66 FR 18747, April 11, 2001 A-580-809 ARP: 11/1/98-10/31/99 PUBLIC DOCUMENT IA, DAS I, Office 1;GWC, ext. 2239 MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary for Import Administration DATE: April 5, 2001 SUBJECT: Issues and Decision Memo for the Administrative Review of Circular Welded Non-Alloy Steel Pipe from the Republic of Korea-November 1, 1998 through October 31, 1999; Final Results ------------------------------------------------------------------------------- I. BACKGROUND On December 6, 2000, the Department of Commerce ("Department") published the Circular Welded Non-Alloy Steel Pipe from the Republic of Korea; Preliminary Results and Rescission in Part of Antidumping Administrative Review, 65 FR 76218 (December 6, 2000) ("Preliminary Results"). We invited parties to comment on the Preliminary Results. The domestic interested parties, as well as the respondents Hyundai Pipe Co., Ltd. ("HDP"), (1) SeAH Steel Corporation ("SeAH") and Shinho Steel Co., Ltd. ("Shinho") (collectively referred to as the "respondents"), submitted case briefs on January 19, 2001 and rebuttal briefs on January 26, 2001. At the request of certain parties, we held a public hearing on March 1, 2001. The period of review ("POR") is November 1, 1998, through October 31, 1999. II. DISCUSSION OF ISSUES A. General Issues Comment 1: Inclusion of Specification in Matching Criteria Respondents' Arguments: Shinho and SeAH argue that "specification" should be included as one of the matching criteria, for the following reasons. First, Shinho and SeAH contend that, in prior segments of this proceeding, they have always reflected specification in their CONNUMs. The domestic interested parties have never disputed the inclusion of specification in the model matching hierarchy and the Department has never redefined the CONNUMs to explicitly exclude specification. Accordingly, Shinho and SeAH conclude, the Department's established practice is to include specification as a matching criterion in this proceeding, recognizing that different specifications can have different physical characteristics or otherwise be incompatible. (2) The only difference between this review and prior reviews, Shinho and SeAH continue, is that all specifications, not just identical specifications, have been accounted for individually. Specifically, in prior reviews the Department matched identical specifications, where available, based on CONNUMs, but disregarded specification when matching to similar models or when the model was not sold in the home market. Shinho and SeAH further note that the Department has addressed a similar issue for SeAH in Korean Stainless Pipe, in which the Department found specification to be an important consideration. (3) Other cases in which the Department recognized product differences based on both specification and grade include Notice of Final Determination of Sales at Less Than Fair Value; Certain Cut-to- Length Carbon-Quality Steel Plate Products from Korea, 64 FR 73196, 73200 (December 29, 1999); and Final Results of Antidumping Duty Administrative Review; Certain Cut-to-Length Carbon Steel Plate from Finland, 63 FR 2952, 2955 (January 20, 1998) (Plate from Finland). In Plate from Finland, Shinho and SeAH argue, the Department refused to ignore differences in specification even when grade was identical. Specifications are utilized in the market and are reflected in the price and use of a given product. Likewise, HDP argues that, consistent with the questionnaire and the Department's past practice, the Department should match by specification. HDP notes that the Matching Criteria Memo establishes "grade/specification" as the most important matching criterion, with each grade consisting of a broad grouping of product uses (e.g., ordinary pipe, conduit). The Department considers specification in conjunction with grade so as to ensure that each U.S. sale is compared to the most similar home market sale. Moreover, HDP continues, in the previous review the Department expressly took specification into account in comparing U.S. to home market sales by using a two-step process that compared differences in grade and specification in tandem. Specifically, if there was a difference in grade between two products and the products had different specifications, the Department increased the magnitude of the difference in grade. In other words, the Department treated differences in specification as if they were differences in grade. Domestic Interested Parties' Arguments: The domestic interested parties counter that a "specification" matching criterion, as propounded by the respondents, has not been used in prior reviews and should not be adopted in this review because it distorts the model comparisons and provides no meaningful addition to the existing list of characteristics. Grade, nominal pipe size, wall thickness, surface finish and end-finish together fully describe the merchandise under review without omitting any important physical characteristic. Additionally, the domestic interested parties argue that the Department's model match hierarchy describes physical differences, rather than industry specifications, because pipe is sold in the U.S. market to U.S. specifications and in the Korean market to Korean specifications. The fact that a sale is made in Korea to U.S. specifications does not mean that comparable sales to Korean specifications should be excluded from the comparison. Rather, the fact that one specification can be sold in the other market confirms the essential interchangeability of the products based on physical characteristics. The domestic interested parties further argue that the respondents' contention that the Department has previously matched by specification in this proceeding is misleading. The domestic interested parties argue that the model matching characteristic "grade/specification" discussed in the Matching Criteria Memo refers to a different meaning of the term from that suggested by the respondents. Moreover, the use of specification (as advocated by the respondents) in matching has never been specifically argued by parties in prior reviews or prior to the Preliminary Results. The domestic interested parties also recognize that the Department apparently matched by specification in Korean Stainless Pipe, but note that the domestic interested parties were not represented by counsel in that review Department's Position: For the final results, we have not included specification as a matching criterion in identifying similar matches. (4) Our reasons are as follows. First, matching to similar sales on the basis of criteria other than specification is consistent with our methodology in prior reviews of this order. Though our precise approach in making similar matches may have evolved over the course of this proceeding (reflecting changes in the Department's standard computer program), our fundamental methodology has been to not explicitly match according to specification when matching to similar sales. (5) This is reflected in our questionnaire, which does not include a field for specification among the requested matching criteria data. Second, there is little evidence on the record of this review addressing the extent, if any, to which specification captures important differences in physical characteristics not otherwise reflected in the other matching criteria. The respondents have not demonstrated, for example, that there are significant differences-affecting price-in the physical characteristics of A53B versus A587. Therefore, the respondents have not articulated a compelling reason, apart from their interpretation of our methodology in prior reviews, to identify similar matches according to specification. Regarding the issue of the effect of different national standards on the matching of similar sales, we recognize that in Korean Stainless Pipe the Department found differences between different standards to be an important consideration in matching sales. Specifically, we stated (at Comment 4), "Specification defines product qualitites such as acceptable tolerance levels in product characteristics, and how product quality is tested.. . ." (6) However, there is no evidence on the record of this review that considerations such as tolerance levels and product-quality testing are as significant in the case of non-alloy pipe as in stainless steel pipe. Therefore, for the final results we have revised Shinho and SeAH's margin calculations by removing specification as one of the matching criteria for similar matches. HDP's preliminary margin calculation did not include specification as a criterion in determining