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UNITED
STATES � ANTI-DUMPING MEASURES ON
Report of the Panel (Continued) B. PROCEDURAL FACTS CONCERNING THE US ANTI-DUMPING INVESTIGATIONS OF KOREAN SSPC AND SSSS 3.11 On 20 April 1998, at the behest of US steel companies and workers, the DOC initiated an anti-dumping investigation of imports of SSPC from Korea and five other countries.4 The "period of investigation" (for purposes of determining whether dumping had occurred) covered the period from 1 January 1997 through 31 December 1997.5
3.12 On 27 May 1998, the DOC issued a questionnaire to POSCO.6 POSCO timely responded to Section A of the questionnaire on 1 July 1998 and to Sections B, C, and D of the questionnaire on 20 July 1998.7 The DOC issued supplemental questionnaires in July, August, September and October 1998, to which POSCO timely responded.8
3.13 On 27 October 1998, the DOC formally issued the preliminary determination in the SSPC investigation. The DOC preliminarily determined that the dumping margin for Korean SSPC was only 2.77%.9 The methodologies used in the preliminary determination were described in the notice of the preliminary determination, and in an analysis memorandum also dated 27 October 1998.10 The substance of this preliminary determination is discussed, in relevant part, below.
3.14 From 9 to 13 November 1998, the DOC conducted verification of POSCO's responses to the DOC questionnaires as they pertained to POSCO's sales.11 From 19 to 20 November 1998, the DOC conducted verification pertaining to the US sales of POSCO's US affiliate, Pohang Steel America ("POSAM"). From 7 to 15 December 1998, the DOC conducted verification pertaining to POSCO's costs. The verified evidence is discussed, in relevant part, below.
3.15 On 26 January 1999, the DOC received case briefs from POSCO and the US petitioners.12 On 2 February 1999, the DOC received rebuttal briefs from POSCO and the US petitioners.13
3.16 On 19 March 1999, the DOC issued its final determination regarding SSPC. Because of several changes from the analysis in the SSPC Preliminary Analysis Memorandum, the "dumping margin" for Korean SSPC increased from 2.77% in the preliminary determination to 16.26% in the final determination.14 The changes in the DOC's analysis were described in the notice of the final determination and in the final "analysis memorandum.15 The substance of the DOC's final determination and final "analysis memorandum" is discussed, in relevant part, below.
3.17 Also on 19 March 1999, the DOC provided to POSCO and the US petitioners various "disclosure documents" containing data used in connection with the DOC's final analysis.
3.18 On 4 May 1999, the USITC informed the DOC of its final affirmative injury determination.16 On 21 May 1999, the DOC issued its anti-dumping order with respect to SSPC, setting the cash deposit rate for Korean SSPC at 16.26%.17
3.19 On 30 June 1998, at the behest of US steel companies and workers, the DOC initiated an anti-dumping investigation of imports of SSSS from Korea and seven other countries.18 The "period of investigation" (for purposes of determining whether dumping had occurred) covered the period from 1 April 1997 through 31 March 1998.19
3.20 On 3 August 1998, the DOC issued a questionnaire to POSCO and several other Korean steel companies.20 POSCO timely responded to Section A of the questionnaire on 8 September 1998 and to Sections B, C, and D of the questionnaire on 23 September 1998.21 The DOC issued three supplemental questionnaires to POSCO in October 1998, to which POSCO timely responded in November 1998.22
3.21 On 17 December 1998, the DOC issued its preliminary determination regarding SSSS. The DOC preliminarily determined that the dumping margin for POSCO's SSSS was 12.35%.23 The DOC's analysis was described in the notice of the preliminary determination in the preliminary "analysis memorandum" also dated 17 December 1998.24 The substance of the DOC's analysis is discussed, in relevant part, below.
3.22 On 28 December 1998, POSCO pointed out that the DOC made three "significant ministerial errors" in its preliminary determination regarding SSSS. On 14 January 1999, the DOC concluded that POSCO was correct. Therefore, the DOC amended its preliminary determination. Upon recalculation with the ministerial errors corrected, the DOC preliminarily determined that the dumping margin for POSCO's SSSS was only 3.92%.25
3.23 From 7 to 15 December 1998, the DOC conducted verification of POSCO's responses to the DOC questionnaires as they pertained to POSCO's costs. From 22 to 26 February 1999, the DOC conducted verification pertaining to POSCO's sales.26 From 17 to 18 March 1999, the DOC conducted verification of the US sales of POSAM, POSCO's US affiliate. The verified evidence is discussed, in relevant part, below.
3.24 On 15 April 1999, the DOC received case briefs from POSCO and the US petitioners.27 On 21 April 1999, the DOC received rebuttal briefs from POSCO and the US petitioners.28
3.25 On 19 May 1999, the DOC issued its final determination regarding SSSS. Because of changes from the analysis in the SSSS Preliminary Determination, the dumping margin for POSCO's SSSS increased from 3.92% in the amended preliminary determination to 12.12% in the final analysis.29 The DOC's revised analysis was described in the notice of the final determination and in the final "analysis memorandum" also dated 19 May 1999.30 The substance of the DOC's final analysis is discussed, in relevant part, below.
3.26 Also on 19 May 1999, the DOC provided to POSCO and the US petitioners various "disclosure documents" containing data used in connection with the DOC's final analysis.
