67 FR 6493, February 12, 2002 A-427-814 AR 1/4/99-6/30/00 Public Document DAS III/9/RAB February 4, 2002 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary for Import Administration, Group III SUBJECT: Issues and Decision Memorandum for the Administrative Review of Stainless Steel Sheet and Strip in Coils from France: January 4, 1999 through June 30, 2000. SUMMARY: We have analyzed the comments and rebuttal comments of interested parties in the first administrative review of the antidumping duty order covering stainless steel sheet and strip in coils from France. As a result of our analysis, we have made changes, including corrections of certain inadvertent programming and clerical errors, in the margin calculations. We recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this Issues and Decision Memorandum. Below is the complete list of the issues in these administrative reviews for which we received comments and rebuttal comments by parties: GENERAL COMMENTS 1. Inclusion of Affiliate U.S. sales 2. Home Market Downstream Sales 3. Negative Dumping Margins 4. U. S. commission rate for certain U.S. sales by Hague Steel 5. Foreign Inland Freight 6. CEP Profit 7. Further Manufacturing sales 8. Commission offset and CEP offset 9. Home Market Surcharges 10. Inadvertent computer programming error BACKGROUND: On August 8, 2001, the Department of Commerce ("Department") published the preliminary results of the administrative review of the antidumping duty order on stainless steel sheet and strip in coils from France. See Stainless Steel Sheet and Strip in Coils from France: Notice of Preliminary Results of Antidumping Duty Administrative Review ("Preliminary Results"), 66 FR 41538 (August 8, 2001). The merchandise covered by this order is stainless steel sheet and strip in coils ("SSS&S") as described in the "Scope of the Review" section of the Federal Register notice. The period of review ("POR") is January 4, 1999 through June 30, 2000. We invited parties to comment on our Preliminary Results. On October 15, 2001, Ugine and petitioners filed comments. On October 22, 2001, Ugine and petitioners filed rebuttal comments. DISCUSSION OF THE ISSUES: GENERAL COMMENTS Comment 1. Inclusion of Affiliate U.S. Sales Respondent states that it made a timely request, pursuant to section 351.213(b)(2) of the Department's regulations, for the Department to review only sales of Ugine S.A. ("Ugine"). Respondent argues that no review of Imphy Ugine Precision ("IUP"), an entity it distinguishes from Ugine, was requested by Ugine, IUP, or any other interested party. Thus, Ugine contends that the Department's inclusion and review of IUP's sales was improper, and the Department should exclude IUP's sales in the final results. Respondent argues that the Department should exclude IUP's U.S. sales from its margin calculation for several reasons. First, Ugine states that it was the only party that requested an administrative review for this particular review period, and the Department is bound by its regulations to conduct an administrative review only of the entity that requested the review. See 19 C.F.R. Section 351.213(b)(2). Second, respondent notes that the Department named only Ugine in initiating this administrative review. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation In Part, 65 FR 53980 (September 6, 2000). Third, Ugine asserts that in its original questionnaire response it reported the resale of its relevant U.S. affiliates (i.e., Uginox Sales Corporation ("Uginox"), Hague Steel Corporation ("Hague"), and Edgcomb Metals Company ("Edgcomb")). Ugine states that it did not report IUP's U.S. sales because IUP's sales during the POR were insignificant and no review of IUP sales was specifically requested in a timely fashion. Respondent notes that petitioners requested that the Department review IUP's U.S. sales six and one-half months after the deadline had passed for requesting a review. Respondent further notes that it urged the Department to reject petitioners request in a letter to the Department dated March 15, 2001 based on the aforementioned facts. Nonetheless, Ugine asserts that the Department improperly requested IUP's U.S. sales and included these sales in its preliminary results calculations. Respondent states that the Court of International Trade ("CIT") has held that amendments to the antidumping statute in recent years have made the conduct of administrative reviews subject to the request of the parties and that the party requesting a review bears the burden of identifying the companies to be reviewed. See Floral Trade Council v. United States, 17 C.I.T. 1417 (CIT 1993) ("Floral Trade") and Transcom, Inc. v. United States, 123 F.Supp.2d 1372, 1377 (CIT 2000) ("Transcom"). In this instant, Ugine properly requested a review, and limited its request to itself. Petitioners did not request a review of IUP's U.S. sales. Thus, respondent argues that according to the CIT's decision in Floral Trade, the Department is not permitted to review IUP's U.S. sales. Therefore, for the final results, Ugine argues that the Department should exclude IUP's U.S. sales from its margin calculation. Petitioners assert that the Department properly reviewed all Ugine U.S. sales and all U.S. sales by its affiliated parties, including IUP, because Ugine and IUP are affiliated persons within the meaning of the Tariff Act of 1930 ("the Act"). See section 771(33)(F). Petitioners state that the Department's initial questionnaire explicitly instructed Ugine to report U.S. sales, both by itself and by all of its affiliates. Because Usinor S.A. is the parent of Ugine and IUP, petitioners note that the final determination and order from the investigation covered all sales of the subject merchandise by Usinor and all of its affiliated parties. Further, petitioners contend that Ugine had the responsibility from the start of this review to report all U.S. sales of subject merchandise made by itself or any affiliated party. Thus, petitioners argue that the inclusion of IUP's U.S. sales in the margin calculation is appropriate, because the Department's review of IUP's U.S. sales was based on Ugines' request for a review, and a review under standard administrative procedures covers a respondent and all of its affiliates. Petitioners claim that record evidence is clear that Ugine and IUP are affiliates and respondent does not dispute this fact. Also, petitioners note that Ugine reported all home market sales made by Ugine and IUP, and find