67 FR 3155, January 23, 2002 A-475-829 Investigation POI: 10/1/99-9/30/00 PUBLIC DOCUMENT DAS I/1: JG MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary Import Administration, Group I SUBJECT: Issues and Decision Memo for the Antidumping Duty Investigation of Stainless Steel Bar from Italy; Final Determination -------------------------------------------------------------------------- SUMMARY We have analyzed the briefs and rebuttal briefs of interested parties in the antidumping duty investigation of stainless steel bar from Italy. As a result of our analysis, we have made changes, including corrections of certain inadvertent programming and clerical errors, to the margin calculations. We recommend that you approve the positions we have developed in the Discussion of Issues section of this memorandum. Below is a complete list of the issues in this investigation for which we received comments and rebuttals by parties: Comment 1: Treatment of Sales Above Normal Value Comment 2: Commission Offset Comment 3: Model Match Methodology Comment 4: Differences in Bedini LOT and Bedini CEP Offset Comment 5: Bedini HM Commission Expenses Comment 6: Clerical Errors in the Calculation of Bedini U.S. Credit Expenses Comment 7: Weight-Averaging of U.S. Prices Comment 8: Collapsing the Sales Prices and Production Costs of Bedini and U-SI Comment 9: Application of Adverse Facts Available for Bedini Due to Home Market Reporting Flaws Comment 10: Bedini HM Billing Adjustments Comment 11: Partial Adverse Facts Available for Unreported Bedini U.S. Sales Comment 12: Revisions to the Calculation of Certain Bedini Expense Fields Comment 13: Adverse Facts Available for All Bedini Expenses Reported on an Average, Not A Transaction-Specific, Basis Comment 14: Methodology for Calculating Bedini's U.S. Credit Expenses Comment 15: Adjustments to Bedini's Reported Costs to Reconcile With the General Ledger Comment 16: Correction to Bedini's Verification Report Comment 17: Application of Adverse Facts Available to Cogne Comment 18: Use of Facts Available to Value Foroni's Packing Costs Comment 19: Foroni's Advertising Expenses Comment 20: Foroni's Calculation of Direct Materials Comment 21: Exclusion of Foroni's Directors' Fees from the G&A Expense Ratio Comment 22: Foroni's Short-Term Bond Interest Offset Comment 23: Foreign Exchange Gains & Losses Comment 24: Foroni's Yield Loss Comment 25: Use of Rodacciai's Reported Data Comment 26: Rodacciai's Reported Home Market Date of Sale Comment 27: Additional Sales Submitted by Rodacciai Comment 28: Rodacciai's U.S. Indirect Selling Expenses Comment 29: Rodacciai's U.S. Warehousing Expenses Comment 30: Rodacciai's U.S. Sales with Missing Date of Payment Comment 31: Rodacciai's G&A Expense Ratio Comment 32: Rodacciai's Interest Expense Ratio Comment 33: Recalculation of Certain Home Market Expenses Reported by Rodacciai Comment 34: Rodacciai's Home Market Credit Adjustments Comment 35: Corrections to and Based on Valbruna's CEP Verification Report Comment 36: Valbruna's Opportunity Cost on VAT Rebates Comment 37: Valbruna's Levels of Trade Comment 38: Treatment of Valbruna's Consignment Holding Period Comment 39: Valbruna's U.S. Brokerage Expenses Comment 40: Valbruna's U.S. Warranty Expenses Comment 41: Valbruna's Unreported Price Adjustment Comment 42: Valbruna's U.S. Repacking Expenses Comment 43: Use of Actual Prices Paid by Valbruna's Customers Comment 44: Valbruna's U.S. Indirect Selling Expense Ratio Comment 45: Valbruna's Home Market Inventory Carrying Costs Comment 46: Valbruna's G&A Expense Ratio Comment 47: Valbruna's Financial Expense Ratio Comment 48: Inclusion of Depreciation Expense in Valbruna's Reported Manufacturing Costs Comment 49: Valbruna's Claimed Inventory Adjustment Comment 50: Treatment of Unreconciled Differences in Valbruna's Cost of Manufacture Comment 51: Foreign Exchange Gains and Losses on Accounts Payable Comment 52: Foreign Exchange Gains and Losses on Financing BACKGROUND On July 26, 2001, the Department of Commerce ("the Department") issued the preliminary determination of this antidumping duty investigation of stainless steel bar from Italy. See Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Stainless Steel Bar From Italy, 66 FR 40214 (August 2, 2001) ("Preliminary Determination"). The period of investigation ("POI") is October 1, 1999, through September 30, 2000. We invited parties to comment on the Preliminary Determination. At the request of the petitioners, we held a public hearing on December 5, 2001. DISCUSSION OF ISSUES Common Issues Comment 1: Treatment of Sales Above Normal Value Respondents' Arguments: Trafilerie Bedini, Srl ("Bedini"), Acciaiera Foroni SpA ("Foroni"), and Acciaierie Valbruna S.p.A. ("Valbruna") submitted comments on this issue. Bedini argues that, in calculating the antidumping duty margin for the Preliminary Determination, the Department improperly disregarded the amounts by which particular U.S. sales were made in excess of normal value, which had the effect of inaccurately inflating Bedini's dumping margin. Bedini argues that this practice violates U.S. and international law, and should be corrected in the final determination. Specifically, according to Bedini, the U.S. antidumping law requires that, in calculating an antidumping duty margin, the Department must make a fair comparison between the EP or CEP and normal value. Like U.S. law, Bedini states that Article 2.4 of the 1994 WTO Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade also provides that a fair comparison shall be made between the export price ("EP") or constructed export price ("CEP") and normal value. However, according to Bedini, a recent interpretation by the WTO Appellate Body of Article 2.4 found that the practice of "zeroing," under which export sales made at prices greater than normal value are assigned a zero antidumping margin, violates article 2.4. (1) Bedini argues that this WTO decision is in direct conflict with the Department's normal practice of calculating dumping margins, which treats sales above normal value as having no dumping margin instead of a negative dumping margin. The Department then calculates the weighted-average dumping margin by dividing the unit margins of the dumped sales plus the zero margins by the value of dumped and non-dumped U.S. sales. Moreover, Bedini argues that the U.S. Court of International Trade ("CIT") has recognized that this methodology introduces a statistical bias in the calculation of dumping margins. (2) Furthermore, Bedini states that the Department's practice of "zeroing" is not required by any U.S. statute or regulation, and that the practice is contrary to the Department's statutory obligation to make a fair comparison between EP or CEP and normal value. Finally, Bedini argues that the Department's position in Notice of Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products From The Netherlands, 66 FR 50408 (Oct. 3, 2001) ("Hot-Rolled from the Netherlands") that 1) zeroing is required by U.S. law under section 771(35)(A) of the Act; 2) zeroing is a reasonable methodology; and 3) U.S. law takes precedence over any "potentially conflicting" URAA obligations is incorrect and should not be followed. Thus, there is no legal basis for the Department to continue this practice, and it should be discontinued in the final determination. Foroni also disagrees with the Department's methodology in the Preliminary Determination. First, inasmuch as this investigation covers only one class or kind of merchandise, Foroni claims that the Department should have calculated a single dumping margin, consistent with 777A(d)(1)(A) of the Act, rather than calculating a weighted-average dumping margin based on the product control number-specific dumping margins. Second, Foroni claims that the Department's practice of aggregating the potentially uncollected dumping duties for stainless steel bar products for which the Department found positive margins while excluding the negative duties of stainless steel bar products for which the Department found that the U.S. price exceeded the normal value is distortive as it has the effect of creating an overall dumping margin where none otherwise exists. Third, Foroni claims that the unfairness of the zeroing methodology has been recognized by the WTO in Bed Linen from India, in which the Appellate Body found that the European Community's "zeroing" methodology violated Article 2.4.2 of the WTO Antidumping Agreement. Although this decision does not directly apply to the United States, Foroni contends that, unless the Department revises its calculation methodology, the WTO may, in time, rule similarly with respect to the Department's analogous methodology. Valbruna contends that the calculation methodology utilized in the Preliminary Determination improperly removes from the analysis the benefit that "negative dumping sales" comparisons have on the overall dumping margin. Valbruna claims that this methodology was found to be inconsistent with Article 2.4.2 of the WTO Antidumping Agreement by a WTO Panel and the WTO Appellate Body. See Bed Linen from India (concluding that the practice of "zeroing" results in an unfair comparison between EP and normal value, as it does not take fully into account the prices of all comparable export transactions). Thus, Valbruna concludes that the Department should adjust its methodology in the final determination by eliminating its practice of "zeroing" certain underlying comparisons that actually resulted in negative values in order to make a "fair comparison" as required under Article 2.4 of the WTO Antidumping Agreement. Petitioners' Argument: The petitioners argue that the Department has specifically found in Certain Preserved Mushrooms from India: Final Results of Antidumping Duty Administrative Review, 66 FR 42507 (August 13, 2001) ("Mushrooms from India") that the WTO decision does not apply to U.S. proceedings. Therefore, the petitioners argue that the Department should not abandon its practice with respect to "zeroing" negative margins. Department's Position: We disagree with the respondents. As we have discussed in prior cases, our methodology is consistent with our statutory obligations under the Act. See, e.g., Hot-Rolled from the Netherlands, at FR 50408 (October 3, 2001), and accompanying Issues and Decision Memorandum, at Comment 1. First, sales that did not fall below normal value are included in the weighted- average margin calculation as sales with no dumping margin. The value of such sales is included in the denominator of the weighted-average margin along with the value of dumped sales. We do not, however, allow sales that did not fall below normal value to cancel out dumping found on other sales. Second, the Act requires that the Department employ this methodology. Section 771(35)(A) of the Act defines "dumping margin" as "the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise." Section 771(35)(B) of the Act defines "weighted-average dumping margin" as "the percentage determined by dividing the aggregate dumping margins determined for a specific exporter or producer by the aggregate export prices and constructed export prices of such exporter or producer." These sections, taken together, direct the Department to aggregate all individual dumping margins, each of which is determined by the amount by which normal value exceeds export price or constructed export price, and to divide this amount by the value of all sales. The directive to determine the "aggregate dumping margins" in section 771(35)(B) makes clear that the singular "dumping margin" in section 771(35)(A) applies on a comparison-specific level, and does not itself apply on an aggregate basis. At no stage in this process is the amount by which EP or CEP exceeds normal value on sales that did not fall below normal value permitted to cancel out the dumping margins found on other sales. This does not mean, however, that sales that did not fall below normal value are ignored in calculating the weighted-average rate. It is important to note that the weighted-average margin will reflect any "non-dumped" merchandise examined during the investigation, the value of such sales is included in the denominator of the dumping rate, while no dumping amount for "non-dumped" merchandise is included in the numerator. Thus, a greater amount of "non-dumped" merchandise results in a lower weighted-average margin. This is, furthermore, a reasonable means of establishing duty deposits in investigations, and assessing duties in reviews. In an investigation such as the present case, the deposit rate calculated must reflect the fact that the Customs Service is not in a position to know which entries of merchandise entered after the imposition of a dumping order are dumped and which are not. By spreading the estimated liability for dumped sales across all investigated sales, the weighted-average dumping margin allows the Customs Service to apply this rate to all merchandise entered after an order goes into effect. Finally, the Bed Linen from India Panel and Appellate Body decisions concerned a dispute between the European Union and India. We have no WTO obligation to act based on these decisions. See also Mushrooms from India, 66 FR at 42507 (August 13, 2001). Comment 2: Commission Offset Respondent's Argument: Valbruna notes that it reported commissions to unaffiliated parties in both the U.S. and Italian markets, but that it paid commissions to unaffiliated parties much more frequently and at a greater level in Italy than in the United States. In the Preliminary Determination, the Department adjusted normal value by a commission offset, increasing normal value by the value of the U.S. indirect selling expenses incurred in Italy or the difference in the commissions paid in the two markets. Valbruna contends that, for the final determination, the Department should not make any commission offset, pursuant to 19 CFR 351.410(e). According to Valbruna, the purpose of the commission offset provisions in the statute and regulations is to avoid unfair comparisons of two different prices in two different markets, one which is net of a commission expense and another in which no commission expense or any corresponding expense was deducted, i.e., selling expenses are removed from the sales price in one market through the deduction of the commission but no analogous selling expense is deducted in the other market. For CEP sales, Valbruna argues that the CEP deductions already account for all selling expenses incurred in the U.S. market and, therefore, there is no danger of unfair price comparisons. Specifically, the Department deducted commission expense from Valbruna's home market prices to derive normal value, and subtracted all selling expenses incurred in the United States in order to derive CEP. Thus, Valbruna claims it was unnecessary for the Department to offset normal value by the lesser of U.S. indirect selling expenses incurred in Italy or the difference between the commissions incurred in each market. This is because the prices in both markets were net of all selling expenses in the CEP comparisons. Moreover, because the indirect selling expenses were deducted from the CEP, Valbruna asserts that they must be excluded from the commission offset calculation. See Notice of Final Results of Antidumping Duty Administrative Review: Certain Pasta from Italy, 65 FR 7349, 7352 (February 14, 2000) ("Certain Pasta from Italy"). Valbruna contends further that there is no justification for including in the CEP offset adjustment an amount for indirect expenses incurred in Italy as a surrogate for expenses incurred in the United States. Doing so is inconsistent with applicable law and achieves indirectly what the courts have said the Department cannot do directly. See Micron Technology v. United States, 243 F. 3d 1301, 1314 (Fed. Cir. 2001) (noting that, under the Department's methodology, the deductions to CEP pursuant to section 772(d) of the Act result in the comparison of adjusted CEP with unadjusted normal value comparability because the statute requires that a level of trade comparison for CEP sales be made at the level of trade that most nearly corresponds to EP). For EP sales, Valbruna contends that the regulations contemplate that the amount of the commission offset be limited to the amount of indirect selling expenses incurred in the market other than that in which the commissions were paid. See 19 CFR 351.410. Thus, if commissions were paid only in the home market, the Department should compare selling expenses incurred in the United States with the commission in the home market, according to Valbruna. However, Valbruna asserts that, because it did not incur indirect selling expenses in the United States on its EP sales, there are no U.S. expenses to use as a commission offset. Therefore, Valbruna concludes that it was inappropriate for the Department to calculate a commission offset on its EP sales by taking the lesser of U.S. indirect selling expenses incurred in Italy or the difference between the commissions in each market, inasmuch as neither the statute nor the regulations contemplate using expenses incurred in the same market in which the commission is paid. In summary, Valbruna argues that the application of a commission offset was unnecessary because the Department already deducts indirect selling expenses in the United States - analogous to the commissions being deducted from Italian sales - and unwarranted because neither the statute nor the regulations provides for an offset comprised of expenses incurred in the same market in which the commissions are paid. Petitioners' Argument: The petitioners assert that, for EP sales, the Department correctly used selling expenses incurred in Italy for U.S. sales to offset commissions paid on Italian sales. The petitioners contend that the Department's commission offset methodology is consistent with its stated practice. See Certain Pasta from Italy. The petitioners further argue that Valbruna's proposed methodology, in which the adjustment would be limited to the expenses already deducted from CEP under section 772(d) of the Act, would result in a one-sided application of the commission offset provision because the commission offset would only be used when there were commissions for U.S. sales, but no commissions for home market sales. Also, the petitioners contend that Valbruna's argument that the Department's methodology provides for an offset that is comprised of expenses incurred in the same market as the market in which the commissions are paid is misplaced because these expenses were associated with U.S. sales and were incurred on behalf of U.S. sales, even though there were actually incurred in Italy. Department's Position: We agree with the petitioners. The Department's position on commission offsets was explained in Certain Pasta from Italy. First, we stated that the commission offset is capped by the amount of indirect expenses attributable to a respondent's CEP sales, but incurred in the foreign market. This is done because the amount of a respondent's indirect selling expenses attributable to U.S. sales and associated with economic activities incurred in the United States are deducted from the CEP starting price under section 772(d) of the Act. Consequently, in order to avoid deducting the same indirect expenses twice, we must exclude from the commission offset those indirect expenses associated with economic activities in the United States, which are already deducted in the calculation of the CEP. Second, in accordance with section 351.410(e) of the Department's regulations, where commissions are incurred in one market, but not in the other, we make an allowance for indirect selling expenses in the other market up to the amount of the commissions. In this case, because commissions were paid in the home market and in the United States, but to a greater degree in the home market, we made an adjustment to offset the greater home market commission deduction. We made this circumstance-of- sale adjustment by adding the offset to home market price rather than subtracting it from the U.S. price. Thus, the overall adjustment to normal value involves deducting home market commissions and then adding U.S. indirect selling expenses up to the amount of the difference in commissions paid in the two markets. As noted above, in CEP situations, the amount of U.S. indirect selling expenses available for purposes of the commission offset is limited by the extent to which such indirect selling expenses were incurred in the home market for U.S. sales. This is done in order to avoid double-counting the same indirect selling expenses while making this adjustment in accordance with our statutory and regulatory mandate. For EP sales, however, where home market commissions are greater than U.S. commissions, the commission offset that is added to normal value is equal to the lesser of (1) U.S. indirect selling expenses incurred in Italy on behalf of U.S. sales and (2) the difference between commissions paid in both markets. We only use those indirect selling expenses paid for in Italy - but paid for on behalf of U.S. sales - because, under the statutory provisions of section 772(d) of the Act, we cannot deduct from U.S. price (or add to normal value) those indirect selling expenses attributable to U.S. sales and associated with economic activities incurred in the United States except in CEP situations. Therefore, for this final determination, we are continuing to apply the commission offset (and CEP offset) in accordance with the applicable law and the methodological principles outlined in Certain Pasta from Italy. Comment 3: Model Match Methodology Respondent's Argument: Bedini argues that the Department's model match methodology is fundamentally flawed and should be changed for the final determination. Specifically, Bedini argues that, for cost purposes, the Department required the respondents to report data on a size-range basis. For sales matching purposes, however, the Department required respondents to report data on an exact-size basis. According to Bedini, the Department required this exact-size reporting for sales matching purposes despite the fact that the Department rejected narrower ranges for cost purposes, stating that "we feel that the 'size' criteria proposed by the Department in these investigations adequately defines the {stainless steel bar ("SSB")}. . ." See February 20, 2001 memorandum to Louis Apple "Selection of Model Matching Criteria for Purposes of Issuing the Antidumping Duty Questionnaire" ("Model Match Memorandum"). Thus, according to Bedini, the Department has taken the position that small size variances within the specified ranges for a given SSB product are not meaningful differences and do not affect prices, and that such products within the size ranges are "comparable products." Furthermore, according to Bedini, the antidumping duty law precludes the Department from using a different definition of the "foreign like product" for product matching purposes than it uses for costs. Bedini cites to SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) ("SKF"), in which the court stated that "Commerce cannot give the term 'foreign like product' a different definition (at least in the same proceeding)." Bedini argues that the Department has improperly used different definitions here. Bedini argues that this inconsistency undermines the accuracy of the dumping calculations and contravenes the Department's obligation to compare the weighted-average prices of "comparable merchandise" in the U.S. and home markets as required by 19 CFR 351.414(d)(2). According to Bedini, the Department identified the "comparable merchandise" when it defined its size ranges for cost reporting purposes, and determined that it would treat SSB products within these size ranges as identical or virtually identical. Thus, Bedini argues that, once the "comparable merchandise" is identified, pursuant to 19 CFR 351.414(d), the Department should have compared the average prices within one size range sold in the United States to those in the same size range in the home market. According to Bedini, by failing to make fair comparisons between comparable merchandise in the home and U.S. markets, the pricing comparisons in the Preliminary Determination were artificially restricted and skewed. The only way to correct this problem, according to Bedini, is to make sales comparisons using size ranges instead of comparing exact sizes as the Department did in the Preliminary Determination. Petitioners' Argument: The petitioners disagree with Bedini, stating that the model match used by the Department in the Preliminary Determination properly defines the product as it is priced in the market and as it is manufactured. First, the petitioners argue that Bedini's reliance on SKF is misplaced because SKF does not actually offer any guidance by the court as to how the Department should interpret and apply the definition of a foreign like product. Instead, the petitioners contend that the court in SKF was very careful to state that the issue it was facing in that case was very narrow and was limited only to a discussion relating to the normal value calculation. The petitioners argue that SKF does not actually address the argument raised by Bedini in this instance, and, thus, should be given little weight in this argument. The petitioners also argue that the Department's definition of the control number for both sales and cost appropriately reflect the unique nature of the sales and production of SSB. Specifically, the petitioners argue that costs vary by ranges of size and not a specific size because the factory will not retool its operations unless it is planning on changing from one size range to another. Thus, according to the petitioners, the cost should reflect the same pattern. However, for sales, according to the petitioners, the selling price should reflect the actual size ordered. Thus, the model match should also reflect this market condition according to the petitioners. Moreover, the petitioners state that Bedini should have raised this issue long before the submission of its case brief. The petitioners state that it is too late in the proceeding to solicit comments for the records of each of the various countries being investigated in relation to this product. The petitioners also contend that it is unclear that Bedini's solution of using size ranges for price comparisons would be any more appropriate than going to a size-specific cost of production ("COP"). Therefore, the petitioners state that the current model match being used by the Department is appropriate and should not be changed for the final determination. Department's Position: We have not revised our methodology for calculating average prices as proposed by Bedini. As to the appropriateness of the Department's model matching criteria, we note that the Department provided all parties to this investigation and the companion investigations of stainless steel bar, an opportunity to comment on the Department's proposed model matching criteria and hierarchy. See e.g., Letter from John Brinkmann to counsel for Rodacciai, dated January 26, 2001. It is significant to note that, while several parties disagreed with the Department's proposal to use exact size for sales reporting and three size ranges for cost reporting purposes, none of the parties suggested that size was an inappropriate