Page 1 of 3 Steel Service Center Institute Comments on ‘Reseller Liquidation’ – Item No. III November 13, 1998 III. Reseller Specific Annual Reviews Require Special Procedures Comment: Assuming that the DOC ultimately decides to modify its current policy, so that additional AD duties on reseller entries are not automatically assessed at either the manufacturer’s rate (as determined in a pending review) or at the reseller’s cash deposit rate, it is clear that the DOC cannot automatically resort to the initial “all others rate” without first affording the reseller the opportunity to participate in the review process. See, e.g., Section 782(d) – (e), Tariff Act of 1930, as amended. Thus, should the DOC decide the modify its current practice, the DOC will need to expressly advise any affected reseller that it will not be subjected to the manufacturer’s rate, as soon as the DOC makes this determination during its analysis of the manufacturer’s submissions. The DOC then must afford the reseller the opportunity to submit information to the DOC in support of the reseller’s position. Since this reseller specific review, by definition, will commence at some point after the manufacturer’s review, the DOC must recognize that its reseller review cannot be conducted in the same manner as its normal manufacturer review. Moreover, the DOC must recognize that reseller’s have neither the requisite information nor capability to respond to the DOC’s “boilerplate” Foreign Producer’s Questionnaire. Thus, if the DOC decides to analyze reseller sales, it is required by Section 782(c)(1) of the Tariff Act to consider “the ability of the interested party to submit the information in the requested form and manner,” and accordingly should structure its questionnaire to conform to the special needs of resellers, to “avoid imposing an unreasonable burden” on these parties. We offer two suggestions as to the methodology which the DOC can utilize in conducting reseller reviews which arise during the course of a manufacturer’s annual review proceeding. Alternative one: Comparison of reseller’s purchase price from manufacturer to the reseller’s modified EP/CEP. In this alternative, the DOC would calculate the reseller’s EP/CEP by taking the reseller’s resale price and deducting SG&A, movement costs and further manufacturing costs (if any). If the reseller’s modified EP/CEP is equal to or greater than its purchase price from the manufacturer, on a weighted average basis, the DOC would apply the Page 2 of 3 manufacturer’s liquidation and cash deposit rate to the reseller. If the reseller’s modified EP/CEP is less than its purchase price, on a weighted average basis, the DOC would increase the manufacturer’s liquidation and cash deposit rate to account for this difference (thereby increasing dumping margins, if any, or potentially even creating margins where none had existed). This simplified calculation methodology conforms to the intent of Sections 777A(c)(2) and 782(c)(1) of the Tariff Act - by allowing the DOC to calculate a reseller’s margins on the basis of a manufacturer’s rate, while confirming that the reseller has not itself sold merchandise to the U.S. at dumped prices - and to the manner in which the DOC determines whether middleman dumping exists. In this regard as most recently discussed in Stainless Steel Plate in Coils from Taiwan, Prelim. Det. SLTFV, 63 Fed. Reg. 59524, 59525-26 (November 4, 1998), the DOC has a longstanding practice of investigating middleman dumping allegations by comparing a middleman's resale prices to its acquisition costs, less movement and selling expenses. See also Fuel Ethanol from Brazil, Final Det. SLTFV, 51 Fed. Reg. 5572, 5573 (February 14, 1986). We are unaware of any reason why the DOC should not employ a similar approach in calculating margins on reseller sales discovered during the course of a manufacturer's Annual Review. Alternative two: Calculate individual reseller margins based on “CV” In this alternative, the DOC would calculate constructed value (“CV”) by adding the reseller’s purchase price from the manufacturer (i.e., material and fabrication costs) to the reseller’s general expenses and profit. The reseller’s margins for liquidation and cash deposit purposes will be reseller specific. Resort to CV clearly conforms to law, and would allow the DOC to calculate reseller specific margins, without unnecessarily requiring a reseller to provide detailed home market sales data, or information outside its control relating to a manufacturer’s production costs. In the event that the DOC decides that price to price comparisons are necessary, the DOC should, upon request, rely on statistically valid samples, in accordance with Section 777A(a), of the Tariff Act. Thus, if asked to do so by the resellers undergoing review, the DOC would conduct a valid statistical sample of numerous resellers, and/or a valid statistical sample of sales of individual resellers. At the same time, we believe that an individual reseller should retain the option of requesting that the DOC conduct a full review of all of its sales, rather than rely on statistical sampling. Page 3 of 3 Finally, regardless of the alternative methodology selected by the DOC, in no event should a reseller be required to, or be adversely affected by its failure to, obtain or report mill costs. If the DOC decides that mill costs are necessary for an accurate price to price comparison, the DOC either should apply verified costs reported by a mill in the current AR of the mill, or exclude the sales from the price comparison. Margins for excluded sales should be based on CV, as set forth above.