similar matches and, therefore, we have made no changes to HDP's program in this regard. We further note, however, that the parties' comments on this topic have raised important issues about what the appropriate matching criteria--particularly regarding grade, specification and standard--ought to be in this proceeding. Therefore, we may reexamine this issue in more detail in any future reviews of this order. Comment 2: Exclusion of Certain Sales Entered During POR Respondents' Arguments: The respondents argue that, in the Preliminary Results, the Department incorrectly excluded certain sales that entered during the POR but that had dates of sale prior to the POR. This was an error, the respondents explain, because the statute instructs the Department to determine a margin for each POR entry. This exclusion was also contrary to the Department's preferred practice, as applied in Korean Pipe IV, (7) of reviewing all entries during the POR regardless of date of sale, which has been upheld by the CIT. (8) The respondents note that there are certain situations in which the Department reviews sales rather than entries, namely: 1) when the entry date for an export price sale is unknown and 2) when a constructed export price (CEP) sale occurs after importation. However, the respondents contend, neither of those exceptional situations are evidenced here because entry dates have been reported for all of the POR entries and all CEP sales were made prior to entry. Moreover, prior reviews in this proceeding have been conducted on the basis of entries and, therefore, to change now to a sales-based approach would distort the final results. Thus, the respondents conclude, in the instant case, there is no justification for the Department's deviating from its preferred practice. Domestic Interested Parties' Arguments: The domestic interested parties argue that the Department should continue with its approach in the Preliminary Results of reviewing POR sales rather than entries as it is, contrary to the respondents' contentions, fully consistent with the statute and the Department's practice. The domestic interested parties argue, citing to NSK Ltd. v. United States, 825 F. Supp. 315, 320 ( CIT 1993) and Ad Hoc Committee v. United States, 914 F. Supp. 535, 544 (CIT 1995), that the Department's practice of reviewing sales rather than entries has been affirmed by the Court as reasonable. Moreover, the domestic interested parties contend, the cases cited by the respondents do not conflict with the Department's margin calculation methodology in the Preliminary Results. Specifically, Helmerich approved the use of an entry-based approach for EP sales, but a sales-based approach for CEP sales. In American Silicon, the Court specifically rejected the argument that the statute requires an entry-based approach in calculating dumping margins, even for EP sales. Moreover, the domestic interested parties note, the respondents did not report actual entry dates in their questionnaire responses. Department's Position: For the final results we have based the margin calculations on sales of merchandise entered during the POR rather than on merchandise sold during the POR. We have done so because of the unique circumstances in this case. In the preamble to the new regulations, the Department explained its general policy, for sales made after importation, of examining sales made during the POR and applying any margin of dumping calculated on those sales to the entries made during the POR. (9) The Department noted, however, that it retains the discretion to select a different methodology where the circumstances warrant: . . . {O}n a case-by-case basis, the Department may consider whether the ability to link sales with entries should cause the Department to base a review on sales of merchandise entered during the period of review, rather than on sales that occurred during the period of review. (10) The Department commented that the methodology of basing a review on entries would be inappropriate where the respondent could not tie sales to entries: Because of the inability to tie entries to sales, the Department normally must base its review on sales made during the period of review. Where a respondent can tie its entries to its sales, we potentially can trace each entry of subject merchandise made during a review period to the particular sale or sales of that same merchandise to unaffiliated customers, and we conduct the review on that basis. (11) Therefore, under the Department's policy, a review of sales of merchandise entered during the POR could only be appropriate first when the respondent could tie sales to entries. We note that in Mn Metal IV (12) the Department elected to base its review of CEP sales on sales made during the POR, rather than on entries during the POR, even though entry dates of sales were available. In doing so, the Department made specific reference to the preamble, noting the Department's movement away from a prior practice of attempting to match particular U.S. sales with entries. (13) The Department noted that "the current practice of reviewing sales to determine amounts to be assessed, and not entries, has been upheld by the U.S. Court of International Trade in FAG Kugelfischer Georg Schafer KgaA v. United States (1995 CIT LEXIS 209, *10 (1995), aff'd, 1996 U.S. App.LEXIS 11544 (Fed. Cir. 1996)." (14) However, Mn Metal IV merely established that while an ability to tie sales to entries is a necessary pre-condition for basing a review on entries, the ability to tie does not require such a methodology. Rather, where a respondent can tie its sales to entries the Department will base the review on entries only where other facts indicate that such a methodology is appropriate. In the present case there is no dispute that the respondents can tie their sales to specific entries during the POR. This is because the respondents' U.S. sales are made to order, the date of sale occurs prior to the date of entry, and the merchandise is shipped directly from the factory to the final customer. (15) Also, the respondents generally are the importer of record. This ability to tie sales to entries is not surprising given that, prior to this review, the respondents were also able to tie sales-then classified as EP sales-to specific entries. In this case, the Department has re-classified these sales not because of any change in the facts, but merely because of the intervening holding of the Court of Appeals in AK Steel Corp. v. United States, 226 F.3d 1361 (Fed. Cir. 2000). Having determined that the respondent can tie sales to entries, however, does not completely answer the question of whether the Department should exercise its discretion to base its review on entries rather than sales. In the Final Regulations, the Department stated that: . . . {T}he determination of whether to conduct a review sales of merchandise entered during the period of review hinges on such case-specific factors as whether certain sales of subject merchandise may be missed because, for example, the preceding review covered sales made during the review period or sales may not have occurred in time to be captured by the review. Additionally, the Department must consider whether a respondent has been able to link sales and entries previously for prior review periods and whether it appears likely that the respondent will continue to be able to link sales and entries in future reviews. The Department must consider these factors because of the distortions that could arise by switching from one method to another in different review periods. (16) In Korean Pipe IV, we reviewed entries rather than sales. Continuing to do so in this review would enhance consistency in how we apply our margin results to a particular period of entries. In fact, basing the final results on sales during the POR rather than entries during the POR, based on the data currently on the record, would likely result in the very kinds of distortion the Final Regulations stated we should avoid. This is because the respondents' U.S. and home market sales databases have been reported, as we requested, on the basis of entries, rather than sales. Given that there can be a significant period of time between sale date and entry date, shifting the basis of this review at this stage may exclude a significant number of sales with entry dates within the POR but sale dates outside the POR. Because sale date precedes entry date under the facts of this case, those sales would not be caught by future reviews. Therefore, given that respondent can tie entries to sales, that we have based prior reviews on entries rather than