67 FR 6490, February 12, 2002 A-201-822 ARP: 01/04/1999-06/30/2000 Public Document IA/Group III: DLS MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary AD/CVD Enforcement Group III SUBJECT: Issues and Decision Memorandum for the 1999-2000 Administrative Review of Stainless Steel Sheet and Strip in Coils from Mexico; Final Results of Antidumping Duty Administrative Review Summary We have analyzed the case and rebuttal briefs of the interested parties in the 1999-2000 administrative review of the antidumping duty order on stainless steel sheet and strip in coils (S4) from Mexico (A-201-822). As a result of our analysis, we have made changes, including corrections to certain programming and ministerial errors, in the margin calculations. We recommend that you approve the positions that we have developed in the "Discussion of the Issues" section of this memorandum. Below is the complete list of the issues in this administrative review on which we received comments and rebuttal comments from parties: Adjustments to Normal Value Comment 1. Indirect Selling Expenses Incurred in the Home Market Comment 2: Circumstances of Sale Adjustment to Normal Value Comment 3: Imputed Credit on Home Market Sales Denominated in U.S. Dollars Adjustments to United States Price Comment 4: U.S. Packing Costs Comment 5: Duty Drawback Comment 6: Date of Payment for Certain Ken-Mac Resales Cost of Production Comment 7: Major Input Rule Comment 8: Fixed Overhead Expenses Comment 9: General & Administrative Expenses Comment 10: Interest Expenses Home Market Downstream Sales Comment 11: Use of Sales by Mexinox Trading in the Calculation of Normal Value Level of Trade Comment 12: Classification of Certain U.S. Sales as Export Price or Constructed Export Price Comment 13: Constructed Export Price Offset Margin Calculations Comment 14: Zeroing Negative Dumping Margins Assessment Rates Comment 15: Assessment Rate Methodology Ministerial Errors Comment 16: Weight Bases Used to Calculate the Difference-in-Merchandise Adjustment Comment 17: Weight Bases Used to Calculate Extended Entered Values for Ken-Mac Metals, Inc. (Ken-Mac) and Copper & Brass Sales, Inc. (CBS) Comment 18: Weight Conversion Factor Comment 19: Application of Corrections from the Ken-Mac Sales Verification to CBS' Resales Comment 20: Application of Neutral Facts Available to Ken-Mac's "Unattributable" Sales Comment 21: Model Match Formatting Errors Background On August 8, 2001, we published in the Federal Register the preliminary results of the administrative review of stainless steel sheet and strip in coils from Mexico for the period January 4, 1999 through June 30, 2000. See Stainless Steel Sheet and Strip in Coils from Mexico; Preliminary Results of Antidumping Duty Administrative Review, 65 FR 66711 (Preliminary Results). This review covers one manufacturer/exporter of stainless steel sheet and strip in coils, Mexinox S.A. de C.V. (Mexinox). We invited parties to comment on our preliminary results of review. We received case briefs from Mexinox and from Allegheny Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc., Washington Steel Division of Bethelehem Steel Corporation, United Steelworkers of America, AFL-CIO/CLC, Butler Armco Independent Union, Zanesville Armco Independent Organization, Inc. (collectively, petitioners) on September 24, 2001, and rebuttal briefs from both parties on October 9, 2001. At the request of respondents, we held a public hearing on October 17, 2001. Discussion of the Issues Adjustments to Normal Value Comment 1: Indirect Selling Expenses Incurred in the Home Market Petitioners state Mexinox's indirect selling expenses (ISEs) include freight expenses, even though these expenses have been reported separately in the freight expense fields. Petitioners contend that including these freight expenses in ISEs represents double counting to the extent these ISEs are deducted from home market selling price (e.g., as a constructed export price (CEP) offset). Similarly, petitioners assert, this double counting understates profit. Therefore, petitioners argue freight charges must be deducted from Mexinox's reported home market ISEs. Asserting petitioners have completely misunderstood the facts, Mexinox states the Department can ignore petitioners' request. As verified by the Department, Mexinox argues, its reported home market ISE ratios already exclude freight expenses. Mexinox claims Attachment B-19 of its November 20, 2000 questionnaire response and the revised ISE expense calculation worksheet verified by the Department both make this clear. Mexinox refers to the Department's August 23, 2001 Sales Verification Report (Sales Verification Report) at 16, in which the Department noted Mexinox made an adjustment to home market ISEs for freight. Therefore, Mexinox submits, no adjustment to its reported ISEs is necessary. Department's Position: We agree with Mexinox. As the record demonstrates, we verified that Mexinox excluded freight expenses incurred in the home market from its calculation of U.S. ISEs (DINDIRSU) and home market ISEs (INDIRSH). See the Sales Verification Report at 16 and Sales Verification Exhibit 14 at S-432 and S-433, respectively. Therefore, we have not adjusted Mexinox's calculation of INDIRSH and DINDIRSU for these final results. Comment 2: Circumstances of Sale Adjustment to Normal Value Mexinox states that in accordance with section 773(a)(7)(B) of the Tariff Act of 1930, as amended (the Tariff Act), the Department granted a CEP offset to normal value (NV) in the preliminary results. Mexinox notes, however, that the Department limited the amount of the CEP offset to the amount of ISEs and inventory carrying costs (ICCs) deducted from CEP. Although the "CEP offset cap" is permitted by the statute, Mexinox contends, it precludes the Department from making a fair comparison between U.S. price and NV. Mexinox asserts both U.S. and international law require a fair comparison between U.S. price and NV, citing Smith-Corona Group v. United States, 713 F.2d 1568, 1578 (Fed. Cir. 1983), cert. denied, 465 U.S. 1022 (1984); Consumer Prod. Div., SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033, 1039-40 (Fed. Cir. 1985); and the World Trade Organization (WTO) Antidumping Agreement at Article 2.4. Nevertheless, Mexinox argues, the Department can still account for the differences affecting price comparability by making an additional adjustment for ISEs and ICCs beyond the amount of the CEP offset. Mexinox claims such a circumstances of sale adjustment is lawful under section 773(a)(6)(B)(iii) of the Tariff Act, and requests that the Department make this necessary and appropriate adjustment for these final results. Mexinox holds that Article 2.4 of the WTO Antidumping Agreement mandates that "[d]ue allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability" (emphasis added by respondents). Regarding CEP sales, Mexinox notes, Article 2.4 specifically provides that if "price comparability has been affected, the authorities shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under this paragraph." Mexinox maintains the WTO Antidumping Agreement does not put a cap on the amount of the adjustments that must be made to NV to make it comparable to CEP. Thus, Mexinox contends the Antidumping Agreement establishes that the Department must adjust for all LOT-related differences between home market and U.S. market sales that affect comparability. While the CEP offset cap appears to prevent the Department from making a fair comparison, Mexinox argues, the Department can adhere to the Antidumping Agreement and simultaneously conduct a "fair comparison" under U.S. law by allowing an additional adjustment for all ISEs and ICCs above the CEP offset cap. Mexinox states that pursuant to section 773(a)(6)(B)(iii) of the Tariff Act, NV "shall be . . . increased or decreased by the amount of any difference (or lack thereof) between export price or constructed export price and [NV] (other than a difference for which allowance is otherwise provided under this section) that is established to the satisfaction of the administering authority to be wholly or partly due to . . . differences in the circumstances of sale." Mexinox asserts this approach is upheld by the Department's practice and Court of International Trade (CIT) case law. Mexinox cites The Budd Co., Wheel & Brake Div. v. United States, 14 CIT 595, 746 F. Supp. 1093, 1100 (1990) (Budd Co.), in which the Department granted a circumstances of sale adjustment to NV to account for distortions caused by hyperinflation in the Brazilian economy between the date of sale and date of shipment. According to Mexinox, the petitioners in that case argued the Department had subverted the applicable currency conversion regulations. Upon appeal, Mexinox contends, the CIT not only sustained the Department's use of the circumstances of sale adjustment as a valid display of discretion, but also stated that "... to the extent the circumstance of sale adjustment conflicted with the currency conversion regulations, it was appropriate for Commerce to choose to effectuate the primary statutory purpose in favor of fair determinations based on contemporaneous comparisons." Respondent's Case Brief at 27, citing Budd Co. at 1100. Although this decision was handed down prior to implementation of the Uruguay Round Agreements Act (URAA), Mexinox notes, the continuity in the statute regarding circumstances of sale adjustments renders it applicable to the instant review. Mexinox also cites Viraj Group, Ltd. v. United States, Slip Op. 01-104, 2001 WL 929756, *6 (CIT 2001), in which the CIT referred to Budd Co. as an example of the discretion available to the Department. According to Mexinox, the CIT remanded this case to the Department because its mechanical application of the exchange rate methodology was contrary to the goal of the antidumping laws to calculate as accurate a margin as possible. Mexinox holds these cases clearly show that, even under U.S. law, "it is the Department's first and most important obligation to establish comparability between the U.S. price and NV." Respondent's Case Brief at 27. Citing Budd Co. at 1001, Mexinox claims that the Department argued it was not required to limit circumstances of sale adjustments to direct expenses, stating "...we are not precluded from using this provision to achieve a result that reflects economic reality and is consistent with the basis purpose of the Act. . . .to fairly compare foreign market value and United States price on an equivalent basis." Petitioners respond that an adjustment to NV for home market ISEs and ICCs above the CEP offset cap would be inappropriate for two reasons. First, petitioners argue, Mexinox should not be allowed to make a claim for such an adjustment at this stage in the review period. Since there is a cap on the amount of indirect selling expenses that can be deducted from NV, petitioners state, the Department places less focus on "potentially inflated indirect selling expenses that a respondent has reported." Petitioners' Rebuttal Brief at 13. Petitioners contend Mexinox should have made a request for this adjustment in its initial questionnaire response, in order to give the Department an opportunity to ask supplemental questions and verify the provided information. Petitioners assert that at this juncture in the review period, a respondent should not be allowed to raise a significant new argument involving reliance on flimsy factual information (i.e., the reported ICCs for home market sales). Second, petitioners maintain, Mexinox incorrectly presumes there can be selling expense differences between home market sales and purported export price (EP) sales that are recognized as being at the same level of trade (LOT). Petitioners contend Mexinox's argument for a circumstances of sale adjustment on ISEs is akin to a back-door request for a LOT adjustment. Petitioners argue Mexinox has not shown that it is entitled to a LOT adjustment and therefore should not be allowed to achieve the same result using a different avenue. Department's Position: We disagree with Mexinox that we should make an additional circumstances of sale adjustment to account for the amount of ISEs and ICCs beyond the CEP offset cap. Section 351.410 of the Department's regulations provides clarification regarding the granting of circumstance of sale adjustments to NV. Specifically, section 351.410(b) states: With the exception of the allowance described in paragraph (e) of this section concerning commissions paid only in one market, the Secretary will make circumstances of sale adjustments under section 773(a)(6)(C)(iii) of the Act only for direct selling expenses and assumed expenses. As defined in section 351.410(c) of the Department's regulations, direct selling expenses consist of expenses "such as commissions, credit expenses, guarantees, and warranties, that result from, and bear a direct relationship to, the particular sale in question." Section 351.410(d), in turn, defines assumed expenses as "selling expenses that are assumed by the seller on behalf of the buyer, such as advertising expenses." The Department treats all other selling expenses as indirect expenses unless the respondent establishes that the expense in question is direct in nature. See, e.g., RHP Bearings v. United States, 875 F. Supp. 854, 859 (CIT 1995). ISEs and ICCs are, by their very nature, indirect expenses; they are incurred regardless of whether the respondent makes a sale. Section 351.410 of the Department's regulations makes clear when the Department will grant a circumstance of sale adjustment. Since ISEs and ICCs are not direct expenses or assumed expenses, the Department cannot make a circumstance of sale adjustment to NV for these expenses. It bears noting that the Department may deduct a portion of these expenses from NV if we determine, in accordance with section 351.412(f) of our regulations, that a CEP offset is warranted. Therefore, we have not made an additional circumstance of sale adjustment to our calculation of NV for these final results. Comment 3: Imputed Credit on Home Market Sales Denominated in U.S. Dollars Referring to Mexinox's November 20, 2000 questionnaire response at B-20, petitioners note Mexinox reported that "while most [home market] sales are invoiced and paid in pesos some invoices were issued in U.S. dollars." In addition, petitioners state, Mexinox reported that its customers have the option of paying in dollars or the peso equivalent "using the exchange rate on the date of payment." Petitioners' Case Brief, citing Mexinox's March 2, 2001 supplemental questionnaire response at 20. Petitioners assert that for home market sales priced in U.S. dollars, the Department should recalculate credit based on a U.S.-dollar interest rate. Since the customer's debt was in dollars, and conversion from dollars to pesos may not occur until the date of payment, petitioners argue, Mexinox did not really offer credit in pesos. Similarly, petitioners contend that even if a customer decided to pay in pesos, "the real currency of the transaction was U.S. dollars by virtue of the required payment-date exchange rate." Petitioners' Case Brief at 25. Petitioners cite Final Determination of Sales at Less Than Fair Value: Oil Country Tubular Goods from Austria, 60 FR 33551, 33555 (June 28, 1995) (OCTG from Austria), in which the Department determined that "when sales are made in, and future payments are expected in, a given currency, the measure of the company's extension of credit should be based on an interest rate tied to the currency in which its receivables are denominated. Only then does establishing a measure of imputed credit recognize both the time value of money and the effect of currency fluctuations on repatriating revenue." Petitioners also refer to similar determinations made in Final Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Japan, 61 FR 38139, 38161 (July 23, 1996) and Certain Cut-to-Length Carbon Steel Plate from Sweden; Final Results of Antidumping Duty Administrative Review, 61 FR 15772, 15780 (April 9, 1996). Based on the foregoing, for home market sales denominated in U.S. dollars, petitioners hold the Department must recalculate Mexinox's credit expenses to reflect the U.S. dollar interest rate. Pointing to business proprietary information contained in Cost Verification Exhibit 8 at 12, 27, 42, and 76, petitioners suggest the Department use the rates therein to measure Mexinox's U.S.-dollar opportunity cost for these sales. According to Mexinox, petitioners incorrectly argue that the interest rate used to calculate imputed credit is determined by the currency of the original invoice. Rather, Mexinox argues, the interest rate is determined by the currency in which the receivable is denominated. Mexinox claims this was the situation in each of the cases cited by petitioners. For instance, Mexinox states, in OCTG from Austria the Department determined that "when sales are made in, and future payments are expected in, a given currency, the measure of the company's extension of credit should be based on an interest rate tied to the currency in which its receivables are denominated." Respondent's Rebuttal Brief at 36, quoting OCTG from Austria at 33555. In the instant review, Mexinox claims, all of its home market sales, whether invoiced in dollars or pesos, are reflected by a corresponding peso-denominated receivable. Mexinox states the Department confirmed this during verification. In addition, referring to its November 20, 2000 section B questionnaire response and its March 5, 2001 supplemental questionnaire response, Mexinox contends that under Mexican law customers must always have the option to pay in pesos, regardless of whether the invoice was denominated in dollars or pesos. Mexinox contends that since its receivables are denominated in pesos, and since under Mexican law there can be no expectation of receiving payment in U.S. dollars, imputed credit for home market sales invoiced in dollars should be computed using a short-term interest rate denominated in pesos. However, Mexinox asserts, even if the Department finds that a U.S.-dollar interest rate should be applied to home market transactions invoiced in U.S. dollars, the Department should not apply a dollar-denominated interest rate to sales that were paid in pesos. Mexinox states that such sales consist of a pesos receivable as well as a payment in pesos, and therefore have been transacted in pesos. Mexinox notes these sales can be identified as those in which the field CURENC1H is coded "USD" and CURENC2H is not coded "USD." Lastly, Mexinox argues that if the Department decides to apply a dollar- denominated interest rate to any of its home market sales, the Department should use the short-term interest rate that represents Mexinox's actual dollar-based borrowings, not the hypothetical interest rate suggested by petitioners. Citing LMI-La Metallie Industriale S.p.A. v. United States, 912 F.2d 455, 460-61 (Fed. Cir. 1990), Mexinox holds that the Department's practice in this area makes clear that the interest rate used to calculate imputed credit expenses must reflect "usual and reasonable commercial behavior." Mexinox argues that both the Federal Circuit's findings and the Department's findings in Notice of Final Determination of Sales at Less Than Fair Value: Certain Steel Concrete Reinforcing Bars from Turkey, 62 FR 9737 (March 4, 1997) (Concrete Reinforcing Bars from Turkey) infer that actual borrowings must be used, not hypothetical rates. Mexinox argues none of the exceptions set forth in Concrete Reinforcing Bars from Turkey apply in the instant review. Mexinox claims it had actual short-term borrowings from unaffiliated parties in U.S. dollars, which the Department verified. Referring to the Sales Verification Report at page 28 and Exhibit 25, Mexinox states the Department found no discrepancies in the calculation of the short-term interest rate or Mexinox's reported credit expenses. Therefore, if the Department determines a dollar-denominated interest rate should be applied to its home market transactions, Mexinox contends the Department must use the verified interest rate used to calculate U.S. credit expenses. Department's Position: We agree with petitioners in part. It bears noting that while we based the calculation of credit expenses on the currency of the respondent's receivables in OCTG from Austria, we have further considered our policy since that decision. The Department's normal policy is to base our calculation of credit expenses upon "a short-term interest rate tied to the same currency as the sale." See Import Administration Policy Bulletin 98.2, "Imputed Credit Expenses and Interest Rates" (February 23, 1998). See also Comment 11 in the Issues and Decision Memorandum accompanying Certain Preserved Mushrooms from Indonesia: Notice of Final Results of Antidumping Duty Administrative Review, 66 FR 36754 (July 13, 2001). Accordingly, for these final results we have assigned a U.S.