wire is 
misplaced. Superior Wire was a ruling on carbon steel wire, not 
stainless steel wire.

[[Page 17327]]

Superior Wire, at 479, held that ``the wire rod dictates the final form 
of the finished wire.'' Regardless of what circumstances may apply in 
the carbon steel wire industry, this statement is demonstrably not true 
here, as is described in detail in the November 12 memorandum.
    Although the respondents argue that our substantial-transformation 
analysis is too specific by incorporating model-matching criteria, 
their argument that we should only take into account the ``overall 
parameters'' and not ``small model-matching criteria'' in our analysis 
is unconvincing. First, it is not clear why model-matching criteria 
such as size and tensile strength would not be part of the 
``parameters'' of round wire. Second, it is unclear why we should not 
consider a change in wire rod such that the finished product (round 
wire) is, for example, one-third of the diameter of the rod input to be 
substantial. The analysis in the November 12 memorandum, at pages 4-5, 
demonstrates that the chemical composition, or grade, of the wire is 
not the only physical characteristic of the round wire. We use 
additional characteristics to define two products that are identical, 
and all those characteristics are changed by the drawing process.
    Moreover, we disagree with the respondents' assertion that the end-
use of wire is determined by the rod input. Again, the respondents' 
reliance on Superior Wire is misplaced. As we stated in the November 12 
memorandum, at page 5, the cold-drawing process results in a product 
with end-uses that are distinct from those of the wire-rod input. 
Whatever the circumstances may be in the carbon steel wire industry, it 
is clear that the end-uses of stainless steel wire are dependent on 
factors other than the grade of the wire-rod input. The respondents 
have not cited any evidence on the record of this investigation or to 
any industry reference that suggests otherwise. Given these 
circumstances, we conclude that the circumstances examined in Superior 
Wire simply do not apply here.
    Furthermore, we disagree with to the respondents' argument that our 
end-use analysis is too specific. In their case brief, quoting from 
Greening Donald's December 29, 1998, submission, the respondents state 
that ``the Department is correct in noting that, within each set of 
general end-uses, there may be more specific end-uses. The drawing 
process may make SSRW more suitable for one rather than another 
specific end-use: nevertheless, the grade of the wire rod has pre-
determined the general set of end-uses for which the wire may be used. 
Thus, for example, neither AISI 304 nor AISI 316 could provide the high 
temperature resistance required to produce a high temperature conveyor 
belt. By contrast, AISI 314 would provide the necessary ``high 
temperature resistance.'' Thus, the respondents consider ``high 
temperature conveyor belts'' to be a general end-use. ``Spring wire,'' 
that is, wire used to produce springs, which we used in an example in 
the November 12 memorandum, at page 5, is no less general an end-use 
than the example cited by the respondents. Moreover, the respondents' 
citation to Semiconductors from the Republic of Korea is inapposite. In 
that case, we determined that ``[p]rocessed wafers produced in Korea, 
but packaged, or assembled into memory modules, in a third country, are 
included in the scope; processed wafers produced in a third country and 
assembled or packaged in Korea are not included in the scope.'' Thus, 
it is the processed wafers that are the subject merchandise, not the 
packaging or memory modules. In this case, it is the stainless steel 
round wire that is subject to this investigation. How it is packaged is 
not relevant to our substantial transformation analysis.
    With regard to the respondents' argument that the investment 
required to draw wire is less than the investment required to produce 
rod, we agree that this can be a factor in our determination as to 
whether a product is substantially transformed. We do not agree that it 
is a controlling factor. Our review of the record indicates that 
``[t]he facilities, machinery and expertise needed to cold-draw 
stainless rod into stainless wire are distinct from those needed to 
produce stainless rod.'' See November 12 memorandum, at page 5. The 
respondents have not cited any evidence to contradict this. Thus, we 
find that the stainless steel round wire industry is separate and 
distinct from the stainless steel wire rod industry, and the two 
industries are not interchangeable. For this reason, we do not consider 
the relative levels of investment required in the industries to be as 
relevant in this proceeding as the fact that stainless steel round wire 
is a product with physical properties, that end-uses are distinct from 
those of stainless steel wire rod, and that the industries are 
distinct.
    We also disagree with the respondents' assertion that the value 
added by the drawing process is insignificant. The cost data submitted 
by the respondents indicates that, on average, the value added by the 
drawing process is greater than the threshold suggested by the cases 
they cite. Furthermore, section 351.402(c)(2) of our regulations 
establishes whether we should apply the special rule in section 772(e) 
of the Act and is inapposite to a substantial-transformation 
determination. Section 772(e) of the Act directs that the Department 
may calculate the margins on further-manufactured merchandise in 
instances where the value added by an affiliated party is likely to 
exceed substantially the value of the subject merchandise. Neither 
section 772(e) of the Act nor 19 C.F.R. 351.402(c)(2) affect the 
Department's determination of whether a product is substantially 
transformed.
    Finally, we reiterate that the disciplines of the WTO Agreement on 
Rules of Origin that are currently in effect under Article 2 of the 
Agreement simply do not require us to apply the country-of-origin 
determinations made by the Customs Service when making determinations 
in AD or CVD proceedings. Therefore, we have not altered our 
preliminary determination regarding our substantial transformation 
decision for this final determination.

Central Wire Comments

    Comment 2: Ordinary Course of Trade. Central Wire argues that the 
Department should exclude all of the sales that it claimed were made 
outside the ordinary course of trade from the home-market sales used to 
calculate normal value. Central Wire contends that the statute directs 
the Department to base normal value only on sales that are made in 
commercial quantities and that are made in the ordinary course of trade 
and that the Department will consider the totality of circumstances in 
examining this issue, citing Murata Mfg. Co. v. United States, 820 F. 
Supp. 603, 607 (CIT 1993).
    Central Wire notes that the Department excluded some of its claimed 
outside-the-ordinary-course-of-trade sales from the calculation of 
normal value because the Department found that some of the sales had 
aberrational pricing. Central Wire contends, however, that the standard 
the Department applied was too restrictive and argues that it would be 
more appropriate to use a 25-percent price difference between the sale 
and other sales of similar products made within the ordinary course of 
trade, rather than the 50-percent price difference the Department used, 
to determine whether an individual sale is outside the ordinary course 
of trade.
    Central Wire also notes that the Department excluded some of its 
claimed outside-the-ordinary-course-of-trade sales from the calculation 
of

