Certain Cut-to-Length Carbon Steel Plate From Mexico: 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.

SUMMARY:

On September 7, 1999, the Department of Commerce (the Department) published the preliminary results of the 1997-98 administrative review of the antidumping duty order on certain cut-to-length (CTL) carbon steel plate from Mexico (64 FR 48584). This review covers one manufacturer/exporter of the subject merchandise, Altos de Hornos de Mexico (AHMSA). The period of review (POR) is August 1, 1997 through July 31, 1998. Based on analysis of the comments received and the results of the cost verification, we have changed the results from those presented in our preliminary results of review.

EFFECTIVE DATE:

February 18, 2000.

FOR FURTHER INFORMATION CONTACT:

Thomas Killiam or Robert James, Enforcement Group III, Office 8, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-3019 or 482-0649, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all references to the Department's regulations are to 19 CFR Part 351 (1999).

Background

On September 7, 1999, the Department published the preliminary results of the 1997-98 administrative review of the antidumping duty order on certain CTL carbon steel plate from Mexico. See Certain Cut-to-Length Carbon Steel Plate from Mexico: Preliminary Results of Antidumping Administrative Review, (64 FR 48584) (Preliminary Results). We gave interested parties an opportunity to comment on the preliminary results. We received both comments and rebuttals from AHMSA and the petitioners, Bethlehem Steel Corporation, Geneva Steel, Gulf Lakes Steel, Inc., of Alabama, Inland Steel Industries, Inc., Lukens Steel Company, Sharon Steel Corporation, and U.S. Steel Group (a unit of USX Corporation). The Department has now completed this administrative review in accordance with section 751(a) of the Act.

Scope of the Review

The products covered in this review 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 coil 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 7208.31.0000, 7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000. Included in this review are flat-rolled products of non-rectangular cross-section where such cross-section is achieved subsequent to the rolling process (i.e., products which have been “worked after rolling”); for example, products which have been beveled or rounded at the edges. Excluded from this review is grade X-70 plate. These HTS item numbers are provided for convenience and U.S. Customs purposes. The written descriptions remain dispositive.

Analysis of Comments Received

Comment 1: Facts Available

Petitioners argue that AHMSA's cost of production (COP) and constructed value (CV) data are fatally flawed because AHMSA used a cost model which was rejected in a previous review to derive that data. Petitioners assert that AHMSA's COP and CV response contains serious cost calculation errors, lacks information necessary to complete the review, and fails to present data in a form and manner requested by the Department. Petitioners assert that the Department should resort to total adverse facts available, as it did in Notice of Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from the Russian Federation, 64 FR 38626, 38633 (July 19, 1999) (“Russian Hot-Rolled”), because the cost data provided by respondent are unusable and the response in toto is flawed and unreliable. Petitioners assert that these errors include (1) Incorrect calculation of the per-unit average plate cost, (2) An erroneous calculation of fixed overhead, (3) Incorrect application of the major input rule, (4) A failure by AHMSA to differentiate costs based on the number of passes a slab makes in the rolling mill, and (5) An inappropriate exclusion of certain other income and expense items. Petitioners conclude that for the final results, the Department should reject AHMSA's submitted costs in their entirety and resort to total adverse facts available to calculate AHMSA's dumping margin.

AHMSA argues in rebuttal that the calculation errors cited by petitioners were minor and were presented to the Department at the start of the cost verification. AHMSA states that notwithstanding a few minor errors, which it corrected before verification, AHMSA's data were verified by the Department. AHMSA argues that it demonstrated at verification that it had reported all costs associated with the production of subject merchandise.

AHMSA claims that it submitted all information necessary to calculate product-specific costs and that the revised quarterly cost model fully accounts for costs incurred in producing the subject merchandise. AHMSA argues that the quarterly cost model accounts for cost differences in producing plate of different thicknesses because the productivity factor calculated by AHMSA reflects the fact that the number of passes necessary to produce a given thickness is a function of the reheating time the slab undergoes as it enters the plate mill. AHMSA argues that the Department should accept the allocation of costs for different gauge plate computed by its quarterly cost model, citing Final Results of Antidumping Duty Administrative Review: Circular Welded Non-Alloy Steel Pipe and Tube from Mexico, 62 FR 37014, 37025, (July 10, 1997) (“Standard Pipe from Mexico”). In that determination, AHMSA notes, the Department accepted respondent's allocation as reasonable, even though the respondent's records did not allow for a cost allocation specifically based on processing time. AHMSA further notes that here, as in Standard Pipe from Mexico, the rolling costs in question represent a small portion of total overall costs.