-based interest rate to those home market sales invoiced in U.S. dollars, and a Mexican-based interest rate to those home market sales denominated in pesos. However, we disagree with petitioners that we should use a U.S. dollar interest rate based on proprietary information included in Cost Verification Exhibit 8. The interest rates referenced therein do not relate to the opportunity cost of selling the foreign like product but rather relate to internal transfer prices calculated by Mexinox USA for purposes of invoicing Mexinox for hotband imports. See the Department's August 22, 2001 Cost Verification Report (Cost Verification Report) at 13. Therefore, in order to recalculate credit expenses for home market sales invoiced in U.S. dollars, we have used the verified rate that Mexinox calculated to report credit expenses for its U.S. sales. Adjustments to United States Price Comment 4: U.S. Packing Costs Petitioners note Mexinox's "monthly packing expenses were allocated to monthly packed production based on the dimensions, product type, and basic type of packing." Petitioners' Case Brief at 23, citing Mexinox's November 11, 2000 questionnaire response at B-41. According to petitioners, products with the same packing type codes should have the same or similar packing costs reported for both the home and U.S. markets. Citing proprietary information, petitioners contend a comparison of the reported packing costs shows there is not uniformity between the costs reported for the home and U.S. markets. Petitioners argue that differences in package weights do not explain the discrepancies between the amount of packing expenses reported in the home and U.S. markets. Therefore, to avoid an inappropriate allocation of costs, petitioners urge the Department to revise the packing costs reported in Mexinox's U.S. sales listing so that they are equivalent to the unit values reported in the home market for comparable packing types. Mexinox claims petitioners' argument does not contain any specific discussion of the methodologies used to report packing expenses. Moreover, Mexinox argues, petitioners fail to point to any specific reporting errors. Mexinox asserts petitioners have just ignored its packing expense calculations and conveyed their disagreement with the results. Mexinox contends that during the sales verification the Department traced Mexinox's reported home market and U.S. market packing expenses to its books and records and found no discrepancies. In addition, Mexinox argues, during the cost verification the Department reconciled the total amount of reported packing expenses and thoroughly examined the conversion cost elements without discrepancy. Mexinox asserts petitioners' observations regarding differences in average home market and U.S. market packing costs do not even remotely point to a discrepancy in the underlying data. As noted by petitioners, Mexinox argues, unit packing costs are highly dependent upon individual package weights. Mexinox states that while per-package costs are similar, as a matter of mathematical certainty heavier packages have relatively lower per-unit costs than smaller packages. Referring to its October 6, 2000 section A questionnaire response at 37 - 38, Mexinox maintains that since average per-package weights for home market sales are lower than the averages for U.S. sales, it is not surprising that the average packing expenses reported for home market sales are higher than the average reported for U.S. sales. In conclusion, Mexinox contends that it reported packing expenses using reasonable methodologies that were identical for both markets, and that the Department successfully verified its reported packing expense data. Therefore, Mexinox urges the Department to accept its data as reported and to dismiss petitioners' request to revise Mexinox's U.S. packing expense data. Department's Position: We disagree with petitioners that we should adjust the per-unit packing costs reported for Mexinox's U.S. sales. First, petitioners have not pointed to any errors in Mexinox's reporting methodology, which we examined at verification. We also examined Mexinox's calculation of per-unit packing costs for the pre-selected and surprise transactions we traced at verification, and noted no discrepancies. Further, petitioners' argument is based solely on a comparison of per-unit costs for certain packing types. While there is a difference between the average per-unit packing costs reported for home market sales and the average per-unit costs reported for U.S. market transactions, we have examined the data on the record and have found that average per-package (i.e., per-coil) costs are similar in the two markets. In addition, the record demonstrates that the average weight of coils sold in the home market is greater than the average weight of coils sold in the United States. Thus, it follows that average per-unit packing costs in the U.S. market are lower. Based on the foregoing, we have accepted Mexinox's per- unit packing costs as reported and have made no adjustments for these final results. Comment 5: Duty Drawback Petitioners argue the Department granted Mexinox an upward adjustment to EP and CEP sales for duty drawback, even though Mexinox did not show whether it had added the full amount of unpaid duty to its reported production costs. Specifically, petitioners state, the Department's traces of material purchases to inventory values at verification did not establish whether Mexinox included duties in its production costs. Petitioners point to the Cost Verification Report, which discussed the trace of an invoice from Mexinox USA to Mexinox for grade 304 hotband. Based on the Department's discussion therein and information in Mexinox's November 20, 2000 questionnaire response, petitioners hold that Mexinox's reported costs do not include any of the alleged duty payable on imported hotbands. Petitioners argue Mexinox cannot report duty drawback on U.S. sales if it did not pay the import duty and did not include it in its reported costs. However, petitioners assert, if the Department accepts Mexinox's duty drawback claim, it should increase Mexinox's reported material costs by 3.8 percent to include the 3 percent ad valorem duty plus the 0.8 percent general duty. Mexinox responds that petitioners fail to cite to any law, regulations, or examples of Department practice advocating their position. Citing section 772(c)(1)(B) of the statute, Mexinox asserts the Department grants duty drawback adjustments under two circumstances: (1) when duties on raw materials are paid at the time of importation and are later rebated upon exportation of the subject merchandise (rebate system); and (2) when import duties are not collected at the time of importation and are paid only if the finished goods are sold in the home market (duty suspension system). Mexinox states that while the Department may encounter duty suspension systems less frequently than rebate systems, duty suspension systems are no less valid under the statute. Referring to the Sales Verification Report, Mexinox states it participates in a duty suspension program called "Programas de Importación Temporal Para Producir Artículos de Exportacíon" ("PITEX") under which raw materials are temporarily imported duty free. Mexinox notes that upon exportation of the finished goods, the temporary suspension of duties becomes permanent; duties are paid only if finished goods are sold in the home market. Mexinox argues the two types of drawback systems lead to different requirements for duty drawback adjustments under the Department's established practice. Citing Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review: Circular Welded Non-Alloy Steel Pipe from Korea, 62 FR 55574, 55577 (October 27, 1997), Mexinox holds that a respondent with a rebate system must show it paid sufficient duties to account for the claimed drawback amounts. For a duty suspension program, however, Mexinox claims this requirement is not relevant since duty suspension programs are not based on a rebate of previously paid duties. In Carbon Steel Wire Rope from Mexico; Final Results of Antidumping Duty Administrative Review, 63 FR 46753 (September 2, 1998) (Steel Wire Rope from Mexico), Mexinox states, the respondent made a claim under the PITEX program. Citing Steel Wire Rope from Mexico at 46756, Mexinox contends that the Department found duty drawback adjustments are appropriate for duty suspension programs where: (1) "import duties were not collected by reason of exportation of the subject merchandise to the United States"; and (2) "the imported raw materials are sufficient to account for the duty drawback received on the exports of the manufactured products." According to Mexinox, the Department made the same determination in Silicon Metal from Brazil; Final Results of Antidumping Duty Administrative Review and Determination Not to Revoke in Part, 62 FR 1970, 1976 (January 14, 1997) (Silicon Metal from Brazil) and Extruded Rubber Thread from Malaysia; Final Results of Antidumping Duty Administrative Review, 62 FR 33588, 33589 (June 20, 1997). Mexinox maintains that it meets both prongs of this test. As the CIT has noted, Mexinox states, the first prong "analyzes the foreign government's export rebate program." Respondent's Rebuttal Brief at 21, quoting Laclede Steel v. United States, 18 CIT 965, 1994 WL 591949, *5-8. Mexinox argues the PITEX program at issue here is identical to that examined in Steel Wire Rope from Mexico. Referring to the Sales Verification Report, Mexinox contends the Department thoroughly examined the Mexican statute and regulations related to the PITEX program and confirmed that Mexinox was authorized to import raw materials duty free under this program during the relevant period. With respect to the second prong, Mexinox claims it is beyond dispute that it imported a sufficient amount of raw materials to account for the drawback amounts claimed, stating the Department verified that all (100 percent) of its raw materials are imported. Mexinox asserts that the Department's decision to grant a duty drawback adjustment does not depend on whether import duties were paid or included in the reported costs. Nonetheless, Mexinox claims, its reported costs do include import duties. In making this assertion, Mexinox points to the expense labeled "RM regularization custom fees" on page 13 of Cost Verification Exhibit 6. In conclusion, Mexinox argues that petitioners have not pointed to, and the Department has not found, any error or distortion in the way in which the amount of Mexinox's duty drawback adjustment was computed. Therefore, Mexinox urges the Department to continue granting Mexinox's reported duty drawback adjustment. Department's Position: We disagree with petitioners. Section 772(c)(1)(B) of the Tariff Act explicitly provides for a duty drawback adjustment for import duties "imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject product to the United States." In accordance with this provision, the Department will grant a duty drawback adjustment if we determine that: 1) import duties and rebates are directly linked to and are dependent upon one another; and 2) the company claiming the adjustment can demonstrate that there are sufficient imports of raw materials to account for the duty drawback received on the exports of the manufactured product. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From Taiwan, 64 FR 30592, 30613 (June 8, 1999). However, the Department has never established a prerequisite that import duties must actually be paid and subsequently rebated in order for there to be the necessary link justifying an adjustment to the U.S. starting price. For those duty drawback programs in which import duties are not collected, the Department first examines whether import duties were actually not collected by reason of the exportation of the subject merchandise to the United States. This type of program clearly falls within the express language of section 772(c)(1)(B) of the Tariff Act as one in which duties "...have not been collected, by reason of the exportation of the subject product to the United States." Under the PITEX program, Mexinox does not pay duties on imported hotband and subsequently receive a rebate of duties upon exportation. Rather, under this program the Mexican government suspends the collection of duties from Mexinox on imports of hotband contingent upon the exportation of the materials within the requisite amount of time. The Department has reviewed this type of program before; see, e.g., Steel Wire Rope from Mexico (import duties not collected under the PITEX program) and Silicon Metal from Brazil at 1976 (Brazilian government suspended the payment of taxes and import duties ordinarily due upon importation). During verification we reviewed the law governing the PITEX program as well as the decree authorizing Mexinox to import raw materials duty free under this program. See the Sales Verification Report at 26. Thus, we determine Mexinox has met the first requirement of the Department's test for receiving a duty drawback adjustment. At verification we also confirmed that all of the hotband used by Mexinox to produce subject merchandise was imported. Since we are satisfied Mexinox had sufficient imports of raw materials to account for its exports of stainless steel sheet and strip in coils to the United States, we find Mexinox has met the second requirement. Therefore, we have continued to accept Mexinox's reported duty drawback adjustment for these final results. Petitioners have also asserted that Mexinox's reported production costs do not include import duties. However, the record shows that duties paid during the POR have been included in Mexinox's total raw materials cost. See Cost Verification Exhibit 6 at 13. Mexinox's total raw materials cost, in turn, was verified as part of its cost of manufacturing reconciliation, with which we found no discrepancies. Therefore, for these final results we have not found it necessary to adjust Mexinox's reported cost of production since it includes import duties. Comment 6: Date of Payment for Certain Ken-Mac Resales Mexinox notes that some Ken-Mac sales were listed as unpaid as of the date of its last data submission. For the preliminary results, Mexinox states, the Department calculated imputed credit expenses for these transactions by setting the payment date equal to the deadline for the preliminary results. Mexinox contends that the use of this date is unfair because it penalizes Mexinox for its inability to update payment dates due to the deadlines imposed by this review. Mexinox proposes that the only fair and logical cut-off date for determining payment dates for sales that were unpaid is to use the last date on which the respondent could have provide updated payment information. Mexinox states that this date would be May 4, 2001, the date on which it made its last data submission regarding Ken-Mac sales. Stating that the Department only accepts new information at verification under limited circumstances, Mexinox claims that under no circumstances should the Department use a payment data later than the last day of the Ken-Mac sales verification (June 7, 2001). Alternatively, Mexinox suggests, the Department could apply the average credit period for all other sales to these unpaid sales. Petitioners assert that using the date of Mexinox's latest questionnaire response or the last day of verification as the payment date for unpaid sales would be an inappropriate application of facts available. Petitioners state the Department has employed various methodologies in the past to determine payment dates for unpaid sales. For instance, petitioners contend, it has used the date of the final determination or final results of review, referring to Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rods From France, 58 FR 68865 (December 29, 1993). Petitioners hold the facts in this case support this approach. Petitioners argue that the sales in question are extraordinary in that they were made on or before June 30, 2000, the last date of the POR, and remained unpaid as of July 31, 2001, the deadline for the preliminary results. Thus, petitioners claim, the credit period for these sales was at least 13 months. Although Mexinox could have presented payment date information up until the last date of the Mexinox sales verification (June 23, 2001), petitioners assert, it did not do so. Contrary to Mexinox's suggestion that such corrections would not have been allowed, petitioners argue these are the types of minor updates expected at verification. Petitioners state the Department should not assume that Ken-Mac received full payment for these sales after the Department's sales verification ended. Instead, petitioners hold, the Department should deduce that these were problem sales and likely remained unpaid. Petitioners note that in an antidumping investigation, the credit period for unpaid sales may span only a few months from the end of the period of investigation to the date of preliminary determination; such a credit period may be consistent with commercial reality and thus require a different methodology. Petitioners submit that the Department should determine that the sales at issue likely remained unpaid as of the date of the final results, and use that date to calculate imputed credit costs. Department's Position: We agree with Mexinox that we should use the average credit period for all Ken-Mac sales with reported payment dates to calculate imputed credit expenses for those sales which were unpaid. The Department does not find it appropriate to take into account the failure of the U.S. customer to make payments for the sales at issue. Therefore, for these final results, we have used the average payment experience for all other U.S. sales made by Ken-Mac as the facts available for the sales at issue. For information regarding the calculation of the average credit period, see the Department's Final Analysis Memorandum, dated February 4, 2002. This methodology is in keeping with that used in Notice of Amendment of Final Determinations of Sales at Less Than Fair Value: Stainless Steel Plate in Coils From the Republic of Korea; and Stainless Steel Sheet and Strip in Coils From the Republic of Korea, 66 FR 45279 (August 28, 2001). Cost of Production Comment 7: Major Input Rule Petitioners note that hotbands are the primary raw material used by re- rollers like Mexinox who produce sheet and strip in coils. Pursuant to section 351.407(b) of the Department's regulations, petitioners state that where an affiliate supplies major inputs and the producer records transfer prices in its cost accounts, the Department's policy is to adjust recorded costs by the highest of transfer price, market price, or cost of production (COP). Petitioners argue that the Department has not applied the major inputs analysis to Mexinox's reported material costs. Even using Mexinox's market price and COP data, petitioners claim, Mexinox's recorded costs (based on transfer prices) are understated because Mexinox's reported costs simply reflect what it recorded. Petitioners contend that for certain grades of hotband purchased by Mexinox, the Department should make an upward adjustment to the recorded costs (the average prices for all purchases) based on Mexinox's month-by-month analysis of transfer prices, market prices, and affiliated suppliers' COP. Petitioners assert, however, that Mexinox's submitted market prices are deeply flawed. First, petitioners argue that as the only re-roller (and thus the only purchaser of hotbands) in Mexico, Mexinox has monopsony control over the prices at which hotbands are sold in that country. Petitioners assert all suppliers of hotband to the Mexican market must negotiate prices with Mexinox and for that reason, the Department should examine carefully the market prices provided by Mexinox. Citing proprietary information, petitioners also argue Mexinox's purchases from a certain unaffiliated supplier are suspect since this supplier has demonstrated unfair pricing practices in the United States. On this point, petitioners maintain the Department must reject Mexinox's reported market prices since they do not represent legitimate market prices. Finally, petitioners contend that Mexinox's relationship with a certain unaffiliated supplier, along with its domination of the Mexican market, "support a conclusion that Mexinox controls [certain unaffiliated] hotband suppliers in the Mexican market, and that these companies have a relationship very much akin to affiliation." Petitioners' Case Brief at 28. Because of the foregoing reasons, petitioners suggest Mexinox's reported market prices cannot be used "... as benchmarks for testing the legitimacy of affiliate-supplied hotband products... ." Id. at 29. Citing their March 30, 2001 letter to the Department, petitioners hold that with world prices prevailing on stainless steel products, there is no reason prices in Mexico should differ from prices in other countries. Petitioners assert that while it may not be practical to find alternative market benchmarks for each grade of hotband purchased by Mexinox, they propose the Department make an adjustment based on legitimate market prices for grades 304 and 430. According to petitioners, neither the Tariff Act nor the Department's regulations require that the Department automatically accept a respondent's reported market prices. Pursuant to section 351.407(b) of the Department's regulations, petitioners hold, the Department normally uses the higher of transfer price, market price, or the affiliate's COP to value a major input, and defines market price as "the amount usually reflected in sales of the major input in the market under consideration." Petitioners claim the word "normally" indicates that Department is not required to rely on a respondent's reported market prices in all instances. In the instant review, petitioners argue, there is no "usual" market price because there are no hotband suppliers based in Mexico; furthermore, as the only buyer in that market, Mexinox controls the market and can extort its suppliers to charge below-market prices. In other antidumping proceedings, petitioners contend, the Department may seek "alternative information as a 'reality check' for its traditional valuation methods." Id. at 30. For example, petitioners note, the Department uses factors of production from a surrogate country to compute NV in non-market economy cases. Petitioners state that while the Department relies on price information from a previously-determined surrogate country in these instances, it often cross-checks these prices with values from other countries or world indices, and may even use the alternative values if they are more reliable. In stating this, petitioners refer to Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of 1998- 1999 Administrative Review, Partial Recission of Review, and Determination Not to Revoke Order in Part, 66 FR 1953 (January 10, 2001) and the accompanying decision memorandum and to Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of 1996-1997 Antidumping Duty Administrative Review and New Shipper Review and Determination Not to Revoke Order in Part, 63 FR 63842 (November 17, 1998). Petitioners also cite Notice of Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination: Certain Softwood Lumber Products from Canada, 66 FR 43186, 43194 (August 17, 2001), in which the Department used U.S. tree-harvesting rates to determine whether government-controlled rates in Canada reflected market prices. Petitioners state that differences in U.S. and Canadian tree-harvesting rates show distortion because of government involvement in the lumber industry. In the same manner, petitioners contend, differences in U.S. and Mexican hotband prices "reflect the distortion in market prices inherent in Mexinox's dominant position as Mexico's only hotband consumer." Petitioners' Case Brief at 31. Therefore, petitioners urge the Department to revise Mexinox's major inputs analysis using the market prices contained in their March 30, 2001 letter or, alternatively, information from another publicly available source. Referencing business proprietary information in Cost Verification Exhibit 10, petitioners explain that adjusting for the higher of COP, transfer price, or market price results in a specific adjustment that can be applied to material costs for grade 304 and 430 blackband. However, claiming that market prices were significantly higher than what Mexinox reported, petitioners also proffer alternative adjustments for grades 304 and 430 blackband based on the alternative market price data in their March 30, 2001 letter. In conclusion, petitioners contend the Department should consider these alternative market prices in order to adjust the cost of grade 304 and 430 S4 products, and also that it should consider adjusting the cost of all S4 products based on the adjustments calculated for grades 304 and 430. Mexinox asserts that petitioners' argument regarding the validity of its reported market prices are ridiculous and totally contradicted by the facts. Addressing petitioners' allegation that Mexinox exercises monopsony control over hotband prices in Mexico, Mexinox responds that even if this were true, it is unclear why this invalidates the use of its reported market prices. Citing the preamble to the Department's regulations at 27362, Mexinox states market prices are compared with affiliated party prices in order to determine whether the affiliated party sales have been made at arm's length. While a monopsony, duopoly, monopoly, or other market structure