67 FR 6685, February 13, 2002 A-580-829 POR: 1999-2000 Public Document GII/O4: AGA/KG MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Bernard T. Carreau Deputy Assistant Secretary for Import Administration Group II DATE: February 6, 2002 SUBJECT: Issues and Decision Memorandum for the Final Results of the Antidumping Duty Administrative Review of Stainless Steel Wire Rod (SSWR) from Korea. Summary We have analyzed the comments in the case and rebuttal briefs submitted by interested parties in the antidumping duty administrative review of SSWR from Korea. Below is a complete list of issues in this investigation for which we received comments from the parties. As a result of our analysis, we have made changes in the preliminary margin calculations. We recommend that you approve the positions we have developed in the Discussion of Issues section of this memorandum. In Section I, we identify the issues in this review for which we received comments from the interested parties. Section II sets out the scope, or product coverage, of this review. Section III identifies the changes made in the margin calculation since the preliminary results. Section IV analyzes the comments of the interested parties. Finally, we recommend approval of the Department's positions developed for each of the issues. Background On October 9, 2002, the Department of Commerce (the Department) published its preliminary determination in the antidumping duty administrative review of SSWR from Korea. See 66 FR 51385. The period of review (POR) is September 1, 1999 through August 31, 2000. The respondents in this review are Changwon Specialty Steel Co., Ltd. (Changwon) and Dongbang Specialty Steel Co., Ltd. (Dongbang) (collectively, respondents). We invited all parties to comment on the preliminary determination. Respondents submitted a case brief on December 5, 2001 and the petitioners (i.e., Carpenter Technology Corp., Empire Specialty Steel, and the United Steel Workers of America, AFL-CIO/CLC), submitted a rebuttal brief on December 12, 2001. I. List of Issues 1. Affiliation Between the Respondents and Their Customers Through a Principal/Agent Relationship 2. Deferred Foreign Exchange Losses 3. Deferred Foreign Exchange Losses of Dongbang Transport 4. Calculation of General and Administrative (G&A) Expenses: 4A. Gains and Losses on Certain Monetary Instruments 4B. Items Relating to the Disposition of Fixed Assets 4C. Gain and Losses on Futures and Gain on Redemption of Corporate Bond 4D. Casualty Insurance Refund 4E. Down Payment for Other Products 5. Conversion of Values in the Constructed Export Price (CEP) Profit Calculation 6. Calculation of Foreign Market Unit Price in U.S. Dollars 7. Model Match Calculations in the Margin Program 8. Variable Cost of Manufacturing (VCOMs) and Total Cost of Manufacturing (TCOMs) Adjustments 9. Correction of Errors Noted in Changwon's Cost of Production Verification Report 10. New Information in the Respondents' Case Brief II. Scope For purposes of this review, SSWR comprises products that are hot-rolled or hot-rolled annealed and/or pickled and/or descaled rounds, squares, octagons, hexagons or other shapes, in coils, that may also be coated with a lubricant containing copper, lime or oxalate. SSWR is made of alloy steels containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. These products are manufactured only by hot-rolling or hot-rolling annealing, and/or pickling and/or descaling, are normally sold in coiled form, and are of solid cross-section. The majority of SSWR sold in the United States is round in cross-sectional shape, annealed and pickled, and later cold- finished into stainless steel wire or small-diameter bar. The most common size for such products is 5.5 millimeters or 0.217 inches in diameter, which represents the smallest size that normally is produced on a rolling mill and is the size that most wire-drawing machines are set up to draw. The range of SSWR sizes normally sold in the United States is between 0.20 inches and 1.312 inches in diameter. Two stainless steel grades are excluded from the scope of the review. SF20T and K-M35FL are excluded. The chemical makeup for the excluded grades is as follows: SF20T Carbon 0.05 max Chromium 19.00/21.00 Manganese 2.00 max Molybdenum 1.50/2.50 Phosphorous 0.05 max Lead-added (0.10/0.30) Sulfur 0.15 max Tellurium-added (0.03 min) Silicon 1.00 max K-M35FL Carbon 0.015 max Nickel 0.30 max Silicon 0.70/1.00 Chromium 12.50/14.00 Manganese 0.40 max Lead 0.10/0.30 Phosphorous 0.04 max Aluminum 0.20/0.35 Sulfur 0.03 max The products subject to this review are currently classifiable under subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and 7221.00.0075 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this review is dispositive. III. Changes in the Margin Calculation Since the Preliminary Results 1. We included an amortized portion of the deferred foreign exchange losses of Pohang Iron and Steel Co., Ltd. (POSCO) and Dongbang Transport Logistics Co., Ltd. that these two companies wrote off in 1999 to retained earnings in the calculation of the respondents' financial expense. See Comments 2 and 3. 2. We included POSCO's consolidated gain on valuation on certain short- term financial instruments in the calculation of the respondents' financial expense. See Comment 4A. 3. We included a gain on the disposition of fixed assets in POSCO's G&A calculation. See Comment 4B. 4. We included a casualty insurance refund in Changwon's G&A calculations. See Comment 4D. 5. We corrected currency conversion errors in the CEP profit calculation. See Comment 5. 6. We corrected the calculation of foreign market unit price in U.S. dollars. See Comment 6. 7. We included missing instructions to identify the identical grades for certain grades in model matching. See Comment 7. 8. We applied the VCOMs and TCOMs from the annual cost database to the margin calculations. See Comment 8. 9. In the preliminary results, we inadvertently applied the Korean won exchange rate to the variable "DINVCARU," which was reported in U.S. dollars. For the final results, we used the variable "DINVCARU" in our calculations as it was reported in U.S. dollars. See Final Calculation Memorandum. For further details of our calculations, see Final Calculation Memorandum dated February 6, 2002. IV. Analysis of Comments Comment 1: Affiliation Between the Respondents and Their Customers Through a Principal/Agent Relationship The petitioners contend that Changwon and Dongbang are affiliated with their trading company customers in the respondents' U.S. sales transactions through a principal/agent relationship under section 771(33)(G) of the Tariff Act of 1930, as amended (the Act). The petitioners claim that the respondents (and the U.S. importers of their sales) are attempting to limit their liability for antidumping duties by "interposing" a trading company in the chain of sale as the first unaffiliated customer in the United States. The petitioners allege that, in fact, the trading companies act as no more than sales agents for the exporters, and merely serve to "shield the price paid by the actual customer from scrutiny under the antidumping laws." The petitioners characterize this distribution "strategy" as a "new twist" on the "scheme" in which respondents interposed a U.S. affiliated sales organization into the distribution chain in order to prevent sales from becoming CEP sales. The petitioners note that this previous "scheme" was undone by the Court of Appeals for the Federal Circuit in A.K. Steel Corp. et al. v. United States, Slip. Op. 99-1296, (Fed. Cir. Sept. 12, 2000), ("AK Steel"), which mandated that such sales should be treated as CEP sales. The petitioners note that the Department, in Notice of Final Determination of Sales at Less than Fair Value: Engineered Process Gas Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether Complete or Incomplete, from Japan, 62 FR 24394, 24403 (May 5, 1997) (Turbo-Compressors from Japan), set out criteria for determining a principal/agent relationship within a sales transaction, namely (1) the foreign producer's role in negotiating