03-25382. Steel Concrete Reinforcing Bar from The Republic of Korea: Notice of Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results of Antidumping Duty Administrative Review.

EFFECTIVE DATE:

October 7, 2003.

SUMMARY:

In response to a request from Dongkuk Steel Mill Corporation Ltd. (“DSM”), the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on steel concrete reinforcing bar (“rebar”) from the Republic of Korea (Korea). The period of review (“POR”) is January 30, 2001 through August 31, 2002.

As discussed below, the Department collapsed DSM and Korea Iron and Steel Co., Ltd. (“KISCO”) into a single entity for purposes of this administrative review. We preliminarily determine that DSM/KISCO made sales at less than normal value during the POR. If these preliminary results are adopted in our final results of review, we will instruct the U.S. Bureau of Customs and Border Protection (“BCBP”) to assess antidumping duties based on the difference between the United States Price (“USP”) and normal value (“NV”). Interested parties are invited to comment on these preliminary results.

FOR FURTHER INFORMATION CONTACT:

Richard Johns or Mark Manning at [phone] or [phone], respectively, Antidumping and Countervailing Duty Enforcement Group II, Office 4, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

On September 7, 2001, the Department issued an antidumping duty order on rebar from Korea. See Antidumping Duty Orders: Steel Concrete Reinforcing Bars From Belarus, Indonesia, Latvia, Moldova, People's Republic of China, Poland, Republic of Korea and Ukraine, 66 FR 46777 (September 7, 2001). On September 3, 2002, the Department published a notice of opportunity to request the first administrative review of this order. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 67 FR 56267 (September 3, 2002). On September 30, 2002, in accordance with 19 CFR § 351.213(b), DSM requested an administrative review. On October 24, 2002, the Department published the notice of initiation of this administrative review, covering the period January 30, 2001, through August 31, 2002. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 67 FR 65336 (October 24, 2002).

On October 18, 2002, the Department issued a questionnaire to DSM. On November 15, 2002, DSM notified the Department that its corporate structure had changed since the less-than-fair-value (“LTFV”) investigation and that it is no longer affiliated with KISCO. DSM stated that it should not be required to submit information regarding KISCO's sales or costs of production, and that it would respond to the Department's questionnaire with only its own data. We received timely responses to Sections A-D of the initial questionnaire in November and December 2002. The Department issued supplemental questionnaires for Sections A-D, in addition to questions regarding the relationship between DSM and KISCO, from January through April 2003. We received timely responses from DSM from February through May 2, 2003.

Because it was not practicable to issue the preliminary results of this review within the normal time frame, on June 3, 2003, we published in the Federal Register our notice of the extension of time limits for these preliminary results. See Steel Concrete Reinforcing Bars from the Republic of Korea: Notice of Postponement of Preliminary Results of Antidumping Duty Administrative Review, 68 FR 33105 (June 3, 2003). This extension established the deadline for these preliminary results as September 30, 2003.

On May 7, 2003, the Department released to DSM the results of a query of entry data obtained from the BCBP, and requested that DSM verify that all sales through an affiliated company were included in the sales data set submitted to the Department. In response, on May 14, 2003, DSM submitted additional U.S. sales, some of which had been previously unreported. On May 27, 2003, the petitioner¹ objected to the additional sales contained in DSM's May 14, 2003 letter, stating that such sales constitute untimely submitted new factual information and should be removed from the record. On June 2, 2003, DSM submitted comments objecting to the petitioner's request that the additional sales be stricken from the record. On June 23, 2003, the petitioner rebutted DSM's June 2, 2003 submission.

On August 6, 2003, the Department instructed DSM to remove the additional sales from its May 14, 2003 submission and delete all references to those sales from its June 2, 2003 submission. On August 11, 2003, DSM submitted a letter objecting to the removal of the additional sales it had reported. DSM argued that the rejected information was an appropriate and necessary response to questions posed in the Department's May 7, 2003 letter. On August 12, 2003, DSM submitted redacted versions of its May 14, 2003 and June 2, 2003 letters, as well as a revised version of its May 14, 2003 letter. The revised version of DSM's May 14, 2003 letter contains a reconciliation worksheet which shows that DSM's previously reported sales and the additional sales reported on May 14, 2003, sum to the total quantity of entries identified by the BCBP data query.

After reviewing the arguments contained in DSM's August 11 and August 12, 2003 submissions, the Department has decided to accept DSM's additional U.S. sales, as reported in its revised May 14, 2003 submission, and include them in our margin calculation for purposes of the preliminary determination. See DSM's May 14, 2003 submission at Attachment III.On September 12, 2003, the Department collapsed DSM and KISCO into a single entity for the purposes of this administrative review. See Memorandum from Thomas F. Futtner, Acting Office Director to Holly A. Kuga, Acting Deputy Assistant Secretary Group II, “Decision Memorandum: Whether to Collapse Dongkuk Steel Mill Co., Ltd., and Korea Iron and Steel Co., Ltd., Into a Single Entity,” dated September 12, 2003 (“Collapsing Memorandum”), on file in the Central Records Unit, Room B-099 of the Main Commerce Building (“CRU”). On September 15, 2003, we issued the antidumping questionnaire to KISCO. Since the questionnaire was released to KISCO approximately two weeks before the fully extended deadline for the preliminary results, KISCO's sales and costs of production data are not available for inclusion in these preliminary results. For this reason, the preliminary results are based only upon DSM's data. We will provide the petitioner an opportunity to comment on KISCO's questionnaire responses and will include KISCO's information in our final results of review.

Scope of the Review

The product covered by this administrative review is all rebar sold in straight lengths, currently classifiable in the Harmonized Tariff Schedule of the United States (“HTSUS”) under item number 7214.20.00 or any other tariff item number. Specifically excluded are plain rounds (i.e., non-deformed or smooth bars) and rebar that has been further processed through bending or coating. The HTSUS subheadings are provided for convenience and customs purposes. The written description of the scope of this proceeding is dispositive.

Verification

Pursuant to 19 CFR § 351.307, the Department will conduct verification of the information and data submitted by DSM and KISCO prior to the final results of administrative review.

Fair Value Comparisons

To determine whether sales of rebar in the United States were made at LTFV, we compared USP to NV, as described in the “Constructed Export Price” and “Normal Value” sections of this notice. In accordance with section 777A(d)(2) of the Tariff Act of 1930, as amended (“the Act”), we calculated monthly weighted-average NVs and compared these to individual U.S. transactions.

Constructed Export Price

We calculated the constructed export price (“CEP”) in accordance with subsection 772(b) of the Act, because the subject merchandise was first sold in the United States by Dongkuk International Inc. (“DKA”), a U.S. seller affiliated with DSM, to a purchaser not affiliated with the producer, DSM. We based CEP on the packed prices charged to the first unaffiliated customer in the United States. Pursuant to section 772(c)(1)(B) we increased the starting price by the amounts reported by DSM for duty drawback. 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 brokerage and handling, international freight, marine insurance, U.S. customs duties, and U.S. brokerage and handling. 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 other direct selling expenses), and indirect selling expenses. We also made an adjustment for CEP profit in accordance with section 772(d)(3) of the Act. See Memorandum from Mark Manning, Senior Import Compliance Specialist, to Ronald Trentham, Acting Program Manager, “Calculation Memorandum of the Preliminary Results of Administrative Review,” dated September 30, 2003 (“Preliminary Calculation Memorandum”), on file in the CRU.

Home Market

In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product was equal to or greater than five percent of the aggregate volume of U.S. sales), we compared the respondent's volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1) of the Act. As DSM'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.

It is the Department's practice to remove from our analysis sales to affiliated customers for consumption in the home market which are determined not to be at arm's-length. To test whether these sales were made at arm's-length, we compared the prices of sales of comparison products to affiliated and unaffiliated customers, net of all movement charges, direct selling expenses, discounts, and packing. Pursuant to 19 CFR § 351.403(c), and in accordance with our practice, when the prices to the affiliated party are, on average, less than 99.5 percent of the prices to unaffiliated parties, we determine that the sales made to the affiliated party are not at arm's-length. See 19 CFR § 351.403(c).² In the instant review, we found that all sales to the single affiliated home market customer passed the arm's-length test and, for this reason, were included in our analysis. See Preliminary Calculation Memorandum.

Cost of Production Analysis

The Department disregarded certain sales made by DSM in the investigation because these sales failed the cost test. See Notice of Final Determination of Sales at Less Than Fair Value: Steel Concrete Reinforcing Bar from the Republic of Korea, 66 FR 33526 (June 22, 2001); see also Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Steel Concrete Reinforcing Bars from the Republic of Korea, 66 FR 8348, 8354 (January 30, 2001). Thus, in accordance with section 773(b)(2)(A)(ii) of the Act, there are reasonable grounds to believe or suspect that sales of rebar in the home market were made at prices below their cost of production (“COP”) in the current review period. Accordingly, pursuant to section 773(b) of the Act, we initiated a cost investigation to determine whether sales made during the POR were at prices below their respective COP.

In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of the cost of materials and fabrication for the foreign like product, plus an amount for general and administrative expenses (“G&A”) and interest expenses. We relied on the COP data submitted by DSM. See Preliminary Calculation Memorandum.

In accordance with section 773(b)(1) of the Act, in determining whether to disregard home market sales made at prices below COP, we examined whether such sales were made within an extended period of time in substantial quantities, and whether such sales were made at prices which would permit recovery of all costs within a reasonable period of time.

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of DSM's sales of a given model were at prices less than COP, we did not disregard any below-cost sales of that model because these below-cost sales were not made in substantial quantities. Where 20 percent or more of DSM's home market sales of a given model were at prices less than the COP, we disregarded the below-cost sales because such sales were made: (1) in substantial quantities within the POR (i.e., within an extended period of time) in accordance with section 773(b)(2)(B) of the Act, and (2) at prices which would not permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act (i.e., the sales were made at prices below the weighted-average per-unit COP for the POR). We used the remaining sales as the basis for determining NV in accordance with section 773(b)(1) of the Act. We did not use the constructed value (“CV”), as all U.S. sales were matched to home market merchandise.

Normal Value

We calculated NV based on prices to unaffiliated customers or prices to affiliated customers that we determined to be at arm's length. We adjusted the starting price for the discount DSM provided to certain home market customers. We made deductions, where appropriate, for foreign inland freight and warehousing, pursuant to section 773(a)(6)(B) of the Act. In addition, when comparing sales of similar merchandise, we made adjustments for differences in cost attributable to differences in physical characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) of the Act and 19 CFR § 351.411. We also adjusted the starting price 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 a COS adjustment for imputed credit expenses. See Preliminary Calculation Memorandum. We also made an adjustment for the CEP offset in accordance with section 773(a)(7)(B) of the Act. See “Level of Trade and CEP Offset” section below. Finally, we deducted home-market (“HM”) packing costs and added U.S. packing costs in accordance with sections 773(a)(6)(A) and (B) of the Act.

Level of Trade and CEP Offset

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 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 CEP, it is the level of the constructed sale from the exporter to the importer. Moreover, for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit, pursuant to section 772(d) of the Act. See Micron Technology, Inc. v. United States, 243 F.3d 1301, 1314-1315 (Fed. Cir. 2001).

To determine whether the comparison-market sales are at a different LOT than 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 a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV LOT 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 affect price comparability, we adjust NV under section 773(a)(7)(B) of the Act (“the CEP offset provision”). See, e.g., Certain Carbon Steel Plate from South Africa, Final Determination of Sales at Less Than Fair Value, 62 FR 61731 (November 19, 1997).

In implementing these principles in this review, we asked DSM to identify the specific differences and similarities in selling functions and support services between all phases of marketing in the home market and the United States. DSM identified two channels of

distribution in the home market: (1) direct sales and (2) warehouse sales. For both channels DSM performs similar selling functions such as negotiating prices with customers, setting similar credit terms, arranging freight to the customer, and conducting market research and sales calls. The remaining selling activities did not differ significantly by channel of distribution. Because channels of distribution do not qualify as separate levels of trade when the selling functions performed for each customer class or channel are sufficiently similar, we determined that one level of trade exists for DSM's HM sales.

For the U.S. market, DSM reported one channel of distribution sales to unaffiliated U.S. customers through DKA, DSM's affiliated U.S. sales company. All of DSM's U.S. sales were CEP transactions and DSM performed the same selling functions in each instance. Therefore, the U.S. market has one LOT.

When we compared CEP sales (after deductions made pursuant to section 772(d) of the Act) to HM sales, we determined that for CEP sales, DSM did not have interaction with customers, did not perform market research, and did not provide inventory maintenance. However, these functions are performed for HM sales. The differences in selling functions performed for home market and CEP transactions indicate that HM sales involved a more advanced stage of distribution than CEP sales. In the home market, DSM provides services normally found further down the chain of distribution which are normally performed by the affiliated reseller in the U.S. market (e.g., interaction with customers, market research).

Based on our analysis, we determined that CEP and the starting price of HM sales represent different stages in the marketing process, and are thus at different LOTs. Therefore, when we compared CEP sales to HM sales, we examined whether a LOT adjustment may be appropriate. In this case, DSM sold at one LOT in the home market; therefore, there is no basis upon which to determine whether there is a pattern of consistent price differences between levels of trade. Further, we do not have the information which would allow us to examine pricing patterns of DSM's sales of other similar products, and there is no other record evidence upon which such an analysis could be based.

Because the data available do not provide an appropriate basis for making a LOT adjustment, but the LOT in Korea for DSM is at a more advanced stage than the LOT of the CEP sales, a CEP offset is appropriate in accordance with section 773(a)(7)(B) of the Act, as claimed by DSM. Therefore, we applied the CEP offset to NV.

Preliminary Results of Review

As a result of our review, we preliminarily determine the following weighted-average dumping margin exists for the period January 30, 2001 through August 31, 2002:

Manufacturer / Exporter	Weighted Average Margin (percentage)
Dongkuk Steel Mill Co., Ltd./Korea Iron and Steel Co., Ltd.	10.37

The Department will disclose the calculations performed within five days of the date of publication of this notice in accordance with 19 CFR § 351.224(b). An interested party may request a hearing within thirty days of publication. See CFR § 351.310(c). The date of any hearing, if requested, will be announced to all interested parties by the Department pursuant to 19 CFR § 351.310(d). The Department will establish a schedule for interested parties to submit case briefs regarding the preliminary results and verification findings. Rebuttal briefs, limited to issues raised in the case briefs, may be filed no later than 5 days after the submission of case briefs. Parties who submit argument in these proceedings are requested to submit with the argument (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Further, parties submitting written comments should provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue final results of these administrative reviews, including the results of our analysis of the issues raised in any such written comments, within 120 days of publication of these preliminary results.

The Department shall determine, and BCBP shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR § 351.212(b)(1), we will calculate importer-specific ad valorem assessment rates for the merchandise subject to this review. These rates will be assessed uniformly on all entries the respective importers made during the POR if these preliminary results are adopted in the final results of review. The Department will issue appropriate appraisement instructions directly to BCBP within fifteen days of publication of the final results of review.

Furthermore, the following cash deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of rebar from Korea entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: 1) the cash deposit rate for DSM/KISCO will be the rate established in the final results of this review; 2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; 3) if the exporter is not a firm covered in this review, or the LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and 4) the cash deposit rate for all other manufacturers or exporters will continue to be 22.89 percent, the “all others” rate made effective by the LTFV investigation. See Notice of Final Determination of Sales at Less Than Fair Value: Steel Concrete Reinforcing Bars From the Republic of Korea, 66 FR 33526 (June 22, 2001). The required cash deposits shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR § 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: September 30, 2003.

James J. Jochum,

Assistant Secretary for Import Administration.

Footnotes

1.  The petitioner in this administrative review is the Rebar Trade Action Coalition and its individual members (collectively, the “petitioner”).

2.  Because this review was initiated before November 23, 2002, the 99.5 percent test applies to this review. See Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186, 69197 (November 15, 2002).