Mexican Steel Exporter Contests Partial AFA for Allegedly Unreported Freight, Insurance Revenues

In addition, Galvasid faulted Commerce for not opening proceedings into whether "action should be taken against Petitioners' counsel" for making false statements regarding the company's U.S. sales revenue.

In the investigation, Galvasid reported that all its U.S. sales were made either on a "Delivered Duty Paid" (DDP) or "Cost, Insurance, and Freight" (CIF) basis. For the DDP sales, the seller is responsible for "all costs associated with delivery of the goods to the location designated by the customer (including any import duties), and the risk of loss transfers to the buyer when the goods are delivered." For CIF sales, the seller is on the hook for "the costs associated with delivery of the goods to the port designated by the customer, and the risk of loss transfers to the buyer when the goods reach the destination port."

The prices for both DDP and CIF sales "necessarily include freight and insurance," the respondent said. Galvasid said it reported to Commerce that since freight was included in the invoice under the DDP and CIF sales terms, "the related expenses had been reported separately as items to be deducted from the reported gross unit price." The company added that it hadn't obtained outside insurance for its U.S. sales but self-insured its CIF sales by "compensating the customer for any losses during transit directly from its own funds."

The respondent also said it gave Commerce a "reconciliation of the total sales value of the U.S. sales reported in its sales listing to the total net sales revenue reported in its audited financial statements." Following the agency's on-site verification of Galvasid's facilities, Commerce said the respondent "included freight revenue and insurance revenue, which were separately listed on the sale invoices for Galvasid's U.S. sales, in Galvasid's calculation of U.S. gross unit price."

The complaint said the claim that freight and insurance revenue were separately listed on the invoices "was incorrect." The invoices examined at verification only listed the prices for U.S. sales on a DEP or CIF basis, without any separate breakdown of freight or insurance revenue, the company said.

The petitioners argued Galvasid inflated its U.S. price and asked Commerce to make an adjustment based on facts available to the respondent's U.S. gross unit prices. The agency agreed, using partial AFA and finding that the respondent "failed to disclose in its questionnaire responses that it had included freight revenue and insurance revenue in its reported U.S. gross unit prices."

Galvasid said Commerce didn't explain why it believed the company's prices included separate freight and insurance revenue, when the documents reviewed at verification "demonstrated conclusively" that the reported U.S. prices matched the DDP and CIF prices found on the company's invoices. The documents also showed that "those invoices did not provide any further breakdown of the DDP and CIF prices" and the "amounts paid by the customers matched the invoice prices and did not include any additional payments to compensate Galvasid for freight or insurance," the complaint said.

After the agency issued its final determination, the respondent wrote to Commerce, seeking a correction of the decision.

The company claimed that, as a "matter of law, the DDP and CIF sales terms made Galvasid responsible for freight for, and the risk of loss during, transit of the merchandise to the location designated by the customer," and that the "expenses incurred by Galvasid for freight to transport the merchandise to the U.S. customers had been separately reported in Galvasid’s U.S. sales listing." The respondent added that Commerce's initial questionnaire expressly said it wasn't necessary for the company to "disaggregate DDP and CIF invoices" to separately identify freight and insurance amounts. The letter was rejected.

Galvasid then sent Commerce another letter, requesting the agency open an inquiry "into the conduct of Petitioners' counsel." The respondent said petitioners' claims regarding Galvasid's U.S. sales revenue was "false, constituted improper conduct" and "warranted sanctions." The agency rejected the letter as untimely.

In the complaint, Galvasid specifically said the instructions in Commerce's initial questionnaire didn't require the separate reporting of the "amount of freight and insurance included in the invoice price as 'revenue' for Galvasid's U.S. sales." The company added that record evidence showed that the initial questionnaire response "fully disclosed to Commerce that the invoice prices for Galvasid’s U.S. sales reflected Galvasid’s obligation to transport the merchandise to the designated delivery point, and to bear the risk of loss during that transport."

Due to the lack of evidence showing that "Galvasid separately negotiated amounts for freight or insurance revenue with its U.S. customers," the agency can't rely on "internal company documents to determine whether there is a separate service-related revenue that may be 'capped,'" the brief said.