E7-21870. Preliminary Results of Antidumping Duty Administrative Review: Carbon and Alloy Steel Wire Rod From Mexico

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to requests by interested parties, the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on carbon and alloy steel wire rod (“wire rod”) from Mexico for the period of review (“POR”) October 1, 2005, through September 30, 2006.

We preliminarily determine that during the POR, Hylsa Puebla, S.A. de C.V. (“Hylsa”) made sales at less than normal value (“NV”). If these preliminary results are adopted in the final results of this administrative review, we will instruct U.S. Customs and Border Protection (“CBP”) to assess antidumping duties equal to the difference between the export price (“EP”) and NV.

DATES:

Effective Dates: November 7, 2007.

FOR FURTHER INFORMATION CONTACT:

John Conniff or Jolanta Lawska, AD/CVD Operations, Office 3, Import Administration, Room 1870, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: [phone] or [phone], respectively.

SUPPLEMENTARY INFORMATION:

Background

On October 29, 2002, the Department published in the Federal Register the antidumping duty order on wire rod from Mexico; see Notice of Antidumping Duty Orders: Carbon and Certain Alloy Steel Wire Rod from Brazil, Indonesia, Mexico, Moldova, Trinidad and Tobago, and Ukraine, 67 FR 65945 (October 29, 2002). On October 2, 2006, the Department published in the Federal Register the notice of Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review, 71 FR 57920 (October 2, 2006).

On October 31, 2006, we received a request for review from petitioners,^[1] with respect to Hylsa and Siderurgica Lazaro Cardenas Las Truchas S.A. de C.V. (“Sicartsa”). This review was requested in accordance with 19 CFR 351.213(b)(2).

On November 27, 2006, we published the notice of initiation of this antidumping duty administrative review covering the period October 1, 2005, through September 30, 2006. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 71 FR 68535 (November 27, 2006).

On December 28, 2006, petitioners withdrew their request for a review of Sicartsa pursuant to 19 CFR 351.213(d)(1). On May 25, 2007, we published in the Federal Register the notice of rescission for Sicartsa; see Certain Carbon and Alloy Steel Wire Rod from Mexico: Notice of Partial Rescission of Antidumping Duty Administrative Review, 72 FR 29300 (May 25, 2007).

On February 5, 2007, Hylsa submitted its section A response to the Department's December 8, 2006, initial questionnaire. On February 12, 2007, Hylsa submitted its sections B-C response to the Department's initial questionnaire. On June 11, 2007, Hylsa submitted its supplemental questionnaire response to the Department's May 4, 2007, questionnaire for sections A-C. On September 6, 2007, Hylsa submitted its second supplemental questionnaire response to the Department's August 23, 2007, questionnaire for sections A-C. On September 20, 2007, Hylsa submitted its third supplemental questionnaire response to the Department's September 10, 2007, questionnaire for sections A-C.

On February 20, 2007, Hylsa submitted its section D response to the Department's December 7, 2007, questionnaire. On July 16, 2007, Hylsa submitted its supplemental questionnaire response to the Department's June 18, 2007, questionnaire for section D. On September 13, 2007, Hylsa submitted its second questionnaire response to the Department's August 23, 2007, questionnaire for section D. On October 10, 2007, Hylsa submitted its third supplemental questionnaire response to the Department's October 3, 2007, questionnaire for section D.

On March 30, 2007, the petitioners submitted comments with respect to Hylsa. On May 17, 2007, the Department published a notice extending the time period for issuing the preliminary results of the fourth administrative review from July 3, 2007, to October 31, 2007. See Carbon and Certain Alloy Steel Wire Rod from Mexico: Extension of Time Limits for the Preliminary Results of Antidumping Duty Administrative Review, 72 FR 27801 (May 17, 2007).

Scope of Review

The merchandise subject to this order is certain hot-rolled products of carbon steel and alloy steel, in coils, of approximately round cross section, 5.00 mm or more, but less than 19.00 mm, in solid cross-sectional diameter.

