[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 85-92]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34460]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-412-818]
Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Stainless Steel Sheet
and Strip in Coils From the United Kingdom
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 4, 1999.
FOR FURTHER INFORMATION CONTACT: Charles Rast at (202) 482-5811 or
Nancy Decker at (202) 482-0196, Antidumping and Countervailing Duty
Enforcement Group III, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230.
Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are to the provisions effective
January 1, 1995, the effective date of the amendments made to the
Tariff Act by the Uruguay Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to the regulations codified at 19 CFR Part 351, 62 FR
27296 (May 19, 1997).
Preliminary Determination
We preliminarily determine that stainless steel sheet and strip in
coils (SSSS) from the United Kingdom is being, or is likely to be, sold
in the United States at less than fair value (LTFV), as provided in
section 733 of
[[Page 86]]
the Tariff Act. The estimated margins of sales at LTFV are shown in the
``Suspension of Liquidation'' section of this notice.
Case History
On June 30, 1998, the Department initiated antidumping duty
investigations of imports of SSSS from France, Germany, Italy, Japan,
Mexico, South Korea, Taiwan, and the United Kingdom. See Initiation of
Antidumping Duty Investigations: Stainless Steel Sheet and Strip in
Coils From France, Germany, Italy, Japan, Mexico, South Korea, Taiwan,
and the United Kingdom, 63 FR 37521, (July 13, 1998). Since the
initiation of this investigation the following events have occurred.
The Department set aside a period for all interested parties to
raise issues regarding product coverage. On July 29, 1998, Allegheny
Ludlum Corporation, Armco, Inc., J&L Specialty Steel, Inc., Washington
Steel Division of Bethlehem Steel Corporation, United Steelworkers of
America, AFL-CIO/CLC, Butler Armco Independent Union, and Zanesville
Armco Independent Organization, Inc. (collectively ``petitioners'')
filed comments proposing clarifications to the scope of these
investigations. Also, from July through October 1998, the Department
received numerous responses from respondents aimed at clarifying the
scope of the investigations. See Memorandum to Joseph A. Spetrini,
December 14, 1998.
During July 1998, the Department requested and received information
from the U.S. Embassy in London to identify producers/exporters of the
subject merchandise. On July 21, 1998, the Department also requested
comments from petitioners, potential respondents, and the British
Embassy in Washington regarding the criteria to be used for model
matching purposes. On July 27, 1998, petitioners and a potential
respondent, Avesta Sheffield Ltd. and Avesta Sheffield NAD, Inc.
(collectively ``Avesta''), submitted comments on our proposed model
matching criteria.
Also on July 24, 1998, the United States International Trade
Commission (the Commission) notified the Department of its affirmative
preliminary injury determination in this case.
The Department subsequently issued its antidumping questionnaire to
Avesta and to Lee Steel Strip Ltd. (``Lee'') on August 3, 1998. The
questionnaire was divided into five parts, in which we requested that
Avesta and Lee respond to section A (general information, corporate
structure, sales practices, and merchandise produced), section B (home
market or third-country sales), section C (U.S. sales), and section D
(cost of production/constructed value).
Avesta and Lee submitted their responses to section A of the
questionnaire on September 8, 1998; Avesta's responses to sections B
through D followed on September 28, 1998.
On September 8, 1998, Lee requested to be excused from being a
mandatory respondent because it accounted for a minimal share of
imports of subject merchandise. On September 10, 1998, petitioners
stated that they did not object to Lee's request. On September 14,
1998, the Department granted Lee's request to withdraw from the
investigation because of its minimal share of imports of subject
merchandise (see Memorandum to Richard Weible, September 14, 1998). On
September 21, 1998, the Department decided to (1) limit the examination
of producers/exporters of subject merchandise, and (2) not investigate
voluntary respondents in this investigation, as well as in the related
investigations of Stainless Steel Sheet and Strip in Coils From France,
Germany, Italy, Japan, Mexico, South Korea, and Taiwan (see Memorandum
to Joseph A. Spetrini, September 21, 1998).
Petitioners filed comments on Avesta's questionnaire responses on
September 23 and October 13, 1998. We issued a supplemental
questionnaire for section A to Avesta on October 9, 1998, and a
supplemental questionnaire for sections B through D on October 28,
1998. Avesta responded to our supplemental questionnaire for section A
on November 2, 1998, and to our supplemental questionnaire for sections
B through D on November 23, 1998.
On August 28, 1998, Avesta requested that the Department exempt it
from reporting certain U.S. resales of rejected merchandise. On
September 4, 1998, petitioners argued that the Department should deny
Avesta's request because these sales are needed for making a fair
comparison of the company's U.S. and home market sales. On October 26,
1998, the Department indicated in a decision memorandum that Avesta
should report these U.S. sales subject to its exclusion request.
However, if the Department determines based on verification that
Avesta's claims about the nature of the resales are correct, they will
not be used in the final antidumping margin calculations. (See
Memorandum to Joseph A. Spetrini, October 26, 1998.)