matching criterion, nor did they suggest that size should rise in importance in the Department's hierarchy. The Department considered the comments of the petitioners and other parties to these investigations and issued a decision memorandum defining the product characteristics and hierarchy to be followed by respondents in responding to the Department's antidumping duty questionnaire. The selected model match criteria, in order hierarchical order were: 1) general type of finish; 2) grade; 3) remelting; 4) type of final finish; 5) shape; and 6) size. The Department also requested that for purposes of reporting costs, respondents should follow the three size ranges proposed by the Department, with the significant caveat that if the company's normal books and records differentiate the production costs associated with size using slightly different ranges, and the company believed it was more appropriate to report cost using company specific ranges, then they should contact the Department. See Model Match Memorandum. See also Appendix V of the Antidumping Duty Questionnaires issued to respondents in these investigations. Thus, from the outset of this investigation, it was established that exact size of the stainless steel bar would be used by the Department as one of the characteristics to define the physical characteristics of the subject merchandise for purposes of making less than fair value comparisons. We also disagree with the respondent that the Department has used different definitions of foreign like product in the same proceeding and that we should make the price comparisons based on the size product groupings used for the cost of production analysis. Section 771(16)(A) of the Act defines "foreign like product" as merchandise that is "identical in physical characteristics." The Department reviewed comments by parties to this investigation prior to defining six physical characteristics of stainless steel bar that it considered appropriate for model matching criteria. Section 777A(d)(1)A)(i) of the Act specifies that the Department compare "the weighted average of the normal values to the weighted average of the CEPs for comparable merchandise." In the Preliminary Determination, the Department's price averaging groups were defined by the six physical characteristics reported by the respondent, although some modifications may have been made by the Department on a case-by-case basis. It is significant to note that CEP and NV prices were defined by the exact same physical characteristics reported by the respondent, meaning that the same definition of foreign like product was used for both price averaging groups. With respect to the respondent's argument that different definitions were used to define the "size" physical characteristic for price averaging and cost reporting, we note that the preamble to the Department's regulations (61 FR 7339) states that "the Department's practice is to calculate costs consistent with the model matching criteria it develops at the outset of an investigation or review, after having received the views of the interested parties. The product categories developed in such fashion generally account for significant differences in actual costs affecting price. The Department intends to continue this practice because it prevents any manipulation of the cost analysis through changes in internal product classifications." Thus, while we take the model match (product definition) criteria into account in determining the appropriate methodology for reporting cost, this does not mean that in every case we can or must calculate a unique cost for every unique product (CONNUM) identified by our product definition criteria. Nor does it mean that if we accept or adopt a cost methodology that yields the same cost for two products, we must consider those two products to be a single product (CONNUM), or a single foreign like product for model matching purposes. Finally, we disagree with the specific argument that the Department's use of size ranges for cost reporting purposes results in or is based on the use of a different definition of foreign like product. For purposes of reporting costs, the Department instructed the respondent to follow the 3 size ranges proposed by the Department, with the significant caveat that if the company's normal books and records differentiate the production costs associated with size using slightly different ranges, and the company wished to report cost using company-specific ranges, then they should contact the Department. See Memorandum to Susan Kuhbach and Louis Apple entitled, "Selection of Model Matching Criteria for Purposes of Issuing the Antidumping Duty Questionnaire," dated February 20, 2001. The Department initially created the 3 size ranges for reporting costs in recognition of its experience in stainless steel bar cases that a respondent may not keep its cost records by specific sizes and that costs generally do not vary within specific ranges of sizes. The Department also recognized that companies that do record their costs by internally unique size ranges may use cost ranges different than those proposed by the Department, thus the caveat that such companies "should contact the Department." In other SSB cases, certain companies did indeed contact the Department on this issue, which led the Department to revise its size reporting requirements for those companies with respect to cost: The original cost questionnaire requested that parties contact the Department if they planned to depart from the designated size ranges. Therefore, for clarification and consistency between companies we request the following. Your reported per-unit cost of production ("COPs") and constructed value must account for cost differences between shapes (e.g., rounds, flats, rectangles, etc.). For size differences within shapes, you must follow the size categories from your normal books and records (i.e., inventory valuation or existing cost accounting records). If you do not differentiate costs by size in your normal books and records then you must use the ranges identified by the Department in the original questionnaire. See e.g., Letter dated May 24, 2001, to Bedini from John Brinkmann Thus, for cost reporting purposes, the respondent was advised to follow the size categories maintained in its ordinary books and records. The record in this investigation shows that the respondent complied with these instructions by reporting its costs based the Department's size ranges. Other respondents in the SSB investigations complied with these instructions by reporting their costs based on exact sizes, company- specific size ranges or the Department's size ranges. Unless adjustments to a particular respondent's cost size ranges were warranted based on the results of verification or other information on the record, it is reasonable to conclude that the respondents (including Bedini) have reported their costs for specific sizes on as specific a basis as possible for that company, whether that is exact size, company size range, or the Department's alternative size range. Thus, where a respondent reported costs by size range, the cost for any specific size range corresponds to the exact cost for any specific size within that range, and we have not applied different definitions of foreign like product in defining price averaging groups and in calculating cost. 2. Company-Specific Issues Comment 4: Differences in Bedini LOT and Bedini CEP Offset Respondent's Argument: Bedini argues that the Department erred in its Preliminary Determination when it found that Bedini's direct home market sales and its CEP sales to the United States were made at the same level of trade. Bedini contends that is has provided extensive documentation showing that Bedini's direct ex-works sales to end-users in the home market occur at a more advanced level of distribution, involving significantly different and more intense selling functions than Bedini's CEP sales to Ugine Stainless and Alloys ("US&A"), Bedini's affiliated U.S. selling agent. The primary selling functions undertaken by Bedini for home market sales are not undertaken by Bedini for its CEP sales to US&A, and are equivalent to those undertaken by US&A for the U.S. market. Moreover, citing to several past cases, (3) Bedini argues that the Department has found that home market sales and CEP sales to a superdistributor, such as US&A, to constitute different levels of trade. Thus, for the final determination, to achieve a fair comparison between CEP and normal value as required by the Act, the Department should adjust normal value to account for sales at distinct levels of trade. As there are no home market sales at the same level of trade as Bedini's CEP sales to US&A and, thus, a LOT adjustment is not possible, Bedini argues that the Department should allow a CEP offset of home market selling expenses to account for the extra layer of selling activities in the home market. Petitioners' Argument: The petitioners disagree with Bedini and argue that the Department should continue to find that Bedini's home market sales are made at the same level of trade as Bedini's U.S. sales. The petitioners contend that record evidence shows that Bedini's home market sales are not made at a more advanced level of trade than Bedini's U.S. sales. Specifically, the petitioners note that both Bedini and US&A provide the same level of selling functions with regard to invoicing, arranging transportation, and providing mill certificates. Moreover, the petitioners argue that record evidence shows that participation in receiving orders and visiting customers, as well as with respect to warranty claims, was the same. Therefore, the petitioners request that the Department continue to find that home market and U.S. sales are made at the same level of trade. Department's Position: For the final determination, as in the Preliminary Determination, we have identified two distinct levels of trade in the home market. However, in a change from the Preliminary Determination, we agree with Bedini that the level of trade of its U.S. sales differs from both home market levels of trade. Upon further review of the record in this proceeding, we agree with Bedini regarding the extent of its selling activities for its direct sales to end users in the home market. Thus, because Bedini does not undertake those same activities with respect to its U.S. sales, we now find that direct home market sales to end users are not at the same level of trade as Bedini's U.S. sales. Consequently, we are unable to match to sales in the home market at the same level of trade. Since neither of the home market levels of trade are similar to the CEP level of trade, we are unable to establish a pattern of consistent price differences between different levels of trade in the home market that would allow us to make a level of trade adjustment, nor do we have any other information that provides an appropriate basis for determining a level of trade adjustment. Accordingly, we have not made a level of trade adjustment. See section 773(a)(7)(A) of the Act. Instead, in accordance with section 773 (a)(7)(B) of the Act, we made a CEP offset. Since we determined that the starting price sales for Bedini's CEP were similar to Bedini's home market sales by an affiliated reseller, we compared these sales, where possible, and made the CEP offset. See Memorandum from Team to John Brinkmann, "Final Determination Calculation Memorandum for Trafilerie Bedini, Srl and Ugine Stainless & Alloys, Inc.," dated January 15, 2002 ("Bedini Final Determination Calculation Memorandum"). Comment 5: Bedini HM Commission Expenses Respondent's Argument: Bedini contends that the Department erred in the Preliminary Determination by not adjusting normal value to account for Bedini's home market commissions. According to Bedini, commissions are direct selling expenses and normal value must be adjusted to account for them. Bedini argues that these expenses are not indirect selling expenses as stated by the Department in the Preliminary Determination and were not included in the indirect selling expense calculation. Bedini states that a commission was paid to its home market commission agent, USRL/U-SIT, for each sale in which the commission agent was used. In reporting these commission expenses, Bedini states that it reported USRL/U-SIT's actual expenses instead of the commission paid because USRL/U-SIT is affiliated with Bedini. As Bedini does not pay a commission unless a sales is made by an agent, Bedini argues that these expenses bear a direct relationship to the particular sale in question pursuant to 19 CFR 351.410(c). Furthermore, Bedini argues that it has not asserted that it paid an arm's- length commission to this agent, and that Bedini is not seeking to deduct the amount of the commissions from normal value. Rather, Bedini states that it reported, as instructed by the questionnaire, the actual selling expenses of USRL/U-SIT for its commission expenses and, according to Bedini, this is the amount that the Department should deduct from normal value. Finally, with respect to the commission offset, Bedini argues that as the Department has already deducted the corresponding commission expenses in the U.S. market, no offset is needed. Petitioners' Argument: The petitioners argue that the Department should not deduct commission expenses from normal value because Bedini's commissions to USRL/U-SIT are not at arm's-length. The petitioners point out that, in its submissions, Bedini clearly admits that its commissions paid to its affiliated agents "cannot be demonstrated to have been negotiated at arm's-length." According to the petitioners, the Department has stated in its past practice that, in situations where the Department cannot test the arm's-length nature of an affiliated party commission, the Department will deny the adjustment. (4) Department's Position: We agree with Bedini that the expenses incurred by USRL/U-SIT should be accounted for in the final determination margin calculations, but disagree with Bedini that they should be treated as direct selling expenses. As both the petitioners and Bedini point out, Bedini has admitted in its responses that it cannot demonstrate, and is not claiming, that its commission agreements with USRL/U-SIT were negotiated in an arm's-length manner. It is the Department's practice to deny an adjustment for commissions if the commissions are not made at arm's-length. See, e.g., Final Determination of Sales at Less Than Fair Value: Coated Groundwood Paper from Finland, 56 FR 56359 (November 4, 1991). Instead, as these expenses were actual expenses that were incurred by Bedini, in order to account for them in the margin calculations, we are continuing to treat home market commission expenses as indirect selling expenses as we did in the Preliminary Determination. With respect to a commission offset, that issue has been addressed above in Comment 2 and will not be addressed again here. Comment 6: Clerical Errors in the Calculation of Bedini U.S. Credit Expenses Respondent's Argument: Bedini contends that, in the Preliminary Determination, the Department erroneously converted the reported U.S. credit expenses from a per-pound basis to a per- kilogram basis. Bedini requests that the Department revise its calculations with respect to this matter for the final determination. Petitioners' Argument: The petitioners agree with Bedini that the Department erred, but disagree with Bedini's proposed programming solution. Department's Position: We agree with both Bedini and the petitioners and have corrected this error for our final determination. See Bedini Final Determination Calculation Memorandum. Comment 7: Weight-Averaging of U.S. Prices Respondent's Argument: Bedini argues that, in the Preliminary Determination, the Department inappropriately calculated separate weighted- average net U.S. prices for CEP sales of identical products based on whether they were or were not further manufactured. Bedini contends that, for the final determination, the Department should calculate a single weighted-average net U.S. price for each U.S. CONNUM regardless of whether it was further manufactured. Petitioners' Argument: The petitioners disagree with Bedini, stating that it is the Department's standard practice to calculate two different weighted-averages in order to recognize that CEP sales are different than CEP sales that undergo further manufacturing. The petitioners argue that Bedini has not provided any compelling reason as to why the Department should deviate from its standard practice. Therefore, the petitioners argue that the Department should continue to calculate two weighted- average U.S. prices for the final determination. Department's Position: We agree with Bedini and are changing Bedini's calculations with respect to this issue for the final results. While we agree with the petitioners that the Department's standard calculation program, by default, calculates separate average U.S. prices which distinguish between CEP sales that are and are not further manufactured, we note that the Department requires respondents to report their sales with a control number that is based on the product that is imported, not as sold. Thus, when we compare foreign market sales to U.S. sales made on a CEP basis, section 772(d) of the Act directs us to make additional deductions to the CEP starting price, including the deduction of further manufacturing costs, to ensure that a comparison is made on the same basis. In other words, the additional deductions made to the CEP starting price result in a net price that is on an as-imported basis, which is the same basis as the home market or third-country sales. Therefore, for the final determination, we are altering our methodology such that whether sales are further manufactured will not be considered when calculating average net U.S. prices. Comment 8: Collapsing the Sales Prices and Production Costs of Bedini and U-SI Petitioners' Argument: The petitioners contend that, for the final determination, Bedini and Ugine Savoie-Imphy ("U-SI"), Bedini's parent company and a respondent in the companion French proceeding, should be collapsed into a single entity pursuant to 19 CFR 351.401(f). Specifically, the petitioners argue that, according to 19 CFR 351.401(f), the Department can treat two or more producers of the subject merchandise as a single entity, or "collapse" two affiliated producers into a single entity if 1) the affiliated producers have production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities and 2) there is a significant potential for the manipulation of price or production. According to the petitioners, because both of these criteria are satisfied in this instance, Bedini and U-SI should be collapsed into a single entity and their sales prices and costs of production should be combined. With respect to the first criterion, the petitioners argue that the questionnaire responses submitted by both Bedini and U-SI make it clear that both are significant producers of SSB, and, thus, neither would have to substantially retool its manufacturing facilities to produce SSB. As for the second criterion, according to the petitioners, the facts on the records of both proceedings clearly show that there is a significant potential for the manipulation of price or production. First, because U-SI holds a 99 percent stake in Bedini, the petitioners argue that this degree of control provides U-SI with a "significant potential" to alter its own or Bedini's production operations to manipulate prices or production. Second, the petitioners state that the responses provided by Bedini and U- SI show that there is significant overlap in the manufacture of each company's products. For instance, the petitioners note that the majority of SSB and stainless steel wire rod ("SSWR") used by Bedini in the production of the subject merchandise is obtained from U-SI. Additionally, U-SI also uses Bedini to finish the manufacturing of its own subject merchandise. Both companies sell subject merchandise either supplied in raw-material form by, purchased from, or finished by one or the other. Moreover, all U.S. sales for both companies are made by their U.S. sales affiliate, US&A. According to the petitioners, this all shows that there is an additional chance that the exact origin of the merchandise could be manipulated. Third, according to the petitioners, difficulties associated with identifying the specific manufacturer of any given quantity of SSB facilitates the manipulation of prices or production by either company. The petitioners further argue that both Bedini and U-SI have shown by their actions throughout the course of the ongoing investigations the type of manipulation that is possible if Bedini and U-SI are not collapsed. Specifically, the petitioners point to the fact that Bedini and U-SI used different calculation methodologies to calculate the same US&A expenses in the two separate investigations. The petitioners also contend that the two companies should be collapsed because, in the Preliminary Determination, the Department determined in the French case that sales of SSWR that was tolled by Bedini into SSB for U-SI should not be considered to be of French origin but of Italian origin, while at the same time in the Italian case determined that this should not be considered a Bedini product. According to the petitioners, by implication, this means that the product should be considered to be U-SI material of Italian origin. The petitioners state that such problems can be avoided, and the potential for distortion can be eliminated, by collapsing the two entities. Otherwise, the petitioners state that Bedini and U-SI can manipulate their own sales databases by claiming that, in some instances, SSWR is tolled by Bedini while in others it was sold to Bedini. The petitioners further note that, if the Department does not collapse the two entities, these sales should at least be inserted into the French database because U-SI is the principal producer, maintains title to the merchandise, and the finishing operations done by Bedini were not significant. This will ensure that these sales will not escape the scrutiny of the Department. The petitioners finally argue that the fact that Bedini and U-SI are located in different countries is irrelevant. According to the petitioners, although the Department has not previously dealt with the situation of collapsing companies across borders, 19 CFR 351.401(f) specifically states that a determination of whether to collapse companies "should not be based upon whether fact patterns calling for collapsing are commonly or rarely encountered." The petitioners argue that nothing in this regulations states that collapsing should not be done across borders, and that the Department should make its determination solely based on the conditions set forth in 19 CFR 351.401(f). In order for the Department to collapse these entities, the petitioners state that the Department should immediately require both companies to submit their sale and cost databases on the records of the respective French and Italian investigations. If either Bedini or U-SI refuses to do so, the petitioners note that the Department will, of course, be required to rely on facts available in order to calculate a single dumping margin to apply to both Bedini and U-SI. Respondent's Argument: Bedini argues that the petitioners' suggestion that the Department collapse two proceedings across country lines is in express disregard of the plain language of the antidumping law itself. According to Bedini, the antidumping duty law operates in relation to merchandise from one country, not from multiple countries. Bedini notes that the law requires petitions that are filed to name the country that is being filed against, that the definition of a foreign like product is done within the context of merchandise that was produced in the same single country as the subject merchandise, and that normal value is based on the price at which the foreign like product is sold in the single exporting country. Furthermore, Bedini points out that the antidumping duty law specifically precludes the inclusion of two or more countries in a single proceeding at section 771(3) of the Act when it defines a "country" as a "foreign country. . . (that), except for the purpose of antidumping proceedings, may include an association of 2 or more foreign countries" (emphasis added). Bedini contends that the petitioners woefully misinterpret 19 CFR 351.401(f) within the context of the antidumping law, and that the law itself defeats the petitioners' argument outright. Thus, Bedini argues that U-SI and Bedini may not properly be collapsed under the antidumping duty law and treated as a single entity. Department's Position: In an antidumping duty investigation, the Department is charged with determining whether "a class of kind of foreign merchandise is being, or likely to be, sold in the United States at less than its fair value . . . ." Section 731 of the Tariff Act of 1930. To offset dumping, an antidumping duty is imposed equal to "the amount by which normal value exceeds export price (or constructed export price) of the merchandise." Id. The Department, therefore, must make a comparison between EP or CEP and normal value. Section 773(a). Normal value is defined as "the price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the exporting country . . . ." Section 773(a)(1)(B)(i) (emphasis added). Or, normal value may be based on the price of the "foreign like product" in a third country. Section 773(a)(1)(B)(ii). In certain instances, normal value may be based on constructed value. Section 773(a)(4). In determining constructed value, the statute instructs the Department to use the selling, general and administrative expenses incurred in connection with "the production and sale of a foreign like product . . . ." Section 773(e)(2)(A) (emphasis added). Thus, the inescapable conclusion is that the Department must look to the foreign like product when calculating normal value. Section 771(16) gives a number of alternative definitions of "foreign like product." In all of the alternative definitions, the foreign like product must be produced in the "same country" as the subject merchandise. "The term 'country' means a foreign country, a political subdivision, dependent territory, or possession of a foreign country, and, except for the purpose of antidumping proceedings, may include an association of 2 or more foreign countries, political subdivisions, dependent territories, or possessions of countries into a customs union outside the United States." Section 771(3). Therefore, in an antidumping investigation, normal value can only be calculated by looking to the subject merchandise in one country. The Department's regulations set forth the rules for collapsing. The regulations begin by stating, "In an antidumping proceeding under this part, the Secretary will treat two or more affiliated producers as a single entity where those producers have production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities and the Secretary concludes that there is a significant potential for the manipulation of price and production." 