may indicate the relative bargaining strength of the parties, Mexinox argues, "it does not in any way call into question the lack of affiliation between the parties or the arm's-length nature of the price itself." Respondent's Rebuttal Brief at 40-41. Mexinox states that as noted in the preamble, that parties are unaffiliated ensures that prices are at arm's-length. According to Mexinox, monopsony refers to a situation in which there exists a single buyer for multiple sellers in the same market. Mexinox claims petitioners' argument is factually incorrect because there is no evidence that this market situation exists in Mexico with respect to hotband. Mexinox holds that while it is the only re-roller of hotband in Mexico, petitioners have not pointed to any evidence showing that Mexinox is the only hotband purchaser in Mexico. Mexinox notes that hotband can be used for purposes other than re-rolling, such as the production of tubular goods. Further, even if it were the sole purchaser of hotband in Mexico, Mexinox argues, there are no hotband suppliers in Mexico. Asserting it buys hotband on the world market, Mexinox contends that if the Department includes market structure and bargaining positions in the major inputs analysis, it must realize that as a purchaser on the world market Mexinox does not exercise monopsony power. Thus, Mexinox argues, petitioners' argument, even if it had legal relevance, fails on factual grounds. Mexinox contends petitioners' second argument - that Mexinox's purchases from a certain unaffiliated supplier are suspect since this supplier allegedly sells other products at less than fair value in the United States - also lacks merit. Mexinox maintains that this suppliers's selling practices in the United States are legally and factually irrelevant to the evaluation of its selling prices in the Mexican market. Mexinox argues there is no basis for the Department to reject a producer's sales prices in one market simply because that producer was found to be dumping in another country based on an investigation period that is now several years old. Mexinox claims petitioners have not pointed to any evidence showing that this particular unaffiliated supplier is dumping in the Mexican market. If petitioners can support their claim, Mexinox holds, they have the option of filing a third country dumping petition in accordance with section 783 of the Tariff Act; however, since they have not done so, the Department should disregard petitioners' claim. Referring to the argument that Mexinox is "affiliated" with a certain unaffiliated supplier of hotband, Mexinox states petitioners have based this argument on one fact pre-dating the POR and another fact post-dating the POR. Even if the first fact is true, Mexinox argues, it cannot be considered sufficient to establish affiliation. Regarding the second fact, Mexinox claims it is not relevant to the Department's analysis because: (1) it constitutes new factual information that cannot be considered pursuant to section 351.301(b)(2) of the Department's regulations; and (2) it pertains to events uncertain to occur, and if they do occur it would be outside the current POR. Further, Mexinox claims, even if the second fact was timely and current, it also would be insufficient to establish affiliation. Mexinox asserts petitioners' argument is baseless, as evidenced by "their inability to characterize the relationship as anything more than 'akin to' affiliation rather than actually consisting [of] affiliation within the meaning of the U.S. dumping laws." Respondent's Rebuttal Brief at 43. Mexinox holds that since there is no legal or factual basis for finding affiliation with this particular unaffiliated supplier, its sales to Mexinox have been made at arm's length. Maintaining petitioners' arguments are either legally irrelevant, factually incorrect, unsupported, or all of the above, Mexinox states there is no basis for disregarding its reported market prices from the major inputs analysis. However, Mexinox argues, even if there were a basis for disregarding its reported market prices, there is no basis on which to resort to alternative market benchmarks. In the absence of market prices based on actual purchases, Mexinox claims, the Department has a clear and established practice of basing the major inputs analysis on the higher of transfer price or COP. Mexinox cites several cases in which market prices were not available and thus were handled by the Department in this manner, such as 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 (June 8, 1999) (S4 from the United Kingdom); Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, from Japan; Final Results of Antidumping Duty Administrative Reviews; 66 FR 15078 (March 15, 2001) (Tapered Roller Bearings from Japan); and Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan, Romania, Sweden, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 64 FR 35590 (July 1, 1999). Mexinox contends petitioners have only offered analogies based on an antidumping case involving a non-market economy (and thus the selection of surrogate prices) and a preliminary countervailing duty determination. Mexinox argues that since Mexico is not a non-market economy, and since this case does not involve allegations of government subsidies, petitioners' analogies demonstrate the weakness of their overall argument. Therefore, Mexinox holds, if the Department disallows its reported market prices, then it must conduct the major inputs analysis by comparing transfer prices to COP. Finally, Mexinox argues that in the event the Department rejects its reported market prices and attempts to develop a surrogate market price in its place, the alternative proffered by petitioners is not viable. First, Mexinox states, petitioners have offered little or no information about these prices, such as the reason it chose this supplier as representative, or the circumstances of sale. Second, stating petitioners have not provided any corroborating information such as calculation worksheets, invoices, accounting records, etc., Mexinox argues neither it nor the Department has any basis on which to determine whether those prices are valid. In conclusion, Mexinox argues, although it purchased hotband from a certain unaffiliated supplier during the POR, it is not affiliated with that supplier. Thus, Mexinox contends these sales were made at arm's- length prices. Therefore, Mexinox urges the Department to reject petitioners' arguments and make no adjustments for the major inputs analysis. Department's Position: We agree with petitioners that we should apply the major inputs analysis to Mexinox's reported material costs for the final results of this review. Section 351.407(b) of the Department's regulations states that for purposes of section 773(f)(3) of the Tariff Act, the Department will determine the value of a major input purchased from an affiliated person based on the higher of: 1) the price paid by the exporter or producer to the affiliated person for the major input; 2) the amount usually reflected in sales of the major input in the market under consideration; or 3) the cost to the affiliated person of producing the major input. We have relied on this methodology in other cases; see, e.g., Final Determination of Sales at Less Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336, 17337 (April 9, 1999), Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, et.al.; Final Results of Antidumping Duty Administrative Reviews and Revocation of Orders in Part, 66 FR 36551 (July 12, 2001) (AFBs 2001), and Tapered Roller Bearings from Japan. Moreover, the CIT has upheld our application of this regulation. See Mannesmann v. United States, 77 F. Supp. 2d 1302 (CIT 1999), and American Silicon Technology v. United States, 110 F. Supp. 2d 992 (CIT 2000). However, we disagree with petitioners that we should disregard Mexinox's reported market costs in applying the major inputs rule. Section 351.407(b)(2) defines market price as "[t]he amount usually reflected in sales of the major input in the market under consideration." The fact that Mexinox may be the only purchaser of hotbands in Mexico is irrelevant to this analysis, since this provision does not specify that we must consider the structure of the market under consideration. Petitioners also have alleged that Mexinox's hotband purchases from a certain unaffiliated supplier cannot be relied upon since this supplier has engaged in unfair pricing practices in the United States. Whatever the facts may be regarding this supplier's pricing practices in the United States, we note they are irrelevant to the facts of this case. Regarding petitioners' argument that Mexinox's relationship with a certain unaffiliated supplier is "akin to affiliation," we have fully examined Mexinox's financial statements and other information on the record and have determined Mexinox is not affiliated with this supplier. See, e.g., Mexinox's October 6, 2000 questionnaire response at Attachment A-11-A-1. Finally, we also disagree with the contention we should use surrogate values in place of Mexinox's reported market costs. In cases where market prices are not available, the Department simply bases the major inputs analysis on the higher of transfer price or COP. See, e.g., S4 from the United Kingdom at 30708-9. Thus, had we found it necessary to disregard Mexinox's reported market costs, we would have relied upon the higher of the affiliated party's COP or the transfer price to perform the major inputs analysis. As noted above, we have applied the major inputs analysis to Mexinox's reported costs for these final results. Given that we have not found any reason to disregard Mexinox's reported market costs, we have based the major inputs analysis on the highest of transfer price, market price, or COP. As a result of our analysis, we have adjusted Mexinox's reported materials costs for all S4 products (i.e., all grades). For a detailed discussion of our analysis, see the Department's Final Analysis Memorandum, dated February 4, 2001. Comment 8: Fixed Overhead Expenses Petitioners note the total fixed overhead (depreciation) reported by Mexinox in its cost database represents a certain percentage of the reported total cost of manufacture. Petitioners argue, however, that Mexinox's 1999 audited financial statement shows the ratio of depreciation of certain assets to the adjusted cost of goods sold is greater. Therefore, petitioners assert the Department should apply a correction factor to Mexinox's reported fixed overhead costs in order to correct this understatement. Mexinox claims petitioners' argument is based on its audited financial statements for 1999. Therefore, Mexinox contends, petitioners have calculated a fixed overhead ratio using data for calendar year 1999 rather than data for the 18-month POR. Mexinox holds the only relevant depreciation ratio is the one calculated for the 18-month period, which is the one the Department requested and verified without discrepancy. Therefore, Mexinox maintains the Department should not make the adjustment proposed by petitioners. Department's Position: We disagree with petitioners that the Department should apply a correction factor to Mexinox's reported fixed overhead costs, which consist solely of depreciation. First, we examined Mexinox's calculation of fixed overhead at verification and accepted its calculation of this ratio. Moreover, the correction factor proposed by petitioners is based on two ratios that measure depreciation expenses over two different periods of time. Specifically, the ratio of depreciation to cost of goods sold ("Ratio 1") is based on Mexinox's 1999 audited financial statement, i.e., a 12-month period, while the ratio of total fixed overhead to total cost of manufacturing ("Ratio 2") is based on the entire 18-month POR. To calculate Ratio 2, petitioners summed the weighted fixed overhead and total cost of manufacture reported for each control number (CONNUM) in Mexinox's cost database (represented by the variables FIXOH and TOTCOM, respectively). Because Mexinox calculated the cost of manufacture for each CONNUM based on the 18-month POR, it is not possible to adjust Ratio 2 to determine what the cost of depreciation would be for the fiscal year. Therefore, we have made no changes to Mexinox's reported fixed overhead costs for these final results. Comment 9: General & Administrative Expenses Petitioners contend the numerator of Mexinox's reported general & administrative (G&A) ratio should be increased to include expenses incurred by Mexinox on behalf of Mexinox Trading, expenses related to certain investment activities, and a third category of expenses not subject to public disclosure, because all of these expenses support Mexinox's production. In addition, petitioners claim the numerator of Mexinox's G&A ratio should be amended to account for expenses incurred on behalf of Mexinox by its parent companies. According to petitioners, it appears Mexinox's payments to Krupp Thyssen Stainless AG (KTS), its immediate parent, equal a percentage of 1999 cost of goods sold that bears no relationship to the actual expenses incurred on behalf of Mexinox by its affiliates. Further, petitioners argue, the record shows the contribution of Mexinox's parent entities was much greater than the amount paid to KTS. Citing Final Determination of Sales at Less Than Fair Value: Certain Hot- Rolled Carbon Steel Flat Products from Canada, 58 FR 37099, 37114 (July 9, 1993), petitioners assert it is customary for the Department to allocate a portion of a parent company's G&A expenses to subsidiaries, and to allocate all parent company expenses to subsidiaries where the parent has no operations of its own. Petitioners note that the parent of Mexinox's immediate parent, KTS, is Thyssen Krupp Steel AG (TKS), whose parent in turn is Thyssen Krupp AG. Petitioners argue that at each level, the parent's contribution to subsidiaries' G&A is equivalent to the unconsolidated parent G&A expenses divided by consolidated sales (unless the parent has significant operations of its own, in which case one can assume only a portion of the parent's G&A is on behalf of subsidiaries). Referring to KTS's 1999 financial statement at 5-10 and 10-22, petitioners argue it is clear KTS contributed G&A-related services to Mexinox and also that KTS has limited unconsolidated operations. See Attachment A-11-L of Mexinox's October 10, 2000 questionnaire response. Therefore, petitioners claim, it is appropriate to allocate unconsolidated G&A over total consolidated sales. Citing KTS's financial statement, petitioners argue that KTS's contribution to its subsidiaries was equivalent to 4.8 percent of sales value (unconsolidated 1998-1999 G&A ("other operating") expense of DM 24.9 million divided by consolidated sales of DM 521.4 million). Similarly, citing TKS's 1999 financial report, petitioners argue that TKS's contribution to its subsidiaries equaled 10.6 percent of the consolidated cost of sales, (1) or €265.1 in "other operating" plus €615.0 in "general administrative" expenses divided by cost of sales of €8,319.2 million. See Attachment A-11-K of Mexinox's October 10, 2000 questionnaire response. Finally, referring to Thyssen Krupp AG's 1999 financial report, petitioners use the same methodology to argue that a certain percentage of selling expenses incurred by Thyssen Krupp AG is attributable to its subsidiaries' operations. See Attachment A- 11-J of Mexinox's October 10, 2000 questionnaire response. Thus, petitioners urge the Department to apply to appropriate percentages to increase Mexinox's reported G&A to account for its parents' contributions to Mexinox's operations. Regarding the expenses incurred by Mexinox on behalf of Mexinox Trading, Mexinox argues that there is no basis for including them in G&A because they are selling expenses, not general expenses. Citing the Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from Mexico, 64 FR 30790, 30818 (June 8, 1999) (S4 from Mexico Final Determination), Mexinox states the Department rejected petitioners' claim regarding these expenses in the original investigation, and states petitioners have not explained why the Department should reach a different conclusion in the instant review. Mexinox claims the expenses related to certain investment activities should not be included in G&A because they are unrelated to the production of subject merchandise or Mexinox's general operations. Mexinox then cites Note 8 to its 1999 audited financial statements, which is not subject to public disclosure. Citing Notice of Final Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon from Chile, 63 FR 31411 (June 9, 1998) (Fresh Atlantic Salmon from Chile), Mexinox argues the Department has an established practice of excluding gains and losses from investment activities from G&A. Since the amount in question represents a loss related to investment activities that are not related to the production of subject merchandise, Mexinox holds, the Department should not include these expenses in G&A. With respect to third category of expenses mentioned by petitioners, Mexinox argues this item does not represent expenses. Mexinox cites Note 14 of its 1999 audited financial statement and claims that this item is not an expense incurred in connection with the production of subject merchandise or other company operations. Rather, Mexinox contends, this item is akin to dividend distributions or income tax payments, neither of which are included in COP or constructed value (CV). Mexinox holds the Department's practice concerning dividends and tax payments is to exclude them from the cost calculation because such payments pertain to the level of income earned by a corporation, not the expenses themselves. Based on the foregoing, Mexinox asserts this item should not be included in G&A. Finally, Mexinox asserts that, like the original investigation, its reported G&A expenses included an amount representing fees paid to KTS for corporate services rendered on Mexinox's behalf. Mexinox states the Department examined these fees in detail at the cost verification, referring to the Cost Verification Report at 23 and Cost Verification Exhibit 15. Arguing that these fees do in fact cover the actual expenses incurred by Mexinox's parents on behalf of Mexinox, Mexinox contends petitioners have not pointed to any evidence showing this was not the case during the POR. Mexinox claims that for each service performed on behalf of a subsidiary, the subsidiary compensates the immediate parent through payment of a corporate fee. Mexinox argues the amount of such a payment is part of the subsidiary's total expenses, which are charged to the subsidiary's own subsidiaries if any services are provided on their behalf. Therefore, Mexinox holds, the corporate fees paid to KTS fully represent any expenses incurred by Mexinox's parent companies at each level. Mexinox recounts that ThyssenKrupp AG, its ultimate parent, is a holding company with no operations of its own. Mexinox states that any expenses incurred by ThyssenKrupp AG are passed on to its subsidiaries. Pointing to ThyssenKrupp AG's unconsolidated financial statement, Mexinox notes ThyssenKrupp AG had total operating expenses of €295.1 million and total operating income of €527.7 million in 1998-1999. Stating the record demonstrates ThyssenKrupp AG charged its affiliates more operating expenses than were actually incurred on their behalf, Mexinox maintains the Department does not need to make an adjustment to G&A with respect to ThyssenKrupp AG. Mexinox argues that as shown in ThyssenKrupp AG's financial statement, ThyssenKrupp AG was paid by subsidiary TKS for expenses incurred on its behalf. Mexinox states petitioners have not cited any contradictory evidence. Mexinox contends that TKS's consolidated expenses, which were the focus of petitioners' comments, reflect the expenses incurred by all of the companies in the TKS group, including Mexinox. Therefore, Mexinox argues, any adjustment for consolidated expenses at the TKS level would double-count Mexinox's expenses and include expenses unrelated to the production of subject merchandise. Mexinox notes that one of TKS's subsidiaries is KTS, who paid TKS for expenses incurred on its behalf. Mexinox states that KTS, in turn, charged its own subsidiaries - one of which is Mexinox - for expenses incurred on their behalf. Respondent's Rebuttal Brief at 53. Mexinox argues the record shows Mexinox paid KTS enough to cover its collective parents' expenses incurred on its behalf. Referring to KTS's financial statements, Mexinox contends its unconsolidated operating expenses for 1998-1999 equaled DM 24.9 million. Therefore, Mexinox claims, KTS's charges of DM 49.0 million to affiliates fully covered these expenses and included a profit as well. Based on the foregoing, Mexinox asserts there is no reason to adjust its reported G&A expenses to account for any parent company expenses. Department's Position: We agree with petitioners in part. With respect to expenses incurred by Mexinox on behalf of Mexinox Trading, we have examined the record and have determined that these should be included in the numerator of Mexinox's G&A ratio. Our findings at verification demonstrate that the amount in question represented G&A expenses, not selling expenses as asserted by Mexinox. See the Cost Verification Report at 22 and Cost Verification Exhibit 15. Regarding the expenses related to investment activities that petitioners claim should be included in the G&A ratio, we disagree with petitioners. The Department does not include gains or losses pertaining to investment activities in G&A expenses, as these are not related to production activities. See, e.g., Fresh Atlantic Salmon From Chile at 31436. We agree with petitioners that the third category of expenses (which Mexinox states are "akin to dividend distributions or income tax payments") should be included in G&A. The Department has an established practice of including this type of expense in the calculation of COP and CV. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 65 FR 5554, 5581 (February 4, 2000). Because this item is a cost of labor and it is an expense recognized within the POR, it should be included in Mexinox's G&A expenses. Finally, we agree with the respondent that the proper amount of its parent company's G&A expenses have been included in the G&A expense rate calculation. Our practice is to calculate general expenses based on the company's normal books and records. Mexinox has included in its G&A expense calculation the total amount charged by its parent company, KTS, and recorded in its audited financial statements. Thus, we see no reason in this case for the Department to abandon its practice of including the G&A expenses presented on the audited financial statements of the respondent that already includes a portion of the parent company G&A expenses. Therefore, for these final results we have not amended the G&A ratio to include expenses incurred by each of Mexinox's parent companies. Therefore, for these final results, we have corrected Mexinox's G&A ratio to include certain expenses incurred by Mexinox on behalf of Mexinox Trading and the expenses "akin to dividend distributions or income tax payments." See the Department's Final Analysis Memorandum, dated February 4, 2001 for our recalculation of G&A expenses. Comment 10: Interest Expenses Petitioners note Mexinox reported a POR financial expense of 1.34 percent, which represents the financial expenses of its ultimate parent, Thyssen Krupp AG. If this ratio is used, petitioners argue, it should be applied on a packing-inclusive basis since packing expenses were included in the ratio's denominator. Petitioners claim, however, that this ratio is not the most appropriate measure of Mexinox's consolidated financial expense. Citing Attachments A-11-E and J of Mexinox's October 10, 2000 questionnaire response, petitioners state Mexinox's 1999 sales represent a small portion of Thyssen Krupp AG's consolidated sales of $30 billion. Petitioners note that Thyssen Krupp AG, a German-based entity with worldwide operations, deals with automotive products, production systems, components, materials services, facilities services, real estate, and engineering. Petitioners claim it is not appropriate to base the financial expenses of a Mexican stainless steel facility on the consolidated financial expenses of an entity with such diverse operations. Petitioners state that KTS, Mexinox's immediate parent, incurred net financing expenses of DM40.1 million on consolidated sales of DM 521.4 million. Id. at Attachment A-11-L. Thus, petitioners hold, KTS' net interest expense likely benefitted Mexinox and its affiliates through investment and R&D activities. Since KTS focuses on stainless operations and is responsible for "coordinating functions for the companies under its control," petitioners assert the Department should base Mexinox's financial expenses on those of its immediate parent, not on those of its ultimate parent. Petitioners state the flow of major inputs, for example, among AST, KTN, and Mexinox demonstrates significant coordination and planning among the KTS subsidiaries. Noting that the Department generally bases financial expenses on the highest level of consolidation, petitioners argue that the CIT has found that an "immediate parent... would be much more likely to have and exercise direct control over the subsidiary," quoting American Silicon Technologies v. United States, 1999 WL 354415 at 8, Slip Op. 99-34 (CIT 1999) (American Silicon). According to petitioners, in American Silicon the case was remanded to the Department in order to base the respondent's financial expenses on those of its immediate parent, since the respondent's ultimate parent's financial statements did not represent the costs associated with producing and selling subject merchandise. Since KTS is most closely involved in the coordination, R&D, and investment of Thyssen Krupp AG's worldwide stainless steel operations, petitioners urge the Department to apply KTS's financial expenses of 7.7 percent (DM 40.1 million divided by DM 521.4 million) rather than the financial expenses of Thyssen Krupp AG. In conclusion, petitioners note, this ratio is expressed as a percentage of sales, and is therefore conservative, because KTS's financial statement does not reflect the consolidated cost of sales. Mexinox contends that it reported a financial expense ratio based on the highest level of consolidation. Respondent's Rebuttal Brief at 54. Mexinox states this was the methodology accepted by the Department in the original investigation. Id. Mexinox claims petitioners' argument - that financial expenses should be based in this case on the lowest level of consolidation - is incorrect because the Department's practice is to compute interest expenses at the highest level of consolidation available. In S4 from the United Kingdom, Mexinox contends, the respondent disagreed with using interest expenses at the highest consolidated level on the grounds that the immediate parent had its own borrowings and was not financed by the ultimate parent. Respondent's Rebuttal Brief at 54, citing S4 from the United Kingdom at 30688. Mexinox argues that the petitioners in S4 from the United Kingdom claimed the Department's normal methodology is to compute financial expenses at the highest consolidated level of affiliation, and that the Department agreed with petitioners. Id. at 54- 55, citing S4 from the United Kingdom at 30709-10. Mexinox contends petitioners incorrectly relied on American Silicon, arguing that the CIT did not overrule the Department's practice of basing financial expenses on the highest level of consolidation. Mexinox claims that American Silicon did not create a requirement for the Department to consider whether an intermediate company might exercise more control over a subsidiary than the ultimate parent. As explained by the Federal Circuit, Mexinox argues, American Silicon relied instead "on the absence in that particular case of any inter-company financial dealings within the group under consideration" in calculating financial expenses. Respondent's Rebuttal Brief at 56 (emphasis in original), citing E.I. DuPont de Nemours & Co. v. United States, 2001 WL 120076 at *3 (Fed. Cir. Feb. 12, 2001). Mexinox states evidence before the International Trade Commission with respect to Mexinox and Mexinox USA shows this is not the case here. Mexinox argues that American Silicon, to the degree it has any bearing on this case, supports the Department's practice. Mexinox argues that the facts of this review do not require a departure from the Department's well-founded practice for computing net interest expenses. Thus, Mexinox urges the Department to reject petitioners' proposal to do otherwise. Department's Position: We disagree with petitioners that we should calculate financial expenses based on the expenses of Mexinox's immediate parent, KTS. The Department's established policy is to calculate financial expenses for COP and CV purposes based on the borrowing costs incurred at the consolidated group level. This practice recognizes two facts: (1) the fungible nature of money within a consolidated group of companies; and (2) that the controlling entity within a consolidated group has the power to determine the capital structure (i.e., the debt and equity) of each member company within its group. See, e.g., Final Results of Antidumping Duty Administrative Review: Silicon Metal from Brazil, 65 FR 7497, 7500 (February 15, 2000) and S4 from the United Kingdom at 30709-10. Therefore, we have continued to base financial expenses on Thyssen Krupp AG's cost of borrowing since Thyssen Krupp AG is Mexinox's ultimate parent. With respect to including packing costs in the numerator of the financial expense ratio, we disagree with petitioners. The record does not contain any information that would require us to make such an adjustment, nor does it demonstrate that packing costs have been included in Thyssen Krupp AG's cost of sales. Therefore, we have not amended the financial expense ratio for these final results. Home Market Downstream Sales Comment 11: Use of Sales by Mexinox Trading in the Calculation of Normal Value Petitioners state that during the early stages of this review, they urged the Department to require that Mexinox provide data on home market downstream sales made by its affiliated reseller, Mexinox Trading. Although the Department solicited these data, petitioners note, it did not use them in making its preliminary determination. Petitioners cite the Preliminary Results at 41526, in which the Department stated it found no reason to use these downstream sales data because "the additional information provided by Mexinox" as well as its "findings at verification" enabled the Department to conclude that "Mexinox and Mexinox Trading are functioning as separate and distinct entities." When the Department solicited Mexinox Trading's downstream sales, petitioners note, it indicated in a March 23, 2001 memorandum that there was "currently insufficient evidence on the record to establish whether Mexinox Trading is indeed functioning as a distinct entity in Mexinox's home market distribution of stainless steel sheet and strip in coils." According to petitioners, Mexinox had already reported in its submissions of March 9 and 19, 2001 that Mexinox Trading was a "legally distinct and fully-functioning retail company, with its own employees, facilities, and operations." Nonetheless, petitioners claim, the additional information furnished by Mexinox in its April 16 and May 25, 2001 supplemental questionnaire responses failed to establish that Mexinox and Mexinox Trading were not closely linked. For instance, petitioners point to Mexinox's April 16, 2001 submission at 3 and 11, in which the respondent indicated Mexinox Trading's headquarters are located in the same building as Mexinox's administrative facilities; Mexinox Trading has some employees on site at Mexinox's manufacturing facility; and Mexinox uses Mexinox Trading's seven remote warehouses in connection with its own home market sales. Petitioners argue the Department has not identified the "additional information" nor the "findings at verification" backing its conclusion that Mexinox and Mexinox Trading are operating as "separate and distinct entities." Petitioners contend that since the Department's Sales Verification Report does not specifically discuss this issue, the Department should use Mexinox Trading's downstream sales to calculate NV. Petitioners hold the Department must reconsider its practice of sometimes excusing respondents from reporting downstream sales data and not using them to compute NV. Since affiliated parties act in the interest of the whole group and not as competitors, petitioners assert affiliated party transactions should be regarded with skepticism. In the context of an administrative review requested by a respondent, petitioners maintain, prices between the respondent and affiliated parties are subject to manipulation. Petitioners argue that the Department's current conflicting policies on downstream sales reporting appear "to have resulted from a blurring, over time, of the considerations that arise from the two types of affiliated party sales: sales to affiliated consumers vs. sales to affiliated resellers." Petitioners' Case Brief at 18 (emphasis in original). Petitioners assert that sales to affiliated consumers never result in an arm's-length sale, because the merchandise is used in production; they also assert there is a legitimate reason for transferring the input from the producer to an affiliated consumer. On the other hand, petitioners aver, sales to affiliated resellers result in a downstream sale to unaffiliated customers and therefore can be manipulated. Thus, petitioners hold, one must ask whether an affiliated reseller exists for legitimate market reasons or to circumvent the reporting of downstream sales. Citing the Department's antidumping questionnaire at G-5-6, petitioners argue the instructions regarding downstream sales reporting are completely clear and have been part of the standard language for many years. Acknowledging that the instructions permit respondents to be excused at times from reporting a small volume of downstream sales, petitioners note such exclusions could enable a respondent to manipulate sales. Id. at 19 n.7. Petitioners claim such exclusions could have a huge impact on the calculation of NV, and therefore, as a policy matter, the Department should always utilize the final, arm's-length sale in the chain of distribution. Petitioners note the Department maintains this policy with respect to sales made in the United States. In stating that the statute prohibits affiliated reseller transfer prices, petitioners refer to section 773(a)(1)(B)(i) of the Tariff Act, which requires that NV be based on "the price at which the foreign like product is first sold ... for consumption in the exporting country...." Since sales to an affiliated reseller are not for consumption, petitioners argue, these sales cannot be excluded pursuant to section 773(a)(1)(B)(i). Petitioners also point to section 773(a)(2) of the Tariff Act, which mandates that the Department reject "fictitious" sales. Petitioners contend transfer prices created by a respondent are "fictitious" since a real price does exist - that charged to unaffiliated customers. Petitioners assert that "[t]he potential for this kind of abuse can be seen in the unusual agreement between Mexinox and Mexinox Trading with respect to servicing of certain home market customers." Petitioners' Case Brief at 20. Petitioners argue this agreement went into effect after the filing of the original antidumping petition and categorized certain home market customers as Mexinox customers. Referring to the Sales Verification Report at 13, petitioners contend certain customers were treated as Mexinox customers even though "virtually all aspects of sales and distribution operations were handled by Mexinox Trading using their facilities." Id. Petitioners cite business proprietary information contained in this agreement, which appears at Attachment B-43 of Mexinox's March 5, 2001 supplemental questionnaire response. According to petitioners, the Department can interpret this agreement either as (1) proof that Mexinox manipulated the antidumping analysis by reclassifying certain Mexinox Trading customers as Mexinox customers, or (2) proof of Mexinox Trading's integration into Mexinox's sales operations. Petitioners claim Mexinox Trading fails the arm's-length test if sales to the customers in question are recategorized as sales from Mexinox to Mexinox Trading, rather than sales from Mexinox to those customers. Referring to the Department's August 23, 2001 Sales Verification Report at 13, petitioners contend Mexinox's explanation of why Mexinox Trading did not sell directly to the customers in question makes no sense. Since the agreement between Mexinox and Mexinox Trading calls for Mexinox Trading to perform certain functions, petitioners assert "Mexinox Trading is obviously well-equipped to handle the needs of these large customers; if it were not, the agreement would not have been struck." Petitioners' Case Brief at 22. Petitioners contend Mexinox may have formulated this agreement to manipulate the results of the antidumping analysis. Petitioners maintain that there is no reason for certain customers to be considered customers of Mexinox while other such customers are considered Mexinox Trading customers. Citing the Sales Verification Report at 6 and business proprietary data related to the 10 highest-volume control numbers sold in the United States, petitioners claim the explanation that Mexinox Trading generally sold in smaller volumes than Mexinox is misleading. Further, petitioners assert, the record shows that merchandise sold by Mexinox Trading was not for "dairy trucks" or "taco stands" but instead for customers buying in commercial quantities. Id. at 22 n.6, citing the Department's Sales Verification Report at 6. Based on the foregoing, petitioners urge the Department to reclassify sales to the customers in question as sales by Mexinox to Mexinox Trading for purposes of the arm's-length test and margin calculation program. As an alternative, petitioners request that the Department consider the agreement between Mexinox and Mexinox Trading to be "a clear attempt at manipulation by Mexinox and simply ignore transfer prices among the two companies." Petitioners' Case Brief at 23. In conclusion, petitioners state the record clearly demonstrates that Mexinox Trading's downstream sales should be used for these final results. In its rebuttal, Mexinox states that during the POR it sold a small quantity of subject merchandise to Mexinox Trading. In accordance with section 351.403(d) of the Department's regulations, Mexinox contends it is authorized to exclude these sales from the dumping analysis because they account for less than five percent of total home market sales and pass the Department's 99.5 percent arm's-length test. Throughout the course of this proceeding, Mexinox argues, petitioners have tried relentlessly to create issues concerning Mexinox Trading where none exist. Mexinox comments that petitioners have suggested Mexinox has been untruthful in its responses regarding Mexinox Trading, has manipulated the dumping margin, and has concocted some of the data examined by the Department. Referring to the S4 from Mexico Final Determination at 30811, Mexinox states that in petitioners' view, downstream sales should always be reported, regardless of the circumstances. However, Mexinox declares, the Department rejected this argument as contrary to Department policy and regulations. Based on a single erroneous sentence in Mexinox Tradings's financial statements, Mexinox argues, petitioners suggested Mexinox Trading has no employees, and that it was a "paper" company set up to hide Mexinox's high- priced sales from the Department. Mexinox states it quickly responded to these allegations in several letters to the Department, explaining that the sentence in the financial statement was poorly worded and that Mexinox Trading in reality has its own employees and separate operations. Mexinox states that in response to the Department's supplemental questionnaires focusing on Mexinox Trading, it supplied corroborating information. Mexinox holds that the Department spent nearly two days verifying this information; referring to the Sales Verification Report, Mexinox contends the Department did not find any discrepancies. Mexinox also quotes the Preliminary Results at 41526, which stated that "[b]ased on the additional information provided by Mexinox as well as our findings at verification, we find that Mexinox and Mexinox Trading are functioning as separate and distinct entities." Mexinox claims the Department made this statement based on its own direct observations of Mexinox Trading's warehouse, sales process, and books and records. Mexinox contends petitioners have now shifted their arguments by claiming certain of Mexinox's reported own direct sales were actually Mexinox Trading transactions, whereas before they argued that Mexinox was hiding sales by claiming they were Mexinox Trading sales. With respect to petitioners' allegation that Mexinox and Mexinox Trading are not operating as "separate and distinct entities," Mexinox maintains the Department has examined this issue thoroughly through its supplemental questionnaires and at verification. For instance, Mexinox argues that at verification the Department examined how Mexinox and Mexinox Trading are staffed and organized and how inventory is stored and handled. Citing Sales Verification Exhibit 34 at S-935, Mexinox asserts the Department confirmed that Mexinox Trading: - has its own management; - files its own audited financial statements; - files its own corporate income tax returns; - operates its own independent warehousing facilities; - maintains its own administrative staff, sales force, and warehousing employees; - pays salaries and benefits for its own separate employees in full; - pays value-added taxes on all purchases from Mexinox; - pays utilities and other expenses in its own name; - develops and maintains its own customer base; - communicates with customers and negotiates prices; - issues its own price lists under its own name; - invoices customers; - arranges and pays for shipment and other logistics; and - collects payments from customers. Mexinox argues this listing is only a partial summary of the evidence the Department relied upon to validate Mexinox Trading's independent operations. Citing the Sales Verification Report at 32, Mexinox contends the Department found "no discrepancies" with this listing. Mexinox asserts the record establishes that Mexinox and Mexinox Trading are "legally and operationally distinct entities." Mexinox maintains the only legitimate question raised by petitioners, therefore, was whether Mexinox Trading has its own employees; however, Mexinox holds that the Department put this issue to rest at verification. Regarding downstream sales reporting, Mexinox urges the Department to reject the petitioners'argument that downstream sales should be reported in all instances. Mexinox avers that in keeping with section 351.403(d) of its regulations, the Department's established policy is "to exclude downstream sales reporting under the circumstances as they exist in this case (i.e., sales below five percent and/or sales are demonstrably at arm's-length prices." Respondent's Rebuttal Brief at 26. Mexinox argues petitioners raised the same argument during the original investigation, at which time the Department determined that "'the appropriate context for the petitioners' comment is the rulemaking process.'" Id., quoting the S4 from Mexico Final Determination at 30810. Mexinox states the rulemaking process related to this issue was completed over four years ago, when the Department considered arguments for a change in policy but in the end codified the existing practice related to downstream sales reporting. Mexinox argues the Department should not have to substantiate its decision and current regulations in each segment of this proceeding. Mexinox asserts it did not concoct the prices charged to Mexinox Trading and stated that its sales to Mexinox Trading were made on the same basis as sales to other unaffiliated retail distributors. As shown on the record, Mexinox contends, the price lists periodically issued to all retail distributors also apply to Mexinox Trading. Thus, Mexinox argues, the prices charged to Mexinox Trading pass the arm's-length test, which shows these prices are not merely "'a number written on a piece of paper.'" Respondent's Rebuttal Brief at 29, quoting Petitioners' Case Brief at 18. Mexinox cites the preamble to the Department's regulations, which states that: The purpose of the arm's-length test is to eliminate prices that are distorted. We test sales between two affiliated parties to determine if prices may have been manipulated to lower normal value. We do not consider home market prices to affiliates at prices above the threshold to have been depressed due to affiliation. Therefore, the Department should treat such sales in the same manner as sales to unaffiliated customers. Antidumping Duties; Countervailing Duties, 62 FR 27296, 27356 (May 19, 1997). Mexinox asserts that since its sales prices to Mexinox Trading pass the arm's-length test, these prices are free of the kind of manipulation claimed by petitioners. Mexinox argues petitioners' theory - that Mexinox created the agreement with Mexinox Trading after the antidumping petition was filed to reclassify certain of its customers - is absurd. Mexinox claims it made an agreement with Mexinox Trading to furnish handling services at certain remote locations prior to the filing of the antidumping petition. Mexinox states it reported this arrangement in its section B response during the original investigation. Referring to the sales made under this arrangement, Mexinox contends that petitioners are incorrect in claiming that "'virtually all aspects of sales and distribution operations were handled by Mexinox Trading using its facilities.'" Respondent's Rebuttal Brief at 30, quoting Petitioners' Case Brief at 20. Referring to Sales Verification Exhibit 8, Mexinox asserts the Department verified that Mexinox, not Mexinox Trading: - is identified in all documentation as the seller; - negotiates and sets prices with the customer; - invoices the customer; - provides credit and assumes all