[Federal Register Volume 62, Number 72 (Tuesday, April 15, 1997)]
[Notices]
[Pages 18486-18493]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9428]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-351-817]
Certain Cut-to-Length Carbon Steel Plate From Brazil: 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 cut-to-length carbon
steel plate from Brazil. 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, D.C. 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 51904) the preliminary results of the administrative
review of the antidumping duty order on certain cut-to-length carbon
steel plate from Brazil (58 FR 44164, 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 administrative review constitute one
``class or kind'' of merchandise: certain cut-to-length carbon steel
plate. These products include hot-rolled carbon steel universal mill
plates (i.e., flat-rolled products rolled on four faces or in a closed
box pass, of a width exceeding 150 millimeters but not exceeding 1,250
millimeters and of a thickness of not less than 4 millimeters, not in
coils and without patterns in relief), of rectangular shape, neither
clad, plated nor coated with metal, whether or not painted, varnished,
or coated with plastics or other nonmetallic substances; and certain
hot-rolled carbon steel flat-rolled products in straight lengths, of
rectangular shape, hot rolled, neither clad, plated, nor coated with
metal, whether or not painted, varnished, or coated with plastics or
other nonmetallic substances, 4.75 millimeters or more in thickness and
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 7208.40.3030, 7208.40.3060,
7208.51.0030, 7208.51.0045, 7208.51.0060,
[[Page 18487]]
7208.52.0000, 7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000,
7211.13.0000, 7211.14.0030, 7211.14.0045, 7211.90.0000, 7212.40.1000,
7212.40.5000, and 7212.50.0000. Included 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 is grade X-70 plate. These
HTS item numbers are provided for convenience and Customs purposes. The
written description remains dispositive.
On April 2, 1997, the Department determined that ``profile slab''
produced by Companhia Siderurgica de Tubarao (CST) constitutes a type
of plate and therefore falls within the scope of the antidumping order
on carbon steel plate from Brazil. Memorandum to Holly A. Kuga,
Regarding the Final Scope Ruling--Antidumping and Countervailing Duty
Orders on Certain Cut-to-Length Carbon Steel Plate from Brazil--Request
by Wirth Limited for a Ruling on Profile Slab.
The POR is August 1, 1994, through July 31, 1995. This review
covers entries of certain cut-to-length carbon steel plate by Companhia
Siderurgica de Tubarao (CST).
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 (CST) 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).
Comment 1
Respondent argues that the Department incorrectly excluded home
market credit costs from its margin calculations. In respondent's view,
the taxa referential (TR), is the Brazilian equivalent to a benchmark
interest rate, such as the prime rate or the LIBOR rate, and the
Department erred in rejecting the TR as a useful surrogate for short-
term interest rates in Brazil.
Respondent notes that CST did not have any short-term Brazilian
currency borrowing during the POR and in its original Section B
response it proposed using CST's borrowing rate in connection with coal
purchases as a surrogate for short-term interest rates. Respondent adds
that the Department rejected this approach and asked CST to provide
published home market prime rates, such as the rates for the Bank of
Brazil or the Bank of Minas Gerais, and use these rates for the
calculation of credit costs.
Respondent states that in its supplemental response it provided TR
rates during the POR and provided background materials on the TR which
state that the TR is a referential interest rate and not an inflation
index. Respondent notes that the Department did not raise any questions
about the use of the TR or any discrepancies associated with the TR
during verification, in the verification report or elsewhere during the
proceeding, prior to the September 25, 1996, decision memorandum.
Respondent argues that the Department's conclusion in this memorandum
that the TR is an inflation index, not an interest rate, was not
supported and the Department did not explain its departure from past
findings. CST objects on procedural grounds to the Department's
decision not to make a home market credit adjustment as the Department
did not inform respondents of questions it had regarding submitted
information. See Bowe-Passat v. United States, 17 CIT 335, 343 (1993).
CST alleges that the TR is an appropriate rate to measure the cost
of credit because it is a rate calculated and published by the Bank of
Brazil similar to the prime rate. Respondent also notes that the
Department, after extensive verification, used the TR as the surrogate
home market interest rate in Ferrosilicon from Brazil, 59 FR 732, 735
(Jan. 6, 1994). Respondent attached an excerpt from a Brazilian
treatise on financial markets which states that the TR was created to
serve as a basic referential rate of interest to be charged in the
month of issuance and ``should function as the LIBOR or prime rate.''
Petitioners support the Department's denial of CST's claimed
deduction for home market credit expenses without elaboration.