price and other terms of sale; (2) the extent of the foreign producer's interaction with the U.S. customer; (3) whether the agent/reseller maintains inventory; (4) whether the agent/reseller takes title to the merchandise and bears the risk of loss; and (5) whether the agent/reseller further processes or otherwise adds value to the merchandise. The petitioners point out that, in Turbo- Compressors from Japan, the Department determined that a principal and agent are affiliated within the meaning of section 771(33) of the Act. The petitioners argue that, based on the criteria for a principal/agent relationship discussed in Turbo-Compressors from Japan, the respondents (i.e., both Changwon and Dongbang) have a principal/agent relationship with their U.S. trading company customers, and are therefore affiliated with these customers. For Changwon, the petitioners claim that Changwon's submitted sales documents for a sale to one party establish that this sale was actually to a third party, made through the first party acting as a sales agent. The petitioners state that the proprietary documents from Changwon, as well as the proprietary documents from Changwon's affiliated parties involved in Changwon's U.S. sales (POSCO Steel Sales & Service Co., Ltd. (POSTEEL) and Pohang Steel America Corporation (POSAM)), (1) provide evidence of this principal-agent relationship. The petitioners state that the sales documents specifically show that (1) Changwon was involved in negotiating the terms of sale with the ultimate customer; and that (2) the reported customer did not (a) have any substantive role in the sale, (b) maintain inventory, (c) take title to the merchandise, (d) bear the risk of loss for this sale, or (e) further process or otherwise add value to the merchandise. The petitioners claim that the only "commercially reasonable" explanation for the role of the reported customer in the sale is that this party acted as an agent of Changwon in this sale. The petitioners further claim that sales documents obtained at verification from Changwon demonstrate that all of Changwon's trading company sales were made using the trading company as an agent in the same manner as described above. The petitioners argue that while Changwon may have communicated through the trading company "agents," if Changwon controls the ultimate price and terms of sale, the trading company still remains "only an instrument" of Changwon. The petitioners contend that the fact that one party bought Changwon's merchandise through more than one "agent" does not necessarily mean, as the Department assumed, that this party chose to work only through trading companies. See Memorandum dated October 1, 2001 on Whether Changwon and Dongbang are Affiliated With Certain U.S. Customers Under Section 771(33) of the Act, as Amended by the Uruguay Round Agreements Act, (Affiliation Memo) at 6. Rather, the petitioners argue that this indicates that Changwon is directing end user sales through its affiliated agents for tactical reasons concerning antidumping liability. The petitioners note that, in general, Changwon can direct all contacts to be through the agent and yet control the process. The petitioners also state that there is no evidence, no definitive proof, and/or many unanswered questions concerning many of the factors that the Department used in its affiliation analysis, including whether the agents/resellers deal in the goods of other suppliers; maintain inventory; bear the risk of loss; or must account to Changwon for their profits or losses. The petitioners contend that proprietary evidence indicates that the (ultimate end user) customer chooses to deal with Changwon, the producer, and does not make its purchasing decision based on the reputation of the agent. The petitioners further argue that in back-to-back transactions, like those performed by the agents, there is no risk to the agent. The petitioners conclude that Changwon controls the commercial sales of its exports through its agents in the United States, and Changwon and its agents should be treated as affiliated parties under section 771(33)(G) of the Act. In a similar manner, the petitioners claim that Dongbang's submitted sales documents for a sale to one party establish that this sale was actually to a third party. The petitioners argue that the criteria for a principal/agent relationship exist in this case because the first party, the reported customer, among other things, (1) did not maintain inventory, (2) did not take title to the merchandise, (3) did not bear the risk of loss, and (4) did not further process or add value to the merchandise. The petitioners further argue that record evidence (including proprietary evidence) demonstrates the existence of a principal/agent relationship between Dongbang and most of its other reported customers. Among these factors, the petitioners state that the record demonstrates that the ultimate end user customers knew that they were dealing with Dongbang; Dongbang controls the prices charged by the trading company customers; and that Dongbang does not need further accountability from its "agents." The petitioner concludes that Dongbang's "sales agents" are not buying from Dongbang as independent actors, but are acting as an instrument of Dongbang. The petitioners contend that the Department's conclusion in Stainless Steel Wire Rod From the Republic of Korea: Preliminary Results of Antidumping Duty Administrative Review, 66 FR 51385, 51387 (October 9, 2001) (Preliminary Results) that the respondents do not have a principal/agent relationship with their trading company "partners" is not supported by record evidence. The petitioners state that the Department's conclusion that Changwon and Dongbang did not market directly to the ultimate U.S. customers is incorrect because Changwon and Dongbang effectively control prices and other terms of sale with the ultimate customer of the trading company. The petitioners also contest the Department's statement that 'trading company customers take title to the inventory and bear risk of loss.' See Id. The petitioners state that taking title in a back-to-back transaction, which is the same type of transaction that Changwon employed with POSAM and POSTEEL, is not enough to transform an agent into an "independent actor." Furthermore, the petitioners state that there is no evidence of whether marketing is done by Changwon, Dongbang, or the trading companies to the ultimate customer. The petitioners further dispute how the Department distinguishes this case from Turbo-Compressors from Japan. The petitioners state that "the issue is not the number of agents or the number of customers but the actions of those agents and customers." The petitioners also contend that, just because of the complexity and variety of the facts in this case, one cannot assume that no principal/agent relationship exists between Changwon, Dongbang, and their trading company "agents." The petitioners claim that the fact pattern in this case is the "natural extension of the back-to-back indirect Export Price (EP) sale scheme that was in place" prior to the A.K. Steel decision. The petitioners assert that the Department must consider the functionality of the relationships in the sale, and "not allow form to supplant substance" in determining the ultimate customer. The petitioners further maintain that the principal/agent affiliation relationships at issue require the 'more sophisticated analysis that better reflects the realities of the marketplace' called for by the Statement of Administrative Action (SAA) accompanying the URAA, H.R. Doc. No. 103-316 at 838 (1994), and through this analysis, the Department should find that Changwon and Dongbang are affiliated with their trading company customers through a principal/agent relationship under Section 771(33) of the Act. The petitioners further contend that, since the transactions reported to the trading companies are transfer prices to an agent, and do not represent the transaction between the exporter and the first unaffiliated U.S. customer, the Department should conclude that the respondents have