66 FR 49618, September 28, 2001 A-583-835 Investigation PUBLIC DOCUMENT Enforcement III/Office 8: PMT MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary Enforcement Group III SUBJECT: Issues and Decision Memo for the Antidumping Investigation of Certain Hot-Rolled Carbon Steel Flat Products from Taiwan - October 1, 1999 through September 30, 2000 Summary We have analyzed the case briefs and rebuttal briefs of interested parties in the antidumping duty investigation of certain hot-rolled carbon steel flat products from Taiwan. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of issues in this investigation for which we received comments and rebuttal comments by parties: 1. Collapsing of China Steel and Yieh Loong 2. Affiliation 3. Time to Respond to Request for Information 4. Application of Facts Available & Adverse Facts Available Background On May 3, 2001, the Department of Commerce (the Department) published its Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products from Taiwan, 66 FR 22204 (May 3, 2001) (Preliminary Determination). The period of investigation (POI) is October 1, 1999 through September 30, 2000. There are three respondents in this investigation, China Steel Corporation (China Steel), Yieh Loong Enterprise Co., Ltd. (Yieh Loong), and An Feng Steel Co., Ltd. (An Feng). As stated in the Preliminary Determination, An Feng did not answer the Department's January 4, 2001 antidumping duty questionnaire. With respect to China Steel and Yieh Loong, the Department determined that these affiliated companies should be collapsed for purposes of an antidumping analysis, pursuant to 19 CFR 351.401(f)(2) of the Department's regulations. See Memorandum to Joseph A. Spetrini, "Affiliation Issue regarding China Steel ... and Yieh Loong ... ," dated April 19, 2001 (Affiliation Memorandum). We also determined that this collapsed entity did not act to the best of its ability in responding to the Department's requests for information. Accordingly, we assigned all three companies a margin of 29.14 percent as adverse facts available. We invited parties to comment on our Preliminary Determination. China Steel and Yieh Loong submitted joint case briefs and rebuttal briefs (the collapsed entity is hereafter referred to as China Steel/Yieh Loong). Gallatin Steel Company, IPSCO Steel Inc., Nucor Corporation, Steel Dynamics, Inc., Weirton Steel Corporation, and Independent Steelworkers Union also filed a case brief. These parties, along with Bethlehem Steel Corp., LTV Steel Company, Inc., National Steel Corp., and U.S. Steel LLC, filed rebuttal briefs. (1) Discussion of the Issues Comment 1: Collapsing of China Steel and Yieh Loong In determining whether or not to collapse two or more affiliated parties, one of the criteria examined is whether or not there is a significant potential for one company to manipulate the price or production decisions of the other. See 19 CFR 351.401(f)(1). Section 351.401(f)(2) adds that in identifying a significant potential for the manipulation of price or production, the factors the Department may consider include: (i) The level of common ownership; (ii) The extent to which managerial employees or board members of one firm sit on the board of directors of an affiliated firm; and (iii) Whether operations are intertwined, such as through the sharing of sales information, involvement in production and pricing decisions, the sharing of facilities or employees, or significant transactions between the affiliated producers. China Steel/Yieh Loong contends that the two companies should not be collapsed. Both companies assert that China Steel only has a minority interest in Yieh Loong, which is insufficient to allow China Steel to exert control over Yieh Loong's production and pricing decisions. China Steel and Yieh Loong maintain that the presence of China Steel's chairman and vice-president on Yieh Loong's Board of Directors does not indicate any potential for price or production manipulation. China Steel/Yieh Loong further argues that the chairman and vice-president of China Steel serving on Yieh Loong's Board of Directors does not indicate any potential for price or production manipulation because these individuals are not employed by Yieh Loong and are not involved in Yieh Loong's daily business operations. China Steel/Yieh Loong insists the primary responsibilities of the board members are to attend meetings of Yieh Loong's Board and make suggestions for shareholder meetings. In addition, China Steel/Yieh Loong states, China Steel did not share senior management employees, as claimed in the Affiliation Memorandum. These five managers, the firm contends, resigned from China Steel and its subsidiaries before taking up employment with Yieh Loong. See China Steel/Yieh Loong's Case Brief at 13 and 14. China Steel/Yieh Loong claims its business operations, e.g., sales, marketing, production, and finances, are independent of each other. The limited transactions that occur between the companies, China Steel/Yieh Loong contends, are at arm's length. China Steel/Yieh Loong claims Yieh Loong's purchases of subject merchandise from China Steel during the POI constituted two percent of Yieh Loong's fully utilized hot-rolled production capacity. See id. at 15. The bulk of this merchandise, China Steel/Yieh Loong asserts, was consumed in the production of non-subject merchandise, such as cold-rolled coils and pipe. Finally, China Steel/Yieh Loong argues that