Department's Position
We agree in part with respondent and have allowed a credit
adjustment in the final results. We note that the original materials
about the TR provided by respondent (see CST's February 29, 1996,
submission) were unclear as to whether the TR is a pure short-term
interest rate. These documents, taken from the provisional bill
establishing the TR and the ``Collor Plan'' Manual prepared by the
Economy Ministry, describe the TR as calculated by the Central Bank of
Brazil from ``the average of monthly net revenue by deposits with fixed
terms raised by branches of commercial banks, investment banks or
multiple banks with commercial or investment divisions, and/or federal
public bonds. * * *'' (CST's translation.) This takes into account all
deposits with fixed terms, including those in investment banks, and
federal public bonds, not just short-term deposits. However, the
information submitted by respondent as an attachment to its November 4,
1996, case brief states that the TR was initially calculated based on
the weighted average of the rates on 30-35 day bank deposit
certificates issued by a subgroup of 20 financial institutions, and
since May 1, 1993, was calculated on a daily basis.
The TR is further described in the original materials we received
as ``a type of interest rate which is based on the market rate,
including the expectation of economic agents with regard to the future
revenue of financial assets.'' The phrase ``a type of interest rate
which is based on the market rate,'' suggests that there is some kind
of adjustment from an actual interest rate. Respondent's more recent
submission states that a part of the actual interest rate is deducted
in calculating the TR so as to discount the cost of taxes on the bank
deposit certificates.
Finally, we note that beyond issuing a supplemental questionnaire,
the Department is not required to give prior notice before disallowing
a claimed adjustment. Our supplemental questionnaire clearly requested
CST to use published Brazilian prime rates in its calculation of home
market credit expenses. CST substituted the TR without explanation.
There is no indication that the respondent in Ferrosilicon was asked to
use a bank rate for its home market credit calculation. The Department
is not obligated to make additional requests for information showing
that the data respondent submits meet the requirements imposed by the
Department. However, because we have determined that the TR does, in
fact, appear to be a benchmark comparable to a prime rate and is
published by the Bank of Brazil, we have used the submitted TR data in
calculating CST's credit adjustment.
Comment 2
Respondent argues that the Department should calculate CST's home
market imputed credit costs using gross price. CST claims that its
liability for taxes is not contingent on customer payment. CST
submitted credit costs based on net price and gross price. Respondent
states that in previous decisions the Department has calculated credit
costs based on a gross price
[[Page 18488]]
inclusive of taxes. (See Stainless Steel Angles from Japan, 60 FR
16608, 16615 (March 31, 1995).)
Petitioners counter that if the Department were to include a
deduction for home market credit expenses, it should base this
deduction on net price. Petitioners argue that imputed credit costs
should reflect the cost to CST of the time value of money and that in
this case, there is no opportunity cost to CST of carrying the tax
amounts as receivables, since they will not be paid to the Brazilian
government until after the receipt of payment from the customer
(Furfuryl Alcohol from South Africa, 61 FR 22550, 22552 (May 8, 1995)).
Department's Position
We agree with petitioners that credit expenses should be calculated
on the basis of net price. See Final Determination of Sales at Less
than Fair Value; Steel Wire Rope from Korea, 58 FR 11029, 11032
(February 23, 1993), where the Department stated:
It is not the Department's current practice to impute credit
expenses related to VAT payments. We find that there is no statutory
or regulatory requirement for making the proposed adjustment. While
there may be a potential opportunity cost associated with the
respondents' prepayment of the VAT, this fact alone is not a
sufficient basis for the Department to make an adjustment in price-
to-price comparisons. We note that virtually every charge or expense
associated with price-to-price comparisons is either prepaid or paid
for at some point after the cost is incurred. Accordingly, for each
pre- or post-service payment, there may also be an opportunity cost
or gain. Thus, to allow the type of credit adjustment suggested by
the respondents would imply that in the future the Department would
be faced with the virtually impossible task of trying to determine
the potential opportunity cost or gain of every charge and expense
reported in the respondents' home market and U.S. databases. This
exercise would make our calculations inordinately complicated,
placing an unreasonable and onerous burden on both respondents and
the Department, without necessarily ensuring a more accurate dumping
margin calculation.
The comment in the Stainless Steel Angles case cited by the respondent
refers to pre-shipment advance payment for the merchandise, rather than
taxes, and is not contrary to the Department's position with respect to
basing credit calculations on a price net of taxes.
Comment 3
Respondent observes that the Department failed to make an upward
adjustment to U.S. price for CST's duty drawback adjustment, which the
Department must do under U.S. law. CST notes that it calculated and
submitted and the Department verified a per-ton duty drawback
adjustment. Respondent states that the Department should correct this
error in its final determination.
Department's Position
We agree with respondent and have made the suggested correction in
the final results.
