This remand determination, submitted in accordance with the Court's October 29, 1999, opinion (Slip Op. 99-118), involves challenges to the antidumping duty determination of the International Trade Administration (ITA), U.S. Department of Commerce, in Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure from Germany. ⁽¹⁾ The Court remanded that determination to Commerce with instructions to: 1) reconsider its conclusion, or more specifically articulate, in accordance with the standards set out in 19 U.S.C. Section 1677(e)(b), why it concluded that Mannesmann failed to act to the best of its ability in providing information about input purchases from both affiliated and non-affiliated parties for the purposes of finding that application of adverse facts available is warranted; 2) should Commerce be unable to identify substantial evidence on the record to support its application of adverse facts available, then use non-adverse facts available to value billets purchased from its affiliated suppliers; 3) either reconsider its conclusion or identify further evidence on the record to support its conclusion that Mannesmann failed to act to the best of its ability in reporting the amount of U.S. duties paid; 4) should Commerce be unable to identify other evidence on the record to support the application of adverse facts available to value the U.S. duty amounts, then use "reasonable, non-adverse facts available."

A draft Remand Determination was provided to the parties on January 12, 2000. On January 20, 2000, we received comments on the draft determination from Respondents Mannesmannrohren -Werke AD and Mannesmann Pipe & Steel Corp. The Defendant-Intervenor did not submit any comments on the draft Remand Determination.

• Application of Adverse Facts Available to Value Mannesmann's Billet Purchases

• Background

On March 18, 1998, Commerce published its final results of the first administrative review of antidumping duties on certain small diameter seamless carbon and alloy steel pipes from Germany. This review covered one manufacturer/exporter of the subject merchandise, Mannesmannrohren-Werke AG and Mannesmann Pipe & Steel Corporation, for the period of January 27, 1995 through July 31, 1996. Final Results, 63 Fed. Reg. At 13,217.

Commerce is required in all administrative reviews of an antidumping order to compare the U.S. prices of the subject merchandise to the prices ("normal value") of the same or similar merchandise in the home market. See 19 U.S.C. Section 1677a (1994) ("Export price and constructed export price") and 19 U.S.C. Section 1677b (1994) ("Normal value"). In the course of calculating the normal value of the subject merchandise in this case, Gulf State Tube Division of Vision Metals, a domestic interested party and Defendant-Intervenor in this case, alleged that Mannesmann was selling the foreign like product in its home market (Germany) at prices below cost of production. Pursuant to 19 U.S.C. Section 1677b(b), such below cost sales, under certain circumstances, may be disregarded by Commerce in its calculation of normal value. On January 31, 1997, Commerce determined that this allegation of below-cost sales was adequately supported, initiated a sales-below-cost investigation, and requested that Mannesmann respond to Section D of Commerce's Antidumping Duty Questionnaire, covering "Cost of Production and Constructed Value." See Letter from Linda Ludwig to Mark Herlach dated January 31, 1997. Appendix of Record Documents Accompanying the Memorandum In Support Of The Motion Of Plaintiffs (Mannesmann) For Judgment On the Agency Record ("Mannesmann Appendix"), App. 3. Mannesmann did not contest the initiation of the below-cost sales investigation.

On September 9, 1997, Commerce published the preliminary results of its administrative review in the Federal Register. See Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from Germany: Preliminary Results of Antidumping Duty Administrative Review ("Preliminary Results"), 62 Fed. Reg 47,446 (1997). In the Preliminary Results, Commerce calculated Mannesmann's cost of production by disregarding Mannesmann's billet purchases from HKM because they did not reflect market value for these inputs. See id. at 47,451. Since Commerce found that the billet sales between Mannesmann and HKM did not reflect market value, Commerce, pursuant to Section 773(f)(2) and (3) of the Tariff Act of 1930 (19 U.S.C. Section 1677b(f)(2) and (3) (1994)), used market prices to value inputs purchased from HKM and, in turn, to calculate Mannesmann's cost of production. See id.; see also Department of Commerce Preliminary Results Analysis Memorandum of 09/02/97, Mannesmann Appendix, App. 11 ("Preliminary Results Memo"), at 16.

To determine market value, Commerce compared the relative prices of one grade of billets which Mannesmann had purchased from both affiliated and non-affiliated parties during the period of review. See Preliminary Results, 62 Fed. Reg. at 47,451. Finding the price paid to the non-affiliated party to be 30.9% higher than the price paid to HKM, Commerce increased the transfer prices for all HKM billet sales to Mannesmann by 30.9% to approximate market value. See id.; Preliminary Results Memo at 16. As 94.21% of Mannesmann's billet purchases were from HKM, this resulted in an aggregate cost of steel billets 29.11% higher than originally reported by Mannesmann. See Preliminary Results Memo at 16.

In response to this aspect of the Preliminary Results, Mannesmann argued that Commerce "improperly invoked the special rule for major inputs in section 773(f)(3) of the Act when it ignored Mannesmann's verified billet costs in calculating the company's cost of production." Final Results, 63 Fed. Reg. at 13,218. Mannesmann also argued that Commerce "had no reasonable basis for applying an across-the-board percentage price increase on all billets based on one exceptional purchase of a steel grade that was not sold in the United States." Id. at 13,219.