there is no potential for manipulation of price or production. The company asserts that China Steel and Yieh Loong have never passed or diverted any purchase orders between the two companies either before or after the two became affiliated. The firm insists Yieh Loong's prices are consistently lower than China Steel's, making any such diversion unpalatable for one firm or the other (i.e., the price would be unacceptably high or low, as the case may be). Id. at 16. Petitioners contend that the Department properly collapsed China Steel and Yieh Loong into a single entity because they met the criteria pursuant to the Department's regulations. Petitioners assert that the two companies are clearly affiliated, as China Steel directly and indirectly owns a substantial percentage of Yieh Loong. Petitioner I Rebuttal at 5. Citing respondent's claim that "[s]taffing by former employees is insufficient to support a finding of affiliation, much less collapsing," petitioners counter that these former employees were not clerical employees. These former China Steel employees, petitioners assert, transferred to Yieh Loong to become President, Vice-President of Marketing Department, Vice- President of Production Department, Assistant Vice-President of Administration Department, and Deputy Manager of Finance Department. These members of senior management and common board members, petitioners conclude, are strong evidence of interlocking management. Id. at 6. Petitioners assert that common board members need not engage in day-to- day management of operational functions to control the business practices of the companies. The strategic decisions of the company are established by the Board of Directors, not the President. Due to the interlocking board members, petitioners claim, China Steel and Yieh Loong have access to each other's production and pricing decisions. To support this claim, petitioners cite "Collapsing Analysis Memorandum in Certain Welded Large Diameter Line Pipe (Line Pipe)" from Mexico (June 20, 2001). According to petitioners, in the Line Pipe case the Department found cross-ownership and directorial privileges would afford either company access to information regarding the other's production and pricing decisions. Id. at 7. Petitioners maintain that the Department's objective in collapsing foreign producers is to prevent the possibility of shifting production of subject merchandise to a producer with the more advantageous dumping margin. Department's Position: The Department disagrees with respondents' argument that it wrongly collapsed China Steel and Yieh Loong. In order to collapse two entities under the Department's regulations, past manipulation of price or production need not have occurred. Rather, the regulation requires that we find a significant potential for manipulation. The regulation clearly defines the criteria for collapsing in section 351.401(f)(1) and (2), and we outlined in detail the decision to collapse the two entities in a memorandum dated April 19, 2001. See Affiliation Memorandum. China Steel's ownership in Yieh Loong is the largest of all shareholders. The chairman and vice-president of China Steel sit on Yieh Loong's three-person Board. The Department's regulations do not require that these board members must oversee daily operations in order to make a collapsing determination; their mere presence is sufficient to indicate the potential for manipulation. The third criterion outlined by the Department's regulation as stated above is met by China Steel's significant transactions with Yieh Loong. Id. at 4. The Department's February 27, 2001 supplemental questionnaire queried China Steel specifically in regard to a statement pertaining to Yieh Loong in its 1999 financial statement. China Steel's March 20, 2001 response at 4 and 5 stated that, "[China Steel] has gained the management and operation right for [Yieh Loong]." China Steel's own admission establishes that the two entities are closely intertwined. Accordingly, in this final determination we have continued to treat China Steel and Yieh Loong as a single entity. Comment 2: Affiliation China Steel/Yieh Loong maintains that the two companies are not affiliated with home market resellers Yieh Hsing, Yieh Phui, and Persistence Hi-Tech, contrary to the conclusion reached in the Department's April 19, 2001 Memorandum to the File (Reseller Memorandum). This memorandum noted that Yieh Loong's chairman was also the chairman of Yieh Hsing, Yieh Phui and Persistence Hi-Tech. The Department's interpretation of section 771(33) of the Tariff Act is incorrect, according to respondents. Citing the language of section 771(33)(B), China Steel/Yieh Loong asserts that "any officer or director of an organization and such organization," cannot be read to mean that if, as here, one individual is a director in two corporations, those two corporations are affiliated. Characterizing the chairman's role as "largely symbolic," China Steel/Yieh Loong states this individual has neither the time nor the ability to direct the day-to-day operations of these companies. China Steel/Yieh Loong also contends that Yieh Loong's equity ownership position in its customers, and vice versa, is under three percent. Therefore, China Steel/Yieh Loong concludes, the threshold five percent ownership level required to find companies affiliated under section 771(33)(F) of the Tariff Act is not met. Moreover, respondents argue that under Taiwanese