Department's Position: We disagree with petitioners' contention that the methodologies used by AHMSA to prepare its COP and CV responses warrant wholesale rejection of those responses and the use of adverse facts available. We address petitioners' comments on particular deficiencies in AHMSA's data below.

We conducted numerous tests, described in our cost verification report, which supported the overall accuracy of AHMSA's reported data. See Memorandum from P. Scholl to N. Halper, October 8, 1999 (Cost Verification Report). Where we noted discrepancies in AHMSA's COP and CV information, we revised AHMSA's reported data based upon information obtained at verification. As discussed below in response to this and other comments, we have remedied the deficiencies noted by petitioners and have applied partial facts available, based on AHMSA's verified data. Because AHMSA provided a substantially complete and accurate response, and because AHMSA fully cooperated in this review, the deficiencies in AHMSA's COP and CV data do not warrant use of adverse facts available.

The errors in the average plate costs and fixed overhead percentages were minor and do not warrant complete rejection of AHMSA's response as provided for in section 776(a) and (b) of the Act. AHMSA provided the necessary information for the Department to make the adjustment necessary to apply the major input rule. (See Comment 3 below for a further discussion of the major input rule.) Therefore, AHMSA did not fail to provide information or significantly impede the proceeding as defined in section 776(a) of the Act.

Similarly, in regards to petitioners' concerns regarding rolling costs and the exclusion of certain other income and expenses, AHMSA, in its responses and at verification, complied with the Department's requests and provided the information we needed to accurately calculate these expenses.

We disagree with petitioners' argument that the serious deficiencies found with AHMSA's quarterly cost model in the prior review necessitate rejection of that cost model in this review. For this review, AHMSA corrected the deficiencies that were identified in the quarterly cost model in the prior review. With the exception of the allocation of rolling costs, we found that the quarterly cost model used by AHMSA reasonably reflects product-specific costs. Because we were able to use most of the data provided by AHMSA, this case is distinct from Russian Hot Rolled.

We also do not believe that the facts in this case are analogous with those of Standard Pipe from Mexico, in which the Department accepted the respondent's allocation of rolling costs because that allocation method accurately captured product-specific costs. As explained in more detail in Comment 4 below, in this case we did not find that AHMSA's method for allocating rolling costs to plate accurately reflected the costs resulting from different processing (i.e., the number of passes) on a product-specific basis.

In sum, AHMSA supplied the data requested and notified the Department of its calculation errors prior to verification, and we were able to correct or complete the significant missing data using AHMSA's own data from its responses and verification. Use of total facts available is therefore not warranted.

Comment 2: Fixed Overhead

Petitioners allege that AHMSA incorrectly applied its fixed overhead ratio to the total variable cost of each specific product to obtain product-specific depreciation and other fixed costs. Petitioners maintain that AHMSA should have applied its fixed overhead ratio to variable costs plus direct labor costs. AHMSA, in rebuttal, states that it treats all labor costs as fixed costs in the normal cost accounting system. AHMSA states that it used the same variable cost definition as it uses in the normal course of business to calculate the fixed overhead rate, and these variable costs do not include labor costs. Since the variable costs used in the fixed overhead ratio do not contain labor costs, AHMSA concludes that would be inappropriate to apply the fixed overhead percentage to variable costs plus direct labor costs.

Department's Position: We agree with AHMSA. The fixed overhead ratio was computed by dividing fixed overhead without labor costs by the variable cost of plate without labor costs. We then applied this ratio to the variable cost of manufacture without labor. This calculation reasonably and accurately reflects AHMSA's fixed overhead rate.

Comment 3: Major Input

Petitioners argue that the Act mandates that major inputs acquired from affiliates are to be valued at the highest of their transfer price, market value or COP. Petitioners state that the “fair value” provision of the Act recognizes that affiliated party transactions are inherently suspect. Petitioners assert that it is therefore necessary to compare transfer prices with market prices to obtain a fair value. Petitioners further argue that the rationale supporting the law would be undermined if the Department were to use the COP of AHMSA's affiliated material suppliers, as opposed to the highest of market value, transfer price or COP, as the Act mandates.