3.27 On 19 July 1999, the USITC informed the DOC of its final affirmative injury determination with respect to imports of SSSS from Korea and two other countries.31
3.28 On 27 July 1999, the DOC issued its anti-dumping order with respect to SSSS. The order set the cash deposit rate for POSCO's SSSS at 12.12%.32
3.29 This Part of the Statement of Facts provides the facts most relevant to the WTO deficiencies of the US anti-dumping measures against Korean SSPC and SSSS, namely, facts concerning: (1) the DOC's treatment of POSCO's sales to an unaffiliated US customer that subsequently went bankrupt without paying POSCO; (2) the DOC's methodology for dividing the investigation period into multiple "averaging periods" for purposes of comparing average normal values with average export prices; and (3) the DOC's treatment of POSCO' s "local sales," which are sales made in the Korean domestic market that are priced in US dollars.
3.30 The ABC Company (as we will refer to it for reasons of confidentiality) had been a valued US customer of POSCO. It is not affiliated with POSCO. It often bought on credit from POSCO. Prior to the period of investigation, it never defaulted on a payment due POSCO. Indeed, prior to the period of investigation, none of POSCO's US customers had ever defaulted on a payment due POSCO.33
3.31 During the period of investigation, POSCO made several sales of SSPC and SSSS to the ABC Company. The ABC Company subsequently declared bankruptcy, and to date has not paid POSCO for certain of those sales. This bankruptcy was an unprecedented, unanticipated event beyond POSCO's control. It had nothing to do with POSCO's pricing policies in the United States.
3.32 The record shows that the ABC Company did not pay POSCO for { } sales of SSPC, accounting for { }% of POSCO's US sales by value and { } by quantity.34 Likewise, the ABC Company did not pay for { } sales of SSSS, accounting for { }% of POSCO's US sales by value and { } by quantity.35
3.33 The issue of how to treat the unpaid sales to the ABC Company first arose in the anti-dumping investigations when POSCO submitted its response to the DOC questionnaire in the SSPC investigation, explained the extraordinary circumstances, and asked the DOC to exclude the unpaid sales from its calculation of export price (and thus from the comparison of export price to normal value).36 The US petitioners objected to POSCO's request, arguing that the unpaid sales were "bad debts" which "should be allocated over [POSCO's] sales to other customers to arrive at a direct selling expense on US sales" and that "direct selling expense must be deducted from gross price in calculating net export prices."37 POSCO responded that the unpaid sales were not "bad debts" and they should be excluded lest the calculation of the dumping margin be distorted by extraordinary or unusual circumstances.38
3.34 The issue arose in the same way in the SSSS investigation. POSCO submitted its response to the DOC questionnaire and requested exclusion of these aberrant sales and the US petitioners objected.39
3.35 In the preliminary determinations for both SSPC and SSSS, the DOC excluded the unpaid sales to the ABC Company from its calculation of export price.40 It agreed with POSCO that these sales were "atypical and not part of POSCO's normal business practice.41 It expressly rejected the petitioners' argument that the cost of these sales was a "direct expense.42
3.36 The preliminary determination to exclude the unpaid sales because they were "atypical" was consistent with the past practice of the United States. The United States has acknowledged that the inclusion in dumping calculations of sales that are "extraordinary for the market in question" can "lead to irrational or unrepresentative results.43 For that reason, the US anti-dumping statute specifically directs the DOC to exclude any home-market sales that are "outside the ordinary course of trade" from its calculation of normal value. Similarly, although the US statute does not contain an explicit provision directing the DOC to exclude such sales from the calculation of the export price, the DOC routinely excludes such sales from its export price analysis. In fact, the US Court of International Trade has affirmed that the DOC "has the discretion to disregard certain US pricing data if 'inclusion of certain sales which are clearly atypical would undermine the fairness of the comparison of foreign and US sales.'44 In accordance with this principle, the DOC has, in at least one past case, excluded from its analysis US sales for which payment was never received because of the customer's bankruptcy, on the ground that the sales were not representative.45
3.37 In the final determinations, however, the United States reversed position. The United States did not exclude the sales for which POSCO did not receive payment because of the customer's bankruptcy. Instead, it included these unpaid sales in its analysis; it declared that the amounts due POSCO by the ABC Company were "bad debts;" it treated the costs of the unpaid sales as "direct selling expenses;" and it adjusted for these alleged expenses in the calculation of the dumping margins.46 This adjustment was made despite the DOC's admission that, "at the time [the sales] were made, POSCO was not aware that the customer would declare bankruptcy.47
3.38 The United States offered the following explanations for its change in policy:
In other words, the United States expressly based its decision regarding SSPC on the "large percentage " of the atypical sales compared to the total sales being investigated. But, when faced with a much smaller percentage of atypical sales in SSSS, the United States held that the percentage of atypical sales was irrelevant. These explanations are obviously inconsistent.