failed to cooperate within the meaning of section 782(e)(4) of the Act. Moreover, the petitioners stress that the Department should therefore assign total adverse facts available to the respondents. The respondents argue that the Department properly concluded that Changwon's and Dongbang's trading company customers are not affiliated with the respondents. The respondents contend that the petitioners are "knowingly and intentionally attempting to mislead" the Department by suggesting that Changwon and Dongbang are selling to trading companies in response to the AK Steel decision. The respondents point out that all the sales in the present proceeding took place before the AK Steel decision. The respondents also point out that the respondents had U.S. sales to unaffiliated trading companies in the investigation stage of this proceeding. See Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Korea, 63 FR 40404 (July 29, 1998). The respondents further note that the Department, in numerous cases, including in the investigation of SSWR from Korea, has consistently determined that in U.S. sales transactions involving unaffiliated trading companies, the unaffiliated trading company is the U.S. customer. See Id. The respondents further argue that, based on the Department's practice regarding principal/agent relationships, including Turbo-Compressors from Japan, the facts confirm that Changwon and Dongbang are not affiliated with their U.S. customers, and do not in any way control their unaffiliated trading company customers. The respondents note that, in Turbo-Compressors from Japan, the Department based its affiliation and control finding, in part, on the fact that the respondent had direct contacts with the ultimate end-user, including joint marketing efforts with the trading company, prior to the sale. The respondents contend that, in the present case, as the Department confirmed in the Preliminary Results, 66 FR at 51387, they did not engage in any such marketing efforts. The respondents also note that, as the Department verified, they: 1). do not directly engage in any sales negotiations or marketing efforts targeting the ultimate end user; 2). do not have any exclusive sales arrangements with any of their unaffiliated trading company customers; and 3). issue their invoices to the unaffiliated trading company, thereby passing title and risk of loss to the trading company. The respondents also contend that the petitioners' suggestion that the respondents were involved in negotiations with the ultimate end-user is based on "pure speculation." In reference to the sales documents submitted by Changwon discussed by the petitioners, the respondents state that these documents mention the trading company's customer only for reference purposes. The respondents explain that foreign producers, in transactions involving trading companies, are made aware of the ultimate end users because the subject merchandise is "generally" shipped directly to the ultimate end user, at the trading companies' request, in order to minimize freight costs. The respondents also explain that a trading company may have more than one customer, and foreign producers reference the ultimate end-user in documents in order to distinguish between the different end users and delivery locations. The respondents note that other documents not referenced by the petitioner, including the order confirmation, commercial invoice, and proof of payment, list the trading company and legally establish the trading company customer as the customer. In reference to the sales documents submitted by Dongbang, the respondents state that the documents at issue indicate that Dongbang and the unaffiliated trading company were the legal parties to the transaction. Furthermore, the respondents contend that no evidence exists of any sales negotiations between Dongbang and the end user identified in these documents. The respondents point out that Dongbang is made aware of the ultimate end user because the merchandise is shipped directly to the ultimate end user. The respondents also state this factual scenario is similar to that in Electrolytic Manganese Dioxide from Japan: Final Results of Antidumping Duty Administrative Review, 58 FR 28551, 28555 (May 14, 1993) (EMD from Japan), where the Department determined that the respondent, which shipped the merchandise directly to the end user, was not affiliated with the trading company customer based on a principal/agent relationship. The respondents also point out two further similarities between the present case and EMD from Japan. First, they note that, in EMD from Japan, 58 FR at 28555, the Department found that the fact that a reseller does not maintain inventory and does not further process the merchandise in question does not mean that a principal/agent relationship exists. The respondents emphasize that, in the present case, these factors also do not lead to the conclusion that Changwon and Dongbang control their trading company customers. They also state that some of the respondents' trading company customers actually maintained inventory and/or further processed the subject merchandise. Second, the respondents state that, in EMD from Japan, 58 FR at 28555, the Department based its finding of unaffiliation primarily on the fact that title and risk of loss for non-payment by the ultimate end user passed from the respondent to the trading company. The respondents point out that, in the present case, they invoiced the unaffiliated trading companies, and the unaffiliated trading companies therefore take title to the merchandise and bear the risk of loss for non-payment by the ultimate end users. The respondents note that the Department confirmed during verification that the transfer of title and risk of loss to the trading companies, in order to avoid the credit risk of selling to small- and medium-sized companies, were two of the primary reasons for the respondents selling to unaffiliated trading companies. The respondents conclude that the Department should continue to find that Changwon and Dongbang are not affiliated with their trading company customers. The Department's Position: We agree with the respondents that Changwon and Dongbang are not affiliated with their trading company customers through a principal/agent relationship. Under section 771(33)(G) of the Act, principals and agents are affiliated because, "by definition, a principal controls its agent." See Turbo-Compressors from Japan, 62 FR at 24403. In determining whether a principal/agent relationship exists, the Department first examines whether an explicit agreement exists from the alleged principal, authorizing the agent to act on its behalf in a specified context. This agreement must not only state that such a relationship exists, but the alleged agent must expressly consent to such representation on behalf of the principal. However, the Department also recognizes that while agency relationships are "frequently established by a written contract, this is not essential." See Id. at 24402-24403 (expressing the principal/agent test); see also Stainless Steel Sheet and Strip in Coils From Taiwan: Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review, 66 FR 41509, 41512 (August 8, 2001). In the absence of an agency contract, "the analysis of whether a relationship constitutes an agency is case-specific and can be quite complex; there is no bright line test." See Turbo-Compressors from Japan, 62 FR at 24403. The Department's examination of allegations of an agency relationship has focused on a range of criteria, including (but not limited to) the following: (1) the foreign producer's role in negotiating price and other terms of sale; (2) the extent of the foreign producer's interaction with the U.S. customer; (3) whether the agent/reseller maintains inventory; (4) whether the agent/reseller takes title to the merchandise and bears the risk of loss; and (5) whether the agent/reseller further processes or otherwise adds value to the merchandise. Id. In the preliminary results, we found that, based on the totality of the circumstances, Changwon's and Dongbang's trading