[Federal Register Volume 63, Number 43 (Thursday, March 5, 1998)]
[Notices]
[Pages 10825-10831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5597]
[[Page 10825]]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-829]
Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Stainless Steel Wire Rod
From Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: March 5, 1998.
FOR FURTHER INFORMATION CONTACT: Cameron Werker at (202) 482-3874 or
Frank Thomson at (202) 482-5254, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230.
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 (May 19, 1997).
Preliminary Determination
We preliminarily determine that stainless steel wire rod (SSWR)
from 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
Since the initiation of this investigation (Notice of Initiation of
Antidumping Investigations: Stainless Steel Wire Rod from Germany,
Italy, Japan, Korea, Spain, Sweden, and Taiwan, 62 FR 45224 (August 26,
1997)), the following events have occurred:
On August 21, 1997, the Department issued a cable to the U.S.
Embassy in Korea requesting information identifying potential Korean
producers and/or exporters of the subject merchandise to the United
States. We did not receive a response from the U.S. Embassy in Korea.
However, on September 9, 1997, we received a letter of appearance on
behalf of two producers/exporters of SSWR: Changwon Specialty Steel
Co., Ltd. (Changwon), and Dongbang Special Steel Co., Ltd. (Dongbang).
Based on this letter of appearance and information contained in the
petition, on September 19, 1997, the Department issued antidumping
questionnaires to the following companies: Dongbang, Changwon, Pohang
Iron and Steel Co., Ltd. (POSCO), and Sammi Steel Co., Ltd. (Sammi).
Also in September 1997, the United States International Trade
Commission (ITC) issued an affirmative preliminary injury determination
in this case (see ITC Investigation No. 731-TA-772).
On October 7, 1997, POSCO submitted a letter to the Department
stating that it had no shipments or sales of the subject merchandise to
the United States during the period of investigation (POI). Following
this submission, we requested that the U.S. Customs Service (Customs)
confirm POSCO's statement. On December 10, 1997, we received
confirmation from Customs that it had no records indicating POSCO had
shipments to the United States during the POI.
On October 10, 1997, the petitioners in this case (i.e., AL Tech
Specialty Steel Corp., Carpenter Technology Corp., Republic Engineered
Steels, Talley Metals Technology, Inc., and United Steelworkers of
America) requested that the Department revise its questionnaire to
obtain information on the actual nickel, chromium, and molybdenum
content for each sale of the SSWR made during the POI. The Department,
upon consideration of the comments from all parties on this matter,
issued a memorandum on December 18, 1997, indicating its decision to
make no changes in the model matching criteria specified in the
September 19, 1997, questionnaire (see Memorandum from Team to Holly
Kuga, Office Director, dated December 18, 1997).
Also, in October 1997, the Department received responses to Section
A of the questionnaire from Dongbang and Changwon (hereinafter ``the
respondents''). The respondents submitted responses to sections B and C
of the questionnaire in November 1997. Sammi failed to respond to the
Department's request for information (see the ``Facts Available''
section of this notice, below).
In November 1997, the petitioners submitted a timely allegation
pursuant to section 773(b) of the Act that Dongbang and Changwon had
made sales in the home market below the cost of production (COP). Based
on our analysis of this allegation, in December 1997 we initiated a COP
investigation with respect to these respondents and informed the
companies that they were required to complete Section D of the
questionnaire.
On December 11, 1997, pursuant to section 733(c)(1)(A) of the Act,
the petitioners made a timely request to postpone the preliminary
determination. We granted this request and, on December 16, 1997, we
postponed the preliminary determination until no later than February
25, 1998 (62 FR 66849, December 22, 1997).
We issued supplemental sections A, B, and C questionnaires to
Changwon and Dongbang in December 1997 and received responses to these
questionnaires in January 1998. We also received a response to Section
D of the questionnaire from the respondents in January 1998. We issued
a supplemental questionnaire to POSCO in December 1997 and requested
that it complete section B of the questionnaire. We received POSCO's
response to this questionnaire in January 1998. We issued supplemental
section D questionnaires to Changwon and Dongbang on February 11, 1998.
Complete responses to these questionnaires are not due until March 4,
1998 and, therefore, could not be considered in this preliminary
determination.
The petitioners submitted comments on February 6, 1998, February
11, 1998, and February 12, 1998, regarding issues they considered
relevant to the preliminary determination. On February 17 and 18, 1998,
Dongbang and Changwon, respectively, submitted responses to the
petitioners' comments.