On October 6, 1998, petitioners made a timely request for a thirty-
day postponement of the preliminary determination pursuant to section
733(c)(1)(A) of the Tariff Act. On October 23, 1998, we postponed the
preliminary determination until no later than December 17, 1998. See
Stainless Steel Sheet and Strip From Italy, France, Germany, Mexico,
Japan, the Republic of Korea, the United Kingdom, and Taiwan; Notice of
Postponement of Preliminary Determinations in Antidumping Duty
Investigations, 63 FR 56909 (October 23, 1998).
Scope of the Investigation
For purposes of this investigation, the products covered are
certain stainless steel sheet and strip in coils. Stainless steel is an
alloy steel containing, by weight, 1.2 percent or less of carbon and
10.5 percent or more of chromium, with or without other elements. The
subject sheet and strip is a flat-rolled product in coils that is
greater than 9.5 mm in width and less than 4.75 mm in thickness, and
that is annealed or otherwise heat treated and pickled or otherwise
descaled. The subject sheet and strip may also be further processed
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that
it maintains the specific dimensions of sheet and strip following such
processing.
The merchandise subject to this investigation is classified in the
Harmonized Tariff Schedule of the United States (``HTSUS'') at
subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70,
7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90,
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35,
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44,
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35,
7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44,
7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30,
7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30,
7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25,
7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00,
7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80,
7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60,
7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15,
7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30,
7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and
7220.90.00.80. Although the HTS subheadings are provided for
convenience and Customs purposes, the Department's written description
of the merchandise under investigation is dispositive.
[[Page 87]]
Excluded from the scope of this investigation are the following:
(1) sheet and strip that is not annealed or otherwise heat treated and
pickled or otherwise descaled, (2) sheet and strip that is cut to
length, (3) plate (i.e., flat-rolled stainless steel products of a
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled
sections, with a prepared edge, rectangular in shape, of a width of not
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a
flat rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5
percent chromium, and certified at the time of entry to be used in the
manufacture of razor blades. See Chapter 72 of the HTSUS, ``Additional
U.S. Note'' 1(d).
In response to comments by interested parties the Department has
determined that certain specialty stainless steel products are also
excluded from the scope of this investigation. These excluded products
are described below:
Flapper valve steel is defined as stainless steel strip in coils
containing, by weight, between 0.37 and 0.43 percent carbon, between
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent
manganese. This steel also contains, by weight, phosphorus of 0.025
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur
of 0.020 percent or less. The product is manufactured by means of
vacuum arc remelting, with inclusion controls for sulphide of no more
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper
valve steel has a tensile strength of between 210 and 300 ksi, yield
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a
hardness (Hv) of between 460 and 590. Flapper valve steel is most
commonly used to produce specialty flapper valves in compressors.
Also excluded is a product referred to as suspension foil, a
specialty steel product used in the manufacture of suspension
assemblies for computer disk drives. Suspension foil is described as
302/304 grade or 202 grade stainless steel of a thickness between 14
and 127 microns, with a thickness tolerance of plus-or-minus 2.01
microns, and surface glossiness of 200 to 700 percent Gs. Suspension
foil must be supplied in coil widths of not more than 407 mm, and with
a mass of 225 kg or less. Roll marks may only be visible on one side,
with no scratches of measurable depth. The material must exhibit
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm
over 685 mm length.
Certain stainless steel foil for automotive catalytic converters is
also excluded from the scope of this investigation. This stainless
steel strip in coils is a specialty foil with a thickness of between 20
and 110 microns used to produce a metallic substrate with a honeycomb
structure for use in automotive catalytic converters. The steel
contains, by weight, carbon of no more than 0.030 percent, silicon of
no more than 1.0 percent, manganese of no more than 1.0 percent,
chromium of between 19 and 22 percent, aluminum of no less than 5.0
percent, phosphorus of no more than 0.045 percent, sulfur of no more
than 0.03 percent, lanthanum of between 0.002 and 0.05 percent, and
total rare earth elements of more than 0.06 percent, with the balance
iron.
Permanent magnet iron-chromium-cobalt alloy stainless strip is also
excluded from the scope of this investigation. This ductile stainless
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10
percent cobalt, with the remainder of iron, in widths 228.6 mm or less,
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic
remanence between 9,000 and 12,000 gauss, and a coercivity of between
50 and 300 oersteds. This product is most commonly used in electronic
sensors and is currently available under proprietary trade names such
as ``Arnokrome III.''1
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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
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Certain electrical resistance alloy steel is also excluded from the
scope of this investigation. This product is defined as a non-magnetic
stainless steel manufactured to American Society of Testing and
Materials (ASTM) specification B344 and containing, by weight, 36
percent nickel, 18 percent chromium, and 46 percent iron, and is most
notable for its resistance to high temperature corrosion. It has a
melting point of 1390 degrees Celsius and displays a creep rupture
limit of 4 kilograms per square millimeter at 1000 degrees Celsius.