it illogical that Ugine did not understand that the same reporting obligation existed for reporting U.S. sales. Petitioners contend that requiring a respondent to completely report all U.S. sales is critical to any investigation or review, in order to avoid having respondent manipulate the outcome of the proceeding. Furthermore, petitioners argue that the cases Ugine cites are irrelevant to this proceeding. Petitioners claim that in Floral Trade the Court did not address whether the identification of a particular company to be reviewed also included affiliated persons to that company. Likewise, petitioners state that in Transcom, the Court dealt with the obligation of the requestor to sufficiently identify the party to be reviewed and the obligation of the Department to provide proper notice to parties to be reviewed, not whether the party so identified would include or exclude affiliates. Department's Position: We disagree with the respondent. On February 20, 2001, petitioners alleged that IUP (an affiliate of Usinor, see below) was Ugine's affiliate and they requested that the Department obtain IUP's U.S. sales for the POR. On March 29, 2001, the Department requested that Ugine provide all of IUP's U.S. sales that it made during the POR to the United States that did not go through the U.S. affiliate, Uginox Steel Corp. ("Uginox"). On April 13, 2001, Ugine provided all of IUP's sales that did not go through Uginox. Ugine reported that IUP sold the subject merchandise in the United States through Uginox during the first half of 1999, then through Rahns Specialty Metal, Inc. ("Rahns") in the second half of 1999 and 2000, in a "commercial" transaction, where Rahns acted as a "super-distributor." While respondent objected to the Department's request at the time, it did provide IUP's U.S. sales for the POR. Additionally, at the preliminary stage of this proceeding, the Department used IUP's U.S. through Rahns in calculating Ugine's margin. See Notice of Preliminary Results of Antidumping Administrative Review: Stainless Steel Sheet and Strip in Coils from France, 66 FR 41538, 41541 (August 8, 2001)("Preliminary Results"). In order to find affiliation between companies, the Department must find at least one of the criteria from section 771(33) of the Act to be applicable to the respondent. According to section 771(33) of the Act: "the following persons shall be considered to be "affiliated" or "affiliated persons" .... (F) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person; and (G) Any person who controls any other person and such other person." Additionally, 771(33) states "for purposes of this paragraph, a person shall be considered to control another person if the person is legally or operationally in a position to exercise restraint or direction over the other person." Record evidence indicates that Ugine and IUP are affiliated parties under section 771(33)(F). The evidence establishes that both IUP and Ugine are affiliated with Usinor (the parent company) through a direct equity interest. As noted in Ugines' October 16, 2001, submission and the verification exhibits (i.e., UG-2), Usinor wholly owned both IUP and Ugine during the POR. We find that Usinor controlled both IUP and Ugine within the meaning of section 771(33)(F) of the Act by virtue of its sole ownership of IUP and Ugine during the POR. The statute specifically does not require a finding of actual control to exist, but only requires that during the POR a person be in a position to exercise control. See section 771(33) of the Act. Further, the statutory definition of control encompasses both legal and operational control. See Notice of Final Determination of Sales of Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from France, 64 FR 30820 (June 8, 1999)("Final Determination"). Section 771(33)(F) of the Act states that there is affiliation between "two or more persons directly or indirectly controlling, controlled by, or under common control with, any person." Based on evidence on the record, IUP and Ugine were affiliated because Usinor controlled both IUP and Ugine during the POR, as a result of its ownership of both IUP and Ugine. See Verification Exhibit UG-2. Additionally, since Usinor was the parent to both IUP and Ugine, Usinor was in a position to exercise control over both IUP and Ugine, both legally and operationally, during the POR. See Verification Exhibit UG-2. Therefore, according to section 771(33)(F) of the Act, IUP and Ugine are affiliated. Furthermore, we find IUP to be a reseller of subject merchandise produced by Ugine in both the home market and U.S. market during the POR. In the home market, Ugine stated that "with respect to SSS&S, IUP buys stainless coils from Ugine and re-rolls SSS&S in its Firminy and Pont de Roide plants, and resells directly to IUP's customers in France." See Ugine's Section A Questionnaire Response dated October 16, 2000 at page A-8. Also, Ugine reported that IUP sold subject merchandise produced by Ugine in the United States during the POR through Uginox or Rahns. See Supplemental Questionnaire Response dated April 13, 2001. Further, the Department verified that IUP sold subject merchandise produced Ugine during the POR. See Home Market Sales and Cost Verifications of Ugine S.A. ("Ugine"); First Administrative Review of the Antidumping Duty Order on Stainless Steel Sheet and Strip in Coils from France ("Verification Report") dated July 31, 2001 at page 24 and Verification Exhibit UG-25. We have determined that pursuant to section 771(33) (F) of the Act and based on record evidence, Ugine and IUP are affiliated. Additionally, we have determined that IUP is a reseller of subject merchandise produced by Ugine. Therefore, based on IUP being affiliated with Ugine and IUP being a reseller of subject merchandise produced by Ugine, for the Final Results, we have continued to use IUP's U.S. sales through Rahns in calculating Ugine's margin. See Final Analysis Memo of the administrative review: stainless steel sheet and strip in coils from France ("Final Analysis Memo"), dated February 4, 2002. Furthermore, we agree with petitioners that neither Floral Trade nor Transcom addresses the issue of affiliation in initiating an administrative review. Comment 2: Home Market Downstream Sales Petitioners request that the Department issue a supplemental questionnaire to Ugine that requests Ugine to provide Ugine France Service ("UFS") further manufactured sales of subject merchandise which it purchased