[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 137-147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34467]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-834]
Notice of Preliminary Determination of Sales at Less Than Fair
Value: Stainless Steel Sheet and Strip in Coils From South Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 4, 1999.
FOR FURTHER INFORMATION CONTACT: Maria Dybczak (Pohang Iron and Steel
Company, Ltd. (``POSCO'')), Brandon Farlander (Inchon Iron & Steel Co.,
Ltd. (``Inchon'')), or Rick Johnson, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-1398 (Dybczak), (202) 482-0182 (Farlander), or
(202) 482-3818 (Johnson).
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 South Korea 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, 63 FR 37521 (July 13, 1998) (``Initiation'').
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 For Joseph
A. Spetrini, Re: Scope Issues, dated December 14, 1998.
In July 1998, the Department requested information from the U.S.
Embassy in South Korea to identify producers/exporters of the subject
merchandise. On July 21, 1998 the U.S. Embassy in South Korea responded
to the Department's request for this information. Also, 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.
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
subsequently issued its antidumping questionnaire to the following
respondents: Pohang Iron and Steel Co., Ltd. (``POSCO''); Inchon Iron
and Steel Co., Ltd. (``Inchon''); Taihan Electric Wire Co., Ltd.
(``Taihan''); Sammi Steel Co., Ltd. (``Sammi''); and Dai Yang Metal
Co., Ltd. (``Dai Yang''). On August 7, 1998, Sammi submitted a letter
to the Department stating that it did not export the subject
merchandise to the United States during the period of investigation
(``POI''), with a request that it be excluded from further
participation in the investigation.
POSCO, Inchon, Sammi, and Dai Yang submitted responses to section A
of the questionnaire on September 8, 1998. Taihan did not respond to
section A of the Department's questionnaire. On September 21, the
Department issued a decision with regard to selection of respondents in
the above-mentioned investigations (see Memorandum to Joseph A.
Spetrini, dated September 21, 1998). On the basis of the analysis
detailed in the memorandum, the Department chose three mandatory Korean
respondents for the investigation: POSCO, Inchon, and Taihan. POSCO
submitted responses to sections B through D on September 23, 1998.
Taihan did not respond to sections B through D of the Department's
questionnaire. Inchon submitted responses to sections B and C on
September 23, 1998, and to section D on September 25, 1998. Petitioners
filed comments on POSCO's section A through D responses on October 13,
1998, and October 21, 1998. Petitioners filed comments on Inchon's
section A on September 21, 1998; to sections B and C on October 14,
1998; and to section D on October 16, 1998. We issued supplemental
questionnaires for sections A, B and C to POSCO on October 23, 1998,
and October 27, 1998. In addition, we issued a supplemental
questionnaire to POSCO for section D on October 20, 1998. We issued
supplemental questionnaires for sections A, B, C, and D to Inchon on
October 26, 1998. POSCO responded to our supplemental questionnaires
for sections A, B and C on November 23, 1998, and to our supplemental
questionnaires for section D on November 17, 1998. Inchon responded to
our supplemental questionnaires for sections A, B, C, and D on November
19, 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
Italy, France, Germany, Mexico, Japan, the Republic of Korea, Taiwan,
the United Kingdom, and Taiwan; 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 South Korea. The critical
circumstances analysis for the preliminary determination is discussed
[[Page 138]]
in the ``Critical Circumstances'' section of the notice below.
On December 3, 1998, petitioners submitted comments regarding
product concordance. See Memorandum to File: Analysis for the
Preliminary Determination in the Investigation of Stainless Steel Sheet
and Strip in Coils from Korea--Pohang Iron and Steel Co., Ltd.
(``POSCO'') (``Analysis Memo: POSCO'') (December 17, 1998) and
Memorandum to File: Analysis for the Preliminary Determination in the
Investigation of Stainless Steel Sheet and Strip in Coils from Korea--
Inchon Iron and Steel Co., Ltd. (``Inchon'') (``Analysis Memo:
Inchon'') (December 17, 1998) for the Department's discussion and
treatment regarding product concordance.
Postponement of Final Determination and Extension of Provisional
Measures
Pursuant to section 735(a)(2) of the Act, on December 15, 1998,
POSCO informed the Department that, in the event of an affirmative
preliminary determination in this investigation, it would request a
full extension of the final determination, until not later than 135
days after the date of publication of the preliminary determination. On
December 16, 1998, POSCO amended its request to include 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) POSCO 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 date of publication in the Federal Register of the
preliminary determination. 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
[[Page 139]]
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
---------------------------------------------------------------------------
\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
Period of Investigation
The period of investigation 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 Korean
producers/exporters with the greatest export volume, as identified
above. In total, these companies (POSCO, Inchon and Taihan) accounted
for more than 85 percent of all known exports of the subject
merchandise during the POI. For a more detailed discussion of
respondent selection in this investigation, see Memorandum to Joseph A.
Spetrini: Selection of Respondents, September 21, 1998.
Inflation
Generally, when the annual inflation rate in the country under
investigation exceeds 25 percent, the Department considers that
inflation to be significant and uses a modified methodology. See, e.g.,
Import Administration Antidumping Manual, Chapter 8, Section 15,
(January 1998).