company customers are independent, unaffiliated resellers, and that a principal/agent relationship does not exist between Changwon, Dongbang, and their respective trading company customers. See Preliminary Results, 66 FR at 51837 and Affiliation Memo. We based our finding on the record evidence that indicates that Changwon and Dongbang negotiated the terms of sales, and set the prices with their trading company customers; did not market to, and except in very limited instances, did not directly interact with the trading companies' end user customers; and invoiced the trading company customers, who take title to the merchandise and bear the risk of loss. See Id. Since none of these facts has changed since the Preliminary Results, we continue to find that a principal/agent relationship does not exist in this case between the respondents and their trading company customers. We do not find persuasive the petitioners' arguments concerning the existence of a principal/agent relationship between Changwon, Dongbang, and their trading company customers. We do not believe, in this case, that the fact that, in many transactions, trading company customers disclosed the names of ultimate end users to Changwon and Dongbang, or the fact that the ultimate end users may have known that they were purchasing merchandise produced by Changwon or Dongbang, provides a basis to conclude that Changwon and Dongbang exercised any control over their trading company customers. We also find no evidence supporting the petitioners' conclusions that Changwon and Dongbang effectively control prices and other terms of sale with the ultimate customers of the trading companies. As we explained in the Affiliation Memo, the voluminous amount of sales correspondence on the record between Changwon, Dongbang, and their trading company customers (see, e.g., Changwon Korean sales verification Exhibits 11 to 18, Changwon U.S. verification Exhibit 8, and Dongbang sales verification Exhibits 8 to 11) demonstrate that Changwon and Dongbang communicated with, and set the terms of sale with, their trading company customers, and not with the ultimate end users; and invoiced their trading company customers, and not the ultimate end users, thereby passing title and risk of loss to the trading company customers. See Affiliation Memo at 5 to 9. The sales correspondence on the record also shows that the trading company customers, in some instances, deal in the goods of other suppliers, and may maintain inventory and further process the merchandise. See Id. Moreover, the record evidence indicates that prices are not imposed by the respondents on their trading company customers, but are the subject of negotiation between the respondents and these trading companies. See Changwon U.S. sales verification Exhibit 8. Based on the totality of these circumstances, we continue to find that Changwon's and Dongbang's trading company customers are independent resellers; a principal/agent relationship does not exist between Changwon, Dongbang, and their respective trading company customers; that Changwon and Dongbang do not control their trading company customers; and that Changwon and Dongbang are not affiliated with these customers under section 771(G) of the Act. Comment 2: Deferred Foreign Exchange Losses The respondents argue that, in the preliminary results, the Department erred by adjusting the reported financial expense to include amounts related to exchange rate losses recognized by the companies as adjustments to shareholders equity. The respondents state that for Changwon's parent company, POSCO, the exchange losses at issue resulted from fluctuations in the Korean won-dollar exchange rate in prior periods. Specifically, the won-dollar exchange rate devalued very suddenly in December 1997. Further, the respondents state that Korean capital markets are not well developed, and as a result, companies such as POSCO generally carry a significant portion of their debt in foreign currencies. The respondents also state that POSCO wrote off the outstanding balance of the exchange rate losses stemming from the 1997 currency devaluation against the asset revaluation reserve, which was appropriate and consistent with longstanding Korean and international accounting practices in matching income and expenses. The respondents also state that the statute directs the Department to use the respondents' normal books and records if such records are maintained in accordance with the exporting country's generally accepted accounting principles (GAAP) if those records reasonably reflect the cost of producing the merchandise. The respondents note that since their books and records are maintained in accordance with Korean GAAP and the treatment of these exchange gains and losses are appropriate, the Department should eliminate this adjustment to the companies' reported financial expense in its final results. The respondents state that, in Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7039 (February 6, 1995) and in Final Results of Antidumping Duty Administrative Review: Dynamic Random Access Memory Semiconductors of one Megabit or Above from Korea, 66 FR 52097 (October 12, 2001) and accompanying Decision Memo at Comment 1, the Department included the foreign exchange losses in financial expense. The respondents note, that in these cases, the Department stated that the foreign exchange losses represent an increase in the actual amount of cash needed by the respondents to retire their foreign currency denominated loan balances. The respondents contend that the same reasoning should not be applied in this case, because POSCO did not write-off against retained earnings any amounts that represented an increase in the actual amount of cash needed to service its foreign currency denominated loans during the POR. Rather, the write off represented the remaining balance of exchange losses associated with foreign currency loans outstanding in December 1997. The respondents state that the write-off is strictly an accounting adjustment relating to prior periods and is completely unrelated to manufacturing or other operational activities during the POR. The respondents claim that the Department should disregard these deferred exchange losses in its analysis. The respondents further point out that if the Department determines it necessary to include foreign exchange losses in financial expense, the Department should follow its normal practice. Specifically the respondents state that '{i}t is the Department's normal practice to amortize the net exchange gains and losses incurred on debt over the maturities of the debt and include only the current portion of the net gain or loss in the cost of production and constructed value'. See Final Determination of Sales at Not Less than Fair Value: Expandable Polystyrene Resins from the Republic of Korea, 65 FR 69284 (November 16, 2000) and accompanying Decision Memo at Comment 10. The respondents note that the Department has consistently amortized exchange losses, even where the companies have reported exchange gains or losses in the income statement in one period and the same exchange gains or losses in the balance sheet in a subsequent period. The respondents point out that in Final Results of Antidumping Duty Administrative Review: Dynamic Random Access Memory Semiconductors of One Megabit or Above from Korea, 65 FR 68976 (November 15, 2000), and accompanying Decision Memo at Comment 3, when the respondents amortized their exchange losses one year, but recategorized the exchange losses to the balance sheet in the next year, the Department continued to include an amortized portion of the exchange losses in the respondents' COP. The respondents note that the Department has the information necessary to include only the amortized portion of foreign exchange losses in the respondents' financial expense ratios. Specifically, for POSCO, the average remaining life of the liabilities was listed in Changwon's June 15, 2001 supplemental questionnaire response, and for Dongbang Transport, the remaining period of the "account payable" was listed in Dongbang's June 