Specifically excluded are steel products possessing the above-noted physical characteristics and meeting the Harmonized Tariff Schedule of the United States (“HTSUS”) definitions for (a) stainless steel; (b) tool steel; (c) high nickel steel; (d) ball bearing steel; and (e) concrete reinforcing bars and rods. Also excluded are (f) free machining steel products (i.e., products that contain by weight one or more of the following elements: 0.03 percent or more of lead, 0.05 percent or more of bismuth, 0.08 percent or more of sulfur, more than 0.04 percent of phosphorus, more than 0.05 percent of selenium, or more than 0.01 percent of tellurium).

Also excluded from the scope are 1080 grade tire cord quality wire rod and 1080 grade tire bead quality wire rod. This grade 1080 tire cord quality rod is defined as: (i) Grade 1080 tire cord quality wire rod measuring 5.0 mm or more but not more than 6.0 mm in cross-sectional diameter; (ii) with an average partial decarborization of no more than 70 microns in depth (maximum individual 200 microns); (iii) having no non-deformable inclusions greater than 20 microns and no deformable inclusions greater than 35 microns; (iv) having a carbon segregation per heat average of 3.0 or better using European Method NFA 04-114; (v) having a surface quality with no surface defects of a length greater than 0.15 mm; (vi) capable of being drawn to a diameter of 0.30 mm or less with 3 or fewer breaks per ton, and (vii) containing by weight the following elements in the proportions shown: (1) 0.78 percent or more of carbon, (2) less than 0.01 percent of aluminum, (3) 0.040 percent or less, in the aggregate, of phosphorus and sulfur, (4) 0.006 percent or less of nitrogen, and (5) not more than 0.15 percent, in the aggregate, of copper, nickel and chromium.

This grade 1080 tire bead quality rod is defined as: (i) Grade 1080 tire bead quality wire rod measuring 5.5 mm or more but not more than 7.0 mm in cross-sectional diameter; (ii) with an average partial decarborization of no more than 70 microns in depth (maximum individual 200 microns); (iii) having no non-deformable inclusions greater than 20 microns and no deformable inclusions greater than 35 microns; (iv) having a carbon segregation per heat average of 3.0 or better using European Method NFA 04-114; (v) having a surface quality with no surface defects of a length greater than 0.2 mm; (vi) capable of being drawn to a diameter of 0.78 mm or larger with 0.5 or fewer breaks per ton; and (vii) containing by weight the following elements in the proportions shown: (1) 0.78 percent or more of carbon, (2) less than 0.01 percent of soluble aluminum, (3) 0.040 percent or less, in the aggregate, of phosphorus and sulfur, (4) 0.008 percent or less of nitrogen, and (5) either not more than 0.15 percent, in the aggregate, of copper, nickel and chromium (if chromium is not specified), or not more than 0.10 percent in the aggregate of copper and nickel and a chromium content of 0.24 to 0.30 percent (if chromium is specified).

For purposes of the grade 1080 tire cord quality wire rod and the grade 1080 tire bead quality wire rod, an inclusion will be considered to be deformable if its ratio of length (measured along the axis—that is, the direction of rolling—of the rod) over thickness (measured on the same inclusion in a direction perpendicular to the axis of the rod) is equal to or greater than three. The size of an inclusion for purposes of the 20 microns and 35 microns limitations is the measurement of the largest dimension observed on a longitudinal section measured in a direction perpendicular to the axis of the rod. This measurement methodology applies only to inclusions on certain grade 1080 tire cord quality wire rod and certain grade 1080 tire bead quality wire rod that are entered, or withdrawn from warehouse, for consumption on or after July 24, 2003.

The designation of the products as “tire cord quality” or “tire bead quality” indicates the acceptability of the product for use in the production of tire cord, tire bead, or wire for use in other rubber reinforcement applications such as hose wire. These quality designations are presumed to indicate that these products are being used in tire cord, tire bead, and other rubber reinforcement applications, and such merchandise intended for the tire cord, tire bead, or other rubber reinforcement applications is not included in the scope. However, should petitioners or other interested parties provide a reasonable basis to believe or suspect that there exists a pattern of importation of such products for other than those applications, end-use certification for the importation of such products may be required. Under such circumstances, only the importers of record would normally be required to certify the end use of the imported merchandise.