from Ugine and IUP and subsequently sold in the French market. They claim that only when these sales are reported will the record be completed. Petitioners state that the courts have held that the Department must compute the most accurate dumping margin possible for either an investigation or administrative review, based on information on the record. See Koyo Seiko Co., Ltd. v. United States, 14 CIT 680, 682, 746 F.Supp. 1108, 1110 (1990)("Koyo Seiko"); and Rhone Poulenc, Inc. v. United States, 8 Fed. Cir. (T) 61, 899 F.2d 1185 (1990)("Rhone Poulenc"). They claim that the most accurate margin in this case would include these sales. Petitioners state that during the POR, both Ugine and IUP sold subject merchandise to UFS, which UFS further manufactured before selling the finished merchandise in the French market. Petitioners note that currently on the record Ugine's home market sales are only reported as the inter- company transfer price between Ugine/IUP and UFS of semi-finished products, not the finished good's sale price from UFS to the unaffiliated French customer. Petitioners contend that the Department should obtain UFS's sales to the first unaffiliated customer because in a concurrent investigation, (see Notice of Initiation of Antidumping Investigations: Stainless Steel Bar from France, Germany, Italy, Korea, Taiwan and the United Kingdom, 66 FR 7620 (January 24, 2001) ("Stainless Steel Bar from France"), the French company (i.e., Ugine-Savoie Imphy, another Ugine- affiliate), reported the downstream sale(s) from UFS to the unaffiliated French customer(s). Petitioners argue that the fact patterns in this administrative review and the stainless steel bar investigation are nearly identical. In both instances, petitioners note, Ugine sold semi-finished products to UFS, which further processed the merchandise and sold the finished goods into the French market. However, in this proceeding, Ugine only submitted the transfer price between Ugine and UFS, while in the stainless steel bar proceeding, Ugine submitted UFS's price to the first unaffiliated customer. In Stainless Steel Bar from France, petitioners note that the Department had Ugine-Savoie Imphy supply all expenses associated with the transfer of the semi-finished merchandise as section D costs and petitioners argue that the Department should do the same in this case. In this case, petitioners argue that the transfer price between Ugine and UFS should not serve as the basis for the home market price and the Department should apply the same standard as it did in the stainless steel bar investigation. Therefore, petitioners request that the Department instruct Ugine to report UFS's sales to the first unaffiliated customer and report all expenses associated with the transfer of the merchandise from Ugine to UFS and UFS's further manufacturing costs. Petitioners also request that the Department should establish a second briefing schedule that would be limited to this new information. Respondent states that there is no need to reopen the record for this administrative review because: (1) it complied with the Department's regulations and practice in reporting of sales to its affiliates; (2) the Department has not requested Ugine's home market downstream sales in this administrative review; and (3) the sales that Ugine reported from itself to UFS were of in-scope, finished SSS&S and were made at arm's length and thus, downstream sales do not need to be reported. Respondent notes that petitioners' request for UFS downstream sales data is built on an inaccurate assertion that Ugine's sales to UFS were inter- company transfers of semi-finished steel. Ugine contends that all of its sales to UFS were finished SSS&S and its quantity and value reconciliation proves this point because it shows no semi-finished merchandise sold to UFS. Furthermore, respondent claims that the Department verified this point. See April 20, 2001 submission and the Department's July 31, 2001 verification report at page 20. Respondent notes that the Department applied its arm's-length test in this case in the Preliminary Results. See Preliminary Results. Ugine claims this was only possible because the merchandise the respondent sold to UFS included merchandise with identical CONNUMs as merchandise sold to its end-user customers. Additionally, Ugine states that a substantial portion of the SSS&S UFS purchased from Ugine during the POI was resold without further processing, which would negate the petitioners' suggestion that the sales were of semi-finished merchandise. Also, respondent notes that when it did perform the further manufacturing processes (e.g., cutting, slitting, etc.), it only did so on finished SSS&S, as it reported in a supplemental response. See Supplemental Questionnaire Response dated January 29, 2001. Further, respondent states that petitioners' assertion that the SSS&S that Ugine sold to UFS subject merchandise during the POR distorts the facts of the production of stainless steel. Ugine notes that the subject merchandise is produced from "semi-finished" material (which are also called black or white coils). Also, respondent points out that the industry definition of "semi-finished" refers to slabs (or black or white coils), from which the subject merchandise is produced. Therefore, Ugine argues that the sale of any semi-finished steel to the U.S. would be outside the scope of this administrative review, and petitioners' characterization of the SSS&S sold to UFS as "semi-finished" does not comport with the facts of this review. Furthermore, respondent argues that it sold the subject merchandise in an arm's-length transaction to its affiliated service center, UFS, and therefore it reported the sales to UFS and not the downstream sales made by UFS. Citing Cold-Rolled and Corrosion-Resistant Steel from Korea, Ugine contends that even though UFS performed additional processes on purchased Ugine SSS&S, the further processing is irrelevant under the Department's regulations and practices. See Notice of Preliminary Results of Antidumping Duty Administrative Review: Certain Cold-Rolled and Corrosion- Resistant Steel from Korea, 66 FR 47163, 47170 (September 11, 2001) ("Cold- Rolled and Corrosion-Resistant Steel from Korea"). Respondent maintains that because the sales from Ugine to UFS were at arm's length, the Department has properly declined to request Ugine's home market downstream sales information. Respondent states that this is consistent with the Department's