19 CFR § 351.401(f) (emphasis added). Thus, the regulations make clear that collapsing can only occur within "an antidumping proceeding." Because an antidumping proceeding only involves the subject merchandise of one country, this means that the Department cannot collapse producers across country lines under 19 CFR 351.401(f). The petitioners here have argued that the Department could calculate one margin for U-SI in France, and one margin for Bedini in Italy, and then calculate a weighted average of those margins to come up with one antidumping margin to apply to both U-SI and Bedini. The petitioners, however, have no statutory authority upon which to base this request. Indeed, if the Department were to do so, the Department would be violating its statutory mandate. In calculating such a weighted average of the margins, the Department would be injecting into the calculation of normal value the price of merchandise produced in a second country. While the Department has used the information from two companies to calculate a single weighted-average margin for those companies when it determined collapsing was appropriate, the Department has done so only within the confines of a single proceeding, which involved a single country. See, e.g., Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 66 FR 14889, 14889 (March 14, 2001). The petitioners have expressed a concern that since U-SI and Bedini are affiliated, applying two separate antidumping margins allows the companies to manipulate their production processes, avail themselves of the lower margin, and thereby circumvent one of the antidumping orders. This concern, however, need not be addressed by collapsing across country lines. Rather, section 781 of the statute and section 351.225 of the regulations establish a procedure through which the petitioners could pursue a circumvention allegation. Comment 9: Application of Adverse Facts Available for Bedini Due to Home Market Reporting Flaws Petitioners' Argument: The petitioners argue that, with respect to Bedini's home market database, Bedini 1) failed to report all downstream home market sales and 2) excluded other home market sales due to an undisclosed computer programming error. Based on these serious errors relating to Bedini's home market database, the petitioners contend that the Department should find that Bedini's responses are not satisfactory and that the requested information was not provided within the specified time limits. With respect to the reporting of downstream home market sales, the petitioners contend that the Department improperly exempted Bedini from its reporting obligation with respect to the reporting of downstream sales made by one Bedini affiliate, and that Bedini should, in fact, be required to report this affiliate's downstream sales. The petitioners contend that, according to the Department's regulations at 19 CFR 351.403(d), "normal value will not usually be calculated based on a sale by an affiliated party if sales of the foreign like product by an exporter or producer to affiliated parties account for less than five percent of the total value (or quantity) of the exporter's or producer's sales of the foreign like product in the market in question. . ." In exempting Bedini's reporting of this single affiliates downstream sales, the petitioners argue that the Department improperly did so based on the fact that this single affiliate's downstream sales alone were less than five percent. The petitioners contend that the Department should have done its analysis based on all downstream sales of all affiliates, which, according to the petitioners, would have been greater than five percent. Therefore, the petitioners contend the Department should require Bedini to report these previously unreported downstream sales. Otherwise, the petitioners argue that the Department should apply the petition rate to all sales in the United States of the merchandise that are identical to that which was sold to this affiliate. As for other excluded home market sales, the petitioners state that, in its November 14, 2001 submission, Bedini reported that it had inadvertently excluded certain sales from its home market sales listing due to a computer error, and submitted a list of these sales as part of its submission. Bedini further noted that most of those sales consisted of SSB produced by unaffiliated manufacturers. The petitioners contend that Bedini did not explain what the specific computer error was that caused these sales to be excluded in the first place, and did not identify who the unaffiliated manufacturers of the merchandise were. Thus, the petitioners state that it is impossible for the Department to verify that no other errors were made, or that the previously-omitted sales were actually produced by a manufacturer other than Bedini as Bedini has claimed. Moreover, the petitioners contend that the information supplied by Bedini in its November 14 submission relating to these home market sales was incomplete due to missing variables, and that complete information was not provided until November 29, 2001, when Bedini submitted its revised databases, two weeks after they were due and more than two months after the close of the record. The petitioners contend that, even when the new databases were submitted, the data was still incomplete because the data supplied by Bedini in its November 14 submission differed from the data submitted on November 29, 2001, and because some of the data was still missing even when the new databases were submitted. Therefore, because Bedini failed to submit a complete and accurate database, according to the petitioners, Bedini withheld information requested by the Department. Moreover, the petitioners state that Bedini failed to provide requested information in a timely manner and in the form requested. The petitioners also state that Bedini significantly impeded the Department's investigation by not submitting information during the time when the record was open for information and because Bedini failed to submit an explanation with respect to the nature of its computer error. Finally, the petitioners state the Bedini provided information that could not be verified. The petitioners also contend that Bedini failed to act to the best of its ability by not submitting a complete home market sales database in a timely manner. Because of this, the petitioners argue that the Department should apply the highest margin to all U.S. sales with the same grade, remelting code, and finish as the home market sales that were not previously reported by Bedini. Respondent's Argument: Bedini disagrees with the petitioners, stating that the petitioners have absolutely no basis to contend that Bedini met any of the conditions required for the application of facts available. Moreover, Bedini contends that it has fully cooperated with every aspect of the investigation and acted to the best of its ability to comply with the Department's numerous requests. First, with respect to Bedini's excluded downstream sales, Bedini notes that it excluded those sales based on the Department's determination to allow Bedini to not report these sales. Thus, Bedini did exactly what the Department told it to do. Moreover, Bedini argues that there is no reason for the Department to change its decision on this matter. Bedini states that the decision to exclude these sales was, according to Bedini, consistent with the Department's regulations and practice. Moreover, even if the Department were to require Bedini to report these sales, according to Bedini, their inclusion would have no impact on the Department's analysis because the quantity is so minuscule and there are no sales in the United States of the same CONNUMs sold by this affiliate in Italy. Thus, Bedini argues that the Department should reject the petitioners' argument. Secondly, with respect to the petitioners' argument relating to other excluded home market sales, Bedini states that the petitioners' assertions with respect to Bedini's "uncooperative behavior" are unfounded. Bedini asserts that, along with the Department's verifications, its own verification preparations were interrupted by the September 11 events. However, when asked by the Department for additional information related to Bedini's cancelled verification in Italy, Bedini states that it fully cooperated and properly submitted on November 14, 2001, certain additional information requested by the Department in a complete and timely manner pursuant to the Department's request. Bedini further stated that it provided the Department with revised databases on November 29, 2001, in a timely manner pursuant to a subsequent request from the Department. Bedini argues that the information it submitted in its November 14 submission was complete, and all the required information relating to the previously-unreported sales was either placed on the record at that time or was already on the record previously. Bedini contends that there was no inconsistency between the data in the November 14 submission and that in the November 29 submissions. Bedini also argues that the information it submitted in its minor corrections with respect to previously unreported sales would have no impact on the Department's investigation. According to Bedini, most of these sales involved SSB manufactured by producers other than Bedini, the types of sales which were properly excluded by the Department in its calculations in the Preliminary Determination. Thus, these sales would have little or no impact on the final determination. Also, Bedini contends that it did, indeed, report all necessary cost data along with this minor correction. Department's Position: Section 776(a)(2) of the Act provides that "if an interested party or any other person (A) withholds information that has been requested by the (Department) under this title, (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 782, (C) significantly impedes a proceeding under this title, or (D) provides such information but the information cannot be verified as provided in section 782(i), the (Department) shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title." Pursuant to section 782(e) of the Act, the Department "shall not decline to consider information that is submitted by an interested party and that is necessary to the determination, even if that information does not meet all the applicable requirements established by the (Department), 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 has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by the Department with respect to the information, and (5) the information can be used without undue difficulties." Section 776(b) of the Act further provides that adverse inferences may be used when an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information. With respect to the petitioners' first argument relating to the reporting of home market downstream sales, we agree with the petitioners that the Department's regulations at 19 CFR 351.403(d) state that "normal value will not usually be calculated based on a sale by an affiliated party if sales of the foreign like product by an exporter or producer to affiliated parties account for less than five percent of the total value (or quantity) of the exporter's or producer's sales of the foreign like product in the market in question. . ." We also agree with the petitioners that the determination as to whether a respondent should be required to report downstream sales should be based on sales made by all affiliated parties and not just the sales of a single affiliated party. However, although we agree with the petitioners on this matter, the facts of this case are that the Department instructed Bedini with respect to its reporting requirements relating to the downstream sales in question here, however erroneously, and Bedini reported its home market sales according to the Department's instructions. Thus, because Bedini acted according to the Department's instructions, it cannot be said that Bedini was in any way uncooperative on this matter or did not report information requested by the Department. Moreover, as pointed out by Bedini, these sales were extremely small in number and would likely not be significant enough to have any impact on the calculation for the margin for Bedini for the final determination. Therefore, there is no reason for the Department to apply facts available with respect to the reporting of these home market sales. As for the petitioners' second argument relating to the reporting of other excluded home market sales, Bedini has reported that these home market sales were discovered in preparation for Bedini's verification. Due to extenuating circumstances, the Department was not able to carry out this verification. However, among other information, the Department specifically asked Bedini to submit any minor corrections that were found by Bedini in preparing for verification. The Department asked Bedini to supply this information by November 14, 2001. In response to the Department's request, Bedini submitted the information requested in a timely manner. The Department further asked Bedini to submit revised databases, a request with which Bedini also complied in a timely manner. Throughout the course of this investigation, there has been no evidence that Bedini has not been cooperating to the best of its ability. Bedini has provided requested information in a timely manner each time such information was requested by the Department. There is no evidence that Bedini was not being cooperative with respect to this requested information. Moreover, although this particular information could have been verified, the Department itself chose not to do so. Finally, the information submitted by Bedini is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination and can be used without undue difficulties. Additionally, these sales would be excluded by the Department from its margin calculations because the stainless steel bar in question was supplied by a non-Bedini manufacturer, and Bedini had no such sales of non- Bedini manufactured stainless steel bar in the United States. Further, this information would likely not be used in the margin calculation because it is hot-rolled stainless steel bar, while the U.S. sales reported by Bedini were cold-rolled stainless steel bar, making it highly unlikely that the two would even be matched. Thus, based on this information, there is no reason for the Department to reject Bedini's home market information and utilize facts available with respect to this home market sales information for the final determination. Comment 10: Bedini HM Billing Adjustments Petitioners' Argument: The petitioners contend that Bedini incorrectly allocated its home market billing adjustments. The petitioners contend that, based on sample information submitted in Bedini's home market verification submission, Bedini allocated its home market billing adjustments from a specific invoice across all sales on that particular invoice despite the fact that the particular invoice at issue showed that the billing adjustment was applicable to only one product. The petitioners state that this methodology is incorrect and cannot be corrected at this late point in the investigation. Therefore, the petitioners contend that the Department should deny all of Bedini's billing adjustments, or, at the very least, correct the billing adjustment from the sample invoice to allocate the billing adjustment to just the applicable sale. Respondent's Argument: Bedini disagrees, stating that its methodology was reasonable because its computer system does not link credit notes to a specific item on an invoice, only to an invoice itself. Moreover, Bedini states that its methodology was done on a more specific basis than the customer-specific basis that was suggested by the Department. Thus, because this was the most specific basis possible, and because it was a reasonable methodology given the time constraints of the case and the difficulty with which Bedini would have been faced had it had to report on a line-item specific basis, Bedini argues that the Department should utilize the billing adjustments as reported for the final determination. Department's Position: Bedini used a reasonable methodology to report its home market billing adjustments, a methodology which was revised by Bedini after extensive questioning and input by the Department in its supplemental questionnaires. Thus, because the methodology used by Bedini in its home market billing adjustment calculations reasonable, we are not revising Bedini's reporting for this field for the final determination. Comment 11: Partial Adverse Facts Available for Unreported Bedini U.S. Sales Petitioners' Argument: The petitioners contend that, based on information submitted in Bedini's U.S. sales verification exhibits, one U.S. sale with a Bedini subject merchandise product code was improperly excluded from Bedini's reported U.S. sales database. According to the petitioners, this is evidence that Bedini did not report all of its U.S. sales. The petitioners contend that this is a serious deficiency that the Department should not overlook. Thus, as facts available, the petitioners contend that the Department should find that Bedini failed to report a certain percentage of its U.S. sales (as this percentage from the petitioners' case brief is proprietary, it will not be explicitly stated here) and should apply the highest calculated margin for this percentage of Bedini's unreported U.S. sales. Respondent's Argument: Bedini contends that the petitioners' argument is incorrect as the petitioners fail to consider verified facts on the record. Specifically, Bedini points out that, at verification, the Department found that merchandise under the product code in question merely designates SSB, and not the country in which the SSB was manufactured. Bedini notes that the Department thoroughly examined samples from Bedini's product exclusion reports, and found that several products using this product code were properly excluded because they were Bedini SSB that was manufactured by other, non-Italian manufacturers. Bedini contends that the petitioners' argument on this issue is groundless, and, thus, the petitioners' argument must be rejected. Department's Position: We disagree with the petitioners and are not applying facts available to a percentage of Bedini's allegedly unreported U.S. sales. At verification, the Department found that, in doing its sales reconciliation, Bedini deducted an amount from its reconciliation for Bedini SSB that was produced by third-country manufacturers. Thus, although these sales had the same product codes as sales of Bedini- manufactured SSB, they were not manufactured in Italy. Therefore, as there is no evidence that Bedini did not report certain of its U.S. sales, there is no need to apply facts available to Bedini for allegedly unreported U.S. sales. Comment 12: Revisions to the Calculation of Certain Bedini Expense Fields Petitioners' Argument: The petitioners argue that the Department should revise Bedini's U.S. sales calculations for early payment discounts, warranty expenses, technical service expenses, and indirect selling expenses to include in the calculation of these expense ratios any amounts reported in the freight revenue field. The petitioners state that, because this field represents an integral part of the cost of the subject merchandise to the customer, the inclusion of this field in the calculations of certain expenses would more accurately reflect the actual discounts received and expenses incurred. Respondent's Argument: Bedini disagrees, stating that revising Bedini's expense calculations for these fields would generate expenses in excess of the amounts that were actually incurred and verified, and would necessitate an offsetting adjustment to the factor calculation itself. According to Bedini, the transaction-specific amounts reported in each of these fields are based on the application of the factors that are calculated by dividing the amount of the applicable discount or expense by net sales revenue. However, Bedini reports that US&A does not record freight revenue as sales revenue. Therefore, Bedini contends that freight revenue is properly excluded from the calculation of the expenses in these fields. Department's Position: We agree with Bedini. Based on our verification findings, we noted that freight revenue, unlike billing adjustments and other revenue, is not normally a line item on the sales invoice. In addition, freight revenue is not generally a part of the total sales revenue amount reflected in US&A's income statement. We recognize that, on occasion, US&A includes an amount of freight revenue in the total invoice amount charged to the customer, but those instances involved small quantities of shipments and were, therefore, the exception rather than the rule based on an examination of this issue at verification. For this reason, we have not included freight revenue in the calculations used to derive per-unit amounts for the field of information noted above. Comment 13: Adverse Facts Available for All Bedini Expenses Reported on an Average, Not A Transaction-Specific, Basis Petitioners' Argument: The petitioners argue that Bedini incorrectly reported certain data (inland freight warehouse to customer, U.S. duty, home market inventory carrying cost, U.S. inventory carrying cost) on an average rather than on a transaction-specific basis. The petitioners claim that information on the record indicates that Bedini could have calculated these costs on a transaction-specific basis despite Bedini's claims that it could not link the reported U.S. sales to specific shipments from Bedini. The petitioners state that this would not have been an undue burden on Bedini, and that Bedini's persistent denial that it could not do its calculations in this matter show that Bedini was trying to evade complying with the Department's request for information. Thus, as adverse facts available, the petitioners contend that the Department should apply the highest reported per-unit expenses for these items to all relevant sales. Respondent's Argument: Bedini disagrees with the petitioners, arguing that it has properly calculated its movement expenses and inventory carrying costs. Bedini contends that it and US&A had a limited amount of time in which to respond to the Department's questionnaire after being chosen as a voluntary respondent, and it did not have the resources necessary to carry out the same U.S. sales data calculations that it did in the concurrent French investigation for U-SI (US&A is also the affiliated U.S. selling agent for U-SI). Moreover, Bedini argues that transaction-specific information was not readily available, as US&A and Bedini record their sales data in different, non-compatible formats. Bedini contends that it followed the Department's questionnaire instructions with respect to the use of a reasonable allocation methodology, and the Department reviewed this methodology and found no discrepancies at verification. Therefore, Bedini argues that the Department should ignore the petitioners' arguments and should not use facts available for these expenses. Department's Position: We disagree with the petitioners. We found that Bedini used a reasonable methodology for calculating and reporting these expenses. Moreover, we disagree that Bedini did not comply with the Department's request for information. Thus, because Bedini, consistent with 19 CFR 351.401(g), used a reasonable methodology for reporting these expenses that was verified by the Department, and provided information that was requested by the Department in a timely manner, we are not using facts available with respect to Bedini's calculations for these expenses for the final determination. Comment 14: Methodology for Calculating Bedini's U.S. Credit Expenses Petitioners' Argument: The petitioners claim that Bedini, in calculating its U.S. credit expenses for its consignment sales, failed to take into consideration the entire time from shipment to the customer. The petitioners argue that, because it changed the reporting of its shipment date to coincide with the withdrawal of the merchandise by the customer, Bedini failed to account for any time that the consignment merchandise sat in the consignment customer's warehouse. Thus, the petitioners contend that, for the final determination, the Department should correct Bedini's credit expenses so that they reflect the full credit period. Respondent's Argument: Bedini disagrees, stating that the Department fully verified Bedini's date of sale methodology with respect to consignment sales and found no discrepancies. Bedini argues that any expenses incurred by US&A for its consignment inventory up the 15th day of the month prior to invoicing are reported in U.S. inventory costs. Any costs after that point up until the date of customer payment are, according to Bedini, properly included in U.S. credit expenses. Thus, Bedini contends that the petitioners' argument is without merit. Department's Position: We disagree with the petitioners and are not revising Bedini's reported U.S. credit expenses for consignment sales. As noted in the Department's questionnaire, it is the Department's practice to calculate U.S. credit expense using the number of days between date of shipment to the customer and date of payment. Bedini has properly reported its credit expenses using this time period as part of its calculation methodology. Moreover, as pointed out by Bedini, any costs incurred with respect to consignment sales being held in inventory prior to shipment to the customer would properly be reported in U.S. inventory carrying costs. The Department found no inconsistencies with the reporting of either of these expenses at verification. Thus, there is no need to revise the U.S. credit expense calculation for consignment sales. Comment 15: Adjustments to Bedini's Reported Costs to Reconcile With the General Ledger Petitioners' Argument: The petitioners argue that the Department should revise Bedini's reported cost of manufacture ("COM") and general and administrative ("G&A") expenses because they do not reconcile with Bedini's general ledger. The petitioners argue that the Department should increase both COM and G&A for Bedini to take this differential into account. Respondent's Argument: Bedini argues that the petitioners' assertions that Bedini's reported COM and G&A expenses do not reconcile with Bedini's general ledger are merit less. Bedini argues that, though there may be small differences between the reported G&A and the general ledger, as adjusted for taxes, Bedini used the higher figure in its costs to be conservative. With respect to COM, Bedini argues that the difference between the correct COM and the general ledger is extremely small. Thus, the Department should use Bedini's reported G&A and COM. Department's Position: Based on our review of record evidence, we find that the methodology and reconciliation methods used by Bedini with respect to these costs are reasonable and these costs do, in fact, reconcile with Bedini's general ledger. Thus, we disagree with the petitioners and are not revising Bedini's G&A and COM for the final determination. Comment 16: Correction to Bedini's Verification Report Respondent's Argument: Bedini notes in its case brief that, in recalculating US&A's indirect selling expenses following verification, the Department did not use US&A's corrected reported sales value for Bedini SSB. Thus, Bedini states that, for the final determination, the Department should revise its calculation to take into account the corrected sales