Comment 4
Respondent argues that the Department should correct its home
market tax deduction. Respondent claims that to achieve tax neutrality,
the Department should deduct from normal value the full amount of the
IPI tax assessed on CST's home market sales but not on export sales.
Instead, the Department deducted only five percent of the IPI tax
assessed, because CST is eligible for an incentive rebate of 95 percent
of the IPI paid to the government. CST claims that this is not in
accordance with antidumping law and that the Department has no
authority in an AD proceeding to net any subsequent receipts under a
fiscal incentive program against taxes imposed. Citing Huffy Corp. v.
United States, 632 F. Supp. 50, 55 (CIT 1986), respondent argues that
if the Department were to limit its adjustment in this case to reflect
the provision of a subsequent incentive to CST, it would in effect be
increasing the amount of AD duties by the amount of a possible (though
not proven) subsidy, without ever determining whether such a subsidy
were even countervailable. Respondent claims that in previous AD
investigations involving companies entitled to the IPI fiscal incentive
rebate, the Department has never reduced the IPI tax adjustment.
Petitioners argue that the Department correctly calculated the IPI
deduction. Petitioners state the Department's methodology was
consistent with the URAA and cite the URAA's Statement of
Administrative Action (SAA):
The deduction from normal value for indirect taxes constitutes a
change from the existing statute. The change is intended to ensure
that dumping margins will be tax-neutral. The requirement that the
home market consumption taxes in question be ``added to or included
in the price'' of the foreign like product is intended to insure
that such taxes actually have been charged and paid on the home
market sales used to calculate normal value. * * * It would be
inappropriate to reduce a foreign price by the amount of the tax,
unless a tax liability had actually been incurred on the sale.
Petitioners argue that because the Department found that, although the
IPI amounts were paid to the government, all but 95 percent of these
amounts were immediately credited back to CST in the form of fiscal
incentives, the Department correctly declined to deduct the full amount
of the reported adjustment.
Petitioners reject CST's argument that the Department should make
an adjustment on the full amount of the IPI because the full amount is
the amount that was ``paid.'' Petitioners note that in every instance
part of the IPI is immediately credited back to CST in a percentage
that is known beforehand, limiting CST's real tax liability to the
small portion that is paid but not credited back. Thus, they state that
the Department correctly calculated CST's home market tax deduction and
that were the Department to do otherwise it would violate the SAA's
requirement that dumping margins ``be tax neutral.''
Petitioners also reject respondent's argument that the Department
should not be investigating fiscal incentive credits in the context of
an AD review because the credits may also be countervailable subsidies.
Petitioners claim that Huffy fully supports the Department's course of
action. In that case, according to petitioners, the CIT stated that the
Department must refrain from making a subsidy determination in the
context of a dumping investigation, and that in a dumping investigation
the Department is not seeking the same information or asking the same
questions as it would in a countervailing duty investigation.
Petitioners conclude that whether it is possible that the IPI fiscal
incentives may also be countervailable subsidies should not be
considered in this proceeding.
Department's Position
Because the reported home market sales are IPI-inclusive, we agree
with the respondent that, given the particular circumstances of this
case, the entire amount of IPI tax paid should be deducted from normal
value, rather than the amount paid minus the amount rebated. Although
respondent refers to the IPI rebate only as a ``possible (though not
proven) subsidy,'' the Department has already made a determination that
the IPI rebate at issue, which is provided only to steel companies, is
a countervailable subsidy. See Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from Brazil, 58 FR 37295, 37298-
99, 37301 (July 9, 1993). Benefits received on respondent's sales of
carbon steel plate pursuant to the IPI rebate program at issue are
currently being countervailed based on the countervailing duty order
issued in that
[[Page 18489]]
companion case. Countervailing Duty Order and Amendment to Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Brazil, 58 FR 43751, 43751-52 (August 17, 1993). Section
773(a)(6)(B)(iii) of the Act, (19 U.S.C. 1677b (a)(6)(B)(iii)) provides
for reducing normal value by ``the amount of any taxes imposed directly
upon the foreign like product or components thereof which have been
rebated, or which have not been collected, on the subject merchandise,
but only to the extent that such taxes are added to or included in the
price of the foreign like product.'' This provision embodies the
principle of GATT Article VI(5) that the simultaneous implementation of
companion AD and CVD orders may not result in a double remedy. If the
rebate were offset, it would reduce the amount of the IPI tax deduction
from normal value by the amount of the rebate, thus increasing the
margin and thereby correcting a second time for the rebate, which has
already been countervailed under the companion CVD order.