accounting rules, "related party," the term used in the firms' financial statement to describe their ties to the resellers, connotes a different meaning than entailed in the antidumping law. China Steel/Yieh Loong's Rebuttal Brief at 11. The respondents also takes issue with the Department's use of these three parties' cooperation with the Department as evidence of their affiliation with Yieh Loong. By ignoring other possible reasons for an unaffiliated company to cooperate with Yieh Loong's investigation, such as a desire to assist a valued supplier, China Steel/Yieh Loong accuses the Department of adopting a "'no good deed goes unpunished' approach." Id. at 12. Disputing the third indicium of affiliation cited in the Reseller Memorandum, China Steel/Yieh Loong further insists that the manner in which a company is characterized in a financial statement is not dispositive of the issue of affiliation under the antidumping law. To support this claim, respondents cite Certain Welded Stainless Steel Pipe from Taiwan, 62 FR 37543, 37548 (1997) and Certain Welded Stainless Steel Pipe from Taiwan, 64 FR 33243, 33247 (1999). Rather, China Steel/Yieh Loong asserts, the Department is obligated to conduct an independent analysis of affiliation within the context of U.S. dumping law. Id. Finally, even if Yieh Phui, Yieh Hsing, and Persistence Hi-Tech are affiliated with Yieh Loong, China Steel/Yieh Loong argues, this does not, in turn, mean these parties are affiliated with China Steel. The collapsing of China Steel and Yieh Loong does not, the company maintains, mean ipso facto that China Steel is affiliated with these parties. According to China Steel/Yieh Loong, the Department must find affiliation between China Steel and Yieh Phui, Yieh Hsing and Persistence Hi-Tech. Petitioners assert that Yieh Loong's chairman need not control the daily operations of the reseller affiliates to have sufficient influence over the resellers' policies to support a finding of affiliation. Petitioner I Rebuttal Brief at 3. Petitioners insist that China Steel/Yieh Loong has not demonstrated that having Yieh Loong's chairman on the resellers' boards does not result in influence sufficient to support an affiliation finding. Rather, petitioners argue that "companies with common board members are by definition related parties." Id., quoting China Steel/Yieh Loong's Case Brief at 12. In response to China Steel/Yieh Loong's claim that three percent equity ownership does not meet the Tariff Act's requirement of five percent, petitioners assert that the statute requires an affirmative affiliation finding where the five percent threshold is met. However, this does not mean the statute precludes a finding of affiliation where the degree of equity ownership is below this level. Id. at 4. Finally, petitioners conclude that China Steel need not be directly affiliated with Yieh Phui, Yieh Hsing, and Persistence Hi-Tech to classify these resellers as affiliates. Petitioners assert "collapsed companies are a single entity and inherently have the same affiliated parties." Id. Department's Position: We agree with petitioners. Collapsed companies constitute a single entity and therefore affiliates of either company are affiliates of the collapsed entity. Section 771(33) of the Tariff Act considers the following persons or parties to be affiliated: (A) Members of a family; (B) Any officer or director of an organization and such organization; (C) Partners; (D) Employer and employee; (E) Any person directly or indirectly owning, controlling, or holding with power to vote, five percent or more of the outstanding voting stock or shares of any organization and such organization; (F) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any persons; (G) Any person who controls any other person and such other person. The Department acknowledges that in the Preliminary Determination, it incorrectly cited section 771(33)(B) of the Tariff Act as the basis for its affiliation decision. The correct citation is section 771(33)(F) and (G) of the Tariff Act. The statute defines control as being in a position legally or operationally to exercise restraint or direction over the other entity. Actual exercise of control is not required by the statute. The Department finds that China Steel/Yieh Loong is affiliated with Yieh Hsing, Yieh Phui and Persistence Hi-Tech for the reasons detailed below. The Department specifically asked China Steel/Yieh Loong in its January 4, 2001 questionnaire who its affiliates are. In its February 2, 2001 section A response Yieh Loong states that it is affiliated with several companies, including Yieh Hsing, Yieh Phui and Persistence Hi-Tech. Yieh Loong stated that where there is no equity ownership, under Taiwanese law the companies are still considered affiliates due to a common chairman. China Steel/Yieh Loong's Case Brief at 12. All four entities have a common chairman and Yieh Loong, Yieh Hsing, and Yieh Phui have minority ownership in each other. (For a detailed discussion of affiliated resellers see Reseller Memorandum.) We also disagree with respondents argument that the chairman of Yieh Loong does not control company prices or daily operations and that the day- to-day operations of Yieh Loong are in the hands of its general manager or president. According to Article 202 of the Taiwan Company Law: The transaction of business of the company shall be decided by the board of directors. Unless this Law or the