IN THE MATTER OF:

Oil Country Tubular Goods from Mexico; Final Determination of Sales At Less Than Fair Value

C. Facts Pertinent to the Challenges to the Final Determination

In this portion of the Opinion, the Panel will further develop the facts contained in the administrative record that are pertinent to each of the above issues.

1. Calculation of Financial Expense

In its brief to the Panel ⁸² the Department noted by way of background that financial expenses are incurred to finance the operation of the integrated enterprise. Therefore, it is the Department’s usual practice to base the financial expense allocated to each product on the consolidated financial statement of all of the related firms. ⁸³

To eliminate the effect of seasonality, to reflect year-end adjustments, and to utilize the most trustworthy data, it is also the Department’s practice to base its calculation on the financial expense reported in the annual, audited financial statements which correspond most closely to the POI. ⁸⁴

When calculating financial expenses, therefore, the Department’s clear preference is to utilize the annual, audited, consolidated financial statement which corresponds most closely to the POI, absent evidence in the record which would require a contrary result.

August 26, 1994 Standard Questionnaire

The Department first sought financial data from TAMSA in its August 26, 1994 questionnaire, wherein at A-5 the Department requested:

b. If internal financial statements are prepared and maintained for the subject merchandise, provide copies for your two most recent fiscal years.

c. Provide English translations of your audited, consolidated financial statements for your two most recent fiscal years.

d. Provide copies of any financial statement or other financial report filed with the local or national government of the country in which your company was located for the two most recent fiscal years.

TAMSA responded to these requests on the date ultimately due-September 23, 1994- by furnishing the Department with TAMSA’s 1992 and 1993 audited, consolidated financial statements. ⁸⁵

September 27, 1994 Section E Questionnaire

The Department submitted its Section E questionnaire on September 27, 1994 ⁸⁶ in which it instructed TAMSA to calculate financial expense "from the annual consolidated financial statements as a percentage of consolidated cost of sales." ⁸⁷

TAMSA submitted its Section E Response on the date ultimately due: November 10, 1994, including as Attachment E9 the "TAMSA Consolidated Financial Statement 1993." TAMSA’s financial expense calculation was, therefore, based on TAMSA’s 1993 annual consolidated audited financial statement. ⁸⁸

October 20, 1994 Section A Deficiency Questionnaire

In its October 20, 1994 Section A deficiency questionnaire, the Department requested that TAMSA, on or by November 3, 1994:

13. ... provide copies and translated versions of Siderca S.A.I.C.’s financial statements for the two most recent fiscal years.... Provide any semi-annual profit and loss statements for January - June 1994 for TAMSA, TIC, TAMTRADE, Siderca Corp., and Siderca S.A.I.C. ⁸⁹

TAMSA responded to this request on the due date, providing the Department with, inter alia, TAMSA’s consolidated profit and loss financial statements for the first and second quarters of 1994. ⁹⁰

December 28, 1994 Section D Questionnaire

In its Section D questionnaire of December 28, 1994, the Department requested that TAMSA base its interest expense calculation on its "audited annual consolidated financial statements" ⁹¹

and that it provide the following:

C . Financial Accounting Systems and Policies

Even if you have already done so in your response to Section A of the Department’s questionnaire, please provide a completely translated copy of the company’s audited financial statements, including footnotes and auditor’s opinion for all fiscal years covered by the POI. ⁹²

In its Section D response of February 1, 1995 (the due date), TAMSA based the financial expense portion of its response on its audited, consolidated financial statement for 1993, stating that this was "the most recently completed fiscal year". ⁹³

In the same submission, TAMSA provided consolidated and unconsolidated financial statements for 1992 and 1993. ⁹⁴

February 3, 1995 Sections B, C and E Deficiency Questionnaire

On February 3, 1995, in a deficiency questionnaire covering Sections B, C, and E, the Department made the following Section E deficiency request:

18. Please provide a copies (sic) of any 1994 financial statements. ⁹⁵

This request came due on March 3, 1995, at which time TAMSA responded by providing TAMSA’s consolidated profit and loss financial statements for the first three quarters of 1994, ⁹⁶ stating that these were the only quarters for which such statements were available. ⁹⁷

February 22, 1995 Cost Verification Outline

As a leadup to the Veracruz cost verification, the Department on February 22, 1995 submitted to TAMSA its agenda for the Section D verification ("Cost Verification Outline"), ⁹⁸ noting that the cost verification was to take place between March 13-17, 1995 at TAMSA’s factory in Veracruz. ⁹⁹

Although the Department made no specific request in the Cost Verification Outline for financial statements, it did note that "[o]ne of the most important verification steps ... is to reconcile the costs traced to the general ledger ... to the financial statements of the company (preferably audited financial statements"). ¹⁰⁰