In the Final Results, Commerce dismissed Mannesmann's claim that the Department improperly invoked the special rule for major inputs and stated that Section 773(f)(2) and (3) of the Tariff Act of 1930 gave Commerce the legal authority to use the highest of transfer price, cost of production, or market value to value the billets purchased from HKM. Id. at 13,219-20. (The Court found Commerce's interpretation of Section 773(f)(2) and (3) reasonable and upheld Commerce's decision to use the market value information. Slip Op. at 17). Commerce also dismissed Mannesmann's claim that Commerce had no reasonable basis for applying the market value adjustment to all purchases from affiliated suppliers, and stated that it was applying this market value adjustment as adverse facts available. Final Results, at 13,219-20. Commerce determined that the application of adverse facts was warranted based on two events. First, Commerce observed that although it requested information on any purchases of the identical input from unaffiliated suppliers in Question II.A.6.b of the Section D Questionnaire, "Mannesmann did not respond to this portion of the questionnaire." Id.; see also Department of Commerce Final Results Analysis Memorandum dated 03/09/98, Mannesmann Appendix, App. 8 ("Final Results Memo"), at 14. Second, and in regard to Question 4 of the Second Supplemental Section D Questionnaire, Commerce pointed out that although Mannesmann stated that it "only purchase(d) from other suppliers billets that HKM does not produce, such as billets comprised of special alloys grades or purities," this assertion did not hold true at verification. See Final Results, 63 Fed. Reg. at 13,220; Final Results Memo at 14. In sampling Mannesmann's purchases for one month, Commerce discovered purchases by Mannesmann of the same grade of billets from both HKM and an unaffiliated party. Final Results Memo at 14. Commerce viewed this as an unexpected discovery, because Mannesmann had specifically denied that they purchase the same grade of billets from HKM and unaffiliated parties. Id.

The Court has instructed Commerce to reconsider our conclusion or identify further record evidence to support our conclusion that Mannesmann failed to act to the best of its ability in reporting the amount of input purchases from both affiliated and non-affiliated parties. Based on our review of the record Commerce continues to find, as articulated below in accordance with the standards set out in 19 U.S.C. Section 1677(e)(b), that the application of adverse facts available is warranted because Mannesmann failed to cooperate by not acting to the best of its ability to comply with our requests for information.

• Analysis

Pursuant to 19 U.S.C. Section 1677e(a)(1994), Commerce is required to use facts otherwise available if necessary information is not available on the record, or:

(2) an interested party or any other person-

(A) withholds information that has been requested by (Commerce)...under this subtitle,

(B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 1677m of this title;

(C) significantly impedes a proceeding under this title, or

(D) provides such information but the information cannot be verified as provided in section 1677m(i) of this title.

Section 1677e(a) provides, however, that the use of facts available shall be subject to the limitations set forth in 19 U.S.C. Section 1677m(d) (1994). Section 1677m(d), entitled "(de)ficient submissions," provides that:

If (Commerce)...determines that a response to a request for information under this subtitle does not comply with the request, (Commerce)...shall promptly inform the person submitting the response of the nature of the deficiency and shall, to the extent practicable, provide that person with an opportunity to remedy or explain the deficiency in light of the time limits established for the completion of investigations or reviews under this subtitle. If that person submits further information in response to such deficiency and either-

(1)(Commerce) finds that such response is not satisfactory, or

(2)such response is not submitted within the applicable time limits,

then (Commerce)...may, subject to subsection (e) of this section, disregard all or part of the original and subsequent responses.

Subsection (e), in turn, provides that:

In reaching a determination ...(Commerce)...shall not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the applicable requirements established by (Commerce)...if-

(1) the information is submitted by the deadline established for its submission,

(2) the information can be verified,

(3) the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination,

(4) the interested party had demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by (Commerce)...with respect to the information, and

(5) the information can be used without undue difficulties.

19 U.S.C. Section 1677m(e) (1994).

"In short, before Commerce may use facts available, 19 U.S.C. Section 1677m(d) (1994) requires that Commerce give a party an opportunity to remedy or explain deficiencies in its submission. If the remedy or explanation provided by the party is found to be 'not satisfactory' or untimely, the information may be disregarded in favor of facts available, subject to the five part test in Subsection (e)." Slip Op. at 19.

Commerce is required to compare the U.S. price of the subject merchandise to the prices (normal value) for the same or similar merchandise in the home market. In the course of calculating the normal value of the subject merchandise, Commerce initiated a sales-below-cost investigation and requested that Mannesmann respond to Section D of Commerce's Antidumping Duty Questionnaire, including the following question:

II.A.6 List the major inputs received from affiliated parties and used to produce the merchandise under review during the cost calculation period...For each major input identified, provide the following information:

(a) the total volume and value of the input purchased from all sources by your company during the cost calculation period, and the total volume and value purchased from each affiliated party during the same period;

(b) the per-unit transfer price charged for the input by the affiliated party (if the affiliated party sells the identical input to other, unaffiliated purchasers, provide documentation showing the price paid for the input by the unaffiliated purchaser; if your company purchases the identical input from unaffiliated suppliers, provide documentation showing the unaffiliated party's sales price for the input); and

(c) if you are responding to this section of the questionnaire in connection with an investigation of sales below cost, provide the per-unit cost of production incurred by the affiliated party in producing the major input.

In addition, specify the basis used by your company to value each major input for purposes of computing the submitted COP and CV amounts (e.g. transfer price, cost of production).