Huffy Corp. v. United States, 632 F. Supp. 50, 55 (CIT 1986), upon
which both parties rely, does not govern the situation in this case. In
Huffy, the CIT rejected a claim by petitioner that a subsidy should not
be allowed to lower an AD margin and that therefore ITA improperly
increased United States Price for a rebate of import duties on inputs.
In reaching this decision, the Huffy court pointed to a specific
statutory provision calling for the adjustment for the import duty
rebate at issue and added that the Court should not preempt the
countervailing duty statute and make determinations as to whether a
subsidy exists in the context of an antidumping case. There was no
companion CVD order in the administrative proceeding underlying the
decision in Huffy. In this case, the determination that the IPI rebate
constitutes a subsidy has already been made in the CVD case. The only
question is therefore how to obtain a tax-neutral dumping margin and no
double remedy for subsidies and dumping; this is achieved by
countervailing the IPI rebate under the CVD order and deducting the
full amount of IPI paid from normal value pursuant to section
773(a)(6)(B)(iii).
Comment 5
Respondent alleges that the Department incorrectly determined that
CST's date of sale in the home market should be the order confirmation
date. CST states that many sales had multiple order acknowledgments and
that the prices and terms set forth in any given order acknowledgment
could be and were changed at will. Respondent claims that the
Department does not recognize an event in the sales process as a
reliable date of sale if there is a chance that the terms and
conditions of sale can and will change after that event. Respondent
cites Certain Cut-to-length Carbon Steel Plate from Brazil, 58 FR
37091, 37093 (July 9, 1993) (Final), arguing that in this case the
Department rejected one respondent's U.S. date of sale methodology
because it found evidence of changes in the material sales terms after
the reported date of sale in a small quantity of sales. Respondent also
cites to Canned Pineapple Fruit from Thailand, 60 FR 29553 (June 5,
1995) (Final) in which respondent claims the Department asked
respondents to indicate whether changes could occur after the order
date.
Respondent acknowledges that CST does issue a new order
acknowledgment when terms are changed, but argues that new order
acknowledgments can be issued until the date of shipment and that
changes can and do occur after an order acknowledgment is issued.
Respondent also notes that the price in local currency is not known
until the date of invoice and cites the Department's new draft
regulations in support of using date of invoice.
Petitioners argue that the Department correctly determined the home
market date of sale to be the order acknowledgment date. Petitioners
respond to CST's argument that a sale may have multiple order
acknowledgment dates, and that the terms are not definitively set until
shipment, by noting that if terms were changed a new order
acknowledgment would be issued. Petitioners add that the mere fact that
changes might occur is irrelevant, since CST admits that if there are
changes a new order acknowledgment is issued.
Petitioners distinguish this case from the cases cited by
respondent. With respect to Certain Cut-to-length Carbon Steel Plate
from Brazil, 58 FR 37091, 37093 (July 9, 1993) (Final), petitioners
note that USIMINAS's reported date of sale was rejected because the
Department found evidence that there were changes in the terms of sale
after the respondent's date of sale. Petitioners argue that even if
CST's claim that the Department selected the invoice date as the date
of sale in Pineapples is correct, that case is distinguishable from
this proceeding, because in this case there is no possibility that
there were changes in material terms after respondent's reported date
of sale.
Petitioners also reject CST's argument that the order
acknowledgment date cannot be the date of sale because the price in
local currency is not known until the date of invoice. Petitioners
state that the law is clear--``the essential terms of price and
quantity are firm when they are no longer within the control of the
parties to alter.'' (See Polyvinyl Alcohol from Taiwan, 61 FR at
14067.) Petitioners, citing the Department's analysis memorandum and
verification report, add that by CST's own admission, at the time of
order acknowledgment the parties agree on both the price in dollars and
on the exchange rate to be used on the date of invoice. Thus, in
petitioners'' view, price and quantity are set on the date of order
acknowledgment, as the final invoice price is outside the control of
either party and is effectively fixed for purposes of determining the
date of sale.
Department's Position
We agree with petitioners. CST stated at verification that if there
are changes to an order acknowledgment, a new order acknowledgment
always is issued. This is fully consistent with our findings at
verification; we found no instances in which any terms were changed
after the final order acknowledgment was issued. Thus, while respondent
may not know in advance if an individual order acknowledgment will be
the final one, in retrospect it can always do so. As petitioners note,
this fact distinguishes the facts of this case from the cases cited by
respondent.
We also reject CST's argument that the order acknowledgment date
cannot be the date of sale because the price in local currency is not
known until the date of invoice. We found at verification that CST and
its customer agree on both the price in dollars and on the exchange
rate to be used on the date of invoice at the time the order
acknowledgment is issued. Thus, price and quantity are set on the date
of order acknowledgment, as the final invoice price is outside the
control of either party and is effectively fixed for purposes of
determining the date of sale. It is immaterial if the exact price in
local currency is not known at this time as long as the mechanism for
determining this price is set--which it is in this case.