Petitioners allege that the Korean economy should be classified as
hyperinflationary, basing their argument on an ``annualized'' monthly
rate for three months of producer prices (see Petitioners' submissions
of September 4, 1998 and December 2, 1998). However, in accordance with
the Department's practice, we considered the Korean inflation rate for
the POI, which was 17.06 percent. Although the inflation rate in Korea
for December 1997 was 8.19 percent, the annual inflation rate during
the POI was well below 25 percent. See International Monetary Fund's
International Financial Statistics: Producer Prices (July 1998; March
1998; December 1997; July 1997). Therefore, we preliminarily determine
that it is not appropriate to use the Department's high inflation
methodology in this case. For a further discussion of this issue, see
Analysis Memo: POSCO.
Fair Value Comparisons
To determine whether sales of SSSS from Korea 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
[[Page 140]]
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
POSCO
POSCO reported that it made sales of subject merchandise to
affiliated resellers during the POI, but claimed that less than five
percent of these resales were sales of subject merchandise. In its
response to the Department's October 23, 1998 supplemental
questionnaire, POSCO provided detailed information regarding the sales
of subject merchandise made to its affiliates. The Department
preliminarily finds that the sales of subject merchandise made to
affiliated resellers constitutes less than five percent of POSCO's
total sales in the home market (subject to verification), and thus, the
Department considered POSCO's sales to the affiliated service centers.
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 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 calculated 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., 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 Final Determination of Sales
at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products
from Argentina, 58 Fed, Reg, 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.
For its home market and U.S. sales, POSCO reported the date of
invoice as the date of sale, because POSCO stated that the invoice date
represented the date when the essential terms of sales, i.e., price and
quantity, are definitively set, and that up to the invoice date, these
terms were subject to change. Petitioners have alleged that the sales
documentation provided by POSCO does not appear to support POSCO's
claim that price and quantity may change at any time between the order
acceptance date (confirmation date) and the final invoice date. Given
the relevance of petitioners' comments and the nature of marketing
these types of made-to-order products, petitioners claims have merit.
Consequently, the Department requested further information concerning
date of sale. On November 23, 1998, in its supplemental questionnaire
response, POSCO provided additional information concerning the nature
and frequency of price and quantity changes occurring between the date
of order and date of invoice. This information appears to support
POSCO's contention that terms of the contract are not finalized until
the invoice date. We will conduct an in-depth examination of
information concerning the designation of date of sale (i.e., order
date versus invoice date) at verification. However, based on POSCO's
record submissions to date, we preliminarily determine that the date of
invoice is the appropriate indicator of the actual date of sale because
price and quantity are subject to negotiation until the date of
invoice. For a further discussion of this issue, see Analysis Memo:
POSCO.
In calculating EP, the Department determined that those U.S. sales
for which POSCO was not paid should be excluded from the U.S. database.
We preliminarily determine that the U.S. sales for which POSCO did not
receive payment because the customer went bankrupt are atypical and not
part of POSCO's normal business practice. Therefore, for this
preliminary determination, the Department has excluded these sales from
our margin analysis. Nevertheless, record evidence indicates that
POSCO's U.S. sales affiliate, Pohang Steel America Corp. (``POSAM''),
recognized the cost of these sales. Petitioners suggest that the
Department treat the cost of these sales as a direct expense. However,
direct expenses are typically expenses that are incurred as a direct
and unavoidable consequence of the sale (i.e., in the absence of the
sale these expenses would not be incurred), whereas indirect expenses
are fixed expenses that are incurred whether or not a sale is made. In
this case, the cost of these sales would have occurred whether or not
other sales had been made, and therefore, the Department preliminarily
determines that the costs associated with these sales are more
appropriately treated as indirect selling expenses incurred on U.S.
sales.
Inchon
For both home market and U.S. transactions, Inchon reported the
invoice date as the date of sale, i.e., the date when price and
quantity are finalized, because Inchon states that the price and
quantity may change until the time of shipment and invoicing. However,
petitioners have requested that the Department examine whether the
material terms of sale (i.e., price and quantity) change and, if the
material terms do change, how frequently are the material terms of sale
changed. Also, petitioners have requested that the Department determine
whether Inchon charges a fee for changes to the terms of sale and how
much time, on average, exists between the purchase order date and the
shipment/invoice date. Given the relevance of petitioners' comments and
the nature of marketing these types of made-to-order products,
petitioners claims have merit. Consequently, on October 26, 1998, the
Department issued a supplemental questionnaire, requesting that Inchon
answer several questions regarding changes, if any, in Inchon's
material terms of sale between
[[Page 141]]
the order confirmation date and the invoice date. In Inchon's November
19, 1998 supplemental questionnaire, Inchon stated that for
approximately 17 percent of U.S. sales, based on sales volume, there
was a change in the material terms of sale (i.e., price or quantity)
between the order date and the invoice date. Based on this information,
the Department has determined that the invoice date is the most
appropriate date to use for the date of sale for U.S. sales, because
the frequency of changes in price and quantity between order
confirmation and invoice date indicate that the essential terms of sale
are not fixed until the invoice date.
Inchon claimed that it could not report the frequency of changes
made in the material terms of sale for home market sales. In Inchon's
November 19, 1998 supplemental questionnaire response, Inchon stated
that most of its home market sales are from inventory. Inchon stated
that when a sale is made from inventory, the terms of sale rarely
change because the order is filled within one or two days. However, if
Inchon receives an order that it does not have in inventory, Inchon
will usually produce the requested product. Inchon claims that if a
product is produced to fill the order, there can be significant changes
in the terms of sale between the order date and the invoice date.