regulations and its final determination in the Less Than Fair Value ("LTFV") segment of this proceeding regarding the reporting of sales to home market resellers. See 19 C.F.R. § 351.403. Consequently, respondent argues that the Department should use the arm's length sales from Ugine to UFS as the basis for normal value and reject petitioners request for additional information and briefing. Department's Position: We disagree with petitioners that UFS' downstream sales should be included in the Final Results. According to 19 C.F.R. 351.403(c), if an exporter or producer sells the foreign like product to affiliated parties, the Department may calculate normal value based on such sales if it determines that the net prices for such sales are comparable to the prices at which the exporter or producer sold the foreign like product to persons not affiliated with the seller. It is the Department's normal practice to conduct an arm's-length analysis on home market sales made by a producer to an affiliated company to determine whether the prices for such sales are comparable to prices charged to unaffiliated parties. If the Department determines that prices for sales to the affiliated company were sufficiently comparable to prices for sales to unaffiliated parties, then the Department need not use downstream sales from the affiliated company in its subsequent calculations. First, it has been the Department's practice that if an affiliated party passes the arm's length test, the Department would not use that affiliates' sales in its analysis. See Notice of Final Determination of Sales of Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from France, 64 FR 30820 (June 8, 1999)("Final Determination"). Second, the Department's questionnaire clearly states, "You must report all your sales to affiliated customers. If the Department determines that your sales to affiliated customers are at arm's length, the Department will use these sales in its analysis." See Department's Questionnaire of September 8, 2000 at page G-6. Prior to issuing its Preliminary Results, the Department conducted an arm's-length analysis on Ugine's home market sales to the affiliated reseller, UFS. This analysis led the Department to conclude that Ugine's sales to UFS were made on an arm's-length basis. See Preliminary Results at 41541. Consequently, downstream sales from UFS to unaffiliated customers were not used in calculations for the Preliminary Results. Accordingly, we have not requested Ugine to provide UFS's downstream sales to unaffiliated customers. Further, we verified that the merchandise that Ugine sold to UFS was finished material, and not semi- finished material as claimed by petitioners. See Exhibit UG-9. Finally, we note that our final margin analysis continues to show that sales between Ugine and UFS sales were made at arm's length. Therefore, for the final results, the Department has used the sales from Ugine to UFS in its calculation. Additionally, the Department has not issued a supplemental questionnaire nor established a second briefing schedule because neither is needed to calculate an accurate dumping margin in this case. Comment 3. Negative Margin Sales Respondent argues that the Department improperly disregarded certain U.S. sales that were made in excess of normal value (i.e., negative margin sales) which has the effect of unfairly inflating the antidumping duty margin. Ugine claims that this practice violates U.S. and international law and should be discontinued, and for the final results, the Department should recalculate the margin using the negative margin sales. Ugine states that U.S. law requires that in calculating an antidumping duty margin the Department make a "fair comparison" between the export price or constructed export price and normal value. See Section 773(a) of the Act. Respondent claims that this World Trade Organization ("WTO") obligation was enacted into U.S. law through the URAA. Respondent further notes that U.S. statutes must be interpreted in a manner consistent with international law, and that the United States has recognized this fact with respect to the WTO and General Agreements on Tariffs and Trade ("GATT"). See Federal Mogul Corp. v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995). Further, respondent contends that a recent WTO Appellate Body decision found that the practice of "zeroing" under which export sales made at prices greater than normal value are assigned a zero margin violates Article 2.4 of the WTO Agreement on the Implementation of Article VI of the GATT. See European Communities - Antidumping measures on imports of cotton-type bed-linen from India, DS 141/AB/R (2001) ("Bed Linen"). Consequently, Ugine argues that the Appellate Body's decision in Bed Linen established the international obligation of WTO members not to use a zeroing methodology. Furthermore, respondent says that the Department's policy of zeroing is not required by any law or regulation. Moreover, respondent argues that the CIT and the Appellate Body have recognized that the Department's methodology for calculating margins (i.e., assigning a zero rather than a negative margin for certain sales) is contrary to the Department's statutory obligation to make a fair comparison between the EP or CEP and normal value. See Bowe Passat v. United States, 926 F. Supp. 1138, 1150 (CIT 1996) and see also, Bed Linen. Thus, Ugine claims that the Department has no legal basis to continue the practice of zeroing negative- margin sales. Additionally, respondent argues that the position in the Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products from the Netherlands, 66 FR 50408 (October 3, 2001) is not correct and should not be followed. In that case, the Department dismissed the Appellate Body's Bed Linen decision based on the facts that the zeroing methodology is required by law, the zeroing methodology is reasonable, and U.S. law takes precedence over any potentially conflicting obligations under the URAA. However, Ugine notes that no U.S. law requires the Department to zero out negative margin sales, no methodology that fails to produce a fair comparison according to the Act can be considered reasonable, and where U.S. law and international obligations do not conflict, U.S. law is to be read in harmony with international obligations. Petitioners note that Ugine's zeroing argument is without merit. Petitioners argue that it is well-established that the Department's antidumping duty determinations are governed by