All products meeting the physical description of subject merchandise that are not specifically excluded are included in this scope.

The products under review are currently classifiable under subheadings 7213.91.3010, 7213.91.3090, 7213.91.4510, 7213.91.4590, 7213.91.6010, 7213.91.6090, 7213.99.0031, 7213.99.0038, 7213.99.0090, 7227.20.0010, 7227.20.0020, 7227.20.0090, 7227.20.0095, 7227.90.6051, 7227.90.6053, 7227.90.6058, and 7227.90.6059 of the HTSUS. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this proceeding is dispositive.^[2]

Product Comparisons

In accordance with section 771(16) of the Tariff Act of 1930, as amended (“the Act”), all products produced by the respondents covered by the description in the “Scope of Review” section, above, and sold in Mexico during the POR are considered to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. We have relied on eight criteria to match U.S. sales of subject merchandise to comparison-market sales of the foreign like product or constructed value (“CV”): grade range, carbon content range, surface quality, deoxidation, maximum total residual content, heat treatment, diameter range, and coating. These characteristics have been weighted by the Department where appropriate. Where there were no sales of identical merchandise in the home market made in the ordinary course of trade 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 listed above.

Comparisons to Normal Value

To determine whether sales of wire rod from Mexico were made in the United States at less than NV, we compared the EP to the NV, as described in the “Export Price” and “Normal Value” sections of this notice. In accordance with section 777A(d)(2) of the Act, we calculated monthly weighted-average prices for NV and compared these to individual U.S. transactions.

Export Price

For the price to the United States, we used EP in accordance with section 772(a) of the Act. We calculated EP when the merchandise was sold by the producer or exporter outside of the United States directly to the first unaffiliated purchaser in the United States prior to importation and when constructed export price was not otherwise warranted based on the facts on the record. We based EP on the packed cost-insurance-freight (“CIF”), ex-factory, free-on-board (“FOB”), or delivered prices to the first unaffiliated customer in, or for exportation to, the United States.

In accordance with section 772(c)(2) of the Act, we made deductions, where appropriate, for movement expenses including inland freight from plant or warehouse to port of exportation, foreign brokerage, handling and loading charges, U.S. brokerage, and U.S. inland freight expenses (freight from port to the customer) and insurance. We also adjusted EP for billing adjustments.

In accordance with 19 CFR 351.401(e)(2) and in keeping with our practice, we added interest, freight, and other revenue (i.e., Mexican and U.S. brokerage and handling) where applicable. See, e.g., Light-Walled Rectangular Pipe and Tube from Mexico: Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination, 69 FR 19400, 19406 (April 13, 2004); unchanged in Light-Walled Rectangular Pipe and Tube From Mexico: Notice of Final Determination of Sales at Less Than Fair Value, 69 FR 53677 (September 2, 2004).

Normal Value

A. Selection of Comparison Markets

To determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV, we compared Hylsa's volume of home market sales of the foreign like product to the volume of its U.S. sales of the subject merchandise. Pursuant to sections 773(a)(1)(B) and 773(a)(1)(C) of the Act, because Hylsa had an aggregate volume of home market sales of the foreign like product that 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.

B. Arm's-Length Test

Hylsa reported sales of the foreign like product to affiliated end-users and affiliated resellers. The Department calculates the NV based on a sale to an affiliated party only if it is satisfied that the price to the affiliated party is comparable to the price at which sales are made to parties not affiliated with the producer or exporter, i.e., sales at arm's-length. See 19 CFR 351.403(c). To test whether these sales were made at arm's-length, we compared the starting prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, discounts and packing. In accordance with the Department's current practice, if the prices charged to an affiliated party were, on average, between 98 and 102 percent of the prices charged to unaffiliated parties for merchandise identical or most similar to that sold to the affiliated party, we consider the sales to be at arm's-length prices. See 19 CFR 351.403(c); see also Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186, 69187 (November 15, 2002). Conversely, where sales to the affiliated party did not pass the arm's-length test, all sales to that affiliated party have been excluded from the NV calculation. Id. Some of Hylsa's sales did not pass the arm's-length test and were excluded from the NV calculation.