March 6, 1995 Sales Verification Outline

On March 6, 1995, the Department submitted to TAMSA its agenda for the Sections A, B and C verifications ("Sales Verification Outline"), ¹⁰¹ noting that the Veracruz verification was scheduled to take place from Monday, March 20, 1995 to Friday, March 24, 1995, and that the Houston verification was scheduled to take place from Monday, April 10, 1995 to Wednesday, April 12, 1995. ¹⁰²

On page 1 of the Sales Verification Outline, the Department indicated that "Financial Statements (with English translations)" would be needed for verification. ¹⁰³

Subsequently in the Sales Verification Outline, the Department stated:

To verify total quantity and value of sales reported during the POI, the verifiers will examine the following source documentation. Please be prepared to present any of these items at verification if they have not already been submitted for the record:

1. Last financial statement, or equivalent;

2. Latest internal financial statements; ¹⁰⁴

At the Veracruz cost verification, TAMSA, in response to an oral request by the verifiers, provided the Department with its 1994 year-end trial balance, ¹⁰⁵ which contained a summary best information available, which may include information supplied by the petitioners, for our final determination." Id., at 2. of all of TAMSA’s unconsolidated accounts for the full-year 1994. This trial balance was included as Attachment A17 to the Cost Verification Report. ¹⁰⁶

The Cost Verification Report, issued on May 1, 1995, describes what, in the Department’s view, took place at the Veracruz cost verification and at the subsequent Houston cost verification with respect to the issue of TAMSA’s financial statements. This statement, and the facts described therein, are a matter of some controversy in this case:

According to company officials, TAMSA’s 1994 audited financial statements were not yet available. Company officials indicated that the 12/31/94 quarterly filing with the Mexican and U.S. securities oversight agencies (which is publicly available) was to be filed by March 21, 1995. Company officials indicated that the 12/31/94 audited financial statements would be available for release on April 14, 1995.

As a part of this investigation, the Department performed a cost verification of the further manufacturing data on April 18-19, 1995. Company officials stated that we would be able to obtain the 12/31/94 audited financial statements at that verification. TAMSA indicated that the only adjustments made to the trial balance amounts would be balance sheet reclassification and a correction for the abrupt devaluation of the peso that occurred in December 1994. At the further manufacturing verification, Department personnel were told that the audited financial statements were not available and that no financial statement was filed with the securities oversight agencies. Therefore, we were not able to obtain the audited 1994 financial statements from TAMSA and could not confirm the adjustment for the devaluation. TAMSA did provide a copy of the press release showing unaudited results. The press release is exhibit 20 of the further manufacturing cost verification. ¹⁰⁷

As indicated by this document, it was the Department’s view, therefore, that it had been informed by TAMSA officials at the Veracruz cost verification that the fourth quarter (in effect, full-year) consolidated statement was not yet available, but that the (unaudited) 12/31/94 quarterly filing with the Mexican and U.S. securities oversight agencies (which is publicly available) was due to be filed March 21, 1995. In addition, it was the Department’s understanding that the "12/31/94 audited financial statements would be available for release on April 14, 1995," and that TAMSA had offered to provide the Department with the audited financial statement during the April 18-20, 1995 further manufacturing cost verification in Houston. ¹⁰⁸

The Department and TAMSA, in their briefs to the Panel, both speak to these "understandings," describing them in somewhat different terms. ¹⁰⁹

TAMSA, acting in a timely fashion, disputed in its pre-hearing Case Brief filed on May 9, 1995, and at the public hearing itself, certain of the characterizations made by the Department in the Cost Verification Report. ¹¹⁰

April 18-20, 1995 Houston Cost Verification

The Department states in its brief to the Panel (citing the Team Concurrence Memorandum) that at the Houston further manufacturing cost verification conducted April 18-20, 1995, ¹¹¹ the Department orally requested the audited 1994 statements and the fourth quarter (in effect, full-year) 1994 unaudited consolidated statements filed with the Mexican and U.S. securities oversight agencies. ¹¹²

The Team Concurrence Memorandum itself, however, does not in direct terms indicate what the Department requested of TAMSA. The scope of the Department’s requests can only be inferred indirectly from the statements contained in the Team Concurrence Memorandum that TAMSA officials told the verifiers that (i) the audited financial statements were not available, and that (ii) no financial statement had been filed with the "securities oversight agencies." ¹¹³

In lieu of the financial statements that TAMSA indicated were still unavailable, TAMSA provided the Department with a copy of a press release showing its 1994 financial results, which included three pages of financial tables (a summarized income statement and a summarized balance sheet for TAMSA’s consolidated 1994 results) ¹¹⁴

TAMSA strongly disputes to the Panel the assertion that the Department requested the Mexican Stock Exchange filing at the Houston cost verification. ¹¹⁵

May 9, 1995 North Star Case Brief

On May 9, 1995, North Star provided the Department with a copy of a 38-page unaudited 1994 consolidated financial statement which TAMSA had filed with the Mexican Stock Exchange on March 23, 1995. ¹¹⁶

Final Determination

In the Final Determination, the Department determined that TAMSA’s "failure" to provide the March 23, 1995 Mexican Stock Exchange filing justified its application of partial BIA. ¹¹⁷