value. Petitioners' Argument: The petitioners disagree, arguing that the call for a correction is both untimely and unsubstantiated. The petitioners first argue that, according to 19 CFR 351.301(c)(1), "an interested party may submit factual information to rebut, clarify, or correct the factual information no later than 10 days after the date such factual information is served on the interested party." The petitioners argue that Bedini did not recommend this correction until long after that deadline. The petitioners also argue that Bedini failed to cite the source of the corrected figure it used in its revised calculation. Finally, the petitioners argue that, if the Department makes any revisions, it should revise the sales revenue from the reported total for all sales to the total sales revenue for the subject merchandise (i.e. based on sales revenue of SSB sold by Bedini and not US&A's sales revenue from Bedini merchandise). Department's Position: Based on the information on the record, the sales value number utilized by the Department to recalculate Bedini's indirect selling expense ratio was not correct. Thus, for the final determination, the Department is revising its calculation of Bedini's indirect selling expense ratio. We further disagree with the petitioners that any other revisions to the net sales value for Bedini should be made, as the Department thoroughly verified Bedini's indirect selling expense calculation and found that the methodology used to calculate this expense was reasonable. Comment 17: Application of Adverse Facts Available to Cogne Petitioners' Argument: The petitioners assert that, consistent with the Preliminary Determination, the Department should continue to assign total adverse facts available to Cogne given its failure to act to the best of its ability in complying with the Department's request for information. However, the petitioners disagree with the Department's choice in the Preliminary Determination of using as adverse facts available the highest price-to-price margin, even though there were higher price-to-constructed value ("CV") margins. The petitioners further disagree with the Department's preliminary finding that the price-to-CV margin calculations in the petition could not be fully corroborated. As adverse facts available for Cogne, the petitioners urge the Department to use the higher of the highest margin contained in the petition or the highest margin calculated for any respondent in this investigation. The petitioners assert that the cost data contained in the petition are corroborated by COP data available to the Department from among the four cooperative respondents. The petitioners conclude that, given that the price-to-CV margins can be corroborated based on data reasonably available on the record of this investigation, the Department should use the highest margin from the petition, in this case a price-to-CV margin, which would prevent Cogne from benefitting from its uncooperative behavior. Department's Position: We agree, in part, with the petitioners. As we stated in the Preliminary Determination, it is the Department's standard practice in an investigation to use as adverse facts available the higher of (1) the highest margin stated in the notice of initiation, or (2) the highest margin calculated for any respondent to this investigation. See, e.g., Notice of Preliminary Determinations of Sales at Less Than Fair Value: Certain Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From Japan and Certain Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From Japan and the Republic of South Africa, 64 FR 69718, 69722 (December 14, 1999), followed in Notice of Final Determinations of Sales at Less Than Fair Value: Certain Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From Japan and Certain Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From Japan and the Republic of South Africa, 65 FR 25907 (May 4, 2000); and Notice of Preliminary Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Korea and Germany, 63 FR 10826, 10847 (March 5, 1998), followed in Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Korea and Germany, 63 FR 40433 (July 29, 1998). However, we disagree with the petitioners' conclusion that the CV-to- price margins can be corroborated based on data reasonably available on the record of this investigation. Pursuant to section 776(c) of the Act, when the Department relies on secondary information (such as the petition) in using the facts otherwise available, it must, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. The SAA clarifies that "corroborate" means that the Department will satisfy itself that the secondary information used has probative value (see SAA at 870). Therefore, as the CV-to-price margins in the petition contained the highest margins, we first attempted to corroborate the COP data used to calculate the CV-to-price margins in the petition by the COP data available to the Department. In order to corroborate this secondary information within the meaning of section 776(c), we analyzed, to the extent practicable, the reliability and relevance of the available information by focusing our analysis around information from which we could draw a reasonable nexus. Accordingly, (1) we chose the three most common grades (303, 304/L, 316L) from the five grades used in the petition to calculate margin percentages and (2) after reviewing each company's financial statements and product characteristics, we selected Valbruna as our independent source of information because its product characteristics (i.e., grade and size) match those used in the petition to calculate the CV-to-price margins. As explained in the Memorandum from John Brinkmann to Susan Kuhbach, Preliminary Determination of Stainless Steel Bar from Italy: Corroboration Memorandum ("Corroboration Memo"), dated July 26, 2001, we were unable to corroborate the COP component of the CV margin calculation with Valbruna's COP information, and because price-to-price margin calculations were available, did not attempt to further corroborate the petition CV-to-price margin calculations. As we were able to corroborate the price-to-price data by the price information contained in Valbruna's U.S. sales database, we preliminarily assigned to Cogne the highest margin listed in the petition for price-to-price sales, 33.00 percent. See Corroboration Memo. Therefore, we disagree with the petitioners that it is possible to corroborate, within the meaning of section 776(c), the CV-to-price margins by the data reasonably available on the record of this investigation. Accordingly, for the final determination, we are continuing to assign Cogne a 33.00 percent margin as the highest margin for which we could corroborate the secondary information. Comment 18: Use of Facts Available to Value Foroni's Packing Costs Respondent's Position: Foroni states that the Department's use of an adverse facts available value for packing costs with respect to shipments from Foroni to its affiliate Foroni Metals of Texas ("FMT") in the Preliminary Determination was unwarranted. Foroni argues that its packing costs are fully accounted for in the company's General Technical Expenses cost center, which was included in Foroni's reported G&A expense ratio. As a result, Foroni contends that the Department grossly overstated Foroni's packing costs and also double counted these costs when it applied a value based on facts available. In support of this position, Foroni argues that the cost verification team verified that the reported amount for packing materials was included in the general technical consumable materials category in the fiscal year 2000 trial balance. Therefore, Foroni submits that the Department should rely on Foroni's original submissions in which de minimis packing costs are included, along with the small portion of the labor costs of the shipping department attributable to packing, as fixed overhead costs. However, if the Department chooses to continue to allocate an amount for packing costs, it should use the value provided by Foroni in its August 3, 2001 submission and reduce Foroni's G&A expense ratio. Petitioners' Position: The petitioners believe that the Department should continue to apply facts available for Foroni's packing expenses in the final determination. The petitioners argue that in sections B and C of the Department's questionnaire and the Department's supplemental questions, Foroni was asked to report its packing costs. In response to these questions, Foroni replied that it had no packing expenses. According to the petitioners, it was not until after the Preliminary Determination that Foroni reported partial packing expenses, but this information was not verified by the Department. See Foroni's August 3, 2001 submission. Additionally, in Foroni's Case Brief, an estimated packing cost was submitted that Foroni argues should be deducted from the G&A expense ratio. The petitioners argue this cost was not verified and that it is not clear whether Foroni accounts for its packing costs in the company's G&A expense ratio or in the company's fixed overhead costs. See petitioners' letter to the Department, dated November 28, 2001, at page 5. Therefore, the petitioners contend there should be no adjustment for packing for home market sales, no reduction of the G&A expense ratio or production costs, and that the Department, pursuant to section 776(a)(2)(A) of the Act, should continue to use facts available to determine the dumping margin in this case. Department's Position: We agree with Foroni. Accordingly, we are using the packing costs submitted by Foroni on August 3, 2001, to value the packing expense related to shipping the subject merchandise from Italy to the United States, inasmuch as this information was submitted by Foroni in a timely manner pursuant to section 351.301(b)(1). Additionally, as we were able to verify that the packing material costs were included in Foroni's COM, we reduced Foroni's reported G&A ratio appropriately. See Memorandum from Robert Greger through Theresa Caherty to Neal M. Halper, "Verification Report on the Cost of Production and Constructed Value Data Submitted by Foroni S.p.A." ("Foroni COP Verification Report"), dated October 24, 2001, at 19 and Memorandum from Team to John Brinkmann, "Final Determination Calculation Memorandum for Foroni S.p.A. and Foroni Metals of Texas," dated January 15, 2002 ("Foroni Calc Memo"). Comment 19: Foroni's Advertising Expenses Petitioners' Position: The petitioners argue that Foroni did incur direct advertising expenses related to its U.S. sales. The petitioners state that during the Department's verification of FMT, the Department noted that FMT officials participated in an offshore technology conference, the participants of which included FMT's customers' customers. Therefore, the petitioners contend that the Department correctly found these expenses related to the conference were advertising expenses and should be included as direct selling expenses in the Department's calculation of Foroni's final margin. Respondent's Position: Foroni does not agree that the Department should view FMT's participation in the annual Houston Offshore Technology Conference as a direct advertising expense. Foroni states that the conference included both indirect and direct customers along with Foroni's competitors, and that FMT attended the conference in order to build name recognition for all of its products (stainless steel bar, stainless steel billets, and superalloys). Therefore, Foroni argues that the associated costs were correctly included as part of Foroni's reported indirect selling expenses. However, Foroni states that if the Department determines to account for the costs of participating in this conference by FMT as a direct selling expense, the Department should appropriately reduce Foroni's reported indirect selling expenses. Department's Position: We agree with the petitioners and, for this final determination, we are treating FMT's expenses pertaining to its participation in the Offshore Technology Conference as a direct selling expense. As noted in the Memorandum from Anthony Grasso to John Brinkmann, "Verification of the Constructed Export Price Sales of Foroni S.p.A.'s U.S. Affiliate, Foroni Metals of Texas, in the Antidumping Duty Investigation of Stainless Steel Bar from Italy," dated October 23, 2001 ("Foroni CEP Verification Report"), since FMT sells its products through distributors, FMT's participation in this conference could be viewed as sales promotion for its customer's customer. See Foroni CEP Verification Report, at 14. However, we agree with Foroni that, as indicated in the Foroni CEP Verification Report, Foroni's reported indirect selling expenses should be reduced by the same amount. See Foroni CEP Verification Report, Section VIII, Indirect Selling Expenses, at 16-17 and the Foroni Calc Memo. Comment 20: Foroni's Calculation of Direct Materials Respondent's Argument: Foroni argues that the Department should reduce its reported CONNUM-specific costs for the overstatement of direct materials identified during the cost verification. Foroni asserts that the Department verified that the overstatement was the result of a conservative assumption regarding the nickel content of its stainless steel scrap inputs and the use of an average POI exchange rate in the software program used to calculate direct materials costs. When the effects of these two errors were corrected, according to Foroni, the estimated total direct materials cost closely approximated the actual cost of raw materials consumed as recorded in the company's cost accounting system. Foroni contends that these errors should be corrected by allocating the aggregate overstatement of direct materials cost over only Foroni products that use stainless steel scrap as an input. Foroni maintains that the Department misunderstood its explanation of the products affected and allocated the overstatement over both stainless steel and super alloy production. Foroni asserts that it explained during verification that stainless steel scrap is only used for production of stainless steel products and that the overstatement does not affect super alloys. Petitioners' Argument: Petitioners do not refute Foroni's argument that the Department should reduce Foroni's reported CONNUM-specific costs for the overstatement of direct materials. Petitioners contend, however, that the Department should not decrease Foroni's direct material costs by more than the overstatement specified in the Foroni COP Verification Report. According to petitioners, Foroni had opportunities to explain which costs were overstated. Department's Position: We agree that the Department should decrease Foroni's reported CONNUM-specific costs for the overstatement of material costs identified at verification. In accordance with section 773(f)(1)(A) of the Act, a respondent's costs should be calculated based on the records of the exporter or producer if such records are kept in accordance with home country GAAP and reasonably reflect the costs of production. At verification, we found that in calculating its CONNUM-specific cost, Foroni overstated the cost of direct materials consumed in production during the POI. In regard to how the overstatement of direct materials cost should be allocated across products, we agree with Foroni only in part. We note that at verification Foroni explained that the nickel content portion of the overstatement related only to stainless steel products. Therefore, we agree that this portion of the overstatement should be allocated only over stainless steel production. We note, however, that the portion attributable to the average exchange rate was related to all products and should be allocated to all production. Comment 21: Exclusion of Foroni's Directors' Fees from the G&A Expense Ratio Respondent's Argument: Foroni argues that its directors' fees are equivalent to dividends and should not have been included in the adjusted G&A expense ratio calculation in the Preliminary Determination. Foroni maintains that the directors' fees are not set in advance and are determined annually by the board of directors, who constitute all shareholders of the company, as a substitute for dividends. Foroni notes that in fiscal year 2000 the company did not pay any dividends to the Foroni family. According to Foroni, the directors' fees are the means by which the owners of the business receive a return on their equity. Foroni argues that if these payments had been made as dividends there is no question that they would have been excluded from the calculation of COP. Foroni asserts that it is not requesting special treatment, but that form should not take precedence over substance simply because the Foroni family chose to make the payments in the form of directors' fees for legitimate tax purposes. Foroni cites Tapered Roller Bearings, Finished and Unfinished, and Parts Thereof from Japan; Final Results of Antidumping Duty Administrative Review, 57 FR 4951, 4957 (February 11, 1992) ("Tapered Roller Bearings from Japan") and contends that when the Department has concluded that payments to directors are equivalent to dividends it has not included those payments in G&A. It is thus proper, Foroni claims, to look past form to substance in determining the proper treatment for these returns on shareholders' equity. Petitioners' Argument: The petitioners contend that the Department properly adjusted Foroni's G&A ratio calculation to include directors' fees. The petitioners assert that all evidence on the record supports the Department's decision to treat the directors' fees as an expense, and not as dividends. The petitioners point out that Foroni classifies the fees in its normal books and records as an expense and that the fees are recorded in the G&A section of the companies financial statements. The petitioners claim that Foroni's reference to Tapered Roller Bearings from Japan to buttress its argument is misplaced. The key point that Foroni fails to note, petitioners assert, is that in Tapered Roller Bearings from Japan the payments in question were paid out of retained earnings and the Department determined that they were dividends and not expense items. In the instant proceeding, the petitioners note, the payments were not paid out of retained earnings but rather classified as an expense item. Department's Position: We disagree with Foroni that its directors' fees should be excluded from the calculation of the G&A ratio. While Foroni maintains that its directors' fees are equivalent to dividends and should not be treated as an expense, record evidence shows that the company recorded these fees as an expense in the G&A section of its audited financial statements. Under section 773(f)(1)(A) of the Act, the Department is directed to calculate costs based on the normal records of a producer or exporter if those records are kept in accordance with the producer's home country GAAP and reasonably reflect the costs of producing the merchandise under investigation. Foroni does not refute the fact that its directors' fees are recorded in its books as an expense in accordance with Italian GAAP. Nor does Foroni provide evidence that its directors' fees unreasonably reflect the cost of producing the merchandise under consideration. Instead, Foroni focuses on arguing that its directors' fees should be considered as analogous to dividends. We find Foroni's arguments to be unpersuasive. We agree with petitioners that Foroni's reference to Tapered Roller Bearings from Japan is misplaced. In that case, the payments in question were considered similar to a dividend because they were paid directly out of retained earnings. Because we find no record evidence to support the conclusion that the Department should depart from the treatment of directors' fees in Foroni's audited financial statements, we have continued to include the directors' fees in the G&A ratio calculation for the final determination. Comment 22: Foroni's Short-Term Bond Interest Offset Respondent's Argument: Foroni contends that its short-term bond interest should be allowed as an offset to interest expense in the calculation of the financial expense ratio. According to Foroni, the Department incorrectly excluded this offset in the Preliminary Determination. Foroni claims that the underlying bonds that generated the interest are issued by banks and are of one or two months duration. Further, Foroni asserts, the Department confirmed this at verification. Foroni cites Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat- Rolled Carbon-Quality Steel Products from Taiwan, 65 FR 34658 (May 31, 2000) and accompanying Issues and Decision Memorandum, at Comment 13 ("Cold-Rolled Steel from Taiwan"), and notes that the Department has previously recognized that interest income from short-term sources should be allowed as an offset to financial expense. Petitioners' Argument: The petitioners did not comment on this issue. Department's Position: We agree with Foroni that its short-term bond interest income should be allowed as an offset in the financial expense ratio calculation. At verification, we reviewed Foroni's interest income accounts and determined that the claimed income offset was from short-term sources. In calculating COP and CV, it is the Department's normal practice to allow a respondent to offset financial expenses with interest income derived from short-term sources. See, e.g., Cold-Rolled Steel from Taiwan; Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from the United Kingdom, 64 FR 30688, 30710 (June 8, 1999); and Notice of Final Determination of Sales at Less Than Fair Value: Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909, 8933 (February 23, 1998). Comment 23: Foreign Exchange Gains & Losses Petitioners' Argument: The petitioners argue that the Department should continue to exclude exchange gains and losses related to accounts receivable from the calculation of Foroni's financial expense ratio. The petitioners assert that the facts on the record and the Department's precedent support the decision to exclude these gains and losses in the Preliminary Determination. According to the petitioners, it is the Department's longstanding practice to exclude exchange gains and losses from accounts receivable from the calculation of COP and CV. Respondent's Argument: Foroni does not challenge petitioners' assertion. Department's Position: We agree with petitioners that the Department should continue to exclude exchange gains and losses realized on accounts receivable from the calculation of Foroni's financial expense factor. Our normal practice is to distinguish between exchange gains and losses realized or incurred in connection with sales transactions and those associated with manufacturing activities. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Flat- Rolled Carbon-Quality Steel Products from Brazil, 64 FR 38756, 38786 (July 19, 1999) and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17334 (April 9, 1999) ("SSWR from Canada"). We normally include in the calculation of COP and CV the foreign exchange gains and losses that result from transactions related to a company's manufacturing activities. We do not consider exchange gains and losses from sales transactions to be related to the manufacturing activities of the company. See, e.g., SSWR from Canada and Notice of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR 9177, 9182 (February 24, 1998). Accordingly, for purposes of the final determination, we have excluded Foroni's foreign exchange gains and losses arising from accounts receivable from the calculation of COP and CV. Comment 24: Foroni's Yield Loss Petitioners' Argument: The petitioners argue that the Department should increase Foroni's reported raw material cost to account for yield loss. The petitioners assert that Foroni has provided no explanation of its treatment of scrap throughout the investigation and that the Department was unable to perform any verification steps or calculations necessary to satisfy itself that scrap is accounted for properly. According to the petitioners, Foroni's explanation of its scrap valuation is not sufficient considering the size of its scrap loss percentage. The petitioners contend that it is unreasonable to accept that Foroni would not track scrap recoveries in its cost accounting system. Based on the lack of data from Foroni, the petitioners maintain, the Department can not ignore this significant deficiency and must adjust Foroni's costs to account for scrap loss by using facts available. Respondent's Position: Foroni argues that the petitioners are attempting to create an issue where none exists and that there is no basis for making an adjustment to its costs to account for yield loss. Foroni refutes the petitioners' argument that it has provided no explanation of its treatment of scrap in this proceeding. According to Foroni, the company explained in its questionnaire responses that internally generated scrap is always reintroduced into production as raw material. Moreover, Foroni contends, the Department verified the company's treatment of yield loss on the basis of records presented and a detailed visual inspection of the company's mill. Foroni argues that the Department did not ignore this issue as the petitioners claim and was fully satisfied with the explanation provided by the company of its treatment of yield losses. Department's Position: We disagree with the petitioners that the Department should increase Foroni's reported raw material cost to account for yield loss. The Department verified the reported cost of manufacturing submitted in Foroni's questionnaire responses and was satisfied that both material and conversion costs were reported on a fully yielded basis. See Foroni COP Verification Report, at 14, 16. The Department was also satisfied with Foroni's explanation of its treatment of scrap and performed the verification steps that it deemed necessary to verify that scrap loss was being accounted for properly. We therefore find no basis on which to conclude that we should adjust Foroni's reported raw material cost for yield loss at the final determination. Comment 25: Use of Rodacciai's Reported Data Petitioners' Argument: The petitioners contend that, despite several opportunities to correct its data, the cost and sales data submitted by Rodacciai S.p.A. ("Rodacciai") contain serious flaws, thus demonstrating a failure to cooperate to the best of its ability and warranting the application of facts available. First, Rodacciai misreported home market sales to affiliated parties. In its original questionnaire response, Rodacciai stated that it only made sales to one affiliated customer in the home market. In a supplemental questionnaire response, Rodacciai identified sales to four additional home market affiliated customers. The total sales quantities in the home market sales file to two of these four additional affiliated customers do not match the total sales quantities to these affiliates listed in Rodacciai's narrative response. According to the petitioners, Rodacciai either did not report these home market affiliated party sales or reported these sales as sales to an unaffiliated customer. If such sales were considered unaffiliated party sales, the petitioners assert that the Department was prevented from conducting an arm's length test in the Preliminary Determination, thereby potentially including non-arm's length prices in the pool of home market