sales, and that we did not direct the respondents to revise their databases on a date of sale basis, we have based the margin calculations on sales of merchandise that entered during the POR. However, in subsequent reviews, we may reconsider this issue and may revise our methodology at that time if the facts of that review indicate that it would be appropriate to do so. Comment 3: Exclusion of Certain Sales in Contemporaneous Window Respondents' Arguments: HDP contends that, in accordance with the instructions in the Department's questionnaire, it reported all home market sales from three months before the date of sale of the earliest reported U.S. sale to two months after the latest reported U.S. sale. As noted in Comment 2, however, some of HDP's reported U.S. sales were sold prior to the POR (though entered during the POR). Therefore, some of the reported sales in this 6-month contemporaneous window had dates of sale earlier than 3 months prior to the POR. Contrary to the Department's regulations and past practice, HDP contends, the Department improperly excluded from its analysis all home market sales with dates of sale more than three months prior to the POR. HDP maintains that the regulations define the "contemporaneous month," from which it selects a matching home market sale, as either the month in which the U.S. sale was made, the most recent of the three months before the U.S. sale was made, or the most recent of the two months after the U.S. sale was made. (17) Further supporting its argument, HDP cites to Porcelain-on-Steel Cookware from Mexico, 65 FR 63562, 63564 (October 24, 2000) as evidence of the Department's practice in this regard. Thus, HDP concludes, the Department should revise its margin calculation by including these previously-excluded home market sales. Domestic Interested Parties' Arguments: The domestic interested parties provided no rebuttal to this specific argument. Department's Position: As we explained in Comment 2, for the final results in this particular case we have included all U.S. sales that entered during the POR. Therefore, consistent with our normal practice, our window for potential contemporaneous matches to home market sales should include all sales that were made within three months prior to the earliest reported U.S. sale, even though that date of sale preceded the POR. Accordingly, we have made the necessary revision to our final results for all respondents. Comment 4: G&A and Interest Ratios Domestic Interested Parties' Arguments: The domestic interested parties argue that the respondents erred in reporting their G&A and interest ratios because these ratios were calculated using a cost of goods sold denominator that includes packing expenses. However, packing costs were not included in the respondents' cost of manufacturing ("COM") to which these ratios were applied and, therefore, the G&A and interest expenses are understated. According to the domestic interested parties, the Department should correct this under-statement by adding packing cost to the COM before calculating the G&A and interest expenses for these companies. The domestic interested parties rely on the Issues and Decision Memorandum incorporated by Brass Sheet and Strip From Canada; Final Results of Antidumping Administrative Review, 65 FR 37520 (June 15, 2000) for the proposition that it is the Department's practice to "correct the calculations of the G&A and interest expenses by including packing costs in the total cost of manufacture." In addition, the domestic interested parties rely on the Issues and Decision Memorandum incorporated by Notice of Final Determination of Sales at Less Than Fair Value: Certain Polyester Staple Fiber from the Republic of Korea, 65 FR 16880 (March 30, 2000) for the distinction that "{w}hen company-wide packing costs are available our preference is to exclude this amount from the total cost of sale. However, when company-wide packing expenses are not available, we include packing costs in COM." Alternatively, the domestic interested parties suggest, the Department could deduct the packing cost from the reported cost of goods sold when calculating the G&A and interest ratios. Respondents' Argument: SeAH and Shinho do not object to the adjustment proposed by the domestic interested parties as, they argue, it has a negligible impact on the reported ratios. SeAH and Shinho do not dispute that packing costs are reflected in the reported cost of goods sold figure, used for purposes of calculating G&A, but not added to the cost of manufacturing. SeAH and Shinho suggest that the Department account for packing costs by applying the general and financing expense factors to the sum of the cost of manufacturing and packing. The total cost of production would then be the sum of the cost of manufacture plus the recalculated amounts for general expenses and financing. HDP argues that no adjustment is required to its reported G&A and interest expense ratios which were used in the Preliminary Results. Although the domestic interested parties argue that the G&A and interest expense ratios were calculated using the cost of goods sold including packing costs, HDP reported G&A and interest expense ratios that were calculated using the cost of goods sold excluding packing costs. Department's Position: Pertaining to SeAH and Shinho, we agree with the domestic interested parties. We note that we have addressed similar comments in a prior review of this order. In Korean Pipe I we stated that While we typically prefer that respondents calculate the SG&A and interest expense factors using data contained in the financial statements, they should have calculated the factor on the same cost basis as the COM to which they applied the factor. As noted by domestic interested parties, respondents' methodology for calculating the factors understates the reported SG&A and interest expenses. To correct this problem, we have added packing expenses to the reported COM for SeAH and Shinho to recalculate SG&A and interest expenses. This ensures that the factors, and the COM to which we apply them, are comparable and corrects the under-reporting of SG&A and interest expenses. (18) Generally, the Department's practice is that where company-wide packing costs are available, our preference is to exclude this amount from the total cost of sales. See, e.g., Notice of Final Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Pasta From Turkey, 63 FR 68429, 68434 (December 11, 1998). However, when company-wide packing expenses are not available, we include packing costs in COM. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from Japan, 64 FR 30574, 30591 (June 8, 1999). Company-wide packing costs are not available on the record of the instant review. Therefore, for the final results of this review, we have added packing expenses to the reported COM for SeAH and Shinho and recalculated G&A and interest expenses. Pertaining to HDP, we agree that no adjustment is required to its reported G&A and interest expense ratios. As evidence on the record indicates, HDP reported G&A and interest expense ratios that were calculated using the cost of goods sold excluding packing costs. (19) Therefore, there is neither reason to add packing expenses to COM nor to adjust the G&A ratio, and no change has been made to HDP's margin calculation in this regard. B. HDP Specific Issues Comment 5: HDP's Overrun Sales Domestic Interested Parties' Arguments: The domestic interested parties argue the Department incorrectly excluded overrun sales as a whole as outside the ordinary course of trade, rather than examining each individual overrun sale to determine whether that particular sale was outside the ordinary course of trade. Citing to Laclede Steel Co. v. United States ("Laclede"), 19 CIT 1076 (CIT 1995), the domestic interested parties state that in examining overrun sales, the Department must pay particular attention to the number of home market customers, product standards and uses, and price and profit differentials vis-á-vis sales made in the ordinary course of trade. The domestic interested parties also suggest that the evidence must show, as in Laclede, a low demand for overrun merchandise in the foreign market. According to the domestic interested parties, the court in Laclede affirmed the Department's analysis of overrun merchandise in the remand determination. In that case, the Department found overrun sales to be outside the ordinary course of trade because profits were "significantly" lower for overrun pipe than for commercial pipe; overrun pipe customers were "minuscule" in comparison with commercial pipe customers; the