3.39 Having decided to make an adjustment for the unpaid sales to the ABC Company, the DOC adjusted the export price downward by { } for every metric ton of SSPC that POSCO sold in the United States, a distortion equal to 13.7% of the weighted average unit value ({ }).50 Likewise, regarding SSSS, the adjustment of { } per metric ton distorted the export price downward by 4.6% of the weighted average unit value ({ }).51
3.40 The standard practice in US anti-dumping investigations is for the DOC to calculate a single weighted-average normal value to compare to a single weighted-average export price for the entire period of investigation.52
3.41 In the SSPC investigation, the US petitioners asked the DOC to depart from that methodology and "at least 'wall off' November and December 1997 � by limiting pricing/cost comparisons between markets to 'same month' transactions."53 The petitioners alleged that this departure was necessary to account for the devaluation of the Korean won beginning in October 1997. The US petitioners elaborated on this argument in a letter to the DOC in the SSSS case.54
3.42 The same argument had been raised by the US petitioners in another US anti-dumping investigation involving the currency devaluation in Indonesia. In its preliminary determination in that case, the United States expressly found "no basis to depart from our practice of calculating the weighted-average EPs [i.e., export prices] for the entire POI [i.e., period of investigation]" merely because of a currency devaluation without "evidence that there has been a significant change in the respondents' pricing or marketing during the POI."55
3.43 In accordance with that determination, the DOC's preliminary determinations in the SSPC and SSSS cases again rejected the US petitioners' request for November and December to be "walled off." In SSSS, the DOC distinguished as inapplicable "the one case cited by petitioners in support of averaging multiple periods" and "preliminarily determine[d] that � the use of multiple periods for averaging is unwarranted.56 The DOC's preliminary determination in the SSPC case did note that it was currently studying this issue in the Preserved Mushrooms case. Thus, it explained that:
3.44 On 31 December 1998, the United States issued its final determination in Preserved Mushrooms from Indonesia . This final determination once more rejected the petitioners' request for multiple averaging, and maintained the established practice of declining to deviate from its standard methodology because of a currency devaluation.58
3.45 Yet, some three months later, in the final determinations for SSPC and SSSS, the United States reversed itself. Although it had previously considered the use of "multiple averaging periods" to be "unwarranted," the United States decided to use multiple averaging in these steel investigations.59 The United States failed to provide any facts or legal reasons that were not considered in its preliminary decisions and which (in the DOC's view) warranted a different outcome in the final determination. The United States also failed to explain its departure from its then three-month-old precedent in Preserved Mushrooms, when the similarities between the devaluations of the won and the Indonesian rupiah clearly demanded the same treatment.
3.46 As a result, the DOC divided the period of investigation into sub-periods: For SSPC, the sub-periods ran (i) from January to October 1997 and (ii) from November to December 1997. For SSSS, the periods ran (i) from April to October 1997 and (ii) from November 1997 to March 1998. The DOC then calculated a separate weighted average export price and a separate weighted average normal value for each sub-period, and calculated a separate dumping margin for each sub-period (based on the amount by which the average normal value exceeded the average export price for that sub-period). In combining the dumping margins for the sub-periods, the DOC treated sub-periods where there were sales at more than fair value" (i.e., "negative dumping") as a sub-period of "zero dumping."60 It then calculated an overall average dumping margin based on the average of the dumping margins found in certain sub-periods and the "zero" dumping margins assigned to the sub-periods in which there had been "negative dumping." As a matter of simple arithmetic, the effect of dividing the period of investigation into separate sub-periods and then treating "negative dumping" for any sub-period as "zero" is necessarily to raise the overall dumping margin.
3.47 The purpose of the "multiple averaging" methodology was plainly to "wall off" the period after the devaluation. In their submissions to the DOC, the US petitioners conceded that { }.61
3.48 By adopting the "multiple averaging" methodology, however, the DOC was able to effectively exclude the sales during the second sub-period from the calculation of the dumping margins. Consequently, the "walling off" of the later sales from the calculation of the dumping margins meant that the finding of dumping was based exclusively on sales before the devaluation of the Korean won. This finding is fundamentally inconsistent with the underlying basis of the anti-dumping orders: Throughout the proceedings in the investigations at issue, the US petitioners predicated their requests for anti-dumping orders on the claim that such relief was needed to protect the US industry from the adverse consequences of the so-called Asian economic crisis that accompanied the devaluation of the Korean won.62 The final injury determinations also relied heavily on the imports (and consequent impact on the US industry) after the devaluation.63 In other words, the increased imports and injury about which petitioners' complained, and on which the anti-dumping orders were predicated, all occurred after the devaluation - while, because of the "multiple averaging" methodology, all the sales that led to the finding of dumping occurred before the devaluation.
3.49 In the normal course of business, POSCO's sales may be classified into three basic categories: (1) domestic sales to Korean companies that are negotiated in Korean won, invoiced in Korean won, and paid in Korean won, (2) export sales to non-Korean companies that are negotiated in a foreign currency, invoiced in the foreign currency, and paid in the foreign currency, and (3) "local sales" to Korean companies that are negotiated in a foreign currency (typically US dollars), invoiced in the same foreign currency, but paid in Korean won.
3.50 For the first category of sales (which are negotiated, invoiced and paid in Korean won), POSCO records the sale in its accounting records at the time of invoice based on the Korean won amount on the invoice, and it records the amount of the payment in its accounting records at the time of payment based on the Korean won amount of the payment (which should be the same as the Korean won amount of the invoice). No difference is recognized between the amount of the sale and the amount of the payment due to changes in exchange rates, because no conversion of currency is required to record the sales or payment.64
3.51 For the second category of sales (which are negotiated, invoiced and paid in a foreign currency), POSCO also records the sale in its accounting records in Korean won at the time of invoice - using the exchange rate of the official Korean Exchange Bank at the date of invoice to determine the relevant Korean won amount. POSCO subsequently records the payment in its accounting records in Korean won at the time of payment - using the exchange rate of the Korean Exchange Bank at the date of payment to determine the relevant Korean won amount. If the exchange rate has changed between the date of invoice and the date of payment, the amount recorded for the sale in Korean won may not match the amount recorded for the payment in Korean won (even though the amount invoiced and paid in the foreign currency is the same). POSCO must therefore record an additional exchange gain or loss to account for the difference between the amount in Korean won recorded at the time of sale and the amount in Korean won recorded at the time of payment.65
3.52 For the third category of "local sales" (which are negotiated and invoiced in a foreign currency), the payments are made in Korean won. The amount of the Korean won payment for these "local sales" is not fixed at the time of the sales negotiation or at the time of invoice. Instead, to accurately reflect the dollar value of these sales at the time of payment, the agreed-upon sale amount in the foreign currency is translated into Korean won using the exchange rate of the Korean Exchange Bank on the date on which the customer pays. The economic value of the sale is therefore fixed in the foreign currency and not in Korean won.