credit risk; - handles customer claims; - retains title to its own inventory, which is segregated from Mexinox Trading's in the warehouse; - assumes all risk of loss while the material is warehoused; and - pays all transportation and warehousing costs. Contrary to petitioners' assertions, Mexinox contends that Mexinox Trading performs just two tasks in conjunction with Mexinox's own sales: (1) it provides local storage and handling; and (2) it transfers customer payments to Mexinox. Mexinox claims this does not show that Mexinox Trading's sales are integrated into its own, nor does it suggest that Mexinox's customers are Mexinox Trading's customers. According to Mexinox, petitioners question why Mexinox and Mexinox Trading would have different customers and customer bases and, in doing so, suggest that the distinction between Mexinox and Mexinox Trading is spurious. Mexinox submits the record makes it clear that Mexinox and Mexinox Trading have different customer bases because they are different companies with separate operations. Further, Mexinox claims, it is clear from the record that the two companies focus on different markets: while Mexinox concentrates on larger customers throughout Mexico, Mexinox Trading participates in small-scale local retail operations. Citing the Sales Verification Report at 32, Mexinox argues the Department found no discrepancies with Mexinox's questionnaire and supplemental questionnaire responses with respect to Mexinox Trading. Referring to the business proprietary data cited in petitioners' case brief with respect to the 10 highest-volume control numbers sold in the United States, Mexinox argues these data uphold its position. Mexinox claims these data demonstrate that the average quantity sold by Mexinox per transaction is greater than the average quantity sold by Mexinox Trading per transaction. To further support its position, Mexinox cites other record evidence, such as the size of each entity's customer base and the average number of months in which each entity's customers made purchases. Finally, Mexinox states, since petitioners have Mexinox's and Mexinox Trading's customer lists from both the original investigation and the instant review, they could compare these lists to see if any reclassification of customers has occurred. However, Mexinox argues, that because petitioners have not alleged any reclassification of customers this demonstrates that there are separate customers for Mexinox and Mexinox Trading. Based on the foregoing, Mexinox urges the Department to continue excluding Mexinox Trading's downstream sales from the calculation of NV for these final results. Department's Position: We disagree with petitioners' assertion that we should use Mexinox Trading's downstream sales in calculating NV. Section 351.403(d) of the Department's regulations states that: If an exporter or producer sold the foreign like product through an affiliated party, the Secretary may calculate normal value based on the sale by such affiliated party. However, the Secretary normally will not calculate normal value based on the 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 or if sales to the affiliated party are comparable, as defined in paragraph (c) of this section. In accordance with section 351.403(d) of the Department's regulations, the Department's normal policy is to exclude affiliated party downstream sales from the calculation of NV if those sales either: (1) account for less than five percent of the exporter's or producer's home market sales; or (2) are made at a price comparable to the price at which the exporter or producer sold the foreign like product to an unaffiliated party. Based on the information on the record, there is no question that Mexinox Trading is affiliated with Mexinox under the meaning of section 771(33) of the statute. Specifically, the record shows that Mexinox Trading is a wholly-owned subsidiary of Mexinox. (See, e.g., Mexinox's 1999 Unconsolidated Financial Statement at Attachment A-11-A-1 of its October 6, 2000 questionnaire response.) In the instant review, the information on the record demonstrates that the total quantity of Mexinox's sales of foreign like product during the POR to Mexinox Trading constituted less than five percent of the total quantity of Mexinox's home market sales of foreign like product. See Mexinox's May 4, 2001 supplemental questionnaire response at Attachment A- 37 and Mexinox's May 25, 2001 supplemental questionnaire response at Attachment B-72-A (home market sales data). At verification we examined the home market quantity and value of sales made by Mexinox during the POR (as reported in its May 4, 2001 supplemental questionnaire response at Attachment A-37) and found no discrepancies. See the Department's Sales Verification Report at pages 8 through 10. In addition, as noted in the Preliminary Results at 41526, Mexinox's sales to Mexinox Trading pass the Department's arm's-length test. Therefore, we find no reason to calculate NV utilizing Mexinox Trading's sales to the unaffiliated customer. This finding is in keeping with other Department determinations such as Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Stainless Steel Bar from Germany, 66 FR 40208 (August 2, 2001) (unchanged in the final determination) and Notice of Preliminary Determination of Sales at Less Than Fair Value: Hot- Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 64 FR 8291, 8295 (February 19, 1999) (unchanged in the final determination). We disagree with petitioners' suggestion that, as a matter of policy, the Department should always use the final, arm's-length sale in the chain of distribution in calculating NV. Such a requirement would be contrary to section 351.403(d) of the Department's regulations and the balance of policy factors the Department considered in promulgating that regulation. See the discussion regarding downstream sales in Antidumping Duties; Countervailing Duties, 62 FR 27296, 27356 (May 19, 1997). We disagree with petitioners' argument that the record fails to demonstrate that Mexinox and Mexinox Trading are separate entities, and that the Department should use Mexinox Trading's sales to the unaffiliated customer in calculating NV. First, we note we found no evidence at verification that Mexinox was shifting high-priced sales to Mexinox Trading. Second, while petitioners have noted that Mexinox Trading's headquarters are located in the same building as Mexinox's administrative facilities, that Mexinox Trading has some employees on site at Mexinox's manufacturing facility, and that Mexinox uses Mexinox Trading's seven remote warehouses in connection with its own home market sales, these activities do not demonstrate that Mexinox and Mexinox Trading are the same entity. Rather, as noted in the Preliminary Results at 41526, we find the record establishes that Mexinox and Mexinox Trading are separate and distinct entities. For example, during verification we examined Mexinox Trading's accounting records and confirmed that Mexinox Trading has its own audited financials and trial balance. See Mexinox Trading's 1999 audited financial statement at Attachment A-11-C of Mexinox's October 6, 2000 questionnaire response and Sales Verification Exhibit 3 at S-095 through S-148. In addition, we thoroughly examined Mexinox's claim that Mexinox Trading pays salaries and benefits to its employees in full, and found no discrepancies while performing this exercise. See the business proprietary version of the Sales Verification Report at 16-17 and 36-37; see also Sales Verification Exhibit 36. As we performed sales traces, we observed that Mexinox Trading invoices its own customers and collects payments. See Sales Verification Exhibit 35. Further, we found no evidence that Mexinox Trading's customer base was not different from Mexinox's. We also disagree with petitioners' argument that the agreement between Mexinox and Mexinox Trading shows certain Mexinox customers are in reality Mexinox Trading customers, or that the agreement is evidence that Mexinox Trading is integrated into Mexinox. At verification we examined sales that Mexinox made under this agreement, and found no discrepancies with the information provided on the record. For instance, Sales Verification Exhibit 17, which documents one such sale, demonstrates the sale was invoiced by Mexinox and that it was booked in Mexinox's records. Therefore, we do not find reason to recategorize certain Mexinox customers as Mexinox Trading customers, nor do we consider this agreement to be evidence that Mexinox Trading is integrated into Mexinox. Further, having established that Mexinox and Mexinox Trading are operating as separate entities and that no Mexinox customers need to be reclassified as Mexinox Trading customers, we also conclude that the total quantity of Mexinox's sales of foreign like product to Mexinox Trading during the POR constituted less than five percent of the total quantity of Mexinox's home market sales of foreign like product, and that Mexinox's sales to Mexinox Trading pass the arm's-length test. Therefore, for these final results, consistent with section 351.403(d) of the Department's regulations, we have not included Mexinox Trading's downstream sales in the calculation of NV. Level of Trade (LOT) Comment 12: Classification of Certain U.S. Sales as Export Price or Constructed Export Price Sales Petitioners note that in the original investigation in this proceeding and in the preliminary results of the instant review, the Department accepted Mexinox's classification of its "direct shipments" and "SLP [San Luis Potosi] stock sales" as EP sales. According to petitioners, only Mexinox USA's "sales through inventory" were classified properly as CEP sales. Although the EP classification may have been tenable in the original investigation, petitioners claim, it is no longer tenable in light of the U.S. Court of Appeals for the Federal Circuit (Federal Circuit)'s decision in AK Steel Corp. v. United States, 226 F. 3d 1361 (Fed. Cir. 2000) (AK Steel). Petitioners therefore urge the Department to correct this error and classify all of Mexinox's U.S. sales as CEP sales for these final results. In AK Steel, petitioners state, the Federal Circuit overturned the Department's use (and the CIT's earlier affirmation) of the three-pronged test (the so-called "PQ Test") to distinguish EP and CEP transactions. Petitioners note that in AK Steel, the Korean producer sold steel to an affiliated Korean exporter, which sold it to a U.S. affiliate, which in turn sold the steel to unaffiliated U.S. customers. According to petitioners, most of the steel was shipped by the Korean exporter directly to the unaffiliated U.S. customer without entering the U.S. affiliate's inventory. In that case, petitioners note, the Department determined that the U.S. affiliate acted merely as a "communication link or processor of documents," thereby satisfying the third prong of the PQ Test and qualifying the sales as EP sales. Petitioners quote the Federal Circuit, which asked in AK Steel "whether a sale to a U.S. purchaser can be properly classified as a sale by the producer/exporter, and thus an EP sale, even if the sales contract is between the U.S. purchaser and a U.S. affiliate of the producer/exporter and is executed in the United States." AK Steel at 1368. Petitioners note the Federal Circuit's conclusion that the addition (through the URAA of 1994) of the phrase "outside the United States" to the definition of EP and "by a seller affiliated with the producer" to the definition of CEP made "where the sale takes place and whether the foreign producer or exporter and the U.S. importer are affiliated ... dispositive of the choice between the two classifications." Id. at 1369. Petitioners cite the Federal Circuit's decision that "[i]f the contract for sale was between a U.S. affiliate of a foreign producer or exporter and an unaffiliated U.S. purchaser, the sale must be classified as a CEP sale." Id. at 1374 (emphasis in original). Based on the Federal Circuit's decision in AK Steel, petitioners assert, it is clear that all of Mexinox's U.S. transactions are CEP sales. First, petitioners note, Mexinox USA was the sole importer of record for all of Mexinox's U.S. sales, regardless of the channel of distribution. Next, referring to Mexinox's October 10, 2000 questionnaire response, petitioners note that it is Mexinox USA to whom customers submit purchase orders, and it is Mexinox USA who invoices the U.S. customer and collects payment. Petitioners argue "there is no material difference" between the sales process used for "direct shipments" and the sales process for "sales through inventory." Petitioners' Case Brief at 4-5, citing Mexinox's October 10, 2000 questionnaire response at 40-42. Petitioners contend the record shows U.S. customers contract with Mexinox USA, not Mexinox, for both "direct shipments" and "sales through inventory." Similarly, petitioners maintain, while "SLP stock sales" may require a greater degree of contact between U.S. customers and Mexinox's staff in SLP, "there can be no doubt that the party selling the merchandise to the U.S. customer is Mexinox USA." Id. at 5 (emphasis in original). Petitioners claim the record clearly shows that for both 'direct shipments' and 'SLP stock sales,' Mexinox USA conducts virtually all price negotiations with the U.S. customer. Further, petitioners assert, Mexinox has emphasized that its 'direct shipments' and 'SLP stock sales' should be considered EP sales in part because they remain in Mexinox USA's warehouses for four days or less prior to delivery to the unaffiliated U.S. customer. However, petitioners argue, AK Steel clearly establishes that even export sales shipped directly from the foreign producer to the unaffiliated U.S. customer can be classified as CEP sales if the sale was concluded "in the United States" by the foreign producer's U.S. affiliate. Petitioners argue that Mexinox USA does take possession of all Mexinox material, even if only for a short time. Thus, petitioners maintain, "[t]his suggests that the only factor distinguishing Mexinox USA's 'direct shipments,' 'sales through inventory' and 'SLP stock sales' is, in the end, the number of days they are held in inventory." Petitioners' Case Brief at 6. Petitioners submit that a shorter inventory holding period is not sufficient for categorizing certain sales as EP sales. Based on the mandate in AK Steel, petitioners affirm, these sales should be regarded as CEP sales. Petitioners contend the record shows that all of Mexinox's U.S. sales were made "in the United States" within the meaning of section 772(b) of the Tariff Act, as interpreted by AK Steel. Petitioners assert that in Stainless Steel Sheet and Strip in Coils from Italy: Preliminary Results of Antidumping Duty Administrative Review, 66 FR 41517, 41520 (August 8, 2001) (S4 from Italy Preliminary Results), the Department determined, consistent with AK Steel, that the respondent's direct shipment sales "were made 'in the United States' within the meaning of section 772(b) of the [Tariff] Act, and thus, should be treated as CEP transactions." Petitioners urge the Department to apply the same analysis to Mexinox's U.S. sales, particularly since Mexinox USA actually takes possession of all Mexinox products before delivery to the unaffiliated U.S. customer. According to petitioners, Mexinox USA's actual possession of this material (regardless of logistical factors) only demonstrates further that Mexinox USA is the entity with whom the U.S. customer contracts. Therefore, petitioners assert, all of Mexinox's U.S. sales must be categorized as CEP for these final results. Mexinox disagrees with petitioners'claim that AK Steel obliges the Department to deviate from the determination made in the original investigation and preliminary results of the instant review that its direct shipments and SLP stock sales constitute EP sales. According to Mexinox, petitioners are incorrect in interpreting AK Steel as saying "'new law'" prevents the Department from making the same finding here. Respondent's Rebuttal Brief at 3. Therefore, Mexinox argues, petitioners cannot claim that a change in the law mandates a different finding than in the original investigation. Further, Mexinox notes, there have not been any factual changes warranting a departure from that finding. Mexinox states that in the investigation, the Department performed its analysis using the prevailing standard at the time of the enactment of the URAA - the PQ Test. Mexinox holds that Congress specifically endorsed and retained this approach in the accompanying Statement of Administrative Action (SAA). Mexinox asserts that while Congress noted that the URAA changed EP/CEP terminology, Congress also noted "no change is intended in the circumstances under which export price (formerly 'purchase price') versus constructed export price (formerly 'exporters sales price') are used." Respondent's Rebuttal Brief at 2, quoting the SAA at 152-53 (emphasis added by respondents). Therefore, Mexinox argues any sale considered an EP sale prior to the URAA would have to be considered an EP sale after its enactment. Mexinox asserts petitioners incorrectly interpret AK Steel as saying the change in law regarding EP/CEP classification requires that Mexinox's sales now be categorized as CEP sales. Mexinox affirms that this approach was rejected by the SAA, which is binding on the Department and courts with respect to interpretation and application of the URAA. Mexinox argues that in making an EP classification, the statute only requires the Department to consider whether a sale: (1) is transacted outside the United States and (2) is made by the foreign producer. Maintaining that the Department has taken both issues into account, Mexinox cites S4 from Mexico Final Determination at 30807, in which the Department stated that "verification uncovered no evidence that conflicts with Mexinox's claim that the sales were made in Mexico, and petitioners have cited to none" (emphasis added by respondent). Although the Department acknowledged Mexinox USA played a role in facilitating the transaction, Mexinox holds, the sale itself occurred outside the United States between Mexinox and the unaffiliated purchaser. Since the Department made an analogous finding in the preliminary results and no factual changes have been alleged by petitioners, Mexinox argues it is not necessary to reevaluate the EP classification of these sales. Therefore, Mexinox urges the Department to maintain its classification of Mexinox's direct shipments and SLP stock sales as EP sales. Department's Position: We agree with petitioners. As petitioners have noted, the facts of this case establish that Mexinox's "direct shipments" and "SLP stock sales" were sold in the United States within the meaning of AK Steel. Mexinox USA acted as the importer of record, collected purchase orders, invoiced the customer and collected payment. Following the criteria set forth in AK Steel, this constitutes a "sale" between Mexinox USA and its U.S. customer. In AK Steel the Federal Circuit noted: CEP is the 'price at which the subject merchandise is first sold in the United States.' ...In contrast, EP is defined as the price at which the merchandise is first sold 'outside the United States.'....Thus, the location of the sale appears to be critical to the distinction between the two categories. See AK Steel at 1369. (Original emphasis). The Federal Circuit in AK Steel rejected the "functional approach" articulated by the PQ test because Congress mandates a strict "structural" approach based upon whether the transaction occurred in the United States. Thus, in determining whether transactions are CEP or EP sales, we no longer consider "function-driven" factors such as whether the merchandise was shipped directly by Mexinox to the U.S. customer, or whether Mexinox or Mexinox USA conducted sales negotiations with the customer. Because the transaction between Mexinox USA and the U.S. customer occurred within the United States, it qualifies as a CEP sale under the "structural" approach mandated by AK Steel. As noted by the Federal Circuit: Congress chose clear and unambiguous words such as 'affiliated,' 'sold,' and 'in' or 'outside' the United States. In no sense did it leave the distinguishing factor to the agency to identify. When...the sales at issue took place in the United States between two entities with United States addresses, one of which was an affiliate of the producer/exporter, it is contrary to the plain meaning of the statute for Commerce to nevertheless use the PQ Test to define the sales as effectively occurring outside of the United States, and thus EP sales rather than CEP sales. Id. at 1371. Moreover, Mexinox's assertion that Congress "endorsed" the PQ test through adoption of the SAA is contrary to the result in AK Steel. The Federal Circuit held that the PQ test "is hardly consistent with the pre- 1994 statute" and that the "distinction based upon location of the sale was already present, although less complete, in the prior version of the statute." Id. at 1373. Based upon the foregoing, we conclude the PQ test was not codified by Congress, and that AK Steel precludes consideration of the functional factors set forth in the PQ test. We further conclude Mexinox's U.S. transactions are properly CEP transactions, because Mexinox sold the merchandise to its U.S. customer within the United States. Therefore, we have revised our final calculations accordingly. Comment 13: Constructed Export Price Offset Petitioners state the Department preliminarily determined that Mexinox's two reported home market channels of distribution constituted a single LOT, and that Mexinox's EP sales were made at the same LOT as the home market LOT. Petitioners also state the Department found that Mexinox's reported CEP sales (as adjusted) consisted of fewer selling activities than its home market sales and were made at a less advanced LOT, and therefore granted a CEP offset in accordance with section 772(d)(1)(D) of the Tariff Act. Petitioners contend, however, that the record demonstrates a single LOT exists in both the home and U.S. markets, and that the home market and U.S. LOTs are comparable. Thus, petitioners argue that neither a LOT adjustment nor CEP offset should be made to NV for these final results. Petitioners note Mexinox has identified a total of 16 distinct selling activities it performs in selling stainless steel sheet and strip in coils. However, according to petitioners, the process of selling subject merchandise is actually simple and routine, since this merchandise has a uniform set of physical characteristics and a well-defined market and customer base. Referring to the selling activities listed in Attachment A- 34 of Mexinox's April 16, 2001 supplemental questionnaire response, petitioners maintain "pre-sale technical assistance," "sample analysis," "prototypes and trial lots," and "continuous technical service" all constitute one selling activity: technical assistance. Citing "Issues and Decision Memorandum for the Final Results in the Antidumping Duty Administrative Review of Grain-Oriented Electrical Steel from Italy" (March 6, 2001), petitioners contend "further processing," "low volume orders," and "shipment of small packages" are not really