The pool of potential BIA rates, and the Department’s basis for selecting among them, was set out in the Team Concurrence Memorandum. ¹¹⁸

1. Calculate interest expense based upon the 1993 financial statements, as submitted	2.9%
2. Calculate interest expense based on the annual amounts reported in the 1994 financial statements filed with the Mexico Stock Exchange. However, completely remove the "special item in loss in exchange rates" reflected in those statements	22.5%
3. Calculate interest expense based on the amounts reported in the quarterly reports filed with the Mexican securities oversight agency for the first two quarters of 1994 (i.e., the POI)	37.0%
4. Calculate interest expense based on the amounts reported in the 1994 statements filed with the Mexico Stock Exchange, however isolate the "special item in loss in exchange rates" and amortize this amount over the life of the debt (5 years). Do not reduce the interest expense by interest income and monetary gain as there is no information on the record to support such an adjustment	39.5%
5. Calculate interest expense based on the entire amount of financial expenses reported in the 1994 financial statements filed with the Mexico Stock Exchange, including the "special item in loss in exchange rates".	95%

The Department gave reasons for rejecting four of the five options, especially option #1 (favored by TAMSA) ¹¹⁹ and option #5 (favored by North Star), ¹²⁰ and for ultimately selecting option #3. ¹²¹

In the Final Determination, as suggested, the Department declined to use the annual data for either 1993 (2.9%) or 1994 (95%) and instead used, without further adjustment, the 37% rate applicable to the POI. ¹²²

2. Calculation of General and Administrative Expense In its brief to the Panel, the Department noted that G&A expenses are those expenses which relate to the activities of a company as a whole, rather than to simply its production processes. ¹²³

Because the Department’s general practice is to base G&A expenses on the experience of the company actually producing the subject merchandise (plus an appropriate allocation of the G&A expenses of the parent company), and because some significant expenses, such as auditing expenses, are paid only once a year but must be allocated over the entire fiscal year, G&A expenses are normally calculated based on unconsolidated full-year data. ¹²⁴

The Department’s December 28, 1994 Section D (COP/CV) questionnaire ¹²⁵ required that TAMSA submit G&A expense data in the following form:

G&A expenses are those expenses which relate to the activities of the company as a whole rather than to the production process.... G&A expenses should be calculated on an annual basis as a percentage of cost of sales. Provide a worksheet reconciling the submitted G&A expenses to the amount recorded on the company’s audited financial statements for the year that most closely relates to the POI. ¹²⁶

In its Section D response of February 1, 1995, TAMSA based the G&A expense portion of its response, as requested, on unconsolidated full-year data for 1993. ¹²⁷

At the Veracruz cost verification conducted on March 13-18, 1995, the Department reports that it orally requested from TAMSA any audited or unaudited 1994 unconsolidated full-year data. ¹²⁸

In response, TAMSA furnished the Department with its unconsolidated trial balance of December 31, 1994. ¹²⁹ The Department verified both the G&A aspects of the 1993 data submitted in response to questionnaires and the G&A aspects of the 1994 unconsolidated data obtained at verification. ¹³⁰

However, TAMSA did not submit a breakout of indirect selling expenses contained in the G&A data underlying the 1994 trial balance, ¹³¹ thereby precluding the Department from making that adjustment.

On this latter point, TAMSA asserts that "the elimination of selling expenses already separately accounted for in the dumping calculation is routinely done to avoid double counting" and that simple methods were available to the Department to accomplish such an adjustment. ¹³²

In the Final Determination, the Department stated that it was inappropriate to use TAMSA’s 1993 G&A expenses for the same reasons it was inappropriate to use TAMSA’s 1993 financial expense data. ¹³³

Specifically, use of the 1993 data was not appropriate because it "is not the most current information available [and] is not indicative of the expenses incurred during the POI." ¹³⁴

However, the Department also rejected North Star’s contention that, because TAMSA was uncooperative in withholding its 1994 consolidated financial statement, the Department should base G&A expense for TAMSA on the consolidated statement prepared for the Mexican Stock Exchange. Instead, the Department followed its usual practice of basing its G&A expense calculation on TAMSA’s unconsolidated data, noting that use of BIA was not called for, since TAMSA’s lack of cooperation had not extended to the unconsolidated data. ¹³⁵

3. Allocation Methodology for Nonstandard Costs

The Department’s Section D (COP/CV) questionnaire called for TAMSA to submit product-specific COM data based on production during the POI. ¹³⁶ In its Section D response of February 1, 1995, TAMSA accordingly based the COM portion of its response on unconsolidated year-to-date data for the first two quarters of 1994. ¹³⁷ The Department’s COM methodology requires that all manufacturing costs be allocated on a per-product basis. ¹³⁸

Thus, TAMSA was required to report per-product data not only for those costs for which TAMSA normally derives a product-specific cost in its accounting system (TAMSA calls these "standard" costs), but also for those costs which TAMSA normally accounts for in the aggregate and does not assign to specific products in the regular course of business (TAMSA calls these "nonstandard" costs). ¹³⁹