15, 2001 supplemental questionnaire response. The petitioners contend that the Department should continue to include in the financial expense calculation the deferred foreign exchange gains and losses. According to petitioners, Korean GAAP's treatment of foreign exchange gains and losses mandate the inclusion of these gains and losses in the financial expense. The petitioners disagree with the respondents' argument that the foreign exchange losses do not represent an actual out- of-pocket expense. The petitioners further point out that whether or not these losses directly affected the respondents' cash flow is not of concern, because the respondents rely on accrual basis rather than a cash basis of the accounting. Moreover, they contend that these unamortized losses represent an expense to the company under Korean GAAP and should be considered as an expense in this proceeding. The petitioners argue that it does not matter that respondents decided to recognize the foreign exchange losses directly to equity, instead of recognizing losses in the profit and loss statement. The petitioners point out that the Department has found in two recent proceedings that the recording of expenses in equity does not change the nature of the expense, and included expenses directly recorded to equity as normal expenses. In Preliminary Results of Antidumping Administrative Review: Stainless Steel Plate in Coils from the Republic of Korea, 66 FR 30699, 30701 (June 7, 2001) and in Preliminary Results and Partial Rescission of Antidumping Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 66 FR 41530, 41534 (August 8, 2001), the Department found that the 1999 foreign exchange losses directly recorded to equity should be properly included in the financial expenses, in full. The petitioners contend that the Department should reject the respondents' suggestion that if the Department decides to include the foreign exchange losses in financial expense, the Department should amortize the losses over the average life of liabilities. The petitioners argue that the Department should reject this suggestion because the respondents failed to identify the portion of the exchange losses related to debt that was extinguished during the POR. Therefore, the petitioners conclude, that the Department should include the full amount of recognized foreign exchange losses in the financial expense calculation. The Department's Position: We disagree with the petitioners that the full amount of deferred foreign exchange losses should be included in the financial expense. Prior to 1999, POSCO and Dongbang's parent company, Dongbang Transport, capitalized their foreign exchange losses to be amortized over time. In 1999, the unamortized losses still remained on the company's books, and POSCO and Dongbang Transport, according to changes in Korean GAAP, moved these losses directly to retained earnings, without affecting the profit and loss statement. See, e.g., POSCO's consolidated financial statements in Exhibit 10 of Changwon's December 11, 2000 response. We also note that, while this may be appropriate for Korean accounting purposes, for antidumping purposes this new practice fails to reasonably reflect the cost of producing the subject merchandise, as the respondents' new accounting treatment of these losses does not change the fact that these losses represent an additional cost of financing to the company. Therefore, for the final results, we have included an amortized portion of the losses in the respondents' COP. We note that our position is consistent with our practice for POSCO in Final Results of Antidumping Administrative Review: Stainless Steel Plate in Coils from the Republic of Korea, 66 FR 64107 (December 11, 2001) and accompanying Decision Memo at Comment 15. We disagree with the petitioners that the full amount of deferred foreign exchange losses should be included in the financial expense because the respondents failed to identify the portion of the foreign exchange losses related to debt that was extinguished during the POR. In fact, the respondents provided the information regarding foreign exchange losses incurred in 1999 (see financial expense calculation table in Exhibit D-14 of Changwon's December 20, 2001 submission), and the Department included this portion of foreign exchange translation losses in its COP calculation. Comment 3: Deferred Foreign Exchange Losses of Dongbang Transport The respondents further state that the Department erroneously adjusted the financial expense ratio to include exchange losses reflected in Dongbang Transport's consolidated financial statement which were expensed to shareholders' equity. The respondents assert that the exchange losses at issue related to Dongbang Transport's accounts payable associated with the purchase of an asset and are unrelated to debt. The respondents point out that exchange gains and losses on accounts payable are not included in financial expense, but rather are included in a company's G&A expense ratio at an unconsolidated level, rather than the consolidated level. See Final Results of Antidumping Administrative Review: Certain Steel Concrete Reinforcing Bars from Turkey, 66 FR 56274 (November 7, 2001) and accompanying Decision Memo at Comment 27; and Final Results of Antidumping Administrative Review: Certain Preserved Mushrooms from Indonesia, 66 FR 36754 (July 13, 2001) (Review of Mushrooms from Indonesia) and accompanying Decision Memo at Comment 4. The respondents further assert that these gains and losses were not reflected in Dongbang's G&A expense, because Dongbang did not incur this exchange loss. Rather, the expense related to Dongbang Transport's accounts payable on acquisition of an asset, and thus, the loss was attributable to Dongbang Transport's own operations. According to the respondents, because the exchange losses incurred by Dongbang Transport associated with accounts payable are related only to Dongbang Transport's general operations and not to Dongbang's general operation, the Department should eliminate the adjustment to reported financial expense in accordance with its stated practice. The petitioners disagree with the respondents' statement that the Department should reverse its preliminary decision and exclude foreign exchange losses that were incurred by Dongbang Transport on a purchase of an asset, from the financial expense calculation. The petitioners further disagree with the respondents that foreign exchange losses are associated with accounts payable. The petitioners assert that, in reality, the foreign exchange losses arose from Dongbang Transport's debt. The petitioners further note that according to the respondents, the remaining life of the loan associated with the purchase of an asset is more than one year. The petitioners contend that this long-term loan is not by definition an "accounts payable;" rather, accounts payable are defined as "current liabilities" that have a life of one year or less. As support for these contentions the petitioners cite Intermediate Accounting, Jan R. Williams, Keith G Stanga, William W. Holder, 1984, at 594. They note that, by definition a long-term loan taken out to purchase an asset is not an accounts payable. The petitioners conclude that since the Department's normal practice is to include all monetary charges related to loans in the financial expense calculation, for the final results of this review the Department should find that the foreign exchange losses that were incurred by Dongbang Transport on the purchase of an asset should be included in the financial expense calculation The Department's Position: We agree with the petitioners' argument that the Department should include the foreign exchange losses that were incurred by Dongbang Transport on the purchase of an asset in the financial expense calculation. By the definition "accounts payable is a liability account used for short-term liabilities or charge accounts usually due within 30 days." See College Accounting, Douglas J. McQuary, Patricia A. Bille, 1993, at 14. Since Dongbang Transport's financial arrangements at issue for the purchase of the