articles of incorporation provide that certain matters shall be resolved at the meeting of shareholders, all matters may be decided by resolutions of the board of directors. Article 202 also states that a Taiwanese company's business strategy and its daily operations shall be decided by the board of directors. See Yieh Loong's April 23, 2001 supplemental questionnaire response at Exhibit A- 32. It is evident from Article 208 of the Taiwan Company Law that the chairman of the board of directors has a substantial say in the business agenda of that company. Id. Article 208 of the Taiwan Company Law states: The chairman of the board of directors shall internally preside at the meetings of shareholders, meetings of the board of directors, and meetings of the managing directors, and shall externally represent the company. In sum, because Yieh Loong's chairman is also the chairman of Yieh Phui, Yieh Hsing and Persistence Hi-Tech, and because of the extensive power of the chairman of the board under Taiwanese law, we find that Yieh Loong controls Yieh Phui, Yieh Hsing and Persistence Hi-Tech. Moreover, we note that these companies hold themselves out to the world as affiliated, and originally reported themselves that way to the Department. Therefore, the Department continues to maintain that Yieh Loong is affiliated with Yieh Phui, Yieh Hsing, and Persistence Hi-Tech. Moreover, the Department continues to conclude that as a collapsed entity, China Steel is affiliated with Yieh Loong's affiliates and vice-versa. See Notice of Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and Strip in Coils from Germany, 64 FR 30710 (June 8, 1999). Comment 3: Time to Respond to Request for Information China Steel/Yieh Loong contends that the Department's supplemental questionnaire (which was due on April 23, 2001) set an unreasonable deadline which did not provide a meaningful period in which to compile its response. China Steel/Yieh Loong asserts the Department only granted it two to four business days to answer the questionnaire and denied any extension requests. When the company did succeed in developing a complete response, China Steel/Yieh Loong complains, the Department rejected the submission as an untimely and unsolicited response. Respondents argue that in light of the communications between China Steel/Yieh Loong and the Department, this subsequent rejection of the revised data was also unreasonable. China Steel/Yieh Loong Case Brief at 3. Further, according to China Steel/Yieh Loong, the statute requires the Department to provide respondents an opportunity to remedy deficient submissions, if time permits. Claiming the Department in some cases will continue the questionnaire process up to two months after a preliminary decision, China Steel/Yieh Loong insists that ample time existed for the company to remedy any deficiencies and allow the Department to calculate China Steel/Yieh Loong's dumping margin. Failure to extend the final determination for this purpose is, the respondents aver, unreasonable. Id. at 5. Petitioners insist the Department acted correctly in rejecting China Steel/Yieh Loong's May 30, 2001 submission. Citing Nippon Steel Corporation v. United States, 118 F. Supp. 2d 1366, 1377 (Ct. of Int'l. Trade 2000), petitioners contend the Department has authority both to set deadlines to "aid the completion of its mission," and to reject untimely responses in favor of facts available. Petitioner I Case Brief at 3. Rather, petitioners maintain, the Department has been "generous" in providing numerous extensions. Petitioner I Rebuttal Brief at 2. Petitioners state that at the time the Department's April 17 and 18, 2001 supplemental questionnaire was issued, Yieh Loong's cost verification was scheduled to begin on Monday, April 30, 2001. Petitioner II Rebuttal Brief at 3. The Department's regulations, petitioners claim, state that the record in an investigation closes one week before verification is set to begin. Therefore the record in this investigation closed on April 23, 2001. Petitioners assert the Department's April 17 and 18 questionnaires "generously [gave] respondents every opportunity to correct the previously identified problems contained in their submissions." Id. at 4. Department's Position: The Department disagrees with China Steel/ Yieh Loong's claim that April 23, 2001 was an unreasonable deadline for its April 17 and 18, 2001 supplemental questionnaires. As the chronology of events outlined below demonstrates, the Department afforded China Steel/Yieh Loong ample time to remedy the deficiencies in their responses. In the Department's questionnaires of April 17 and 18, 2001, we requested information previously identified in the Department's original January 4, 2001 and subsequent questionnaires. In the January 4, 2001 questionnaire at question 2C, the Department requested a list of all affiliates and a description of "all aspects of the relationship between your company and each person you name, and describe each person's role (if any) in the manufacturing, sale, and/or development of the product under investigation (including all inputs)." Question 2D of the questionnaire stated: If any of the affiliated persons you have identified above are in turn affiliated with other persons that are involved in the manufacturing, sale, and/or development of the product under investigation (including all inputs), please provide a list of those persons and describe the nature of the