TAMSA’s standard costs, which constitute the bulk of manufacturing costs and which, as indicated above, are normally allocated to specific products, include direct material costs and direct labor costs. ¹⁴⁰ TAMSA’s nonstandard costs, a smaller basket of costs which are accounted for in the aggregate and are normally not assigned to specific products, include input, price and efficiency variances as well as depreciation and other fixed overhead costs. ¹⁴¹

In its initial cost questionnaire response of February 1, 1995, ¹⁴² and its supplemental questionnaire response of March 3, 1995. ¹⁴³ TAMSA allocated its nonstandard costs to individual products on the basis of the machine time for a single process: the finishing line. ¹⁴⁴ In its brief to the Panel, the Department spelled out the exact calculation that TAMSA performed. ¹⁴⁵

In submissions commenting on TAMSA’s responses, North Star questioned the appropriateness of TAMSA’s allocation methodology and requested that the Department investigate it. ¹⁴⁶ At the Veracruz cost verification, TAMSA officials informed the Department that OCTG production, and therefore cost, is dependent on the slowest process, which is the finishing line. The finishing line at TAMSA’s factory, therefore, acted as a "bottleneck" or production limit on the other (prior) production process. ¹⁴⁷

For the submitted costs, TAMSA allocated all variances and fixed costs based on finishing line machine time. TAMSA officials stated that production, and therefore costs, are dependent on the slowest machine in the process. TAMSA officials refer to the slowest machine as the bottleneck. TAMSA maintains that the finishing line is the slowest process. TAMSA claims that beveling and finishing line pipe is far more time consuming and expensive than threading and finishing OCTG. TAMSA allocated N$[ ] of nonstandard costs using this methodology. TAMSA’s methodology resulted in allocating [ ]% of the nonstandard costs to subject merchandise and [ ]% of the nonstandard costs to non-subject merchandise.

The use by TAMSA of this finishing line allocation methodology was, in its view, a practical necessity. ¹⁴⁸

Both the claim that the finishing line acted as a bottleneck for the entire production line and the claim concerning beveling and finishing were listed, in the Cost Verification Report, as issues for further consideration by the Department. ¹⁴⁹ In order to reconcile standard costs to actual POI costs, Department officials at the Veracruz cost verification requested and obtained a listing of standard costs for all OCTG production during the POI. However, the Department did not request similar information for products that were sold within the POI but produced outside the POI. ¹⁵⁰ In view of the controversy concerning its allocation methodology, TAMSA, in its pre-hearing Rebuttal Brief, ¹⁵¹ submitted opinions of its Mexican auditors, Price Waterhouse, that its finishing line allocation methodology was consistent with Mexican Generally Accepted Accounting Principles ("GAAP"), and was "most suitable" for TAMSA’s particular manufacturing process; and a further opinion of its U.S. auditors, also Price Waterhouse, that TAMSA’s allocation methodology was reasonable under GAAP and was utilized by other companies. ¹⁵²

In its Final Determination, the Department made three different findings critical of TAMSA’s finishing line allocation methodology:

1. TAMSA’s allocation methodology "distorts actual production costs because it shifts overhead expenses to products which undergo more finishing";

2. TAMSA’s allocation methodology "did not reflect the machine time for other processes performed"; and

3. While machine time is an accepted allocation basis for depreciation costs, it "is not the appropriate allocation basis for costs other than depreciation"; therefore, TAMSA should not have used (finishing line) machine time to allocate material and energy price variances, efficiency variance, or other fixed costs, because these other items have different "cost drivers". ¹⁵³

As a result, the Department decided to reject TAMSA’s allocation methodology and to re-allocate nonstandard costs, using standard costs as the basis for that re-allocation. ¹⁵⁴

In its Panel Rule 57(2) Brief, at 93, the Department has acknowledged that its original calculation using this standard cost methodology, with respect to a certain subset of sales (i.e., sales of OCTG produced before the POI but sold by TAMSA within the POI), leads to inappropriately adverse results to TAMSA, and has requested a remand to amend its calculation.

4. Offset for Non-Operating Income

As indicated above, TAMSA’s original G&A expense calculation was based on the data contained in its audited, unconsolidated 1993 financial statement. ¹⁵⁵

As part of this calculation, TAMSA made an offset against the G&A expenses in the amount of the income from the sale of its ownership interest in two companies, both of which it considered to be production-related. ¹⁵⁶

Evidence in support of this position was provided by TAMSA to the Department at the Veracruz cost verification. ¹⁵⁷

However, the subsequent Cost Verification Report described the non-operating income that TAMSA had included as an offset to the G&A expenses as a "gain ... from the sale of an investment in common stock in two companies the parent had made," and noted further that "the gain TAMSA included in G&A was recorded as a non-operating income on its parents’ books." ¹⁵⁸ This summary of the facts contained an inaccuracy: TAMSA has no parent company. ¹⁵⁹