average quantity of overrun pipe was "much smaller" than of commercial pipe sales; and overrun sales comprised only "a small percentage" of home market sales. However, according to the domestic interested parties, the facts in this case do not resemble the facts in Laclede. In addition, the domestic interested parties claim that HDP reported several times the number of overrun sales as SeAH, evidencing a high demand for overrun pipe in Korea. Respondent's argument: HDP argues the Department determined overrun sales, as a whole, were outside the ordinary course of trade in a manner consistent with past reviews of this order. According to HDP, analyzing each individual sale in order to determine whether it should be outside the ordinary course of trade, as suggested by the domestic interested parties, is unreasonable and unsupported by the facts of this case. HDP suggests it is illogical to examine each individual sale to determine whether it is outside the ordinary course of trade since the reason for examining overrun sales is because the characteristics of overrun sales as a whole are different from the characteristics of regular sales. HDP states the domestic interested parties' argument regarding the high demand for overrun pipe in Korea is not evidenced by the facts. In fact, according to HDP, overrun sales constituted only a small portion of HDP's home market transactions, indicating a lack of demand for overrun merchandise. Moreover, HDP argues that comparing HDP's overrun sales to SeAH's overrun sales is irrelevant; instead the relevant comparison is HDP's sales of overrun merchandise relative to its own sales of commercial pipe. HDP also disagrees with the domestic interested parties' focus on the volume of HDP's overrun sales as opposed to the conditions of the sale. (20) In this case, according to HDP, overrun pipe is used only in crude structural applications, whereas commercial pipe is certified to meet precise specifications. Accordingly, HDP claims, regardless of the volume of overrun sales, overrun pipe is subject to different sale conditions from commercial pipe. In making the determination to not treat overrun sales as being in the ordinary course of trade, HDP agrees with the Department's evaluation of all of the circumstances involved in the sale of pipe, rather then isolating only one. (21) Finally, HDP refutes the domestic interested parties' reading of Laclede and their interpretation of the facts in this case. Specifically, HDP argues that in the Laclede Remand, the Court rejected the argument that overrun sales were within the ordinary course of trade based on the average sales quantities for overrun sales being similar and sometimes larger than the average sales quantities for commercial sales. (22) Moreover, according to HDP, the specific facts of this case show that profit margins on overrun sales were significantly lower than for commercial sales; the number of customers that purchased solely overrun pipe was minuscule; overrun pipe constituted a small percentage of all home market sales; and overrun pipe did not have the same quality assurances and end uses as commercial pipe. Department's position: In the Preliminary Results of this review, we found overrun pipe sales to be outside the ordinary course of trade as a result of our analysis of several factors. For the final results, in light of our quantitative analysis and the qualitative differences between overrun pipe and commercial pipe, we continue to conclude that overrun pipe sales are outside the ordinary course of trade. Since a full analysis of this issue requires the discussion of business proprietary information, we have included a complete description of our examination of this issue in a separate memorandum. (23) This separate memorandum is incorporated by reference into this document. Comment 6: Application of the Arm's-length Test to HDP's Home Market Sales Domestic Interested Parties' Arguments: The domestic interested parties argue that, although the Department stated that it applied the arm's-length test to HDP's home market sales, it did not. Thus, the domestic interested parties request that the Department do so for the final results. Respondent's argument: HDP did not comment on this issue. Department's position: We agree with the domestic interested parties and have applied the arm's-length test for the final results. (24) Comment 7: Calculation of HDP's Interest Expense Ratio Domestic Interested Parties' Arguments: The domestic interested parties argue that the Department incorrectly based the calculation of HDP's interest expense ratio on unconsolidated financial statements rather than consolidated financial statements. The domestic interested parties cite to Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea, 65 FR 68976 (Nov. 1, 2000) and accompanying Decision Memo at Comment 19, as stating the Department's practice of using consolidated financial statements rather than unconsolidated financial statements. The Department's reason for using consolidated financial statements, according to the domestic interested parties, is the fungible nature of invested capital resources within the consolidated group and because the controlling entity has the power to determine the capital structure of each member within the group. The domestic interested parties request that the Department follow past practice and calculate HDP's interest expense ratio using consolidated financial statements. Respondent's argument: HDP argues that the Department correctly calculated HDP's interest expense ratio using its unconsolidated financial statements. According to HDP, as in prior reviews, reliance on unconsolidated financial statement is warranted because all of the consolidated subsidiary operations are foreign entities. Therefore, HDP claims, its unconsolidated financial statements more accurately capture the costs of manufacturing the subject merchandise in Korea. In any event, HDP states, should the Department want to use its consolidated financial statements, these statements are already on the record. Finally, HDP notes, calculating the interest expense ratio from its consolidated financial statements results in a lower interest expense ratio. Department's position: We agree with the domestic interested parties that our practice is to use consolidated financial statements to calculate financial ratios. In this case, however, it appears that the consolidated financial statements on the record have not been audited, whereas the unconsolidated financial statements on the record have been audited. Moreover, sales and cost of goods sold reported in the unconsolidated financial statements constitute approximately 96% of sales and cost of goods sold reported in the consolidated financial statements. As for the financial expenses, interest income and interest expenses from the unconsolidated financial statements constitute 99.7% and 98.3%, respectively, of the interest income and interest expenses from the consolidated financial statements. Clearly, the operations of HDP were the most significant among the consolidated companies and any effect of capital being shifted among consolidated companies would have very little impact in this situation. For these reasons, we find the unconsolidated financial statements to provide an adequate measure of interest expense in this case. Comment 8: Product Matching Codes for End Finish Respondent's argument: HDP argues the Department created an incorrect hierarchy of codes for the matching criterion relating to end finish. Specifically, HDP states that in the Preliminary Results, we coded, inter alia, "plain end" pipe as "1," "threaded end" pipe as "2," and "threaded and coupled" pipe as "3." HDP notes this coding hierarchy assumes threaded pipe is equally similar to both plain end pipe and threaded and coupled pipe. According to HDP, this hierarchy is unreasonable since the physical differences between threaded and coupled pipe and threaded pipe is greater than the differences between plain end pipe and threaded pipe. HDP describes threaded pipe as merely plain end pipe that has been threaded. On the other hand, HDP describes threaded and coupled pipe as threaded pipe with an additional piece of pipe with inner threads attached. Therefore, according to HDP, threaded and coupled pipe is significantly different from threaded pipe, and should be coded accordingly. Moreover, HDP argues, in the previous administrative review, the Department assigned code "1" for plain pipe, code "2" for threaded pipe, and "4" for threaded and coupled pipe. Domestic Interested Parties' Arguments: The domestic interested