affiliation (e.g., shared directors or managers, equity ownership, close supplier relationship). Include any such affiliated persons in the chart you provide in response to Question 2.c., above. Also describe the nature of each person's involvement with the product under investigation. China Steel's February 2, 2001 response to those two questions failed to list Yieh Loong as an affiliate which manufactured, sold, or developed subject merchandise and did not include Yieh Hsing and Yieh Phui which are in turn affiliated with Yieh Loong. See China Steel's section A questionnaire response, February 2, 2001. In the Department's February 27, 2001 supplemental section A questionnaire, China Steel was asked at question 3 if China Steel and Yieh Loong were indeed affiliates. At question 4, China Steel was asked to confirm if Yieh Hsing and Yieh Phui were affiliated with Yieh Loong and if each manufactured, sold, or developed subject merchandise. On March 20, 2001 China Steel confirmed that Yieh Loong is an affiliate and that Yieh Phui and Yieh Hsing were affiliates of Yieh Loong which manufactured, sold or developed subject merchandise. See China Steel's March 20, 2001 response at 3-6. Similarly, the Department asked Yieh Loong why it considered Persistence Hi-Tech an affiliate and it replied that the two companies were considered affiliates due to a common chairman. See Yieh Loong March 20, 2001 response at 2. On March 15, 2001 the Department issued to China Steel its supplemental section B and C questionnaire and specifically requested China Steel to code sales to Yieh Loong, Yieh Phui, and Yieh Hsing as sales to affiliates and to report downstream sales along with any resales made by China Steel Global and China Steel Chemical. In the same supplemental questionnaire, the Department requested China Steel to remedy missing product characteristics for a sizeable number of its home market sales. Similarly, the supplemental questionnaire sent to Yieh Loong requested it to report all affiliated resellers downstream sales. See the Department's March 15, 2001 supplemental section B and C questionnaire to Yieh Loong. On April 3, 2001 China Steel submitted its supplemental section B and C response. From the information provided, the Department concluded that China Steel did not remedy the deficiencies addressed in the Department's March 15, 2001 supplemental questionnaire. China Steel did not provide missing product characteristics, i.e., carbon, quality, yield strength, thickness, or width. Even though it previously stated in the same submission that physical characteristics, " can be identified from the production record, inventory record as well as the product code system." Quoting China Steel's April 3, 2001 supplemental section B and C response at answer to question 4. China Steel's affiliated resellers' information was not complete. The information provided on April 3, 2001 was inconsistent with the narrative. (For a detailed discussion of the deficiencies in China Steel/Yieh Loong's submissions see Memorandum to the File, The Use of Adverse Facts Available, April 23, 2001.) The April 17 and 18, 2001 supplemental questionnaires constituted the Department's third request to China Steel regarding downstream sales and missing product characteristics. The Department specifically instructed China Steel to report downstream sales and to include detailed narratives with source documentation, worksheets, and sample printouts of sales listings. In addition, the Department instructed China Steel to report all physical characteristics for its home market sales listing and its affiliated resellers' sales listing. See the Department's supplemental questionnaire, April 17 and 18, 2001. Once again, the Department's April 17 and 18, 2001 questionnaires requested Yieh Loong to provide narratives on its affiliated resellers' sales. (This information is essential to calculating a dumping margin as detailed in the Preliminary Determination at 66 FR 22207 and 22208.) See Memorandum to the File, The Use of Adverse Facts Available, April 23, 2001. The Department notified China Steel/ Yieh Loong early in the proceedings of its deficiencies and allowed numerous extensions of time to remedy these deficiencies as requested. China Steel/Yieh Loong's repeated failure to remedy these deficiencies establish that they significantly impeded the conduct of this investigation and failed to cooperate to the best of their ability. Id. China Steel/ Yieh Loong cites Ta Chen Stainless Steel Pipe v. United States, Slip Op. 99-117 at 40 (CIT October 28, 1999) to assert that the Department is in violation of the statutory requirement to afford opportunity to remedy deficiencies. However the circumstances of that case are not analogous to the facts of this investigation. The Department in that case did not inform the respondent specifically to provide U.S. sales information for its affiliated resellers. Only upon publication of the final results of review, on July 8, 1997, was Ta Chen made aware that additional U.S. sales data were required. Ta Chen was not given the opportunity to remedy such deficiencies since the submission of factual information had to be made six months before Ta Chen was informed that the Department would consider its sales to its affiliates as constructed export price (CEP) sales. In this investigation the Department specifically instructed China Steel and Yieh Loong on numerous occasions to rectify