This steel is most commonly used in the production of heating ribbons
for circuit breakers and industrial furnaces, and in rheostats for
railway locomotives. The product is currently available under
proprietary trade names such as ``Gilphy 36.'' 2
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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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Certain martensitic precipitation-hardenable stainless steel is
also excluded from the scope of this investigation. This high-strength,
ductile stainless steel product is designated under the Unified
Numbering System (UNS) as S45500-grade steel, and contains, by weight,
11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,
manganese, silicon and molybdenum each comprise, by weight, 0.05
percent or less, with phosphorus and sulfur each comprising, by weight,
0.03 percent or less. This steel has copper, niobium, and titanium
added to achieve aging, and will exhibit yield strengths as high as
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after
aging, with elongation percentages of 3 percent or less in 50 mm. It is
generally provided in thicknesses between 0.635 and 0.787 mm, and in
widths of 25.4 mm. This product is most commonly used in the
manufacture of television tubes and is currently available under
proprietary trade names such as ``Durphynox 17.'' 3
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\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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Finally, three specialty stainless steels typically used in certain
industrial blades and surgical and medical instruments are also
excluded from the scope of this investigation. These include stainless
steel strip in coils used in the production of textile cutting tools
(e.g., carpet knives).4 This steel is similar to ASTM grade
440F, but containing, by weight, 0.5 to 0.7 percent of molybdenum. The
steel also contains, by weight, carbon of between 1.0 and 1.1 percent,
sulfur of 0.020 percent or less, and includes between 0.20 and 0.30
percent copper and between 0.20 and 0.50 percent cobalt. This steel is
sold under proprietary names such as ``GIN4 Mo.'' The second excluded
stainless steel strip in coils is similar to AISI 420-J2 and contains,
by weight, carbon of between 0.62 and 0.70 percent, silicon of between
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent,
phosphorus of no more than 0.025 percent and sulfur of no more than
0.020 percent. This steel has a carbide density on average of 100
carbide particles per square micron. An example of this product is
``GIN5'' steel. The third specialty steel has a chemical composition
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,
molybdenum of between 1.15 and 1.35 percent, but lower manganese of
between 0.20 and 0.80 percent, phosphorus of no more than 0.025
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no
more than 0.020 percent. This product is supplied with a hardness of
more than Hv 500 guaranteed after customer processing,
[[Page 88]]
and is supplied as, for example, ``GIN6''.5
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\4\ This list of uses is illustrative and provided for
descriptive purposes only.
\5\ ``GIN4 Mo'', ``GIN5'' and ``GIN6'' are the proprietary
grades of Hitachi Metals America, Ltd.
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Period of Investigation
The period of investigation (POI) is April 1, 1997, through March
31, 1998.
Postponement of Final Determination and Extension of Provisional
Measures
Pursuant to Section 735(a)(2) of the Tariff Act, on December 8 and
9, 1998, Avesta requested that, in the event of an affirmative
preliminary determination in this investigation, the Department
postpone its final determination until not later than 135 days after
the date of the publication of an affirmative preliminary determination
in the Federal Register, and request to extend the provisional measures
to not more than six months. In accordance with 19 CFR 351.210(b),
because (1) our preliminary determination is affirmative, (2) Avesta
accounts for a significant proportion of exports of the subject
merchandise, and (3) no compelling reasons for denial exist, we are
granting the respondent's request and are postponing the final
determination until no later than 135 days after the publication of
this notice in the Federal Register. Suspension of liquidation will be
extended accordingly.
Fair Value Comparisons
To determine whether sales of SSSS from the United Kingdom to the
United States were made at less than fair value, we compared export
price (EP) or constructed export price (CEP) to the normal value (NV),
as described in the ``Export Price and Constructed Export Price'' and
``Normal Value'' sections of this notice, below. In accordance with
section 777A(d)(1)(A)(i) of the Tariff Act, we calculated weighted-
average EPs and CEPs for comparison to weighted-average NVs.
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.).
In that case, based on the pre-URAA version of the Tariff Act, the
Court discussed the appropriateness of using constructed value (CV) as
the basis for foreign market value when the Department finds home
market sales to be outside the ``ordinary course of trade.'' The URAA
amended the definition of sales outside the ``ordinary course of
trade'' to include sales below cost. See Section 771(15) of the Tariff
Act. Consequently, the Department has reconsidered its practice in
accordance with this court decision and has determined that it would be
inappropriate to resort directly to CV, in lieu of foreign market
sales, as the basis for NV if the Department finds foreign market sales
of merchandise identical or most similar to that sold in the United
States to be outside the ``ordinary course of trade.'' Instead, the
Department will use sales of similar merchandise, if such sales exist.
The Department will use CV as the basis for NV only when there are no
above-cost sales that are otherwise suitable for comparison.
Transactions Investigated
For its home market and U.S. sales, Avesta reported the date of
invoice as the date of sale, in keeping with the Department's stated
preference for using the invoice date as the date of sale. Avesta
stated that the invoice date best reflects the date on which the
material terms of sale are established and that price and/or quantity
can and do change between order date and invoice date. However,
petitioners have alleged that the sales documentation indicates that
the order date appears to be the date when the material terms of sale
are set for the majority of Avesta's sales of SSSS. Given the relevance
of petitioners comments and the nature of marketing these types of
made-to-order products, petitioners claims have some merit.