asset have a length of more than one year, the Department considers these financial arrangements a long-term debt. As a result, the foreign exchange losses on this debt represent a cost of financing to the company. Therefore, the Department continues to include the foreign exchange losses of Dongbang Transport in the financial expense calculation, as explained above in Comment 2. Comment 4: Calculation of G&A Expenses The respondents generally argue that the Department incorrectly adjusted Changwon's and POSCO's reported G&A expenses to include certain non- operating items. They contend that, for certain of these items, the Department incorrectly determined that these items do not relate to the companies' manufacturing activities. Moreover, the respondents, citing to several cases, including Certain Cut-to-Length Carbon-Quality Steel Plate from the Republic of Korea, 64 FR 73196, 73209 (December 29, 1999), and Polyethylene Terephthalate Film, Sheet and Strip from the Republic of Korea, 66 FR 57417 (November 15, 2001) (PET Film from Korea), and accompanying Decision Memo at Comment 1, contend that the Department normally examines whether the items in question relate to the companies' general or overall operations, not whether they specifically relate to manufacturing operations. The respondents emphasize that every one of the items at issue, as discussed specifically below, relates to the companies' general operations, and were properly reported as part of the G&A expense calculations. 4A. Gains and Losses on Certain Monetary Instruments The respondents argue that the Department improperly eliminated from the G&A calculations gains and losses on certain monetary instruments from Changwon's G&A calculation. They state that they explained at verification that these monetary instruments are short-term monetary assets. The respondents contend that these instruments are used to manage the companies' debt, and contend that these instruments are a type of activity that the Department specifically includes in its analysis through the financial expense. The respondents, citing to PET Film from Korea, Decision Memo at Comment 1, also state that the Department has included offsets relating to the valuation of monetary instruments in its calculation of G&A in prior cases. The petitioners claim that nothing exists in the verification report or exhibits to support the respondents' statement that these monetary instruments are short-term in nature. The petitioners claim that, without evidence to support respondents' statement at issue, the Department should follow its preliminary decision and exclude these gains and losses from G&A. The Department's Position: We agree, in part, with the respondents. After further review of Changwon sales verification exhibit 4 and Changwon cost verification exhibit 20, we have determined that the financial instruments at issue have a term of less than one year, and therefore are short-term in nature. As the respondents note, the Department includes interest expense, and short-term interest income related to short-term financial assets, in its calculation of financial expense. See, e.g., Final Results of Antidumping Duty Administrative Review and Determination Not to Revoke in Part: Silicon Metal From Brazil, 66 FR 11256 (February 23, 2001) (Silicon Metal from Brazil), and accompanying Decision Memo at Comment 8. Although, as the respondents point out, the income and expenses related to Changwon's short-term financial instruments at issue are more appropriately included in the financial expense calculation, the Department calculates financial expense for COP and CV purposes based on the borrowing costs incurred at the consolidated group level. See, e.g., Silicon Metal from Brazil, Decision Memo at Comment 6. In the present case, we are calculating financial expense, in part, based on the 1999 consolidated financial statement of Changwon's parent company, POSCO. Since the short-term financial instruments at issue relate to Changwon's financial statement, and not POSCO's consolidated financial statement, we have not included the reported income and expense related to these instruments, as recorded on Changwon's financial statement, in our calculations. However, since Changwon's financial statement, including the items at issue, is consolidated in POSCO's consolidated financial statement, we reviewed POSCO's 1999 consolidated financial statement for appropriate consolidated income and expense items related to these short-term financial instruments to use in the calculation of the respondents' financial expense. We found that note 4 of POSCO's 1999 consolidated financial statement, (2) which is the parallel section to the section of Changwon's 1999 financial statement where Changwon records the financial instruments at issue, (3) records a gain on valuation of the financial instrument at issue. We therefore included this short-term interest income from POSCO's 1999 consolidated financial statement, which relates to a short-term financial instrument, in the financial expense calculation for the final results. (4) 4B. Items Relating to the Disposition of Fixed Assets The respondents argue that the Department incorrectly excluded from Changwon's and POSCO's G&A calculations (5) items relating to the disposition of fixed assets, specifically, for Changwon, an extraordinary gain on received assets, and for POSCO, a gain on disposition of fixed assets. The respondents contend that the Department's analysis that these gains do not relate to the companies' manufacturing operations is inconsistent with the fact that the Department has included depreciation on these assets in the companies' respective costs of production. The respondents further contend that, for POSCO, the Department inconsistently included the loss on disposition of fixed assets, but excluded the gain on the same type of assets. The respondents note that the adjustment to POSCO's G&A expense conflicts with the Department's treatment of income from the sale of fixed assets in past cases, including Steel Concrete Reinforcing Bars from the Republic of Korea, 66 FR 33526 (June 22, 2001) (Rebar from Korea), and accompanying Decision Memo at Comment 7; Review of Mushrooms from Indonesia, Decision Memo at Comment 4; and Stainless Steel Bar from Japan, 65 FR 13717 (March 14, 2000), and accompanying Decision Memo at Comment 9 (quoting U.S. Steel v. United States, 998 F. Supp. 1151, 1151 (CIT 1998)). The respondents also note that the Department, in Structural Steel Beams from Korea, 65 FR 41437 (July 5, 2000), and accompanying Decision Memo at Comment 27, recognized that it is appropriate to include offsets even where the reported costs include amounts related to items provided for free. The petitioners support the Department's exclusion of Changwon's extraordinary gain on received assets. The petitioners generally state, citing Dynamic Random Access Memory Semiconductors of One Megabit and Above from Taiwan, 64 FR 56308, 56323 (October 19, 1999), that the Department evaluates whether to include an item in the G&A calculation by reviewing the nature of a G&A activity and the relationship between this activity and the general operations of the company. The petitioners also note that where the activity is relatively small in relation to the company's primary activities, the Department has included the occasional miscellaneous gain or loss in G&A expense; but where the activity becomes significant enough to constitute a separate business activity, the Department treats it as separate business activity, and will not allow the gain to be offset in the G&A expense. See Certain Cut-to-Length Carbon- Quality Steel Plate Products from Korea, 64 R 73196, 72210 (December 19, 1999). In relation to the issue at hand, the petitioners contend that the acquisition of free assets is not the routine acquisition of fixed assets, and the Department should continue to disallow this gain. The petitioners also state that Changwon's accounting treatment of the donated assets is "wrong." Citing to accounting authorities, including Intermediate Accounting, Jan