3.53 The accounting for these local sales is, therefore, necessarily the same as the accounting for the transactions resulting in foreign currency payments: In both cases the economic value is fixed in foreign currency, the accounting records are kept in Korean won, and any change in the exchange rate of the Korean Exchange Bank between the date of invoice and the date of payment has to be recorded in won as an exchange gain or loss.66
3.54 The economic substance and accounting treatment of these three types of transactions may be illustrated by the following simplified examples. Suppose that POSCO makes three sales that are invoiced on April 1: (1) a domestic sale at a price of 100,000 won that is invoiced and paid in Korean won; (2) an export sale at a price of $100 that is invoiced and paid in US dollars; and (3) a local sale at a price of $100 that is invoiced in dollars but paid in won (as determined by converting the US dollar price using the exchange rate on the date of payment). Suppose, further, that payment for all three sales is made on April 30, that the exchange rate on April 1 (the date of invoice) was 1,000 won per dollar, and that the exchange rate on April 30 (the date of payment) was 1,100 won per dollar. In such circumstances, the transactions would be recorded in POSCO's accounting records as follows:
2. Export Sale in US Dollars
3. Local Sale Invoiced in US Dollars but Paid in Korean Won
3.55 During the period of investigation, approximately { } of POSCO's sales of SSPC and approximately { } of its sales of SSSS in the home market consisted of "local sales" that were priced in US dollars.67 As discussed above, POSCO booked these dollar-priced sales in its sales ledgers in Korean won, using the daily exchange rate in effect at the Korean Exchange Bank on the date of sale.68 The customers made payment in Korean won. The amount of the payment was calculated by multiplying the US dollar invoice amount by the exchange rate in effect at the Korean Exchange Bank on the date of payment.69 Gains or losses resulting from a change in the exchange rate between sale and payment were reflected in POSCO's books as transaction gains or losses.70
3.56 The issue of how the "local sales" should be treated first arose when the DOC preliminary determination in SSPC treated POSCO's "local sales" as export sales and excluded them from the calculation of normal value.71 Both the US petitioners and POSCO agreed that this decision was in error.72
3.57 In its preliminary determination in SSSS and in its final determinations in both SSPC and SSSS, the DOC included these "local sales" in its calculation of normal value.73 The DOC did not, however, base its calculations on the actual dollar amount at which POSCO invoiced the customer for these sales. Instead, the DOC applied the following methodology:
For the "local sales," this methodology meant that the dollar amount of the invoice was translated into Korean won using one exchange rate (i.e., the exchange rate of the Korean Exchange Bank on the date of the local sale), and then translated back into dollars using a different exchange rate (i.e., a calculated exchange rate based on a weighted average of the New York Federal Reserve exchange rates on the dates of POSCO's US sales).75 3.58 Not surprisingly, this "double conversion" methodology distorted the results of the DOC's calculations, and increased the dumping margins found. The following example, which is based on the actual US and home-market ("HM") sales data submitted by POSCO for one of its SSSS products, illustrates how the double-conversion methodology increased its normal value and thus inflated the dumping margins.
Calculation of Weighted Average Normal Value Based on Dollar Prices
Thus, for this comparison, the DOC's double-conversion methodology increased the normal value in US dollars from { } to { } - an increase of { }.
3.59 The United States claimed that its "double conversion" of the prices of the "local sales" was necessary, primarily because the exchange rates used by POSCO did not correspond to the exchange rates announced by the US banking authorities.76 In particular, the DOC claimed that the exchange rates used by POSCO "are quite dissimilar" from the exchange rates published by the Federal Reserve Bank of New York - which are based on the exchange rates at 12:00 noon in New York on the relevant dates.77 3.60 The factual basis for this decision is severely flawed in several respects:
The United States also failed to explain why the New York Federal Reserve exchange rates should be considered more accurate than the Korean Exchange Bank rates, or why a Korean company should be expected to use New York exchange rates with respect to its accounting in Korea of domestic transactions within Korea. And, the United States failed to address how a Korean exporter could possibly use rates that are not determined until eight or nine hours after the close of business in Korea.80
3.61. The "double conversion" of the prices of the "local sales" from dollars to won to dollars (at different exchange rates) was an unprecedented departure from the established policy of "accept[ing] charges in the currency in which the charges are made."81 In fact, neither the United States nor the petitioners in the 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.
3.62 By contrast, there are several cases - most notably Fresh Cut Roses from Colombia - in which the United States properly declined to "double convert" home-market sales that were priced in dollars.82 The United States claimed that the factual situation in Fresh Cut Roses differed from the factual situation presented in the SSPC and SSSS cases. However, that claim made no sense.
4 See Notice of Initiation, 63 Fed.
Reg. 20580, 20585 (27 April 1998) (hereinafter, "SSPC Notice of Initiation").
A copy of the SSPC Notice of Initiation is provided as ROK Ex. 3.
5 Notice of Preliminary Determination of Sales at Less than
Fair Value: Stainless Steel Plate in Coils ("SSPC") from the Republic of
Korea, 63 Fed. Reg. 59535, 59536 (4 Nov. 1998) (hereinafter, "SSPC
Preliminary Determination"). A copy of the SSPC Preliminary Determination is
provided as ROK Ex. 4.
6 SSPC Preliminary Determination, ROK Ex. 4, at 59536. The
DOC also issued a questionnaire to another Korean steel company. The other
company responded that it did not export the merchandise under investigation
to the United States during the period of investigation. Id.
7 Id.
8 Id.
9 Id. at 59539.
10 DOC Memorandum to File of 27 October 1998, at 1
(hereinafter, "SSPC Preliminary Analysis Memorandum"). SSPC Preliminary
Analysis Memorandum is provided at ROK Ex. 5.