parties did not comment on this issue. Department's position: We agree with HDP. Since the difference between "threaded end" pipe and "threaded and coupled" pipe is larger than the difference between "threaded end" pipe and "plain end" pipe, for the final results, we have re-coded the end finish criterion as follows: Plain end = 1; Threaded end = 2; Threaded and coupled = 4; Vitaulic Joint = 5; and Roll grouping = 0. (25) This is consistent with our coding in prior reviews. Comment 9: Separate Analysis of Products Produced by HDP and Those Further Manufactured by HDP Respondent's argument: Due to a programming error, HDP claims the Department did not separately analyze products produced by HDP and those further manufactured by HDP. According to HDP, the Department intended to analyze these products separately. Domestic Interested Parties' Arguments: The domestic interested parties did not comment on this issue. Department's position: We agree with HDP and for the final results, we have corrected the calculation program. (26) C. SeAH & Shinho Specific Issues Comment 10: Bad Debt Expenses Domestic Interested Parties' Arguments: The domestic interested parties argue that the Department should reclassify all bad debt expenses reported by SeAH and Shinho as direct selling expenses and then recalculate SeAH's and Shinho's direct and indirect selling expenses ratios. According to the domestic interested parties, bad debt expenses are direct selling expenses. In support of their assertion, the domestic interested parties cite to Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From the Republic of Korea ("Sheet"), 64 FR 30664, 30674 (June 8, 1999) for the proposition that the Department's practice is "to include sales which incur bad debt in the database and treat the bad debt expense as a direct selling expense when the expense is incurred on sales of subject merchandise." The domestic interested parties further argue, citing to 19 CFR §351.410(c), that direct selling expenses are defined as expenses which "result from, and bear a direct relationship to, the particular sale in question." Hence, the domestic interested parties argue, because there would be no bad debt expenses without sales, a bad debt expense is directly related to sales. Respondents' Argument: SeAH and Shinho argue that the domestic interested parties' reliance on Sheet and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Plate in Coils from the Republic of Korea, ("Plate"), 64 FR 15444 (March 31, 1999) is misguided for two reasons. First, both proceedings were subject to a WTO panel decision ruling that the United States had acted inconsistently with the WTO Antidumping Agreement. See United States-Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179/R. Second, the circumstances of both Sheet and Plate were factually different from the instant review. In Sheet and Plate, SeAH and Shinho argue, the question was how to treat a number of unpaid, U.S. sales of subject merchandise that were made during the period of investigation. The Department treated the bad debt associated with those sales as a direct selling expense. However, SeAH and Shinho argue that they have always treated home market bad debt expenses in their indirect selling expense, in this case and in all other dumping cases in which they have been involved. Furthermore, SeAH and Shinho point out that classification of home market bad debt expenses as indirect selling expenses has never been an issue in this case. They rely on Coalition for the Preservation of American Brake Drum and Rotor Aftermarket Manufactures v. United States ("American Brake Drum"), 44 F. Supp. 2d 229 (CIT 1999) in arguing that new factual issues are generally supposed to be raised prior to the filing of case briefs. However, the domestic interested parties failed to raise this argument in their comment letters of September 14, May 1, April 19 and April 25, 2000, which replied to the Korean respondents' questionnaire responses. Additionally, SeAH and Shinho argue that their respective financial statements have allowance accounts for bad debt. During the POR, SeAH and Shinho expensed the allowance for bad debt. This allowance is not limited to actual expenses incurred for bad debt during the POR since it also includes estimated bad debt. Shinho offset the allowance by reporting income associated with redemption of bad debt in G&A. SeAH and Shinho rely on the May 3, 2000 Decision Memorandum incorporated by Porcelain-on-Steel Cookware From Mexico; Final Results of Antidumping Administrative Review, 65 FR 30068 (May 10, 2000) for the proposition that it is the Department's practice to treat expensed bad debt as an indirect selling expense. SeAH and Shinho argue that in the only case, other than Sheet and Plate, on which the domestic interested parties rely to support their claim that bad debt should be a direct selling expense, the Department verified that the bad debt expenses tied directly to sales on the database. See Color Television Receivers from the Republic of Korea; Final Results of Antidumping Administrative Review, 61 FR 4408 (February 6, 1996). SeAH and Shinho further argue that it is the Department's practice to treat actual bad debt which cannot be tied to individual sales on the database as an indirect selling expense. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 64 FR 35590 (July 1, 1999); Certain Fresh Cut Flowers From Colombia; Final Determination of Sales at Less Than Fair Value, 52 FR 6842 (March 5, 1987); Stainless Steel Wire Rod From Korea; Final Determination of Sales at Less Than Fair Value, 63 FR 40404 (July 29, 1998); Bicycles From the People's Republic of China; Final Determination of Sales at Less Than Fair Value, 61 FR 19026 (April 30, 1996). Because SeAH and Shinho reported imputed credit expenses for home market sales on the basis of average accounts receivable, the portion of reported bad debt expenses associated with receivables during the POR could not be linked to individual sales. Thus, SeAH and Shinho argue, there is no legal or factual basis to support the domestic interested parties' claims that bad debt should be classified as a direct expense. Department's Position: We agree with SeAH and Shinho that their home market bad debt expenses should be categorized as indirect selling expenses in the instant review. Therefore, we have continued to rely on the respondents' information as submitted. (27) As the Department's past practice indicates, we may consider bad debt expense to be either direct or indirect depending on the relationship between the bad debt expense and the sale. (28) However, in cases where bad debt cannot be tied to specific sales of subject merchandise, the Department generally treats bad debt expenses as indirect selling expenses. (29) Although the Department did treat certain bad debt expenses as direct selling expenses in Sheet and Plate, those cases are factually distinct from the instant review. In both Sheet and Plate, POSAM classified certain unpaid sales as a type of bad debt but did not maintain separate bad debt accounts. (30) However, in the instant review both SeAH and Shinho do maintain separate accounts for bad debt which, according to respondents, include allowances for estimated bad debt. (31) Furthermore, the bad debt expenses at issue in Sheet and Plate could be tied directly to specific sales of subject merchandise in the United States because these sales were reversed in POSAM's books by issuing negative invoices to its customers. (32) In the current case, the bad debt expenses cannot be tied directly to sales of subject merchandise and no evidence on the record indicates a similar negative invoicing system. Therefore, we continue to treat SeAH's and Shinho's bad debt expenses as indirect selling expenses. Comment 11: Non-Operating Related Income Offsetting G&A Expenses Domestic Interested Parties' Arguments: The domestic interested parties argue that the Department should not allow Shinho to offset certain G&A expenses with income that is unrelated to the general operations of Shinho. The specific income categories in question are gains on investment by equity method, (33) gains on disposal of investment assets, (34) gains on redemption of bad debt, and liability exemption gains. (35) Citing to Structural Steel Beams from South Korea; Final Determination of Sales at Less Than Fair Value ("Steel Beams"), 65 FR 41437 (July 5, 2000), where the Department found that "a substantial gain related to non-depreciable assets, which were unrelated to the general operations of the company, could not offset G&A expenses," the domestic