[[Page 17328]]

normal value because the Department found, based on Central Wire's 
descriptions in its responses, that the circumstances of the sales 
demonstrated that they were made outside the ordinary course of trade. 
However, Central Wire claims, there were some sales that it reported as 
outside the ordinary course of trade which the Department did not 
exclude and for which the Department did not explain why it had not 
excluded the sales. With regard to these sales, Central Wire contends 
that the Department's findings at verification demonstrate that all of 
its claimed outside-the-ordinary-course-of-trade sales were, in fact, 
made outside the ordinary course of trade and should be excluded from 
the Department's dumping calculations.
    The petitioners contend that the information on the record does not 
provide a sufficient basis to support Central Wire's claims. The 
petitioners argue that Central Wire essentially claimed sales it made 
to new customers or sales of products with different specifications to 
existing customers as outside the ordinary course of trade. The 
petitioners argue that this does not demonstrate that a sale is outside 
the ordinary course of trade and observe that Central Wire had a number 
of ``one-time'' sales to customers that it did not claim were made 
outside the ordinary course of trade. The petitioners contend that, to 
do business in a competitive market, a producer has to accommodate its 
customers' needs, to sell to new customers, even to solicit new 
customers, and that it should not be a commercial irregularity that 
Central Wire sometimes sells to less-desirable customers or that it 
could sometimes take advantage of the market situation and charge a 
higher-than-normal price for identical or similar merchandise to other 
customers. The petitioners also argue that the nature of the customer, 
such as whether it was a supplier to Central Wire, should not be a 
factor in determining whether a sale was made outside the ordinary 
course of trade.
    Central Wire rebuts that the Department should not accept the 
petitioners' argument regarding Central Wire's claimed outside-the-
ordinary-course-of-trade sales on procedural grounds because, according 
to Central Wire, the petitioners never raised the issue of its claimed 
outside-the-ordinary-course-of-trade sales previously in this 
investigation. Central Wire argues that, if the Department accepts the 
petitioners arguments, it will leave respondents unable to respond 
adequately to allegations made by petitioners adequately. Moreover, 
Central Wire contends that it conservatively identified its sales as 
being outside the ordinary course of trade and that, perhaps, 
additional sales may have been able to be similarly identified.
    Department's Position: We agree with the petitioners in part. A 
company may well obtain new customers or sell different products to 
existing customers, and it may even seek such business actively. In 
addition, the record shows that Central Wire had a number of apparent 
``one-time'' sales which it did not claim as outside the ordinary 
course of trade. Thus, the fact that Central Wire has some sales to 
customers to which it does not normally sell or sells products that the 
customer does not normally buy does not demonstrate, in itself, that a 
sale is outside the ordinary course of trade. However, this fact, in 
conjunction with other circumstances, such as aberrational pricing, may 
lead us to conclude that a sale is outside the ordinary course of 
trade. In this case, we have reconsidered our analysis of Central 
Wire's claimed outside-the-ordinary-course-of-trade sales. We have 
accepted portions of Central Wire's claim that certain sales were made 
outside the ordinary course of trade and excluded those sales from our 
normal value calculation. We determined that one-time, small-quantity 
sales that had unusual circumstances, such as aberrational pricing, 
were outside the ordinary course of trade. Due to the business-
proprietary nature of the information, please see the Memorandum from 
Thomas Schauer to Richard W. Moreland dated April 2, 1999, for a 
complete description of the sales we excluded and the circumstances 
which led us to conclude that they were outside the ordinary course of 
trade.
    Furthermore, we disagree with Central Wire's assertion that we 
should use a threshold of 25 percent to determine aberrational prices 
instead of the 50-percent threshold we used for the preliminary 
determination. Central Wire argues that the lower threshold is more 
appropriate on the theory that the threshold we used was too 
``restrictive,'' given the nature of SSRW sales and the frequent 
presence of a market price for a particular product. However, Central 
Wire did not explain how the nature of SSRW sales renders a 25-percent 
threshold more appropriate, nor did it point to any evidence in support 
of its claim. In addition, Central Wire did not explain how the 
frequent presence of a market price for particular products suggests 
that a lower threshold would be more appropriate. We must ensure that 
our consideration is tailored in a manner that does not result in 
excluding sales that, while different from the majority of sales, are 
not outside the ordinary course of trade. Therefore, the standard for 
determining whether a sale is outside of the ordinary course of trade 
needs to be high in order to prevent potential manipulation of a sales 
database that would result in excluding sales not outside the ordinary 
course of trade. Central Wire has presented no convincing argument to 
support its claim that the threshold we used in our analysis was 
inappropriate. Therefore, we have not changed our threshold for this 
case in our analysis.
    Finally, we disagree with Central Wire that we should reject the 
petitioners' arguments on procedural grounds. Central Wire should read 
the record more carefully. The petitioners have voiced their concern 
about Central Wire's claimed outside-the-ordinary-course-of-trade sales 
in a number of submissions prior to its case brief at various stages of 
this investigation. Further, when we receive comments in a case brief, 
we consider all issues raised in the context of the record as it stands 
at that time. Thus, there is no reason to reject the petitioners' 
arguments as a procedural matter.
    Comment 3: Quantity-Band Matching. Central Wire argues that the 
Department should account for variations in prices due to quantities 
sold. Central Wire claims that section 773(a)(1) of the Act directs the 
Department to compare U.S. sales only to home-market sales made in the 
usual commercial quantities. Central Wire claims further that section 
773(a)(6) of the Act, as well as the Department's regulations at 19 
C.F.R. 351.409, directs the Department to adjust its price comparisons 
if there is a difference in price due wholly or in part to differences 
in the quantities of the normal value sale and the EP sale being 
compared.
    Central Wire contends that, though the Department has historically 
been reluctant to make quantity adjustments pursuant to 19 C.F.R. 
351.409, there is no reason why the Department should not make a 
quantity adjustment in Central Wire's case. Central Wire acknowledges 
that the quantity-adjustment regulation does not appear to be tailored 
for, nor does it account for, Central Wire's circumstances because 
Central Wire does not grant quantity discounts, per se, although it 
does effectively impose a surcharge for low-quantity sales.
    Central Wire suggests that the Department compare U.S. sales to 
home-market sales made within the same ``quantity band'' which Central 
Wire suggested prior to the preliminary determination. By matching 
within the

[[Page 17329]]