11 DOC Memorandum to File of 5 January 1999, at 1
(hereinafter, "SSPC Sales Verification Report"). Excerpts of the SSPC Sales
Verification Report are provided at ROK Ex. 6.
12 POSCO�s Case Brief of 26 January 1999 (hereinafter,
"POSCO�s SSPC Case Brief") is provided at ROK Ex. 7. The US Petitioners� Case
Brief of 26 January 1999 (hereinafter, "US Petitioners� SSPC Case Brief�) is
provided at ROK Ex. 8.
13 POSCO�s Rebuttal Brief of 2 February 1999 (hereinafter,
"POSCO�s SSPC Rebuttal Brief") is provided at ROK Ex. 9. The US Petitioners�
Rebuttal Brief of 2 February 1999 (hereinafter, "US Petitioners� SSPC
Rebuttal Brief") is provided at ROK Ex. 10.
14 Notice of Final Determination of Sales at Less than Fair
Value: Stainless Steel Plate in Coils ("SSPC") from the Republic of Korea, 64
Fed. Reg. 15444, 15456 (31 Mar. 1999) (hereinafter, "SSPC Final
Determination"). The SSPC Final Determination is provided at ROK Ex. 11.
15 DOC Memorandum to File of 19 March 1999, at 1
(hereinafter, "SSPC Final Analysis Memorandum"). The SSPC Final Analysis
Memorandum is provided at ROK Ex. 12.
16 See Antidumping Duty Orders, 64 Fed. Reg. 27756 (21 May
1999) (hereinafter, "SSPC Anti-Dumping Order"). The SSPC Anti-Dumping Order
is provided at ROK Ex. 13.
See also Certain Stainless Steel Plate from Belgium,
Canada, Italy, Korea, South Africa, and Taiwan, 64 Fed. Reg. 25515 (12 May
1999). The USITC�s explanation of its final injury determination was set
forth separately in its publication Certain Stainless Steel Plate from
Belgium, Canada, Italy, Korea, South Africa and Taiwan, USITC Pub. 3188 (May
1999) (hereinafter, "SSPC Final Injury Determination"). The SSPC Final Injury
Determination is provided as ROK Ex. 14.
17 SSPC Anti-Dumping Order, ROK Ex. 13, at 27757.
18 See Notice of Initiation of Antidumping Duty
Investigations, 63 Fed. Reg. 37521, 37528 (13 July 1998) (hereinafter, "SSSS
Notice of Initiation"). A copy of the SSSS Notice of Initiation is provided
as ROK Ex. 15.
19 Notice of Preliminary Determination of Sales at Less than
Fair Value: Stainless Steel Sheet and Strip in Coils from South Korea, 64
Fed. Reg. 137, 139 (4 Jan. 1999) (hereinafter, "SSSS Preliminary
Determination"). A copy of the SSSS Preliminary Determination is provided as
ROK Ex. 16.
20 Id. at 137.
21 Id.
22 Id.
23 Id. at 147.
24 DOC Memorandum to File of 17 December 1998, at 1
(hereinafter, "SSSS Preliminary Analysis Memorandum"). The SSSS Preliminary
Analysis Memorandum is provided at ROK Ex. 17.
25 Notice of Amended Preliminary Determination of Sales at
Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from South
Korea, 64 Fed. Reg. 3928, 3930 (26 Jan. 1999) (hereinafter, "SSSS Amended
Preliminary Determination"). The SSSS Amended Preliminary Determination is
provided at ROK Ex. 18.
26 DOC Memorandum to File of 6 April 1999, at 1 (hereinafter,
"SSSS Sales Verification Report"). Excerpts of the SSSS Sales Verification
Report are provided at ROK Ex. 19.
27 POSCO�s Case Brief of 15 April 1999 (hereinafter, "POSCO�s
SSSS Case Brief") is provided at ROK Ex. 20. The US Petitioners� Case Brief
of 15 April 1999 (hereinafter, "US Petitioners� SSSS Case Brief") is provided
at ROK Ex. 21.
28 POSCO�s Rebuttal Brief of 21 April 1999 (hereinafter,
"POSCO�s SSSS Rebuttal Brief�) is provided at ROK Ex. 22. The US Petitioners�
Rebuttal Brief of 21 April 1999 (hereinafter, "US Petitioners� SSSS Rebuttal
Brief") is provided at ROK Ex. 23.
29 Notice of Final Determination of Sales at Less Than Fair
Value: Stainless Steel Sheet and Strip in Coils from the Republic of Korea,
64 Fed. Reg. 30664, 30688 (8 June 1999) (hereinafter, "SSSS Final
Determination"). The SSSS Final Determination is provided at ROK Ex. 24.
30 DOC Memorandum to File of 19 May 1999, at 1 (hereinafter,
"SSSS Final Analysis Memorandum"). The SSSS Final Analysis Memorandum is
provided at ROK Ex. 25.
31 See Notice of Antidumping Duty Order; 64 Fed. Reg. 40555
(27 July 1999) (hereinafter, "SSSS Anti-Dumping Order"). The SSSS
Anti-Dumping Order is provided at ROK Ex. 26.
See also Certain Stainless Steel Sheet and Strip from
France, Germany, Italy, Japan, the Republic of Korea, Mexico, Taiwan, and the
United Kingdom, 64 Fed. Reg. 40896, 40897 (28 July 1999). The USITC�s
explanation of its final injury determination was set forth separately in its
publication Certain Stainless Steel Sheet and Strip from France, Germany,
Italy, Japan, the Republic of Korea, Mexico, Taiwan, and the United Kingdom,
USITC Pub. 3208 (July 1999) (hereinafter "SSSS Final Injury Determination").