The later Team Concurrence Memorandum continued the error concerning TAMSA’s corporate structure; nevertheless, that document for the first time highlighted the Department’s essential reasoning:

First, a gain from the sale of an ownership interest is a gain on an investment, and not a gain from a production asset.... Second, the ownership interests were not held by TAMSA directly.... While TAMSA may have derived some benefit from its parent’s ownership interest in the related companies, the investment was not an asset used in production by TAMSA. ¹⁶⁰

After first noting that the Participants’ arguments on this point would be "completely moot" if information from the 1994 financial statements were used, the Department was nevertheless clearly stating in this document that if it had used the 1993 G&A expense rate, it would have excluded the gains from TAMSA’s sale of its ownership interest in the two companies since the income at issue resulted from an "investment," not from the sale of "fixed" productive assets. ¹⁶¹

In the Final Determination, because of the Department’s decision not to use the 1993 financial statement as the basis for calculating the 1994 G&A expense, ¹⁶² which decision was reached subsequent to the issuance of the Team Concurrence Memorandum, the Department found that this issue was moot and expressly did not address it. ¹⁶³

Since it is within the competence of the Panel to determine that the 1993 data should be used for the calculation of the G&A expense (as opposed to the 1994 data), and since the Department has already "articulated its view" that this offset for non-operating income would be improper, TAMSA argues that "[i]n the interest of judicial economy, the issue is ripe for consideration and properly before this Panel." ¹⁶⁴

Continue on to Section III: Standard of Review

⁸² Department Panel Rule 57(2) Brief, at 8.

⁸³The Department noted that "TAMSA’s 1991-93 consolidated statement consolidates the financial operations of TAMSA and ten subsidiaries. Pub. Doc. 176, [Fiche 31, Frame 1,] Attachment D8 at 6. In May of 1993, the Argentine OCTG producer Siderca acquired a substantial interest in TAMSA. Id., Attachment D8 at 14. It is common for a parent company to obtain credit which will also be used by its related entities. Money obtained in this way is often reflected on the books of a subsidiary firm as debt to the parent, rather than to a lending institution, and interest is not necessarily paid to the parent firm. Thus, in determining financial expense with respect to a firm which is part of a consolidated group, the Department generally bases this figure on a ratio of the annual financial expenses of the consolidated entity to the annual cost of goods sold of the consolidated entity. This ratio is then applied to the COM of the firm under investigation for the POI, usually six-months." Id., at 8 note 4.

⁸⁴ See Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 13, citing New Minivans from Japan, 57 Fed. Reg. 21937 (May 26, 1992) and Small Business Telephones from Korea, 54 Fed. Reg. 53141 (December 27, 1989).

⁸⁵Pub. Doc. 72, Fiche 14, Frame 1, Attachment A11 ("TAMSA Consolidated and Unconsolidated Financial Statements for 1992 and 1993").

⁸⁶Pub. Doc. 78, Fiche 14, Frame 25. The Section E questionnaire concerns further manufacturing in the United States.

⁸⁷ Id., Section E2 - Cost of Further Manufacturing Performed in the United States, at 12.

⁸⁸ TAMSA Panel Rule 57(1) Brief, at 12.

⁸⁹ Pub. Doc. 100, Fiche 18, Frame 23, at 2.

⁹⁰Pub. Doc. 110, Fiche 21, Frame 1, Attachment A30 ("TAMSA and Siderca SAIC Profit and Loss Statements - First Two Quarters of 1994"). These statements, consisting of the balance sheet and income statement for only the first two quarters of 1994, were, of course, unaudited.

⁹¹ Pub. Doc. 146, Fiche 26, Frame 35, at 15. The Section D questionnaire concerns both COP and CV.

⁹² Id., at 7.

⁹³ Pub. Doc. 176, Fiche 31, Frame 1, at 21 ("TAMSA has reported its interest expense on a consolidated basis for fiscal year 1993, the most recently completed fiscal year.").

⁹⁴ Id., at Attachment D8 ("TAMSA Consolidated and Unconsolidated Financial Statements for 1992 and 1993").

⁹⁵ Pub. Doc. 181, Fiche 32, Frame 12.

⁹⁶ Pub. Doc. 197, Fiche 33, Frame 1, Attachment E37 ("TAMSA Financial Statements - First Three Quarters 1994"); this attachment consisted of the balance sheets and income statements for the first three quarters of 1994. The record does not reflect at what point TAMSA’s unconsolidated "data for the fourth quarter of 1994" became available. See TAMSA Panel Rule 57(1) Brief, at 13 (stating that it is undisputed that such data was not available on March 3, 1995).

⁹⁷ TAMSA Panel Rule 57(1) Brief, at 13.

⁹⁸ Prop. Doc. 100 [not reproduced on microfiche].

⁹⁹ Id., Cost Verification Outline cover letter, at 1.

¹⁰⁰ Id., Cost Verification Outline, at 1.