Consequently, on October 9 and 28, 1998, the Department requested that
Avesta provide additional information concerning the nature and
frequency of price and quantity changes occurring between the date of
order and date of invoice. We also asked Avesta to report order date
for all home market and U.S. sales and to ensure that all sales with
order or invoice dates within the POI are reported. On November 2 and
23, 1998, Avesta reiterated that invoice date is the appropriate date
of sale and stated that it is unable to gather the data within a
reasonable period of time. Avesta did not report order date for home
market sales. However, Avesta reported the order date for U.S. sales,
including sales with order dates within the POI but invoices after the
POI. The Department is preliminarily using the invoice date as the date
of sale for both home market and U.S. sales. We intend to fully examine
this issue at verification, and we will incorporate our findings, as
appropriate, in our analysis for the final determination. If we
determine that order confirmation is the appropriate date of sale, we
may resort to facts available for the final determination to the extent
that this information has not been reported.
In its September 28, 1998, response, Avesta noted that slabs, which
are initially produced in the U.K., are hot-rolled outside of the U.K.
(i.e., in Sweden), and then returned to the U.K. for annealing and
pickling. Avesta asserts that hot-rolled merchandise, which is sold
only in the home market, should be considered a product of Sweden and,
thus, sales of hot-rolled merchandise should be excluded from the
Department's analysis. Avesta also asserts that a small amount of
merchandise reported in the U.S. and/or home market databases is: (1)
hot-rolled and cold-rolled in Sweden, and then further cold-rolled,
annealed and finally processed in the U.K. (affecting U.S. and home
markets); and (2) hot-rolled and cold-rolled in Sweden and then further
processed in the U.K. (affecting the home market). Avesta claims that
this cold-rolled merchandise should also be considered a product of
Sweden and, as such, it should be excluded from the Department's
analysis. In Stainless Steel Plate from Sweden, we determined that hot
bands rolled in Sweden from British slab are within the scope of that
antidumping finding (see Memorandum to Joseph A. Spetrini, December 22,
1997, the public version of which is attached to our Preliminary
Determination Analysis Memorandum, December 17, 1998). Therefore, we
preliminarily determine, pending the results of verification, to
exclude from our analysis (1) Avesta's hot-rolled sales, and (2) those
sales of merchandise that are first cold-rolled in Sweden. The
Department invites parties to submit information and comment on this
issue. Interested parties are instructed to submit their comments,
along with any additional supporting information, to the Department by
January 7, 1998.
Product Comparisons
In accordance with section 771(16) of the Tariff Act, we considered
all products produced by the respondent covered by the description in
the ``Scope of the Investigation'' section, above, and sold in the home
market during the POI, to be foreign like products for purposes of
determining appropriate product comparisons to U.S. sales. Where there
were no sales of identical merchandise in the home market to compare to
U.S. sales, we compared U.S. sales to the next most similar foreign
like product on the basis of the characteristics and reporting
instructions listed in the Department's questionnaire.
Level of Trade
In accordance with section 773(a)(1)(B) of the Tariff Act, to the
extent practicable, we determine NV
[[Page 89]]
based on sales in the comparison market at the same level of trade
(LOT) as the EP or CEP transaction. The NV LOT is that of the starting-
price sales in the comparison market or, when NV is based on CV, that
of the sales from which we derive selling, general and administrative
(SG&A) expenses and profit. For EP it is the level of the sale from the
exporter to the importer. For CEP, it is the level of the constructed
sale from the exporter to the importer. If the sales being compared are
at different LOTs, and the difference affects price comparability, as
manifested in a pattern of consistent price differences between the
sales on which NV is based and the U.S. sales being compared, we make a
LOT adjustment under section 773(a)(7)(A) of the Tariff Act.
To determine whether NV sales are at a different LOT than EP or CEP
sales, we examine stages in the marketing process and selling functions
along the chain of distribution. If the comparison market sales are at
a different LOT, and the difference affects price comparability, as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison market sales at the LOT of
the export transaction, we make a LOT adjustment under section
773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level
is more remote from the factory than the CEP level and there is no
basis for determining whether the differences in the levels between NV
and CEP sales affect price comparability, we adjust NV under section
773(A)(7)(B) of the Tariff Act (the CEP offset provision). (See, e.g.,
Certain Carbon Steel Plate from South Africa, Final Determination of
Sales at Less Than Fair Value, 62 FR 61731 (November 19, 1997).)