The relevant portions of the SSSS Final Injury Determination are provided as
ROK Ex. 27.
32 SSSS Anti-Dumping Order, ROK Ex. 26, at 40557.
33 POSCO�s SSPC Rebuttal Brief, ROK Ex. 9, at 5.
34 SSPC Supplemental Questionnaire Response for Sections B
and C, ROK Ex. 28, at 15.
35 SSSS Questionnaire Response for Sections B and C, ROK Ex.
29, at C-1.
36 SSPC Questionnaire Response for Sections B and C, ROK Ex.
30, at C-1.
37 Letter of 19 October 1998 from US Petitioners to DOC, at
2-3. This letter is provided at ROK Ex. 31.
38 Letter of 22 October 1998 from POSCO to DOC, at 3-5. This
letter is provided at ROK Ex. 32.
39 SSSS Questionnaire Response for Sections B and C, ROK Ex.
29, at C-1 (POSCO�s request); Letter of 2 December 1998 from US Petitioners
to DOC, at 6-7 (US petitioners� response). This letter is provided at ROK Ex.
33.
40 SSPC Preliminary Determination, ROK Ex. 4, at 59536-37;
SSSS Preliminary Determination ROK Ex. 16, at 140.
41 SSPC Preliminary Analysis Memorandum, ROK Ex. 5, at 3;
SSSS Preliminary Determination, ROK Ex. 16, at 140.
42 SSSS Preliminary Determination, ROK Ex. 16, at 140.
43 Statement of Administrative Action for the Uruguay Round
Agreements, at 164, reprinted in 1 H.Doc. 103-316 at 656, 834 (1994). The
relevant excerpt of the Statement of Administrative Action is provided as ROK
Ex. 34.
44 Chang Tieh Industry Co., Ltd. v. United States, 840
F. Supp. 141, 145 (Ct. Int�l Trade 1993) (see ROK Ex. 35), quoting Ipsco,
Inc. v. United States, 714 F. Supp. 1211, 1217 (Ct. Int�l Trade 1989).
See also Asociacion Colombiana de Exportadores de Flores v. United States,
704 F. Supp. 1114, 1126 (Ct. Int�l Trade 1989) (when deciding whether to
include US sales in its analysis, DOC "must make a determination as to which
sales of the included producer are so unrepresentative as to be unfairly
distorting.") (see ROK Ex 36).
45 See Fabric and Expanded Neoprene Laminate from Taiwan:
Final Determination of Sales at Less Than Fair Value, 52 Fed. Reg. 37193,
37194 (5 Oct. 1987) (see ROK Ex. 37).
46 SSPC Final Determination, ROK Ex. 11, at 15447-49; SSSS
Final Determination, ROK Ex. 24, at 30671-74.
47 SSPC Final Determination, ROK Ex. 11, at 15449; SSSS Final
Determination, ROK Ex. 24, at 30673-74.
48 SSPC Final Determination, ROK Ex. 11, at 15449.
49 SSSS Final Determination, ROK Ex. 24, at 30674.
50 SSPC Final Analysis Memorandum, ROK Ex. 12, at 1,
Attachment 1.
51 SSSS Final Analysis Memorandum, ROK Ex. 25, at 1,
Attachment 1.
52 See, e.g., 19 C.F.R. � 351.414(d)(3) (ROK Ex. 2).
53 SSPC Letter of 14 October 1998 from US Petitioners to DOC,
at 2-3. This letter is provided as ROK Ex. 38.
54 SSSS Letter of 2 December 1998 from US Petitioners to DOC,
ROK Ex. 33, at 2-5.
55 Notice of Preliminary Determination of Sales at Less than
Fair Value and Postponement of Final Determination: Certain Preserved
Mushrooms from Indonesia , 63 Fed. Reg. 41783, 41785 (5 August 1998) (see ROK
Ex. 39).
56 SSSS Preliminary Determination, ROK Ex. 16, at 145
(emphasis added).
57 SSPC Preliminary Determination, ROK Ex. 4, at 59359
(emphasis added).
58 Notice of Final Determination of Sales at Less than Fair
Value: Certain Preserved Mushrooms from Indonesia , 63 Fed. Reg. 72268, 72272
(31 Dec. 1998) (see ROK Ex. 40).
59 SSPC Final Determination, ROK Ex. 11, at 15450-52; SSSS
Final Determination, ROK Ex. 24, at 30674-76.
60 This practice of treating "negative dumping" as "zero
dumping" is sometimes called "zeroing."
61 Petitioners� SSPC Case Brief, ROK Ex. 8, at 28;
Petitioners� SSSS Case Brief, ROK Ex. 21, at 14.
62 See USITC Hearing Transcript in Final SSPC Investigation
at 91 (Statement of Dr. Magrath) (explaining that the sharp drop in the US
industry�s profitability in the fourth quarter of 1997 (the "flip-flop") was
caused by "the price declines of both the domestic producers and the subject
imports, [which] ... were unusually steep and severe in the latter part of
�97"); id. at 91-92 (Statement of Mr. Rosenthal) ("the principal factor"
affecting imports of the subject merchandise was "the beginning of the Asian
financial crisis") (emphasis added). See also USITC Hearing Transcript in
Final SSSS Investigation at 142 (Statement of Mr. Malashevich) ("the price
competition was felt only beginning in late 1997"). For the Panel�s
reference, a copy of the relevant pages of these transcripts is provided at
ROK Ex. 41 and ROK Ex. 42, respectively.