¹⁰¹ Sales Verification Outline, Pub. Doc. 198, Fiche 36, Frame 1.

¹⁰²Id., Sales Verification Outline cover letter, at 1. The cover letter also noted that the enclosed agenda was not necessarily all inclusive and that the Department reserved "the right to request any additional information or materials necessary for a full verification." Id. In addition, the Department noted that "if information requested for verification is not supplied, or is unverified..., we may be obligated to use the

¹⁰³ Sales Verification Outline, Pub. Doc. 198, Fiche 36, Frame 3, at 1.

¹⁰⁴ Id., at 4.

¹⁰⁵North Star informs the Panel that "a ‘trial balance’ typically is an internal company accounting record which forms the basis of the audited financial statements. It incorporates all of the key financial information from the company’s subsidiary ledgers, including its record of sales, costs, assets, and liabilities. A trial balance usually contains all balance sheet data and income statement information shown in an audited financial statement, but in much greater detail." North Star Panel Rule 57(2) Brief, at 34 note 84.

¹⁰⁶ Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 9. The 1994 trial balance was given in apparent response to the following Department request: "The Department next requested the complete 1994 financial statements at the verification of TAMSA’s cost information, March 13-18, 1994 (sic) in Veracruz, Mexico." See Team Concurrence Memorandum, Pub. Doc. 251, Fiche 26, Frame 51, at 11.

¹⁰⁷ Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 9-10.

¹⁰⁸ Id., at 10; see also TAMSA Panel Rule 57(1) Brief, at 15.

¹⁰⁹ TAMSA’s brief to the Panel states that "TAMSA volunteered that unaudited financial results for 1994 would be published and filed with the Mexican and U.S. securities oversight agencies shortly after verification. TAMSA emphasized that both filings would be available on the public record, but also offered to submit them to the Department after they were made." TAMSA Panel Rule 57(1) Brief, at 14- 15 (emphasis added).The Department Panel rule 57(2) Brief, at 11, states: "Instead, [the Department] indicated that TAMSA could provide them with the unaudited consolidated filings (and the audited TAMSA-specific statement) during the further manufacturing verification in Houston."

¹¹⁰ Quoting TAMSA in full: "With reference to page 10 of the cost verification report TAMSA wishes to clarify that, at verification, TAMSA officials stated that TAMSA’s non-final, unaudited 1994 results, which must be released in accordance with the requirements of the U.S. and Mexican securities authorities, would be available during the Department’s further manufacturing cost verification in April 1995. As indicated in the cost verification report, these results were provided to the Department during the further manufacturing verification, in the form released. Company officials did not state that the 1994 audited financial statements would be available at that time." TAMSA Case Brief, Pub. Doc. 223, Fiche 39, Frame 36, at 21.TAMSA also asserted at the public hearing that at the time it provided the Department with the unaudited 1994 trial balance, it (i) clarified to the Department that the 1994 audited financial statement was not yet completed; (ii) volunteered that after verification it would be filing, with the securities authorities in both countries, unaudited 1994 results; and (iii) did not (and could not) promise that the audited financial statement was going to be available by the time of the U.S. verification. Public Hearing Transcript, Pub. Doc. 231, Fiche 44, Frame 1, at 33.

¹¹¹ The agenda for the April 18-20, 1995 Houston further manufacturing (cost) verification was set out in a letter from the Department to TAMSA dated April 13, 1995. See Pub. Doc. 270 [not reproduced on microfiche].As drafted, this document was similar in style and content to the February 22, 1995 Cost Verification Outline. See supra note 98.

¹¹²Department Panel Rule 57(2) Brief, at 11, citing Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 11.

¹¹³ See Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 11 ("At the Department’s verification of further manufacturing cost conducted April 18-20, 1995 in Houston, Texas, we were told that the audited financial statements were not available and that no financial statement was filed with the securities oversight agencies. Therefore, the Department was not able to obtain the audited or unaudited 1994 financial statements from TAMSA and could not review the company’s accounting for the devaluation of the Mexican peso which occurred in 1994.") Id. This quotation highlights a difference between the Department’s Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 10, which indicates that the Department was unable to obtain the "audited" 1994 financial statements from TAMSA at the Houston cost verification, and the Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 11, which indicates that the Department was unable to obtain the "audited or unaudited" 1994 financial statements at that verification.

¹¹⁴ See Further Manufacturing Cost Exhibit 20.

¹¹⁵TAMSA asserts that, at the Houston cost verification, the Department "explicitly requested: (1) the 1994 audited financial statement; and (2) the financial statement filed with the SEC." TAMSA states that it accurately informed the Department that tht 1994 audited financial statement was not completed, and that it provided the Department with the 1994 financial results that soon would be filed with the SEC. The Department, TAMSA asserts, never requested the Mexican Stock Exchange filing. TAMSA Panel Rule 57(1) Brief, at 27,28.

¹¹⁶ North Star Case Brief, Pub. Doc. 224, Fiche 40, Frame 1, Exhibit 1.See supra note 62 and accompanying text.