In the home market, Avesta made sales to distributors and end-
users. The company claims five channels of distribution with respect to
these sales: (1) mill ``super direct'' sales (i.e., sales shipped
directly to affiliated and unaffiliated end-user customers and invoiced
from the producing mill); (2) mill ``direct'' sales to unaffiliated
distributor and end-user customers (i.e., sales shipped directly from
the mill, using Avesta Sheffield Distribution Ltd. (AVSD), an
affiliated sales company/service center, as a sales agent); (3) AVSD
``service center distributor'' sales (i.e., the producing mills sell to
AVSD, which resells the merchandise in original form or following
further processing) ; (4) Billing Stainless, an affiliated sales
company, sales (i.e., resales of offcuts and non-prime merchandise from
the mills); and (5) AVSD consignment sales. Avesta claims that each
channel of distribution represents a separate LOT. In the U.S. market,
Avesta reported sales made to distributors and end-users, claiming
three channels of distribution for these sales: (1) Mill ``direct''
sales (i.e., sales shipped directly from the mill to the unaffiliated
U.S. distributor and end-user customers, using Avesta Sheffield, Inc.
(ASI), an affiliated sales company, as a sales agent); (2) sales from
warehouse stock which includes ASI ``master distributor'' sales; and
(3) ASI consignment sales. Avesta claims two LOTs in the U.S.: (1) CEP
sales; and (2) EP sales. The first channel of distribution (i.e., mill
direct sales) includes both CEP and EP sales, while the other two
channels of distribution (i.e., ASI master distributor and ASI
consignment sales) consist solely of CEP sales. Avesta also asserts
that prices charged to customers in the United States and in the United
Kingdom tend to vary across channels of distribution and that these
variations typically reflect differences in the selling activities
performed. Avesta claims that CEP sales were made at a LOT comparable
to ``super direct'' mill sales in the home market. Avesta requests that
the Department make a LOT adjustment or, alternatively, grant a CEP
offset to the extent ASI's CEP sales cannot be compared to sales at the
same LOT.
In determining whether separate LOT actually existed in the home
market, we first examined whether Avesta's sales involved different
marketing stages (or their equivalent) and selling functions along the
chain of distribution between Avesta and its unaffiliated customers. We
found that Avesta provided no detailed narrative explanation supporting
its claim that the channels of distribution represent different LOTs,
nor did it explain why each of these channels represents a different
stage of marketing. Normally, stages of marketing focus on whether
sales are to service centers or end-users, in some instances taking
into account whether or not sales are made through intermediate
parties. On this basis, it appears that Avesta's mill super direct
sales may be at a different stage of marketing than its other sales
because these sales were sold directly from the mill to the
unaffiliated customer, whereas sales through the other four channels of
distribution involved an affiliated intermediary before going to the
unaffiliated customer. This would indicate that Avesta has, at most,
two home market LOTs, rather than five.
In further analyzing Avesta's LOT claims in the home market, we
reviewed available information on the record about the company's
selling functions at each marketing stage. Avesta identified 30
different selling functions (see Attachment SRA-5 of Avesta's November
2, 1998, supplemental section A response). We closely examined these
functions and concluded that the following ten functions do not appear
to be selling functions relevant to the Department's LOT analysis
because they do not characterize significant services provided to
customers: issuing purchase order confirmations; inputting orders;
sending a mill certificate; sending packing lists; issuing invoices;
buying coils from mills; acting as commission agent; buying merchandise
on account; repacking; and issuing product brochures and data sheets.
We also decided to combine several other functions because we found
that they were not sufficiently different to warrant being treated as
unique selling functions. Thus, we consolidated negotiating price/
discounts/rebates to unaffiliated and affiliated customers and
maintaining internal and external warehouses into two single
categories. Similarly, we have combined several sales and marketing
support functions (i.e., identifying customers, acting as mill and
customer liaison, promoting new products, maintaining sales department,
sales and marketing support, and developing sales strategies) into a
single sales and marketing support selling function. As a result of our
analysis, we concluded that Avesta performed 13 separate selling
functions in its home market, rather than 30.
Next, we tested whether these selling functions are provided
consistently across all five channels of distribution in the home
market, finding that the following eight functions were provided across
all channels of distribution: negotiating prices; performing credit
checks; extending credit; collecting payment; assuming warranty
obligations; maintaining inventory; arranging shipment logistics; and
providing sales and marketing support. Of the remaining five selling
functions, we noted the following differences: processing services are
not provided on super direct and mill direct sales; warehousing
services are not provided on mill direct sales; technical services and
market research are not provided on Billing Stainless sales; and R&D is
only provided on super direct sales.
In conclusion, while Avesta claimed differences in selling
functions in connection with each channel of distribution, we find that
the actual differences in selling functions between channels are
relatively minor. Thus, we conclude that the company did not
[[Page 90]]
adequately support these claims. Therefore, we preliminarily determine
that only one LOT existed for Avesta in the home market.
In determining whether two LOTs existed in the U.S. market, as
Avesta claims, we examined the selling functions performed by Avesta
for both EP and CEP sales. According to Avesta, it provides no selling
functions in support of its CEP sales, when the expenses associated
with the sales by ASI to the unaffiliated buyer are excluded pursuant
to the Department's practice. Avesta reported that the following
selling functions were provided for EP sales: sales and marketing
support (including negotiating prices); logistics; credit checks;
credit; collecting payment; and assuming warranty obligations. Based on
our analysis of the information on the record, we find that these
functions were not provided for Avesta's CEP sales. Consequently, we
determine that Avesta provided significantly different selling
functions for its EP sales than it did on CEP sales.