the U.S. antidumping statute and numerous courts have recognized that in the event of a conflict between a GATT or WTO obligation and the U.S. statute, the U.S. statute has prevailing rights. See Federal-Mogul Corp v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995); Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660, 668 (Fed. Cir. 1992). Citing Section 102 of the URAA, petitioners note that "{n}o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect." Thus, petitioners contend that the Department must first and foremost enforce the U.S. statute. Petitioners assert that section 751(a)(2)(A)(ii) of the Act requires that an antidumping margin must be established in a review for each entry during the POR. Petitioners note that if the Department did not apply a zero margin to non-dumped sales, then these sales would offset dumping on other sales and could lead to a negative determination. Further, petitioners contend that the Statement of Administrative Action ("SAA") is the authoritative statement on the interpretation of U.S. law, and the SAA interprets the United States obligations to be consistent with the zeroing methodology. See the SAA. Therefore, petitioners argue that zeroing is appropriate under the U.S. statute. Petitioners further state that the Department has found that the decision cited by Ugine, i.e., Bed Linen, does not apply to U.S. proceedings. See Final Results of Administrative Review, Certain Preserved Mushrooms from India: 66 FR 42507 (August 13, 2001) and accompanying Decision Memorandum at 16 ("The Bed Linens Panel and Appellate Body decision concerned a dispute between the EU and India. We have no WTO obligations to act. Therefore, we have continued the practice of using zero where the NV does not exceed the export price or CEP in our calculation of overall margin for the final results.") Also, petitioners contend that Bed Linen is not appropriate because it involved a challenge to duty calculation in the context of an investigation, rather than with respect to an administrative review. Accordingly, petitioners argue that the Department should continue to apply its zeroing methodology in this administrative review because it is consistent with U.S. law and its obligations under the Antidumping Agreement. Department's Position: We disagree with respondent. As we have discussed in prior cases, our methodology is consistent with our statutory obligations under the Act. See, e.g., Notice of Final Determinatioin of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products from the Netherlands, 66 FR 50408 (October 3, 2001), and accompanying Issues and Decision Memorandum, at Comment 1. First, sales that did not fall below normal value are included in the weighted- average margin calculation as sales with no dumping margin. The value of such sales is included in the denominator of the weighted-average margin along with the value of dumped sales. We do not, however, allow sales that did not fall below normal value to cancel out dumping found on other sales. Second, the Act requires that the Department employ this methodology. Section 771(35)(A) of the Act defines "dumping margin" as "the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise." Section 771(35)(B) of the Act defines "weighted-average dumping margin" as "the percentage determined by dividing the aggregate dumping margins determined for a specific exporter or producer by the aggregate export prices and constructed export prices of such exporter or producer." These sections, taken together, direct the Department to aggregate all individual dumping margins, each of which is determined by the amount by which normal value exceeds export price or constructed export price, and to divide this amount by the value of all sales. The directive to determine the "aggregate dumping margins" in section 771(35)(B) makes clear that the singular "dumping margin" in section 771(35)(A) applies on a comparison-specific level, and does not itself apply on an aggregate basis. At no stage in this process is the amount by which EP or CEP exceeds normal value on sales that did not fall below normal value permitted to cancel out the dumping margins found on other sales. This does not mean, however, that sales that did not fall below normal value are ignored in calculating the weighted-average rate. It is important to note that the weighted-average margin will reflect any "non-dumped" merchandise examined during the investigation, the value of such sales is included in the denominator of the dumping rate, while no dumping amount for "non-dumped" merchandise is included in the numerator. Thus, a greater amount of "non-dumped" merchandise results in a lower weighted-average margin. This is, furthermore, a reasonable means of establishing duty deposits in investigations, and assessing duties in reviews. In an investigation such as the present case, the deposit rate calculated must reflect the fact that the Customs Service is not in a position to know which entries of merchandise entered after the imposition of a dumping order are dumped and which are not. By spreading the estimated liability for dumped sales across all investigated sales, the weighted-average dumping margin allows the Customs Service to apply this rate to all merchandise entered after an order goes into effect. Finally, the Bed Linen from India Panel and Appellate Body decisions concerned a dispute between the European Union and India. We have no WTO obligation to act based on these decisions. See Certain Preserved Mushrooms from India: Final Results of Antidumping Administrative Review, 66 FR 42507 (August 13, 2001). Comment 4. U.S. Commission Rate for Certain U.S. Sales by Hague Steel Respondent states that for certain year 2000 U.S. sales Ugine reported commissions paid by Hague Steel Corporation ("Hague")(an affiliate of Uginox) to an affiliated sales agent, Uginox, for which the commission rate was not an arm's length rate. Respondent notes that because the commission was not at an arm's length rate, it reported the expenses of the Uginox sales agent (which included the expenses of any affiliated selling agents). Respondent argues that in the preliminary results the Department improperly recalculated those expenses by assigning a commission rate in place of the reported expense rate for Hague's 2000 sales for which Uginox was the sales agent. Ugine states that the Department did not provide a reasonable rationale for its recalculation in the preliminary results, but