C. Cost of Production (“COP”) Analysis

1. Calculation of COP

Before making any comparisons to NV, we conducted a COP analysis of Hylsa, pursuant to section 773(b) of the Act, to determine whether the respondents' comparison market sales were made below the COP. We calculated the COP based on the sum of the cost of materials and fabrication for the foreign like product, plus amounts for selling, general, and administrative expenses (“SG&A”) and packing, in accordance with section 773(b)(3) of the Act. We adjusted Hylsa's reported general and administrative expenses to account for certain costs. The Department normally includes these costs in the calculation of COP. See October 31, 2007, memorandum to the file, “Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results—Hylsa Puebla S.A. de C.V.” from Gina K. Lee, Accountant, to Neal M. Halper, Director, Office of Accounting.

2. Test of Comparison Market Prices

As required under section 773(b)(2) of the Act, we compared the weighted-average COP to the per-unit price of the comparison market sales of the foreign like product, to determine whether these sales had been made at prices below the COP within an extended period of time in substantial quantities, and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time. In accordance with the statute and the Department's practice, we determined the net comparison market prices for the below-cost test by subtracting from the gross unit price any applicable movement charges, discounts, rebates, direct and indirect selling expenses (also subtracted from the COP), and packing expenses. We also adjusted the gross unit price for billing adjustments and interest revenue. See section 773(b) of the Act; see also Certain Steel Concrete Reinforcing Bars From Turkey: Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review and Notice of Intent Not To Revoke in Part, 69 FR 25063, 25066 (May 5, 2004); unchanged in Certain Steel Concrete Reinforcing Bars From Turkey: Final Results, Rescission of Antidumping Duty Administrative Review in Part, and Determination Not To Revoke in Part, 69 FR 64731 (November 8, 2004).

3. Results of the COP Test

Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 percent of 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 POR were at prices less than the COP, we determined such sales to have been made in “substantial quantities.” See section 773(b)(2)(C) of the Act. The sales were made within an extended period of time in accordance with section 773(b)(2)(B) of the Act, because they were made over the course of the POR. In such cases, because we compared prices to POR-average costs, 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, for Hylsa, for purposes of this administrative review, we disregarded below-cost sales of a given product and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act. See the October 31, 2007, memorandum to the file, “Preliminary Calculation Memorandum for Hylsa S.A. de C.V.” (“Calculation Memorandum for Hylsa”) from Jolanta Lawska, Case Analyst, Office of AD/CVD Operations III, available in the Central Records Unit (“CRU”) Import Administration, Washington, DC, HCHB Building, Room B for our calculation methodology and results.

D. Calculation of Normal Value Based on Comparison Market Prices

We calculated NV based on ex-works, FOB or delivered prices to comparison market customers. We calculated the starting price taking into account, where necessary, billing adjustments and early payment discounts. Pursuant to section 773(a)(6)(B)(ii) of the Act, we made deductions from the starting price, when appropriate, for handling, loading, inland freight, and inland insurance. In accordance with 19 CFR 351.402, we added interest revenue, where applicable. In accordance with sections 773(a)(6)(A) and (B) of the Act, we added U.S. packing costs and deducted comparison market packing, respectively. In addition, we made circumstance of sale (“COS”) adjustments for direct expenses, including imputed credit expenses, and warranty expenses in accordance with section 773(a)(6)(C)(iii) of the Act.

When comparing U.S. sales with comparison market sales of similar, but not identical, merchandise, we also made adjustments for physical differences in the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this adjustment on the difference in the variable cost of manufacturing for the foreign like product and subject merchandise, using POR-average costs.

Sales of wire rod purchased by the respondents from unaffiliated producers and resold in the comparison market were treated in the same manner described above in the “Export Price” section of this notice.

E. Level of Trade

In accordance with section 773(a)(1)(B) of the Act, we determined NV based on sales in the comparison market at the same level of trade as the EP sales, to the extent practicable. When there were no sales at the same LOT, we compared U.S. sales to comparison market sales at a different LOT.

Pursuant to 19 CFR 351.412, to determine whether comparison market sales were at a different LOT, we examined stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated (or arm's-length) customers. If the comparison-market sales were at a different LOT and the differences affect 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 will make an LOT adjustment under section 773(a)(7)(A) of the Act.