In analyzing the differences between stages of marketing, we have
also concluded that Avesta's EP and CEP sales are at two separate
stages of marketing. See Preliminary Analysis Memorandum, December 17,
1998, a public version of which is on file in room B-099 of the main
Commerce building. Based on our analysis, we have preliminarily
determined that Avesta has two separate LOTs in the United States.
We next compared EP sales to home market sales to determine whether
they were made at the same LOT. To perform this analysis, we compared
the selling functions offered by Avesta on its EP sales to the
functions performed by it on its home market sales. The information on
the record indicates that, for both EP and home market transactions,
Avesta performed numerous similar selling functions, such as sales and
marketing support, negotiating prices, logistics, credit checks,
extending credit, collecting payment and assuming warranty obligations.
We also noted that there were some selling functions performed by
Avesta that were not common to its EP and home market sales (e.g.,
inventory maintenance, processing services, R&D, warehousing, technical
support and market research). We believe these differences are
qualitatively and quantitatively significant. See Preliminary Analysis
Memorandum, December 17, 1998. Because we compared these EP sales to
home market sales at a different LOT, we examined whether a LOT
adjustment may be appropriate. In this case, Avesta sold at one LOT in
the home market; therefore, there is no basis upon which Avesta has
demonstrated a pattern of consistent price differences between LOTs.
Further, we do not have the information which would allow us to examine
pricing patterns of Avesta's sales of other similar products, and there
are no other respondents or other record evidence on which such an
analysis could be based. Therefore, we cannot make a LOT adjustment,
and a CEP offset, pursuant to section 773(a)(7)(B) of the Tariff Act,
is not appropriate because these are EP sales.
Avesta requested a CEP offset in this investigation. Section
773(a)(7)(B) of the Tariff Act establishes that a CEP ``offset'' may be
made when two conditions exist: (1) NV is established at a LOT which
constitutes a more advanced stage of distribution than the LOT of the
CEP; and (2) the data available do not provide an appropriate basis to
determine a LOT adjustment. In this case, we note that for CEP sales,
after excluding the expenses associated with the sales by ASI to the
unaffiliated buyers in the United States, Avesta performed no services
for the customer. Therefore, the differences in selling functions
between home market sales and CEP sales are even greater than those
described above. Because Avesta's home market sales are at a more
advanced stage of distribution than its CEP sales, these sales are at a
different LOT. See Preliminary Analysis Memorandum, December 17, 1998.
Because we compared these CEP sales to home market sales at a
different LOT, we examined whether a LOT adjustment may be appropriate.
See discussion above. Because the data available do not provide an
appropriate basis for making a LOT adjustment, but the home market LOT
is at a more advanced stage than the LOT of the CEP sales, a CEP offset
is appropriate in accordance with section 773(a)(7)(B) of the Tariff
Act, as claimed by Avesta. We based the CEP offset amount on the amount
of home market indirect selling expenses, and limited the deduction for
home market indirect selling expenses to the amount of indirect selling
expenses deducted from CEP in accordance with section 772(d)(1)(D) of
the Tariff Act. We applied the CEP offset to NV, whether based on home
market prices or CV.
Export Price and Constructed Export Price
Avesta reported as EP transactions its sales of subject merchandise
to unaffiliated U.S. customers, in which sales arrangements are
negotiated with sales representatives at the U.K.-producing mill,
although paperwork, invoicing, and shipment are handled by ASI. For EP
sales, Avesta has claimed that the prices are negotiated by sales
representatives in the United Kingdom before importation into the
United States, and the products were shipped directly to the customer
through ASI without being introduced into U.S. inventory. Avesta
reported as CEP transactions its sales of subject merchandise sold to
ASI for its own account. ASI then resold the subject merchandise to
unaffiliated customers in the United States.
We calculated EP, in accordance with section 772(a) of the Tariff
Act, for those sales where the merchandise was sold to the first
unaffiliated purchaser in the United States prior to importation and
CEP methodology was not otherwise warranted, based on the facts of
record. We based EP on the packed, delivered, duty paid price to
unaffiliated purchasers in the United States. We made deductions for
freight charged to the customer and other movement expenses in
accordance with section 772(c)(2)(A) of the Tariff Act; these included,
where appropriate, freight charged to the customer (the amount included
in reported gross unit price), foreign inland freight, foreign inland
insurance, international freight, marine insurance, U.S. inland
freight, U.S. inland insurance, unloading charges, U.S. duty, and
foreign and U.S. brokerage and handling.