same quantity bands, Central Wire argues, the Department would minimize 
the need for a quantity adjustment. Citing Framing Stock from the 
United Kingdom, 61 FR 51411, 51420 (October 2, 1996) (``Framing 
Stock''), Central Wire contends that the Department has used the 
quantity-band concept for matching purposes in prior cases. Central 
Wire also claims that an examination of prices within each of the 
quantity bands demonstrates that the average prices at each quantity 
band differ from each other in both the U.S. and home markets. Finally, 
Central Wire suggests, if the Department can not match the identical or 
most similar product within the same quantity band, that the Department 
make an adjustment based on the difference in the weighted-average 
prices across quantity bands.
    The petitioners assert that, section 771(16) of the Act requires 
the Department to compare the subject merchandise based on the 
products' physical characteristics. The petitioners argue that, because 
the quantity of the product has nothing to do with the physical 
characteristics of round wire, quantity bands should not be used as a 
matching criterion. The petitioners, citing United Eng'g & Forging v. 
United States, 779 F. Supp. 1375, 1381-82 (CIT 1991), also argue that 
the courts have upheld the Department's practice of not using volume as 
a criterion for selecting the most similar merchandise.
    The petitioners argue further that because Central Wire has not 
demonstrated that during the POI it granted quantity discounts of at 
least the same magnitude on 20 percent or more of sales of the foreign 
like product for that country or the discounts reflect savings 
specifically attributable to the production of different quantities, 
criteria required in the Department's regulations, it is not eligible 
for a quantity discount.
    In addition, the petitioners assert that the circumstances in 
Framing Stock are different from the instant situation. In that case, 
according to the petitioners, the respondent asked for a quantity 
adjustment for its products and the Department determined that a 
quantity adjustment was warranted in certain instances but not in 
others. In any event, the petitioners contend, the respondent in that 
case was seeking a quantity adjustment and not a new product-matching 
criterion based on sales quantities.
    Finally, the petitioners argue that, even if there were not clear 
statutory and case precedents against comparing products on the basis 
of quantities, Central Wire has not provided convincing evidence to 
attribute price differences between its sales to differences in 
quantities. The petitioners argue that, in its price analysis, Central 
Wire did not control for certain differences, such as differences in 
merchandise sold among the claimed quantity bands or differences in 
expenses such as freight or packing for each sale. The petitioners also 
contend that price differences could also be caused by a number of 
other reasons such as the timing of the sale, customers' relationships 
with the supplier, and market conditions for finished products and raw 
materials. The petitioners conclude that it would be inappropriate to 
make any quantity adjustment or compare across quantity bands without 
taking these other factors into account.
    Department's Position: Central Wire did not demonstrate that the 
difference in prices among its claimed quantity bands were wholly or 
partly due to the differences in quantities. Central Wire's price 
analysis did not account for many factors that might more reasonably be 
said to cause the differences in prices. For example, Central Wire 
presumably has different product mixes within the different claimed 
quantity bands. If one claimed quantity band consists mainly of sales 
of fine wire and another claimed quantity band consists mainly of sales 
of wire that has undergone only one draw, then that, in our view, would 
be a more likely explanation of any difference in prices. Also, Cental 
Wire's analysis reflected gross prices, and did not take other factors, 
such as differences in packing or freight expenses, into account. Thus, 
because Central Wire has not demonstrated that any differences in price 
among its claimed quantity bands is wholly or partly due to the 
differences in quantities, it would be inappropriate to attempt to 
match products using Central Wire's claimed quantity bands as a 
matching criterion. Therefore, we have not attempted to match products 
by quantity bands.
    With respect to making an adjustment if we make comparisons of 
products sold at different quantities, our regulation at 19 C.F.R. 
351.409 states that ``the Secretary will make a reasonable allowance 
for any difference in quantities to the extent the Secretary is 
satisfied that the amount of any price differential * * * is wholly or 
partly due to that difference in quantities.'' The regulation 
identifies the standards we use to determine whether any price 
differential is wholly or partly due to that difference in quantities: 
``[t]he Secretary normally will calculate normal value based on sales 
with quantity discounts only if * * * the exporter or producer granted 
quantity discounts of at least the same magnitude on 20 percent or more 
of sales of the foreign like product'' or ``the exporter or producer 
demonstrates to the Secretary's satisfaction that the discounts reflect 
savings specifically attributable to the production of the different 
quantities.'' Central Wire did not grant quantity discounts nor did it 
demonstrate that any difference in prices were specifically 
attributable to the production of the different quantities. In 
addition, Central Wire did not demonstrate how any evidence on the 
record, such as price lists, supported its claim that prices varied by 
quantity. Therefore, we have not made any quantity adjustments.
    Comment 4: Allocation of Indirect Selling Expenses. Central Wire 
disagrees with the Department's re-allocation of its reported U.S. and 
home-market indirect selling expense adjustments. Claiming that there 
is no evidence on the record that it incurred indirect selling expenses 
on a value basis rather than a weight basis, Central Wire argues that 
there is no conceptual, accounting, or economic justification for the 
Department's preference for a value-based allocation.
    Central Wire argues further that, in the event that the Department 
continues to re-allocate its indirect selling expenses on a value 
basis, the Department should adjust its re-allocation methodology to 
reflect the fact that some of the sales values in the Department's 
calculation are in U.S. dollars while other values are in Canadian 
dollars.
    The petitioners agree with the Department's reallocation of Central 
Wire's indirect selling expenses, contending that the Department's 
normal practice is to require that a respondent allocate indirect 
selling expenses based on sales value rather than on sales quantity. 
The petitioners also observe that a volume allocation would likely 
allocate a smaller portion of the expenses to small-sized, more 
expensive wire than to relatively inexpensive larger wire.
    Department's Position: In the Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Plate in Coils From Belgium, 64 FR 
15476 (March 31, 1999), we stated that, in calculating indirect selling 
expenses, ``the Department should use a value-based allocation rather 
than a quantity-based one,'' and that ``the Department's normal 
practice is to base calculations of [selling, general, and 
administrative expenses] based on value [or cost].'' While Central Wire 
claims that there is no evidence on the record that it incurred 
indirect selling expenses on a

[[Page 17330]]