Defendant's Memorandum In Opposition To Plaintiffs' Motion for Judgment On The Agency Record ("Defendant's Response"), Public Ex. 1, at 91-92.

Mannesmann's response for subpart (a) was that it had not "sourced billets used in producing subject merchandise from unrelated parties." Response of (Mannesmann) to Section D of the Antidumping Questionnaire, Mannesmann Appendix, App. 4, at 8. Mannesmann failed to fully respond to this question because Commerce asked for information on input purchases related to the "merchandise under review" and not "subject merchandise." As defined in a footnote to Section A of the antidumping questionnaire, "products under review" and "merchandise under investigation" referred generally to "all products within the scope of the order that your company sold during the period of review in any market" (emphasis added), while "subject merchandise" referred only to "products sold to the United States." See Commerce's Antidumping Questionnaire, Defendant's Response, Public Ex. 1, at 15 n.6.

Subpart (b) of Question II.A.6 is designed to provide Commerce with the necessary data to compare transfer price, market price and cost of the major input under sections 773(f)(2) and (3) of the Act. Once again, the term "subject merchandise" did not appear in question 6, or in subpart (b). This information was vital for Commerce to complete its COP investigation, as well as its major input valuation analysis. Mannesmann provided a substantial amount of information concerning its relationship with Huettenwerke Krupp Mannesmann GmbH ("HKM"), an affiliated party from whom it purchases the vast majority of the steel it uses to produce seamless and welded tubes, (see Response of Mannesmann to Section D of The Antidumping Questionnaire, Mannesmann Appendix, App. 4, at 9-13). However, Mannesmann did not provide any information in regard to the last part of subpart (b), which requested that "if your company purchases the identical input from unaffiliated suppliers, provide documentation showing the unaffiliated party's sales price for the input." Commerce's Antidumping Questionnaire, Defendant's Response, Public Ex. 1, at 91. Therefore, Mannesmann did not provide information about purchases of the input billet from unaffiliated suppliers despite being asked to do so, and limited its response to subject merchandise only.

Commerce then sent Mannesmann a supplemental questionnaire, which asked two additional questions regarding the purchase of inputs from affiliated and unaffiliated suppliers. First, Question 11 of the Supplemental Section D Questionnaire asked Mannesmann:

As requested in the original Section D questionnaire, please provide a complete, translated listing of all inputs used to produce the merchandise under review. For each input received from an affiliated party, provide the name of the affiliated party and state the nature of the affiliation. Also, report the total volume and value of the purchases and the percentage of the COM of the subject merchandise represented by the value of the purchases.

Response of (Mannesmann) To Supplemental Section D of The Antidumping Questionnaire, Mannesmann Appendix, App. 5, at 7 (emphasis in original). Mannesmann provided the short response that "(s)teel billets are the only input from affiliated suppliers for the subject merchandise. All of the steel billets purchased for producing the subject merchandise were produced at HKM ." Id. Once again, this response was limited to "subject merchandise," although the question specifically asked for information on the broader category of "merchandise under review."

Second, Question 12 of the Supplemental Section D Questionnaire asked that Mannesmann:

Use the following headings to provide a chart which reports purchases of billets from unrelated suppliers, regardless of whether or not they are used in subject merchandise. (Unrelated supplier, month during (the period of review), billet grade, volume purchased, value of purchases. (sic))

Id. (emphasis in original). Mannesmann responded by providing an exhibit that listed billet purchases from unrelated suppliers. This exhibit, however, did not respond to Commerce's request for billet grade information.

Commerce, in reviewing this information, found that the cost of billets purchased from unaffiliated suppliers exceeded the cost of billets purchased from affiliated suppliers. Commerce, therefore, as part of its COP investigation, sent a third questionnaire (Commerce's "Second Supplemental Section D Questionnaire") to find out the market value of the major input for the merchandise under review, so that it could determine whether the transfer price from Mannesmann's affiliated supplier was at arm's length. Question 4 of the Second Supplemental Section D Questionnaire specifically asked Mannesmann to explain the reasons for the difference in the cost of billets as follows:

In Exhibit D-4 of the Supplemental D questionnaire response, you provided a breakdown of billet purchases from unaffiliated parties. When compared to the billet prices provided in Exhibit E of the Section D response, it appears that the average POR cost of billets purchased from unaffiliated parties significantly exceeds the cost of billets purchased from HKM. Explain the reason for such difference.

Mannesmann Second Supplemental Section D Response, Mannesmann Appendix, App. 6, at 2. In explaining this cost differential between billets from affiliated and unaffiliated suppliers, Mannesmann responded that:

MWR and MWS only purchase from other suppliers billets that HKM does not produce, such as billets comprised of special alloy grades or purities. The price of these specialized billets with higher alloy content of higher purity is quite naturally greater than the price for the standard grade billets manufactured by HKM.

Id. at 3.