Because, as Inchon states, the majority of its sales in the home market
are made from inventory, and thus the terms are set, and because Inchon
has not been able to substantiate its claim of frequent changes in the
terms of its non-inventory sales, the Department preliminarily
determines that the order date is the most appropriate date to use for
the date of sale for home market sales. For a further discussion of
this issue, see Analysis Memo: Inchon.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by the respondents 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 August 3, 1998 questionnaire.
Export Price and Constructed Export Price
The Department considers several factors in making its
determination concerning whether sales made prior to importation
through a U.S. affiliate to an unaffiliated customer in the United
States are EP sales. These factors are: (1) whether the merchandise was
shipped directly from the manufacturer to the unaffiliated U.S.
customer without being introduced into the physical inventory of the
affiliated selling agent; (2) whether the sales follow customary
commercial channels between the parties involved; and (3) whether the
functions of the U.S. sales affiliates are limited to those of a
``processor of sales-related documentation'' and a ``communication
link'' with the unrelated U.S. buyer. Where the factors indicate that
the activities of the U.S. sales affiliate are ancillary to the sale,
we treat the transactions as EP sales. Where the U.S. sales affiliate
has a significant role in the sales process, we treat the transactions
as CEP sales. See Certain Cut-to-Length Carbon Steel Plate from
Germany: Final Results of Antidumping Administrative Review, 62 FR
18389, 18391 (April 15, 1997); Mitsubishi Heavy Industries v. United
States, Slip Op. 98-82 at 6 (CIT, June 23, 1998).
POSCO
POSCO reported three channels of distribution for U.S. sales. In
channel 1, POSCO Steel Sales and Service Co., Ltd. (``POSTEEL''), which
is POSCO's affiliated trading company, sold directly to a U.S.
customer. In channel 3, POSTEEL sold directly to unaffiliated Korean
trading companies for resale of subject merchandise to the United
States. We classified sales made through these two channels as EP
sales, since the U.S. affiliate, POSAM, had no involvement in the
selling process. In channel 2, however, POSAM was involved in all the
sales made to unaffiliated U.S. customers, and reported that although
the majority of sales were EP sales, there were some sales classified
as CEP.
For U.S. sales channels one and three, we based our calculation on
EP, in accordance with section 772 (a) of the Act, because the subject
merchandise was sold by the producer or exporter directly to the first
unaffiliated purchaser in the United States prior to importation, and
CEP methodology was not otherwise indicated. For U.S. sales channel
two, for those sales for which POSCO categorized as EP sales, we based
our calculations on EP, in accordance with section 772(a) of the Act.
For sales for which POSCO categorized as CEP, we based our calculations
on CEP, in accordance with 772(b) of the Act.
The record indicates that those of POSCO's channel 2 sales reported
as EP sales were shipped directly from the manufacturer to the
unaffiliated U.S. customer and that the reported U.S. sales, with the
exception of ``bankrupt'' sales not included in our analysis (see
``Transactions Investigated'', above), were made in the customary
commercial channel, thereby satisfying the first two criteria mentioned
above. In determining whether the U.S. affiliate acted solely as a
``processor of sales-related documentation'' and a ``communication
link'' with the unaffiliated U.S. customer, we reviewed the selling
functions performed by POSAM and the sales process for these sales.
POSAM performed a variety of selling functions on behalf of POSCO
in connection with POSCO's SSSS sales in the United States. These
functions include forwarding inquiries and confirmations to and from
the customer and POSTEEL, invoicing customers, arranging for freight to
the customer from the U.S. port, extending credit and collecting
payment, and serving as importer of record. POSCO has stated that
POSTEEL determined price and terms of sale and performed ``all other''
sales related activities, including meeting with U.S. customers on
standard marketing trips, warranty-related functions, market research
and technical assistance.
In addition, according to POSCO's response, POSTEEL ``communicates
a variety of general price information to and from POSAM,'' including
``quarterly FOB price guidelines'' (see November 23, 1998 response at
11). Record evidence indicates that although POSTEEL presents POSAM
with quarterly guidelines, each sale must be approved by POSTEEL. In
some instances, POSTEEL has rejected terms of particular inquiries
submitted by POSAM.
We will conduct an in-depth examination of the information
concerning classification of POSCO's U.S. sales through POSAM (i.e.,
CEP versus EP) at verification. However, based on POSCO's record
statements, we preliminarily determine that POSCO's U.S. sales of SSSS
through POSAM reported as EP sales qualify as EP sales. For further
discussion of this issue, see Analysis Memo: POSCO.
As discussed in ``Transactions Investigated'', above, one of
POSCO's customers declared bankruptcy during the POI. During this time,
shipments to
[[Page 142]]
this customer were canceled en route to the United States, and POSCO
had to place the merchandise into an unaffiliated warehouse. POSCO then
resold the merchandise with POSTEEL as the facilitator. As these sales
to the first unaffiliated purchaser took place after importation into
the United States, they have been correctly classified by POSCO as CEP
sales.
We based EP on the packed prices to unaffiliated purchasers in the
United States. We made deductions for foreign inland freight, brokerage
and handling, ocean freight, marine insurance, U.S. inland freight
(where applicable), U.S. brokerage and wharfage charges (where
applicable) and U.S. Customs duties in accordance with section
772(c)(2)(A) of the Act. Additionally, we added to the U.S. price an
amount for duty drawback pursuant to section 772(c)(1)(B) of the Act.
For a further discussion of this issue, see Analysis Memo: POSCO.
We calculated CEP, in accordance with subsections 772(b), (c), and
(d) of the Act, for those sales to the first unaffiliated purchaser
that took place after importation into the United States. We based CEP
on the packed, delivered, duty paid or delivered prices to unaffiliated
purchasers in the United States. We made deductions for movement
expenses in accordance with section 772(c)(2)(A) of the Act; these
included, where appropriate, foreign inland freight, foreign wharfage
and loading, international freight, marine insurance, domestic inland
freight, U.S. brokerage and wharfage, 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 and bank
charges) and indirect selling expenses (e.g., inventory carrying
costs). For CEP sales, we also made an adjustment for profit in
accordance with section 772(d)(3) of the Act. Additionally, we added to
the U.S. price an amount for duty drawback pursuant to section
772(c)(1)(B) of the Act. For a further discussion of this issue, see
Analysis Memo: POSCO.
Inchon
For U.S. sales channels two and three, which are defined in the
Level of Trade section below, we based our calculation on EP, in
accordance with section 772 (a) of the Act, because the subject
merchandise was sold by the producer or exporter directly to the first
unaffiliated purchaser in the United States prior to importation, and
CEP methodology was not otherwise indicated. For U.S. sales channel
one, which is defined in the Level of Trade section below, we based our
calculation on CEP, in accordance with section 772 (b) of the Act,
because the merchandise was sold by or for the account of the producer
or exporter of such merchandise or by a seller affiliated with the
producer or exporter, to a purchaser not affiliated with the producer
or exporter, and based on our analysis of the facts as discussed in
this section.
We have preliminarily determined that the affiliated purchaser in
the United States, Hyundai U.S.A., did more than merely act as a
``processor of sales-related documentation and a communication link
with the unrelated U.S. buyer.'' Inchon claimed that all of its U.S.
sales of subject merchandise are EP sales, including those sales made
prior to importation through Hyundai U.S.A., Hyundai Corporation's
wholly-owned U.S. subsidiary (i.e., channel 1 sales). Inchon claims
that Hyundai U.S.A., did not act in a significant role in the sales
negotiation process. We preliminarily disagree with this
characterization.
To ensure proper application of statutory definitions, where a U.S.
affiliate is involved in making a sale, we normally consider the sale
to be CEP unless the record demonstrates that the U.S. affiliate's
involvement in making the sale is incidental or ancillary. The record
demonstrates that Hyundai U.S.A.'s role exceeds that of an incidental
or ancillary role.
Hyundai U.S.A. participates in several significant pre- and post-
sale selling activities. At the initial stages, Inchon and Hyundai
U.S.A. jointly call on U.S. customers to discuss sales and prices.
Hyundai U.S.A. quotes prices to prospective customers and if the price
is acceptable, the customer submits a purchase order to Hyundai U.S.A.
When the merchandise arrives in the United States, Hyundai U.S.A. acts
as the importer of record and arranges for U.S. inland freight. For a
significant number of channel 1 transactions, Hyundai U.S.A. also
arranged and paid for post-sale warehousing and freight to the
warehouse. Hyundai U.S.A. invoices and collects payment from the U.S.
customer, including any late payments and/or outstanding accounts
receivable. Additionally, there is one other selling function which
supports our determination that these sales are CEP. However, because
this information is business proprietary, please see our discussion in
the analysis memorandum. See Analysis Memo: Inchon, page 4. Based on
the record as stated above, we have determined that these sales are CEP
transactions. For a further discussion of this issue, see Analysis
Memo: Inchon.
We based EP on the packed, delivered, tax and duty unpaid price to
unaffiliated purchasers in the United States. We made deductions for
movement expenses in accordance with section 772(c)(2)(A) of the Act;
these included, where appropriate, foreign inland freight, foreign
wharfage and loading, international freight, marine insurance, domestic
inland freight, and U.S. brokerage and wharfage. Additionally, we added
to the U.S. price an amount for duty drawback pursuant to section
772(c)(1)(B) of the Act. For a further discussion of this issue, see
Analysis Memo: Inchon.
We calculated CEP, in accordance with subsections 772(b), (c), and
(d) of the Act, for those sales to the first unaffiliated purchaser
that took place after importation into the United States. We based CEP
on the packed, delivered, duty paid or delivered prices to unaffiliated
purchasers in the United States. We made deductions for movement
expenses in accordance with section 772(c)(2)(A) of the Act; these
included, where appropriate, foreign inland freight, foreign wharfage
and loading, international freight, marine insurance, domestic inland
freight, U.S. brokerage and wharfage, 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 and bank
charges), and indirect selling expenses. For CEP sales, we also made an
adjustment for profit in accordance with section 772(d)(3) of the Act.
Additionally, we added to the U.S. price an amount for duty drawback
pursuant to section 772(c)(1)(B) of the Act. For a further discussion
of this issue, see Analysis Memo: Inchon.
Level of Trade
In accordance with section 773(a)(1)(B) 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 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, 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.
[[Page 143]]
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. 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 an 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 Notice of Final
Determination of Sales at Less Than Fair Value: Certain Carbon Steel
Plate from South Africa, 62 FR 61731 (November 19, 1997).
In the present review, none of the respondents requested a LOT
adjustment. To ensure that no such adjustment was necessary, in
accordance with the principles discussed above, we examined information
regarding the distribution systems in both the United States and Korean
markets, including the selling functions, classes of customer, and
selling expenses for each respondent.
POSCO
POSCO did not claim a LOT adjustment. POSCO identified two channels
of distribution in the home market: (1) sales made by POSCO directly to
its customers; and (2) sales made by POSCO through its selling arm,
POSTEEL, to customers. Both POSCO and POSTEEL made sales to domestic
trading companies, service centers, and unaffiliated and affiliated
end-users. For both channels, POSCO and POSTEEL report that they
perform similar selling functions. Either POSCO or POSTEEL contacted
customers, managed inventory, arranged for shipment and freight, and
invoiced the customer. In addition, POSCO claims that either POSCO or
POSTEEL offered, as needed, technical services and warranty processing.
Because channels of distribution do not qualify as separate LOTs when
the selling functions performed for each customer class are
sufficiently similar, we preliminarily determine that there exists one
LOT for POSCO's home market sales.
POSCO reports three channels of distribution in the U.S. market:
(1) sales made by POSTEEL directly to a U.S. end-user; (2) sales to
U.S. end-users made by POSTEEL through its wholly-owned U.S.
subsidiary, POSAM; and (3) sales made by POSTEEL to unaffiliated Korean
trading companies for shipment to the United States. POSCO claimed two
LOTs in the U.S. market, but requested no LOT adjustment for the U.S.
LOT purported to be different from the home market LOT. The Department
examined the claimed selling functions performed by POSCO and its
subsidiaries, POSTEEL and POSAM (although we did not consider POSAM's
selling functions in determining CEP LOT), for all U.S. sales. These
selling functions included freight and delivery arrangements, invoicing
customers, and extending credit.
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 POSCO and its home
market and U.S. customers. We compared the selling functions performed
for home market sales with those performed with respect to the CEP
transactions, after deductions for economic activities occurring in the
United States, pursuant to section 772(d) of the Act, to determine if
the home market level of trade constituted a more advanced stage 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 CEP and EP sales to all
three channels of distribution are made at the same stage in the
marketing process and involve identical selling functions. Therefore,
we preliminarily determine that POSCO and its subsidiaries POSTEEL and
POSAM (for EP sales) provided a sufficiently similar degree of services
on sales to all three channels of distribution, and that the sales made
to the United States constitute one LOT.
Based on a comparison of the selling activities performed in the
U.S. market to the selling activities in the home market, we
preliminarily determine that there is not a significant difference in
the selling functions performed in both markets, and thus, a LOT
adjustment is not appropriate. For a further discussion, see Analysis
Memo: POSCO.
Inchon
In the home market, Inchon reported two sales channels: (1) to
unaffiliated distributors; and (2) to affiliated and unaffiliated end-
users. We examined the selling functions performed for both channels.
These selling functions included inventory maintenance, freight and
delivery arrangements, and credit services. Because there are no
differences between the selling functions on sales made to either
unaffiliated distributors or affiliated and unaffiliated end-users in
the home market, sales to both of these customer categories represent a
similar stage of marketing. Therefore, we preliminarily conclude that
sales to unaffiliated distributors and affiliated and unaffiliated end-
users constitute one LOT in the home market.
For its EP and CEP sales in the U.S. market, Inchon reported three
sales channels: (1) Inchon sales through Hyundai Corporation, Inchon's
affiliated trading company, to Hyundai U.S.A., a wholly owned
subsidiary of Hyundai Corporation located in the United States and an
affiliate of Inchon, and finally, to an unaffiliated customer; (2)
Inchon sales through Hyundai Corporation, to an unaffiliated customer;
and (3) Inchon sales to an unaffiliated trading customer. Inchon's U.S.
customers for all three sales channels are to trading companies and
distributors. We examined the selling functions performed for each of
the three U.S. sales channels. These selling functions included freight
and delivery arrangements, credit services, and post-sale warehousing.
With the exception of post-sale warehousing for one sale in channel
one, selling functions performed in the three sales channels were
identical. Thus, sales to these customer categories represent a similar
stage of marketing. Therefore, we preliminarily determine that Inchon
provided a sufficiently similar degree of services on sales to all
three channels of distribution, and that the sales made to the United
States constitute one LOT.
Further, because we preliminarily conclude that the U.S. LOT and
the home market LOT included similar selling functions, we conclude
that these sales are made at the same LOT. Therefore, a LOT adjustment
for Inchon is not appropriate. For a further discussion, see Analysis
Memo: Inchon.
Normal Value
After testing home market viability and whether home market sales
were made 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 is 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
is equal to or
[[Page 144]]
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)(B) of the Act. Since both POSCO's and
Inchon'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 for the subject merchandise, we determined that the home markets
for both companies were 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 (``COP'') Analysis
Based on the cost allegations submitted by the petitioners in their
June 10, 1998 petition, the Department found reasonable grounds to
believe or suspect that POSCO and Inchon had made sales in the home
market at prices below the cost of producing the merchandise, in
accordance with section 773(b)(1) of the Act. As a result the
Department initiated an investigation to determine whether POSCO and
Inchon made home market sales during the POI at prices below their
respective COPs within the meaning of section 773(b) of the Act. See
Initiation.
We conducted the COP analysis described below.
A. Calculation of COP
In accordance with section 773(b)(3) of the Act, for each
respondent we calculated COP based on the sum of the cost of materials
and fabrication for the foreign like product, plus amounts for home
market selling, general and administrative expenses (``SG&A''),
interest expenses, and packing costs, respectively. We used the
information from POSCO's and Inchon's section D supplemental
questionnaire responses to calculate each company's COP.
In a letter dated August 12, 1998, POSCO asked that the Department
examine fiscal year 1997 (January-December 1997) cost data rather than
cost data for the full POI, April 1, 1997 to March 31, 1998. On
September 4, 1998, petitioners responded to respondent's request,
noting that the cost data submitted would not coincide with the sales
data, particularly in light of the won's devaluation during the POI. On
September 28, 1998, the Department requested that POSCO report its
costs using costs incurred during the POI.
B. Test of Home Market Prices
We compared the weighted-average COP for POSCO and Inchon to each
company's respective home market sales of the foreign like product as
required under section 773(b) of the Act. 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) such sales were made at prices
which permitted the recovery of all costs within a reasonable period of
time. On a product-specific basis, we compared POSCO's and Inchon's COP
to their respective home market prices, less any applicable movement
charges and direct and indirect selling expenses.
C. Results of the COP Test
Pursuant to section 773(b)(2)(C) of the Act, where less than 20
percent of 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'' within an extended period of time in accordance with
sections 773(b)(2)(B) and 773(b)(2)(C)(i) 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, in
accordance with 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
in determining NV.
D. Calculation of CV
In accordance with section 773(e)(1) of the Act, we calculated each
respondent's CV based on the sum of the respondent's cost of materials,
fabrication, SG&A, interest expenses and profit. In accordance with
section 773(e)(2)(A) of the Act, we based SG&A and profit on the
amounts incurred and realized by the respondents in connection with the
production and sale of the foreign like product in the ordinary course
of trade, for consumption in South Korea.
Price-to-Price Comparisons
For those product comparisons for which there were sales at prices
above the COP, we based NV on prices to home market customers. We made
adjustments, where appropriate, for physical differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.
POSCO
We calculated NV for EP sales based on prices to unaffiliated home
market customers. We made a deduction for inland freight. We made
circumstance-of-sale (``COS'') adjustments based on differences in
direct selling expenses (i.e., credit, warranty expense and interest
revenue) incurred on U.S. and home market sales, where appropriate. In
accordance with section 773(a)(6), we deducted home market packing
costs and added U.S. packing costs.
We calculated NV for CEP sales based on prices to unaffiliated home
market customers, as sales to affiliated customers failed the arm's
length test. We made a deduction for inland freight. We made COS
adjustments based on differences in direct selling expenses (i.e.,
credit, warranty expense and interest revenue) incurred on U.S. and
home market sales, where appropriate. In accordance with section
773(a)(6), we deducted home market packing costs and added U.S. packing
costs.
Inchon
We calculated NV for EP sales based on prices to unaffiliated home
market customers. We made a deduction for inland freight. We made
billing adjustments, where appropriate. We made COS adjustments based
on differences in direct selling expenses (i.e., credit) incurred on
U.S. and home market sales, where appropriate. In accordance with
section 773(a)(6), we deducted home market packing costs and added U.S.
packing costs.
We calculated NV for CEP sales based on prices to unaffiliated home
market customers. We made a deduction for inland freight. We made
billing adjustments, where appropriate. We made COS adjustments based
on differences in direct selling expenses (i.e., credit) incurred on
U.S. and home market sales, where appropriate. In accordance with
section 773(a)(6), we deducted home market packing costs and added U.S.
packing costs.
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 match of the foreign like
product. 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
home market direct selling expenses and adding U.S.
[[Page 145]]
direct selling expenses. Where we compared CV to CEP, we deducted the
weighted-average home market direct selling expenses from CV.
Currency Conversion
Our preliminary analysis of Federal Reserve dollar-won exchange
rate data shows that the won declined rapidly at the end of 1997,
losing over 40 percent of its value between the beginning of November
and the end of December. The decline was, in both speed and magnitude,
many times more severe than any change in the dollar-won exchange rate
during the previous eight years. Had the won rebounded quickly enough
to recover all or almost all of the initial loss, the Department might
have been inclined to view the won's decline at the end of 1997 as
nothing more than a sudden, but only momentary drop, despite the
magnitude of that drop. As it was, however, there was no significant
rebound.
We have preliminarily determined that the decline in the won at the
end of 1997 was so precipitous and large that the dollar-won exchange
rate cannot reasonably be viewed as having simply fluctuated during
this time, i.e., as having experienced only a momentary drop in value.
Therefore, in making this preliminary determination, the Department
used daily rates exclusively for currency conversion purposes for home
market sales matched to U.S. sales occurring between November 1, 1997
and December 31, 1997.
For sales occurring after December 31, but before March 1, 1998,
the Department relied on the standard exchange rate model, but used a
modified benchmark. In calculating a benchmark rate, the Department's
standard practice is to incorporate rates extending back 40 days from
the date of sale. However, using such a benchmark rate would
incorporate rates during November and December of 1997, when the
dollar-won exchange rate dropped, and hence would result in apparent
significant fluctuations in the dollar-won exchange rates used in the
Department's margin calculation.
In order to ensure that rates used are more indicative of the
exchange rate climate during January and February 1998, the benchmark
was modified to include rates extending back only to January 1, 1998.
Therefore, we have applied an up-to-date (post-precipitous drop)
benchmark, while at the same time we have avoided making sales
comparisons using exchange rates with excessive day-to-day
fluctuations. By March 1, 1998, the dollar-won exchange rate had
stabilized sufficiently so that the Department's standard model could
be employed. For sales occurring after March 1, the standard model and
benchmark rate were used.
Petitioners have suggested that the Department segregate the
current POI into multiple periods to account for the effect of the
devaluation of the Korean won during the last portion of the POI. See
petitioners' submission of December 2, 1998. Petitioners state that the
Department has examined this question in a recent preliminary
determination involving the same POI and Korea, namely, Emulsion
Styrene-Butadiene Rubber from the Republic of Korea. See Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber
from the Republic of Korea, 63 FR 59514 (November 4, 1998). However,
the Department used the same currency conversion methodology described
above in that case, and for the preliminary determination, did not
average margins based on multiple periods within the POI. In the one
case cited by petitioners in support of averaging multiple periods, PVA
from Taiwan, the Department used multiple periods when there was a
significant change in pricing. However, in that case, the decline in
pricing was due to a company-specific change in selling practices made
at a particular point in the POI (i.e., the use of long term contracts
versus purchase orders), rather than a devaluation of the local
currency. See Notice of Final Determination of Sales at Less Than Fair
Value: Polyvinyl Alcohol from Taiwan, 61 FR 14064 (March 29, 1996). The
Department preliminarily determines that the modification of currency
conversion reasonably accounts for the devaluation of the won, and that
the use of multiple periods for averaging purposes is unwarranted.
The Department makes this determination without the benefit of
extensive case precedent dealing with this area of our currency
conversion policy. The Department therefore welcomes comments from
interested parties on all aspects of our analysis and the time period-
specific exchange rates used. For the purposes of the final
determination, the Department will continue to analyze the
implications, if any, of the decline in the won during 1997 for price
averaging and whether multiple averages are warranted. The Department
is examining this issue in Mushrooms from Indonesia and Emulsion
Styrene-Butadiene Rubber from the Republic of Korea. See Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Certain Preserved Mushrooms from
Indonesia, 63 FR 41783 (August 5, 1998); also, see Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber
from the Republic of Korea, 63 FR 59514 (November 4, 1998).
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 Korea. 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 no later than the
preliminary determination.
Section 733(e)(1) of the Act provides that the Department will
determine that there is a reasonable basis to believe or suspect that
critical circumstances exist if: (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 whether there is a history of injurious dumping of the
merchandise under investigation, in accordance with Section
733(e)(1)(A)(i), the Department considers evidence of an existing
antidumping order on SSSS from the country in question in the United
States or elsewhere to be sufficient. We are not aware of any
antidumping order in any country on SSSS from any of the countries
subject to this investigation.
In determining whether an importer knew or should have known that
the exporter was selling SSSS at less than fair value and thereby
causing material injury, the Department normally considers margins of
15 percent for CEP sales and 25 percent for EP sales or more sufficient
to impute knowledge of dumping and of resultant material injury. See
Notice of Final Determination of Sales Less than Fair Value: Certain
Cut-to-Length Carbon Steel Plate from the People's Republic of China,
63 FR 61964, 61967 (November 20, 1997); see also Notice of Final
[[Page 146]]
Determination of Sales Less Than Fair Value: Manganese Sulphate from
People's of Republic of China 60 FR 52155, 52161 (October 5, 1995).
In this investigation, respondents POSCO and Inchon, which the
Department has preliminarily determined have both EP and CEP sales, do
not have margins over 15 percent. 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 imports of SSSS from
respondents POSCO or Inchon. We have not analyzed the respondent's
shipment data 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, 63 FR 25895,
25898 (May 12, 1997).
However, because respondent Taihan has not responded to the
Department's questionnaires, and has been assigned a margin based on
facts otherwise available (see ``Facts Available'' section, below), its
margin exceeds 25 percent, thus meeting the first criterion. Also, as
facts available, we consider Taihan to have had massive imports over a
relatively short period. Therefore, having met both criteria, critical
circumstances exist for imports of subject merchandise from Taihan.
Regarding all other exporters, an ``All Others'' rate has been
determined (see ``The All Others Rate'', below); because this rate does
not exceed 15 percent, 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.
Facts Available
Section 776(a)(2) of the Act provides that if an interested party
or any other person (A) withholds information that has been requested
by the administrating authority; (B) fails to provide such information
by the deadlines for the submission of information or in the form and
manner requested, subject to subsections (c)(1) and (e) of section 782
of the Act; (C) significantly impedes a proceeding under the
antidumping statute; or (D) provides such information, but the
information cannot be verified as provided in section 782(i) of the
Act, the administrating authority shall, subject to section 782(d) of
the Act, use facts otherwise available in reaching the applicable
determination. As discussed above, Taihan failed to respond to the
Department's questionnaire. Accordingly, we have preliminarily
determined, under section 776(a)(2)(A), that we must base our
determination for that company on facts available.
Section 776(b) of the Act further provides that adverse inferences
may be used for a party that has failed to cooperate by not acting to
the best of its ability to comply with a request for information (see
also the Statement of Administrative Action (``SAA''), accompanying the
URAA, H.R. Rp. No. 316, 103rd Cong., 2d Sess. 870). Given the company's
refusal to comply with the Department's request for information, Taihan
has failed to cooperate to the best of its ability in this
investigation. Therefore, the Department has determined that an adverse
inference is warranted with respect to Taihan.
In this proceeding, we used the information from the petition, as
adjusted by the Department for the purposes of initiation, to form the
basis for a dumping margin for this respondent. Thus, consistent with
the Department's practice (see Notice of Preliminary Determination of
Sales at Less Than Fair Value: Stainless Steel Wire Rod from Germany,
63 FR 10847 (March 5, 1998) (``Stainless Steel Wire Rod from
Germany'')), the Department is assigning to Taihan the highest margin
alleged in the petition, as adjusted, for Korean producers, which is
58.79 percent (see June 30, 1998, ``Import Administration Antidumping
Investigation Initiation Checklist (``Initiation Checklist'') and the
Notice of Initiation for a discussion of the margin calculations in the
petition).
Section 776(c) of the Act provides that when the Department relies
on ``secondary information'' (e.g., the petition) as the facts
available, the Department shall, to the extent practicable, corroborate
that information with independent sources reasonably at the
Department's disposal. The SAA accompanying the URAA clarifies that the
petition is ``secondary information.'' See SAA at 870. The SAA also
clarifies that ``corroborate'' means to determine whether the
information used has probative value. Id.
We reviewed the accuracy and adequacy of the information in the
petition during our pre-initiation analysis of the petition, to the
extent appropriate information was available for this purpose (e.g.,
import statistics, foreign market research reports, and data from U.S.
producers). See Initiation Checklist. Specifically, in the petition,
the petitioners based both EP and NV on foreign market research,
affidavits concerning prices and freight costs, official U.S. import
statistics, U.S. government sources and International Financial
Statistics.
As certain information included in the petition's margin
calculation is from public sources (e.g., international freight and
insurance, U.S. harbor maintenance and U.S. merchandise processing
fees, SG&A, and profit), we find for the purpose of the preliminary
determination, that the information has probative value and is
therefore corroborated. In addition, with respect to certain data
included in the margin calculations included in the petition (e.g.,
gross U.S. and home market unit prices), the Department was provided
information by other respondents that corroborates the remaining
portions of the margin calculation in the petition. We have examined
the reliability of this information. See Memorandum to the File, dated
June 20, 1998. Finally, we note that the Department has, in other
cases, for facts available purposes, used margins developed in a
petition that are based in part on foreign market research. However,
with respect to certain data included in the margin calculations in the
petition (e.g., gross U.S. and home market unit prices), the Department
was provided no information by the respondents or other interested
parties, and is aware of no other independent sources of information,
that would enable it to further corroborate the remaining components of
the margin calculation in the petition. The implementing regulation to
section 776 of the Act, at 19 CFR 351.308(c), states ``[t]he fact that
corroboration may not be practicable in a given circumstance will not
prevent the Secretary from applying an adverse inference as appropriate
and using the secondary information in question.'' Additionally, we
note that the SAA at 870 specifically states that, where
``corroboration may not be practicable in a given circumstance'', the
Department may nevertheless apply an adverse inference. We note further
that the Department has used as the facts available margins developed
in the petition that are based in part on foreign market research in
other cases. See e.g., Stainless Steel Wire Rod from Germany, and
Notice of Preliminary Determination of Sales at Less Than
[[Page 147]]
Fair Value and Postponement of Final Determination: Melamine
Institutional Dinnerware Products from Indonesia, 61 FR 43333 (August
22, 1996).
The All Others Rate
Section 735(c)(5) of the Act provides that, where the dumping
margins established for all exporters and producers individually
investigated are determined entirely under section 776 of the Act, the
Department may use any reasonable method to establish the estimated
all-others rate for exporters and producers not individually
investigated. For this preliminary determination, since Inchon has a
zero margin, the all other's rate is simply the calculated rate for
POSCO.
Suspension of Liquidation
In accordance with section 733(d) of the Act, we are directing the
U.S. 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 U.S. 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 in the
chart below. These suspension-of-liquidation instructions will remain
in effect until further notice. The weighted-average dumping margins
are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
(percentage)
------------------------------------------------------------------------
POSCO..................................................... 12.35
Inchon.................................................... 0.0
Taihan.................................................... 58.79
All Others................................................ 12.35
------------------------------------------------------------------------
In addition, in accordance with section 733(e)(2) of the Act, on
the date of publication of affirmative preliminary determinations in
these investigations, the Department will direct the U.S. Customs
Service to suspend liquidation of all entries of SSSS from Korea for
exporter Taihan, for which we found critical circumstances, that are
entered, or withdrawn from warehouse, for consumption on or after 90
days prior to the date of publication of our preliminary determination
in the Federal Register. The Customs Service shall require a cash
deposit or posting of a bond equal to the estimated preliminary dumping
margins reflected in the preliminary determinations published in the
Federal Register. This suspension of liquidation will remain in effect
until further notice.
ITC Notification
In accordance with section 733(f) of the Act, we are notifying 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 these imports are materially injuring, or threaten material
injury to, the U.S. industry.
Public Comment
Case briefs or other written comments in at least ten copies must
be submitted to the Assistant Secretary for Import Administration no
later than 50 days after the publication of the preliminary
determination, and rebuttal briefs, limited to issues raised in case
briefs, no later than 55 days after the publication of the preliminary
determination. A list of authorities used and an executive summary of
issues should accompany any briefs submitted to the Department. Such
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, the hearing
will be held 57 days after the publication of the preliminary
determination, time and room to be determined, at the U.S. Department
of Commerce, 14th Street and Constitution Avenue, N.W., Washington,
D.C. 20230. Parties should confirm by telephone the time, date, and
place 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 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.
Oral presentations will be limited to issues raised in the briefs. We
will make our final determination no later than 135 days after the date
of publication in the Federal Register of our 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. 98-34467 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P