See also Petitioners� Post-Hearing Brief in Final USITC
Investigation of SSPC (30 March 1999), Exhibit 1 (Responses to Commission�s
Questions) at 12 ("Weakening foreign markets, particularly in Asia which
culminated in the currency crisis that began in mid-1997 and deepened in
the fourth quarter of 1997, contributed to a sharp influx in US imports
in the second half of 1997, as demand in the United States remained
relatively robust. ... [T]he severe weakness for the domestic industry in
the fourth quarter of 1997 coincided with a period of relative strength
for subject imports, which rose by 26 percent in terms of volume and by 21
percent in terms of value compared to their respective averages in the first
three quarters of the year.") (emphasis added). Petitioners� Post-Hearing
Brief in Final USITC Investigation of SSPC (30 Mar. 1999), Exhibit 1
(Responses to Commission�s Questions) at 12 (emphasis added). A copy of the
relevant pages of this brief is provided in ROK Ex. 43.
63 SSPC Final Injury Determination, ROK Ex. 14, at 15-16,
20-22; SSSS Final Injury Determination, ROK Ex. 27, at 14-15, 17-20.
64 POSCO�s accounting practices for domestic sales that were
invoiced in Korean won were reviewed by the DOC in its verifications in both
the SSSS and SSPC cases. See SSPC Sales Verification Report, ROK Ex. 6, at
Ex. 6, 19, 20; SSSS Sales Verification Report, ROK Ex. 19, at Ex. 17, 19, 21.
65 POSCO�s accounting practices for export sales in US
dollars were reviewed by the DOC in its verifications in both the SSSS and
SSPC cases. SSPC Sales Verification Report, ROK Ex. 6, at Ex. 25, 26, 31;
SSSS Verification Report, ROK Ex. 19, at Ex. 22.
66 Specifically, even though the local sale is invoiced in
the foreign currency, POSCO records the sale in its accounting records in
Korean won at the time of invoice - using the exchange rate of the Korean
Exchange Bank at the date of invoice to determine the relevant Korean won
amount for its accounting entry. POSCO subsequently records the payment in
its accounting records in Korean won at the time of payment - using
the amount of the customer�s actual payment in Korean won, which was
calculated by applying the exchange rate of the Korean Exchange Bank at the
date of payment to the foreign currency amount shown on the invoice. If the
exchange rate has changed between the date of invoice and the date of
payment, the amount recorded for the sale in Korean won may not match the
amount recorded for the payment in Korean won. POSCO must therefore record an
additional exchange gain or loss to account for the difference between the
amount recorded in Korean won at the time of sale and the amount recorded in
Korean won at the time of payment.
In this regard, it should be noted that POSCO�s accounting
practices for the local sales that were invoiced in US dollars were reviewed
by the DOC in its verifications in the SSSS and SSPC cases. For example, in
the SSSS case, it was verified that POSCO "recognized an exchange rate loss"
on Home Market Sale No. 1, due to changes in the dollar-won exchange rate
between invoice and payment. SSSS Sales Verification Report, ROK Ex. 19, at
14. See also SSPC Sales Verification Report, ROK Ex. 6, at 6; SSPC Final
Analysis Memorandum, ROK Ex. 12, at 4; SSSS Sales Verification Report, ROK
Ex. 19, Ex. 17; SSSS Final Analysis Memorandum, ROK Ex. 25, at 3.
67 Data reported to DOC shows that there were { } metric tons
of local sales of SSPC out of { } metric tons of total home-market sales of
SSPC during the period of investigation and that there were { } metric tons
of local sales of SSSS out of { } metric tons of total home-market sales of
SSSS.
68 A chart showing the daily exchange rates of the Korean
Exchange Bank for the period from 1 January 1997 to 31 March 1998 is provided
at ROK Ex. 44. The DOC verified that POSCO used the Korean Exchange Bank�s
rates in its accounting books. See SSSS Sales Verification Report, ROK Ex.
19, at 14.
69 The DOC verified that the payment amount for these "local
sales" was determined by applying the exchange rate on the date of payment to
the foreign currency amount on the invoice. The payment record (set forth on
page 25 of the verification exhibit) indicates that the "total US$ to be
paid" for this transaction was { }. It further indicates that POSCO received
a total amount of { } Korean won for this transaction on { } - a date which
is described in the verification exhibit as the "date monies are received"
and as "date of �payment� for exchange rate purposes." The Korean Exchange
Bank exchange rate on { } was { } won per dollar (according to page 17 of the
verification exhibit). Multiplying the { } dollar invoice price by the { }
won per dollar exchange rate yields a Korean won amount of { }, which is
exactly the amount in Korean won actually received by POSCO. Thus, a review
of this verification exhibit demonstrates that the customer�s payment in
Korean won was determined by multiplying the US dollar invoice amount by the
exchange rate of the Korean Exchange Bank on the date of payment - which
differed from the exchange rate on the date of sale. (A copy of the relevant
pages of SSSS Sales Verification Exhibit 17 is provided in ROK Ex. 45.)
70 SSSS Supplemental Sales Questionnaire Responses, ROK Ex.
46, at 19.
71 SSPC Preliminary Analysis Memorandum, ROK Ex. 5, at 2.
72 Letter of 5 November 1998 from US Petitioners to DOC, at 3
(US petitioners alleging " ministerial error"); Letter of 6 November 1998
from POSCO to DOC, at 2 (agreeing with US petitioners that there was an
error, but disagreeing as to its characterization as "ministerial"). The US
petitioners� letter is provided at ROK Ex. 47. POSCO�s response is provided
at ROK Ex. 48.
73 SSPC Final Determination, ROK Ex. 11, at 15455-56; SSSS
Preliminary Analysis Memorandum, ROK Ex. 17, at 2.
74 This average exchange rate was calculated by weighting the
New York Federal Reserve exchange rates on the date of each US sale by the
quantity sold in each US sale.