deficiencies in their responses, and to report affiliated re- sales. Because China Steel/ Yieh Loong had failed to remedy those deficiencies, the deadline outlined in our April 17 and 18, 2001 supplemental questionnaires was reasonable. Comment 4: Application of Facts Available & Adverse Facts Available China Steel/ Yieh Loong asserts the Department imposed facts available against it without providing the statutorily-required notice of deficiencies and an opportunity to remedy the deficiencies in its response. Respondent maintains the Preliminary Determination collapsed Yieh Loong with China Steel while specifically indicating that adverse facts available was imposed against Yieh Loong solely on the basis of alleged deficiencies in China Steel's response. The Department, the company further claims, had not advised Yieh Loong that Yieh Loong was responsible for China Steel's actions until the Preliminary Determination. Since this determination was announced on April 24, 2001, i.e., one day after the record in this investigation closed, Yieh Loong did not have any opportunity to persuade China Steel to comply. China Steel/Yieh Loong's Case Brief at 8. Further, China Steel/Yieh Loong avers, were the Department to extend the deadline for its final determination, as China Steel/Yieh Loong requested, the Department would have three and a half months to analyze the May 30 and 31, 2001 responses which were ultimately returned. China Steel/Yieh Loong asserts this would be "far more time" than needed to verify the response. In addition, China Steel/ Yieh Loong argues the Department can only apply adverse facts available against a party which did not act to the best of its ability, yet the Department did not cite evidence that this was the case in this investigation. Citing American Silicon Technologies v. United States, 110 F. Supp. 2d 992, 1003 (Ct. of Int'l Trade, 2000), China Steel/Yieh Loong asserts that an alleged lack of information on the record cannot automatically be equated with a failure to act to the best of one's abilities. China Steel/Yieh Loong Case Brief at 17. In that case, the company avers, the Court of International Trade (the Court) was not persuaded by the Department's claim that the "numerous opportunities" afforded the respondent was "not probative of [a respondent's] ... ability to respond." Id., quoting American Silicon Technologies. China Steel/Yieh Loong asserts they are being penalized improperly for the failure of third parties - the putatively affiliated resellers - to provide information. In Usinor Sacilor v. United States, 907 F. Supp 426 (Ct. of Int'l Trade, 1995), respondent claims the Court held that the Department may not apply adverse facts available where "the missing data [were] beyond the control of the respondent." Id. According to China Steel/Yieh Loong, the Department concluded on remand that the respondent did not have control over the information and, accordingly, did not make an adverse inference in applying facts available. Petitioners argue that respondents' failure to submit complete factual information in a timely fashion warrants the use of facts available. Citing section 776(a)(2)(B) of the Tariff Act, petitioners maintain that when a submission is untimely filed, the Department may use the facts otherwise available. Petitioner I Case Brief at 3. Petitioners further assert that the use of adverse facts available is warranted because the respondents failed to provide adequate responses in this proceeding. Petitioners assert that the Department has gone out of its way to give respondents multiple opportunities to correct these deficiencies. Petitioners note that the Department's April 17 and 18 supplemental questionnaire constituted the Department's second supplemental questionnaire. Furthermore, petitioners point to China Steel/Yieh Loong's longstanding efforts, dating from January 19, 2001, to be excused from reporting the very home market downstream sales data at issue in this case. Id. at 5. Finally, petitioners contend that the sales and cost-of- production data submitted by China Steel/Yieh Loong were so deficient (i.e., missing product characteristics and downstream sales), that "the Department could not reasonably calculate a dumping margin." Id. Petitioners propose using a facts available margin of 43.53 percent, the highest margin alleged in the petition, as a facts available margin; if the Department continues to assign a margin based on adverse facts available, petitioners urge the Department to double that highest figure and assign a margin of 87.06 percent. Petitioners note that respondents knew of the 43.53 percent rate at the outset of the investigation. If these companies' actual margins of dumping were below this figure, petitioners reason, they would have cooperated fully with the Department. Therefore, petitioners argue, only a margin higher than that alleged in the petition would be truly adverse. Petitioner I Rebuttal Brief at 8. Even if the Department disagrees with this suggestion, petitioners urge the Department to state affirmatively that the petition margin is the best facts available margin available. Petitioners suggest doing so will protect the petition margin as a source of facts available in the event the use of adverse facts available does not withstand judicial scrutiny. Id. at 9. In their rebuttal comments, petitioners emphasize the Department's authority to employ facts available is the "sole incentive for