selling functions. Referring to that same memorandum, petitioners also argue "price negotiation/customer communication," "processing of customer orders," and "credit and collection" are merely subparts of the overall sales process, as are "sales calls and visits" and "international travel." Finally, petitioners assert "currency risks" constitute a business risk, not a selling activity. Thus, petitioners claim, Mexinox's list of 16 selling activities can be reduced to four: "technical assistance," "inventory maintenance and just-in-time deliveries," "freight and delivery arrangement," and "warranty services." As discussed in comment 12, petitioners assert Mexinox plays a similar role in all U.S. sales, and for that reason should determine a single LOT exists in the U.S. market. For instance, petitioners argue, Mexinox processes orders, reviews and approves prices, arranges freight from Mexico to the United States, and provides warranties for both Mexinox USA and the unaffiliated U.S. customer. As in S4 from Italy Preliminary Results, petitioners contend, the differences in the selling functions performed by Mexinox (the foreign producer) in each of its reported U.S. channels of distribution are minor. Also, as discussed in comment 12, petitioners assert the number of days the merchandise remains in Mexinox USA's possession cannot be used as a benchmark for finding different LOTs in the United States. With respect to Mexinox's claim that its two home market channels of distribution (i.e., sales to retailers and end-users) constituted a single LOT, petitioners argue it is hard to understand this claim, since Mexinox reported that home market sales to end-users required a higher level of service for several of the 16 selling functions. Petitioners aver that even when these 16 selling activities are reduced to four, Mexinox's home market sales to end-users require a greater degree of technical assistance and warranty service for both direct shipments and sales through inventory, and a greater degree of inventory maintenance for direct shipments. However, petitioners state, at the end of the day they do not question the conclusion that only one LOT exists in the home market. Petitioners note that in the preliminary results, the Department determined Mexinox's claimed EP sales were made at the same LOT as its home market sales, and that Mexinox's selling activities chart in Attachment A-34 of its April 16, 2001 supplemental questionnaire response supported this conclusion. Petitioners argue that since all of Mexinox's U.S. sales should be classified as CEP sales, all of the selling activities listed for all three U.S. channels of distribution can only be viewed as selling activities conducted by Mexinox in connection with CEP sales. Petitioners note Mexinox deems its U.S. sales activities to be less intensive since many of Mexinox's U.S. sales are made to service centers (who perform many of the selling functions themselves). Despite this, petitioners claim, the Department preliminarily determined "that the somewhat lower levels of selling activities claimed by Mexinox on its purported EP sales (U.S. channels 1 and 2) are sufficiently comparable to those reported for the home market that it is appropriate to find that there is no difference in LOT." Petitioners' Case Brief at 14. Further, petitioners contend, since Mexinox has claimed more intensive selling activities for its reported CEP sales, "the Department can only conclude that there is a single LOT in the U.S. market, and that LOT is no less advanced than the home market LOT." Id. Petitioners maintain that Mexinox's home market sales cannot be considered more advanced than its purported CEP transactions if all of Mexinox's U.S. sales are considered to constitute a single LOT. Petitioners argue that "[v]irtually every selling activity that Mexinox claims to perform in the home market is also performed in the U.S. market - if not in connection with Mexinox's CEP sales to Mexinox [USA], then with respect to its 'direct shipments' and 'SLP stock sales' (which are also properly classified as CEP)." Id. Citing section 773(a)(7)(B) of the Tariff Act, petitioners note the CEP offset may only be granted when the NV LOT is found to constitute a more advanced stage of distribution than the CEP LOT. In conclusion, petitioners assert, the Department should determine there is a single LOT in both the U.S. and home markets, that the home market and U.S. LOTs are equivalent, and that the home market LOT is not more advanced than the U.S. LOT, and therefore should not allow a CEP offset. Mexinox states that in the preliminary results and original investigation, the Department found Mexinox's CEP LOT to be substantially different from its home market LOT, and at a less advanced stage in marketing. On this basis, Mexinox asserts, the Department preliminarily granted a CEP offset. For the reasons discussed below, Mexinox urges the Department to reject petitioners' argument that the record does not support granting a CEP offset, and urges the Department to continue granting a CEP offset for these final results. Mexinox contends it performs each selling activity listed in its section A questionnaire response. Not only has the Department verified this, Mexinox claims, but the Department also has deemed these activities to be relevant to the LOT analysis both in the original investigation and in earlier cases involving the same selling activities. Respondent's Rebuttal Brief at 6. According to Mexinox, petitioners claim that "low volume orders," "shipment of small packages," and "further processing" should not be considered in the LOT analysis because these simply relate to differences in quantities sold and product operations. However, Mexinox argues, in the original investigation the Department determined that filling low volume orders and shipping small packages was a strong indication of an advanced stage of marketing. Furthermore, Mexinox asserts, even petitioners listed "low volume orders" as a selling activity during the original investigation. With respect to "further processing," Mexinox cites Cold-Rolled Carbon Steel Flat Products from the Netherlands: Final Results of Antidumping Duty Administrative Review, 63 FR 13204 (March 18, 1998) (Cold-Rolled Carbon Steel from the Netherlands). In that case, Mexinox contends, the Department recognized the respondent provided little technical assistance to its service center customer because the service center provided further processing services to its downstream customers, thereby illustrating that the respondent's sales to the service center were at a less advanced LOT than its sales to end-users. Respondent's Rebuttal Brief at 6, citing Cold-Rolled Carbon Steel from the Netherlands at 13205-07. Mexinox argues that despite designating "currency risks"as a business risk in their case brief, petitioners listed "currency risks" as a selling activity during the original investigation. Mexinox argues that in the final determination the Department found it relevant to the LOT analysis that Mexinox had incurred currency risks in the home market. Therefore, Mexinox states, the Department correctly considered each of these activities in its LOT analysis for the preliminary results. With respect to petitioners' suggestion that Mexinox's reported selling activities be collapsed into four categories, Mexinox claims petitioners' list has shrunk from seven categories in the original investigation, even though there have been no factual changes in the selling activities performed. Citing the S4 from Mexico Final Determination at 30810, Mexinox argues that even if the Department had accepted petitioners' arguments, it still would have found both an EP LOT equivalent to the home market LOT and the CEP LOT less advanced than the home market LOT. Mexinox also asserts that the record shows it has satisfied the three conditions that must be met in order to receive a CEP offset: (1) the home market and CEP LOT must be different; (2) the home market LOT must be more advanced than the CEP LOT; and (3) the Department must be unable to make a LOT adjustment (e.g., because there is only one LOT in the home market). Mexinox notes that in the original investigation and preliminary results, Mexinox's sales to retailers and its sales to end-users constituted a single LOT in the home market. Mexinox states that even though petitioners appear to be confused by this finding, they do concede there is only one LOT in the home market. Having met the third condition, Mexinox asserts the Department has only to consider whether the home market LOT is more advanced, and involves more extensive selling functions, than the CEP LOT. Mexinox quotes the Preliminary Results at 41527, in which the Department stated that, "[i]n the home market, Mexinox provides marketing further down the chain of distribution by providing certain downstream selling functions that are normally performed by service centers in the U.S. market (e.g., technical advice, credit and collection, etc.)." Mexinox notes this is the same conclusion made by the Department in the original investigation. Mexinox contends its home market sales are made at a stage near the end of the chain of distribution. For sales made to both retailers and end-users, Mexinox states, it provides a wide range of selling functions including further processing of coils, technical advice, and credit and collection. On the other hand, Mexinox argues, sales at the CEP LOT occur at the top of the distribution chain. Mexinox recounts that in the U.S. market, the distribution chain generally flows from Mexinox, to Mexinox USA, to a large service center, and finally to an end-user or smaller retailer or distributor. Mexinox claims that in the U.S. market, large service centers perform most of the functions that Mexinox itself performs in the home market. Mexinox argues the transaction from Mexinox to Mexinox USA consists of very little selling activity because it transpires prior to distribution to the service center. Referring to the original investigation and its section A questionnaire response in the current review, Mexinox contends that the transaction between Mexinox and Mexinox USA is simply a logistical transfer of merchandise involving basic selling activities such as trucking and basic order processing. Citing business proprietary information, Mexinox argues that a fundamental difference between the home market and CEP LOTs is the difference in the size of the coils typically sold in each market. As shown on the record, Mexinox asserts, it tends to sell in smaller volumes in the home market. Mexinox contends that certain of its U.S. customers generally purchase large master coils (coils with individual weights of 8,000 lbs. or above) in standard width ranges (36 or 48 inches) that are further processed to meet downstream customers' needs. As noted in the original investigation, Mexinox argues "the much smaller coil sizes and transaction volumes that predominate in the home market have a significant and profound effect on Mexinox's per unit selling expenses associated with home market sales and LOT." Respondent's Rebuttal Brief at 12. Mexinox then cites the S4 from Mexico Final Determination at 30810, in which the Department stated: because of the smaller lots sold in the home market, we find that the home market order processing, price negotiation, and payment collection activities would be more expensive on a per-unit basis than for CEP sales between Mexinox and Mexinox USA, and thus reflects a less advanced stage of marketing. Based on the foregoing, Mexinox asserts the record fully demonstrates the CEP LOT is less advanced than the home market LOT. Since the Department made the same conclusion in the original investigation and no material factual changes have occurred, Mexinox maintains, a different conclusion is not justified here. Mexinox also claims that there are dramatic differences between the selling activities carried out by Mexinox in the home market and CEP LOTs. Mexinox holds that in the CEP LOT, many of the selling activities related to U.S. sales, such as internal freight and brokerage arrangements, customer sales calls, continuous technical advice, invoicing and collection are performed by Mexinox USA in the United States. As shown in its section A questionnaire response, Mexinox argues, Mexinox performs few selling activities related to these sales. Specifically, Mexinox states, Mexinox does not provide pre-sale technical service, sample analysis, prototypes or trial lots, continuous technical service, inventory maintenance or just-in-time delivery, warranty services, or further processing. Also, Mexinox states, it does not engage in price negotiations with Mexinox USA, make sales calls, engage in international travel, or bear currency risks, and rarely does it fill low volume orders or ship small packages. Thus, Mexinox affirms the only selling activities consistently undertaken by Mexinox in the CEP LOT are freight and basic order processing services (such as price approval) required to provide merchandise to Mexinox USA. Mexinox contrasts this with the home market, arguing that it engages in every selling activity in the home market LOT. Mexinox argues those selling activities not performed with respect to the CEP LOT are performed at a high or medium level of intensity in the home market; those carried out in both LOTs are assumed at more intense levels in the home market. Mexinox states petitioners do not seem to challenge the Department's determination that the CEP LOT is less advanced and involves less intensive selling functions than the home market LOT. Instead, Mexinox holds, petitioners argue that if Mexinox's EP sales are reclassified as CEP sales, then "'all of the selling activities listed for direct shipments, SLP stock sales, and sales through inventory {would have to} be seen as selling activities conducted by Mexinox in connection with U.S. CEP sales.'" Respondent's Rebuttal Brief at 14, quoting Petitioners' Case Brief at 13-14. According to Mexinox, petitioners further argue that if all the selling functions are considered together, then nearly every selling activity performed in the home market would also be found in the U.S. market. In response, Mexinox asserts petitioners' argument assumes that Mexinox's EP sales are properly categorized as CEP sales, which is not the case. Mexinox also asserts that petitioners' argument rests on the completely false premise that if its EP sales were reclassified as CEP sales, then all of the selling functions related to the former EP sales would be relevant in evaluating the LOT for the CEP sales. Respondent's Rebuttal Brief at 14-15. Mexinox contends the statute, the SAA, the Department's regulations and preamble, and agency practice, as upheld by the CIT and the Federal Circuit, corroborate that this methodology is not correct. Id. at 15. Referring to the statute at sections 772(b) and 773(a)(1)(B)(i), as well as section 351.412(c)(1)(ii) of the Department's regulations, Mexinox asserts "it is a settled principle that the analysis of the LOT for CEP sales must be conducted at the 'constructed level' after all expenses and selling activities associated with economic activities occurring in the United States are deducted." Respondent's Case Brief at 15. Therefore, Mexinox argues, even if EP sales are recategorized as CEP sales, only the transaction between Mexinox and Mexinox USA and the selling activities performed in Mexico by Mexinox are properly considered for CEP offset purposes. In other words, Mexinox claims, all of the selling activities performed by Mexinox USA in the United States must be excluded from the LOT analysis. Mexinox argues that when its direct shipment and SLP stock sales are adjusted to the "constructed" level, they cannot be distinguished from its CEP sales. In both cases, Mexinox declares, the sale occurs at the beginning of the distribution chain at a stage at which mainly master coils are sold. Maintaining the Department has acknowledged such large coil, high volume sales result in lower per-unit order processing, price negotiation, and payment collection costs, Mexinox claims this reflects a less advanced stage of marketing than in the home market where smaller volumes are typically sold. Respondent's Rebuttal Brief at 16, citing S4 from Mexico Final Determination at 30810. Further, Mexinox contends, in both cases Mexinox only performs minimal selling activities such as arranging trucking across the border and order processing. Mexinox argues that since these functions are performed with respect to an affiliated party, they are more routine and less intensive than if they had been carried out on behalf of Mexinox's unaffiliated customers. Mexinox claims this establishes evidence that the CEP LOT is less advanced than the home market LOT. In fact, Mexinox holds that, when its direct shipment and SLP stock sales are adjusted to the "constructed" level, the only difference among the three U.S. channels of distribution is that for SLP stock sales, Mexinox negotiates the final terms of sale whereas for direct shipments and sales through inventory Mexinox only has final price approval. Respondent's Rebuttal Brief at 16. Nonetheless, Mexinox argues, "'substantially all price negotiations with the U.S. customer are conducted by representatives of Mexinox USA...;'" therefore, they must be excluded from the LOT analysis pursuant to the statute and Department's regulations. Id., quoting Petitioners' Case Brief at 5. Mexinox argues the rest of the selling activities listed in its section A questionnaire response with respect to EP sales (i.e., internal freight and brokerage arrangements, sales calls, continuous technical service, external invoicing, and payment collection) are conducted by Mexinox USA. Citing the S4 from Mexico Final Determination at 30805, Mexinox contends petitioners have noted Mexinox USA's "extensive involvement in the selling process." In keeping with section 351.412(c)(1)(ii) of the Department's regulations, Mexinox argues, these selling activities must also be excluded from the LOT analysis. Mexinox claims the basic selling functions remaining at this juncture are no more extensive than those in the CEP LOT. Asserting that the Department found the CEP LOT to be different from and less advanced than the home market LOT in the original investigation and preliminary results, Mexinox argues that if the Department reclassifies direct shipments and SLP stock sales as CEP sales, it should make the same determination with respect to these sales. In conclusion, Mexinox holds that because there is only one home market LOT, and that LOT is more advanced and involves more selling functions than the CEP LOT, the Department should continue to grant a CEP offset to those sales classified as CEP sales. Department's Position: As noted in comment 12, we agree with petitioners that AK Steel establishes that Mexinox's U.S. transactions are properly considered CEP transactions. Having reclassified Mexinox's sales, we agree with Mexinox that a CEP offset is warranted in this case. As Mexinox notes, to the extent practicable, we determine NV based on sales in the comparison market at the same LOT as the EP or CEP transaction pursuant to section 773(a)(1)(B)(i) of the Tariff Act. The NV LOT is that of the starting price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive selling, general and administrative (SG&A) expenses and profit. For CEP, it is the level of the constructed sale from the exporter to the importer. To determine whether NV sales are at a different LOT than CEP, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the differences in the levels between NV and CEP affect price comparability, we adjust NV under section 773(A)(7)(B) of the Tariff Act. See, e.g., Certain Carbon Steel Plate from South Africa, Final Determination of Sales at Less Than Fair Value, 62 FR 61731 (November 19, 1997). Differences in selling functions exist between sales in the home market and the sale from Mexinox to Mexinox USA. See, e.g., Attachment A-34 of Mexinox's April 16, 2001 supplemental questionnaire response. In the home market, Mexinox provides more intensive selling services than are provided in the sale from Mexinox to Mexinox USA. Specifically, Mexinox provided a greater degree of freight and delivery arrangements, order processing, customer sales contacts, price negotiations, credit and collection services, inventory maintenance, technical services, and warranty services on home market sales than on sales made to the CEP LOT. Id. The differences in selling functions performed by Mexinox for home market and CEP transactions indicate home market sales involved a more advanced stage of distribution than CEP sales since Mexinox provided a greater degree of services on its home market sales then it did on its CEP sales. Because we compared these CEP sales to HM sales at a different LOT, we examined whether a LOT adjustment may be appropriate. As noted in the Preliminary Results at 41527, Mexinox sold at one LOT in the home market; therefore, there is no demonstrated pattern of consistent price differences between LOTs. Further, we do not have the information which would allow us to examine pricing patterns of Mexinox's sales of other similar products, and there is no other record evidence on which such an analysis could be based. Because the data available do not provide an appropriate basis for making a LOT adjustment and the LOT in Mexico for Mexinox is at a more advanced stage than the LOT of its CEP sales, a CEP offset is appropriate in accordance with section 773(a)(7)(B) of the Tariff Act. In accordance with section 773(a)(7)(B), we based the CEP offset amount on the amount of home market indirect selling expenses, and limited the deduction for home market indirect selling expenses to the amount of indirect selling expenses deducted from CEP. Margin Calculations Comment 14: Zeroing Negative Dumping Margins Mexinox states that in the preliminary results of this review, the Department calculated the overall dumping margin by assigning a zero- percent dumping margin to U.S. sales made at or above the prices charged in the home market. Mexinox argues this practice, which is referred to as "zeroing," is unlawful under both U.S. and international law and should not be adhered to for the final results. Respondent's Case Brief at 20. Mexinox states the WTO Appellate Body ruled in European Communities - Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/AB/R (March 1, 2001) (Bed Linen from India) that the practice of zeroing violates the terms of the WTO Antidumping Agreement. By zeroing, Mexinox claims, the administering agency arbitrarily presumes "'the weighted-average export price to be equal to the weighted average normal value . . . despite the fact that it [is], in reality, higher than the weighted average normal value.'" Respondent's Case Brief at 20-21, quoting Bed Linen from India at 55. Mexinox asserts the Appellate Body correctly determined that zeroing also violates the "fair comparison" requirements of Article 2.4. and 2.42 of the Antidumping Agreement in part by not fully considering "all comparable export transactions" as specified therein. Id. Citing AFBs 2001, Mexinox acknowledges that the Department has noted in recent