merely stated that it discovered at verification that Hague did not pay an arm's-length price to the sales agent. However, respondent notes that it stated in its questionnaire response that it was reporting Uginox's expenses because the commission rate was not at arm's length and that there was no additional information discovered at verification. Therefore, respondent argues that for the final results, the Department should recalculate CEP using the reported expenses for Hague's sales agents on 2000 sales. Petitioners state that at verification, the Department discovered that Hague had two commission rates for its unaffiliated sales agents, and that Hague offered a certain incentive rate to unaffiliated sales agents to generate new business. Additionally, petitioners note that in the year 2000 Hague decreased the commission rate to Uginox due to its affiliation with Uginox. Also, petitioners assert that pursuant to the court case, LMI- LA Metali Industriale S.p.A. v. United States, commissions paid to affiliated parties will be accepted at the claimed level, so long as those commissions were at arm's-length prices and tied directly to sales. See LMI-LA Metali Industriale S.p.A. v. United States, 912 F.2d 455 (Fed. Cir. 1990) ("LMI"). However, petitioners contend that in this instance, the commissions paid to Uginox in the year 2000 were suppressed by the respondent due to the affiliation between the parties. Therefore, petitioners argue that commissions paid in the year 2000 were not at an arm's-length price and should be adjusted to reflect the affiliated party commissioned sales during that calendar year. Ugine contends that petitioners' suggested approach to calculating Hague's commission is without merit for several reasons. First, respondent argues that the expenses reported for these sales were the values that the Department's questionnaire requested and there is no justification for substituting other values. Second, Ugine asserts that the value suggested by petitioners has no connection to the subject merchandise. The suggested value was a commission rate that was not paid for subject merchandise during the POR. Additionally, respondent states that petitioners' reliance on LMI is misplaced. Respondent notes that in LMI, the issue was whether the reported commissions paid to an affiliate were at arm's-length. In the instant case, Ugine states that it acknowledged that the commissions were not at arm's length and therefore, reported the expenses of the affiliated agent. Finally, Ugine states that LMI in no way suggests that properly reported expenses of the affiliated agent may not be used where the non- arm's length commission may not be used. Therefore, respondent argues that the petitioners' proposal should be rejected. Petitioners contend that Ugine's argument is incorrect and should be dismissed because Ugine admitted that Hague's payment of commissions to Uginox were not arm's-length transactions. Petitioners state that at verification, the Department discovered that for the year 2000, Hague decreased the commission rate it paid to Uginox because of its affiliation with Uginox, and Hague had two commission rates for its unaffiliated sales agents as an incentive to receive more business and generate more new business. See Home Market Sales and Cost Verifications of Ugine S.A. ("Ugine"); First Administrative Review of the Antidumping Duty Order on Stainless Steel Sheet and Strip in Coils from France ("Verification Report") dated July 31, 2001. (emphasis added), page 11. Also, petitioners note that Hague decreased the commission rate it paid to Uginox because of its affiliation with Uginox. Petitioners argue that respondent's indirect selling expense rate to Uginox does not reflect the market rate that Hague paid to unaffiliated sales agents due to its affiliation with Uginox. Thus, petitioners assert that Hague made an explicit decision to assign Uginox a non-arm's length commission rate that is not in accordance with normal market practices regarding its commission payment. Therefore, petitioners argue that the Department should reject Uginox's indirect selling expense ratio, and instead use the commission rate paid by Hague to unaffiliated sales agents. Department's Position: We agree with respondent. It is the Department's preferred approach to use the affiliates' selling expenses rather than the commission paid to the affiliate. As the Department's questionnaire states, "Include the expenses of any affiliated selling agents instead of the commissions paid to those agents." See the Department's Original Questionnaire dated September 8, 2001. Ugine reported in its November 7, 2000 section C response that for certain U.S. sales Hague paid non-arm's length commissions to an affiliated sales agent, (i.e., Uginox). Thus, in the November 7, 2001 section C response, Ugine reported the expenses of Uginox, rather than the commission rate. The Department verified that the respondent reported the actual U.S. expenses, instead of the commission rate, because the commission rate was not at arm's length. See United States Sales Verification Report of Uginox dated July 25, 2001 at page 15 and United States Sales Verification Report of Hague Steel Corporation dated July 25, 2001 at page 11. Therefore, for the final results, the Department will use the reported expenses for Hague's affiliated sales agents on the year 2000 sales. See Final Analysis Memo and Margin Calculation Program dated February 4, 2002. Comment 5: Foreign Inland Freight Expense Respondent argues that in the preliminary results the Department inadvertently failed to convert Ugine's reported expense for foreign inland freight to warehouse (i.e., DINLFTWU) from French francs to U.S. dollars. Therefore, respondent contends for the final results, the Department should correct this error by converting DINLFTWU from francs to dollars. Petitioners did not comment on this issue. Department's Position: We agree with respondent, and for the final results we have converted the variable DINLFTWU from francs to dollars. See Final Analysis Memo and Margin Calculation Program dated February 4, 2002. Comment 6: CEP Profit Petitioners state that in the model match program, the Department calculated the home market values for CEP profit for each home market sale and then summed these results to determine the variables, TOTREVH, TOTCOGSH, TOTSELH, and TOTMOVEH which were denominated in French francs. Further, in the margin calculation program, the