value basis rather than a weight basis, neither is there any evidence 
to support a conclusion that Central Wire incurred these expenses on a 
weight rather than value basis. Because there is no evidence on the 
record demonstrating the need to deviate from our normal practice, we 
have reallocated Central Wire's indirect selling expenses on a value 
basis. Moreover, based on our findings at verification, we have revised 
our calculation for varying currencies in our re-allocation worksheet. 
See Central Wire Final Determination Analysis Memorandum dated March 
31, 1999.
    Comment 5: Post-Verification Cost Submission. The petitioners argue 
that the Department should not accept the cost data which Central Wire 
submitted after verification because the changes Central Wire made to 
its data were more extensive than necessary as indicated by the 
Department's verification report. Although Central Wire presented 
corrections to the verifiers at the beginning of verification, the 
petitioners contend that certain changes, such as production quantities 
and the number of products sold, should not have been affected by those 
corrections. The petitioners also claim that Central Wire reported its 
costs based on the products sold during the POI, whereas the Department 
asked for respondents to report costs based on the products produced 
during the POI.
    The petitioners also contend that Central Wire did not reconcile 
its reported costs for subject merchandise to its normal accounting 
records, thereby preventing the Department from performing certain 
verification procedures.
    Finally, the petitioners argue that Central Wire should not be 
allowed to use verification as an opportunity to make substantial 
revisions to its submitted responses. The petitioners conclude that, in 
light of these facts, the Department should not use the cost databases 
submitted by Central Wire after verification and instead use the 
databases Central Wire submitted prior to verification.
    Central Wire argues that the Department should use the databases 
that Central Wire submitted subsequent to verification. Central Wire 
contends that its revised costs correct inaccuracies in its previous 
submissions, the Department verified these revised costs, and it did 
not in any way modify the total cost of goods sold it used to calculate 
costs of production. Central Wire argues further that the Department is 
required by law and practice to accept its new information as it is 
demonstrably more accurate than its earlier information and was 
submitted in a timely manner. Central Wire contends that the number of 
products and the production quantities changed because of corrections 
presented at the start of the sales verification. Finally, citing 
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate From Canada: Final Results of Antidumping 
Duty Administrative Reviews and Determination To Revoke in Part, 64 FR 
2173 (January 13, 1999), Central Wire argues that the fact that its 
data is based on sales quantities rather than production quantities is 
not a basis for rejecting Central Wire's costs. Central Wire contends 
that, because it does not maintain production records which would allow 
it to calculate model-specific costs on the basis of production 
quantities, it acted to the best of its ability in reporting its costs.
    Department's Position: The cost data Central Wire submitted after 
verification is accurate. By applying the cost variances in Exhibit 8 
of the cost-verification report dated February 8, 1999, to the model-
specific standard costs in Exhibit 7 of the cost-verification report 
dated February 8, 1999, we obtained the same cost figures that Central 
Wire submitted after verification. Because we verified the data in 
Exhibits 7 and 8 of the cost-verification report by tying the data to 
Central Wire's audited financial statements, we are satisfied that the 
cost-of-production data in Central Wire's submission is accurate. With 
regard to the number of control numbers and production quantities, we 
agree with Central Wire that the cause of the difference is due to 
corrections presented at the start of verification.
    Although the petitioners are correct that Central Wire reported its 
revised costs based on the products sold during the POI, this is the 
manner in which Central Wire reported its original costs. In addition, 
we never asked Central Wire to revise its methodology for calculating 
costs nor is there any evidence on the record suggesting that Central 
Wire's methodology is distortive. In light of these facts and because 
the revised database contains data which we verified to be accurate, it 
would be inappropriate to reject Central Wire's revised database in 
favor of its original database.
    Furthermore, while we normally would share the petitioners' 
concerns regarding the accuracy of post-verification revisions, in this 
case we requested that Central Wire revise and resubmit its databases 
pursuant to our findings at verification. Because we requested the data 
and because Central Wire met the deadline we imposed upon it for 
submitting the revised data, we determine that Central Wire's revisions 
were filed in a timely manner. Thus, because Central Wire's information 
is timely filed and verified to be accurate, we have used the revised 
databases Central Wire submitted.
    Comment 6: General and Administrative Expenses. The petitioners 
argue that the Department should recalculate Central Wire's reported 
general and administrative expense ratio to include certain expenses 
which Central Wire did not include in its general and administrative 
expense calculation.
    Central Wire contends that it did include the expenses to which the 
petitioners refer in its general and administrative expense 
calculation.
    Department's Position: Exhibit 4 of the cost-verification report 
dated February 8, 1999, demonstrates that Central Wire included these 
expenses in its general and administrative expense calculation. 
Therefore, no adjustment is necessary.
    Comment 7: Alleged Consignment Sales. The petitioners contend that 
the Department found that Central Wire did not report certain sales in 
its home-market database and that the Department should include these 
sales in its margin calculation for Central Wire for the final 
determination. The petitioners argue further that, to the extent that 
the data the Department collected are not sufficient, the Department 
should resort to partial facts available to fill in the blanks for 
information not on the record.
    Central Wire argues that it reported these sales properly. Central 
Wire contends that, during the period of time in which these sales 
occurred, the consignment agreement with the consignee had not been 
concluded and thus Central Wire prepared an invoice at the time of 
shipment. Central Wire asserts that it did not begin issuing usage 
invoices for shipments to the consignee until after reaching a 
consignment agreement. According to Central Wire, the existence of the 
consignment agreement therefore explains why merchandise was shipped in 
1996 but had sales dates in 1997.
    Department's Position: We disagree with the petitioners. The record 
shows that Central Wire did not enter into a consignment agreement with 
the consignee until October 1996. Furthermore, according to the 
Department's Central Wire Sales Verification Report dated February 8, 
1999, at page 7, for shipments to the consignee ``prior to the signing 
of the consignment agreement, [Central Wire]

[[Page 17331]]

invoiced the consignment sales at the time of delivery to the consignee 
rather than the time of usage.'' Thus, these sales can be distinguished 
from the shipments to the consignee after the agreement was made. In 
the case of sales Central Wire made prior to the agreement, the date 
that the price and quantity were set was the date of shipment and the 
customer was responsible for payment at that time. In the case of sales 
after the agreement, the price and quantity were not set until the 
customer actually used the merchandise, at which time Central Wire 
issued a usage invoice for the merchandise. In this case, the customer 
was not responsible for payment until Central Wire issued the usage 
invoice. Therefore, we conclude that Central Wire excluded the sales 
made prior to the agreement from its home-market sales database 
properly because they occurred prior to the POI. See Memorandum from 
Thomas Schauer to Richard W. Moreland dated April 2, 1999 for further 
discussion of this issue.
    Comment 8: Inventory Carrying Costs. The petitioners argue that the 
Department should not consider certain inventory carrying costs as 
direct expenses as Central Wire claimed. The petitioners contend that 
Central Wire is the owner of the merchandise during the inventory 
carrying period in question and thus these expenses should be treated 
as any other inventory carrying expense. The petitioners contend 
further that the facts were different in Stainless Steel Wire Rod From 
France, 58 FR 68865 (December 29, 1993), which Central Wire cited to 
support its claim. The petitioners state that Central Wire reported the 
date that the consignee used the merchandise as the date of sale rather 
than the date when Central Wire shipped the merchandise to the 
consignee.
    Central Wire asserts that the petitioners do not demonstrate that 
the Department's decisions applicable to these circumstances are wrong, 
nor do they distinguish this situation with the situation in the case 
it cited in claiming these expenses as direct. Central Wire contends 
that, because it is the Department's practice to treat consignment 
inventory carrying costs as direct expenses, the Department deducted 
them from normal value in the preliminary determination as direct 
expenses appropriately. Central Wire cites Stainless Steel Wire Rod 
From France, 58 FR 68865, 68870 (December 29, 1993), and Flat-Rolled 
Steel From France, 58 FR 37125, 37133 (July 9, 1993), in support of its 
contention.
    Department's Position: Central Wire's situation is similar to that 
of Usinor, a respondent in Flat-Rolled Steel From France, in which we 
treated the expense of holding inventory at the customer's warehouse as 
a direct expense. In that case, the ``merchandise [was] shipped to a 
warehouse selected by the customer and the customer assumes the 
warehousing expense. Usinor [did] not invoice the customer until it 
[was] notified that the customer has withdrawn the material from the 
warehouse.'' See Concurrence Memorandum (public version), dated June 
17, 1993 for Final Determinations in Antidumping Duty Investigations of 
Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled 
Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel 
Flat Products, and Certain Cut-to-Length Carbon Steel Plate From France 
(Investigations A-427-806 through 809), at pp. 10-11. Similarly, in 
this case, because the so-called ``consignee'' is itself the customer 
for this merchandise and this ``consignment'' arrangement is a term of 
sale, these expenses are direct in nature. Therefore, we have not 
changed our treatment of these expenses for the final determination.
    Comment 9: Freight Expense. The petitioners argue that the 
Department should restate Central Wire's reported freight expense for 
CEP sales. The petitioners observe that, in instances in which Wire 
Industries, Central Wire's U.S. affiliate, included goods on more than 
one invoice in a shipment, Central Wire calculated the per-unit inland 
freight by dividing the freight expense by the gross weight of the 
shipment rather than the net weight, thereby understating the expense. 
The petitioners argue that, because Central Wire did not revise its 
reported inland freight expense in the CEP sales listing based on the 
Department's verification findings, the Department should revise the 
expense for the final determination. Because it is not possible to 
determine from the record which sales are affected by this 
understatement, the petitioners argue that the Department should adjust 
the freight expense for all CEP sales.
    Central Wire argues that the Department should accept its reported 
inland freight. Citing the sales-verification report, Central Wire 
contends that this type of calculation was infrequent and only has a 
minimal effect on the actual adjustment. Given the infrequent nature of 
this calculation and the minuscule impact of this calculation, Central 
Wire concludes that it would be inappropriate for the Department to 
make an upward adjustment to freight for all of its CEP sales.
    Department's Position: We found at verification that this 
calculation affected only a small proportion of its CEP sales. See the 
Department's Central Wire sales-verification report dated February 8, 
1999, at page 9. Section 777A(a)(2) of the Act directs that ``[f]or 
purposes of determining the export price (or constructed export price) 
* * * the administering authority may * * * decline to take into 
account adjustments which are insignificant in relation to the price or 
value of the merchandise.'' Section 351.413 of our regulations defines 
``insignificant adjustments'' as any individual adjustment having an ad 
valorem effect of less that 0.33 percent of the export price, 
constructed export price, or normal value. The sales-verification 
report demonstrates that the effect of Central Wire's calculation was 
less than 0.33 percent of price. Ibid. We conclude from the facts on 
the record that Central Wire's calculation for these few sales will not 
affect the margin significantly. It would be inappropriate to increase 
the freight expense for all of Central Wire's CEP sales because the 
verification report demonstrates that this allocation affected a 
minority of these sales. Therefore, we have not revised Central Wire's 
reported freight expense.
    Comment 10: Fuel Surcharge. The petitioners argue that, because the 
Department found that Central Wire did not include a fuel surcharge for 
one CEP transaction in its inland-freight calculation for one product, 
the Department should adjust the freight expense for all CEP sales of 
that product for the final determination.
    Central Wire argues that the Department should not make an 
adjustment because the effect is minuscule and that it only affected 
one sale. Central Wire argues further that, in the event that the 
Department does make the change the petitioners suggest, the Department 
should not rely on the petitioners' formula because it is 
mathematically incorrect.
    Department's Position: We found at verification that Central Wire 
inadvertently did not include a fuel surcharge incurred on one shipment 
in its reported freight expense. It is clear from Exhibit 12a of the 
Department's Central Wire sales-verification report dated February 8, 
1999, that the fuel surcharge affects several different products. 
However, in examining the data on the record, we conclude that it is 
not possible for us to include the fuel surcharge except for the 
individual product we verified. To correct this error for the one 
product accurately, we allocated the freight surcharge to that product 
in the same manner as Central