sales used as the basis of normal value. Second, the petitioners argue that Rodacciai failed to report the actual transaction price and quantity for its EP sales to one of its customers as those terms appeared on the actual sales documentation, thereby resulting in an inaccurate and incomplete U.S. sales database. Given Rodacciai's decision not to conform with the Department's instructions to report gross unit price and sales quantity for its EP sales as those items appeared on the sales documentation, the petitioners contend that Rodacciai has failed to act to the best of its ability. See, e.g., Issues Memorandum for the Final Determination, Antidumping Duty Investigation of Certain Hot-Rolled Steel Flat Products from Indonesia, 66 FR 49628 (September 28, 2001) (Comment 1). Accordingly, the petitioners urge the Department not to rely upon Rodacciai's converted prices and quantities for the EP sales in question, but should, instead, rely only on the verified CEP sales. As facts available the petitioners suggest applying the highest calculated margin for individual CEP sales to the EP sales in question. Third, the petitioners contend Rodacciai has included in its U.S. sales database subject merchandise produced by producers other than Rodacciai, inasmuch as Rodacciai reported CEP sales of products in sizes greater than that which Rodacciai allegedly has the capability of producing. Thus, the petitioners assert that the Department has sufficient grounds to reject Rodacciai's submitted data. Alternatively, the petitioners suggest that the Department exclude products that apparently were not manufactured by Rodacciai from the final margin analysis. Respondent's Argument: Rodacciai counters that the Department should rely on Rodacciai's reported data for the final determination. First, with respect to Rodacciai's home market sales to affiliated parties, Rodacciai claims that all affiliated parties had been disclosed in its original questionnaire submission. Rodacciai acknowledges that it misreported the customer relationship for one of its affiliated customers, but asserts that it would have disclosed this minor correction at its Italian verification had one taken place. Also, Rodacciai claims that it was unable to report the downstream sales of this affiliated customer because it is a competitor who would not release that information for Rodacciai. Further, with respect to certain customer codes identified as "Rodacciai," Rodacciai explains that these codes were for trial samples to Rodacciai's sales office and were not sales by undisclosed affiliated resellers. Also, Rodacciai reiterates that the record demonstrates that Rodacciai, in accordance with the Department's instructions, properly excluded it sales to affiliates that resell the subject merchandise, and instead reported the downstream sales by those affiliates. Rodacciai further contends that the Department should not disregard Rodacciai's entire home market database over these disputed sales to affiliated resellers, which are an insignificant portion of Rodacciai's overall home market sales and represent sales that are disregarded from the Department's analysis given that they do not pass the arm's-length test. Second, Rodacciai counters that, contrary to the petitioners' allegations concerning Rodacciai's actual transaction prices and quantities, the gross unit prices reported in the sales database do match the sales documentation provided by Rodacciai. Also, Rodacciai claims that certain sales with minor errors cited by the petitioners actually pertain to CEP sales that had input errors, not conversion errors, and, therefore, the petitioners' conclusions concerning the prices and quantities for EP sales are erroneous. Finally, Rodacciai contends that the petitioners' assertions concerning the data submitted by Rodacciai's affiliated U.S. reseller, Sovereign Specialty Steel ("Sovereign"), are unfounded given that the Department verified Sovereign's response, including errors submitted at the onset of verification and observations from Rodacciai's August 8, 2001 submission. Third, regarding Rodacciai's size reporting, Rodacciai contends that evidence from its section D questionnaire responses indicates that Rodacciai can produce hot-rolled bars and smooth turned cold finished bar of up to 80 millimeters (3.15 inches), but that the largest size reported is 70 millimeters (2.76 inches). See Rodacciai's April 18, 2001 questionnaire response, at Appendix D-1. Thus, contrary to the petitioners' contentions and an incorrect statement by a Sovereign official at the CEP verification regarding the upper limit of what Rodacciai can actually produce, Rodacciai contends that it is capable of producing the sizes that it reported in the CEP sales file. Department's Position: Section 776(a)(2) of the Act provides that "if an interested party or any other person (A) withholds information that has been requested by the (Department) under this title, (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 782, (C) significantly impedes a proceeding under this title, or (D) provides such information but the information cannot be verified as provided in section 782(i), the (Department) shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title." Pursuant to section 782(e) of the Act, the Department "shall not decline to consider information that is submitted by an interested party and that is necessary to the determination, even if that information does not meet all the applicable requirements established by the (Department), 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 has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by the Department with respect to the information, and (5) the information can be used without undue difficulties." In this instance, Rodacciai provided the Department with a complete response, including an explanation of its reporting methodology. Rodacciai has not significantly impeded this investigation and its CEP sales response was verified by the Department. Furthermore the information that was supplied by Rodacciai was submitted by the deadline established for its submission, was subject for verification, is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination, and can be used without undue difficulties. Moreover, Rodacciai had not proved to be uncooperative or unresponsive in its proceedings. Rodacciai has generally responded to the Department's requests in a complete and timely manner, and has provided documents requested by the Department throughout the course of this proceeding. Rodacciai has sufficiently described its reporting methodology and has provided complete data. We have reviewed the petitioners' claims and find that they are without merit. First, based on record evidence, we find that Rodacciai has completely reported its home market sales to affiliated parties in accordance with the Department's requirements. With respect to the misreported customer relationship, we have corrected that error for the final determination. Second, concerning Rodacciai's actual transaction prices and quantities, we have carefully reviewed the reported EP sales and compared the amounts reported in the sales database to sample documentation submitted on the record. We have noted no discrepancies between the actual documentation and the converted amounts from Rodacciai's accounting system that were reported in the sales database. Finally, regarding Rodacciai's size reporting, we agree that record evidence supports Rodacciai's contention that Rodacciai can actually produce and did sell the sizes reported in the CEP sales file. Thus, we find no reason to decline its consideration pursuant to section 782(e) of the Act and, accordingly, we are using the data provided by Rodacciai for the final determination. Comment 26: Rodacciai's Reported Home Market Date of Sale Petitioners' Argument: For all of its home market sales, Rodacciai used the date of invoice as the date of sale, whereas in the U.S. market Rodacciai used multiple dates of sale, including the order confirmation date and the invoice date. The petitioners contend that the Department should use the order date as the date of sale for Rodacciai's produced-to- order home market sales because, according to Rodacciai's questionnaire responses, this is the date on which the material terms of sale were determined. The petitioners request that the Department adjust Rodacciai's reported home market sales by excluding those sales that were made outside the POI, based on a date of sale methodology that uses a date of sale when the material terms of sale were first determined. To accomplish this, the petitioners suggest constructing a date of sale for Rodacciai's produced- to-order sales in the home market - which, according to Rodacciai, experienced a six to seven week lag between order and delivery of the merchandise - by deducting 45.5 days (i.e., 6.5 weeks) from the reported date of shipment. Additionally, the petitioners argue that the Department should not accept Rodacciai's reported invoice date as the date of sale because, in many instances, the invoice date on its home market sales lagged behind the shipment date, thereby rendering the selected date of sale methodology inappropriate. See, e.g., Stainless Steel Bar from Japan: Final Results of Antidumping Administrative Review, 65 FR 13717 (March 14, 2000), and accompanying Issues and Decision Memorandum, at Comment 1; Notice of Final Determination of Sales at Less Than Fair Value; Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 FR 38756, 38768 (July 19, 1999). Thus, the petitioners conclude that the Department should use the date of shipment as the date of sale for Rodacciai's home market sales from inventory and use the constructed order date as the date of sale for Rodacciai's home market produced-to-order sales. Respondent's Argument: Rodacciai contends that the Department should continue to accept its reported home market date of sale. First, Rodacciai argues that the petitioners' proposed constructed date of sale for produced-to-order merchandise is unreasonable and unsupported by record evidence. Rodacciai argues that the six to seven week delivery period referenced by the petitioners refers only to welding grades of stainless steel bar and not to all produced-to-order home market sales. Also, Rodacciai notes that, in addition to produced-to-order sales, there are other types of selling situations that would not result in a warehousing expense: (1) the expense on sales through the Ancona warehouse are paid for by the unaffiliated sales agent, who is compensated through a sales commission; (2) sales originating from the mill production warehouse; and (3) sales from Redaelli, a separate corporate entity, do not have warehousing expenses because Redaelli is not a distribution warehouse. Therefore, Rodacciai concludes that the petitioners' suggested constructed date of sale for all produced-to-order sales is unreasonable and unsupported. Second, Rodacciai contends that the petitioners' proposed use of date of shipment for stock sales is unnecessary because a review of the home market sales file demonstrates that there were no home market sales reported in which the date of shipment was prior to the POI and, therefore, changing the methodology would not change the universe of sales. Department's Position: We disagree with the petitioners in part. The Department's regulations, at 19 CFR 351.401(i), provide that, in identifying the date of sale of the foreign like product, the Department normally will use the date of invoice, as recorded in the exporter or producer's records kept in the ordinary course of business. However, the Department may use a date other than the date of invoice (e.g., order confirmation date) if satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale (e.g., price, quantity). In its original questionnaire response dated March 22, 2001, Rodacciai conceded that the material terms of sale were generally fixed at the time of order confirmation. However, Rodacciai stated that the amount of time that elapsed between the order confirmation date and the date of shipment is insignificant (1 to 7 days). See Rodacciai's March 22 response, at 22- 23. Rodacciai further noted that prices and quantities almost never change after the order is confirmed, and that Rodacciai invoices the home market customer at the end of each week based upon the cumulative shipments to the customer from the distribution warehouse during the week. Id. at 17. Thus, Rodacciai contends that there is only a two day difference between the shipment date and the invoice date. Further, Rodacciai was not aware of any instances in which invoicing differed from the stated practice. Id. In its supplemental questionnaire response dated June 14, 2001, Rodacciai explained that it is extremely difficult to retrieve home market sales on the basis of order date, because the order date is deleted from Rodacciai's computer system after the goods are shipped. See Rodacciai's June 14 response, at 15. Given the large number of home market sales, manually reviewing the company's paper records to identify and input all sales with order dates inside the POI would be extremely difficult to execute and verify, particularly given that a single invoice can have line items from more than one order. Based on our review of record evidence, we find that the terms of sale are typically established by the order confirmation date. As noted above, the Department normally will use the date of invoice, as recorded in the exporter or producer's records kept in the ordinary course of business. In this instance, it is clear that, while the material terms of sale may not have changed after the order confirmation date, this date is not kept by Rodacciai in its ordinary course of business. Moreover, to require Rodacciai to report its home market sales database based on order confirmation date would place an undue burden on the respondent. Furthermore, we have reviewed sample home market sales documentation and agree with Rodacciai's assertion that the time lag between the order confirmation date and the date of invoice is insignificant, not the six-to- seven week lag asserted by the petitioners. However, we also find that using the invoice date may not be appropriate given that, as Rodacciai acknowledged, the date of shipment may proceed the date of invoice in light of Rodacciai's invoicing practices. Accordingly, for this final determination, we are using the earlier of the date of invoice or the date of shipment as the date of sale for Rodacciai's reported home market sales. Comment 27: Additional Sales Submitted by Rodacciai Petitioners' Argument: On August 8, 2001, prior to the onset of the CEP verification, Rodacciai submitted a list of minor corrections that included certain additional U.S. sales that Rodacciai had inadvertently excluded from the U.S. database. The petitioners argue that these additional sales contain unsupportable or erroneous information, rendering the list unreliable and unusable. Specifically, the petitioners contend that certain of these sales were reportedly either (1) made prior to the POI; (2) of a product type not produced by Rodacciai; or (3) had a reported inventory carrying cost that appears inaccurate. In the absence of complete source documentation for these sales, the petitioners assert that the Department cannot determine whether these sales in fact had the above-described errors or whether there were other errors on these additional sales. Because it is too late for the Department to permit Rodacciai to explain or correct the apparent errors in these additional CEP sales, and given that these sales are not complete, verifiable, or can be used without undue difficulties, the petitioners assert that the Department should not rely upon this information. Instead, the petitioners urge the Department to resort to partial facts available. As partial facts available, the petitioners suggest assigning the highest calculated individual margin to the total sales quantity of these additional CEP sales. Respondent's Argument: Rodacciai counters that the Department should use the verified CEP sales data. Rodacciai contends that it had submitted its additional U.S. sales in accordance with the Department's instructions and normal procedures. Rodacciai notes that the Department verified Sovereign's reporting of CEP sales data and contends that it has acted to the best of its ability to comply with the Department's requests. Further, Rodacciai notes that the Department verified its CEP sales response, including the information in the August 8, 2001, submission, and, therefore, its response was complete and verifiable. Rodacciai notes that, in fact, the Department verified its minor corrections presented at verification and noted only one minor discrepancy. Moreover, Rodacciai contends that the Department can use its submitted additional information without undue difficulties. Finally, Rodacciai agrees with the petitioners that certain CEP sales with an order date prior to the POI should not have been reported because the order date is the proper date of sale on these particular sales, but Rodacciai does not believe it should be penalized for this error given that it affected only a few sales. Second, with respect to sales of sizes that Rodacciai allegedly does not produce, Rodacciai contends that it can produce such items and Sovereign does sell such items. Third, Rodacciai agrees with the petitioners that the inventory carrying cost it notes in its brief is incorrect, and argues that the Department should simply use a zero or the average inventory carrying cost for this sale. Department's Position: We disagree with the petitioners. Pursuant to section 782(e) of the Act, the Department shall not decline to consider information that is submitted by an interested party and that is necessary to the determination, even if that information does not meet all the applicable requirements established by the (Department), 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 has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by the Department with respect to the information, and (5) the information can be used without undue difficulties. The additional sales submitted by Rodacciai meet the threshold of section 782(e) and, accordingly, we are using these sales for the final determination. First, the information was submitted by the deadline established for its submission, which, in this case, was one week prior to the start of the first verification, or August 8, 2001. Second, the additional sales submitted by Rodacciai could be verified. In fact, one of the additional sales submitted by Rodacciai in its August 8, 2001 submission was reviewed during the Department's sales traces at the CEP verification. Third, the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination, as Rodacciai, pursuant to the Department's instructions, submitted a database containing the additional sales. Fourth, Rodacciai acted to the best of its ability in providing the information and met the requirements established by the Department with respect to the information. Finally, we have reviewed the information and find that it can be used without undue difficulties. Accordingly, we are accepting these additional sales for use in the final determination, except that we have excluded from our analysis any sales where the date of sale is outside the POI. Also, consistent with the Preliminary Determination, we have set reported negative inventory carrying costs equal to zero. See Final Determination Calculation Memorandum for Rodacciai S.p.A.," dated January 15, 2002. Comment 28: Rodacciai's U.S. Indirect Selling Expenses Petitioners' Argument: The petitioners contend that the Department should revise Rodacciai's reported U.S. indirect selling expense ratio because it appears that Rodacciai inappropriately excluded depreciation expenses incurred by Sovereign in the last three months of the POI, thereby understating the expenses. Respondent's Argument: Rodacciai counters that Sovereign reported the year 2000 portion of its depreciation expense in accordance with its own financial statements for the period January through September 2000, which reflected only that depreciation incurred in the first six months of 2000, but did not include any allocation for the third quarter. Rodacciai notes that this can be confirmed by comparing CEP Verification Exhibit 11 (see Memorandum to John Brinkmann "Verification of the Constructed Export Price Sales of Rodacciai S.p.A. through its U.S. Affiliate, Sovereign Specialty Steel," dated November 1, 2001 ("Rodacciai Verification Report")) with Appendix C-9 of Rodacciai's April 18, 2001 questionnaire response. If the Department does decide to adjust Rodacciai's indirect selling percentage to the amount recommended by the petitioners, Rodacciai argues that the new percentage should be applied to a U.S. gross unit price less early payment discounts and credit adjustments, and should also be applied to CEP sales that have not yet been shipped. Department's Position: We agree with both the petitioners and Rodacciai. As we noted in the Rodacciai Verification Report, the amount of depreciation reported by Rodacciai for 2000 reflected "only the amounts incurred during the first six months, but did not include any allocation for July through September." See Rodacciai Verification Report, at 22. Accordingly, we have revised Rodacciai's reported U.S. indirect selling expense ratio to include the depreciation incurred by Sovereign in the last three months of the POI. Furthermore, we have applied the indirect selling expense ratio to a U.S. gross unit price less early payment discounts and credit adjustments, and to CEP sales that have not yet been shipped. Comment 29: Rodacciai's U.S. Warehousing Expenses Petitioners' Argument: The petitioners note that, at verification, the Department discovered that Rodacciai did not report an amount for warehouse supplies for Sovereign's Illinois warehouse during 2000 because Sovereign did not purchase any new supplies in 2000, but rather used supplies that had been purchased prior to the POI. The petitioners contend that Rodacciai inappropriately omitted the costs associated with warehouse supplies purchased prior to the POI but used during the POI, inasmuch as the costs incurred to support sales made during the POI should be included as part of warehousing expense, regardless of when the suppliers were purchased. Accordingly, the petitioners assert that the Department should revise Rodacciai's reported U.S. warehousing expense to account for Sovereign's unreported costs of warehousing supplies. Respondent's Argument: Rodacciai argues that the Department should not adjust Rodacciai's reported U.S. warehousing expenses because it is inappropriate to ask Sovereign to estimate periodic expenses that do not exist for the POI. Moreover, Rodacciai notes that Sovereign only reported zero expenses for Illinois warehouse supplies for the 2000 portion of the POI. Rodacciai contends that all of the expenses incurred for warehouse supplies during the POI should have been captured by the amount recorded during the 1999 portion of the POI. If the Department agrees with the petitioners and decides to use a surrogate figure for the 2000 portion of the POI, Rodacciai claims that using the cost of warehouse supplies from the New Jersey warehouse would be inappropriate because the New Jersey warehouse has a greater volume of sales than the Illinois warehouse and, therefore, the cost of supplies would be much greater than for the Illinois warehouse. Department's Position: We disagree with the petitioners. At verification, we noted that Sovereign did not report any warehouse supplies for the Illinois warehouse during 2000 because the company had leftover supplies from 1999, so it did not purchase any new supplies in 2000. As Rodacciai correctly contends, these expenses were merely period expenses incurred by Sovereign during its normal course of business. Were these long-term expenses, then Sovereign would have been required to capitalize the expenditures and account for them over the entire period of investigation. However, expenses such as warehouse supplies are short-term in nature and, accordingly, Sovereign need only account for them in the period in which the expenses were incurred. A review of Sovereign's general ledger confirmed that no new warehouse supplies were purchased during January through September 2000. Accordingly, we are only including those warehousing expenses incurred by Sovereign in the 1999 portion of the POI. Comment 30: Rodacciai's U.S. Sales with Missing Date of Payment Petitioners' Argument: For the Preliminary Determination, the Department used the date of the Preliminary Determination (i.e., July 26, 2001) as a surrogate date of payment for those U.S. sales with a missing date of payment. For the final determination, the petitioners argue that the Department should calculate the actual imputed credit expense for those U.S. sales that now have an actual reported date of payment. Based on a review of those U.S. sales that continue to have missing payment information, the petitioners contend that using as a surrogate date of payment the date of the Preliminary Determination or an average of all U.S. sales for which payment was reported would not be representative of Rodacciai's actual payment experience. Accordingly, the petitioners urge the Department to revise its preliminary methodology and use a surrogate date that more reasonably reflects the payment experience by Rodacciai for its U.S. sales. The petitioners suggest using the longest payment period reported by Rodacciai for the rest of its U.S. sales as the surrogate payment period for those sales that Rodacciai did not report a date of payment or, alternatively, using the date of the final determination as the surrogate for those U.S. sales with a missing date of payment. Respondent's Argument: Rodacciai claims that the petitioners' recommended surrogate dates of payment are unduly punitive, particularly since Rodacciai did not have an opportunity to update its payment information at verification as the home market and EP sales verifications were cancelled. For those sales that had missing dates of payment as of the time of verification, Rodacciai suggests that the Department should, consistent with prior cases, use the average payment period for all U.S. sales as a surrogate payment date, which is more neutral than the petitioners' suggested dates. See, e.g., Stainless Steel Plate in Coils from the Republic of Korea, 66 FR 45279, 45280 (August 28, 2001); Certain Corrosion Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 64 FR 2173, 2179 (January 13, 1999). Alternatively, Rodacciai suggests that the Department should, consistent with other prior cases, use the last date of the Sovereign verification as the surrogate payment date. See, e.g., Stainless Steel Sheet and Strip in Coils from France, 64 FR 30820, 30822 (June 8, 1999); Aramid Fiber Formed of Poly Para-Phenylene Terephtalamide from the Netherlands, 63 FR 37516, 37519 (July 13, 1998). Department's Position: We disagree with petitioners' assertion that the Department should use an adverse inference in calculating the imputed credit expense. In this investigation, Rodacciai has not impeded the investigation by providing inaccurate or unverifiable data, nor has it provided data that could