Although Mannesmann stated that it "only purchase(d) from other suppliers billets that HKM does not produce, such as billets comprised of special alloy grades or other purities," this assertion did not hold true at verification. Sampling Mannesmann's purchases for one month during verification, Commerce discovered purchases by Mannesmann of the same grade of billets from both HKM and an unaffiliated party. After Commerce found the discrepancy during verification, Mannesmann's Marketing Manager explained two situations where Mannesmann purchased billets from unaffiliated suppliers: 1) when a customer orders seamless pipe made from a specific [ * * * ] ) and 2) when Mannesmann purchased [ * * * ] volumes of billets from suppliers other than HKM when Mannesmann required [ * * * ] than the minimum volume that their affiliated supplier would sell. Mannesmann Appendix, App. 16 at 62. This evidence directly contradicts their second supplemental questionnaire response that Mannesmann does not purchase the same grade of billets from HKM and unaffiliated parties.

As demonstrated above, Mannesmann not only failed to provide complete information about its input purchases from both affiliated and non-affiliated parties in the initial questionnaire, but also in several subsequent supplemental questionnaires. Consequently, as contemplated by section 1677e(a)(2) (A) and (B) Mannesmann had withheld information requested by Commerce and has failed to provide such information by the deadline in the form and manner requested. Moreover, as required by section 1677 m(d), Commerce sent Mannesmann several supplemental questionnaires requesting correction of the deficient submission. These supplemental questionnaires were only met with a repetition of the deficient information. Finally, section 1677 m(e) does not apply as the information submitted could not be verified. Mannesmann has not demonstrated that it acted to the best of its ability in providing the information requested, and the incomplete information about home market billet purchases cannot serve as a reliable basis for reaching the determination. Thus, in accordance with section 1677 e(a) the Department must base its determination on facts otherwise available.

Once Commerce determines that the use of facts available is warranted, 19 U.S.C. Section 1677e(b) (1994) further permits Commerce to apply an adverse inference if it makes the additional finding that "an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information." In determining whether a party has cooperated to the best of its ability, "Commerce must necessarily draw some inferences from a pattern of behavior." See Slip Op. at 36, Citing Borden, Inc. v. United States, 1998 WL 895890 (CIT 1998) at 1. In reviewing the evidence on the record, as discussed above, there is a pattern of behavior in Mannesmann's responses from which Commerce can reasonably draw inferences to determine that Mannesmann failed to cooperate to the best of its ability. Mannesmann failed to cooperate by not acting to the best of its ability to comply with requests for information in numerous instances during the administrative review. They provided incomplete information, failed to cooperate by not providing information it had readily available, and provided limited if not misleading information.

Beginning with the original Section D questionnaire, Mannesmann did not respond fully to Question II.A.6 and subparts (a) and (b) regarding identical inputs from an unaffiliated supplier. This section is necessary for a determination of whether Mannesmann's transfer prices reflected normal market value in the Department's COP investigation of sales in its home market and is key information to determine whether Mannesmann's sales in its home market were below cost. Furthermore, Mannesmann, in responding to Commerce's questions seeking information on the "merchandise under review," limited its responses to "subject merchandise" despite the fact that both of these terms were defined in Section A of the antidumping questionnaire.

As defined in a footnote to Section A of the antidumping questionnaire, "products under review" and "merchandise under investigation" referred generally to "all products within the scope of the order that your company sold during the period of review in any market (emphasis added)," while "subject merchandise" referred only to "products sold to the United States." See Commerce's Antidumping Questionnaire, Defendant's Response, Public Ex. 1, at 15 n.6. The term "subject merchandise" does not appear in Question II.A.6, or in subpart (a). Rather the term "merchandise under review" is used to describe the merchandise of the respondent in question. Therefore, it is difficult to understand how Mannesmann could have read the question within the context of subject merchandise as it claims. See Memorandum In Support Of The Motion Of Plaintiff (Mannesmann) For Judgment On The Agency Record at 15 and Fn. 6. In addition, Mannesmann should have understood what Commerce meant by the term "merchandise under review," because this term was explained in the same definition section that Mannesmann referred to in its claim of understanding the question within the context of "subject merchandise." Further, if Mannesmann had any questions about Commerce's questionnaire, including the definition of any term or the coverage of question 6, it was instructed to contact Commerce for clarification. See Commerce Antidumping Questionnaire, Defendant's Response, Public Ex. 1 at 9.

Additionally, subpart (b) of Question 6 is designed to provide Commerce with the necessary data to compare transfer price, market price and cost of the major input under sections 773(f)(2) and (3) of the Act. Once again, the term "subject merchandise" does not appear in either Question II.A.6, or in subpart (b). This information was vital for Commerce to complete its COP investigation, as well as its major input valuation analysis.

Commerce, in an effort to remedy the deficiencies in the original questionnaires, sent out two supplemental questionnaires seeking further information. In both supplemental questionnaires Mannesmann failed to provide complete information in its responses to the Department's questions regarding purchases of identical inputs from unaffiliated suppliers for its merchandise sold in any market, including its home market. Mannesmann omitted grade information requested by Commerce in Question 12 of the Supplemental Section D Questionnaire, which might have permitted Commerce to discover that the purchases from unaffiliated parties were of the same grade as those produced by Mannesmann's affiliated party.

In addition, Mannesmann stated in its response to Question 4 of the Second Supplemental Section D Questionnaire that it only purchased billets from unaffiliated suppliers which HKM did not produce.

During verification Commerce attempted to confirm Mannesmann's claim that they only purchased billets from unaffiliated suppliers of a grade not produced by its affiliated supplier, HKM. Commerce discovered a purchase of a grade of billets that was obtained from both HKM and an unaffiliated supplier. This evidence directly contradicted Mannesmann's claim. In addition, the purchase price from the unaffiliated supplier was higher than the purchase price from Mannesmann's affiliated supplier.