AHMSA argues that it is a vertically integrated steel producer, that AHMSA's affiliated suppliers of raw materials are one-hundred percent owned by AHMSA and are dependent upon AHMSA for their business, and that AHMSA and its affiliates should be treated as a single entity for determining COP. AHMSA states that since it owns all of the production assets involved in producing the subject merchandise, the Department should value the raw materials used in production at cost, not at the highest of cost, transfer price or market price. Although these assets are owned by a separate corporate entity, AHMSA claims it nevertheless has complete control of those assets, including raw materials, from mining through liquid steel production. AHMSA further argues that if the Department decides to apply the major input rule to certain raw material inputs obtained from affiliated suppliers, then the Department should correct the proposed adjustment outlined in the verification report, to reflect the percentage of limestone purchased from AHMSA's affiliated supplier during the cost calculation period.

Department's Position: We agree with petitioners that it is appropriate to use the highest of the market price, transfer price or cost to value the major inputs supplied to AHMSA by its affiliated producers in accordance with 19 CFR 351.407(b). The Department's practice is to request information on both the transfer price and the market value of the input and chooses the higher of the two valuations. The Department may value major inputs at the affiliate's cost of producing the input if it is higher than both the transfer price and the market price. All parties agree that the inputs in question are major inputs.

AHMSA's affiliated suppliers, who are producers of these major inputs, are separate corporate entities and not mere divisions of AHMSA. Therefore, materials purchased from them are subject to the major input rule. See Final Results of Antidumping Duty Administrative Reviews and Determination to Revoke in Part: Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 64 FR 2173, 2190 (January 13, 1999). We have therefore applied the major input rule and have corrected the limestone percentages accordingly for the final results.

Comment 4: Rolling Costs

Petitioners state that AHMSA's cost methodology as verified by the Department fails to account for product-specific rolling costs in the plate mill. Petitioners argue that the costs of rolling slab to a specified plate thickness can vary significantly. Petitioners urge the Department to reject respondent's costs altogether and apply total facts available.

AHMSA argues that its quarterly cost model contains a productivity factor which properly allocates plate rolling costs by internal grade group and thickness range. AHMSA disputes the Department's conclusion that AHMSA's quarterly cost model does not properly account for rolling costs. AHMSA argues that the productivity factor in the cost model is based on the size of the input slab and the reheating time necessary to produce a particular plate (i.e., by thickness and grade) from a particular slab. AHMSA argues that this productivity factor does account for the number of passes needed to produce plate of a particular thickness, because the number of passes is a function of the size of the input slab and of reheating time.

Department's Position: We agree with petitioners that the respondent's costing method does not adequately capture variations in rolling costs by model, but we do not agree that the appropriate remedy in this case is the application of total facts available.

As we noted at verification, the quarterly cost model used to derive the reported costs does not account for cost variations resulting from the number of passes that a slab may go through in the plate rolling process. See Cost Verification Report, page 12. Contrary to AHMSA's claim, the productivity factor does not specifically account for the rolling costs for plate of different thicknesses (i.e., the number of passes required to achieve the desired thickness). Since there are differences in the number of passes required to achieve a desired thickness in the rolling mill, we consider it appropriate to take this into account in determining product-specific costs. Therefore, we have reallocated the plate mill costs based on the number of passes a plate required to achieve the desired thickness as provided by AHMSA at verification. See Memorandum from P. Scholl to N. Halper, “Cost of Production and Constructed Value Adjustments for Final Results”, January 5, 1999 at 2 and Attachment 3.

Comment 5: General and Administrative Expenses

Petitioners contend that restructuring charges and foreign exchange losses relate to AHMSA's overall operations, and therefore should be included as general and administrative (G&A) expenses. Respondent did not comment on this issue.

Department's Position: We agree with petitioners. We added restructuring charges to G&A because these costs relate to the general operations of the company as a whole. See Cost Verification Report, page 25. See also Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al.; Final Results of Antidumping Duty Administrative Reviews and Partial Termination, 61 FR 66472, 66496 (December 17, 1996). We added foreign exchange losses from purchases to AHMSA's calculated G&A expense rate, as opposed to manufacturing costs, because we are unable to determine whether these costs relate to the general operations of the company as a whole or solely to purchases of materials used in the production of subject merchandise. See Notice of Final Determination of Sales at Less Than Fair Value: Saccharin from Korea, 59 FR 58826, 58828 (November 15, 1994).

Comment 6: Interest

AHMSA argues that the Department should reverse its preliminary decision to disallow the gain on monetary position from AHMSA's calculation of the net interest expense ratio. This item, AHMSA argues, is a required component of financial expenses under Mexican GAAP. AHMSA argues that the Department's practice in Mexican cases has been to include such gains or losses in the calculation of the interest expense ratio, and that to exclude the gain distorts the financial expenses incurred in real terms by AHMSA's parent company, Grupo Acero del Norte, S.A. de C.V.