75 After the DOC�s preliminary determination in SSSS, POSCO
strongly objected to the DOC�s methodology in its case briefs in both the
SSPC and SSSS cases. SSPC Final Determination, ROK Ex. 11, at 15456; SSSS
Final Determination, ROK Ex. 24, at 30678. In the end, however, the DOC
persisted in making a "double conversion" of local sales from dollar prices
to won prices back to dollar prices.
76 SSPC Final Determination, ROK Ex. 11, at 15456; SSPC Final
Analysis Memorandum, ROK Ex. 12, at 4; SSSS Final Determination, ROK Ex. 24,
at 30678; SSSS Final Analysis Memorandum, ROK Ex. 25, at 3.
77 The DOC�s "Policy Bulletin" regarding its exchange rate
methodology notes that:
Notice: Change in Policy Regarding Currency Conversions,
61 Fed. Reg. 9434, 9436 n.4 (8 March 1996) (hereinafter, "DOC Notice on
Currency Conversion" ). A copy of the DOC Notice on Currency Conversion is
provided at ROK Ex. 49.
The daily New York Federal Reserve exchange rates, from 1
January 1990 to the present, are available on the Internet at
www.bog.frb.fed.us/releases/H10/hist/dat96-ko.txt. For the Panel�s reference,
the exchange rates for the fifteen months covering the periods of the SSPC
and SSSS investigations, from 1 January 1997 to 31 March 1998, are provided
as ROK Ex. 50.
78
According to the final analysis memorandum in the SSSS
case,
[A] comparison of the internal exchange rate used by
POSCO to the market exchange rate used by the Department for Home Market
Observation { } shows that the two exchange rates are dissimilar: POSCO�s
won/USD exchange rate for { } is { } won per dollar while the Federal
Reserve rate for this date is { } won per dollar. Also, POSCO�s won/USD
exchange rate on the date of payment ({ }) is { } won per dollar, while
the Federal Reserve exchange rate on the date of payment is { } won per
dollar.
SSSS Final Analysis Memorandum, ROK Ex. 25, at 3. A
simple calculation indicates that the differences between the POSCO rates
and Federal Reserve rates identified by this analysis memorandum
represent in all cases less than one percent of the Federal Reserve
exchange rate.
79 For example, the final analysis memorandum in the SSPC
case stated that the Federal Reserve exchange rate on 23 November 1997 was
947.87 won per dollar. SSPC Final Analysis Memorandum, ROK Ex. 12, at 4. In
fact, the Federal Reserve rate on that date was actually 1060.00 won per
dollar. See New York Federal Reserve Daily Exchange Rates, ROK Ex. 50. The
947.87 won per dollar rate mentioned in the final analysis memorandum is
actually the exchange rate for 23 November 1997 calculated by the DOC using
its specialized exchange rate model for appreciating currencies - a model
which, by its terms, should not have been applied to the Korean won in the
first place, because the won was depreciating in value during the period
under consideration. (The adjusted exchange rates calculated by the DOC are
available on the Internet at
www.ita.doc.gov/import_admin/records/exchange/skorea.txt. The adjusted
exchange rates for the fifteen months covering the periods of the SSPC and
SSSS investigations, from 1 January 1997 to 31 March 1998, are provided as
ROK Ex. 51.).
The final analysis memorandum makes a similar error with
respect to the exchange rates on 18 November 1997. See SSPC Final Analysis
Memorandum, ROK Ex. 12, at 5.
In this regard, it is interesting to note that the
"internal" rate used by POSCO for 23 November 1997 (which is also the rate
published by the Korean Exchange Bank) was 1072.10 won per dollar. See SSPC
Final Analysis Memorandum, ROK Ex. 12, at 4; see also Korean Exchange Bank
Daily Exchange Rates, ROK Ex. 44. In other words, the actual Federal Reserve
rate was much closer to POSCO�s "internal" rate than it was to the adjusted
DOC rate that the United States erroneously relied upon in its analysis (i.e.,
1060.00 is much closer to 1072.10 than it is to 947.87).
80
As mentioned, the Federal Reserve rates are collected by
the New York Federal Reserve Bank based on the noon buying rates in New York
for a sample of market participants at 12:00 noon in New York. See DOC Notice
on Currency Conversion, ROK Ex. 49, at 9436 n.4. Noon in New York is either 1
a.m. or 2 a.m. the following morning in Korea (depending on whether daylight
saving�s time is in effect in New York).
81 Final Determination on Sales at Less Than Fair Value:
Fresh Cut Roses from Colombia, 60 Fed. Reg. 6980, 7006 (6 Feb. 1995) ("It is
the Department�s practice to accept charges in the currency in which the
charges are made. In this instance, home market prices were charged in
dollars. Therefore, the Department found it appropriate that respondent�s
home market sales were reported in dollar value since the dollar value was
the currency in which the sales transactions were made.") (ROK Ex. 52).
82 Id.; see also Final Determination of Sales at Less
Than Fair Value: Silicon Metal from Argentina, 56 Fed. Reg. 37891, 37895-96
(9 Aug. 1991) (ROK Ex. 53).
83 SSPC Final Determination, ROK Ex. 11, at 15456; accord
SSSS Final Determination, ROK Ex. 24, at 30678 ("[T]here is a disparity
between the exchange rates reflected in POSCO�s accounting records and those
used by the Department�.").
84 SSPC Final Determination, ROK Ex. 11, at 15456; SSPC Final
Analysis Memorandum, ROK Ex. 12, at 5; SSSS Final Determination, ROK Ex. 24,
at 30678; SSSS Final Analysis Memorandum, ROK Ex. 25, at 3-4.
85 SSSS Final Determination, ROK Ex. 24, at 30678.
86 Fresh Cut Roses from Colombia, ROK Ex. 52, at 7005-06.
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