not be verified. Therefore, for the final determination, we are using the last day of verification, August 17, 2001, as the date of payment for unpaid home market and U.S. sales, and have recalculated home market and U.S. credit expenses accordingly. See Extruded Rubber Thread From Malaysia; Final Results of Antidumping Duty Administrative Review, 63 FR 12752, 12757 (1998) (citing Static Random Access Memory Semiconductors from Taiwan; Final Results of Less than Fair Value Investigation, 63 FR 8909, 8928 (1998) and Brass Sheet and Strip from Sweden; Final Results of Antidumping Administrative Review, 60 FR 3617, 3621 (1995)). Comment 31: Rodacciai's G&A Expense Ratio Petitioners' Argument: The petitioners contend that, consistent with 19 CFR 351.401(b)(1), the Department should recalculate Rodacciai's G&A expense ratio to account for adjustments for which Rodacciai did not provide any justification, inasmuch as G&A expenses should reflect a respondent's full-year company-wide G&A expense and cost of goods sold as reported in the respondent's audited financial statements. Respondent's Argument: Rodacciai argues that it is the Department's practice to exclude gains or losses from investment activity from production costs of subject merchandise. See, e.g., Certain Steel Concrete Reinforcing Bars from Turkey, 66 FR 56274, 56276 (November 7, 2001); Fresh Atlantic Salmon from Chile, 63 FR 31411 (June 8, 1998); Oil Country Tubular Goods from Korea, 60 FR 33561, 33567 (June 28, 1995). Rodacciai also notes that the petitioners have not cited any Department precedent to support their contentions. Department's Position: We agree with Rodacciai. As we explained in Fresh Atlantic Salmon from Chile, the Department considers the disposal of fixed assets used to produce the merchandise under investigation to be a normal part of a company's operation, and typically accounts for the gains or losses generated from these transactions as part of G&A expense in the COP and CV calculations. However, the Department treats a transfer of an equity interest in another company as a sale of an investment, which is unrelated to the production activities for G&A expenses. Accordingly, we have accepted Rodacciai's reported G&A expense ratio. Comment 32: Rodacciai's Interest Expense Ratio Petitioners' Argument: The petitioners contend that the Department should revise Rodacciai's interest expense ratio because it appears that, as the result of certain unsupported adjustments made by Rodacciai, its total reported interest expense was understated. Respondent's Argument: Rodacciai counters that none of the items cited by the petitioners are long-term investment income or dividends. Moreover, Rodacciai notes that the petitioners have not cited any Department precedent for their contentions. Accordingly, Rodacciai concludes that the Department should not adjust Rodacciai's interest expense ratio as its adjustments are appropriate offsets to the total finance expense. Department's Position: We agree with Rodacciai. The Department's normal practice is to allow only short-term interest income as an offset to financial expenses. We have reviewed the interest income used by Rodacciai to offset its financial statement and agree that none of these interest income items appears to be long-term in nature. Accordingly, we have made no revisions to Rodacciai's interest expense ratio for the final determination. Comment 33: Recalculation of Certain Home Market Expenses Reported by Rodacciai Petitioners' Argument: The petitioners note that Rodacciai calculated certain home market expenses (i.e., imputed credit expense, commissions, and indirect selling expenses) by applying a ratio to the gross unit price, adjusted for credit adjustments. The petitioners contend that Rodacciai should have applied such ratios to the gross unit price adjusted for credit adjustments, discounts, and rebates, in order to reflect the amount Rodacciai expected to receive, rather than the full invoice amount less credit adjustments only. Otherwise, Rodacciai has inappropriately inflated the basis for calculating these expenses and, therefore, overstated the deductions to normal value. Accordingly, the petitioners urge the Department to recalculate these expenses for the final determination. Respondent's Argument: Rodacciai counters that the Department's practice is not to deduct rebates from gross price for purposes of calculating credit expenses because rebates are not granted until some time after the sale and, therefore, are not part of the opportunity cost. Rodacciai further contends that commissions and indirect selling expenses are not analogous to credit expenses because opportunity costs are not relevant to these adjustments. Moreover, commissions are a fixed percentage applied to the invoice price based on an agreement with the selling agent. Further, Rodacciai notes that the petitioners have not cited any Department precedent for their contentions. Alternatively, Rodacciai argues that, if the Department does make the petitioners' requested deductions from the net price used to calculate any of the home market expenses, then the Department should make the same deductions with respect to the calculation of the analogous U.S. expenses. Department's Position: We agree with the petitioners in part and with Rodacciai in part. The petitioners correctly assert that, when applying ratios to calculate a home market expense, the Department must ensure that a respondent is not inappropriately inflating the basis for calculating these expenses and, therefore, overstating the deductions to normal value. Conversely, when applying ratios to calculate an U.S. expense, the Department must ensure that a respondent is not inappropriately deflating the basis for calculating these expenses and, therefore, understating the deductions to EP or CEP. In resolving this issue, we note that there is a distinction between imputed expenses and actual expenses. Imputed expenses are opportunity costs that are not reflected in the financial records of the company being investigated, but which must be estimated and reported for purposes of an antidumping inquiry. An example of an imputed expense is credit expenses, which reflects the interest expense incurred (or interest revenue foregone) between shipment of merchandise to a customer and receipt of payment from the customer. The Department normally imputes the expense by applying a respondent's annual short-term borrowing rate in the currency of the transaction, prorated by the number of days between shipment and payment, to the unit price. The unit price must reflect that which the respondent actually expects to receive from the customer. Thus, when calculating credit expenses, for purposes of the unit price, we normally look at a gross unit price, adjusted for invoicing errors (reported as credit or billing adjustments) and discounts actually taken on the invoice. We typically do not adjust for rebates because, in the normal course of business, they are not considered until sometime after the sale and, therefore, are part of the opportunity cost of the delay in the receipt of payment from the time of shipment. Therefore, for purposes of calculating Rodacciai's home market and U.S. credit expenses, we are adjusting the gross unit price for credit adjustments and any on-invoice discounts. Finally, we note that commissions and indirect selling expenses, in contrast to credit expenses, are actual costs, not imputed costs. Therefore, in calculating these expenses, the Department must ensure that the reported per-unit expense reflects the actual expenses incurred in Rodacciai's normal course of business. If a commission expense is applied as a fixed percentage to the invoice price based with an agreement with the selling agent, as is the case here, then we must apply the ratio that basis. Likewise, if an indirect selling expense ratio is inclusive of discounts and rebates, then it must be applied to a gross unit price that is inclusive of discounts and rebates. Accordingly, we have not altered Rodacciai's calculation of commissions or indirect selling expenses for the final determination. Comment 34: Rodacciai's Home Market Credit Adjustments Respondent's Argument: Rodacciai contends that the Department erred in its treatment of Rodacciai's reported home market credit adjustment variables, which were reported as positive integers, by adding these values to the home market net price rather than deducting them. Petitioners' Argument: The petitioners argue that, if the Department accepts Rodacciai's arguments concerning the reporting of credit adjustments for its home market sales, then the Department should also deduct credit adjustments from U.S. sales rather than adding them. Department's Position: We agree with Rodacciai and the petitioners have made these changes for the final determination to both the home market and U.S. databases. Comment 35: Corrections to Valbruna's CEP Verification Report Respondent's Argument: Valbruna argues that the Department should make two minor, technical corrections to items described in the Memorandum to John Brinkmann "Verification of the Constructed Export Price Sales of Acciaierie Valbruna S.p.A. through its U.S. Affiliate, Valbruna Corporation," dated October 31, 2001, which is on file in the Import Administration's Central Records Unit ("CRU"), Room B-099 of the main Department of Commerce building ("Valbruna CEP Verification Report"). Specifically, Valbruna claims that the Department incorrectly stated that one of its customers has a balance due to Valbruna's U.S. affiliate, Valbruna Corporation ("Valbruna Corp."), when in fact the customer has actually overpaid Valbruna Corp. The Department also incorrectly stated the per-container charge reported by Valbruna in its questionnaire responses as the basis of its per-unit U.S. brokerage adjustment. Petitioners' Argument: The petitioners did not comment on this issue. Department's Position: Based on our review of the CEP verification exhibits and submitted responses, we agree with Valbruna that the Valbruna CEP Verification Report incorrectly described the information reviewed at verification. Accordingly, we have corrected these technical errors for the final determination. See Memorandum to John Brinkmann, "Final Determination Calculation Memorandum for Acciaierie Valbruna S.p.A.," dated January 15, 2002. Comment 36: Valbruna's Opportunity Cost on VAT Rebates Respondent's Argument: Valbruna argues that the Department should grant Valbruna its claimed adjustment for the opportunity cost of the delay in receiving VAT rebates, which the Department denied in the Preliminary Determination. Valbruna claims that this adjustment is the same as the imputed financial expenses calculated for credit expense and inventory carrying costs because Valbruna experiences a time delay between the end of the production process and its receipt of the VAT rebate income, which affects Valbruna's economic return on the transaction. Petitioners' Argument: The petitioners contend that the Department should not accept Valbruna's claimed VAT opportunity cost adjustment. The petitioners note that the Department denied this adjustment in other cases. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar from Italy, 59 FR 66921, 66926-27 (December 28, 1994) ("Stainless Steel Bar from Italy - 1994"). Inasmuch as Valbruna has not provided any information that would justify the Department changing its prior practice (e.g., calculations showing the payment delays for all costs, charges, and expenses, rather than one opportunity cost that pertains solely to home market sales), the petitioners assert that the Department should not allow Valbruna's claimed VAT adjustment. Department's Position: We agree with the petitioners. As we noted in Stainless Steel Bar from Italy - 1994, "The regulations contain no indication that the Department should consider granting an adjustment to account for a government imposed tax such as the VAT, or for any other type of so-called "'opportunity cost.'" 59 FR at 66926. In reaching that decision, we cited 19 CFR 353.56(a)(2), which is now embodied in 19 CFR 351.410. According to this regulation, the Department will only make circumstance of sale adjustments for (1) direct selling expenses (e.g., commissions, credit expenses, guarantees, and warranties) that result from, and bear a direct relationship to, the particular sale in question; and (2) assumed expenses (e.g., advertising expenses) that a seller assumes on behalf of the buyer. Thus, the current regulations continue to provide no indication that the Department should consider granting an adjustment to account for the opportunity cost of the delay in receiving VAT rebates. Moreover, as we noted in Stainless Steel Bar from Italy - 1994: virtually every charge or expense associated with price-to-price comparisons is either prepaid or paid for at some point after the cost is incurred. Accordingly, for each pre- or post-service payment, there is also an opportunity cost (or gain). Thus, to allow the type of adjustment suggested by respondent would imply that in the future the Department would be faced with the impossible task of trying to determine the opportunity cost (or gain) of every freight charge, rebate and selling expense for each sale reported in a respondent's database. 59 FR at 66926 (quoting Final Determination of Sales at Less Than Fair Value: Sulfur Dyes, Including Sulfur Vat Dyes, from the United Kingdom, 58 FR 3253 (January 8, 1993)). Valbruna has provided no authority to the contrary and, accordingly, the same conclusion applies to the present investigation. Comment 37: Valbruna's Levels of Trade Petitioners' Argument: The petitioners assert that the Department should redefine Valbruna's home market and U.S. levels of trade. With respect to the home market levels of trade, the petitioners contend that the Department should amend its preliminary level-of-trade finding and establish two levels of trade in the home market based on the two channels of distribution (sales directly from the mill and sales through Valbruna's affiliated service centers). The petitioners argue that separate channels of distribution are the first indicator of separate home market levels of trade, particularly in the steel industry, where the most commercially significant indicator of a marketing stage is the extent to which a company extends its corporate structure into the market place (e.g., through use of regional service centers). Furthermore, the petitioners reviewed the four major categories of selling functions relied upon by the Department in making its level-of-trade determinations (i.e., sales and marketing support, freight and delivery, inventory and warehousing, and quality assurance/warranty services) and, based on their analysis, contend that in all four areas the selling functions are more advanced for sales through Valbruna's service centers than for its mill-direct sales. The petitioners attribute the quantified difference in selling functions to the fact that these two home market channels of distribution reach distinct sets of customers. Accordingly, the petitioners conclude that, for the final determination, the Department should find two distinct levels of trade in the home market. With respect to the U.S. levels of trade, the petitioners argue that the Department should find that CEP and EP sales are sold at the same level of trade, thereby rejecting Valbruna's claim to treat these as separate levels of trade. The petitioners assert that Valbruna has not presented evidence supporting its claim of significant differences in selling functions between CEP and EP sales and, accordingly, the Department should not consider Valbruna's CEP and EP sales as being made at distinct levels of trade. See, e.g., Circular Welded Non-Alloy Steel Pipe from Mexico: Final Results of Antidumping Duty Administrative Review, 66 FR 21311 (April 30, 2001), and accompanying Issues and Decision Memorandum, at Comment 3. Similar to the home market, the petitioners reviewed the four major categories of selling functions relied upon by the Department in making its level-of-trade determinations and, based on their own quantitative and qualitative analysis, contend that CEP and EP sales are qualitatively and quantitatively similar to one another. Accordingly, the petitioners conclude that, for the final determination, the Department should find a single level of trade in the U.S. market. Finally, the petitioners argue that, based on its own review of the home market and U.S. levels of trade, all mill-direct sales, whether in the home market or to the United States, were made at fundamentally the same level of trade. Accordingly, the petitioners contend that, for the final determination, the Department should treat all U.S. sales as being made at the same level of trade as Valbruna's mill-direct sales in the home market. Where sales between the United States and Italy cannot be matched by level of trade, the petitioners assert that a level-of-trade adjustment can be calculated and, therefore, no CEP offset is warranted. Respondent's Argument: Valbruna claims that the Department correctly granted a CEP offset in the Preliminary Determination to reflect the different and more advanced home market level of trade. First, Valbruna claims that its home market channels of distribution reflect differences in geography, not customer size, customer importance, or level of selling services demanded by the customers. Valbruna notes that customers located in close geographic proximity to Valbruna's service centers purchase from the service centers, irrespective of the customer's size. Conversely, customers who are located close to Valbruna's mills or who are not conveniently located near either the service centers or the mills, are serviced directly from Valbruna. Valbruna provides an analysis of its domestic sales by channel of distribution and geographical region, and concludes that the closer a customer is to the point of sale, the smaller the average quantity purchased, and that, contrary to the petitioners' assertions, most of Valbruna's largest Italian customers (and not its smaller customers) purchased from service centers during the POI Second, Valbruna contends that the petitioners' quantitative analysis suffers serious flaws, particularly with regard to early payment discounts, third-party commissions, and quality-assurance/warranty expense. Valbruna contends that, for early payment discounts and commissions, the petitioners divided the extended value of the expense in the numerator by the extended value of all sales in the respective channels, rather than just those sales in each channel that actually received the discount or on which commissions were paid. Valbruna further argues, with respect to commissions, that the record demonstrates that the selling services provided in the two channels are similar in nature and degree, but are structured differently because certain commissioned agents work in conjunction with an established Valbruna service center and are promoting service center sales. Also, with respect to quality assurance/warranty expenses, Valbruna claims that nothing in the record supports the petitioners' determination that warranties are low for sales from headquarters and are high on sales from service centers. Finally, Valbruna asserts that U.S. sales require less selling services from Valbruna Italy than do home market sales, and that U.S. sales are at a different and less advanced level of trade. Also, Valbruna argues that the different selling functions performed by Valbruna Italy for EP and CEP sales justify a finding that there are two distinct levels of trade in the United States. Valbruna claims that the record demonstrates that Valbruna Italy is heavily engaged in providing services to all customers in Italy, regardless of customer size, location, or category. In contrast, Valbruna provides substantially less selling services to U.S. customers because Valbruna has its U.S. affiliate to devote its resources for the promotion of U.S. sales. Valbruna contends that a comparison of indirect selling expenses incurred by Valbruna Italy on home market sales versus U.S. sales supports its contentions. Accordingly, Valbruna concludes that the Department should affirm its preliminary level-of-trade finding with respect to Valbruna. Department's Position: We disagree with the petitioners and have not changed from our Preliminary Determination LOT finding for Valbruna. In order to determine whether sales in the comparison market are at a different level of trade than EP or CEP sales, we examine whether the comparison market sales were at different stages in the marketing process than the U.S. sales. We make this determination on the basis of a review of the distribution system in each market (i.e., the "chain of distribution"), including selling functions, (5) class of customer (customer category), and the level of selling expenses for each type of sale. While different stages of marketing necessarily involve differences in selling functions, differences in selling functions, even substantial ones, are not alone sufficient to establish a difference in the level of trade. 19 CFR 351.412(c)(2). Thus, as different levels of trade are characterized by purchasers at different places in the chain of distribution and sellers performing qualitatively or quantitatively different functions in selling to them, an analysis of the chain of distribution and of selling functions substantiates or invalidates claimed levels of trade. The marketing process in the U.S. and comparison markets begins with the producer and extends to the sale to the final user or consumer. The chain of distribution between the two may have many or few links, and a respondent's sales occur somewhere along this chain. While customer categories such as "distributor" and "end user" are insufficient, in themselves, to establish that there is a difference in the level of trade, we find that these customer categories are typical of the classes of customers found in the chain of distribution for stainless steel bar. Accordingly, in the Preliminary Determination, to establish levels of trade, we considered the customer categories and physical channels of distribution reported by the respondents to evaluate the chain of distribution and selling functions. To do so, we considered the narrative responses of each respondent as well as certain quantifiable information provided for each reported sales transaction. Quantifiable transactional information, in such areas as freight and warehousing, allowed us to evaluate the degree to which customers within the customer categories are similar with respect to the physical distribution of stainless steel bar. Based on the comments received, we have revisited our preliminary level of trade finding with respect to Valbruna, consistent with these general level of trade principles. The fundamental position underlying the petitioners' arguments is that Valbruna's home market mill direct sales and sales through its service centers are two distinct levels of trade and that the mill direct level of trade is similar to the U.S. CEP and EP levels of trade. Thus, we first examined our Preliminary Determination with respect to determining the level of trade in the home market. In the Preliminary Determination, we made the following determination of Valbruna's home market level of trade: Valbruna reported two channels of distribution in the home market, with two customer categories. The first channel of distribution, coded in its submissions as channel 1, included sales made to end-users and distributors by factory headquarters. Sales to both customer categories in this channel were similar with respect to sales process, freight services, warehouse/inventory maintenance and warranty service. The second channel of distribution, coded in its submissions as channel 2, were sales made to end-users and distributors by service centers. We compared these two channels of distribution and found that, while they differed slightly with respect to warehouse/inventory maintenance, they were similar with respect to sales process, freight services and warranty service. Accordingly, we preliminarily determine that home market sales in these two channels of distribution constitute a single level of trade. Preliminary Determination, 66 FR at 40220-21. We find no convincing evidence on the record to support the petitioners' position that each of the selling activities examined by the Department should be qualitatively and quantitatively at a "high" level through the service center marketing level and at a "low or medium"level for mill direct sales. Much of the petitioners arguments are premised on a presumed correlation between the relative importance of the types of customers purchasing in each channel of distribution (i.e. large volume national accounts serviced by the mill versus smaller volume regional or local customers serviced by the service centers) and the presumed amount of selling services required by Valbruna to sell to these different groups of customers. We agree with Valbruna that there is no quantitative or qualitative support in the record for this presumption by the petitioners. Further, we find that petitioners over-reliance on quantitative analysis is not in line with the Department's practice of weighing both the narrative description of the sales process as well as certain quantifiable information provided for each reported sales transaction. For example, with respect to the sales and marketing selling function, whether or not Valbruna grants an early payment discount and the frequency and utilization of that discount, is a relatively insignificant selling activity, as early payment discounts are nothing more than optional term of sale that is largely left to a customer's discretion to exercise. Similarly, a practical understanding of the sales effort extended by Valbruna to sell its product to its customers is more significant than an empirical analysis of whether the actual amounts of commissions and indirect selling expenses are higher in sales made by service centers than mill direct sales. Finally, it is illogical to conclude that warranty servicing should be categorized high for service centers and low for mill direct sales simply because warranty expenses are included in indirect selling expenses and total indirect selling expenses are higher for service-center sales than for mill direct sales. While the Department does consider quantifiable information in its level of trade analysis, it primarily does so in such areas as freight, warehousing, and selective rebate/discount programs where it is relevant to measure the frequency with which customers in the channel and/or customer category being examined utilize a particular selling activity. Thus, the petitioners' analysis does not provide a basis for changing our position in the Preliminary Determination that the mill direct and service center sales are similar with respect to sales process, freight services and warranty service, and therefore at the same level of trade. There is also no need to evaluate the merits of petitioners' arguments with respect to Valbruna's EP and CEP selling functions, because assuming arguendo that petitioners' classifications of selling functions for EP and CEP are correct, the single home market level of trade would still differ significantly from