interested parties argue that it is contrary to the Department's practice to allow the respondents to lower their cost of production and constructed value by offsetting their expenses with income that is unrelated to the general operations of the company. Because gains on investment by equity method and on disposal of investment assets were related to the company's investment activity and not to the general operations of the company, the domestic interested parties argue, they should not be allowed to offset the G&A expenses. In addition, because gain on redemption of bad debt was a gain related to a prior period the offset of such gain would distort cost reporting in the current POR. The bad debt to which this gain relates was reported by Shinho in accounting records for prior periods. Furthermore, the domestic interested parties argue that the gain on redemption of bad debt does not relate to the production of subject merchandise during the period of review and, thus, should not be allowed as an income offset to G&A expenses in the calculation of the G&A ratio. Finally, the liability exemption gain should not be allowed as an income offset to G&A expenses because it neither related to the production cost of the subject merchandise nor was derived from activities during the period of review. Respondent's Argument: Shinho counters the domestic interested parties' arguments by first noting that the Department has not sought additional clarification with regard to these expense and income items, nor have the domestic interested parties raised the issue prior to the deadline for the submission of new factual information. Shinho relies on American Brake Drum, which supported the Department's rejection of a petitioner's analysis of information when submitted for the first time in its case brief, because it was considered new factual information. Shinho argues that its G&A calculation properly includes these expenses and the offsetting income associated with those expense accounts. Shinho does not dispute that it is the Department's practice to disallow gains unrelated to the general operations of the company. However, it contends that all of the expenses and corresponding revenues are related to Shinho's general operations. Shinho makes the following arguments as to why certain individual expense and income accounts are related to Shinho's general operations. With regard to bad debt expenses, Shinho disputes the relevance of the following arguments made by domestic interested parties: that bad debt redemption may include payment of prior period receivables, that expenses may include write-offs of prior period sales, and that the allowance of bad debt expense is an estimate of future period receivables and, therefore, not related to Shinho's general operations during the POR. Shinho asserts that these expenses are indirect and general as they cannot be tied to individual sales. Therefore, Shinho argues, it properly reported the income associated with bad debt redemption in its G&A expenses and the bad debt expenses as indirect selling expenses. As to liability exemption gains, Shinho asserts that the domestic interested parties' reliance on Steel Beams is misguided. Shinho argues that its reported liability exemption gain was not associated with future interest but was instead a reduction to interest during the POR for early payment of bank loans during the same period. Thus, the Department's concern in Steel Beams is inapplicable in the instant review. Specifically, in Steel Beams, the respondent recorded a gain on exemption of debt covering multiple accounting periods in the POI but amortized the associated expenses over several years, a practice the Department found distortive. In the instant review, there is no evidence that the reported gain had any relationship to future expenses and, thus, was properly reported. Shinho further asserts that it is equally the Department's practice to disallow expenses unrelated to the general operations of the company. Thus, Shinho argues, if the Department were to disallow the income items that the domestic interested parties allege are unrelated to the general expenses of the company, then the correlating expenses should also be excluded from G&A expenses. Department's Position: We agree, in part, with the domestic interested parties and, in part, with Shinho. Pursuant to section 773(b), the Department may disregard sales made below cost of production ("COP") for determining NV whenever such sales have been made (1) within an extended period of time in substantial quantities, and (2) at prices which do not permit the recovery of all costs within a reasonable amount of time. In calculating COP, the Department must include "an amount for selling, general, and administrative expenses based on actual data pertaining to production and sales of the foreign like product by the exporter in question." Section 773(b)(3)(B). For the final results, we disallowed certain non-production-related income offsets to Shinho's G&A costs. As we stated in Certain Cut-To-Length Carbon-Quality Steel Plate Products from Korea; Notice of Final Determination of Sales at Less Than Fair Value, 64 FR 73196, 73209 (December 29, 1999), "In analyzing whether to include an item in G&A, the Department considers the nature of the activity and whether the activity is significant enough to be treated separately from the respondent's other business activities." When determining whether it is appropriate to include or exclude a particular item from the G&A calculation, the Department reviews the nature of the G&A activity and the relationship between this activity and the general operations of the company. See, e.g., Dynamic Random Access Memory Semiconductors of One Megabit and Above From Taiwan; Notice of Final Determination of Sales at Less Than Fair Value, 64 FR 56308, 56323 (October 19, 1999). (36) Evidence on the record (37) indicates that Shinho's gain on investment by equity method, gain on disposal of investment assets, and liability exemption gain are investment-related gains which do not relate to the general operations of the company. As stated above, the Department's past practice is to disallow gains unrelated to general operations of the company to offset G&A expenses. However, we agree with Shinho that because we disallowed these income items, any expenses corresponding to these income categories should likewise be excluded. In reviewing the information regarding G&A expenses provided by Shinho, we have identified the following non-operating expenses as corresponding to the three excluded non-operating income categories: "loss on disposal of marketable securities" and "loss on valuation of investment assets." Accordingly, we have excluded these expenses on the basis that they are not related to the general operations of Shinho. With regard to gains on redemption of bad debt, as noted in Comment 10, we consider bad debt expenses to be properly reported as indirect selling expenses, not G&A expenses, and have included them as such in Shinho's COP. There is relatively little information on the record as to what these redemption gains are related to or how they are calculated. Shinho did note, in its January 26, 2001 rebuttal brief (at 11), that the reported bad debt expenses were "not limited to actual expenses incurred for bad debt during the POR (which may, in fact, be related to sales in prior periods) but included, in larger part, {an} allowance for estimated bad debt." Shinho further noted (at 15) that "the allowance portion of the bad debt expense is, by its very nature, an estimate of future period receivables." Therefore, the limited information on the record regarding these redemption gains indicates that these gains were corrections to, or reversals of, write- offs of receivables in prior years. In other words, each period Shinho estimates the value of uncollectible sales or receivables, presumably based on prior years' experience, and records that estimate as bad debt expense in that period. It also writes off certain outstanding receivables by making appropriate adjustments to its allowance account. If Shinho subsequently receives payment for a receivable written off as bad debt in a prior period, it records the difference as a gain in the subsequent period (i.e., the period in which the payment is received). The essential point here, however, is that, presumably, Shinho's recorded bad debt expense in any given period is the best estimate available of the actual expense for that period. There is no reason to believe the actual bad debt expense will be any higher or lower than the estimated expense