cases that Bed Linen from India is not technically binding on the United States since the United States was not a party to that particular dispute resolution proceeding. Mexinox contends this argument is based purely on procedural technicalities and does not address "the underlying substantive issue of whether the practice of zeroing negative margins does or does not violate the Antidumping Agreement." Respondent's Case Brief at 21. Mexinox states this argument puts forth the position that the Department should not address this issue until forced to do so through WTO litigation. On the contrary, Mexinox maintains, there is nothing in the Bed Linen from India ruling that does not make it equally applicable to, and therefore prohibitive of, the Department's practice. Id. In that decision the Appellate Body interpreted Article 2.4 and 2.4.2 of the Antidumping Agreement as outright prohibiting an investigating agency from zeroing negative margins in the calculation of overall dumping margins. With respect to Bed Linen from India, Mexinox holds there was nothing in the facts of that case, the legal regimes, or the practice at issue that sets them apart from those applied by the Department in the preliminary results of this case. In both cases, Mexinox claims, the investigating agency computed overall margins by assigning a value of zero to negative margins, hence violating Articles 2.4 and 2.4.2. Id. at 21-22. Mexinox argues Bed Linen from India cannot be distinguished from the instant review based on the fact that the former involved an investigation while this case concerns an administrative review. Rather, Mexinox claims, the WTO Antidumping Agreement clearly states the calculation methodologies specified in Article 2.4 and 2.4.2 also pertain to antidumping reviews, citing the WTO Antidumping Agreement at Article 9.3. Thus, Mexinox contends, if zeroing is unlawful under Article 2.4 and 2.4.2 in the investigation phase, it is also unlawful in the review phase. Although the Bed Linen from India ruling is a WTO panel decision, Mexinox argues, it is no less binding on the Department. Mexinox contends that in keeping with federal statutory interpretation, "absent express Congressional language to the contrary, statutes must not be interpreted to conflict with international obligations." Mexinox Case Brief at 22, quoting Federal Mogul Corporation v. United States, 63 F. 3d 1572, 1581 (Fed. Cir. 1995) (Federal Mogul v. United States) (citing Alexander Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804)). As the Federal Circuit upheld in Federal Mogul v. United States, Mexinox avers, the various GATT (now WTO) agreements qualify as such "international obligations." Mexinox claims this is more true now than under the GATT regimes because the URAA specifically endorsed the WTO Antidumping Agreement and sought to implement its terms. Thus, Mexinox states, Congress intended that the WTO Antidumping Agreement be applied to the extent it was not contrary to existing legislation. Mexinox maintains the Department cannot point to any provision of U.S. law that mandates the Department to assign a value of zero to negative dumping margins, and states the Department's methodology with respect to zeroing was developed solely through administrative practice. Mexinox notes that in the few instances in which the CIT has upheld the practice of zeroing, it did so solely on the grounds that the Department's approach was a reasonable or allowable interpretation of U.S. law in the circumstances of the particular case, referring to Bowe Passat Reinigungs- Und Waschereitechnik GmbH v. United States, 926 F. Supp. 1138 (CIT 1996) and Serampore Industries PVT. Ltd. v. United States, 675 F. Supp. 1354 (CIT 1987). In order to avoid a conflict with international obligations, Mexinox asserts, the Department may not replace negative dumping margins with zero margins in this or any review. Therefore, for these final results, Mexinox urges the Department to include negative margins in its calculation of the overall dumping margin. Petitioners respond that Mexinox's argument is without merit, asserting it is well-established that the U.S. antidumping statute governs the Department's determinations in antidumping proceedings. Petitioners' Rebuttal Brief at 9-10. Referring to Federal-Mogul Corp. v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995) (in which the Federal Circuit cited Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660, 668 (Fed. Cir. 1992)), petitioners contend that when there is a conflict between a GATT or WTO obligation and the Tariff Act, the Tariff Act must prevail. Petitioners hold that this principle is codified in Section 102 of the URAA, which states in part that "[n]o provision of ... the URAA, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect." Therefore, petitioners assert, the Department's primary duty is to enforce the U.S. antidumping statute, not the provisions of the WTO Antidumping Agreement. Petitioners state the Department has determined the WTO's ruling in Bed Linen from India did not pertain to U.S. proceedings, citing Notice of Final Determination of Sales at Less Than Fair Value: Steel Wire Rope from India and the People's Republic of China, 66 FR 12759 (February 28, 2001) and the accompanying Decision Memorandum for India at Comment 8 and Tapered Roller Bearings from Japan and the accompanying Decision Memorandum at Issue 9, Comment 1. Petitioners aver that the Department recently reaffirmed its position after the Appellate Body issued its decision, referring to Certain Preserved Mushrooms from India: Final Results of Administrative Review, 66 FR 42507 (August 13, 2001) (Mushrooms from India) and the accompanying Decision Memorandum at Comment 16. Contrary to Mexinox's contention, petitioners argue, the Bed Linen from India decision is irrelevant because it involved the calculation of dumping margins in the context of an original investigation, not an administrative review. Petitioners note that while there is considerable variation in the methodologies used by WTO members to assess duties, the U.S. practice is to review individual sales already made and determine whether or not they were made at prices below NV. Petitioners contend that Article 9.3 of the Antidumping Agreement "cannot reasonably be construed as proscribing the final assessment in an administrative review of an antidumping duty on an entry that is exactly equal to the actual calculated margin of dumping." Petitioners' Rebuttal Brief at 11. Petitioners assert that "zeroing" negative margins is an important manner in which to discourage "targeted dumping." Petitioners state that a seller's pricing behavior often reflects the specific competitive conditions faced with respect to individual customers, regions, or time periods. Petitioners hold that if an exporter dumps only half of its sales (e.g., in a particular region), the exporter would still be dumping. According to petitioners, such pricing practices should not be excused simply because competitive conditions in some regions allow the exporter to charge prices that are higher than NV in other regions. Thus, it is logical that the assessment calculation should assign a value of zero to U.S. sales made at or above NV, not a negative dumping margin. Therefore, petitioners argue the Department should not abandon its practice of zeroing negative margins. Department's Position: We disagree with Mexinox. As we have discussed in prior cases, our methodology is consistent with our statutory obligations under the Tariff Act. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products From The Netherlands, 66 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 Tariff Act requires that the Department employ this methodology. Section 771(35)(A) of the Tariff 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 Tariff 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 administrative review, 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 close of the present review period are dumped and which are not. By spreading the estimated liability for dumped sales across all reviewed sales, the weighted-average dumping margin allows the Customs Service to apply this rate to all merchandise entered after the close of the review period. 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 and the accompanying Decision Memorandum at Comment 16. Assessment Rates Comment 15: Assessment Rate Methodology Mexinox states that for the preliminary results, the Department calculated the assessment rate based on the ratio of the total amount of antidumping duties due on POR sales to the total entered value of those sales. Mexinox asserts, however, that the assessment rate could be computed more accurately by dividing the dumping duties due by the entered value of all suspended POR entries. Under this methodology, Mexinox argues, the Department would collect the exact amount of dumping duties determined to be due for this review period and would avoid assessing dumping duties on entries of non-subject merchandise. Mexinox claims this assessment methodology is easy to implement and is in keeping with the statute and the Department's practice. Mexinox notes the amount of antidumping duties due is equal to the total "potentially uncollected dumping duties" or "TOTPUDD" calculated for in- scope sales made during the POR. Mexinox holds the assessment rate calculated for the preliminary results does not collect the exact amount of duties due since the total entered value of POR entries, to which this rate is applied, is different from (and greater than) the entered value of the sales used to compute the amount due. Mexinox illustrates this concept using business proprietary figures calculated in the preliminary results, and states this problem can be solved by using the total entered value of the POR entries as the denominator of the assessment rate. Mexinox claims equivalence between the assessment rate denominator and the basis for assessment guarantees that the exact amount of antidumping duties calculated for this review is collected. Referring to its illustration, Mexinox maintains the difference in the assessment denominators is due mainly to timing differences that occur between the entry and subsequent sale of subject merchandise. Mexinox argues that for purposes of completeness, it included in its U.S. sales listing all POR sales of in-scope merchandise under any possible definition of date of sale (i.e., invoice date, shipment date, or order date). Mexinox holds, therefore, that its sales listing includes some subject merchandise that was entered during the POR and invoiced after the POR. Since this material was invoiced after the POR, Mexinox asserts, this material (as well as other material entered during the POR and invoiced after the POR) will be included in its sales listing for the second review, at which time the Department will calculate the dumping margin and amount due on this merchandise. Respondent's Case Brief at 13. Mexinox contends the difference in assessment denominators is also due to the suspension of liquidation of non-subject merchandise. As verified by the Department, Mexinox argues, two categories of non-subject merchandise are included among the suspended POR entries: (1) material that was physically outside the scope of the order (e.g., circles) but was inadvertently suspended along with imports of subject merchandise; and (2) material that was physically in-scope when imported but was first sold to an unaffiliated party (after importation) outside the United States. Id. Although duties should not be assessed on either category, Mexinox asserts that because these non-subject entries have been suspended together with other subject entries, "applying the assessment rate to these entries will inadvertently result in a collection of dumping duties from them." Respondent's Case Brief at 13. With respect to merchandise in the second category, Mexinox argues, the Department's current assessment methodology is particularly problematic since it often cannot be ascertained until a later review period whether the material was first sold to a U.S. customer or to a third country. Mexinox claims its proposed methodology avoids this problem because it postpones the collection of antidumping duties until the material has been sold and there is evidence to determine: (a) whether the entry resulted in a sale subject to review; and (b) the exact amount of the dumping margin on sales of subject merchandise. On the contrary, Mexinox holds, the Department's methodology "simply assumes, without evidence, that this material is subject merchandise and also estimates (rather than calculates) that the dumping margin that might be incurred on those transactions is equal to the average amount incurred on sales in a prior review period." Respondent's Case Brief at 14 (emphasis in original). While the Department may be permitted to make assumptions and estimations in cases where it is not possible to do otherwise, Mexinox argues, it is unreasonable for the Department to do so where there exists an alternative methodology to avoid collecting dumping duties on non-subject material and to collect the exact amount of duties due. Id. Mexinox asserts the Department should employ its proposed methodology, which is consistent with the statute and the Department's practice, to avoid an over- collection of duties in this case. Mexinox states that at one point the Department contemplated codifying this methodology in its regulations, citing Antidumping Duties, 56 FR 63696 (December 5, 1991) (Proposed Rulemaking). Mexinox notes that the Department referred to this methodology as "Option 1" and quotes the Proposed Rulemaking at 63698, which stated: When entry data are available, the Department can derive a percentage margin by dividing the calculated dumping duties due (based on sales) by the number of units entered and then apply the per-unit margin against all units entered during the review period. Or, the Department can derive a percentage margin by dividing the calculated dumping duties due (based on sales) by the entered value of the merchandise entered during the POR and then instruct Customs to apply this percentage margin against the entered Customs value of merchandise entered during the POR. Noting the Department did not codify Option 1 and has not always followed this methodology in subsequent cases, Mexinox contends it is obvious that the Department did not do so based on "questions of feasibility and other case-specific facts that are not present here - i.e., it was either not practicable to do so because the POR entry information necessary to calculate the assessment figures was not available or verified, or there was no evidence that applying the alternative assessment rate calculation methodology would significantly distort the results." Respondent's Case Brief at 15 (emphasis in original). Mexinox states the only substantive objective to Option 1 that it is aware of "relates to the impact of review periods for which no review is requested and where the entries at issue are therefore automatically liquidated at the original deposit amounts." Id. n.14. Mexinox refers to Tapered Roller Bearings, Four Inches or Less in Diameter, and Components Thereof from Japan; Notice of Final Results and Partial Termination of Antidumping Duty Administrative Reviews, 59 FR 56035 (November 10, 1994) (Tapered Roller Bearings from Japan 1979-86), stating the Department considered Option 1 to be a permissible alternative in that case. Mexinox claims the petitioner in that case advocated Option 1 in order to avert a possible under-collection of dumping duties resulting from the alleged incorrect liquidation of certain POR entries prior to the completion of the review. Citing Tapered Roller Bearings from Japan 1979-86 at 56036-37, Mexinox maintains that although the Department dismissed the use of Option 1 in that case, it did so only on the grounds of "feasibility," and not principle or accuracy. According to Mexinox, the Department did not apply Option 1 in that case due to the respondent's limitations in reporting data and a lack of evidence that the alternative methodologies, as applied in that case, would result in distorted assessments. However, Mexinox holds, the Department clearly noted in that case that technological advances related to electronic databases might surmount that lack of feasibility. Stating the circumstances in the instant review are completely different, Mexinox contends there is no question that it is technologically possible to apply Option 1 in this case given Mexinox's electronic reporting capabilities. Respondent's Case Brief at 17. Mexinox claims the Department has tested and verified the universe of and the total entered value of suspended POR entries. In addition, Mexinox argues, the Department has the discretion to confirm the total entered value of the suspended merchandise with the U.S. Customs Service. Further, Mexinox asserts, by examining individual transactions at verification, the Department has confirmed that Mexinox has the ability to link sales to entries with consistency and to report that information to the Department. Based on the foregoing, Mexinox contends it is reasonable for the Department to employ the Option 1 assessment methodology in this case because: (1) it is feasible to do so in this and any subsequent reviews; (2) it results in the collection of the exact amount of duties owed without resorting to estimates of dumping margins; and (3) it averts the inadvertent and unlawful assessment of antidumping duties on merchandise not subject to review and assessment. Mexinox therefore urges the Department to recalculate the assessment rate for these final results and institute a consistent and reliable assessment methodology for all future entries under this order by using the total entered value of all suspended POR entries in the denominator of the assessment rate. In the event the Department continues to use same assessment rate methodology as used in the preliminary results, Mexinox requests that the Department add the entered value of the known entries of non-subject merchandise to the denominator of the assessment rate. Id. at 18. Mexinox argues that such an adjustment would be consistent with prior Department practice, referring to Certain Internal-Combustion Industrial Forklift Trucks from Japan (need full cite), 62 FR 34216 (June 25, 1997) (Industrial Forklift Trucks from Japan) and Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan; Final Results of Antidumping Duty Administrative Reviews and Revocation in Part of an Antidumping Finding, 61 FR 57629 (November 7, 1996). In the former case, Mexinox states, the Department determined it was necessary to include the entered value of the non-subject leased trucks in the assessment rate denominator. Respondent's Case Brief at 19, citing Industrial Forklift Trucks from Japan at 34219. With respect to the merchandise that is physically outside the scope of the order (e.g., circles) that was inadvertently suspended with subject merchandise, Mexinox argues the entered value of this merchandise is known precisely. Mexinox also argues that the Department verified the entered value of this merchandise, referring to Sales Verification Exhibit 29. With respect to in-scope merchandise that was first sold to customers outside the United States, Mexinox states that at this time it is not possible to quantify fully the amount of this merchandise since the disposition of some of these entries will not be determined until the merchandise is sold in later review periods. Nonetheless, Mexinox claims, at least a portion of this category of non-subject merchandise can be identified from the submitted sales listings as those sales where the field SUBJECTU equals "N2." Therefore, in order to avoid assessing duties on these confirmed non-subject entries, Mexinox urges the Department to include the total entered value of these sales in the assessment rate denominator. Petitioners respond that Mexinox's criticisms of the assessment rate methodology used in the preliminarily results are misplaced. Petitioners assert the Department has correctly calculated the assessment rate by dividing the total dumping duties due by the entered value of the sales examined, and also correctly applied that rate to non-reviewed POR entries that were destined for resale in third-country markets. With respect to entries of non-subject merchandise whose liquidation has been suspended, petitioners claim that Mexinox can protest any assessment of antidumping duties against those entries; therefore, petitioners state, the Department does not need to amend the assessment rate to address this issue. Quoting Gray Portland Cement and Clinker from Mexico; Final Results of Antidumping Duty Administrative Review, 64 FR 13148 (Mar. 17, 1999), petitioners argue that it is the Department's normal practice to assess dumping duties "based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of sales examined." Petitioners state this practice, which is codified in section 351.212(b)(1) of the Department's regulations, was used by the Department in the preliminary results and should continue to be used for the final results. Citing Antidumping Duties; Countervailing Duties; Proposed Rule: Uruguay Round Agreements Act (URAA); Conformance, 61 Fed. Reg. 7308, 7317 (Feb. 27, 1996), petitioners note the Department's intention in implementing this regulation. Also, petitioners note, in Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed. Reg. 27,296 (May 19, 1997) (citing Torrington Co. v. United States, 44 F.3d 1572, 1578 (Fed. Cir. 1995)) (Torrington), the Department stated: [T]hat the amount of duties assessed may differ depending on the method used is not necessarily grounds to conclude that the assessment rate method is distortive, because neither the Act nor the AD Agreement specifies whether sales or entries are to be reviewed, nor do they specify how the Department must calculate the amount of duties to be assessed. Finally, citing Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, from Japan; Final Results of Antidumping Duty Administrative Reviews and Termination in Part, 63 Fed. Reg. 20,585, 20,590 (April 27, 1998) and Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62 Fed. Reg. 54,043, 54,045 (Oct. 17, 1997), petitioners contend that the Department's practice with respect to assessment rates is reflected in numerous administrative determinations and is well-established. Petitioners aver that even Mexinox admits its suggested methodology might permit entries to avoid assessment entirely if a review were not conducted when the merchandise eventually was sold. Contrary to Mexinox's argument that "'this circumstance can only occur if both Petitioners and respondents allow it to occur,'" petitioners contend that current POR entries would escape assessment completely under Mexinox's methodology in certain circumstances, irrespective of petitioners' objections. Petitioners' Rebuttal Brief at 5, quoting Mexinox's Case Brief at 15 n. 14. For instance, petitioners hold, entries from a particular POR sold after the revocation of an order would not be included in the assessment rate calculation. Similarly, petitioners maintain, POR entries sold in a later review