In its questionnaire response, Hylsa did not claim a LOT adjustment. See Hylsa's Section A questionnaire response dated February 12, 2007, at page 29. Moreover, based on our analysis of the facts of this administrative review, we preliminarily determine that there is no substantial difference in the selling functions between the sales on which NV is based and the export transactions. All of Hylsa's U.S. sales are reported as EP sales. Thus, we have matched EP sales to sales in the home market without regard to level of trade and made no level of trade adjustment.

For a detailed description of our LOT methodology and a summary of Hylsa's LOT findings for these preliminary results, see page 3 of the October 31, 2007, calculation memorandum for Hylsa.

Currency Conversion

For purposes of these preliminary results, we made currency conversions in accordance with section 773A(a) of the Act, based on the official exchange rates published by the Federal Reserve Bank.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following percentage weighted-average margins exist for the period October 1, 2005, through September 30, 2006:

Manufacturer/exporter	Margin (percent)
Hylsa	17.78

The Department will disclose calculations performed within five days of the date of publication of this notice to the parties of this proceeding in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held 37 days after the date of publication, or the first working day thereafter, unless the Department alters the date pursuant to 19 CFR 351.310(d). Interested parties may submit case briefs no later than 30 days after the date of publication of these preliminary results of review. See 19 CFR 351.310(c). Rebuttal briefs limited to issues raised in the case briefs, may be filed no later than 35 days after the date of publication. See 19 CFR 351.310(d). Parties who submit arguments are requested to submit with the argument (1) a statement of the issue, and (2) a brief summary of the argument. Further, parties submitting written comments are requested to provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, or at a hearing, within 120 days of publication of these preliminary results.

Assessment Rate

Upon completion of this administrative review, the Department shall determine, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries. After 41 days of publication of the final results of this administrative review, if any importer-specific ad valorem rates calculated in the final results are above de minimis (i.e., at or above 0.5 percent), the Department will issue appraisement instructions directly to CBP to assess antidumping duties on appropriate entries. The total customs value is based on the entered value reported for each importer for all U.S. entries of subject merchandise purchased during the POR for consumption in the United States.

The Department clarified its “automatic assessment” regulation on May 6, 2003. See Antidumping and Countervailing Duty Proceedings: Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003). This clarification will apply to entries of subject merchandise during the POR produced by the companies included in these preliminary results for which the reviewed companies did not know their merchandise was destined for the United States. In such instances, we will instruct CBP to liquidate unreviewed entries at the “All Others” rate if there is no rate for the intermediate company or companies involved in the transaction.

Cash Deposit Requirements

To calculate the cash deposit rate for Hylsa in this administrative review, we divided the total dumping margins by the total net value for this company's sales during the review period.

The following deposit rates will be effective upon publication of the final results of this administrative review for all shipments of wire rod from Mexico entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(2)(C) of the Act: (1) The cash deposit rates for the companies listed above will be the rates established in the final results of this review, except if the rate is less than 0.5 percent and, therefore, de minimis, the cash deposit will be zero; (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 final results in which that manufacturer or exporter participated; (3) if the exporter is not a firm covered in this review, a prior review, or the original less than fair value (“LTFV”) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent final results for the manufacturer of the merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous review conducted by the Department, the cash deposit rate will be 20.11 percent, the “All Others” rate established in the LTFV investigation. See Notice of Final Determination of Sales at Less than Fair Value: Carbon and Certain Alloy Steel Wire Rod From Mexico, 67 FR 55800 (August 30, 2002).

These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice 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.

This administrative review is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: October 31, 2007.

Stephen J. Claeys,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  The petitioners are Mittal Steel USA Inc., Gerdau USA Inc., Nucor Steel Connecticut Inc., Keystone Consolidated Industries, Inc., and Rocky Mountain Steel Mills (collectively “the petitioners”).

2.  Effective January 1, 2004, CBP reclassified certain HTSUS numbers related to the subject merchandise. See http://hotdocs.usitc.gov/​tariff_​chapters_​current/​toc.html.