Comment 6
Respondent argues that the Department incorrectly determined that
CST is affiliated with USIMINAS and COSIPA. Respondent notes that the
Bozano Group only owned 20.3 percent of the stock of CST and 8 percent
of the stock of USIMINAS. Respondent notes that with respect to CST
there were two other shareholders with a percentage
[[Page 18490]]
ownership of CST that was equal to Bozano's and there were two other
shareholders which each owned almost 13 percent of CST's stock.
Respondent claims that there is no evidence to support
petitioners'' claim that Bozano was part of a controlling shareholder
group consisting of Bozano and CVRD. Respondent cites to the
Shareholders'' Agreement in Verification exhibit 4A, which speaks of a
core group, consisting of the Bozano Group, CVRD plus UNIBANCO and
Kawasaki. Citing the Shareholders'' Agreement, respondent argues that
no single member of the group would be in a position to exercise
control, as actions must have the support of parties holding at least
60 percent of the shares. Respondent further notes that Bozano and
CVRD, even together, only appoint four of the nine members of CST's
Board of Directors, known in Brazil as the Administrative Council.
Respondent claims that Julio Bozano's position as president of
CST's Administrative Council did not permit him to exercise restraint
or control over CST. Again citing to the Shareholders'' Agreement,
respondent argues that the purview of the Administrative Council is
limited to large corporate and financial decisions, rather than setting
product pricing or production decisions.
Respondent claims that the Department determined that CST was
affiliated with COSIPA solely because of USIMINAS' stockholdings in
COSIPA. Respondent does not discuss whether USIMINAS and COSIPA are
affiliated because of its contention that CST is not affiliated with
USIMINAS. Respondent argues if it is not affiliated with USIMINAS, it
is also not affiliated with COSIPA.
Petitioners counter that the Department's determination that CST is
affiliated with USIMINAS AND COSIPA is correct and fully supported by
the record. Petitioners note that the Department's decision was based
on the following: Julio Bozano is both President and Chairman of CST's
Board and President of USIMINAS's Board; Banco Bozano provided
substantial financing to all three steel producers; the Bozano Group
has a significant minority shareholding interest in all three steel
producers; the combination of Julio Bozano's role as President of
USIMINAS, USIMINAS' ownership of almost half of COSIPA's voting stock,
and the Bozano Group's minority ownership of COSIPA place Bozano in a
position of influence over COSIPA. Petitioners state that CST does not
challenge the Department's conclusion regarding Bozano's control over
USIMINAS and COSIPA.
Petitioners argue that the legislative history of the URAA makes it
clear that the statute does not require majority ownership for a
finding of control, and cites to prior Department control decisions in
which a party did not have the power to appoint a majority of the board
(Certain Cold-Rolled Carbon Steel Flat Products from Korea, 60 FR 65284
(Dec. 19, 1995). Petitioners claim that in addition to its substantial
ownership stake in CST and its ability to name two board members, Banco
Bozano was the largest private lender to CST throughout the POR. Thus,
in petitioners' view, CST's argument that Bozano did not control CST
ignores ``business and economic reality,'' the standard in the SAA.
Petitioners also disagree with respondent's claims regarding the
Administrative Council. They note that CST acknowledges that its
Administrative Council's jurisdiction includes power over:
consolidations, mergers and splitting operations involving CST, and
approval of, and changes in CST's long-term business plans. Petitioners
argue that these are precisely the types of power that a producer's
management exercises in restructuring manufacturing priorities, such as
would be involved in shifting production between CST and USIMINAS.
Petitioners further argue that the Administrative Council's powers are
more extensive than CST concedes. Citing CST's Bylaws, petitioners
claim that additional powers of the Council include: monitoring the
performance of the directors; examining the Company's books; requesting
information on contracts; setting the general orientation for Company
business; establishing the basic guidelines for executive actions, as
well as issues relating to technical aspects of production and
marketing; and authorizing the opening, transfer or closing of offices,
affiliates, subsidiaries, or other Company establishments. Petitioners
also explain that on a day-to-day basis the Administrative Council
exercises control over CST through an executive management group called
the executive directorate, selected by and responsible to the
Administrative Council. Thus, petitioners conclude that the Council
does have legal power to exercise restraint and direction over CST's
operations.