¹¹⁷ In the Team Concurrence Memorandum, the Department elaborated on its reasoning: "TAMSA’s failure to provide the financial statements when they became available effectively prevented the Department from reviewing this data during the verification process. If this information had been presented at such time, the Department would have been able to test and possibly quantify the effects of any unusual results, stemming from either the peso devaluation or any other factors. We also would have been able to raise issues or concerns noted with the data contained in those statements. In that way, the Department would have allowed parties to provide substantive comments on the issues and could have fully addressed those substantive issues in our determination." Pub. Doc. 251, Fiche 46, Frame 51, at 13.

¹¹⁸ Id., at 13-15

¹¹⁹Id., at 13-14 ("The Department normally relies on the most recent audited financial statement to calculate the financial expense. This is because, absent evidence to the contrary, we believe the prior year to be reasonably representative of the company’s normal experience. TAMSA’s quarterly filings with the Mexican Stock Exchange show its financial expense totalled 27 percent of cost of goods sold for the quarter ended March 31, 1994, 37 percent for the quarter ended June 30, 1994 and 58 percent for the quarter ended September 1994. These are significantly higher rates than the rate based on the 1993 audited financial statement. Therefore, the 1993 financial expense rate is not representative of the costs incurred during the POI.")

¹²⁰ Id., at 15 ("Although this option would be the most punitive, like option 4, it also carries the problem of holding the company responsible for pricing decisions it made which did not take into account an event of enormous magnitude, occurring after the POI which could not have reasonably been foreseen.") (emphasis in original).

¹²¹Id., at 14 ("This option reflects TAMSA’s financial costs as reported in the quarterly statements filed with the Mexican Stock Exchange. The option reflects costs incurred by TAMSA specifically during the POI. We reviewed the exchange rate between the Mexican peso and the U.S. dollar during the POI and noted that during the POI the Mexican peso lost approximately 9 percent of its value. This option, therefore, is punitive in that it captures the change in the value of the Mexican currency during the POI. We note that it does not include the largest effect of the currency devaluation, which was the severe and sudden devaluation of December 1994. Although the quarterly filings do not reflect audited results, company officials have filed them with the government’s securities oversight agencies, and certified their accuracy under threat of penalties if they are misstated.").

¹²² Fin. Det., 60 Fed. Reg. at 33572.

¹²³ Department Panel Rule 57(2) Brief, at 12.

¹²⁴ Id.

¹²⁵ Pub. Doc. 146, Fiche 26, Frame 35.

¹²⁶ Id., at 15 (emphasis added).

¹²⁷ Pub. Doc 176, Fiche 31, Frame 1, Attachment D14.

¹²⁸ Department Panel Rule 57(2) Brief, at 13. See also Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 11.

¹²⁹ Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 5, 20; see Attachment A17. TAMSA’s Panel Rule 57(1) Brief, at 41, states that the Department specifically "requested and received the 1994 unconsolidated trial balance, which set forth TAMSA’s unconsolidated, unaudited 1994 financial data, including G&A expenses." For a description of a "trial balance," see supra note 105.

¹³⁰ TAMSA asserts that the Department "did not seek to analyze or verify the unaudited 1994 G&A expenses." TAMSA Panel Rule 57(1) Brief, at 41. In its brief to the Panel, the Department asserted that the 1994 data was verified. Department Panel Rule 57(2) Brief, at 68-72.

¹³¹ Department Rule 57(2) Brief, at 72.

¹³² TAMSA Panel Rule 57(1) Brief, at 46-47.

¹³³ Fin. Det., 60 Fed. Reg. at 33573 (response to Comment 8, cross-referencing Comment 6).

¹³⁴Fin. Det., 60 Fed. Reg. at 33572 (response to Comment 6). It will be recalled that the Department also noted in its response to Comment 6 that using 1993 data for financial expense would be inappropriate because it "would reward the respondent for not fully cooperating in the investigation."Id.However, because TAMSA cooperated by providing the full year 1994 unconsolidated G&A trial balance, thus allowing the Department to verify this data, the Department’s decision not to use 1993 data for G&A expenses did not involve BIA.

¹³⁵Id., at 33573. In a memorandum dated June 19, 1995 (the same date as the Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51), a Department official stated that BIA was applied to the recalculation of TAMSA’s G&A expense rate. Pub. Doc. 249, Fiche 46, Frame 1, at 2. However, the Final Determination itself states otherwise and the Department’s brief to the Panel confirms that this reference was simply a mistake. See Department Panel Rule 57(2) Brief, at 65 note 38.

¹³⁶ Pub. Doc. 146, Fiche 26, Frame 35, at 1, 2.

¹³⁷ Pub. Doc. 176, Fiche 31, Frame 1, at 2.

¹³⁸ Pub. Doc. 146, Fiche 26, Frame 35, at 1 ("for each product sold in the home/third country market") and 2 ("for each product sold in the U.S. market").