[[Page 17332]]

Wire calculated the freight expense and recalculated the total freight 
accordingly.
    With regard to the rest of the products affected, we do not have 
the data on the record to include the fuel surcharge in Central Wire's 
freight expenses. Because it is clear from Exhibit 12a of Central 
Wire's sales-verification report dated February 8, 1999, that the 
effect is substantially less than 0.33 percent of the price of the sale 
we verified, correction of this error will not affect the margin 
significantly. Therefore, because it is impossible for us to correct 
the error except for the one product and because the effect of the 
error is insignificant, we have restated Central Wire's reported 
freight expense only for the one product.
    Comment 11: U.S. Customs Duties. The petitioners contend that 
Central Wire did not report U.S. duties for certain EP sales with 
``delivered'' terms of sale. The petitioners claim there is no reason 
why Central Wire would not incur U.S. duties for such sales and argue 
that the Department should use the higher of the duty rates which the 
Department verified for EP sales to calculate the duties for these 
sales.
    Central Wire argues that it reported U.S. duties correctly, which 
the Department verified. Central Wire also asserts that it was 
incumbent on the petitioners to raise this issue prior to verification 
so that the Department could address it at verification.
    Department's Position: We requested that Central Wire report the 
unit amount of any customs duty paid on the subject merchandise in our 
questionnaire. Although Central Wire stated in its narrative 
questionnaire response that it reported duties on all sales for which 
they were incurred, the EP sales database did not reflect these duties 
for certain sales. There is no explanation on the record showing why 
these specific EP sales would not have U.S. duty expenses related to 
them nor is there any evidence that Central Wire did not incur these 
expenses for these sales. Because these were ``delivered'' sales, which 
means that Central Wire was responsible for all shipping costs to the 
customer, we assume that Central Wire did, in fact, incur these 
expenses. In determining the amount of duties paid on the subject 
merchandise and in accordance with section 776(e) of the Act, we have 
used the average U.S. duty rate for other EP sales with the same sales 
terms to calculate the U.S. duties for these sales.

Greening Donald Comments

    Comment 12: U.S. Consignment Sales. The petitioners argue that the 
Department should treat Greening Donald's U.S. consignment sales as CEP 
sales because the merchandise was sold by or for Greening Donald's 
account after importation into the United States and because the 
consignee is substantially involved in selling in the United States on 
behalf of Greening Donald.
    The respondent argues that the Department should continue to treat 
its consignment sales as EP sales because the title of goods remains 
with Greening Donald and that the consignee acts independently of 
Greening Donald in terms of sales, pricing, and region, as the 
Department confirmed at verification. The respondent argues that these 
facts do not meet the Department's test for distinguishing between EP 
and CEP sales and thus the Department should consider these sales to be 
EP sales.
    Department's Position: Section 772(b) of the Act defines CEP as 
``the price at which the subject merchandise is first sold (or agreed 
to be sold) in the United States before or after the date of 
importation by or for the account of the producer or exporter of the 
subject merchandise'' (emphasis added). Section 772(a) of the Act 
defines EP as ``the price at which the subject merchandise is first 
sold (or agreed to be sold) before the date of importation by the 
producer or exporter of the subject merchandise'' (emphasis added). The 
record is clear that Greening Donald did not make a sale prior to the 
time that the subject merchandise was imported into the United States. 
Therefore, we agree with the petitioners that Greening Donald's 
consignment sales are CEP sales. However, because we did not request 
Greening Donald to report the consignee's sales to the unaffiliated 
customer in the United States and because we do not otherwise have the 
prices of those sales, we cannot treat these sales as required by the 
statute and the regulations. Furthermore, these sales represent less 
than five percent of Greening Donald's total sales to the United 
States. Therefore, we have disregarded these U.S. sales for purposes of 
calculating Greening Donald's margin for the final determination.
    Comment 13: Certain Supplies. Greening Donald argues that, in its 
preliminary determination, the Department erred by including in its 
manufacturing costs the cost for certain supplies purchased during the 
POI but not used until after the POI. Greening Donald claims that these 
costs should be excluded from the calculation of COP and CV because the 
expenses cannot properly be matched to the merchandise that was sold 
during the POI, citing AK Steel Corporation v. United States, No 96-05-
01312, Slip. Op. 97-152 (CIT 1997). Greening Donald asserts that, 
because the supplies were purchased during the POI but they were not 
used until after the POI, inclusion of the cost of these supplies in 
the COP and CV calculations would distort the reported costs. The 
respondent also cites Small Diameter Circular Seamless Carbon and Alloy 
Steel, Standard, Line and Pressure Pipe from Italy, 60 FR 31981, 31991 
(June 19, 1995), in which the Department refused to include the 
respondent's reported cost reversals that were recorded during the POI 
but that related to operational expenses of a prior period, in support 
of its position.
    Greening Donald asserts that its normal books and records distort 
costs because they do not reflect the cost associated with the 
production and sale of the merchandise. Greening Donald claims that in 
such instances the Department allows or makes adjustments to the 
respondent's costs as reported in the normal books and records, citing 
Static Random Access Memory Semiconductors from The Republic of Korea, 
63 FR 8934, 8937 (February 23, 1998), and Static Random Access Memory 
Semiconductors from Taiwan, 63 FR 8909, 8920 (February 23, 1998). 
Therefore, Greening Donald argues that such an adjustment should be 
made in this instance to conform to the Statement of Administrative 
Action, H. Doc, 316, 103d Cong., 2d Sess. 821 (1994) (``SAA'') which 
states that ``costs will be allocated using a method that reasonably 
reflects and accurately captures all of the actual costs incurred in 
producing and selling the product under investigation'' and Antidumping 
Duties; Countervailing Duties; Final Rule, 62 FR 27295-27379, 27362 
(May 19, 1997).
    The petitioners agree with the Department's denial of Greening 
Donald's claim to exclude the cost of certain supplies from its COP. 
The petitioners point out that, during verification, Greening Donald 
was unable to substantiate the quantity and value of the supplies in 
question that it consumed during the POI. The petitioners also observe 
that Greening Donald recorded the cost of the supplies in question in 
its financial statements, which were in accordance with Canadian 
generally accepted accounting principles (``GAAP''). Thus, the 
petitioners argue that the Department should continue to include these 
costs in Greening Donald's COP for its final analysis.
    Department's Position: We have not accepted Greening Donald's claim 
that