Department's Position
We agree with petitioners that CST is affiliated with USIMINAS and
COSIPA. Section 771(33) of the Act, which governs which entities shall
be considered ``affiliated,'' requires the Department to base its
findings of control on several factors, not merely the level of stock
ownership. In commenting on this section, the SAA states that: ``The
traditional focus on control through stock ownership fails to address
adequately modern business arrangements, which often find one firm
`operationally in a position to exercise restraint or direction' over
another even in the absence of an equity relationship.'' SAA at 838,
quoting section 771(33). Our decision regarding affiliation was based
on the following: Julio Bozano is both President and Chairman of CST's
Board and President of USIMINAS's Board; Banco Bozano provided
substantial financing to all three steel producers; the Bozano Group
has a significant minority shareholding interest in all three steel
producers; the combination of Julio Bozano's role as President of
USIMINAS, USIMINAS' ownership of almost half of COSIPA's voting stock,
and the Bozano Group's minority ownership of COSIPA place Bozano in a
position of influence over COSIPA.
Respondent's argument against affiliation focuses on: Bozano's
minority shareholder role; under the terms of the Shareholders'
Agreement support of 60 percent of the shareholdings is required;
Bozano does not appoint a majority of the members of the board; and
that Julio Bozano's position as President of CST's Administrative
Council did not permit Bozano to exercise restraint or control over
CST.
As petitioners state, the legislative history of the URAA makes it
clear that the statute does not require majority ownership for a
finding of control. Even a minority shareholder interest, examined
within the context of the totality of other evidence of control, can be
a factor that we consider in determining whether one party is
operationally in a position to control another. In this case, the
Bozano Group has a minority shareholder interest in all three steel
companies in question, and this can appropriately be considered in our
affiliation analysis. As respondent's only argument with respect to
Bozano's control over USIMINAS and COSIPA was that Bozano's minority
shareholding was not a sufficient basis for control, and respondent did
not address the other factors considered by the Department, we continue
to support our original decision with respect to these companies.
With respect to CST's Shareholders' Agreement, we note that despite
multiple submissions from parties on the issue of affiliation and
petitioners' specific allegations regarding the existence of a
``control group,'' the first
[[Page 18491]]
time respondent even identified the existence of this agreement was at
verification. It is true that this agreement is currently between the
four parties identified by respondent. However, the Shareholders'
Agreement indicates that it was originally an agreement between CVRD
and Bozano (as of December 1, 1993). UNIBANCO became a party to the
agreement on April 25, 1994. Kawasaki did not enter the agreement until
May 25, 1995--close to the end of the POR.
Respondent acknowledges that its Administrative Council's
jurisdiction includes power over: consolidations, mergers and splitting
operations involving CST, and approval of, and changes in CST's long-
term business plans. However, respondent has taken this list of
functions from the Shareholders' Agreement, not CST's Bylaws. As
petitioners correctly state, CST's Administrative Council has
substantial additional functions under the terms of CST's Bylaws. Taken
together, these are precisely the types of power that a producer's
management exercises in restructuring manufacturing priorities, such as
would be involved in shifting production between CST, USIMINAS and
COSIPA. While it is true that the support of 60 percent of the
shareholdings is required to make decisions under the terms of the
Shareholders' Agreement, Julio Bozano's position as president of CST's
Administrative Council allows him to chair Council meetings, help set
the agenda for meetings, vote and voice his opinion on proposals before
the Council. This clearly gives him the potential to influence pricing
and production decisions with respect to CST. See Certain Cold-Rolled
Carbon Steel Flat Products from Korea, 60 FR 65284, 65284-5 (December
19, 1995),
Thus, for the reasons originally enumerated in the Department's
September 10, 1996, memorandum, we continue to find that CST is
affiliated with USIMINAS and COSIPA.
Comment 7
Petitioners argue that the Department must apply partial facts
available because CST withheld crucial information regarding its
affiliates. Specifically, petitioners state that the Department was not
able to obtain sufficient information to confirm that CST was
affiliated with a certain Brazilian steel reseller until verification.
Petitioners state that this failure was crucial, because CST's sales to
this affiliated party matched a majority of its U.S. sales, but failed
the arm's length test and therefore could not be used by the Department
in price-to-price comparisons. Furthermore, downstream sales to
unaffiliated customers had not been reported. Petitioners claim that
under the Department's regulations, it must use the facts otherwise
available where a party withholds information requested by the
Department. Petitioners note that CST did not identify this reseller as
an affiliate, report its downstream sales to unaffiliated customers or
contact the Department about the reporting of these sales. In
petitioners' view, the Department should apply an adverse inference in
its selection of facts available and apply the highest rate from the
petition to the U.S. sales which were matched to CST's sales to this
affiliate before application of the arm's length test.