and, therefore, this estimate should not be lowered due to a correction or adjustment to previous years' write-offs. Thus, for the final results we have not used the reported gains on redemption of bad debt to offset either the bad debt indirect selling expense or the G&A expenses. Comment 12: Arm's-Length Test Should be Rerun for Certain of SeAH's Sales Respondent's Arguments: SeAH asserts that the Department performed the arm's- length test for sales to its affiliate, Haiduk Steel Industrial Co., Ltd. ("HSI"), based on customer code rather than by customer, as is the Department's practice. Specifically, SeAH argues that nine (38) distinct customer codes should be collapsed into one customer code for purposes of the arm's-length test because they represent one customer, HSI. SeAH contends that despite spelling differences in English translations of the name, they are all part of HSI. Moreover, these customers are distinguished based solely on customer category (i.e., end-user or distributor), location, or both. In Certain Corrosion-Resistant Carbon Steel Flat Products From Japan: Final Results of Antidumping Duty Administrative Review 65 FR 8935, 8945 (February, 23, 2000) ("Certain Carbon Steel Flat Products"), the Department collapsed "those customer codes which represent division or delivery points into a single customer, because it is the Department's practice to analyze sales on a customer-specific basis." SeAH asserts that the situation is the same in the instant case and thus, the Department should rerun its arm's-length test accordingly. Domestic Interested Parties' Comments: The domestic interested parties provided no arguments on this issue. Department's Position: We agree with the respondents. There is sufficient evidence on the record to indicate that these nine customer codes do, in fact, represent a single customer. Accordingly, we are considering these nine customer codes to represent a single customer, HSI, for purposes of the arm's- length test. We have made the appropriate changes in the margin calculations for SeAH. Comment 13: CEP Offset for Shinho and SeAH Respondents' Arguments: Shinho and SeAH argue that the Department was wrong in not granting them a CEP offset in the Preliminary Results because the selling functions for home market sales, they contend, are more advanced than those for U.S. sales. Specifically, Shinho and SeAH performed certain selling functions for their home market sales that their U.S. affiliates, Shinho America ("SA") and Pusan Pipe America ("PPA"), respectively, performed in the U.S. market for their U.S. sales. According to Shinho and SeAH, these selling functions include, the extension of credit, price negotiation, invoicing, home market research, and the arranging of freight. Shinho and SeAH explain that the Department made the comparison of selling functions in the two markets after CEP deductions were made on the U.S. side for those activities performed in the United States. Because the selling functions associated with their U.S. sales are performed in the U.S. by their U.S. affiliates, Shinho and SeAH reason that once CEP deductions are removed from the comparison, the selling functions performed by Shinho and SeAH in the home market are clearly greater than any remaining on the U.S. side. Thus, Shinho and SeAH conclude, the home market is at a more advanced level of trade ("LOT") than the U.S. market. Shinho and SeAH cite to Industrial Nitrocellulose from the United Kingdom; Notice of Final Results of Antidumping Duty Administrative Review 65 FR 6151 (February 8, 2000) in which the Department granted a CEP offset when selling functions for the home market were found to be more advanced than those for the U.S. market. Moreover, they note that in Stainless Steel Pipe From Korea; Preliminary Results of Antidumping Duty Administrative Review 64 FR 72645, 72647 (December 28, 1999), the Department granted SeAH a CEP offset based on "identical facts and identical functions." Therefore, these respondents conclude, a CEP offset is likewise warranted in the instant review. Domestic Interested Parties' Arguments: The domestic interested parties state that the Department should reject the respondents' request for a CEP offset for two reasons. First, the domestic interested parties argue, Shinho and SeAH wrongly assume that the Department must exclude the activities of their U.S. affiliates in evaluating whether sales in the home market are made at a more advanced LOT than those made in the United States. The domestic interested parties contend that this methodology was rejected by the CIT in Borden, (39) in which the Court stated that LOT must be evaluated prior to the deduction of indirect selling expenses. Second, the domestic interested parties argue that substantial differences in selling functions, while required, are not necessarily sufficient to establish different levels of trade. The domestic interested parties cite to the preliminary results of Korean Pipe IV, (40) where the Department found Shinho's selling functions to be at a single stage of marketing in the home market and in the U.S. market and "not substantially dissimilar." The domestic interested parties note that Shinho did not contest that finding in the briefing stage of that review. Likewise, the domestic interested parties continue, the Department did not grant a CEP offset to SeAH in Korean Pipe IV. Neither Shinho nor SeAH, the domestic interested parties contend, has presented data in the instant review demonstrating that their selling activities in the two markets have changed in any significant way since previous reviews. Thus, the domestic interested parties urge the Department to continue to reject these respondents' request for a CEP offset. Department's Position: We are not granting a CEP offset in these final results to either Shinho or SeAH. As explained in the Preliminary LOT Analysis, (41) "{w}hile the starting price for CEP is that of a sale to an unaffiliated buyer, this construction of the export price results in a price that would have been charged if the importer had not been affiliated. Thus, for both EP and CEP, the relevant transaction for LOT is the sale from the exporter to the first U.S. purchaser, whether or not affiliated." (42) We, therefore, disagree with the domestic interested parties' contention that the CEP expenses should not be deducted before analyzing differences in LOT. We also disagree, however, with Shinho and SeAH's contention that, based on this level of comparison, there are differences in the LOTs of the two markets which would merit a CEP offset. As set forth in section 351.412(f) of the Department's regulations, a CEP offset will be granted where (1) normal value is compared to CEP sales, (2) normal value is determined at a more advanced LOT than the LOT of the CEP, and (3) despite the fact that the party has cooperated to the best of its ability, the data available do not provide an appropriate basis to determine whether the difference in LOT affects price comparability. We do not find that Shinho or SeAH performed more advanced selling functions for sales in the home market than for their sales to their U.S. affiliates and, therefore, these respondents have not met criterion 2 (above) for CEP offset eligibility. (43) Furthermore, the domestic interested parties are correct in stating that substantial selling differences, while required, are not necessarily sufficient to establish different levels of trade. We agree with the domestic interested parties that neither Shinho nor SeAH has presented evidence showing significant changes in selling functions performed in the instant review as compared with the prior review. With respect to the CEP offset granted in Stainless Steel Pipe, we recognize that in that proceeding, the Department granted a CEP offset to the respondent SeAH. However, the facts in this case, which involves different subject merchandise and potentially different selling functions from those in Stainless Steel Pipe, show that both Shinho and SeAH had similar LOTs for their respective home and U.S. affiliate sales. Accordingly, we have not granted a CEP offset to either of these respondents. III. RECOMMENDATION Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final determination in the Federal Register. AGREE ___________ DISAGREE ___________ _____________________________________ Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration _____________________________________ (Date) __________________________________________________________________________ footnotes: 1. In a letter dated January 5, 2001, HDP informed the Department that its corporate name would change to Hyundai Steel Company effective February 1, 2001. On February 27, 2001, the Department initiated a changed circumstances review to determine whether entries naming "Hyundai Hysco" as manufacturer or exporter should receive the cash deposit rate currently applied to HDP. Certain Circular Welded Non-Alloy Steel Pipe from the Republic of Korea; Initiation of Changed Circumstances Antidumping Duty Administrative Review, 66 FR 12460 (February 27, 2001). Pending a final determination in that changed circumstances review, we will continue to refer to the respondent in the instant review as HDP. 2. See Memorandum to File Regarding Matching Criteria for Certain Circular Welded Non-alloy Steel Pipe from the Republic of Korea (June 24, 1994) ("Matching Criteria Memo") attached to the questionnaire at Appendix VI. 3. Final Results of Antidumping Duty Administrative Review; Certain Welded ASTM A-312 Stainless Steel Pipe from the Republic of Korea, 64 FR 30071 (May 10, 2000) in the accompanying Issues and Decision Memorandum (April 26, 2000) at Comment 4. 