Certain Corrosion-Resistant Carbon Steel Flat Products From Canada; Notice of Amended Final Results of Administrative Review in Accordance With North American Free Trade Agreement Panel Decision

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of amended final results of Administrative Review in accordance with North American Free Trade Agreement Panel Decision on Certain Corrosion-Resistant Carbon Steel Flat Products from Canada. USA-CDA-98-1904-01.

SUMMARY:

On August 24, 2001, the North American Free Trade Agreement (NAFTA) Panel affirmed the Department of Commerce's final remand results of the antidumping duty administrative review of certain corrosion-resistant carbon steel flat products from Canada. As there is now a final and conclusive NAFTA Panel decision in this action, we are amending our final results.

EFFECTIVE DATE:

October 12, 2001.

FOR FURTHER INFORMATION CONTACT:

Mark Hoadley at (202) 482-0666 or Julio Fernandez at (202) 482-0190, Office of AD/CVD Enforcement VII, Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 7866, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act (“URAA”). In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations set forth at 19 CFR part 351 (2000).

Background

On March 16, 1998, the Department of Commerce (the Department) published its final results for the administrative review of certain corrosion-resistant carbon steel flat products from Canada for the period August 1, 1995 through July 31, 1996. See Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada: Final Results of Antidumping Duty Administrative Reviews, 63 FR 12725 (March 16, 1998) (Final Results). One of the respondents in this review was Stelco Inc. (Stelco).

In the Final Results, with respect to Stelco's cost of producing the subject merchandise, the Department explained that, in accordance with its standard practice for valuing major inputs supplied by affiliated companies, it had valued coating services and painting services supplied by Baycoat Partnership (Baycoat) and Z-Line Company (Z-Line), respectively, pursuant to the major input rule and the transactions disregarded rule, at the highest of three valuations: The transfer price between the affiliated parties; the market price between unaffiliated parties (which, in this case, was inapplicable, as there were no unaffiliated transactions to indicate market price); and the affiliated supplier's cost of producing the input. See Final Results, at 63 FR 18464.

In responding to the Department's questionnaire, Stelco only supplied Z-Line's “actual cost of the operation in a manner consistent with other Hilton Works operating units,” and Baycoat's transfer price adjusted for profit remitted to Stelco. In the Final Results, the Department increased the reported cost of coating and painting by the weighted average difference between invoice (i.e. transfer price) values from the sample invoices of the respective services to Stelco, obtained at verification, and the values reported by Stelco. The Department determined that these transfer prices were above the affiliated supplier's cost of producing these inputs. Therefore, for the final results of review, the Department used the transfer prices to value such inputs when calculating Stelco's cost of production (COP) and constructed value (CV). See Final Results.

With regard to the Department's calculation of imputed credit expenses, in the Final Results the Department applied the Federal Reserve rate in its calculations of Stelco's imputed credit expenses in the United States for each transaction during the period of review (POR). Furthermore, to calculate imputed credit expenses for sales in which payment was not received by the time Stelco submitted its response to the agency, the Department applied the date of its final results as the surrogate payment date.

On March 20, 2001, the NAFTA Panel remanded the above-referenced proceeding to the Department with instructions to: (1) Recalculate Stelco's costs of production, taking account of the year-end return of profits by Baycoat and Z-Line to Stelco; provide the Panel with the method by which the Department recalculates COP in light of such return of profits; and explain the Department's methodology in light of the statutory requirements and attendant legislation as interpreted by this Panel; (2) to reevaluate the application of section 773(f)(3) of the Act in light of the requirement that the Department adjust the transfer price in accordance with the recalculation set out under (1) immediately above; and (3) to correct any errors on the imputed credit expense and payment date issues, in light of Stelco's complaint. See Article 1904 Panel Review Pursuant to the North American Free Trade Agreement: Panel Determination and Remand, Stelco, Inc. v. United States Department of Commerce, USA-CDA-98-1904-01 (March 20, 2001) (Panel Decision).

Pursuant to its receipt of the NAFTA Panel's remand instructions, the Department issued a supplemental questionnaire to Stelco. On June 25, 2001, Stelco submitted its response to this questionnaire (Supplemental Response). On July 6, 2001, the Department issued its draft remand results and requested comments from interested parties. See Draft Results of Redetermination: North American Free Trade Agreement, Article 1904 Panel Review, USA-CDA-98-1904-01 (July 6, 2001) (Draft Remand Results). In the Draft Remand Results, we reconsidered our methodology in accordance with the Panel Decision. On July 11, 2001, respondent filed comments on the Draft Remand Results. No party filed rebuttal comments.

On July 20, 2001, the Department issued its final remand results, which are discussed in detail below. See Final Remand Determination: North American Free Trade Agreement, Article 1904 Panel Review, USA-CDA-98-1904-01 (July 20, 2001) (Final Remand Results).

Pursuant to the order of the Panel, the Department recalculated Stelco's COP by taking into account year-end return of profits to Stelco from Baycoat and Z-Line, as reported in Stelco's Supplemental Response. See Final Remand Results. The methodologies adopted for recalculating Stelco's COP, by accounting for profits returned to Baycoat and Z-Line, were used in light of the Panel's interpretation of the relevant statutory provisions and their legislative history, including those provisions set forth in subsections 773(f)(2) and (f)(3).

Specifically, the Panel found that the Department failed to reasonably comply with the requirement to establish that the amount, which in the instant case the Panel found to be the invoice prices less profits returned from Baycoat, “did not fairly reflect” the amount usually reflected in sales. The NAFTA Panel further found that even if the Department were entitled to rely on the invoice prices paid by Stelco, rather than the invoice price adjusted for profit remittances, the Department has not established that it has taken due account of all material factors in arriving at a reasonable calculation of costs.

In light of the Panel's statement that it has remanded the case for the Department to compare Baycoat's transfer price without profits to the COP, we interpreted the Panel's ruling to mean that, pursuant to the major input rule, the Department is to ensure that the value of the major inputs used to calculate Stelco's COP are not below the cost of producing such inputs. In the Final Remand Results, we recalculated Stelco's COP for the subject merchandise based upon the adjusted transfer price. Where the Department found that the adjusted transfer price value was less than Baycoat and Z-Line's respective costs of producing such inputs, the Department used the COP for such inputs, pursuant to the major input rule.

We note that the NAFTA Panel's ruling does not establish binding precedent and that the Department believes its interpretation of these statutory rules is reasonable and consistent with the intent of Congress. We also note that, in future reviews, the Department intends to pursue an examination of market price more fully to ensure appropriate application of the test, consistent with subsections 773(f)(2) and (f)(3) of the Act.

The Department also reconsidered the calculation of Stelco's imputed credit expense in the United States during the POR and its choice of surrogate payment dates where payment was not remitted at the time of submission. In addition, we corrected a clerical error, as alleged by respondent in its comment on the Draft Remand Results. See Final Remand Results.

On August 24, 2001, the Panel affirmed the Department's Final Remand Results. As this case is now final and conclusive, we are amending the Final Results of review. As a result of our recalculations, based upon the changes set forth above, we have revised the dumping margin for respondent.

Amendment to Final Results of Review

Because no further appeals have been filed and there is now a final and conclusive decision in the Panel Decision proceeding, effective as of the publication date of this notice, we are amending the Final Results, and establishing the following revised weight-averaged dumping margin: