[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 116-124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34464]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-475-824]
Notice of Preliminary Determination of Sales at Less Than Fair
Value: Stainless Steel Sheet and Strip in Coils From Italy
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 4, 1999.
FOR FURTHER INFORMATION CONTACT: Lesley Stagliano or Rick Johnson,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-0190 or (202) 482-3818,
respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (``the Act''), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Act by the Uruguay Round Agreements Act (``URAA''). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to the regulations 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 Italy is being, or is likely to be, sold in the
United States at less than fair value (``LTFV''), as provided in
section 733 of the 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 (``Initiation'') 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, petitioners,
Allegheny Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc.,
Washington Steel Division of Bethlehem Steel Corporation (formerly
Lukens, Inc.), the United Steelworkers of America, AFL-CIO/CLC, the
Butler Armco Independent Union, and the Zanesville Armco Independent
Organization, Inc., 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, Re: Scope Issues, dated December 14, 1998.
On July 7, 1998, the Department requested information from the U.S.
Embassy in Italy to identify producers/exporters of the subject
merchandise. On July 21, 1998, the Department requested comments from
petitioners and other interested parties regarding the criteria to be
used for model matching purposes. On July 27, 1998, petitioners
submitted comments on our proposed model matching criteria.
Also on July 24, 1998, the United States International Trade
Commission (ITC) notified the Department of its affirmative preliminary
injury determination in this case. On August 3, 1998, the Department
issued an antidumping questionnaire to Acciai Speciali Terni SpA
(``AST'') and Arinox SrL (``Arinox''). On September 21, 1998, the
Department selected AST as a respondent in this investigation. See
``Selection of Respondents,'' below.
AST submitted its response to section A of the questionnaire on
September 8, 1998, and AST's responses to sections B through D followed
on September 28, 1998. Petitioners filed comments on AST's Section A
through D responses on October 9, October 13, and October 16, 1998. We
issued supplemental questionnaires for Sections A, B, and C to AST on
October 23, 1998, and for Section D on November 13, 1998. AST responded
to our supplemental questionnaires for Sections A, B, and C on November
6, and November 12, 1998, and to our supplemental questionnaires for
Section D on December 2, 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 Act. The Department determined that these
concurrent investigations are extraordinarily complicated and warranted
the thirty-day postponement requested by petitioners. On October 23,
1998, we postponed the preliminary determination until no later than
December 17, 1998. See Stainless Steel Sheet and Strip in Coils From
France, Germany, Italy, Japan, Mexico, South Korea, Taiwan, and the
United Kingdom; Notice of Postponement of Preliminary Determinations in
Antidumping Duty Investigations, 63 FR 56909 (October 23, 1998). On
October 30, 1998, petitioners alleged that there is a reasonable basis
to believe or suspect that critical circumstances exist with respect to
imports of SSSS from Italy. The critical circumstances analysis for the
preliminary determination is discussed in the ``Critical
Circumstances'' section of the notice below.
[[Page 117]]
On December 2, 1998, petitioners submitted comments for use in this
preliminary determination. Petitioners also submitted comments on
December 3, 1998, regarding the product concordance for use in this
preliminary determination.
Postponement of Final Determination and Extension of Provisional
Measures
Pursuant to section 735(a)(2) of the Act, on December 15, 1998, AST
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. AST also included a 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) AST 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.
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.
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
[[Page 118]]
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, 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.
Selection of Respondents
Section 777A(c)(1) of the Act directs the Department to calculate
individual dumping margins for each known exporter and producer of the
subject merchandise. However, section 777A(c)(2) of the Act gives the
Department discretion, when faced with a large number of exporters/
producers, to limit its examination to a reasonable number of such
companies if it is not practicable to examine all companies. Where it
is not practicable to examine all known producers/exporters of subject
merchandise, this provision permits the Department to investigate
either: (1) a sample of exporters, producers, or types of products that
is statistically valid based on the information available at the time
of selection; or (2) exporters and producers accounting for the largest
volume of the subject merchandise that can reasonably be examined.
After consideration of the complexities expected to arise in this
proceeding and the resources available to the Department, we determined
that it was not practicable in this investigation to examine all known
producers/exporters of subject merchandise. Instead, we found that,
given our resources, we would be able to investigate the Italian
producers/exporters with the greatest export volume, as identified
above. Since AST accounted for more than 70 percent of all known
exports of the subject merchandise from Italy during the POI, we
selected it as the sole respondent. See Memorandum from Program
Managers to Joseph A. Spetrini Re: Selection of Respondents, September
21, 1998.
Affiliation
AST has claimed that it is not affiliated with Thyssen AG or any of
Thyssen AG's affiliates. However, a review of the evidence demonstrates
that AST is affiliated with Thyssen AG. Pursuant to section 771(33)(E)
of the Act, the Department will determine that companies are affiliated
where a company directly or indirectly owns, controls, or holds power
to vote, five percent or more of the outstanding voting stock or shares
of any organization. Here, evidence establishes that AST is 75 percent
owned by a joint venture company, KTS. KTS, in turn, is 40 percent
owned by Thyssen Stahl AG, itself a wholly-owned subsidiary of Thyssen
AG. Consequently, Thyssen AG has a 33.75 percent equity holding in AST
and, therefore, because this is greater than five percent, Thyssen AG
is affiliated with AST within the meaning of section 771(33)(E). See
Memorandum: Affiliation of AST and Thyssen AG, and AST and A Thyssen
Affiliate (company A), dated December 17, 1998.
AST also claimed that because it was not affiliated with Thyssen AG
or any of Thyssen AG's affiliates, AST was not affiliated with a
particular U.S. customer, company A. AST stated that company A was
wholly-owned by Thyssen Inc., N.A. and other evidence establishes that
Thyssen Inc., is in turn a wholly-owned subsidiary of Thyssen AG.
Because the Department is precluded under the statute from using sales
to affiliates in determining CEP or EP, we examined whether AST was
affiliated to company A. See Section 772 (a) and (b) of the Act.
Section 771(33)(F) provides the Department with the authority to find
parties affiliated where two or more persons are directly or indirectly
controlled by or under common control with any other person. Therefore,
if evidence demonstrates that Thyssen AG controls both company A and
AST, then AST and company A are affiliated within the meaning of
section 771(33)(F). Based on the evidence, we have preliminarily found
that Thyssen AG has the ability to control AST and company A, and
therefore, we find that AST and company A are affiliated.
In codifying a new definition of affiliated persons, the
legislative history make clear that one of the Department's goals was
to broaden its ability to analyze commercial relationships for the
purposes of a dumping analysis and
[[Page 119]]
consistent with economic reality. New section 771(33)(F) defines
affiliation to include additional control relationships. The
legislative history also makes clear that the statute does not require
majority ownership for a finding of control, but rather encompasses
both legal and operational control. See SAA at 838. A minority
ownership interest, examined within the context of the totality of the
circumstances, is a factor that we will consider in determining if one
party is operationally in control of another. See Certain Cut-To-Length
Carbon Steel Plate From Brazil, 62 FR 18486, 18490 (April 15, 1998).
Additionally, evidence of actual control is not required. See 19 C.F.R.
351.102(b).
Because, in essence, company A is wholly-owned by Thyssen AG,
Thyssen AG has both legal and operational control over company A. With
regard to AST, Thyssen AG has a substantial minority equity interest in
AST of 33.75 percent. Under the prior statutory provision, parties were
deemed ``related'' if any person or persons owned or controlled 20
percent or more of the voting power or control in both entities. See
Queen's Flowers de Colombia v. United States, 981 Fed. Supp. 617 (CIT
1997); section 771(13) of the Act. As Congress intended the Department
to analyze a broader range of relationships under section 771(33) of
the Act, a minority equity interest of over 20 percent presumably would
represent control pursuant to section 771(33)(F) of the Act.
However, for our preliminary determination we also examined the
shareholder agreement forming KTS and other evidence which leads us to
conclude that, coupled with its 33.75 percent interest in AST, Thyssen
AG has the ability to control AST. Because most of this evidence is
proprietary in nature, we are not able to discuss this evidence
publicly. See Memorandum: Affiliation of AST and Thyssen AG, and AST
and A Thyssen Affiliate (Company A). In summary, we can say that this
evidence indicates that Thyssen AG retained the ability to control the
production and pricing decisions of AST through the joint venture
company KTS. Because both company A and AST are controlled by Thyssen
AG within the meaning of section 771(33)(F), we have preliminarily
found that AST and company A are affiliated. We therefore have
requested company A to provide all of its downstream sales of subject
merchandise made during the POI. On December 11, 1998, the Department
received this downstream U.S. sales information. However, due to the
timing of the receipt of this information, we were not able to review
these transactions for the preliminary determination.
Additionally, on December 11, 1998, AST reported that it could not
compel two additional resellers in the U.S. market, to which it claims
to have only an indirect minority interest, to report their downstream
sales information. Based on the fact that such sales constitute an
insignificant portion of total U.S. sales (exclusion of which from the
margin calculation, therefore, is non-distortive), for the purposes of
the preliminary determination, we have calculated a margin which does
not account for these sales.
Fair Value Comparisons
To determine whether sales of SSSS from Italy to the United States
were made at less than fair value, we compared the 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 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 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 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 sales, and U.S. sales which AST claimed were
CEP, AST reported the date of invoice as the date of sale, stating that
the invoice date represented the date when the essential terms of sale,
i.e., price and quantity, are definitively set, and that up to the
invoice date, these terms were subject to change. For sales AST claimed
were EP (``back-to-back'') sales, AST reported the date of shipment
from Italy as the date of sale because this is when final price and
quantity terms are determined. However, petitioners alleged that the
sales documentation provided by AST does not appear to support AST's
claims that price and quantity may change at any time between the order
acceptance date (confirmation date) and the shipment date. 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 23, 1998, the Department requested that AST
provide additional information concerning the nature and frequency of
price and quantity changes occurring between the date of order and date
of invoice for sales in both markets. In addition, we requested that
AST report all sales during the POI for which AST had issued an order
acceptance, in addition to those sales invoiced during the POI. AST
reported this information in its November 12, 1998 submission.
Normally, the Department has a preference of using invoice date as
the date of sale. However, the Department may use a date other than
invoice date if a different date better reflects the date on which the
material terms of the sale were set. Final Determination of Sales at
Less Than Fair Value: Polyvinyl Alcohol from Taiwan, 61 FR 14067 (March
29, 1996); 19 C.F.R. 351.401(i). For AST's home market sales, AST
submitted information that indicates that date of invoice is the
appropriate date of sale. See Analysis Memo for AST at page 2.
Therefore, we have preliminarily determined that the date of invoice is
the appropriate indicator of the actual date of sale for all home
market sales, because price and quantity are subject to negotiation
until that time. For the U.S. sales that are EP (direct) sales, we have
preliminarily determined that the shipment date is the appropriate
indicator of the actual date of sale because price and quantity are
subject to negotiation until the date of shipment, a date preceding the
invoice date. For the U.S. sales that are CEP sales, we used the
invoice date as the date of sale, because either the material terms of
sale had not been fixed prior to invoice or the sale did not occur
prior to importation.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by the respondent covered by
[[Page 120]]
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.
In its supplemental response dated November 12, 1998, AST defined
``side cuts'' as the 1\1/4\ inch trimmings that result from slitting
mill-edge coils with a width of 50\1/2\ inches. AST stated that side
cuts are second quality merchandise because ``the mill edges often
containing surface defects (like edge laminations) and variable
width.'' For ``pup coils'', AST stated that during inspection, it
sometimes is determined that the ends of the coil require cropping due
to defects (such as cross breaks) that cannot be corrected. AST stated
that the resulting coils generated from cropping the ends are pup
coils. Although AST has claimed that pup coils and side cuts are non-
prime merchandise, because AST provided no evidence to support its
claim that side cuts and pup coils were damaged or defective, thus
making them non-prime, the Department has treated both side-cuts and
pup-coils as prime merchandise for the purposes of this preliminary
determination. Data regarding the quality of side-cuts and pup-coils
will be reviewed at verification.
Level of Trade
In accordance with section 773(a)(1)(B)(i) of the Act, to the
extent practicable, we determine NV 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 comparison sales
in the home market or, when NV is based on constructed value (CV), that
of the sales from which we derive SG&A expenses and profit. For EP, the
LOT is also the level of the starting price sale, which is usually from
the exporter to the importer. For CEP, it is the level of the
constructed sale from the exporter to the importer.
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 between the producer and the
unaffiliated customer in the comparison market. 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 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 affects price comparability, we
adjust NV under section 773(A)(7)(B) of the Act (the CEP offset
provision). See Certain Cut-to-Length Carbon Steel Plate from South
Africa, Notice of Final Determination of Sales at Less Than Fair Value,
62 FR 61731 (November 19, 1997).
In this investigation, AST did not request a level-of-trade (LOT)
adjustment. To ensure that no such adjustment was necessary, in
accordance with principles discussed above, we examined information
regarding the distribution systems in both the United States and
Italian markets, including the selling functions, classes of customers
and selling expenses for AST.
For its home market sales, Acciai Speciali Terni SpA (``AST'')
reported: (1) three customer categories--industrial end-users, white
goods manufacturers, and service centers/distributors; and (2) two
channels of distribution--direct factory sales (sales of prime
merchandise) and warehouse sales (the majority of which are sales of
non-prime merchandise). AST claimed two levels of trade in the home
market based solely on the quality of subject merchandise, i.e., prime
vs. non-prime.
In reviewing AST's LOT in the home market, we asked AST to identify
the specific differences and similarities in selling functions and/or
support services between all phases of marketing to customers in the
home market and the United States. As mentioned above, AST identified
two channels of distribution in the home market based entirely on
whether the sale to the customer was of prime or non-prime merchandise.
For sales of prime merchandise, AST sold to all three of the customers
mentioned above, and provided the same selling functions to each of the
customers. Specifically, AST provided freight and delivery, credit,
technical services, and warranties. For sales of mostly non-prime
merchandise sold from AST's warehouse, AST performed the same selling
functions (except for providing warranties) as for sales of its prime
merchandise, but AST also engaged in the additional selling activities
of advertising of its mostly non-prime merchandise and maintaining
inventory of this merchandise at AST's warehouse. Because the selling
activities engaged in by AST were identical for each customer when
selling prime merchandise and were identical for each customer when
selling mostly non-prime from inventory, and because the selling
activities for both groups of sales were very similar, we preliminarily
determine that there exists one level of trade for AST's home market
sales.
For its U.S. sales, AST reported that its affiliated importer, AST
USA, made sales to two customer categories--industrial end-users and
service centers and through three channels of distribution--direct
factory sales, warehouse sales, and consignment sales. AST claimed two
levels of trade in the U.S. market based solely on the quality of
subject merchandise: (1) non-prime; and (2) prime. We examined the
claimed selling functions performed by AST and its U.S. affiliate, AST
USA, for all U.S. sales. For sales made directly to the unaffiliated
U.S. customer (EP sales), AST performed the same selling functions; it
provided technical and warranty services, arranged for freight and
delivery, and extended credit. For sales made to AST USA (CEP sales) as
adjusted, AST engaged in identical selling activities, providing
technical and warranty services, freight and delivery and credit. In
making sales from warehousing and consignment sales, AST USA engaged in
the additional activities of advertising and maintaining inventory.
In order to determine whether NV was established at a different LOT
than CEP sales, we examined stages in the marketing process and selling
functions along the chains of distribution between AST and its home
market customers. We compared the selling functions performed for home
market sales with those performed with respect to the CEP transaction,
after deductions for economic activities occurring in the United
States, pursuant to section 772(d) of the Act, to determine if the home
market levels of trade constituted more advanced stages of distribution
than the CEP level of trade.
Based on our analysis of the chains of distribution and selling
functions performed for sales in the home market and CEP and EP sales
in the U.S. market, we preliminarily find that both are made at the
same stage in the marketing process and involve identical selling
functions. Therefore, we preliminarily determine that AST made sales in
the home market at the same level of trade as existed in the U.S.
market for both CEP sales and EP sales.
[[Page 121]]
Thus, an LOT adjustment in this case is not appropriate.
For matching purposes, we have matched AST's sale of prime
merchandise in the home market to sales of prime merchandise in the
U.S. market. We have also matched sales of non-prime merchandise in the
home market to sales of non-prime merchandise in the U.S. market.
Export Price And Constructed Export Price
Based on the Department's practice, we examine several criteria in
determining whether sales made prior to importation through a sales
agent to an unaffiliated U.S. customer are EP sales, including: (1)
whether the merchandise was shipped directly from the manufacturer to
the unaffiliated customer; (2) whether this was the customary
commercial channel between the parties involved; and (3) whether the
function of the U.S. selling agent was limited to that of a ``processor
of sales-related documentation'' and a ``communications link'' with the
unaffiliated U.S. buyer. Where all three criteria are met, indicating
that the activities of the U.S. selling agent are ancillary to the
sale, the Department has regarded the routine selling functions of the
exporter as merely having been relocated geographically from the
country of exportation to the United States where the sales agent
performs them, and has determined the sales to be EP sales. Where one
of more of these conditions are not met, indicating that the U.S. sales
agent is substantially involved in the U.S. sales process, the
Department has classified the sales in question as CEP sales. See
Viscose Rayon Staple Fibre From Finland: Final Results of Antidumping
Duty Administrative Review, 63 FR 32820, 32821 (June 16, 1998); Certain
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from
Korea: Final Results of Antidumping Duty Administrative Review, 63 FR
13170, 13174 (March 18, 1998).
AST has classified certain sales transactions which are further-
processed in the United States as EP sales. However, we preliminarily
determine that such sales are CEP sales. Evidence establishes that AST
USA contracts with unaffiliated processors to provide substantial
value-added services for these sales. This necessarily entails
significant expenses which are added to the price originally negotiated
between the unaffiliated customer and AST. Under such circumstances,
the characterization of a further-manufactured sale as an export price
sale would ignore these substantial expenses related to the sale of
subject merchandise. Clearly, AST USA's role with regard to these sales
is more than an ancillary one. Moreover, the Department has always
analyzed further manufacturing in the context of CEP, pursuant to
section 772(d) of the Act. See Notice of Final Determination of Sales
At Less Than Fair Value: Large Printing Presses and Components Thereof,
Whether Assembled or Unassembled, From Germany, 61 FR 38166, 38174
(July 23, 1996).
For the remaining sales which AST has classified as EP sales, our
examination leads us to preliminarily conclude that these are EP sales.
AST ships the subject merchandise directly to the unaffiliated U.S.
customer and we have no evidence to indicate this is other than a
customary commercial channel of trade between the parties.
Additionally, the facts demonstrate that it is AST which sets the terms
of the sale in Italy prior to importation. AST USA merely provides a
communication link and processes sales-related documentation by
transmitting the U.S. customer's request to AST and receiving AST's
response either confirming or not confirming the order.
Finally, AST classified sales of subject merchandise sold by AST
USA after importation and for the account of AST USA as CEP sales.
These were referred to by AST as warehouse or consignment sales.
We calculated EP, in accordance with section 772(a) of the 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 tax and duty unpaid price to unaffiliated
purchasers in the United States. We made adjustments to starting price
for billing adjustments, alloy surcharges, and skid charges, and for
movement expenses in accordance with section 772(c)(2)(A) of the Act;
these included, where appropriate, freight equalization charges,
foreign inland freight, foreign brokerage and handling, international
freight and foreign inland insurance.
We calculated CEP, in accordance with subsections 772(b) of the
Act, for those sales to the first unaffiliated purchaser that took
place after importation into the United States, or otherwise warranted
the application of CEP, as discussed above. We based CEP on the packed,
delivered, duty paid or delivered prices to unaffiliated purchasers in
the United States. We made adjustments to the starting price for price-
billing errors, where applicable. In addition, we made adjustments to
the starting price by adding alloy surcharges, and skid charges where
appropriate. We also made deductions for movement expenses in
accordance with section 772(c)(2)(A) of the Act; these included, where
appropriate, freight equalization charges, foreign inland freight,
marine insurance, U.S. customs duties, U.S. inland freight, foreign
brokerage and handling, international freight, foreign inland
insurance, and U.S. warehousing expenses. In accordance with section
772(d)(1) of the Act, we deducted those selling expenses associated
with economic activities occurring in the United States, including
direct selling expenses (credit costs, warranty expenses and technical
selling expenses), inventory carrying costs, and indirect selling
expenses. With regard to indirect selling expenses, we have included
the expense associated with AST's two U.S. shipments that were damaged
in transit, before reaching the United States. We calculated the
expense as the difference between the original value of the merchandise
(as represented by the amount of the insurance claim) less the
insurance revenue received for these two shipments, and the less value
of the subsequent sale of this material as secondary merchandise. For
CEP sales, we also made an adjustment for profit in accordance with
section 772(d)(3) of the Act.
Affiliated-Party Transactions and Arm's-Length Test
Sales to affiliated customers in the home market not made at arm's-
length prices 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 the 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 Final Determination of Sales at Less Than Fair
Value: Certain Cold-Rolled
[[Page 122]]
Carbon Steel Flat Products from Argentina (``Certain Cold-Rolled Carbon
Steel Flat Products from Argentina'') (58 FR 37062, 37077 (July 9,
1993); See, Notice of Preliminary Determination of Sales at Less Than
Fair Value and Postponement of Final Determination: Emulsion Styrene-
Butadiene Rubber from Brazil, 63 Fed. Reg. 59509 (Nov. 8, 1998), citing
to Certain Cold-Rolled Carbon Steel Flat Products from Argentina. 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.
Normal Value
After testing home market viability and whether home market sales
were at below-cost prices, we calculated NV as noted in the ``Price-to-
Price Comparisons'' and ``Price-to-CV Comparison'' sections of this
notice.
Home Market Viability
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 AST's volume of home market sales of
the foreign like product to the volume of its U.S. sales of the subject
merchandise, in accordance with section 773(a)(1)(C) of the Act.
Because AST'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.
Cost of Production Analysis
Based on the information contained in the timely cost allegation
filed by the petitioners on June 10, 1998, the Department found
reasonable grounds to believe or suspect that AST's sales of the
foreign like product were made at prices which represent less than the
cost of production, in accordance with section 773(b)(1) of the Act. As
a result, the Department initiated an investigation to determine
whether AST made home market sales during the POI at prices below their
respective cost of production (COP)s, within the meaning of section
773(b) of the Act. See Initiation. Before making any fair value
comparisons, we conducted the COP analysis described below.
Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated COP
based on the sum of AST's cost of materials and fabrication for the
foreign like product, plus an amount for home market general and
administrative expenses (SG&A), interest expenses, and packing costs.
We relied on the COP data submitted by AST in its Section D cost
questionnaire response, except in the following instances where we
determined the reported costs were improperly valued: (1) We
recalculated AST's G&A rate using fiscal year data as reported on its
1997 audited financial statement; (2) we recalculated AST's financial
expense rate by excluding its financial income offset because it failed
to support that it was generated from short-term sources. In addition,
we recalculated the cost of sales denominator to include certain non-
operating income and expense items.
B. Test of Home Market Prices
We compared the weighted-average COP figures for AST to home market
sales prices of the foreign like product, as required under section
773(b) of the Act, in order to determine whether sales had been made at
prices below their COPs. In determining whether to disregard home
market sales made at prices less than the COP, we examined whether (1)
within an extended period of time, such sales were made in substantial
quantities, and (2) at prices which permitted the recovery of all costs
within a reasonable period of time in the normal course of trade. On a
product-specific basis, we compared COP to home market prices, less any
applicable movement charges, billing adjustments, alloy surcharges,
skid charges, rebates, and direct and indirect selling expenses.
C. Results of the COP Test
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20
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 20 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'', pursuant to section 773(b)(2)(c)(i), and within an
extended period of time, in accordance with section 773(b)(2)(B) of the
Act. In such cases, because we compared prices to weighted-average COPs
for the POI, we also determined that such sales were not made at prices
which would permit recovery of all costs within a reasonable period of
time, pursuant to section 773(b)(2)(D) of the Act. 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.
For those U.S. sales of SSSS for which there were no comparable home
market sales in the ordinary course of trade, we compared the CEP to CV
in accordance with section 773(a)(4) of the Act.
D. Calculation of Constructed Value
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of AST's cost of materials, fabrication, selling,
general, and administrative expenses (SG&A), interest expenses, profit,
and packing. In accordance with section 773(e)(2)(A) of the Act, we
based SG&A and profit on the amounts incurred and realized by AST in
connection with the production and sale of the foreign like product in
the ordinary course of trade for consumption in Italy. For CV, we made
the same adjustments described in the COP section above.
Price-to-Price Comparisons
We performed price-to-price comparisons where there were sales of
comparable merchandise in the home market that did not fail the cost
test.
For AST's home market sales of products that were above COP, 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 price billing errors,
discounts and rebates where appropriate. We made deductions, where
appropriate, for foreign inland freight, warehousing, and foreign
inland insurance expenses pursuant to section 773(a)(6)(B) of the Act.
In addition, we made adjustments for differences in cost attributable
to differences in physical characteristics of the merchandise, as well
as for differences in circumstances of sale (COS) in accordance with
section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS
adjustments, where appropriate, for imputed credit, warranty expenses,
and technical expenses. Finally, we deducted home market packing costs
and added U.S. packing costs in accordance with section 773(a)(6)(A)
and (B) of the Act.
Price-to-CV Comparisons
In accordance with section 773(a)(4) of the Act, we based NV on CV
if we were unable to find a home market
[[Page 123]]
match of such or similar merchandise. Where appropriate, we made
adjustments to CV in accordance with section 773(a)(8) of the Act. For
comparisons to EP, we made COS adjustments by deducting the weighted
average home market selling expenses and adding U.S. direct selling
expenses. Where we compared CV to CEP, we deducted from CV the 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
Act.
Critical Circumstances
On October 30, 1998, petitioners alleged that there is a reasonable
basis to believe or suspect that critical circumstances exist with
respect to imports of SSSS from Italy. In accordance with 19 CFR
351.206(c)(2)(i), since this allegation was filed at least 20 days
prior to the Department's preliminary determination, we must issue our
preliminary critical circumstances determination not later than the
preliminary determination.
Section 733(e)(1) of the Act provides that if a petitioner alleges
critical circumstances, the Department will determine that critical
circumstances exist if there is a reasonable basis to believe or
suspect that: (A)(i) there is a history of dumping and material injury
by reason of dumped imports in the United States or elsewhere of the
subject merchandise; or (ii) the person by whom, or for whose account,
the merchandise was imported knew or should have known that the
exporter was selling the subject merchandise at less than its fair
value and that there was likely to be material injury by reason of such
sales; and (B) there have been massive imports of the subject
merchandise over a relatively short period.
To determine that there is a history of dumping of the subject
merchandise, the Department normally considers evidence of an existing
antidumping duty order on SSSS in the United States or elsewhere to be
sufficient. Petitioners did not provide any information indicating a
history of dumping of SSSS from Italy. Furthermore, we investigated the
existence of antidumping duty orders on SSSS from Italy in the United
States or elsewhere and found none. We were also unable to find other
information that would have indicated a history of dumping of SSSS from
Italy.
In determining whether an importer knew or should have known that
the exporter was selling subject merchandise at less than fair value
and thereby causing material injury, the Department normally considers
margins of 25 percent or greater for EP sales to impute knowledge of
dumping and of resultant material injury. In this investigation, we
have not calculated estimated dumping margins of 25 percent or greater.
With regard to CEP sales, the Department normally consider margins of
15 percent or greater sufficient to impute knowledge of dumping and
material injury. In this investigation, we have not calculated
estimated dumping margins of 15 percent or greater. Based on these
facts, we determine that the first criterion for ascertaining whether
critical circumstances exist is not satisfied. Therefore, we
preliminarily determine that there is no reasonable basis to believe or
suspect that critical circumstances exist with respect to exports of
SSSS from Italy by AST. We have not analyzed the shipment data for AST
to examine whether imports of SSSS have been massive over a relatively
short period. (see e.g., Notice of Preliminary Determination of Sales
at Less Than Fair Value and Postponement of Final Determination:
Collated Roofing Nails From Korea, 62 FR 25895, 25898 (May 12, 1997)).
Regarding all other exporters, because we do not find that critical
circumstances exist for AST, we determine that critical circumstances
do not exist for companies covered by the ``All Others'' rate. We will
make a final determination concerning critical circumstances when we
make our final determination in this investigation, if that final
determination is affirmative.
Verification
As provided in section 782(i) of the Act, we will verify all
information relied upon in making our final determination.
The All Others Rate
Because the Department investigated one company (AST), we used
AST's margin in this investigation as the all-others rate. As a result,
the all-others rate is 6.25 percent.
Suspension of Liquidation
In accordance with section 733(d) of the 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
------------------------------------------------------------------------
AST........................................................ 6.25%
All Others................................................. 6.25%
------------------------------------------------------------------------
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC 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 plate 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 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
[[Page 124]]
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). We will issue our final determination in
this investigation no later than 135 days after the date of publication
in the Federal Register of the preliminary determination.
This determination is issued and published in accordance with
sections 733(d) and 777(i)(1) of the Act.
Dated: December 17, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34464 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P