4. We note that in the course of this review, there appears to be some confusion among parties regarding the terms "grade" and "specification." For the purposes of explaining in this decision memo the department's position on matching criteria, we use the term "grade" to refer to general pipe type, i.e., ordinary, structural and conduit. The term "specification" refers to particular pipe model, e.g., A53AS, SPPD, UL6. The term "standard" refers to national classification system, e.g., ASTM, KS, JIS. 5. See e.g., Exhibit 3 of the January 26, 2001 SeAH/Shinho Rebuttal Brief. 6. Other steel cases where the Department has matched by individual specification include, e.g., Certain Cut-to-Length Carbon Steel from Finland; Final Results of Antidumping Duty Administrative Review, 62 FR 18468, 18469 (April 15, 1997); Notice of Final Determination of Sales at Less Than Fair Value; Certain Cut-to-Length Carbon-Quality Steel Plate Products from Korea, 64 FR 73196, 73200 (December 29, 1999). 7. Circular Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, 63 FR 32833 (June 16, 1998) ("Korean Pipe IV"). 8. Helmerich & Payne, Inc. v. United States, 24 F. Supp. 2d 304, 312-313 (CIT 1998) ("Helmerich") and American Silicon Technologies v. United States, CIT Slip Op. 99-34 (April 9, 1999) at 8-9 ("American Silicon"). 9. See 19 CFR 351.212 and the preamble to that section of Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27314-15 (May 19, 1997) ("Final Regulations"). 10. Final Regulations, 62 FR at 27314. 11. Id. 12. Manganese Metal From the People's Republic of China; Final Results of Antidumping Administrative Review, 66 FR 15076 (March 15, 2001). 13. Mn Metal IV, 66 FR at Comment 26. 14. Id. 15. In discussing the problem of tying sales to entries in CEP situations, the preamble appears to contemplate CEP situations in which merchandise is entered into the United States and subsequently sold from inventory to unaffiliated purchasers. The Department observed that reviewing sales of the merchandise entered during the POR for CEP sales would be inappropriate because, "in the case of CEP sales, the delay between importation and resale to an unaffiliated customer means that merchandise entered during the review period often is different from the merchandise sold during that period." Final Regulations, 62 FR at 27314. In the present case, the merchandise is sold by the U.S. affiliate, and then manufactured in Korea and shipped directly to the customer, eliminating the problem of tying which can develop when the sales occur after importation. 16. Id. 17. 19 CFR §351.414(e)(2). 18. Circular Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review, 62 FR 55574, 55581 (October, 27 1997) ("Korean Pipe I"). 19. See HDP Supplemental Questionnaire Response at 25 (June 28, 2000). 20. HDP cites to several cases where the Court of International Trade (CIT) held that the conditions of sale are the relevant factors in determining whether sales are within the ordinary course of trade, not whether such sales are ordinarily made. See Mantex, Inc. v. United States, 841 F. Supp. 1290, 1306 (CIT 1993); Cemex, S.A. v. United States, 19 CIT 587, 590 (1995). 21. HDP cites to Murate Mfg. Co. v. United States, 820 F. Supp 603, 607 (CIT 1993) and to Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea, 62 FR 18404, 18463 as saying that in determining whether sales are within the ordinary course of trade, the Department typically examines several factors, none of which are dispositive. 22. Laclede Steel Co. v. United States, 18 CIT 965, 968 (CIT 1994). 23. See Memorandum to Bernard T. Carreau from Richard W. Moreland, "Analysis of Overrun Sales for Hyundai Pipe Co., Ltd," (April 5, 2001). 24. See Final Results Calculation Memorandum for HDP (April 5, 2001) (Final Calc Memo) for the actual changes made to the calculation program. 25. See Final Calc Memo for the actual changes made to the calculation program. 26. See Final Calc Memo for the actual changes made to the calculation program. 27. Shinho § B-D Questionnaire Responses at B-21 (March 24, 2000), SeAH § B-D Questionnaire Responses at B-29 (March 24, 2000). 28. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 64 FR 35590, 35607 (July 1, 1999). 29. See, e.g., Bicycles From the People's Republic of China; Final Determination of Sales at Less Than Fair Value, 61 FR 19026, 19041 (April 30, 1996). 30. Sheet, at 30674. 31. Shinho § B-D Questionnaire Responses at Exhibit A-19 (March 24, 2000), SeAH Supplemental Questionnaire Responses at Exhibit A-28 (June 30, 2000). 32. Sheet, supra note 30. 33. The equity method is used to adjust the carrying amount of an investment in which the owner holds between 20 and 50 percent ownership. 34. Gains on disposal of investment assets occur when an investor sells an investment at higher than the carrying amount of the investment at the time of sale. These pertain to investments not accounted for using the equity method. 35. In its rebuttal brief, Shinho indicates that "gain on redemption of bad debt" is a receipt of payment on pre-POR receivables that have already been written off as bad debt. Shinho also indicates that "liability exemption gain" is a reduction to reported POR interest expense due to an early repayment of bank loans during the POR. 36. See also, Final Determination of Sales at Less Than Fair Value: Oil Country Tubular Goods from Korea, 60 FR 33561, 33567 (June 28, 1995), where the Department stated that its practice is to not include investment-related gains, losses, and expenses in the calculation of G&A expenses. 37. See e.g., Shinho Section B-D Questionnaire Responses at Exhibit D-17 (March 24, 2000). 38. See Memorandum to File from Sibel Oyman "SeAH's Customer Codes" (March 5, 2001). 39. Borden, Inc. v. United States ("Borden"), 4 F. Supp. 2d 1221, 1240-41 (CIT 1998). The domestic interested parties also cite to various other CIT decisions which, they claim, affirm Borden with regard to this issue. 40. Circular Welded Non-Alloy Steel Pipe from the Republic of Korea; Preliminary Results of Antidumping Administrative Review, 62 FR 64559, 64562 (December 8, 1997). 41. See Memorandum from Team to John Brinkmann, "Preliminary Level of Trade Analysis" (November 29, 2000). 42. The Court of International Trade has held that the Department's practice of determining levels of trade for CEP transactions after CEP deductions is an impermissible interpretation of section 772(d) of the Act. See Borden, Inc. v. United States, 4 F.Supp.2d 1221 (1998); and Micron Technology, Inc. v. United States, 40 F.Supp.2d 481 (1999). The U.S. Court of Appeals for the Federal Circuit, however, has reversed the Court of International Trade's holdings in both Micron and Borden on the level of trade issue. The Federal Circuit held that the statute unambiguously requires Commerce to deduct the selling expenses set forth in section 772(d) from the CEP starting price prior to performing its LOT analysis. See Micron Technology, Inc. v. United States, Court Nos. 00-1058,- 1060 (Fed. Cir. March 7, 2001); see also Borden, Inc. v. United States, Court Nos. 99-1575,-1576 (Fed. Cir. March 12, 2001) (unpublished opinion). Consequently, the Department will continue to adjust the CEP, pursuant to section 772(d), prior to performing the LOT analysis, as articulated by the Department's regulations at §351.412. 43. For a detailed comparison of the LOTs of the respondents' home market and U.S. sales, see Memorandum to Susan H. Kuhbach "Final LOT Memorandum for SeAH Steel Corp. and Shinho Steel Co., Ltd." (April 5, 2001).