A company official informed the verifiers that there were in fact certain circumstances under which Mannesmann purchased billets from unaffiliated suppliers notwithstanding their availability from HKM. Hence, Mannesmann was aware of such purchases and had ample opportunity to provide the requested information. As stated in the Final Results Memo "(i)t was reasonable to assume that because Mannesmann's assertion was found to be untrue in one sample month, that there may have been other instances in which Mannesmann's claim proved untrue and the same grade of billets was purchased from both HKM and an unaffiliated party." Final Results Memo. at 14-15.

Therefore, Commerce believes it is reasonable to determine that Mannesmann failed to cooperate by not acting to the best of its ability to comply with several requests for information regarding any purchases of identical inputs from unaffiliated suppliers, because it was not forthcoming and provided both incomplete and inconsistent responses and explanations.

As a result, pursuant to 19 U.S.C. Section 1677e(b), Commerce determines that the application of adverse facts available is warranted. As adverse facts available, Commerce will continue to use the market price it used in the Final Results in valuing Mannesmann's billet purchases from HKM. The Court stated in its decision that should Commerce demonstrate on remand that the use of adverse best information available is still appropriate, the Court would sustain, as supported by substantial record evidence, the rationality of using the billet purchase (SPEC2H 61 and 62) from Vallourec as a means of determining market values for all of Mannesmann's billet purchases from HKM. Slip Op. at 30.

II. Application of Non-Adverse Facts Available to Value U.S. Duty

• Background

For U.S. duty rates, Commerce in the Final Results, determined that the use of adverse facts available was appropriate since the information provided by Mannesmann proved unverifiable. During verification Commerce examined over half of Mannesmann's total U.S. sales in its review of U.S. duty paid. See Mannesmann's Motion at 28 (noting that Commerce's observations covered 52% of the subject merchandise (in terms of tonnage) sold in the United States). Commerce "summed total U.S. duty paid on the entry (Commerce was) examining and compared it to the total U.S. duty reported in the applicable observations." Final Results, 63 Fed. Reg. at 13,222. For several entries, Commerce found that Mannesmann had under reported the total U.S. duty paid. Further, at verification Mannesmann could not recreate or explain the allocation methodologies used in its submission to Commerce. Id. Therefore, Commerce was unable to examine Mannesmann's methodology, compare it to its own, and determine why Mannesmann's reported duties were slightly lower than those calculated by Commerce in most instances.

Commerce used the duty rates reported by Mannesmann in the three instances where it was able to confirm Mannesmann's figures. Id at 13,222; Final Results Memo at 12.

For all other sales, however, including those where Commerce otherwise calculated the correct amount of duty paid, Commerce used the highest U.S. duty amounts reported by Mannesmann. Final Results, 63 Fed. Reg. at 13,222. ⁽²⁾ Generally, this resulted in duties significantly higher than either those reported by Mannesmann or, where applicable, those calculated by Commerce. See, e.g.; Analysis of U.S. Duty Adjustment, Mannesmann's Motion, Ex.A.

With regard to the value of U.S. duties paid, the Court found that Mannesmann's errors were de minimis. Given the limited nature of these errors, the Court did not find substantial evidence to support Commerce's conclusion that application of adverse facts available is warranted. The Court has instructed Commerce to either identify further evidence on the record to support its conclusion that Mannesmann failed to act to the best of its ability in reporting the amount of U.S. duties paid or, if unable to do so, use only "reasonable, non-adverse facts available." Slip Op. at 39-40.

• Analysis

Pursuant to 19 U.S.C. Section 1677e(a)(2)(D) and Section 1677m(e)(2) (1994), Commerce may disregard information submitted by a party that cannot be verified and substitute facts available. The Court found that despite the relative insignificance of the errors involved, Commerce's decision to use facts available to value Mannesmann's U.S. duty amounts is supported by substantial record evidence in light of Commerce's inability to verify Mannesmann's calculation methods. Slip Op. at 35. Therefore, the sole issue is whether application of adverse facts available is warranted. Based on our review of the record evidence in accordance with the Court's instructions, Commerce will apply for the purposes of this remand determination non-adverse facts available to value the U.S. duty amounts paid by Mannesmann.

For the purpose of valuing U.S. duty amounts, if the duties were verified and correct, then there will be no changes. If the information was verified and incorrect, then Commerce will use what was found at verification for that specific sale to value those duty amounts. As facts available for all sales not examined at verification, we are adding an average discrepancy amount, by observation (of all observations examined at verification) which is [ * * * ] to the reported duty amount. Commerce believes that a weighted average discrepancy amount is not appropriate as facts otherwise available because weight is not a factor in the amount of the discrepancy. For example, the entry document for 6 sales observations (5,6,8-11) was for [ * * * ] tons and the discrepancy was [ * * * ] . The entry document for 7 sales observations (45,46,49-51,53-54) was for [ * * * ] tons and the discrepancy was [ * * * ] . This demonstrates that for entries with similar tonnage there was a big difference in the discrepancy and that weight is not a factor in the amount or frequency of the discrepancy. Therefore, for that pool of 13 sales observations there is an almost equal likelihood of having a [ * * * ] discrepancy as having a [ * * * ] discrepancy. As a result, Commerce has determined that an average discrepancy amount by observation rather than an weighted average discrepancy amount added to the reported duty amount is appropriate to use as facts otherwise available to value the unverified U.S. duty amounts paid by Mannesmann. For details of the calculations of the U.S. Duty amounts paid please see Analysis Memorandum for the Draft Remand. ("Analysis Memo").