We calculated CEP, in accordance with subsection 772(b) of the
Tariff Act, for those sales made by ASI to unaffiliated purchasers in
the United States. We based CEP on the packed, delivered, duty paid
prices to unaffiliated purchasers in the United States. We made
adjustments for discounts and rebates, where applicable. We also made
deductions for freight charged to the customer and other movement
expenses in accordance with section 772(c)(2)(A) of the Tariff Act;
these included, where appropriate, foreign inland freight, foreign
inland insurance, international freight, marine insurance, U.S. inland
freight, U.S. warehousing, U.S. inland insurance, unloading charges,
U.S. duty, and foreign and U.S. brokerage and handling. In accordance
with section 772(d)(1) of the Tariff Act, we deducted those selling
expenses associated with economic activities occurring in the United
States, including direct selling expenses (credit costs, warranty
expenses), inventory carrying costs, and indirect selling expenses. In
accordance with section 772(d)(2) of the Tariff Act, we deducted the
cost of further manufacturing (slitting costs). For CEP sales, we also
made an adjustment for
[[Page 91]]
profit in accordance with section 772(d)(3) of the Tariff Act.
Normal Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable basis for calculating NV
(i.e., the aggregate volume of home market sales of the foreign like
product was equal to or greater than five percent of the aggregate
volume of U.S. sales), we compared the respondent's volume of home
market sales of the foreign like product to the volume of U.S. sales of
the subject merchandise, in accordance with section 773(a)(1)(C) of the
Tariff Act. As Avesta's aggregate volume of home market sales of the
foreign like product was greater than five percent of its aggregate
volume of U.S. sales of the subject merchandise, we determined that the
home market was viable. Therefore, we have based NV on home market
sales in the usual commercial quantities and in the ordinary course of
trade.
Affiliated-Party Transactions and Arm's-Length Test
Sales to affiliated customers in the home market not made at arm's-
length prices (if any) were excluded from our analysis because we
considered them to be outside the ordinary course of trade. See 19 CFR
351.102. To test whether these sales were made at arm's-length prices,
we compared, on a model-specific basis, the starting prices of sales to
affiliated and unaffiliated customers net of all movement charges,
direct selling expenses, and packing. Where, for the tested models of
subject merchandise, prices to the affiliated party were on average
99.5 percent or more of the price to unaffiliated parties, we
determined that sales made to the affiliated party were at arm's
length. See 19 CFR 351.403(c). In instances where no price ratio could
be constructed for an affiliated customer because identical merchandise
was not sold to unaffiliated customers, we were unable to determine
that these sales were made at arm's-length prices and, therefore,
excluded them from our LTFV analysis. See, e.g., Final Determination of
Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat
Products from Argentina, 58 FR 37062, 37077 (July 9, 1993); Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber
from Brazil, 63 FR 59509 (Nov. 8, 1998), citing to Final Determination
of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat
Products from Argentina, 58 FR 37062 (July 9, 1993). Where the
exclusion of such sales eliminated all sales of the most appropriate
comparison product, we made a comparison to the next most similar
model.
Cost of Production Analysis
Based on a cost allegation filed by petitioners, the Department
found reasonable grounds to believe or suspect that Avesta's sales of
the foreign like product were made at prices which represent less than
the cost of production (COP). See section 773(b)(2)(A) of the Tariff
Act. As a result, the Department has initiated an investigation to
determine whether the respondent made home market sales during the POI
at prices below their respective COPs, within the meaning of section
773(b) of the Tariff Act. (See Initiation, 63 FR 37521, July 13, 1998).
In accordance with section 773(b)(3) of the Tariff Act, we
calculated COP based on the sum of Avesta's cost of materials and
fabrication for the foreign like product, plus an amount for G&A,
interest expenses, and packing costs. In addition, on a transaction
specific basis, we added to COP, tolling costs for slitting work done
by an unaffiliated party.
We used the information from Avesta's section D questionnaire
responses to calculate COP. We compared the weighted-average COP for
Avesta to home market sales prices of the foreign like product, as
required under section 773(b) of the Tariff Act. In determining whether
to disregard home market sales made at prices less than the COP, we
examined whether such sales were made (i) in substantial quantities
over an extended period of time, and (ii) at prices which permitted the
recovery of all costs within a reasonable period of time. On a product-
specific basis, we compared COP to home market prices, less any
applicable movement charges, billing adjustments, and discounts and
rebates.
Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less
than twenty percent of a respondent's sales of a given product were at
prices less than the COP, we did not disregard any below-cost sales of
that product because we determined that the below-cost sales were not
made in ``substantial quantities.'' Where twenty percent or more of a
respondent's sales of a given product during the POI were at prices
less than the COP, we determined such sales to have been made in
substantial quantities, in accordance with section 773(b)(2)(C)(i) of
the Tariff Act. In addition, we determined that such below-cost sales
were made within an extended period of time, in accordance with section
773(b)(2)(B) of the Tariff Act. In such cases, pursuant to section
773(b)(2)(D) of the Tariff Act, we also determined that such sales were
not made at prices which would permit recovery of all costs within a
reasonable period of time. Therefore, we disregarded the below-cost
sales. Where all sales of a specific product were at prices below the
COP, we disregarded all sales of that product and relied on similar
merchandise to match, if available (see CEMEX v. United States, 1998 WL
3626 (Fed. Cir.)).
Our cost test for Avesta revealed that less than twenty percent of
Avesta's home market sales of certain products were at prices below
Avesta's COP. We retained all such sales in our analysis. For other
products, more than twenty percent of Avesta's sales were at below-cost
prices. In such cases we disregarded the below-cost sales, while
retaining the above-cost sales for our analysis. See Preliminary
Determination Analysis Memorandum, December 17, 1998.