a respondent to cooperate" with the Department. Petitioner II Rebuttal Brief at 10. Because of the "gross inadequacies" in China Steel/Yieh Loong's response, petitioners continue, the Department properly decided not to verify these responses. Petitioners further note that having decided not to verify, the Department is foreclosed from using the unverified data. Id. at 11, citing section 782(i)(1) of the Tariff Act. Claiming China Steel/Yieh Loong i) withheld information requested by the Department; ii) failed to provide requested data by deadlines established; and iii) significantly impeded the proceeding, petitioners aver the use of facts available is clearly warranted. Further, in cases where a respondent fails to act to the best of its ability, petitioners argue, the Department's "long-standing practice is to employ total adverse facts available." Id. at 12. Accusing China Steel/Yieh Loong of responding to the Department's questions with "circular nonsensical narratives," petitioners insist the Department should continue to apply adverse facts available for the final determination. Id. Department's Position: Section 776(a) of the Tariff Act provides that if: (1) necessary information is not available on the record, or (2) an interested party or any other person; (A) withholds information that has been requested by the administering authority or the Department, (B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, (C) significantly impedes a proceeding under this title, or (D) provides such information but the information cannot be verified, the Department is required to use facts otherwise available to make its determination. In addition, section 776(b) of the Tariff Act provides that, in selecting from among the facts available, the Department may employ adverse inferences against an interested party if that party failed to cooperate by not acting to the best of its ability to comply with requests for information. As detailed in Time to Respond to Request for Information section above, the Department repeatedly instructed China Steel/Yieh Loong to remedy deficient information regarding missing product characteristics and downstream sales. See Memorandum to the File, The Use of Adverse Facts Available for China Steel and Yieh Loong, April 23, 2001. The Department's February 27, 2001 supplemental section A questionnaires specifically questioned China Steel and Yieh Loong regarding their affiliation with each other. In their March 20, 2001 supplemental section A response, the two companies acknowledged an affiliation with each other. They based the affiliation on China Steel's substantial equity ownership in Yieh Loong and China Steel's chairman and a senior executive being board members on Yieh Loong's three-person Board of Directors. See China Steel's and Yieh Loong's March 20, 2001 supplemental section A response. In the Department's March 15, 2001 supplemental section B and C questionnaires, we instructed China Steel and Yieh Loong to report complete and accurate downstream sales information. We also specifically instructed China Steel to provide all required physical characteristics. China Steel/Yieh Loong's April 3, 2001 supplemental section B and C response did not provide the requested information. Yieh Loong failed to provide a narrative for its downstream sales. China Steel failed to rectify the missing product characteristics, which not only affected its home market database but also whatever affiliated reseller information they were able to provide. Their downstream sales information was still extremely insufficient. See Memorandum to the File, The Use of Adverse Facts Available for China Steel and Yieh Loong, April 23, 2001. Once again, on April 17 and 18, 2001 the Department gave China Steel/Yieh Loong another opportunity to correct their deficient information. China Steel/Yieh Loong's submission on April 23, 2001 failed again to rectify the deficiencies the Department outlined in its memorandum on the use of adverse facts available; the sales listing submitted on April 23, 2001 contained nearly identical sales information as the April 3, 2001 submission. Id. Because respondents failed to remedy these deficiencies despite three opportunities to do so, the Department informed China Steel/Yieh Loong in a letter dated May 10, 2001, that the sales and cost verifications were cancelled. China Steel/Yieh Loong filed additional information on May 30 and 31, 2001, five weeks after the April 23, 2001 deadline. Pursuant to section 782(f) of the Tariff Act and 19 CFR 351.302(d)(i), the Department returned the submissions to China Steel/Yieh Loong and did not consider them part of the record of this investigation. See Department's letter to Peter Koenig, June 5, 2001. We disagree with China Steel/Yieh Loong's claim that an extension of the final determination would provide sufficient time for the Department to use the new information. The May 30 and 31, 2001 submissions, assuming they were essentially complete, would constitute such a major revision of China Steel/ Yieh Loong's questionnaire as to qualify as a completely new response. It would involve significant new subsets of home market sales, and accompanying narrative, submitted for the first time. The same holds true for the missing model match data. Even with an extended final determination, the Department would not be able to properly administer the investigation of this case. To properly administer the case, the