III. Interested Party Comments

Comment 1 Commerce's Interpretation and Application of the Major Input Rule

The respondent Mannesmann submits that although the Court upheld Commerce's legal interpretation of 19 U.S.C. section 1677b(f)(2) and (3) (1994), the Department's interpretation is in error and argues that the Department should revisit its improper application of the major input rule for this case because the threshold requirement for invoking the major input rule was not met. Respondent argues that the Department must have reasonable grounds to believe or suspect that the amount at which Mannesmann's affiliate supplied a major input to Mannesmann was below COP and that therefore, the major input rule is not applicable in this case because the Department had verified that the transfer price was above the COP.

Department's Position:

Commerce used a constructed market price which was higher than the actual transfer price or cost of production to value Mannesmann's billet costs from an affiliated party based on its interpretation of 19 U.S.C. section 1677b(f)(2) and (3). As the Court noted, Commerce did not rely on the major input rule as a basis for disregarding the transfer prices reported by Mannesmann, but rather, used constructed market values to value these billets per section 1677b(f)(2) after verifying that HKM's billet costs were below the transfer price. Slip Op. at 15. In rejecting the respondent's arguments above, the Court upheld both Commerce's legal interpretation of section 1677(b)(f)(2) and (3) as well as Commerce's decision based on its legal interpretation of the statute to use market value even though the transfer price was above the COP:

In short, both the plain language of section 1677b(f)(2) and (3), as well as the legislative history of the major input rule, support Commerce's decision to use the highest of transfer price, cost of production, or market value to value the billets Mannesmann purchased from HKM. Contrary to Mannesmann's claims, Commerce reasonably interpreted section 1677b(f)(2) and (3) in finding that section 1677b(3) did not limit its ability to use market value information, notwithstanding the fact that HKM's billet costs of production were verified as being below the transfer prices reported by Mannesmann.

Slip Op. at 17.

Therefore, after being upheld by the Court in its decision on this case, Commerce continues to reject respondent's arguments that its legal interpretation of section 1677b(f)(2) and (3) is in error and that it "improperly applied the major input rule" in this case.

Comment 2 Use of Adverse Facts to Value Mannesmann's Steel Billets

Respondent argues that the accusations the Department has made and continues to make against Mannesmann are false and unjust, and the draft remand has made and continues to reflect post hoc rationalization in support of the Department's use of adverse information. Respondent claims the Department has taken a series of routine, honest and innocent actions and statements by Mannesmann in the course of its administrative review and twisted them in an attempt to fabricate an alleged pattern of nefarious conduct that the Department claims gives it the right to reject Mannesmann's verified cost information. Respondent continues by stating that the Department has ignored the fact that Mannesmann fully and honestly cooperated in this review. Respondent asserts that despite Mannesmann's substantial efforts and good faith, the Department continues to mischaracterize Mannesmann's actions as an effort to conceal information and deceive the agency.

Respondent claims there is no basis for the Department to conclude that Mannesmann failed to cooperate to the best of its ability. As Mannesmann has acknowledged throughout, it may have inadvertently made errors in its responses due to misunderstandings, time constraints or differing interpretations of what was being requested. Mannesmann did its best to provide correct and complete responses to the Department's satisfaction and the record supports the fact that Mannesmann was not deliberately uncooperative.

Respondent states that the untimely addition of Defendant-Intervenor's allegation of Mannesmann's answers in terms of "subject merchandise" when it should have referred to "merchandise under review" and other alleged problems with its answers to Questions 11 and 12 in the Supplemental Section D questionnaire, as support for the use of adverse information is entirely inappropriate.

Although Respondent answered in terms of "subject merchandise" the answer-steel billets- is the same for "merchandise under review." Mannesmann states that this is clearly a terminological error with no bearing on the issue of Mannesmann's intent. Mannesmann correctly identifies HKM as its affiliated supplier and informs the Department that all of the billets used for "subject merchandise" came from HKM. Further, respondent points out that even if billets from third parties had been used to produce merchandise under review that was not subject merchandise, it would have been logical to assume that sales of products containing third-party billets would not have been utilized by the Department for comparison purposes. Respondent claims that it is not uncommon for the two terms, "subject merchandise" and "merchandise under review" to be misunderstood or erroneously interchanged by the parties. In fact, the Department confused such terms in the final results analysis memorandum between "subject merchandise" and "merchandise under review." Respondent asserts that these types of mistakes, hardly support an allegation of deliberate misconduct. Respondent claims the Department realized its own mistake and discontinued allegations against Mannesmann for making inconsistent statements based upon the use of these terms. When Mannesmann answered questions in terms of "subject merchandise," the Department predictably followed up with questions to clarify the questions and seek the answer to the information requested for "merchandise under review." Respondent states that it is not logical for the Department to suggest that Mannesmann answered the way it did in an effort to conceal important information from the Department.