Petitioners assert that the Department properly excluded the monetary correction from the calculation of net interest expense, because the monetary correction does not represent actual income to AHMSA. Petitioners point out that the inclusion of the monetary correction as an income offset in the calculation of the net interest expense would not comport with U.S. generally accepted accounting principles (“GAAP”), because accounts are not adjusted for the effect of inflation under U.S. GAAP. Petitioners contend that when an economy is not hyper-inflationary, but does experience significant inflation, the Department will use actual current period costs and prices, unadjusted for inflation. See Final Results of Antidumping Administrative Review: Certain Fresh Cut Flowers from Colombia, 63 FR 31724, 31728 (June 10, 1998). Since the Mexican economy was not hyper-inflationary during the POR, petitioners argue, the Department's exclusion of the monetary correction from the calculation correctly rendered the net expense rate consistent with the historical, unadjusted cost of manufacturing (COM) to which the expense rate was applied. Petitioners state the Department has previously determined that monetary correction adjustments of non-monetary assets and liabilities should not be included in the calculation of the COP and CV, because monetary correction adjustments of non-monetary assets and liabilities do not constitute, in any meaningful sense, true income or expense to the company. Rather, such corrections represent the restatement of non-monetary assets and liabilities into current price levels, not gains or losses. Petitioners cite in this regard the Department's determination in Notice of Final Determination of Sales At Less Than Fair Value: Certain Preserved Mushrooms from Chile, 63 FR 56613, 56621 (October 22, 1998).

Department's Position: We agree with petitioners. AHMSA incorrectly applied an inflation-adjusted net interest expense rate to a historical COM. We excluded the monetary correction for inflation adjustment from the calculation of net interest expense because it would distort the COP. The COM, as reported by respondents, was based on historical costs exclusive of any inflationary adjustments. Eliminating the monetary correction from the calculated net interest expense rate provided a historical cost net interest expense rate which is consistent with the historical costs to which the rate was applied. AHMSA's methodology would allow it to report lower historical costs of manufacturing while obtaining the benefits of monetary correction gains which result from inflation indexation. This methodology clearly distorts the COP and CV. The historical net interest expense is consistent with the historical COM data provided by AHMSA. Accordingly, for these final results, we have continued to exclude respondent's monetary correction from the calculation of the net interest expense rate.

Comment 7: Home Market Inland Freight

Petitioners argue that the Department should deny freight expense adjustments for any home market sales where the sales terms, as reported in one data field, suggest that AHMSA should not have incurred freight expenses. AHMSA argues in rebuttal that it explained in its responses that on some sales with terms that would normally indicate no delivery charges, AHMSA nevertheless incurred some freight expenses, and the amounts reported are justified claims.

Department's Position: We agree with AHMSA that the freight expenses in question have been repeatedly and plainly explained on the record. Accordingly, we have continued to make a deduction for home market inland freight in these final results.

Comment 8: Foreign Inland Freight

Based on a sample U.S. price quote provided in AHMSA's responses, the petitioners argue that AHMSA's reported U.S. prices must be inclusive of freight, and that the Department should use the sample in question to derive a uniform per-ton freight expense to deduct from AHMSA's U.S. prices. AHMSA counters that it reported exact per-transaction freight costs on each U.S. sale and that the Department, in its preliminary results, properly accounted for U.S. freight expense.

Department's Position: We agree with AHMSA that it properly reported the actual freight expenses that it incurred on its U.S. sales and made its calculation method quite plain on the record (see, for example, Exhibit C-24 of AHMSA's November 16, 1998 response). Accordingly, for these final results, we have continued to use the actual freight expenses which AHMSA reported.

Final Results of Review

As a result of this review, we have determined that the following weighted-average dumping margin exists for the period August 1, 1997 through July 31, 1998:

The Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. The Department shall issue appraisement instructions directly to the Customs Service. Because there is only one importer of the subject merchandise, we have calculated an importer specific duty assessment rate for the merchandise based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of sales.

Furthermore, the following deposit requirements shall be effective upon publication of this notice of final results of review for all shipments of certain CTL carbon steel plate from Mexico, entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(1) of the Tariff Act: (1) The cash deposit rate for the reviewed company will be the rate stated above; (2) For previously 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 these reviews or the original LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) If neither the exporter nor the manufacturer is a firm covered in this review, the cash deposit rate for this case will continue to be 49.25 percent, the “All Others” rate in the LTFV investigation. These deposit requirements 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 19 CFR 351.402(f) 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 orders (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3)(1999). Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.