Department must: analyze the new submissions; allow an opportunity for comments from interested parties; issue additional supplemental questionnaires; conduct cost and sales verification of China Steel/Yieh Loong; issue verification reports; and allow interested parties to comment and request a hearing. Because of the extreme tardiness of China Steel/Yieh Loong's May 30 and 31, 2001 submissions, we find it significantly impeded the proceeding of this investigation. The Department continues to maintain that because of deficiencies in the record the use of adverse facts available is warranted pursuant to section 776(a) and (b) of the Tariff Act. For example, China Steel/ Yieh Loong failed to remedy missing product characteristics. The Department requires the physical characteristics of paint, quality, carbon, yield strength, thickness, width, cut-to-length versus coiled, tempered rolled, pickled, edge trim, and patterns in order to match the product appropriately to products sold in the United States, to ascertain whether the home market merchandise was sold at prices above the cost of production, and to calculate a difference-in-merchandise adjustment. See Memorandum to the File, The Use of Adverse Facts Available for China Steel and Yieh Loong, April 23, 2001. Respondents' failure to provide this information, again, precludes the Department from calculating an accurate margin. While China Steel/Yieh Loong submitted new information on May 30 and 31, 2001, the information was five weeks past due and consequently rejected as untimely. Moreover, China Steel/ Yieh Loong's data failed to provide complete and accurate downstream sales information. Without these data, the information regarding home market sales is unusable because a significant quantity of China Steel/Yieh Loong's home market sales were made through affiliates. The Department disagrees with petitioners' proposal of using the highest margin alleged in the petition of 43.53 percent, nor do we agree that the adverse facts available margin should be 87.06 percent. As stated in section 776(c) of the Tariff Act: When the Department relies on secondary information rather than on information obtained in the course of an investigation or review, the Department, as the case may be, shall, to the extent practicable, corroborate that information from independent sources that are reasonably at their disposal. For the Preliminary Determination, the Department corroborated the facts available rate from the antidumping petition of 29.14 percent. The rate was based on a margin computation employing constructed value (CV) as the normal value, for which petitioners used their own cost of manufacturing (COM) data in the calculation. Petitioners calculated a separate rate for each of three HTS numbers that cover subject merchandise, employing a different COM for each HTS number. We used as the facts available rate the margin for the HTS number that had the highest margin. That HTS number was 7208.27.00.60, a category covering pickled merchandise. The Department knew of no sources to corroborate the petitioner's reported COM data except the COM data the respondents submitted in their calculation of CV. (China Steel/ Yieh Loong provided this data in their April 9, 2001 submission.) The Department maintains that the COM submitted by respondents is reasonably close to the COM contained in the petition, and therefore find the COM contained in the petition for HTS 7208.27.00.60 to be sufficiently corroborated. The Department is able to corroborate the petition dumping margin of 29.14 percent, however we are unable to corroborate petitioners' proposed adverse facts available margin of 87.06 percent with information currently submitted by respondents. Moreover, we believe that the highest petition margin, as recalculated by the Department, is adverse in that it reasonably insures that the respondent does not benefit from its own lack of cooperation. See Memorandum to the File from Fred Baker, Corroboration dated April 23, 2001. Therefore, we have continued to use as adverse facts available the 29.14 percent rate used in our preliminary results. Recommendation Based on our analysis of the comments received, we recommend adopting all of the positions set forth above. If these recommendations are accepted, we will publish the final determination of the antidumping duty investigation and the final dumping margins for all firms in the Federal Register. AGREE____ DISAGREE____ ________________________________ Faryar Shirzad Assistant Secretary for Import Administration _______________________________ Date ________________________________________________________________________ footnote: 1. Three separate law firms are representing petitioners in the various investigations of hot-rolled steel. Two of these submitted comments in these proceedings, Schagrin Associates, and Dewey Ballantine LLP. For clarity, citations to either case or rebuttal briefs will be preceded by the submitting party's name (e.g., China Steel/Yieh Loong Case Brief, Petitioner I Rebuttal Brief, Petitioner II Rebuttal Brief). Schagrin Associates represents Gallatin Steel Company, IPSO Steel Inc., Nucor Corporation, Steel Dynamics, Inc., Weirton Steel Corportion, and Independent Steelworkers Union (collectively Petitioner I). Dewey Ballantine LLP represents Bethlehem Steel Corp., LTV Steel Company, Inc., National Steel Corp., and United States Steel LLC (collectively Petitioner II).