Constructed Value
In accordance with section 773(e)(1) of the Tariff Act, we
calculated CV based on the sum of respondent's cost of materials,
fabrication, SG&A, interest expenses, and profit. In accordance with
section 773(e)(2)(A) of the Tariff Act, we based SG&A and profit on the
amounts incurred and realized by Avesta in connection with the
production and sale of the foreign like product in the ordinary course
of trade for consumption in the foreign country. We used the CV data
Avesta supplied in its section D questionnaire responses.
Price-to-Price Comparisons
We calculated NV based on FOB or delivered prices to unaffiliated
customers or prices to affiliated customers that we determined to be at
arm's-length prices. We made adjustments for billing adjustments and
discounts and rebates. We made deductions, where appropriate, for
foreign inland freight, warehousing, and inland insurance, pursuant to
section 773(a)(6)(B) of the Tariff Act. In addition, we made
adjustments for differences in physical characteristics of the
merchandise pursuant to section 773(a)(6)(C)(ii) of the Tariff Act, as
well as for differences in circumstances of sale (COS) in accordance
with section 773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. We
made COS adjustments for imputed credit expenses and warranties.
Finally, we deducted home market packing costs and added U.S. packing
costs in accordance with
[[Page 92]]
section 773(a)(6)(A) and (B) of the Tariff Act.
Price-to-CV Comparisons
In accordance with section 773(a)(4) of the Tariff Act, we based NV
on CV if we were unable to find a home market match of identical or
similar merchandise. We calculated CV based on the costs of materials
and fabrication employed in producing the subject merchandise, SG&A,
and profit. In accordance with section 773(a)(2)(A) of the Tariff Act,
we based SG&A expense and profit on the amounts incurred and realized
by the respondent in connection with the production and sale of the
foreign like product in the ordinary course of trade for consumption in
the United Kingdom. For selling expenses, we used the weighted-average
home market selling expenses. Where appropriate, we made adjustments to
CV in accordance with section 773(a)(8) of the Tariff Act. For
comparisons to EP, we made COS adjustments by deducting home market
direct selling expenses and adding U.S. direct selling expenses. When
we compared CV to CEP, we deducted from CV the weighted-average home
market direct selling expenses.
Currency Conversion
We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales, as certified
by the Federal Reserve Bank, in accordance with section 773A(a) of the
Tariff Act.
Verification
As provided in section 782(i) of the Tariff Act, we will verify all
information relied upon in making our final determination.
Suspension of Liquidation
In accordance with section 733(d) of the Tariff Act, we are
directing the Customs Service to suspend liquidation of all imports of
subject merchandise that are entered, or withdrawn from warehouse, for
consumption on or after the date of publication of this notice in the
Federal Register. We will instruct the Customs Service to require a
cash deposit or the posting of a bond equal to the weighted-average
amount by which the NV exceeds the export price, as indicated below.
These suspension-of-liquidation instructions will remain in effect
until further notice. The weighted-average dumping margins are as
follows:
------------------------------------------------------------------------
Weighted-
Exporter/manufacturer average margin
(percentage)
------------------------------------------------------------------------
Avesta Sheffied........................................ 13.45
All Others............................................. 13.45
------------------------------------------------------------------------
Commission Notification
In accordance with section 733(f) of the Tariff Act, we have
notified the Commission of our determination. If our final
determination is affirmative, the Commission will determine before the
later of 120 days after the date of this preliminary determination or
45 days after our final determination whether imports of stainless
steel sheet and strip in coils are materially injuring, or threaten
material injury to, the U.S. industry.
Public Comment
Case briefs or other written comments may be submitted to the
Assistant Secretary for Import Administration no later than fifty days
after the date of publication of this notice, and rebuttal briefs,
limited to issues raised in case briefs, no later than fifty-five days
after the date of publication of this preliminary determination. A list
of authorities used and an executive summary of issues should accompany
any briefs submitted to the Department. This summary should be limited
to five pages total, including footnotes. In accordance with section
774 of the Tariff Act, we will hold a public hearing, if requested, to
afford interested parties an opportunity to comment on arguments raised
in case or rebuttal briefs. Tentatively, any hearing will be held
fifty-seven days after publication of this notice at the U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230, at a time and location to be determined.
Parties should confirm by telephone the date, time, and location of the
hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the date of publication of this notice.
Requests should contain: (1) The party's name, address, and telephone
number; (2) the number of participants; and (3) a list of the issues to
be discussed. At the hearing, each party may make an affirmative
presentation only on issues raised in that party's case brief, and may
make rebuttal presentations only on arguments included in that party's
rebuttal brief. See 19 CFR 351.310(c). If this investigation proceeds
normally, we will make our final determination by no later than 135
days after the publication of this notice in the Federal Register.
This determination is issued and published in accordance with
sections 733(d) and 777(i)(1) of the Tariff Act.
Dated: December 17, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34460 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P
