UNITED STATES � ANTI-DUMPING MEASURES ON
STAINLESS STEEL PLATE IN COILS AND STAINLESS
STEEL SHEET AND STRIP
FROM KOREA

Report of the Panel

(Continued)

ANNEX 1-3

WRITTEN QUESTIONS FROM KOREA

FIRST MEETING OF THE PANEL

(13-14 June 2000)

CONTENTS

1. UNPAID SALES 
    
2. MULTIPLE AVERAGING 
    
3. DOUBLE CONVERSION OF LOCAL SALES 

I. UNPAID SALES

1. In its oral statement, the United States describes that it classified POSCO's US sales through POSAM as constructed-export-price ("CEP") sales, while it classified POSCO's direct sales to US customers as export-price ("EP") sales.¹ The United States then describes that it made (or did not make) the following adjustments for "bad debt" expenses:

• For the CEP sales, the United States deducted the allocated US "bad debt" expense from the price to the first unaffiliated customer.²

• For the CEP sales, the United States did not add the allocated US "bad debt" expense to the normal value that was compared to the constructed export price.³

• For the EP sales, the United States did not deduct the allocated US "bad debt" expense from the sales price to the first unaffiliated customer.⁴

The United States did not address the fourth circumstance, however. In other words, the United States did not state whether, for those sales classified as EP sales, the allocated US "bad debt" expense was added to the normal value that was compared to the export price. Would the United States please confirm whether the allocated US "bad debt" expense was added to the normal value that was compared to the export price for the sales classified as "EP" sales?

2. If the allocated US "bad debt" expense was added to the normal value that was compared to the export price for EP sales, is it the position of the United States that this adjustment was authorized by Article 2.3 of the Anti-Dumping Agreement?

3. Is it the US position that there are no limits on adjustments that may be made under Article 2.3 of the Anti-Dumping Agreement? If there are limits, what are they?

4. The United States contends that, if "the seller agrees to sell on credit ... [it] accepts a credit expense, including the risk of non-payment."⁵ It also states that, in this case, "POSCO agreed to sell to this US customer on credit and in doing so accepted the risk of non-payment as a condition of sale."⁶ The United States contends that POSCO's acceptance of this risk "is sufficient to warrant including bad debt in an Article 2.4 adjustment."⁷ In light of these assertions,

(a) What evidence was there in the Plate and Sheet cases regarding the risk of non-payment at the time that POSCO made its US sales to the ABC Company (and, according to the United States, agreed to accept the risk of non-payment)?

(b) Was there any evidence in the Plate and Sheet cases demonstrating that, at the time POSCO made its sales to the ABC Company, there was a difference in the risk of non-payment for sales to customers in the United States and for sales to customers in Korea?

(c) If there was no difference in the risk of non-payment for sales in Korea and the United States at the time POSCO made its sales, what is the basis for claiming that there was a difference in the conditions and terms of sale?

5. Does the actual bad debt experience that occurs after a sale is made provide an accurate measure of the risk of bad debt before the sale was made?

6. The United States asserts that the risk of non-payment is equivalent to the risk that a warranty expense will be incurred. The past decisions by the United States have recognized that warranty expenses may fluctuate from year to year and that, where there are fluctuations in warranty expenses, the use of a historical average is appropriate to avoid distortions. The standard questionnaire used by the Department of Commerce therefore requests information on the historical warranty expense experience for sales in the home market and the United States. Did the Department of Commerce request information on POSCO's historical bad debt experience in the home market or the United States in the Plate and Sheet cases? Did the United States evaluate whether the bad debt experience during the investigation periods in those cases was consistent with POSCO's historical experience?

7. The United States has contended that, under US law, adjustments for differences in "conditions and terms of sale" are referred to as "circumstance-of-sale" adjustments.⁸ The Department of Commerce's regulations state that circumstance-of-sale adjustments will normally be made only for "direct selling expenses" (or for expenses that the seller assumes on behalf of the buyer).⁹ In these circumstances, what is the significance of the finding by the Department of Commerce that the "bad debt" expense on POSCO's US sales was a "direct" selling expense?

8. What evidence is there on the records of the Plate and Sheet investigations to indicate that POSCO (or any of its affiliates) experienced actual bad debt expenses on any sales of Plate or Sheet to the United States prior to the sale to the ABC Company?

9. Is it the position of the United States that investigating authorities may include any export sales in the calculation of export price, no matter how aberrational they are and no matter how much their inclusion distorts the calculation of the dumping margins? Is it the US position that there are no limits at all on the investigating authorities' discretion to include export sales in the price comparison, including the "fair comparison" requirement of Article 2.4?

II. MULTIPLE AVERAGING

1. In employing its "multiple-averaging" comparison methodology (i.e., comparing sub-period averages to sub-period averages and combining the results) in the Plate and Sheet cases, did the Department of Commerce treat the dumping margins for sub-periods that had negative margins as if they were zero margins? In other words, did the United States employ the practice known as "zeroing"?

2. Article 2.4 specifically refers to a number of "differences" for which adjustments are permitted because they affect "price comparability". This list includes differences in physical characteristics and differences in levels of trade. Where does Article 2.4 indicate that differences in the timing of sales constitute "differences affecting price comparability"?

III. DOUBLE CONVERSION OF LOCAL SALES

1. If the prices for the "local sales" were fixed in dollars, as POSCO contended, would it have been appropriate for the Department of Commerce to base its normal-value calculations on won amounts shown on the invoices that did not correspond to the amounts actually paid? Would it have been appropriate in such circumstances to base the normal-value calculations on the US dollar prices set forth on the invoices?

2. When the United States reviewed the local sales during the verifications in the Plate and Sheet cases, did it confirm that the dollar prices shown on the invoices matched the dollar prices reported by POSCO?

3. The United States admits that POSCO told it during the course of both the Plate and Sheet investigations that the prices for its "local sales" were fixed in dollars and not in won.¹⁰ The United States also admits that, in the verification in the Sheet case, the Department of Commerce obtained evidence confirming that the amount the customer actually paid for these "local sales" was based on the dollar prices shown on the invoices, and not on the won amounts shown on the invoices.¹¹ Was there any evidence indicating that any Korean customer who purchased Plate or Sheet in a "local sale" actually paid the won amount shown on the invoice? If there was no evidence that any Korean customer who purchased Plate or Sheet in a "local sale" actually paid the won amount shown on the invoice, what evidence was there to refute POSCO's testimony that the prices for these sales were fixed in dollars, and not in won?

4. Is it the normal practice of the Department of Commerce to verify that the amounts shown on the invoices to home-market customers correspond to the amounts actually paid by those customers? Is there any evidence that the Department of Commerce departed from that practice in the Plate and Sheet investigations?

5. Were the Plate and Sheet investigations the first anti-dumping investigations where some of the home-market sales were dollar-denominated local sales? Does the United States agree or disagree with the statement on para 4.72 of Korea's First Submission that "neither the United States nor the petitioners in the [Plate and Sheet] investigations cited a single case before the investigations at issue where the United States treated a home-market sale priced in dollars as if it had been priced in the local currency"?

6. Does the United States agree that the records of the Plate and Sheet cases show that POSCO's "internal exchange rate" was the rate published by the Korean Exchange Bank? If not, please describe the evidence to the contrary in the record.

7. Is it the US position that the fact that the currency conversion was made for accounting purposes in a home-market sale is determinative of, or relevant to, whether that sale was valued in dollars or won? If so, please explain the basis for that position.