Department used the French francs values to calculate TOTREVU, TOTCOGSU, TOTSELLU, and TOTMOVEU. Petitioners argue that the result leads to misconstrued data. Therefore, petitioners assert that the Department should convert the home market values to U.S. dollars prior to being added with U.S. dollar values. Respondent contends that there was no ministerial error in the Department's calculation of CEP profit. Ugine argues that petitioners wrongly stated that the Department's calculation of CEP profit was in error (i.e., where French francs home market values were added to U.S. dollar values). Respondent states that all the values used to calculate CEP profit were denominated in French francs, and the U.S. components were converted to French francs before the calculation of CEP profit. Therefore, Ugine argues that home market and U.S. values were correctly denominated in French francs when they were combined, and there is no need to convert any home market values into U.S. dollars before calculating CEP profit. Department's Position: We disagree with petitioners. First, the Department has used its standard methodology for CEP profit, and in performing its CEP profit calculation has not altered any of the programming language for CEP profit in this administrative review. In calculating CEP profit from the standard programming language, the Department performed the following four steps. First, in calculating CEP profit in the margin program, the Department first converted any U.S. denominated expense or cost into French francs. See Preliminary Margin Program, dated July 31, 2001, at lines 444-449. Second, the Department added values from the margin program (e.g., TOTREVU, TOTCOGSU, etc.) which are denominated in French francs to the home market values from the model match program which are also denominated in French francs to obtain total values of these components (i.e., TOTREV, TOTCOGS, etc.). See Preliminary Margin Program, dated July 31, 2001, at lines 497-502. Third, the Department calculated a CEP profit ratio based on two of the total value components (i.e., TOTPROFT and TOTEXP). See Preliminary Margin Program, dated July 31, 2001, at line 507 . Lastly, the Department multiplied the CEP profit ratio by certain U.S. expenses (i.e., these expenses are denominated in U.S. dollars) to derive a CEP profit figure. See Preliminary Margin Program, dated July 31, 2001, at line 515. The Department then applied this CEP profit figure in calculating net U.S. price. Accordingly, when the Department calculated its CEP profit, the home market and U.S. values were correctly denominated in French francs when they were added together. Consequently, for the final results, the Department has determined that there is no need to convert any home market values into U.S. dollars before calculating CEP profit and will not change its standard programming language for CEP profit. Comment 7: Further Manufacturing Sales Petitioners state that it appears that the Department referenced Ugine's U.S. further manufacturing sales incorrectly as "FMG" instead of as Ugine reported these sales "CEP/FM," in the preliminary results. Petitioners hold that the result of this error is that the Department's test for sales outside the period of review did not test Ugine's U.S. further manufactured sales, and the variable INDEXUS was not considered in the CEP profit or deducted from U.S. further manufactured sales. Petitioners assert the Department should correct its error by referencing Ugine's U.S. further manufactured sales as "CEP/FM." Ugine did not comment on this issue. Department's Position: We agree with petitioners. For the final results, we have corrected our margin calculation program to correctly reference Ugine's U.S. further manufacturing sales. See Final Analysis Memo and Margin Calculation Program dated February 4, 2002. Comment 8: Commission Offset and CEP Offset Petitioners argue that the Department's margin program incorrectly calculated the commission offset because the commission rate was only applied to gross unit price and did not add surcharges, billing adjustments and freight revenue. Additionally, petitioners contend where commissions were paid in the U.S., but no commissions were paid in the home market, the variable INDDOL used to determine the home market commission offset incorrectly includes home market inventory carrying costs. Petitioners also note that a similar problem exists on the U.S. side with variables INDEXUS and IND2DOL. Additionally, petitioners contend that the Department failed to make a commission offset for CEP sales where commissions are paid in the home market, but no commissions were paid in the U.S. market. Petitioners argue that in Pasta from Italy, the Department agreed that "there was no offset made for instances where there were commissions in the home market, but none in the U.S. market." See Notice of Final Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Pasta from Italy, 64 FR 6615, 6618 (February 10, 1999)(Comment 2) ("Pasta from Italy"). Thus, petitioners assert that the Department should provide a commission offset for CEP sales where there was a commission paid in the home market but no commission paid in the U.S. Finally, petitioners state that it appears that the Department double- counted indirect selling expenses in the commission offset and CEP offset because the Department used both INDDOL and INDEXUS for the commission offset and CEP offset. Petitioners note that the Department could solve this problem by creating a variable (i.e., MAXOFF) that would be equal to the minimum of INDDOL, or the sum of CEPCHDOL and OFFSETH, and the Department would subtract MAXOFF when making offsets. Also, petitioner contend that when commissions are paid in both markets, the INDDOL variable could be changed to IND2DOL. Respondent argues that all of petitioners arguments in regards to this issue are without merit. First, Ugine contends that no change needs to be made to the variable INDEXUS because this variable is used for only the CEP offset and not the commission offset. Moreover, respondent argues that the Department's CEP offset should include inventory carrying costs. Second, respondent argues that petitioners proposal is not specific as to what expenses should be included in the commission offset. Respondent asserts that the home market commission deduction should not be reduced by the amount of home market selling expenses or by the amount of any indirect selling expenses associated with