[[Page 17333]]

we should exclude from the calculation of COP and CV the expense that 
the respondent recognized for certain supplies during the POI. Section 
773(f) of the Act directs the Department to calculate costs based upon 
the respondent's records, provided that such records are kept in 
accordance with respondent's home-country GAAP and reasonably reflect 
the costs associated with the production of the merchandise. In this 
case, Greening Donald's independent auditors accepted the company's 
treatment of these supplies (i.e., written-off or expensed fully during 
the period).
    We disagree with Greening Donald's contention that we should depart 
from the costs that it calculates in the ordinary course of business 
and exclude the portion of the costs that relate to supplies that it 
may have not consumed during the POI. First, the amount the company 
wishes to capitalize is merely an approximation because the company 
does not maintain inventory or movement records that identify the 
actual quantity and the value of the supplies in question. See Greening 
Donald Cost Verification Report at page 15. Thus, Greening Donald's 
proposed adjustment could not be substantiated with production or 
accounting records. In circumstances where there is an absence of 
verifiable information supporting a party's claim, our practice is to 
rely on the amounts recorded in the books and records of the 
respondent. See Final Determination of Sales at Less Than Fair Value: 
Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line 
and Pressure Pipe From Italy, 60 FR 31981 (June 19, 1995). Second, it 
is also likely that Greening Donald actually consumed some supplies 
during the POI which it purchased and expensed in prior periods. If we 
were to adopt Greening Donald's proposed methodology, we would not only 
exclude some of the current purchases, we would also include a portion 
of purchases from prior periods. Since this information is not on the 
record and the company's normal method of recognizing the full expense 
when purchased is acceptable under Canadian GAAP, we have not excluded 
these costs for the final determination.
    Comment 14: General and Administrative Expenses. Greening Donald 
argues that the Department should accept the method the company used to 
calculate its reported general and administrative (G&A) expense ratio. 
Greening Donald asserts that its reported G&A expense ratio was based 
on the company's historic allocations and is the appropriate 
methodology and consistent with past practice. Greening Donald states 
that it first allocated the company's G&A expenses to its separate 
operating divisions using historic allocations which it uses in the 
ordinary course of business. It argues that it based these allocations 
on the operating realities of the company's business. Greening Donald 
states that it allocated each division's portion of the G&A expense to 
its merchandise over its cost-of-sales figures. If it simply computed 
G&A expenses on a company-wide basis as a percentage of cost of sales, 
Greening Donald argues that the result would over-allocate G&A expenses 
to the subject merchandise. Moreover, Greening Donald states that the 
Department does not always use the company-wide cost-of-sales figure as 
the allocation base when the results are distortive. To support this 
assertion, Greening Donald cites Dynamic Random Access Memory 
Semiconductors of One Megabit of Above from the Republic of Korea, 61 
FR 20216, 20217 (May 6, 1996).
    If the Department does revise its G&A expense ratio based on the 
company-wide cost-of-sales figure, Greening Donald argues that it 
should use the company's unconsolidated cost-of-sales figure based on 
the sum of its divisional profit and loss (``P&L'') statements. 
Greening Donald claims that this step is necessary because the cost-of-
sales figure on the company-wide financial statements represents a 
consolidated figure of the three divisions which excludes inter-
divisional transfer amounts. According to Greening Donald, the 
Department's normal practice is to calculate the G&A expense rate based 
on a respondent company's unconsolidated statements and cites Stainless 
Steel Wire Rod from Japan, 63 FR 40434 (Comment 8) (July 29, 1998), to 
support this assertion.
    The petitioners argue that the Department should calculate Greening 
Donald's G&A ratio in accordance with the Department's normal 
methodology. According to the petitioners, the respondent did not 
follow the instructions in the Department's questionnaire which 
requires respondents to calculate the G&A expense ratio based on the 
company's audited financial statements. Instead, the petitioners 
comment, Greening Donald reported a G&A expense ratio for its wire 
division that was based on allocations of its total company G&A 
expenses to each division. The petitioners argue that this method is 
inappropriate because it is based on historic allocations that Greening 
Donald could not substantiate with source records. The petitioners also 
disagree with Greening Donald's concern that the Department should use 
an unconsolidated cost-of-sales figure if the Department does decide to 
revise its G&A expense ratio. According to the petitioners, Greening 
Donald is using an incorrect reference to the term ``consolidation.'' 
The petitioners note that the three operating divisions of the company 
are not independent companies so their internal P&L statements do not 
represent unconsolidated financial statements. The petitioners also 
contend that Greening Donald's cost-of-sales figure is not on the same 
basis as the reported cost of manufacturing (``COM'') because the 
reported cost-of-sales figure includes packing expenses, freight, and 
certain adjustments not included in COM.
    Department's Position: Normally, we calculate G&A based on the 
producing company as a whole and not on a divisional or product-
specific basis. See Fresh Atlantic Salmon from Chile, 63 FR 31412, 
31433 (Comment 29) (June 9, 1998). This approach recognizes the general 
nature of these expenses and the fact that they relate to the company 
as a whole. The Department's methodology also avoids any distortions 
that may result if greater amounts of company-wide general expenses are 
allocated disproportionally between products. In this instance, 
Greening Donald deviated from the Department's normal methodology and 
calculated its G&A expenses using an internal accounting methodology, 
under which the company charged some G&A expenses directly to each of 
its production divisions.
    Both parties agree that it is our normal practice to calculate the 
G&A expense rate based on the respondent's unconsolidated operations 
(plus a portion of G&A expenses incurred by affiliated companies on 
behalf of the respondent). See Stainless Steel Wire Rod from Japan, 63 
FR 40434 (comment 8) (July 29, 1998). However, Greening Donald's 
divisions are not separate entities that require consolidation but 
merely separate business units that make up a single corporation. Thus, 
we agree with the petitioners that we can not consider the divisional 
P&L statements as ``unconsolidated'' financial statements. As for 
Greening Donald's concern that the corporate-wide cost-of-sales figure 
is understated because it excludes inter-divisional transfer amounts, 
we disagree. It would be inappropriate to allocate G&A expense to 
inter-company transactions since the amount would normally be 
eliminated when preparing the company-wide financial statements. Even 
in the cases where two separate but affiliated companies are collapsed