period when no entries were made (thus permitting no review to be requested) would never be factored into any future assessment calculation under Mexinox's proposed methodology. Therefore, petitioners argue the Department should "opt for ensuring that all entries for consumption are assessed with antidumping duties." Id. Referring to Mexinox's argument that the Department's methodology results in inappropriately assessing antidumping duties on non-subject entries, petitioners assert these purportedly non-subject entries constitute only a small portion of the entries made during the POR but not examined by the Department. Petitioners aver the Department should not allow this considerable volume of POR entries to escape assessment at this point by accepting Mexinox's alternative assessment methodology. Regarding Mexinox's contention that the assessment denominator should include merchandise that is physically out of scope when imported, petitioners argue the Department does not need to include the value of this merchandise in the assessment rate denominator. Petitioners assert that Mexinox does not explain in its case brief how these out-of-scope products were "'inadvertently suspended.'" Petitioners' Rebuttal Brief at 6, quoting Respondent's Rebuttal Brief at 13. Petitioners submit that these entries were "inadvertently suspended" as a result of Mexinox USA or its broker importing subject and non-subject merchandise under a single consolidated entry summary, referring to Mexinox's November 20, 2000 questionnaire response at pages C-1 and 2 and Attachment C-2. If so, petitioners maintain, this problem could have been solved by Mexinox USA filing separate entries for subject and non-subject merchandise contained in the same import shipment. More importantly, petitioners hold, Customs likely will not assess antidumping duties on these out-of-scope products, and if they do, Mexinox has a clear remedy. Petitioners state the Department's standard liquidation instructions to Customs apply, by their precise terms, to the liquidation of entries of subject merchandise. Petitioners argue that where suspended entries include both subject and non-subject merchandise, Customs officials would seem to have the discretion, based on Commerce's instructions, to apply the assessment rate only to that portion of the total value of the suspended entry that is attributable to subject merchandise. Petitioners claim this effectively ensures that out-of-scope merchandise is not assessed incorrectly with antidumping duties. If that discretion is not utilized or if Customs improperly applies the assessment rate to the total value of the consolidated entry, petitioners claim, the importer can protest that action in keeping with 19 U.S.C. section 1514. Petitioners state the Department need not assume that Customs will make this error or will not fix such an error when it is brought to its attention. With respect to imported material that was physically within the scope of the order but was first sold to an unaffiliated party (after importation) outside the United States, petitioners argue this merchandise is properly subject to the assessment of antidumping duties. Noting Mexinox's claim the merchandise in this category cannot be fully quantified at this time, petitioners contend that Mexinox knows the value of a certain portion of those entries. Based on information on the record, petitioners argue that the entries described by Mexinox are consumption entries, not entries imported under temporary importation bond ("TIB") or another device that treats the entries as outside U.S. customs territory. Citing Grain- Oriented Electrical Steel from Italy: Final Results of Antidumping Duty Administrative Review, 66 FR 14887 (March 14, 2001) (Grain-Oriented Electrical Steel from Italy) and the accompanying Decision Memorandum at 4- 5, petitioners hold that all entries for consumption of subject merchandise are subject to antidumping duties. Petitioners contend that if Mexinox shipped in-scope merchandise to the United States and consumption entries were filed, the merchandise is legally subject to review and to the assessment of antidumping duties. Petitioners state that while those entries may not actually be used to establish the CEP if the first unaffiliated purchaser is located outside the United States, this does not signify that the original consumption entries themselves are not subject to assessment of antidumping duties in keeping with the rate established in that review. Therefore, petitioners assert the Department should not increase the assessment denominator to account for imported material that was physically within the scope of the order but was first sold to an unaffiliated party (after importation) outside the United States. Department's Position: We agree with petitioners in part. Section 351.212(b)(1) of our regulations establishes that the Department "normally will calculate the assessment rate [for each importer] by dividing the dumping margin found on subject merchandise examined by the entered value of such merchandise for normal customs duty purposes." Calculating assessment rates by dividing total dumping duties by the total value of POR entries would complicate continuity from one review period to another, would be more burdensome to the Department and the U.S. Customs Service, and could conceivably preclude the Department from collecting antidumping duties in future reviews should Mexinox have sales but no entries during a particular review period. Accordingly, in these final results we have adhered to our established policy and based assessment on the ratio of total antidumping duties to the entered value of the entries. As petitioners observe, the Department noted in its notice of proposed regulations with respect to implementing section 351.212(b)(1): With respect to the use of duty assessment rates, the Department believes that, except in unusual situations, we should assess duties on subject merchandise entered during the review period. Therefore, paragraph b(1) provides that the Department normally will calculate a duty assessment rate based on sales reviewed, and will apply those duties to entries made during the review period. In all cases, this will result in assessment of duties on merchandise entered during the review period. To the extent possible, these assessment rates will be specific to each importer, because the amount of duties assessed should correspond to the degree of dumping reflected in the price paid by each importer. Where possible, we will base assessment rates on the entered value of the sales examined in the review... See Antidumping Duties, Countervailing Duties, Proposed Rule: Uruguay Round Agreement Act (URAA): Conformance, 61 FR 7308, 7317 (February 27, 1996). Moreover, we noted in the proposed regulations that: The Department believes that except in unusual situations, it should not abandon the objective of assessing duties on the basis of entries, even when it is possible to precisely link sales to entries. In most antidumping proceedings, it is necessary to assess duties on the basis of entries in order to maintain continuity with periods of no review and to avoid the over- or under-collection of duties. Moreover, because we typically cannot link sales to entries, we currently have no means of collecting precisely an amount of duties equal to the total absolute dumping margins calculated for the sales reviewed. This would require exact knowledge, for each importer, as to the total quantity or value of unliquidated entries during the review period, information that often is difficult or impossible to obtain. (Id.) In issuing its current assessment regulations the Department was aware of Mexinox's concern that different assessment rates could result depending upon whether sales or entries were the basis of assessment. The Department determined that such differences were not normally a sufficient basis for abandoning our normal assessment methodology. As petitioners have noted, and as the Federal Circuit sustained in Torrington, neither the Tariff Act nor the Antidumping Agreement specify whether the Department is to review sales or entries or how the Department must calculate the amount of duties to be assessed. In addition, use of the methodology set forth by Mexinox could significantly complicate assessment in future reviews of this case. While Mexinox contends that it or its importers can furnish the Custom values of all entries suspended during this review period, it is unclear whether Mexinox or its importers could provide such information in future proceedings. Also, in cases where sales were made during a period of review, but the entries associated with those sales entered during a subsequent period, the Department would have no basis to assess any dumping duties under Mexinox's proposed methodology. We also disagree with Mexinox's contention that modification of the assessment rate is necessary to account for imports of out-of-scope merchandise during the POR. We note that the assessment instructions we will issue to Customs will pertain to "subject merchandise," that is, merchandise that is within the scope of the order. Customs thereby will have the discretion to apply assessment instructions only to the portion of the entry that pertains to subject merchandise. Should Customs improperly apply our liquidation instructions to out-of-scope merchandise, the importer's remedy would be to file a protest pursuant to 19 U.S.C. 1514. Finally, we agree with Mexinox's assertion that subject merchandise sold to unaffiliated parties outside the United States is not subject to antidumping duties. See The Torrington Company v. United States, 82 F.3d 1039 (Fed. Cir. 1996) (where there is no U.S. price for an entry which is subsequently re-exported, Commerce's decision not to impose antidumping duties on the entry is consistent with the basic purpose of the antidumping laws). For assessment purposes, we agree with Mexinox's suggestion that we should include the entered value of merchandise sold to unaffiliated parties outside the United States in the denominator used to determine the assessment rate in order to facilitate the U.S. Customs Service's collection of antidumping duties on subject merchandise. Based upon the foregoing, in these final results we have adhered to our normal assessment methodology. Consistent with our standard practice, we will instruct the Customs Service to assess dumping duties based upon the ratio of the total amount of antidumping duties to the entered value of the sales reviewed for each importer covered by this review. Additionally, we have included the entered value of subject merchandise entered for consumption but sold to unaffiliated parties outside the United States in the denominator used to determine the assessment rate. Ministerial Errors Comment 16: Weight Bases Used to Calculate the Difference-in-Merchandise Adjustment Mexinox notes that it reported transaction-specific difference-in- merchandise (difmer) data on the same weight basis as the prices and adjustments for the transaction. Thus, home market variable cost of manufacture (VCOMH) was reported on a per metric ton basis, whereas variable and total cost of manufacture for Mexinox's U.S. sales (VCOMU and TCOMU, respectively) were reported on a per hundred weight (cwt) basis. Likewise, Ken-Mac and CBS's VCOMU and TCOMU were reported on a per pound basis. Mexinox argues the Department's model matching program failed to convert the difmer data to a common weight basis before calculating the DIFMER. As a result, Mexinox claims, the Department's model-matching program could not identify similar matches within the acceptable 20 percent difmer and instead compared non-identical matches to constructed value. To correct this error, Mexinox asserts the Department should convert the variable and total cost fields to a common weight basis. Therefore, Mexinox urges the Department to convert the U.S. cost data to a metric ton basis. Department's Position: We agree with Mexinox that we should convert the U.S. variable and total cost fields to a metric ton basis to be consistent with the home market cost data. Therefore, we have corrected our computer program accordingly for these final results. See the Department's Final Analysis Memorandum, dated February 4, 2001. Comment 17: Weight Bases Used to Calculate Extended Entered Values for Ken-Mac and CBS Mexinox states it reported entered values for Ken-Mac and CBS in dollars per pound. However, Mexinox claims, in calculating extended entered value the Department erroneously multiplied the entered value in pounds by the quantity expressed in hundred weights (cwt). Since this resulted in entered values being understated, Mexinox argues, the Department should convert the quantities reported for Ken-Mac and CBS from hundred weights to pounds for purposes of reporting extended entered value. Petitioners respond that the Department should only amend Mexinox's data if the record shows that the reported data are incorrect. Department's Position: We agree with Mexinox. The record shows that Mexinox reported entered values for sales by Mexinox USA in U.S. dollars per cwt, while it reported entered values for resales by Ken-Mac and CBS in U.S. dollars per pound. However, before combining the three datasets in our preliminary margin calculation program, we inadvertently failed to convert the entered values reported for Ken-Mac and CBS sales to cwt. Therefore, we have corrected this error for the final results in order to calculate extended entered values on a consistent basis. See the Department's Final Analysis Memorandum, dated February 4, 2001. Comment 18: Weight Conversion Factor Mexinox argues the Department made two clerical errors related to the conversion of Ken-Mac's sales data from an invoiced to actual weight basis. First, Mexinox states, the Department erroneously multiplied the reported quantity by the conversion factor instead of dividing. Second, Mexinox asserts the Department neglected to convert any of the value fields (e.g., prices, price adjustments, movement expenses, selling expenses, etc.), and requests that the Department amend this error by multiplying the value fields by the conversion factor. Petitioners reply that Mexinox does not cite the record in making its claim that the Department should divide quantities by the conversion factor rather than multiplying. Petitioners assert the correct conversion method is not clear given that actual weights may either be greater than or less than theoretical weights. Therefore, petitioners argue, the Department should not make any corrections that are not upheld by the record. Department's Position: We agree with Mexinox. We have examined the record and have determined that it is appropriate to divide (rather than multiply) the Ken-Mac sales quantity by the weight conversion factor. The record shows Mexinox calculated the weight conversion factor by dividing the density of the product based on invoiced weight by the density of the product based on actual weight. See the Department's August 17, 2001 Sales Verification Report for Ken-Mac at 9 n.6. Therefore, for these final results, we have divided by the weight conversion factor in order to convert Ken-Mac's sales from a theoretical weight basis to an actual weight basis. Regarding the argument that we should apply the weight conversion factor to the price adjustments and expenses reported for Ken-Mac, we agree with Mexinox in part. As noted in its questionnaire response, Mexinox reported each of the expenses incurred in making the sale to Ken-Mac (e.g., domestic inland freight incurred in Mexico, Mexican brokerage, packing, etc.) based on the weighted-average expense incurred on its sales of subject merchandise to Ken-Mac during the POR. See, e.g., Mexinox's November 20, 2000 questionnaire response at KMC-25. All of Mexinox USA's sales of subject merchandise to Ken-Mac during the POR were made on an actual weight basis. Therefore, it is not necessary to apply the weight conversion factor to any of the Mexinox-incurred expenses reported in the Ken-Mac database. With respect to the adjustments and expenses incurred by Ken-Mac, we have determined that we should apply the weight conversion factor to expenses calculated on a weight basis that could not be determined to be theoretical or actual. Two expenses incurred by Ken-Mac meet this condition: freight (KMFRTCU) and warehousing (KMWHSU). Therefore, for these final results we have applied the weight conversion factor to these two expenses. We have also applied the weight conversion factor to the Ken- Mac unit price and to those adjustments and expenses that were calculated on the basis of the Ken-Mac unit price. Comment 19. Application of Corrections from the Ken-Mac Sales Verification to CBS' Resales Mexinox notes that the Department recalculated Ken-Mac's indirect selling expenses (KMINDSU) and inventory carrying costs (KMINVCU) based on the Department's findings at verification. Mexinox argues that in applying these corrections to the reported CBS sales data, the Department mistakenly applied the amended indirect selling expense ratios and inventory carrying cost ratios to CBS's gross price rather than to the transfer price from Ken-Mac to CBS. Thus, Mexinox asserts that the Department has overstated KMINDSU and KMINVCU for CBS transactions. Although the CBS sales listing does not include data on prices from Ken- Mac to CBS, Mexinox states, the Department can obtain the same result and correct this error by adjusting CBS's indirect selling expenses and inventory carrying expenses by the ratio of the corrected expense factors to the originally reported expense factors. Petitioners claim that Mexinox has failed to cite any evidence that transfer prices were included in the denominator used to compute the corrected expense ratios. Petitioners state that transfer prices are not an appropriate basis for any calculation of actual expenses. Department's Position: We agree with Mexinox in part. Under the Ken-Mac expense fields (e.g., KMINDSU) in the CBS database, Mexinox reported "the weighted average of the per unit amounts in the Ken-Mac sales listing for sales to CBS during the period of review." See Mexinox's November 20, 2000 questionnaire response at CBC-51. The per-unit expenses reported in the Ken-Mac database reflect the prices charged by Ken-Mac to its customers. Thus, the weighted-average expense amounts in the CBS database reflect the transfer price from Ken-Mac to CBS. Therefore, in order to apply the corrections from the Ken-Mac sales verification to the CBS database, we should multiply the expense at issue by the ratio of the corrected expense factor to the originally reported expense factor. Upon reexamining the record, we found the amount reported under KMINDSU in the Ken-Mac database already reflects the correct ISE ratio (i.e., the ratio we verified). Thus, we do not need to correct KMINDSU in our margin program, and have reversed our recalculation for these final results. Since KMINDSU was correctly reported in the Ken-Mac database, the weighted- average amount in the CBS database is also correct. Therefore, we have not made any changes to the amount reported under KMINDSU in the CBS database. However, it is still necessary to correct the amount reported under KMINVCU in the Ken-Mac database for these final results. Therefore, in order to correct the amount reported under KMINVCU in the CBS database, we have multiplied KMINVCU by the ratio of the corrected inventory carrying days to the originally reported inventory carrying days. We have also applied the ratio of the average POR Federal Reserve rate used in the preliminary results to the reported short-term interest rate. Comment 20: Application of Neutral Facts Available to Ken-Mac's "Unattributable" Sales Mexinox states the Department calculated a neutral facts available rate for the "unattributable" Ken-Mac transactions by multiplying the overall margin calculated on all other sales/resales of subject merchandise by the weighted-average price of the unattributable sales. Mexinox notes that the Department then weighted the result by using a portion of the "unattributable" database representing the ratio of Ken-Mac's purchases of stainless steel from Mexinox to Ken-Mac's stainless steel purchases from all vendors, as reported in Attachment KMC-11 of its March 5, 2001 supplemental response. Mexinox argues that this methodology over-allocated the unattributed sales to Mexinox because the ratio used presupposes that all Ken-Mac purchases from Mexinox consisted of subject merchandise when, in reality, a substantial proportion of those purchases consisted of material imported into the United States in non-subject form (e.g., cut-to-length) or prior to the suspension of liquidation (i.e., before January 4, 1999). Mexinox asserts that Attachment KMC-11 shows that a certain percentage of Ken- Mac's purchases of stainless steel from Mexinox during this period consisted of merchandise imported in non-subject cut-to-length form. Mexinox holds that the Department thoroughly tested Ken-Mac's identification of subject and non-subject merchandise at verification, thereby validating the accuracy of this figure. Therefore, referring to its May 4, 2001 Supplemental Response at 14-15, Mexinox clams that in order to account for purchases of non-subject merchandise, the Department must make a further adjustment to reflect that portion of total purchases actually consisting of subject merchandise. Department's Position: We disagree with Mexinox. At the Ken-Mac sales verification, we examined Ken-Mac's resales of Mexinox merchandise and confirmed that it correctly segregated sales of subject merchandise from non-subject merchandise for reporting purposes. See the Sales Verification Report at 4. However, despite Mexinox's assertion, we did not test the proportion of Ken-Mac's purchases of subject and non-subject merchandise from Mexinox USA (as reported in its March 5, 2001 supplemental questionnaire response at Attachment KMC-11-C). Therefore, for these final results we are unable to make the further adjustment proposed by Mexinox, and have made no changes to our calculation of neutral facts available for the "unattributable" Ken-Mac transactions. Comment 21: Model Match Formatting Errors Mexinox asserts the Department failed to assign a weight to grade 316 in its model match program and that matching therefore was not performed correctly. Also, Mexinox states, the Department's model match program misformatted the codes identifying non-metallic coating types by omitting a necessary leading zero. Department's Position: We agree with Mexinox and have corrected our model match program accordingly for these final results. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting the margin calculation accordingly. If accepted, we will publish the final results of the review and the final weighted-average dumping margin in the Federal Register. AGREE _______ DISAGREE _______ _____________________________ Faryar Shirzad Assistant Secretary for Import Administration _____________________________ Date _____________________________________________________________ footnote: 1. Petitioners state it is not clear from the record what the unconsolidated G&A expense figure was for TKS.