economic activities in the United States, which are deducted in the calculation of CEP. Further, Ugine maintains that selling expenses incurred by it and IUP for sales to its affiliate Uginox are not related to activities for which either Ugine or IUP paid a commission agent for sales in France, because the selling activities are performed by the U.S. affiliate when agent is not used. Therefore, respondent argues that the net CEP price is equivalent to the home market price net of commissions, and additional adjustment in the form of a commission offset is unnecessary. Department's Position: We agree with petitioners in part. First, the Department has not changed its U.S. commission calculation for this final results and has determined that the inclusion of surcharges, billing adjustments and freight revenue is not appropriate in the calculation of the U.S. commission because these expenses are only adjustments to gross unit price. Second, we have not adopted the computer programming changes suggested by petitioners. The variables petitioners mention in their brief (INDDOL, INDEXUS, and IND2DOL) are standard programming language components, which reflect the Department's practice to include inventory carrying costs. In the preliminary results, the Department used its standard programming language to calculate commission offsets, which is based on the Department's standard methodology, and in performing its commission offsets has not altered any of the programming language for this administrative review. The SAA defines "indirect selling expenses" specifically as "expenses which do not meet the criteria of "resulting from and bearing a direct relationship to" the sale of the subject merchandise, do not qualify as assumptions, and are not commissions." See SAA at page 154. Accordingly, the Department has defined inventory carrying costs as "indirect selling expenses." Thus, the Department is treating inventory carrying costs as indirect selling expenses, as directed by the SAA. Therefore, for the final results, the Department has included inventory carrying costs in the variables (INDEXUS and IND2DOL) when determining home market commission offsets. Further, the Department stated in Wire Rod from France that the definition of INDEXUS is the sum of indirect selling expenses and inventory carrying costs incurred in the United States. See Notice of Final Results of Antidumping Duty Administrative Review: Certain Stainless Steel Wire Rods from France, 63 FR 30185 (June 3, 1998)(Comment 11)("Wire Rod from France"). This is repeated in the comment section of the margin calculation program, where the Department explains our calculations, defining INDEXUS: to "calculate INDEXUS - the sum of U.S. indirect expenses incurred in the U.S., including imputed inventory carrying costs." See Preliminary Margin Calculation Program, dated July 31, 2001, at line 428. We agree with petitioners that we did not accurately calculate a commission offset for CEP sales where commissions are paid in the home market, but no commissions were paid in the U.S. market. As we stated in Certain Pasta from Italy, "for CEP sales, a commisssion offset should be made in those instances where there were commissions in the home market and none in the U.S. market." See Notice of Final Results and Partial Recission of Antidumping Duty Administrative Review: Certain Pasta from Italy, 64 FR 6615 (February 10, 1999). Therefore, we have do so for these final results. Lastly, we agree with petitioners about the methodology the Department used to calculate the commission offset and CEP offset. In the preliminary results, when the Department calculated its foreign unit price in dollars (i.e., FUPDOL), it appears that the Department double-counted certain indirect selling expenses. Accordingly, we have corrected this error in our final results, by applying the petitioners suggestion computer programming language. See Final Analysis Memo and Margin Calculation Program dated February 4, 2002. Also, the Department has retained its standard programming language which takes into the variable IND2DOL where commissions are paid in both markets. Comment 9: Home Market Surcharges Petitioners state that in the preliminary results, the Department did not consistently consider Ugine's home market surcharges in its calculations. Specifically, petitioners state that in the model match program, the Department did not consider the surcharges in the home market net price, the home market net price for the cost of production ("COP") test, and home market revenue (REVEHUH) for use in the CEP profit calculation. Thus, petitioners argue that the Department should correct this error for the final results, by adding the home market surcharge to net price. Respondent states that petitioners' correction for home market surcharges only identified part of the correction. Respondent contends that the Department should also consider home market surcharges in the arm's length program. Department's Position: We agree with petitioners and respondents and have included home market surcharges in the home market net sales price (in the model match program), the home market net price for COP (in the model match program), and the home market net price in the arm's length program. See Final Analysis Memo and Arm's Length, Model Match, and Margin Calculation Programs dated February 4, 2002. Comment 10: Inadvertent Computer Programming Error Petitioners note that the Department's preliminary margin program inadvertently set the first day of the POR as January 4, 1998, not the correct date of January 4, 1999. Thus, petitioners state that the Department should correct this error for the final results. Ugine did not comment on this issue. Department's Position: We agree with petitioners and have corrected this inadvertent error by setting the first day of the POR to January 4, 1999. See Final Analysis Memo and Margin Calculation Program, dated February 4, 2002. RECOMMENDATION: Based on our analysis of the comments received, we recommend adopting all of the above changes and positions, and adjusting the model match and margin calculation programs accordingly. If accepted, we will publish the final results of the reviews and the final weighted-average dumping margins for the reviewed firms in the Federal Register. AGREE___________ DISAGREE___________ __________________________________________ Faryar Shirzad Assistant Secretary for Import Administration ___________________________________________ Date