Respondent states that the Department for the first time on remand claims the answers to Question 12 was not responsive to its requests for grade information. Respondent claims that Defendant-Intervenors raised this issue but Commerce never did and Mannesmann never had occasion to address this issue. Respondent alleges that Mannesmann was not able to provide a full breakdown of grade information requested by the Department in its supplemental questionnaire response due to time constraints, but Mannesmann's answer to the Department's question was responsive in alerting the Department that there were purchases of the type the Department described. Respondent states that Mannesmann did in fact provide the Department with a breakdown of the grade information that it needed for verification. Respondent argues that it would not be appropriate for the Department to add a complaint about grade information in its remand results for the first time. Since the Department never raised this issue in the past, such an approach is a post hoc rationalization.

Respondent contends that Mannesmann did not believe that it had purchased billets from non-affiliated parties to produce either subject merchandise or merchandise under review because there was generally no overlap in Mannesmann's billet sourcing. Respondent explains that company officials would not normally be focused on a small uncharacteristic billet purchase from unaffiliated parties and could reasonably have thought that there were no such third-party purchases. When the Department asked its clarifying question regarding billet purchases, Mannesmann states in its questionnaire response that it did not purchase billets from unaffiliated suppliers except in certain limited instances. Respondent explains further at verification and before the Department identified the single extraordinary purchase, that Mannesmann's companies purchased billets from unaffiliated suppliers in unusual situations.

Respondent argues that neither the cost verification nor the preliminary results analysis memorandum contain any references to Mannesmann's alleged lack of cooperation or deficient responses with regard to its affiliated party input.

Respondent suggests that the new grounds identified in its draft remand results only make more evident such post hoc rationalization. Respondent states that the Department appears to suggest that Mannesmann's responses were untimely provided. Further, respondents claim that it is irrelevant whether the Department received information in an original questionnaire or a supplemental questionnaire as long as it received and accepted the requested information.

Department's Position:

We disagree with respondent. The main purpose of the questions addressed by the original questionnaire and supplemental questionnaires was to determine the market price for billets purchased from its affiliated supplier in order to complete the COP investigation. The Court has upheld the Department's practice in valuing a major input (i.e., the highest of the cost-of-production, market price and actual transfer price) from an affiliated party as a reasonable interpretation of the statutory scheme. See Slip Op. at 14. In an effort to obtain information to value the billets purchased from HKM, Commerce requested information with regard to market price. In our review of the record, there are several occasions in which Mannesmann either failed to respond or provided incomplete responses to this major cost issue during the course of the administrative review. Given the totality of the circumstances regarding Mannesmann's responses for market value information on the billets, it is reasonable for the Department to infer a pattern of non-cooperative behavior which demonstrates that Mannesmann failed to act to the best of its ability with regard to determining the market value of the billets purchased from HKM for the purpose of the COP investigation. See Borden, Inc. v. United States, 1998 WL 895890 (CIT 1998). Thus, Commerce finds that the application of adverse facts available is warranted in valuing Mannesmann's billet purchases from HKM.

Commerce requested specific information in its original questionnaire and then sent supplemental questionnaires in an effort to solicit information from Mannesmann that would remedy or explain deficiencies in its previous submissions. The answers provided by Mannesmann were not satisfactory because they were found to be inaccurate and incomplete at verification. When asked in Question 4 of the second supplemental questionnaire (the third questionnaire) about the prices of billets purchased from affiliated parties, Mannesmann responded:

MWR and MWS only purchase from other suppliers billets that HKM does not produce, such as billets comprised of special alloy grades or purities.

Mannesmann Second Supplemental Section D Response, Mannesmann Appendix, App. 6, at 3.

Mannesmann never told us prior to verification that it purchased identical inputs from affiliated and unaffiliated suppliers. In fact, as noted above, when specifically asked by the Department, Mannesmann denied that it purchased from unaffiliated suppliers the same billet types purchased from its affiliate, HKM. The Department sought to confirm that there were no such purchases at verification. However, the Department discovered at verification during a routine sampling of Mannesmann's purchases that Mannesmann did in fact purchase from an unaffiliated supplier identical inputs to those HKM produced and sold to Mannesmann. This discovery directly contradicted previously submitted information. Contrary to Mannesmann's claim, there is nothing on the record to support respondent's statement that the Department was informed that the company purchased small quantities of billets that were the same grade as those made by HKM at verification prior to this discovery. We note, however, that even if this claim were supported by the record, this would still be new information which directly contradicted the information we were trying to verify. The purpose of verification is to verify the accuracy of information that has been previously submitted. Commerce purposefully sampled Mannesmann's purchases at verification to make sure that Mannesmann did not purchase the same grade of billets as they had claimed during the course of the review. Commerce needed this information in order to complete its analysis for the COP investigation.

Respondent is mistaken in claiming that the Department would not have used information about non-subject merchandise in its major input analysis. The purpose of Question 11 was to solicit information regarding all inputs which would be used in applying the market price analysis; not what was sold as suggested by the respondents. We were simply trying to determine the market price of billets - regardless of use or market. Question 12 requested information from unaffiliated suppliers to look at the cost and grade of billets purchased in an effort to determine the market value of the major input for the merchandise under review. This question specifically instructed respondents to provide information for all purchases of billets from unaffiliated suppliers regardless of whether the billets were used to produce subject merchandise. Whether Mannesmann used the particular billet purchased from an unaffiliated supplier in a finished product sold to the U.S. is irrelevant for what we wanted to accomplish. We attempted to identify purchases of identical billets from both affiliated and unaffiliated suppliers in order to assess the arm's-length nature of transactions between Mannesmann and its affiliate HKM. Mannesmann's response to this question failed to fully address the question asked. Specifically, in response to Question 12, Mannesmann failed to provide the billet grade information requested by the Department. Instead, Mannesmann simply reported an average price for all billet purchases from non-affiliated suppliers.