Respondent argues that the Department should not apply partial
facts available for CST's sales to this reseller. Indeed, respondent
argues that it is not affiliated with this reseller. CST argues that
the Bozano Group is not in a position to exercise operational control
over both CST and USIMINAS, and that even if USIMINAS and CST are
affiliated, the Department would have to undertake a separate analysis
with respect to the reseller in question. While noting that USIMINAS
does control this reseller, respondent claims that there is no basis
for finding that this company is affiliated with CST or that it is
controlled by Bozano.
Respondent argues that the Department's questionnaire initially
leaves it up to the respondent to identify affiliated parties.
Respondent states that in this case, the affiliated issue was complex,
involving multiple submissions from interested parties and extensive
analysis by the Department. Respondent also notes that this is the
first case addressing the issue of mutual control/affiliation under the
new law. Because CST did not purposely deceive the Department, in
respondent's view, there are no grounds for punishing CST with the
application of facts available. Respondent argues that even if the
Department determines that this reseller is affiliated with CST, the
Department should simply perform the arm's length test. Respondent
claims that sales to this reseller are not overly significant in terms
of margin calculations, and that all U.S. sales that are potentially
matched to sales to this customer also match sales to other home market
customers. Respondent argues that downstream sales made by this
reseller are to end-users, while U.S. sales and other home market sales
are to distributors/resellers. Finally, respondent argues, because it
does not control the reseller in question, it could not have obtained
resale information from this party.
Department's Position
As noted in our response to comment 6 above, we continue to find
that CST and USIMINAS are affiliated. Given that the reseller in
question is 100 percent owned by USIMINAS, a separate affiliation
analysis is not required. While it is true that affiliation is a new
concept, since the issue of affiliation was raised early in this
proceeding, respondent would have been well advised to seek guidance on
its reporting of this reseller's downstream sales. Respondent did not
do so.
The Department applied the arm's length test to CST's sales to its
affiliated reseller. These sales failed the test. Consequently, we did
not use these sales in the preliminary results. Because these sales
were only a small portion of CST's reported home market sales, we did
not ask CST to report sales made by the affiliated reseller to the
first unaffiliated customer (downstream sales). There were sufficient
remaining home market sales to match to U.S. sales for the purpose of
determining the dumping margin. All the sales to the affiliated
reseller had the same CONNUMH and date of sale. Without these sales we
found identical matches for the same CONNUM and sale month. Omitting
these sales did not have a distorting effect on the margin calculation.
Therefore, we have determined for these final results that there is no
need to use facts otherwise available.
Comment 8
Petitioners argue that the Department should use facts available
for the difference in merchandise (difmer) adjustment. Petitioners
argue that CST was required to provide variable and total cost on a
product-specific basis to allow calculation of the difmer adjustment.
However, petitioners state that CST only reported two sets of costs--
one for high manganese products and another for low manganese products.
Petitioners argue that for partial facts available, the Department
should select a difmer adjustment of 20 percent of total cost of
manufacturing in each case where similar (rather than identical)
products are matched. See Porcelain-on-Steel Cookware from Mexico, 61
FR 54616, 54617 (October 21, 1996); Certain Cold-Rolled Carbon Steel
Flat Products from Korea, 60 FR 65284, 65287 (December 19, 1995) and
Cemex, S.A. v. United States, Slip Op. 96-132, at 9 (CIT August 13,
1996).
Respondent counters that the Department decided early in this
[[Page 18492]]
proceeding that CST's cost system was adequate for its dumping
calculations. Respondent states that it submitted cost data in
accordance with its existing cost accounting system. While petitioners
requested that CST provide additional data, respondent notes that the
Department did not ask it to do so and did not solicit CST to develop
difmers outside its cost system. Respondent notes that the Department
used the difmer data submitted by CST to analyze petitioners' cost
allegation and argue that the Department would not have used this data
unless the Department believed that CST's existing cost system and its
submitted costs were useful and adequate for the purpose of this
dumping proceeding. Respondent rejects petitioners' argument that it
has a ``duty'' to develop a methodology to report costs that
distinguish between product characteristics and claims that petitioners
have failed to cite any support in the dumping law or case precedent
for the proposition that this duty exists. Respondent also notes the
Department's long-standing preference for the use of respondent's
existing cost systems and cites Pineapples, in which the Department
adjusted difmer costs for respondents because they were not based
strictly on respondent's cost system.