the petitioners' EP and CEP level of trade with respect to freight services and warehouse/inventory maintenance. Accordingly, we continue to find, as we did in the Preliminary Determination, that Valbruna's EP level of trade differed from the home market level of trade and, consequently, we could not match the EP sales to sales at the same level of trade in the home market. Since there was only one level of trade in the home market, there was no pattern of consistent price differences between different levels of trade in the home market, nor do we have any other information that provides an appropriate basis for determining a level of trade adjustment. Therefore, we have not made a level of trade adjustment. See section 773(a)(7)(A) of the Act. Finally, we continue to find, as we did in the Preliminary Determination, that Valbruna's CEP level of trade differed from the single home market level of trade and, consequently, we could not match to sales at the same level of trade in the home market. Since there was only one level of trade in the home market, there was no pattern of consistent price differences between different levels of trade in the home market, nor do we have any other information that provides an appropriate basis for determining a level of trade adjustment. Accordingly, we have not made a level of trade adjustment. See section 773(a)(7)(A) of the Act. We therefore determined normal value based on the single level of trade in the home market, and because this home market level of trade was at a more advanced stage of distribution than the CEP level of trade, we made a CEP offset in accordance with section 773(a)(7)(B) of the Act. Comment 38: Treatment of Valbruna's Consignment Holding Period Petitioners' Argument: The petitioners note that Valbruna reported that it made consignment sales to five U.S. customers, and that Valbruna treated the costs associated with its consignment inventories as inventory carrying costs. The petitioners contend that, consistent with its prior practice, the Department should treat the consignment inventory period as a direct credit expense rather than as an indirect inventory carrying cost. See Final Determination of Sales at Less Than Fair Value: Certain Stainless Steel Wire Rod from France, 58 FR 68865, 68870, 68871 (December 29, 1993) ("Stainless Steel Wire Rod from France") (treating expenses incurred while merchandise that remains in a respondent's customer's consignment inventory and is unavailable for sale to any other of respondent's customers as a direct expense); see also Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17331 (April 9, 1999) ("Stainless Steel Round Wire") (stating that, if the merchandise in consignment inventory is not available for sale to other customers, the Department will treat the costs incurred during the consignment inventory period as direct costs and consider the credit period as beginning when the merchandise is shipped to consignment inventory). Inasmuch as the Department confirmed that merchandise in Valbruna's consignment customers inventory was not available for sale to any other customers, was never moved from one consignee to another consignee, ultimate collectibility of the sales price on the goods shipped to the consignment customers is not uncertain, and in light of its stated practice, the petitioners conclude that the Department should treat the consignment inventory period as a direct credit expense. Respondent's Argument: Valbruna counters that, contrary to the petitioners' assertion, Stainless Steel Round Wire stands for the proposition that opportunity costs prior to the sale should be treated as inventory carrying costs, rather than credit expenses. Similar to the respondent in that case, the customer was not responsible for payment until Valbruna issued the usage invoice. Accordingly, Valbruna contends that the opportunity cost during this period should be treated as Valbruna Corp.'s inventory carrying expense, not as a credit expense, because the customer does not owe Valbruna any money until the usage invoice is issued. Valbruna cites recent authority in support of its position, which, Valbruna notes, the petitioners have not addressed. See Aramid Fiber Formed of Poly Para-Phenylene Terephtalamide from the Netherlands; Final Results of Antidumping Duty Administrative Review, 65 FR 67347, 67348 (November 9, 2000) and Issues and Decision Memorandum, at Comment 1B ("Aramid Fiber") (finding that the opportunity cost of consignment inventory is captured in the inventory carrying cost calculation). Finally, Valbruna argues that, if the date of sale does not occur until the merchandise is withdrawn from the consignment warehouse, then the opportunity cost for holding the consignment inventory should not be treated as a credit expense. Department's Position: We agree with Valbruna. In this case, we examined Valbruna's consignment arrangements extensively at the CEP verification of Valbruna Corp. We found that, regardless of the customer category, Valbruna issues the customers an invoice once it receives a report from the consignment customers, either in the form of a requisition report from a distributor or a consumption report from an end-user. With regard to Valbruna's consignment agreements, we noted that: These agreements state specifically that Valbruna Corp. maintains title of merchandise in consignment inventory and that third parties are to be made aware that the customer is holding Valbruna Corp. merchandise. These agreements also have provisions that everything in consignment inventory that is not consumed after a certain time is deemed consumed. Once this point is reached, Valbruna Corp. will issue the consignment customer an invoice for the merchandise. If there is a serious concern about a consignment customer's financial solvency, or if an agreement is terminated, then, according to the agreements, Valbruna Corp. could take the merchandise back. However, this did not happen during the POI. According to Valbruna Corp. officials, legally the product is not considered sold until the consumption report is received or the permitted time period has elapsed. Also, because there is a requirement in the consignment provisions that customers must purchase consigned merchandise after a certain period (i.e., everything not consumed within a specified time period is deemed consumed), ultimate collectibility of the sales price on the goods shipped to consignment customers' warehouse is, for practical purposes, not uncertain. Company officials confirmed that, in certain circumstances, the company has invoiced consignment customers for merchandise not consumed within the preordained period. Memorandum to John Brinkmann "Verification of the Constructed Export Price Sales of Acciaierie Valbruna S.p.A. through its U.S. Affiliate, Valbruna Corporation," dated October 31, 2001, at 8-9. As explained in the Department's standard antidumping questionnaire, "{i}nventory carrying costs are the interest expenses incurred (or interest revenue foregone) between the time the merchandise leaves the production line at the factory to the time the goods are shipped to the first unaffiliated customer." Conversely, credit expense "is the interest expense incurred (or interest revenue foregone) between shipment of merchandise to a customer and receipt of payment from the customer." In this case, it is clear that, in the normal course of business, Valbruna does not consider merchandise as being shipped until it receives a consumption report from its consignment customers. Until the merchandise is removed from consignment inventory, Valbruna Corp. maintains title to the merchandise in the consignment inventory, and thus bears the risks and enjoys the rewards of ownership. In fact, the consignment customers' customers are made aware that the merchandise being held in consignment inventory is not that of the consignment customer, but is Valbruna Corp.'s merchandise. Although, per the consignment agreement provisions, collectibility on merchandise in consignment inventory is reasonably assured, Valbruna Corp. cannot recognize any revenue until it either receives a consumption report or, alternatively, invoices the consignment customer after a certain preordained period. Therefore, we find that the date of shipment for Valbruna's U.S. consignment sales does not occur until the merchandise is removed from the consignment inventory. As we held in Aramid Fiber, where a respondent includes consignment shipments in its own inventory until it is notified by the customer of the sale, then the related imputed expenses are captured in inventory carrying costs, such that "any addition to imputed credit expense associated with consignment sales would double-count the opportunity cost, prior to invoicing, which is already captured in inventory carrying expense." Aramid Fiber, at Comment 1B. We find that the facts of this case are similar to Aramid Fiber and not like those of Stainless Steel Wire Rod from France and Stainless Steel Round Wire, cited by the petitioners, which stand for the proposition that the imputed expenses related to consignment inventory are direct in nature where the merchandise remains in the inventory of the consignment customer rather than in the respondent's inventory. Accordingly, we are continuing to treat the opportunity cost of merchandise remaining in inventory as an indirect inventory carrying cost. Comment 39: Valbruna's U.S. Brokerage Expenses Petitioners' Argument: The petitioners argue that, based on its findings at verification, it appears that Valbruna understated its U.S. brokerage expense and, accordingly, the Department should adjust Valbruna's reported U.S. brokerage expense to reflect the highest brokerage cost discovered at verification. Respondent's Argument: Valbruna contends that it did not understate its U.S. brokerage expenses, for the reasons explained above in Comment 35 and that its reported brokerage expense accurately reflected its actual brokerage expenses. Department's Position: We agree with Valbruna and have not made any changes to Valbruna's reported U.S. brokerage expense for the final determination. Although we note that, in one instance, the actual brokerage charge incurred on a transaction was higher than the average amount used by Valbruna, as noted in the Valbruna CEP Verification Report, in most of the broker invoices we surveyed, we found that the actual brokerage expense was less than the average amount relied upon by Valbruna. Accordingly, we find that the average amount used by Valbruna for purposes of calculating the U.S. brokerage expense was reasonable. Comment 40: Valbruna's U.S. Warranty Expenses Petitioners' Argument: The petitioners note that, at verification, the Department discovered that Valbruna did not report as a warranty expense certain cleaning costs incurred on one sale of subject merchandise. Accordingly, the petitioners contend that the Department should revise Valbruna's U.S. sales database treating these cleaning costs as a warranty expense on this one sale. Respondent's Argument: Valbruna agrees with the petitioners that this adjustment should be made, but contends that a corresponding reduction should be made to indirect selling expenses in order to avoid double- counting this expense. Department's Position: We agree with the petitioners and Valbruna and have made these changes for the final determination. Comment 41: Valbruna's Unreported Price Adjustment Petitioners' Argument: The petitioners note that, at verification, the Department discovered that Valbruna did not report a price adjustment on a particular U.S. POI sales invoice referred to in sales person call reports. Accordingly, the petitioners contend that the Department should revise Valbruna's U.S. sales database to apply a price reduction to all reported sales observations related to this particular invoice. Respondent's Argument: Valbruna contends that the Department should not adjust the price to reflect the sales person call reports because there is no evidence in the accounting system that this credit was ever granted to the customer, despite the fact that the call report reflects a request by the customer for the price adjustment. Valbruna claims that this request was based on a customer complaint that might be taken into account in future sales negotiations. Accordingly, Valbruna concludes that this is not a sufficient basis for adjusting the gross unit price on this particular invoice. Alternatively, if the Department does make this adjustment, Valbruna argues that the adjustment should be limited based on a handwritten notation on the call report suggesting a smaller adjustment was to be granted to the customer. Department's Position: We agree with the petitioners and have made this change for the final determination. In the Valbruna CEP Verification Report, we noted the following about this price adjustment: In reviewing the call reports we noted a reference in an August 24, 2000 call report from a Valbruna Corp. salesperson indicating that a credit would be granted to that customer based on certain previous mill direct sales to that customer (see Verification Exhibit 6, at 16). * * * There was no documentation indicating that this credit adjustment was ever applied in the form of a credit memo and an August 24, 2000 fax from the Valbruna Corp. sales manager to the customer indicated that such a discount was inappropriate. However, a later call report dated December 13, 2000, contained the statement that the customer "appreciated our help with the surcharge adjustment on his one container." Valbruna Corp. officials acknowledged that a discount was likely given to this customer in the form of a price adjustment on future sales from inventory. The documentation showed that Valbruna Corp. did have future mill-direct sales to this customer in April and May 2001, as well as sales by Valbruna Corp. from inventory throughout the post-POI period. Valbruna CEP Verification Report, at 31. We find that this is sufficient evidence to indicate that a price adjustment was made to this customer on a sale that occurred during the POI. Although Valbruna could not show that this credit was ever granted to the customer in its accounting system, it could not show that the adjustment had not been granted. Moreover, since Valbruna Corp. officials acknowledged that a discount was likely given to this customer in the form of a price adjustment on future sales from inventory, and given that there were future sales from inventory to this customer that were within the POI, we believe there is a sufficient basis for adjusting the gross unit price on this particular invoice. As noted above in Comment 9, the Department may rely on facts available, pursuant to section 776(a)(2) of the Act, if an interested party, inter alia, withholds information that has been requested by the Department or provides such information but the information cannot be verified as provided in section 782(i). Inasmuch as Valbruna did not provide this information to the Department, and the price adjustment discovered at the CEP verification could not be verified, we are relying on facts available with respect to this price adjustment. A respondent is charged with knowledge of its own business operations. See, e.g., Mannesmannrohren-Werke AG v. United States, 120 F. Supp. 2d 1075, 1083 (CIT 2000). The failure of Valbruna to identify the appropriate price adjustment that it granted to its customer amounts to failure to cooperate to the best of its ability in this limited instance. Accordingly, we must make an adverse inference, pursuant to section 776(b) of the Act, that the price adjustment granted to this customer was the highest one noted on the call reports, not the smaller adjustment that Valbruna recommends be used for the final determination. Comment 42: Valbruna's U.S. Repacking Expenses Petitioners' Argument: The petitioners note that, at verification, the Department discovered that Valbruna has a separate line item on most invoices when it incurs U.S. repacking costs, except that, for one customer, the cost of this packing is included in the cost of the product and Valbruna Corp. is not reimbursed separately for this packing cost. For this particular customer, the Department was able to determine the per- unit repacking expense. Accordingly, the petitioners contend that the Department should revise Valbruna's U.S. sales database to deduct the per- unit repacking expense from the reported sales price for all sales to the specific customer whose shipments were subject to U.S. repacking. The petitioners further argue that this per-unit repacking expense should be deducted from all of Valbruna's U.S. inventory sales because it is clear that Valbruna increases its U.S. price to charge for U.S. repacking costs, but that Valbruna did not report these repacking costs on a sale-by-sale basis, even though the amounts were determinable. Furthermore, the petitioners contend that this repacking expense should be included in the calculation of CEP selling expenses for purposes of applying the CEP profit ratio. Respondent's Argument: Valbruna agrees that this deduction for repacking costs should be made for the specific customer to which the costs applied, but objects to the petitioners' argument that this adjustment should apply for all inventory customers. Valbruna claims that the record does not provide any support for deducting these repacking costs from all inventory sales, but rather indicates that repacking costs occur infrequently and, when they do, are typically invoiced separately to the customer. Moreover, Valbruna notes that the warehousing expense account, in addition to including repacking costs, also including repacking revenue as an offset to the repacking costs, and that the Department verified that the packing revenue was not included in sales revenue. Thus, Valbruna concludes that its treatment of repacking costs does not understate repacking costs and, therefore, the adjustment made should be limited to the single customer identified at verification. Department's Position: We agree with the petitioners in part. For the final determination, we have revised Valbruna's U.S. sales database to deduct the per-unit repacking expense from the reported sales price for all sales to the specific customer whose shipments were subject to U.S. repacking. However, at verification we found no evidence that this repacking expense applied to all inventory customers. We noted that "{w}hile Valbruna Corp. has a separate line item on most invoices when it incurs additional packing, for this customer the cost of this packing is included in the cost of the product and Valbruna Corp. is not reimbursed separately for this packing cost." Valbruna CEP Verification Report, at 25. Although Valbruna Corp. was unable to provide the supporting invoice, company officials were able to identify the packing costs in their accounting system. Thus, the record clearly demonstrates that the repacking expense discovered at verification is not typical in Valbruna Corp.'s ordinary course of business. Accordingly, we are limiting the change for the final determination to only that customer for whom we found the repacking expense applied. Furthermore, we are including this expense in the calculation of CEP selling expenses for purposes of applying the CEP profit ratio. Comment 43: Use of Actual Prices Paid by Valbruna's Customers Petitioners' Argument: The petitioners note that, at verification, the Department discovered that one of Valbruna's consignment customers underpaid Valbruna on a particular invoice, that this customer had a history of overpaying on some invoices and underpaying on others, and that at the end of the POI there was a balance due to Valbruna. Accordingly, the petitioners contend that the Department should use information obtained at verification to adjust the prices reported by Valbruna for all sales to this customer to reflect the amounts that were actually paid by this customer. Respondent's Argument: Valbruna contends that the Department should not adjust the gross unit price to the consignment customer because, as explained above in Comment 35, the record demonstrates that the customer actually overpaid for the sales under the consignment agreement. Department's Position: We agree with Valbruna and have not made any changes to the gross unit price for sales to the consignment customer in question. Comment 44: Valbruna's U.S. Indirect Selling Expense Ratio Petitioners' Argument: The petitioners note that, at the onset of verification, Valbruna revised its U.S. indirect selling expense after correcting certain minor errors. Furthermore, at verification, Valbruna officials agreed with Department verifiers that "Other Income" items should not have been deducted from the total U.S. indirect selling expenses. Also, the Department discovered that "Interest Income," which was also deducted from the total U.S. indirect selling expenses, included income that should have been recorded in the gain and loss on currency conversion. Accordingly, the petitioners contend that the Department should revise Valbruna's U.S. indirect selling expense ratio to exclude all "Other Income" as well as the "Interest Income" related to the gain and loss on currency conversions, inasmuch as these items were not selling expenses during the POI. Respondent's Argument: Valbruna contends that the revisions to the indirect selling expense factor should be limited to the items acknowledged by Valbruna during the course of the CEP verification, i.e., changes related to the minor corrections at the onset of verification and the "Other Income" items. Valbruna objects to the exclusion of "Interest Income" related to the gain and loss on currency conversions, because these amounts relate to payables, which, under the Department's rules are included in general expenses. Department's Position: At verification, we noted that the "Interest Income" included income that Valbruna Corp. claims should have been recorded in the "Gain and Loss on Currency Conversion." See Valbruna CEP Verification Report, at 29-30. We agree with Valbruna that the Department's normal practice is to include amounts related to payables in general expenses. Therefore, we disagree with the petitioners that Valbruna's offset of its indirect selling expenses through the exclusion of "Interest Income" was inappropriate. For the final determination, therefore, we are continuing to include "Interest Income" in the calculation of the indirect selling expense ratio, but have made all other revisions to the indirect selling expenses based on our verification findings. Comment 45: Valbruna's Home Market Inventory Carrying Costs Petitioners' Argument: The petitioners argue that the Department should not allow the home market inventory carrying costs claimed by Valbruna because, contrary to the provisions of section 773(f)(1)(A) of the Act, the average inventory holding periods that Valbruna claimed in its questionnaire responses for its sales in Italy are not consistent with information in Valbruna's financial statements and do not reasonably reflect the costs associated with the production and sale of the foreign like product. The petitioners point out discrepancies between the information in Valbruna's financial statements and its reported inventory holding periods, which the petitioners assert that Valbruna has not explained in any of its responses. Since Valbruna has not provided any information to substantiate its claimed home market average inventory holding period, and given that these claimed inventory holding periods and inventory carrying costs were not verified by the Department, the Department should disallow Valbruna's claimed home market inventory carrying costs. Respondent's Argument: Valbruna counters that its reported inventory carrying costs should be accepted because the petitioners' analysis did not include in the numerator the finished goods inventory value of Bolzano, which was a separate entity in 1999, and included in the denominator sales to all markets, even though most sales to export markets are produced to order. Department's Position: We agree with Valbruna. Based on our review of record evidence, we find that the average inventory holding periods that Valbruna claimed in its questionnaire responses for its sales in Italy are consistent with information in Valbruna's and Bolzano's financial statements and reasonably reflect the costs associated with the production and sale of the foreign like product. Accordingly, we find no reason to deny Valbruna's claimed home market inventory carrying costs for the final determination. Comment 46: Valbruna's G&A Expense Ratio Petitioners' Argument: The petitioners assert that the Department should revise Valbruna's general and administrative expense ("G&A") ratio to account for the corrections discovered during verification. Specifically, the petitioners contend, the Department should include the telephone, EDP, stationery and service center expenses identified by Valbruna, and the other non-manufacturing expenses that the verifiers discovered Valbruna had excluded in the ratio calculation. The petitioners state that these expenses are associated with the overall operation of the company and should, therefore, be included in the cost of production in accordance with the Department's practice of using company-wide G&A expenses to calculate COP. Respondent's Argument: Valbruna agrees that its G&A ratio should be revised to account for the telephone, EDP, stationery, service center and non-manufacturing expenses identified at verification. Department's Position: We agree and have included the telephone, EDP, stationery, service center and other non-manufacturing expenses identified at verification in the calculation of the G&A ratio. As noted in both Memorandum to Troy H. Cribb from Holly Kuga, Re: Issues and Decision Memorandum for the Investigation of Certain Cold-Rolled Flat-Rolled Carbon- Quality Steel Products from Taiwan dated May 22, 2000 and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336, 17339 (April 9, 1999), in calculating the G&A ratio it is the Department's practice to include revenues and expenses that relate to the general operations of the company. Consequently, in determining whether it is appropriate to include particular items in G&A, the Department reviews the nature of the items and their relationship to the general operations of the company. At verification, we determined that each of these items is related to Valbruna's general operations and have, therefore, included them in the G&A ratio calculation for the final determination. Comment 47: Valbruna's Financial Expense Ratio Petitioners' Argument: The petitioners argue that the Department should include depreciation on idle assets in Valbruna's reported G&A expenses. The petitioners cite Notice of Final Determination of Sales at Less Than Fair Value: Certain Stainless Steel Wire Rod from Taiwan, 63 FR 40461, 40647 (July 29, 1998) ("Wire Rod from Taiwan") and assert that it is the Department's practice to include depreciation on idle assets in a respondent's G&A expenses. The petitioners contend that these types of expenses should be included in G&A even if they do not relate to the production of subject merchandise as it is also the Department's practice to calculate G&A expenses on a company-wide basis. See Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from