[[Page 17334]]

into one entity for the purposes of an antidumping analysis, the 
Department eliminates inter-company transactions from the calculation 
of cost of sales, in effect treating them as a single company. See 
Certain Cut-to-Length Carbon Steel Plate from Brazil, 63 FR 12744, 
12749 (Comment 8) (March 16, 1998).
    As for Greening Donald's citation to Dynamic Random Access Memory 
Semiconductors of One Megabit or Above from the Republic of Korea, 61 
FR 20216, 20217 (May 6, 1996), the Department's position addressed the 
basis of allocating indirect selling expenses and not general expenses. 
Thus, the circumstances were different and not related to the 
calculation of the G&A expense ratio. For the reasons stated above, we 
have calculated Greening Donald's G&A expense ratio in accordance with 
our normal methodology using a cost-of-sales figure that was on the 
same basis as the reported COM.
    Comment 15: Financial Expenses. The petitioners contend that 
Greening Donald did not use the financial statements at the highest 
level of consolidation to calculate its financial-expense ratio. Thus, 
the petitioners recommend that the Department revise the company's 
financial expenses accordingly.
    Greening Donald claims that it calculated its financial expense 
ratio in accordance with the Department's instructions and, thus, 
should not be revised. According to Greening Donald, there is no 
requirement in the Department's questionnaire that the level of 
consolidation must be the highest level of consolidation. Greening 
Donald believes that the calculation of financial expense should be 
based on the level of consolidation that excludes operations unrelated 
to the production of subject merchandise.
    Department's Position: We agree with the petitioners that Greening 
Donald did not calculate its financial expenses using information from 
the consolidated financial statements of the highest level. 
Specifically, Greening Donald used Thyssen Industrie's consolidated 
financial statements. However, Thyssen Industrie's financial statement 
data is consolidated into the Thyssen Group's financial statements. As 
we have stated repeatedly and the CIT has upheld, we recognize the 
fungible nature of a corporation's invested capital resources. We 
allocate the interest expense related to the debt portion of the 
capitalization of the corporation, as appropriate, to the total 
operations of the consolidated corporation (i.e., Thyssen Group). More 
important, our established practice of requiring the use of 
consolidated financial statements recognizes the fungible nature of 
invested capital resources such as debt and equity of the controlling 
entity within a consolidated group of companies and that the 
controlling entity within a consolidated group has the power to 
determine the capital structure of each member company (e.g., Thyssen 
Industrie) within its group. See E.I. Du Pont de Nemours & Co. v. U.S., 
Slip. Op. 98-7 (CIT 1998), Camargo Correa Metals, S.A. v. U.S., 17 CIT 
897 (CIT August 13, 1993), and Aramid Fiber Formed of Poly Para-
Phenylene Terephthalamide From the Netherlands; Final Results of 
Antidumping Administrative Review, 62 FR 38059, 38060 (July 16, 1997).
    Comment 16: Foreign-Exchange Losses. The petitioners state that the 
Department should follow its normal practice and include Greening 
Donald's foreign-exchange losses generated from accounts payable in the 
calculation of COP and CV. As support for their position, the 
petitioners cite several Department determinations in which the 
Department included this expense in respondent's cost.
    Greening Donald recognizes that it is the Department's practice to 
include foreign-exchange gains and losses related to all accounts 
except accounts receivable accounts. Thus, if the Department decides to 
include these amounts, Greening Donald contends that it should include 
both the gains and losses generated from accounts payable and cash 
accounts. Greening Donald requests further that the Department 
reconsider its policy in regards to foreign-exchange gains and losses 
related to accounts receivable. The respondent argues that the 
Department should treat these gains and losses the same way it treats 
gains and losses from short-term investments which are used to adjust 
financing costs.
    Department's Position: To calculate its reported costs, Greening 
Donald excluded foreign-exchange gains and losses. However, our normal 
practice is to include a portion of these foreign-exchange gains and 
losses in the calculation of COP and CV. Specifically, it is our normal 
practice to distinguish between exchange gains and losses realized or 
incurred in connection with sales transactions and those associated 
with purchase transactions. See, e.g., Notice of Final Determination of 
Sales at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 
63 FR 9177, 9181 (February 24, 1998) (``Steel Wire Rod from Trinidad 
and Tobago''). We normally include in the calculation of COP and CV the 
foreign-exchange gains and losses that result from transactions related 
to a company's manufacturing activities. We do not consider exchange 
gains and losses from sales transactions to be related to the 
manufacturing activities of the company. See, e.g., Steel Wire Rod from 
Trinidad and Tobago and Final Determination of Sales at Less Than Fair 
Value: Fresh Atlantic Salmon from Chile, 63 FR 31411, 31430 (June 9, 
1998). Accordingly, for purposes of the final determination, we have 
included only the foreign-exchange gains and losses that relate to 
maintaining accounts payable and cash accounts. We disallowed foreign-
exchange gains and losses arising from sales transactions in the COP 
and CV calculation.
    Comment 17: Inventory Write-Downs. The petitioners argue that the 
Department should revise Greening Donald's reported costs to include 
losses for inventory adjustments. Citing Canned Pineapple Fruit from 
Thailand, 60 FR 29553, 29571 (June 5, 1995), the petitioners claim that 
it is the Department's practice to include inventory write-downs and 
write-offs in the cost of production.
    According to Greening Donald, the write-down portion of its 
inventory adjustment is associated with finished-goods inventory and, 
as such, it should not be included in cost of production. To support 
its assertion, Greening Donald cites Stainless Steel Wire Rod from 
Italy, 63 FR 40422, 40430 (July 29, 1998), in which the Department 
excluded this type of expense.
    Greening Donald claims that the other component of its inventory 
adjustment is due to changes in the price of wire rod which affect the 
cost of production. However, Greening Donald contends, because wire rod 
prices increased, not decreased, during the POI, the net amount of 
inventory was a gain or a write-up to materials inventory. Thus, 
Greening Donald asserts, the net effect on the cost of production, were 
the Department to adjust for this, would be to reduce its costs of 
production. Greening Donald observes that, in any event, the amount of 
these adjustments would have no material effect on the reported cost.
    Department's Position: We agree with the respondent that inventory 
write-downs which are made to value finished-goods inventory at the 
lower of cost or market should not be considered a part of COM. We 
derive the product-specific costs during the POI from the cost of 
products manufactured, not sold. Thus the value of beginning and ending 
finished-goods inventory does not affect the calculation. Therefore, 
consistent with our most recent determinations, we have excluded this 
expense from the calculation of COP and CV. See, e.g., Stainless Steel 
Wire Rod from Italy, 63

[[Page 17335]]