Department's Position
We disagree with petitioners. Section 773(f)(1)(A) of the Act
expresses the Department's preference for using a respondent's existing
cost accounting system when it is in accordance with generally accepted
accounting practices (GAAP) and reasonably reflects the costs
associated with the production of the subject merchandise. The approach
used by CST in reporting the costs of its profile slabs, the only
subject merchandise it exported during the POR, reasonably reflects
CST's costs. Therefore, we did not ask CST to provide more detailed
information on its variable and total costs of manufacturing. The
reasons for this constitute proprietary information contained in CST's
Section B response of November 13, 1995, beginning at B-37. See also
the Analysis Memo of March 31, 1997. We verified CST's submitted
variable and total costs of manufacturing; no discrepancies were
identified. There is no basis to apply partial facts available in
making a difmer adjustment under these circumstances.
Comment 9
Petitioners claim that the respondent omitted an initial cost
associated with foreign exchange contracts, and argue that the
Department should increase the imputed credit cost for each U.S.
customer using the ratio of the alleged effective interest rate to the
interest rate used in the CREDITU calculation.
Respondent claims that petitioners are confusing the concepts of an
exchange rate with an interest rate. Respondent states that there is no
one-time fee associated with the foreign exchange contracts, and that
the proper rate to be extracted from the contract is the interest rate,
which is what CST used in its credit cost calculation.
Department's Position
We agree with the respondent. The rate the petitioners
misinterpreted as an additional interest cost is clearly an exchange
rate used to convert the value of the foreign exchange contract in
dollars into local currency. See Verification Exhibit 13.
Comment 10
Petitioners claim that an adjustment must be made for quality
control costs directly associated with U.S. sales and that CST failed
to report any such costs. Petitioners state that ultrasonic testing is
a condition of sale for U.S. sales, but not for home market sales.
Petitioners argue that the Department has consistently held that where
a quality control expense is a condition of sale and can be tied to a
specific market or sale, it should be deducted as a selling expense.
See Oil Country Tubular Goods from Argentina, 60 FR 33539, 33548 (June
28, 1995); Industrial Belts and Components and Parts Thereof, Whether
Cured or Uncured, from Japan, 58 FR 30018, 30024 (May 25, 1993); and
Stainless Steel Sheet and Strip Products from France, 48 FR 19441,
(April 29, 1983). As partial facts available, petitioners urge the
Department to use the cost identified in USIMINAS' questionnaire
response in the third administrative review.
Respondent argues that the Department should not make any
deductions for ultrasonic testing. Respondent claims that petitioners'
allegation that ultrasonic testing is an unreported selling expense is
untimely, as it is based on inferences from CST's technical protocols
that were submitted much earlier in the proceeding. Respondent notes
that if this argument had been made earlier, CST would have had an
opportunity to rebut them in the form of verifiable submissions.
Respondent asserts that ultrasonic testing is not a direct,
separately identifiable selling expense because it is a production
overhead cost that is reflected in cost of goods sold. While not all of
CST's technical protocols require ultrasonic testing, CST notes that
all profile slab is subject to ultrasonic testing as an internal
quality control measure. Respondent also denies that ultrasonic testing
was a condition of sale on U.S. sales. Respondent argues that there is
no indication on the mill certificates or U.S. customers' orders
indicating otherwise.
Department's Position
We agree with the respondent. Neither the U.S. purchase orders nor
the mill certificates include any notations concerning ultrasonic
testing as a specification.
Comment 11
Petitioners claim that the Department should correct a ministerial
error in the calculation of the ICMS tax on home market sales.
Petitioners argue that the Department should calculate this amount on
gross price, not net price.
Respondent states that ICMS is applied on net price plus freight,
not gross price. Respondent argues that to attain tax neutrality the
Department is calculating the ICMS tax on the home market sale as if it
had been exported and that no taxes other than the reduced ICMS tax are
applied to an export sale.
Department's Position
We agree with respondent. The ICMS tax is not applied to gross
price. Moreover, as respondent correctly notes, no tax other than ICMS
is applied to export sales.
Final Results of Review
As a result of our review, we have determined that no margin exists
for Companhia Siderurgica de Tubarao (CST) during the period 8/1/94-7/
31/95. 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 plate from Brazil 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 rates for the
reviewed company will be zero; (2) for previously reviewed or
investigated companies not listed above, the cash deposit rate will
continue to be the company-specific rate published for the most recent
period; (3) 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
[[Page 18493]]
the merchandise; and (4) if neither the exporter nor the manufacturer
is a firm covered in this review, the cash deposit rate will be 75.54
percent. This is the ``all others'' rate from the LTFV investigation.
See Antidumping Duty Order and Amendment of Final Determination of
Sales at Less Than Fair Value: Certain Cut-To-Length Carbon Steel Plate
From Brazil, 58 FR 44164 (August 19, 1993). 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. 97-9428 Filed 4-14-97; 8:45 am]
BILLING CODE 3510-DS-P