¹³⁹ See id., at 1, and Fin. Det., 60 Fed. Reg. at 33573. See also TAMSA’s Panel Rule 57(1) Brief, at 49.

¹⁴⁰ Fin. Det., 60 Fed. Reg. at 33573.

¹⁴¹ TAMSA informs the Panel that depreciation is the decrease in value over time of plant and equipment. Manufacturing overhead comprises all manufacturing costs other than direct materials and direct labor. It is divided into variable and fixed overhead. Fixed overhead costs are those that are not affected by the volume of activity, and include certain supervisory salaries, depreciation, real estate taxes, insurance, and basic maintenance. Variances account for the difference between budgeted costs and actual costs incurred in production (for example, standard and actual input prices). See TAMSA Panel Rule 57(1) Brief, at 49.

¹⁴² Prop. Doc. 61, Fiche 87, Frame 1.

¹⁴³ Prop. Doc. 68, Fiche 90, Frame 1.

¹⁴⁴ Fin. Det., 60 Fed. Reg. at 33572-73. TAMSA notes in its Panel Rule 57(1) Brief, at 50 note 112, that there are three basic processes at TAMSA’s plant: (1) production of steel bar (steel shop); (2) rolling of pipe (rolling mill); and (3) straightening, cutting, finishing and testing pipe (finishing line). See Cost Verification Exhibit A11 (plant layout) and Cost Verification Exhibit A9 (layout of the finishing line).

¹⁴⁵ TAMSA divided total nonstandard costs for the six month POI by total hours of finishing line machine time for the same period, yielding a nonstandard cost allocation per hour of finishing time. This cost per finishing hour was then multiplied by the actual product-specific finishing line machine time of each of the OCTG products sold during the POI, yielding a product-specific nonstandard cost for each OCTG product sold during the POI. See Department Panel Rule 57(2) Brief, at 78.

¹⁴⁶ Prop. Doc. 65, Fiche 89, Frame 17; Prop. Doc. 70, Fiche 93, Frame 14.

¹⁴⁷ Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 15.

¹⁴⁸ At the public hearing, TAMSA noted that while it does "have the records at the various processes, the task of assigning depreciation for each of the many machines in each process and calculating an expense on a per process basis would have been exceedingly complex and perhaps realistically impossible within the time frame of a dumping investigation." Pub. Doc. 231, Fiche 44, Frame 1, at 46-47. TAMSA then stated that there was no point in doing this when there was "another method at hand that was just as good or better for their own operation[]." Id., at 47. TAMSA further noted that this methodology was already in use by the company for certain other purposes (e.g., to evaluate timing in production and prices). The Panel notes that North Star disputes TAMSA’s characterization. See North Star Panel Rule 57(2) Brief, at 55-56 note 140 ("TAMSA could have taken total non-standard manufacturing costs and allocated it to each product based on total machine time. The record clearly demonstrates that both figures were readily available to TAMSA.") (emphasis in original).

¹⁴⁹ Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 2. In this issue summary, the Department reiterated that TAMSA’s allocation methodology would result in a specified allocation of nonstandard costs between subject and non-subject merchandise.

¹⁵⁰ Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 19.

¹⁵¹ Pub. Doc. 227, Fiche 42, Frame 7.

¹⁵² Id., at Attachment 1.

¹⁵³ Fin. Det., 60 Fed. Reg. at 33573.

¹⁵⁴Id. ("We have used total standard cost as the appropriate allocation basis for the nonstandard costs. Total standard cost factors in machine time, labor hours, direct and indirect material cost and usage, labor cost and usage, energy cost and usage, other variable costs, maintenance, and other services. Therefore, we revised the COP and CV to include nonstandard costs as a percent of total standard costs.").

¹⁵⁵ See TAMSA’s September 23, 1994 Section A Response, Prop. Doc. 9, Fiche 56, Frame 1, at 3, 10-11, Attachment A11.

¹⁵⁶ See TAMSA’s March 3, 1995 Sections B, C, D and E Supplemental Response, Prop. Doc. 68, Fiche 90, Frame 1, at 12-13, Attachment E32.

¹⁵⁷ See TAMSA Panel Rule 57(1) Brief, at 68-69.

¹⁵⁸ Prop. Doc. 80, Fiche 97, Frame 1, at 19, 20 (emphasis added).

¹⁵⁹ See TAMSA Panel Rule 57(1) Brief, at 70. See also Panel Hearing Transcript, at 154.

¹⁶⁰ Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 51, at 21.

¹⁶¹ Id.

¹⁶² Because the decision whether to base G&A expenses on 1993 data or 1994 data had not been made at the time the Team Concurrence Memorandum was prepared, this document discussed both options. See Department Panel Rule 57(2) Brief, at 98.

¹⁶³Fin. Det., 60 Fed. Reg., at 33573, response to Comment 8 ("All other comments concerning G&A are moot, as they concerned the calculation of G&A using the 1993 financial statements.").

¹⁶⁴ TAMSA Panel Rule 57(1) Brief, at 70-71.