Japan, 64 FR 30574, 30589 (June 8, 1999) ("SSSSC from Japan"). The petitioners refer to section 773(f)(1)(A) of the Act whereby the Department is directed to follow the normal records of a producer if those records are kept in accordance with the producer's home country GAAP. In this case, the petitioners contend, Valbruna recorded its depreciation on idled assets in G&A expenses and has stated that Italian GAAP requires that idle assets be depreciated. The petitioners argue that if the Department allows Valbruna to exclude depreciation on idled assets from its G&A expenses, it should also exclude the miscellaneous income amounts that Valbruna has used to offset G&A from the calculation of the G&A ratio. The petitioners maintain that if, as Valbruna has claimed, the depreciation on idled assets is to be excluded because it is not related to subject merchandise, then the same standard should be applied to the miscellaneous income amounts. As Valbruna has failed to demonstrate that any of these items are related to the production of stainless steel bar, the petitioners contend, they would also have to be excluded from G&A. Respondent's Argument: Valbruna disagrees with the petitioners' argument that depreciation on idle assets should be included in the calculation of the G&A ratio. According to Valbruna, the company excluded this depreciation because the idled assets to which it was related were clearly unrelated to the production of subject merchandise or to Valbruna's operations. Valbruna claims that two of the three assets in question were foundries that were used to produce steel castings that are completely unrelated to the production of stainless steel bar and are unrelated to the operations of the Vicenza and Bolzano plants. Valbruna states that the third asset was a building that also was not related to the production or operations of either plant. Thus, Valbruna argues, there is no reason for the depreciation of these idled assets to affect the COP calculation for stainless steel bar. Moreover, Valbruna refutes the petitioners' assertion that if the Department allows Valbruna's exclusion of depreciation on idled assets from its G&A expenses it should also exclude the miscellaneous income amounts that were used to offset G&A. According to Valbruna, the miscellaneous income amounts are related to the general operations of the company. Moreover, Valbruna asserts, the company used the same criteria for both income and expense items to determine which items should be included in the G&A ratio. Department's Position: We disagree with Valbruna that we should exclude its depreciation on idled assets from the calculation of the G&A ratio. Although we acknowledge that the idled assets in question were unrelated to the production of subject merchandise, we consider such depreciation to be more closely related to the accounting period and the operations of the company as a whole rather than the current manufacturing costs for specific products. Our practice, therefore, has been to include depreciation on idle assets as part of G&A. See Wire Rod from Taiwan, SSSSC from Japan and Silicon Metal from Brazil: Notice of Final Results of Antidumping Duty Administrative Review, 64 FR 6305, 6313 (February 9, 1999). Additionally, the Department verified that Valbruna recorded its depreciation on idled assets in G&A expenses in its unconsolidated financial statements. Thus, for purposes of the final determination, we have included Valbruna's depreciation on idled assets in the calculation of the G&A ratio. In view of the above, we note that the petitioners' argument that the Department should exclude miscellaneous income amounts if its allows Valbruna to exclude depreciation on idled assets from its G&A expenses is moot. Comment 48: Inclusion of Depreciation Expense in Valbruna's Reported Manufacturing Costs Petitioners' Argument: The petitioners contend that the Department should revise Valbruna's reported cost of manufacturing to include the total depreciation expense recorded in the company's fiscal year 2000 unconsolidated financial statements. The petitioners point out that under section 773(f)(1)(A) of the Act, the Department is directed to calculate costs based on the normal records of a producer if those records are kept in accordance with the producer's home country GAAP. The petitioners argue that Valbruna's depreciation expense calculated based on revalued asset values is recorded in its audited financial statements and that the company itself has stated that its accounting practices are in accordance with Italian GAAP. Therefore, the petitioners contend, that is the expense that should have been included in the reported cost of manufacturing, and not the depreciation expense calculated based on historical asset values submitted to the Department. Moreover, the petitioners assert, it is the Department's practice to include depreciation expense on revalued assets in the cost of production. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products from France, 64 FR 73143, 73153 (December 19, 1999) ("CTL Plate from France"). Respondent's Argument: Valbruna argues that the Department should continue to calculate depreciation on the basis of historical cost. Valbruna holds that historical cost is the appropriate basis for product cost purposes because that is the basis on which depreciation is calculated in its cost accounting system and in its audited consolidated financial statements. The only place where depreciation is calculated on a revalued asset basis, Valbruna asserts, is in the unconsolidated financial statements, of which the primary purpose is to determine taxable income. Valbruna refers to section 773(f)(1)(A) of the Act and states that costs should normally be calculated based on the records of the exporter or producer of the merchandise if such records are kept in accordance with GAAP of the exporting country and reasonably reflect the costs associated with the production and sale of the merchandise. The Department has discretion to accept a cost methodology, Valbruna asserts, as long as it does not distort a company's true costs. Accordingly, Valbruna argues, Department precedent reflects the acceptance of both historical and revalued depreciation methods in previous cases. See Final Determination of Sales at Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 57 FR 42942 (September 17, 1992) and Stainless Steel Hollow Products from Sweden; Preliminary Results of Antidumping Duty Administrative Review, 58 FR 69332 (December 30, 1993). Valbruna argues that the record in this case demonstrates that using the depreciation based on historical asset values is consistent with the company's books and records and accurately reflects the cost of producing the merchandise under investigation. Moreover, Valbruna asserts, the Department verified that its cost accounting system calculates costs on the basis of historical asset values and that the same basis is used in the company's audited consolidated financial statements. Valbruna maintains that the Department verified that Valbruna revalued its assets only in its unconsolidated financial statements and solely for tax purposes. According to Valbruna, the record in this case establishes that using a depreciation expense based on asset values calculated for tax purposes highly distorts its cost of producing subject merchandise during the POI. In past cases, Valbruna asserts, the Department has ruled that depreciation calculated for tax purposes should not be used in calculating costs where the historical value of the assets is unaffected. See Fresh and Chilled Atlantic Salmon from Norway; Final Results of Antidumping Duty Administrative Review, 58 FR 37912 (July 14, 1993) ("Salmon from Norway"). The only effect of the revaluation of its assets, Valbruna contends, is to reduce the company's income tax, which is not relevant to the cost of producing subject merchandise. Department's Position: We agree with the petitioners that the Department should revise Valbruna's reported cost of manufacturing to include the total depreciation expense recorded in the company's fiscal year 2000 unconsolidated financial statements. Under section 773(f)(1)(A) of the Act, the Department adheres to an individual manufacturer or exporter's recording of costs in its books and records if such records are kept in accordance with its home country GAAP and reasonably reflect the costs associated with the production of the merchandise under investigation. During fiscal year 2000 Valbruna merged with Acciaierie di Bolzano S.p.A. In accordance with Italian GAAP and as a result of the merger, the fixed assets of the newly created entity were revalued to more accurately reflect their current valuation. The revalued asset amounts were recognized in Valbruna's balance sheet, depreciation was calculated based on the revalued fixed asset amounts, and the revalued depreciation expense was recognized in the company's income statement. As the revalued asset amounts more closely compare to the assets' appraised values (see Cost Verification Exhibit D2) than the historical net asset values, we deem it reasonable for Valbruna to calculate depreciation expense based on the revalued fixed asset amounts as recorded in its normal books and records. Our normal practice has been to rely on the depreciation expense recorded in the reporting company's financial statements, including instances where that depreciation expense is calculated based on revalued asset amounts. See, e.g., CTL Plate from France, Silicon Metal from Brazil; Final Results of Antidumping Duty Administrative Review, 64 FR 6305, 6321 (February 9, 1999) and Porcelain-on-Steel Cookware from Mexico: Notice of Final Results of Antidumping Duty Administrative Review, 62 FR 25907, 25913 (May 12, 1997). This practice was upheld by the Court of International Trade ("CIT"). See, e.g., Laclede Steel Co. v. United States, Slip 94-160 at 24 (CIT 1994) and Cinsa S.A. de C.V. v. United States, 966 F. Supp 1230, 1234 (CIT 1997). We disagree with Valbruna's assertion that historical cost is the appropriate basis to calculate depreciation for cost reporting purposes because it is the basis on which depreciation is calculated in its cost accounting system and its consolidated financial statements. Section 773(f)(1)(A) specifically directs the Department to rely on the financial statements of the manufacturer or exporter, not the financial statements of the consolidated entity or the company's cost accounting system. We also disagree with Valbruna's reliance on Salmon from Norway in its argument that depreciation expense calculated for tax purposes distorts the cost of producing subject merchandise. In that case, the Department found that the depreciation in question did not appear to be a current income statement cost, but rather an appropriation to an account that reflects the difference between ordinary depreciation and tax depreciation. Comment 49: Valbruna's Claimed Inventory Adjustment Petitioners' Argument: The petitioners argue that the Department should not allow Valbruna's claimed inventory change adjustment. According to the petitioners, Valbruna's claimed adjustment contains the same defects that led the Department to disallow a similar adjustment claimed by Valbruna in Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar from Italy, 59 FR 66921, 66929 (December 28, 1994) ("Stainless Steel Bar from Italy"). Both adjustments, the petitioners assert, include beginning and ending inventories and, therefore, convert cost of manufacturing to cost of goods sold. The petitioners also claim that in both Stainless Steel Bar from Italy and the current investigation, Valbruna used the last- in first-out ("LIFO") method to value its inventories and that this should result in costs similar to current costs. The petitioners assert that the inventory change adjustment appears irrelevant to the calculation of COP and that it is unclear why it is warranted. As the Department stated in Stainless Steel Bar from Italy, the petitioners assert, Valbruna's use of the LIFO inventory method should mean that Valbruna's raw material costs should closely reflect the cost of materials consumed in production during the POI. Further, the petitioners contend, Valbruna recorded this LIFO inventory in its separate company financial statements. The petitioners argue that under section 773(f)(1)(a) of the Act, the Department is directed to calculate costs based on the normal records of a producer if those records are kept in accordance with the producer's home country GAAP. Therefore, the petitioners assert, the Department should use the LIFO inventory costs reflected in Valbruna's financial records. The petitioners maintain that the Department allowed Valbruna to report its COP based on calendar year 2000 data rather than POI data in part because Valbruna claimed that its costs were higher during 2000. Valbruna's inventory change adjustment, the petitioners argue, appears to be an attempt to roll back the period for computing its raw materials costs because it is based on the difference in the average prices of raw materials in its inventory at the end of 1999 and at the end of 2000. Respondent's Argument: Valbruna claims that the reported cost of manufacture should be adjusted by the amount of its verified inventory adjustment. Valbruna refutes the petitioners' argument that the inventory adjustment should be rejected on the grounds that the same adjustment was rejected in Stainless Steel Bar from Italy. In that case, Valbruna asserts, the Department recognized the reasonableness of its claim, but denied the adjustment because (1) it included finished goods inventory in the calculation and converted the cost of manufacture into cost of goods sold, and (2) the current cost method used for reporting purposes is similar to the LIFO method used for financial accounting purposes. Valbruna contends that it has addressed both of those concerns in the instant proceeding. Valbruna asserts that the inventory adjustment submitted in this investigation eliminates finished goods inventory from the calculation and that the Department recognized that the adjustment was made only to measure the price effects between current costing and LIFO valuation. Valbruna argues that the purpose of the inventory adjustment is to adjust the reported unit cost of manufacturing, which is based on the current cost of raw materials, to reflect the benefit of being able to use lower priced opening inventory. Valbruna objects to the petitioners' assertion that its inventory adjustment is an attempt to roll back the period for computing raw material costs and suggests that the adjustment is instead an attempt to properly value the cost of raw materials consumed during the cost reporting period. The Department should continue to include the inventory adjustment in its final determination, according to Valbruna, in order to accurately reflect the average cost of consumption rather than purchases in fiscal year 2000. Department's Position: We disagree with Valbruna that the Department should allow its claimed inventory change adjustment. The Department disallowed a similar adjustment in Stainless Steel Bar from Italy and we continue to consider the adjustment inappropriate. The adjustment that Valbruna is claiming is not recorded in its normal books and records. Section 773(f)(1)(A) of the Act requires the Department to use the producer's normal accounting records if they are kept in accordance with GAAP of the producing country and they reasonably reflect the cost to produce the merchandise under consideration. While Valbruna has shown that by using different cost assumptions it can calculate a different cost for the merchandise under consideration, it has failed to demonstrate that the company's normal inventory valuation method distorts the cost of producing stainless steel bar. Companies have numerous options with regard to how they value inventory (e.g., LIFO, FIFO, weighted-average, etc.). No one method is deemed better than another. Usually, the decision as to which method to use is driven by the unique characteristics of the industry and the company involved. Once an inventory valuation method is adopted, consistency in applying the method is critical. In Valbruna's case, it has consistently used the LIFO inventory method in its normal books and records. Other than the fact that it results in a higher cost of manufacturing for antidumping purposes, Valbruna has provided no evidence that its normal costing and inventory valuation methods unreasonably state costs. Thus, for the final determination we have not adjusted Valbruna's cost of production by its proposed inventory change adjustment. Finally, we disagree with Valbruna's assertion that the Department recognized that the inventory adjustment was made only to measure the price effects between current costing (i.e., the reporting methodology) and LIFO valuation. Evidence obtained at verification clearly demonstrates that the LIFO methodology followed in the company's normal books and records closely reflects the methodology used for reporting purposes. See Cost Verification Exhibits B3 and C1. Thus, there are no price effects between them and no need to calculate an inventory adjustment. Comment 50: Treatment of Unreconciled Differences in Valbruna's Cost of Manufacture Petitioners' Argument: The petitioners argue that the Department should continue to adjust Valbruna's reported cost of manufacturing to account for unreconciled differences. The petitioners note that the verification report identified an unreconciled difference between the total cost of manufacturing in Valbruna's questionnaire response and the total cost of manufacturing in its cost accounting system and that this difference has not been explained. The petitioners cite Notice of Final Determination of Sales at Less Than Fair Value: Certain Stainless Steel Wire Rods from France, 58 FR 68865, 68874 (December 29, 1993) and maintain that in past cases where there were unreconciled differences in cost the Department has adjusted the respondents' reported cost data to account for these differences. According to the petitioners, Valbruna has provided no reason for the Department to depart from its practice in this case. Further, the petitioners suggest that the adjustment should be calculated by dividing the unreconciled difference by the submitted cost of manufacturing subject merchandise. Respondent's Argument: Valbruna argues that the Department should not increase the reported cost of manufacturing for the amount of its unreconciled difference. Valbruna asserts that the adjustment made in the preliminary determination was not warranted and that it has demonstrated through its responses and verification that it reported its COP and CV data accurately. According to Valbruna, the difference between the total reported cost and the cost of manufacturing as reported in the cost accounting system is inconsequential and shows that no adjustment is necessary. If the Department does decide to make an adjustment, Valbruna holds, then it should use the verified information in the cost verification report and exhibits. Valbruna argues that petitioners' suggested calculation of the unreconciled difference should not be used because it incorrectly expresses the difference as a percentage of subject merchandise only instead of the total cost of manufacturing both subject and non-subject merchandise. Department's Position: We agree with the petitioners that the Department should adjust Valbruna's reported cost of manufacturing to account for the unreconciled difference between the total cost of manufacturing in its cost accounting system and the reported costs. Our normal practice is to include such items in the calculation of COP and CV unless the respondent can identify and document why the amount does not relate to the merchandise under investigation. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Flat-Rolled Carbon- Quality Steel Products from Brazil, 64 FR 38756, 38785 (July 19, 1999) ("Hot-Rolled Steel from Brazil"). In this case, Valbruna was unable to identify the amount as specifically related to either subject or non- subject merchandise. Because it is possible that the entire unreconciled amount relates to subject merchandise, for the final determination we have increased Valbruna's reported cost of manufacturing for the full amount of the unreconciled difference. Comment 51: Foreign Exchange Gains and Losses on Accounts Payable Petitioners' Argument: The petitioners argue that the Department should revise Valbruna's G&A expenses to include the total net foreign exchange losses on accounts payable. The petitioners assert that the Department's stated practice is to include foreign exchange gains and losses on accounts payable in G&A, include foreign exchange gains and losses on financing transactions in interest expense and exclude foreign exchange gains and losses on accounts receivable. See Hot-Rolled Steel from Brazil. The petitioners assert that Valbruna did not identify the sources of its foreign exchange gains and losses prior to verification, and also shifted its estimated net foreign exchange losses on accounts payable from its reported G&A expenses to its reported financial expenses. The petitioners argue that the Department's findings in its verification report contain the information needed to identify the actual total net foreign exchange losses on accounts payable, and that this amount should be included in Valbruna's reported G&A expenses, not its financial expenses. Respondent's Argument: Valbruna claims that all foreign exchange gains and losses associated with production were included in the calculation of its financial expense factor. Valbruna does not object, however, to the petitioners' argument that the total net foreign exchange losses on accounts payable should be included in G&A expenses, as long as the amount is excluded from the calculation of the financial expense factor. Department's Position: We agree with the petitioners that the Department should revise Valbruna's G&A ratio to include the total net foreign exchange loss on accounts payable. Our normal practice is to distinguish between exchange gains and losses realized or incurred in connection with sales transactions and those associated with purchase transactions. See Hot-Rolled Steel from Brazil, Notice of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR 9177, 9182 (February 24, 1998) and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Canada, 64 FR 17324, 17334 (April 9, 1999). We normally include exchange gains and losses associated with purchase transactions in the G&A ratio calculation. See Hot-Rolled Steel from Brazil. As noted by the petitioners, the Department obtained information at verification that enables it to identify the actual net exchange loss on accounts payable. Accordingly, for purposes of the final determination, we have included the verified net foreign exchange loss on accounts payable in the calculation of the G&A ratio. We have also addressed Valbruna's concern noted above and excluded this amount from the calculation of the financial expense factor. Comment 52: Foreign Exchange Gains and Losses on Financing Petitioners' Argument: The petitioners argue that the Department should revise Valbruna's financial expense ratio based on the net foreign exchange loss information obtained at verification. Specifically, the petitioners argue that the Department should include the exchange loss on U.S. dollar loans, the net exchange loss on cash and other, and the unrealized foreign exchange loan losses in the calculation of the financial expense ratio because they were all incurred as a result of Valbruna's financing transactions. It is the Department's stated practice, the petitioners maintain, to include exchange gains and losses from financing operations in the calculation of the financial expense ratio. See Hot-Rolled Steel from Brazil. Respondent's Argument: Valbruna agrees with the petitioners' argument that the Department should adjust the financial expense ratio to account for foreign exchange gains and losses associated with financing. Valbruna argues, however, that the portion related to the net exchange loss on cash and other should be allocated evenly between accounts payable and accounts receivable rather than allocated completely to accounts payable. Department's Position: We agree with the petitioners that the Department should revise Valbruna's financial expense ratio based on the information on net foreign exchange losses obtained at verification. We normally include foreign exchange gains and losses from financing transactions in the calculation of the financial expense ratio. See Hot-Rolled Steel from Brazil. Therefore, we have included the exchange loss on U.S. dollar loans, the net exchange loss on cash and other, and the unrealized foreign exchange loan losses in the ratio calculation. As for Valbruna's assertion that the Department should divide the net exchange loss on cash and other evenly between accounts payable and accounts receivable, we find that evidence on the record does not support this treatment. We verified the amount of foreign exchange gains and losses from accounts payable, accounts receivable, U.S. dollar loans and cash and other as recorded in Valbruna's financial accounting system and we find no basis to conclude that the verified amounts should not be used for the final determination. Additionally, because cash accounts are generally associated with a company's net financing activity, we included the net exchange gains and losses generated from these accounts in the financial expense ratio calculation. RECOMMENDATION Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final determination of this investigation and the final weighted-average dumping margins for all investigated firms in the Federal Register. AGREE _________ DISAGREE _________ _______________________ Faryar Shirzad Assistant Secretary for Import Administration _______________________ Date ______________________________________________________________________ footnotes: 1. See European Communities - Anti-Dumping Duties on Imports of Cotton- Type Bed Linen from India, Report of the Appellate Body, WT/DS141/AB/R (March 1, 2001), affirming European Communities - Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, Report of the Panel, WT/DS141/R (October 30, 2000) ("Bed Linen from India"). 2. See Bowe Passat Reinigungs - Und Waschereitechnik GmbH v. United States, 926 F. Supp. 1138, 1150 (CIT 1996). 3. See, e.g. Certain Stainless Steel Wire Rods from France, 58 FR 68865 (1993), Certain Stainless Steel Wire Rods from France, 63 FR 30185 (1998), and Stainless Steel Sheet and Strip in Coils from France, 64 FR 30820 (1999). 4. See, e.g., Final Determination of Sales at Less Than Fair Value: Coated Groundwood Paper from Belgium, Finland, France, Germany and the United Kingdom, 56 FR 56359 (November 4, 1991). 5. Selling functions associated with a particular chain of distribution help us to evaluate the level(s) of trade in a particular market. For purposes of this final determination, we have organized the common SSB selling functions into four major categories: sales process and marketing support, freight and delivery, inventory and warehousing, and quality assurance/warranty services. Other selling functions unique to specific companies were considered, as appropriate.