R. Williams, Keith G. Stanga, William W. Holder, 1984, at 594, and APB Opinion No. 29, the petitioners state that, under U.S. GAAP, donated assets do not generate a gain at the time of donation. The petitioners therefore urge the Department to reject the respondents' argument because Changwon's treatment of the donated asset is not in accordance with U.S. GAAP and distorts the transaction. The petitioners did not comment on the Department's treatment of POSCO's gain on disposition of fixed assets. The Department's Position: We agree with the respondents, in part, and with the petitioners, in part. First, we agree with the respondents that we should include POSCO's gain and loss on the disposition of fixed assets in POSCO's G&A calculation. It is the Department's practice to include gains or losses on the routine sale of fixed assets in the G&A calculation. See Rebar from Korea, Decision Memo at Comment 7. Since we have no evidence that the sale of fixed assets at issue were not routine, we have included both POSCO's gains and losses on the disposition of fixed assets in POSCO's G&A calculation. Second, we agree with the petitioners that the Department should continue to exclude Changwon's extraordinary gain on received assets from Changwon's G&A calculation. While Changwon may have recorded this transaction as an extraordinary gain to income in its normal books and records, we consider it more appropriately treated as an increase in equity because the transaction is an increase in the company's capital rather than income. See, e.g., Structural Steel Beams from Korea, Decision Memo at Comment 27. Therefore, we disallowed the extraordinary gain on received assets from the calculation of Changwon's G&A expenses for purposes of the final results. 4C. Gain and Losses on Futures and Gain on Redemption of Corporate Bond The respondents argue that the Department incorrectly eliminated from POSCO's G&A calculation gains and losses on futures and the gain on redemption of a corporate bond. They contend that these items, similar to the gains and losses on the monetary instruments at issue under item A above, relate to the management of debt. They specifically state that the gains and losses on futures are related to POSCO's interest expense ratio swaps, which POSCO used to hedge its risks and manage its interest expenses. The respondents also state that the gain on redemption of the corporate bond was the discount revenue derived from POSCO's payment of a corporate bond earlier than the expiration date. The respondents note that the Department has included the total interest expenses in its calculations and recognized that activities relating to managing debt relate to the companies total operations. They further note that the interest income generated from the activities at issue is also logically related to the company's manufacturing operations, and should be included in the G&A calculation. The petitioners state that none of these items should be included in the G&A calculation. Citing to Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review: Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 62 FR 55574, 55583 (October 27, 1997), the petitioners contend that the Department will only allow an offset of interest income if respondents can demonstrate that the underlying investment is short-term. The petitioners state that, based on the respondents' statements in their case brief, including a statement that Korean companies 'typically' hold a high portion of their debt in the form of long-term debt, that the Department should reasonably assume that the derivatives (i.e., futures and swaps) used to manage the interest expenses are tied to long-term instruments. With regard to the gain on redemption of a corporate bond, the petitioners state that corporate bonds are investments, and are not considered by the Department in its dumping analysis. The Department's Position: All of the items at issue here relate to the management of debt, and therefore, like the financial instruments in item A above, are more appropriately included in the respondents' financial expense calculation. POSCO's reported G&A expenses, including the items at issue, were based on POSCO's 1999 unconsolidated financial statement. Since we are calculating the respondents' financial expense, in part, on POSCO's 1999 consolidated financial statement, we are not including these items, as recorded on POSCO's unconsolidated financial statement, in our calculations. However, since POSCO's unconsolidated financial statement (including the items at issue) is consolidated in POSCO's consolidated financial statement, we reviewed POSCO's 1999 consolidated financial statement for similar appropriate items to use in the calculation of the respondents' financial expense. We also reviewed whether this statement classifies these items as short- or long-term items. We found that this financial statement, at note 15, lists maturities of more than one year for POSCO's swap agreements, and at note 10, lists all of POSCO's bonds as long-term debts. Since the record indicates that all of POSCO's swap agreements and bonds are long-term instruments, pursuant to the Department's practice (see issue A above), we have not included any of the income from these instruments in our calculations. 4D. Casualty Insurance Refund The respondents state that the Department also incorrectly excluded a casualty insurance refund from Changwon's G&A expense calculation. The respondents, citing to Certain Preserved Mushrooms from Indonesia, 65 FR 72268, 72281 (December 31, 1998) (Mushrooms from Indonesia), contend that the Department has included offsets where the reported costs include amounts related to the income or offset item, while, in the present case, Changwon included the amount of its casualty insurance premium in the calculation of Changwon's G&A expenses. The respondents conclude that the Department's position that the refund of the proprietary expense does not relate to the company's operations is "internally inconsistent," and urge the Department to consistently include or exclude these items in Changwon's G&A calculation. The petitioners state that the Department should continue to exclude this item because respondents have not demonstrated that it is related to Changwon's manufacturing operations. The petitioners contend that this item cannot be linked directly to the operations of the company, and is simply non-operating income, and as such is not part of the cost of production. The Department's Position: We agree with the respondents. Changwon reported both its insurance expenses, which presumably include casualty insurance premiums, and the refund that it received on these expenses in its G&A calculations. The actual amount of insurance expense that Changwon incurred is the amount of the insurance premiums net of the casualty insurance refund. Therefore, we have used the actual amount of insurance expense that Changwon incurred, including the casualty insurance refund, in Changwon's G&A calculations for the final results. 