FR 40422, 40429 (July 29, 1998). We disagree that Canned Pineapple 
Fruit from Thailand is relevant because of facts specific to that case. 
In Canned Pineapple Fruit from Thailand, we found that ``inventory 
write-downs are a normal, recurring period adjustment made annually by 
(the respondent).''
    We agree with the respondent that its adjustment to its wire-rod 
prices held in inventory is minor. Specifically, Greening Donald 
normally records a variance to reflect the gain or loss that occurs 
when its wire-rod standard costs are updated. During the fiscal year, 
Greening Donald experienced a favorable variance (reduction in costs) 
while during the POI it experienced an unfavorable variance (increase 
in costs). Because the variance relates to the value of raw materials, 
which are a component of COM, we consider it more appropriate to 
include the variance related to the POI rather than the fiscal year. 
However, we have not made this adjustment for the final determination 
due to the immaterial impact the variance has on the reported costs.
    Comment 18: Affiliated-Party Inputs. The petitioners state that the 
Department should value major inputs between affiliated companies at 
the higher of transfer price, market price, or the cost to the 
affiliated supplier. Therefore, the petitioners suggest that, in order 
to reflect properly the value of certain wire rod Greening Donald 
purchased from an affiliated party, the Department should use the 
average price Greening Donald paid to unaffiliated suppliers for the 
same input during the POI.
    The respondent, citing section 773(f)(3) of the Act, argues that 
the major-input rule would be applicable if the affiliated suppliers 
were the producers of the wire rod sold to Greening Donald and the 
Department had reason to believe or suspect that the price of the major 
input between affiliated parties was below the cost of production. With 
regard to the first condition, the respondent states that this 
affiliated supplier did not produce the input but purchased it from an 
unaffiliated supplier. As to the second condition, the respondent 
claims that the price this affiliated supplier paid for the input was 
lower than the price it charged to Greening Donald. Therefore, 
according to the respondent, the Department has no reason to believe 
that the transfer price is below the cost of production. In addition, 
the respondent argues, even if the Department determines to make the 
adjustment the petitioners suggest, it should use a weighted-average 
price based on home-market purchases from unaffiliated suppliers.
    Department's Position: We agree with the petitioners that the 
major-input rule should be applied to Greening Donald's purchases of 
certain wire rod obtained from an affiliated party. As a result, we 
disagree with the respondent's narrow definition of the term 
``producer'' as it is used in section 773(f)(3) of the Act. The intent 
of this section and the related regulations is to account for the 
possibility of shifting costs to an affiliated party. This possibility 
arises when an input passes to the responding company through the hands 
of an affiliated supplier, regardless of the value added to the product 
by the affiliated supplier.
    Sections 773(f)(2) and (3) of the Act specify the treatment of 
transactions between affiliated parties for purposes of reporting cost 
data (for use in determining both COP and CV) to the Department. 
Section 773(f)(2) of the Act indicates that the Department may 
disregard such transactions if the amount representing that element 
(the transfer price) does not fairly reflect the amount usually 
reflected (typically the market price) in the market under 
consideration. Under these circumstances, the Department may rely on 
the market price to value inputs purchased from affiliated parties. 
Section 773(f)(3) of the Act indicates that, if transactions between 
affiliated parties involve a major input, then the Department may value 
the major input based on the COP if the cost is greater than the amount 
(higher of transfer price or market price) that would be determined 
under section 773(f)(2) of the Act. Therefore, for the final 
determination, we have made an adjustment to increase the transfer 
price to a market price using the adjustment factor Greening Donald 
suggests.
    Comment 19: Miscellaneous Taxes and Expenses. The petitioners 
contend that the Department should revise Greening Donald's COP to 
include the Ontario capital tax, large-corporation tax, bad-debt 
expenses, miscellaneous income and expense, and discount income. 
According to the petitioners, Greening Donald inadvertently omitted 
these expenses.
    The respondent states that it has already corrected this omission. 
According to Greening Donald, it provided a revised submission on 
December 29, 1998, that included these items in the calculation of COP 
and CV. Therefore, the respondent claims no further adjustment is 
needed to include them. However, Greening Donald does believe that the 
Department should now make an adjustment to remove the large-
corporation tax and the Ontario capital tax included in the calculation 
of COP and CV because they relate to taxes paid on capital stock and, 
as such, they should not be included in the calculation of COP and CV.
    Department's Position: We agree with the respondent that it 
included these expenses included in the calculation of COP and CV. See 
the Department's Greening Donald Cost Verification Report at page 4, 
step I.A. Thus, no further adjustment is necessary to include these 
expenses.
    With regard to the respondent's claim that we should not include 
the large-corporation tax and the Ontario capital tax in Greening 
Donald's reported COP, we have stated our position on this issue in 
several previous cases. In those cases, we included payments to 
governments, other than income taxes, that are periodic general taxes 
levied on the company and which are not based on revenues. Thus, it is 
appropriate to include them in the calculation of the company's general 
expense. See, e.g., Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 62 
FR 18448, 18465 (April 15, 1997).
    Comment 20: Auditor's Adjustment. The petitioners argue that the 
Department should revise Greening Donald's reported cost to include an 
adjustment the company's independent auditors made. The petitioners 
point out that this adjustment is included in Greening Donald's 
financial statements which are prepared in accordance with Canadian 
GAAP. As such, the petitioners claim that the expense should be 
included in the calculation of COP and CV.
    The respondent argues that this adjustment was made by the outside 
accountants only for the purposes of calculating Greening Donald's tax 
liability. According to the respondent, the adjustment is not included 
in the company's internal books and records which are maintained in 
accordance with Canadian GAAP.
    Department's Position: We agree with the petitioners that it is 
appropriate to include this year-end adjustment in the calculation of 
COP and CV. Specifically, Greening Donald excluded from its reported 
costs a year-end adjustment that reconciles the depreciation expense 
reported in its cost accounting systems with the depreciation expense 
reported in the audited financial statements. As a result, there is a 
difference between the actual manufacturing costs in the financial 
statements and the manufacturing costs Greening Donald submitted. We do 
not find relevant Greening Donald's claim that the

[[Page 17336]]

outside accountants made this adjustment merely for tax purposes. 
First, Greening Donald's audited financial statements, which were 
prepared in accordance with Canadian GAAP, include this adjustment. 
Moreover, Greening Donald provided no explanation as to why recognition 
of this adjustment distorts costs. Consistent with our normal practice, 
we rely on the respondent's normal books and records kept in accordance 
with the respondent's home country's generally accepted accounting 
principles. Thus, we have included this adjustment in the calculation 
of COP and CV.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
entries of stainless steel round wire from Canada that are entered, or 
withdrawn from warehouse, for consumption on or after November 18, 
1998, the date of publication of the preliminary determination in the 
Federal Register. The Customs Service shall continue to require a cash 
deposit or the posting of a bond equal to the weighted-average amount 
by which the normal value exceeds the U.S. price, as indicated in the 
chart below. The suspension of liquidation instructions will remain in 
effect until further notice. The weighted-average dumping margins are 
as follows:

------------------------------------------------------------------------
                                                             Weighted-
                  Exporter/manufacturer                   average margin
                                                             percentage
------------------------------------------------------------------------
Central Wire............................................           11.79
Greening Donald.........................................           11.18
All Others..............................................           11.64
------------------------------------------------------------------------

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 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.
    We are issuing and publishing this determination in accordance with 
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. 99-8926 Filed 4-8-99; 8:45 am]
BILLING CODE 3510-DS-P