We noted that the reported average billet purchase price from unaffiliated suppliers significantly exceeded that from its affiliated supplier. In giving Mannesmann a chance to explain the significant difference and in making every effort to not penalize the respondent for their unclear and non-responsive answers to our requests concerning unaffiliated supplier purchases of billets by grade, we asked again about their billet purchases from unaffiliated suppliers. Question 4 of the second supplemental section D questionnaire asked why the reported POR average cost of billets purchased from unaffiliated suppliers significantly exceeded the average cost of billets purchased from its affiliate, HKM. Mannesmann's response was that the unaffiliated billet purchases were of different grades from those purchased from its affiliated supplier, HKM. In addition, Mannesmann stated that it only purchases from suppliers other than HKM billets that HKM does not produce. We relied on this assertion up until verification where upon testing of a single month, we noted that Mannesmann did indeed purchase the same grade of billet from both its affiliate, HKM, and an unaffiliated supplier. Mannesmann's repeated failure to provide all of the requested billet purchase information and its failure to correctly describe its billet purchases impeded the Department's ability to apply sections 1677b(f)(2) and (3) in valuing the billets from HKM for the purposes of its COP investigation.

As for Mannesmann's claim that the Department utilized post hoc rationalization in support of applying adverse facts available, it is appropriate for the Department to review all factual information on the record relating to whether Mannesmann acted to the best of its ability in providing information about input purchases from both affiliated and unaffiliated parties. Slip Op. at 25. The Court itself invited the Department to reexamine this information for the remand determination and even identified certain information that the Department may wish to consider. The Court specifically stated that upon remand Commerce may consider record evidence cited by the Defendant-Intervenor in their case brief. Slip. Op. at 27. Therefore, the consideration of all the information on the record which Commerce used to determine that application of adverse facts available is warranted in this case.

Based on our reexamination of the record, we find that Mannesmann has failed to cooperate by not acting to the best of its ability to comply with the Department's request for information on the market value of the steel inputs from its affiliated suppliers which were necessary to complete its COP investigation. Therefore, Commerce maintains that the application of adverse facts available to value the billets from HKM is warranted.

Comment 3 The Department's Adjustment For U.S. Duty

Respondent notes that the Court directed the Department to use reasonable facts available if it could not demonstrate that Mannesmann failed to act to the best of its ability to comply with the Department's request for information. Respondent argues that the Department's methodology for sales not examined results in an adjustment over three times the average per ton discrepancy. Respondent states that the Department's claims that a weighted average discrepancy is not appropriate because weight is not a factor in the amount of the discrepancy is illogical and unreasonable. Respondent notes that the Department required Mannesmann to report the duty amount on a per ton basis, calculated the discrepancies at verification on a per ton basis and applied its adjustment on a per ton basis. Respondent observes that unless tonnage is factored in, the results are distorted, with large discrepancies on small tonnage amounts disproportionately overshadowing minimal discrepancies on very large tonnage observations. Respondent advocates using a tonnage weighted average discrepancy to adjust U.S. duty.

Department Position:

We disagree with respondent. The Department continues to believe that it is reasonable to calculate an observation-weighted discrepancy and apply this amount to all sales not examined at verification. To put this in perspective, we note that the Department examined 57 percent of the total tonnage covered by this review at verification. For all of these entries the Department is using either the amount reported (if that amount was correct) or the actual duty amount found at verification (if there was a discrepancy between the reported amount and the correct amount). It is only for the residual tonnage not examined at verification that we are adding the observation-weighted discrepancy.

Duty is paid on an entry basis. Tonnage is taken into account by dividing the total duty due for an entry by the tonnage associated with the entry. Therefore, the same discrepancy applies to all observations associated with a given entry. The more observations associated with a given entry, the greater the probability that the discrepancy associated with the entry will be observed. For example, if there are two entries (with two difference discrepancies) in the universe and one entry has one observation and the other entry has nine observations, there is a 90 percent chance that any given observation will have the discrepancy associated with the second entry. This is true regardless of the relative weights of the observations covered by the two entries. Consequently, an observation-weighted average discrepancy is a reasonable facts available proxy to adjust the U.S. duty for individual observations not examined at verification.

IV. Conclusion

For the reasons stated above, we have revised our Final Results of the administrative review with respect to Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure from Germany. The revised dumping margin with respect to Mannesmann is 20.08 percent. The "All Others" rate is not affected by this remand determination.

Holly A. Kuga
Acting Assistant Secretary
  for Import Administration

(Date)

1. 62 Fed. Reg. 13,217 (1998) ("Final Results").

2. Specifically, Commerce applied the highest reported duty amount for carbon products ($86.35 ton) to all sales of carbon products, and it applied the highest reported duty amount for alloy products ($119.07/ton) to all sales of alloy products. See Final Results, 63 Fed. Reg. at 13,222; Final Results Memo. at 12.