4E. Down Payment for Other Products The respondents argue that the Department incorrectly excluded a down payment for other products from Changwon's G&A calculation. The respondents state that the Department verified that this item was a payment Changwon received when a customer defaulted on a contract to purchase non-prime pipe, and the respondents characterize this payment as "essentially an insurance payment." The respondents contend that Changwon incurred and reported the expenses related to this payment in its G&A expenses. Furthermore, the respondents, citing to several cases, including Mushrooms from Indonesia, 65 FR 72268, 72281 and Certain Hot-Rolled Carbon Steel Flat Products from Thailand, 66 FR 49622 (September 28, 2001), and accompanying Decision Memo at Comment 5, note that the Department has permitted offsets for insurance claims in past cases after recognizing that the costs related to these claims have been reflected in the reported costs. The respondents state that, the Department, consistent with this practice, should include the "insurance settlement" in Changwon's calculated G&A expense ratio. The petitioners contend that this item represents non-operating income to Changwon that is related to non-subject merchandise. The petitioners urge the Department to continue to exclude this item from the calculation of Changwon's G&A expense. The Department's Position: We agree with the petitioners. There is no evidence on the record that this item is an "insurance settlement." Rather, the record indicates that it is part of a payment for non-subject merchandise that Changwon recorded in its miscellaneous income account. See Changwon's cost verification report at page 19. Since we do not include payments for non-subject (or subject) merchandise in the G&A calculations, we have continued to exclude this item from the calculation of Changwon's G&A expenses. Comment 5: Conversion of Values in the CEP Profit Calculation The petitioners note that in the preliminary margin program, the Department made an inadvertent ministerial error by converting certain Korean won values in the CEP profit calculation to U.S. dollars. The petitioners point out that the Department's CEP profit calculation is based on the home market currency. Thus, for this review, all components of the CEP profit should be stated in Korean won. The petitioners suggest that the Department should correct this ministerial error by removing the exchange rate conversion from the CEP profit calculation in the margin program. The respondents did not comment on this issue. The Department's Position: We agree with the petitioners that we inadvertently overstated the cost of goods sold and ultimately understated the amount of CEP profit by incorrectly converting certain variables to U.S. dollars. We have adjusted the margin program for the final results accordingly. Comment 6: Calculation of Foreign Market Unit Price in U.S. Dollars The petitioners point out that in its preliminary calculation, the Department inadvertently miscalculated the foreign market unit price in U.S. dollars. The petitioners suggest that the Department should add the difmer adjustment ("DIFMER"), level of trade adjustment ("LOTADJM"), and U.S. packing expenses ("USPACK") to the home market price ("HMP") to calculate foreign market unit price in dollars ("FUPDOL"). The respondents disagree with the petitioners' adjustment. The respondents suggest that the Department should modify the SAS programming language as follows: FUPDOL = HMP - (DIFMER + LOTADJMT - USPACK) * USXRATE; The Department's Position: We partially agree with the petitioners' clerical error allegation. We reviewed our SAS programming language. The SAS programming language for the final results has been corrected as follows: FUPDOL = HMP - (DIFMER - LOTADJMT - USPACK) * USXRATE; We continue to subtract DIFMER in the margin program, because in the same program DIFMER is calculated as the variable cost of the foreign like product less the variable cost to produce the product sold in the United States. Comment 7: Model Match Calculations in the Margin Program The respondents claim that the Department should correct an error in the ranking of most similar grades sold in the home market for comparison to grades sold in the U.S. market for purposes of its model match calculations in the margin program. The respondents point out that computer code erroneously omits instructions to identify the identical and most similar grades for certain grades. In order to correct this error, the Department should insert the omitted SAS lines to identify the identical grades for these certain grades. The petitioners did not comment on this issue. The Department's Position: We agree with the respondents' clerical error allegation. The relevant programming error has been corrected for the final results. Comment 8: VCOMs and TCOMs Adjustments The respondents claim that the Department did not adjust the VCOMs and TCOMs reported on the sales files that were based on semiannual costs. According to the respondents, the Department should replace those values with the VCOMs and TCOMs reported in the annual cost file. The petitioners did not comment on this issue. The Department's Position: We agree with the respondents' clerical error allegation and have made the appropriate corrections to the margin program. Comment 9: Correction of Errors Noted in Changwon's Cost of Production Verification Report The petitioners state that the Department should correct unspecified errors noted in Changwon's cost verification report for the final results. The respondents did not comment on this issue. The Department's Position: In the preliminary results, we corrected the errors noted in Changwon's cost verification report. For example, we incorporated the correction to POSCO's net account payables from Changwon cost verification Exhibit 1 in our calculation of POSCO's G&A expenses. See Attachment 5 to the Preliminary Calculation Memorandum dated October 1, 2001. Since we are unaware of any other errors, and the petitioners did not specify any errors, we have made no further adjustments to our calculations for the final results. Comment 10: New Information in the Respondents' Case Brief The petitioners argue that the respondents introduced new information into the record on page 17 of the respondents' case brief. The petitioners contend that the Department should determine that the submission of this new information is late pursuant to Section 351.301(b)(2) of the Department's regulations, and the Department should return this new information to the respondents pursuant to section 351.302(d) of the Department's regulations. The petitioners also note that the new claim is unsupported by record evidence. The Department's Position: On page 17 of their case brief, the respondents provide an explanation for a insignificant discrepancy noted by the Department in Changwon's cost verification report. Neither this explanation, nor the discrepancy itself, relate in any way to any of the issues raised by the parties in their case and rebuttal briefs or the margin calculations. Since the respondents' explanation of this insignificant discrepancy is irrelevant to the final results, and, in any case, is unsupported by record evidence, we have not considered the question of the timeliness of this information. Recommendation Based upon our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review and the final weighted-average dumping margin for the reviewed firm in the Federal Register. Agree____ Disagree____ _________________________________ Faryar Shirzad Assistant Secretary for Import Administration _________________________________ (Date) ______________________________________________________________________ footnotes: 1. All of Changwon's sales to the United States of subject merchandise during the POR were sold by Changwon to POSTEEL, and then by POSTEEL to POSAM, and then finally to a fourth party, whom Changwon reported as the U.S. customer. For the purposes of this comment, we will refer to Changwon, POSTEEL, and POSAM collectively as "Changwon." 2. See Exhibit 10B of Changwon's December 11, 2000 Section A submission. 3. See Note 6 to the English version of Changwon's 1999 financial statement in Exhibit 6 of Changwon's December 11, 2000 Section A submission, and Note 4 in the English translation of the Korean version of Changwon's 1999 financial statement in Exhibit 6 of Changwon's March 16, 2001 supplemental response. 4. We also note that POSCO included a similar gain on valuation of securities from its 1999 unconsolidated financial statement in its reported G&A expense, and the Department excluded this gain from its calculations in the preliminary results. Since, as noted above, this gain relates to an item that is more appropriately included in the calculation of financial expense (which is based on POSCO's 1999 consolidated financial statement), we have continued to exclude this unconsolidated item from the G&A expense calculations for the final results. 5. We included POSCO's G&A expenses in our calculations as part of POSCO's cost of production of certain proprietary inputs transferred by POSCO to Changwon.