Postponement of Final Determination and Extension of Provisional
Measures
On February 19, 1998, Changwon and Dongbang requested that, in the
event of an affirmative preliminary determination in this
investigation, the Department postpone its final determination until no
later than 135 days after the publication of this notice in the Federal
Register pursuant to section 735(a)(2)(A) of the Act. Changwon and
Dongbang also requested that the Department extend the provisional
measures of sections 733(d)(1) and (2) of the Act from a four-month
period to not more than six months, in accordance with section 733(d)
of the Act. In accordance with 19 CFR 351.210(b)(2), because (1) our
preliminary determination is affirmative, (2) Changwon and Dongbang
account 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
[[Page 10826]]
no later than 135 days after the publication of this notice in the
Federal Register. Suspension of liquidation will be extended
accordingly. See Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Open-End Spun Rayon
Singles Yarn From Austria, 62 FR 14399, 14400 (March 26, 1997); see
also Final Determination of Sales at Less Than Fair Value: Certain
Pasta From Italy, 61 FR 30326 (June 14, 1996).
Scope of Investigation
For purposes of this investigation, SSWR comprises products that
are hot-rolled or hot-rolled annealed and/or pickled and/or descaled
rounds, squares, octagons, hexagons or other shapes, in coils, that may
also be coated with a lubricant containing copper, lime, or oxalate.
SSWR is made of alloy steels containing, by weight, 1.2 percent or less
of carbon and 10.5 percent or more of chromium, with or without other
elements. These products are manufactured only by hot-rolling or hot-
rolling, annealing, and/or pickling and/or descaling, are normally sold
in coiled form, and are of solid cross-section. The majority of SSWR
sold in the United States is round in cross-sectional shape, annealed
and pickled, and later cold-finished into stainless steel wire or
small-diameter bar.
The most common size for such products is 5.5 millimeters or 0.217
inches in diameter, which represents the smallest size that normally is
produced on a rolling mill and is the size that most wire-drawing
machines are set up to draw. The range of SSWR sizes normally sold in
the United States is between 0.20 inches and 1.312 inches diameter. Two
stainless steel grades, SF20T and K-M35FL, are excluded from the scope
of the investigation. The chemical makeup for the excluded grades is as
follows:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
SF20T
----------------------------------------------------------------------------------------------------------------
Carbon........................... 0.05 max............ Chromium............ 19.00/21.00
Manganese........................ 2.00 max............ Molybdenum.......... 1.50/2.50
Phosphorous...................... 0.05 max............ Lead................ added (0.10/0.30)
Sulfur........................... 0.15 max............ Tellurium........... added (0.03 min)
Silicon.......................... 1.00 max .................................
----------------------------------------------------------------------------------------------------------------
K-M35FL
----------------------------------------------------------------------------------------------------------------
Carbon........................... 0.015 max........... Nickel.............. 0.30 max
Silicon.......................... 0.70/1.00........... Chromium............ 12.50/14.00
Manganese........................ 0.40 max............ Lead................ 0.10/0.30
Phosphorous...................... 0.04 max............ Aluminum............ 0.20/0.35
Sulfur........................... 0.03 max
----------------------------------------------------------------------------------------------------------------
The products under investigation are currently classifiable under
subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and
7221.00.0075 of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheadings are provided for convenience
and customs purposes, the written description of the scope of this
investigation is dispositive.
Period of Investigation
The POI is July 1, 1996, through June 30, 1997.
Facts Available
On September 19, 1997, we sent a questionnaire to Sammi, a Korean
SSWR producer/exporter which allegedly underwent bankruptcy in 1997.
Sammi never responded to our original questionnaire nor at any time
filed an extension request. On October 24, 1997, we received a faxed
confirmation from the commercial courier that the questionnaire was
delivered to and signed for by personnel at Sammi. Therefore, on
October 31, 1997, the Department sent a letter to Sammi alerting it to
the fact that it had missed its deadlines for responding to the
Department's information request, and that the Department would have to
use adverse facts available as required under the antidumping statute
in making its determinations. We have received no correspondence from
Sammi to date.
Section 776(a)(2) of the Act provides that, if an interested party
(1) Withholds information that has been requested by the Department,
(2) fails to provide such information in a timely manner or in the form
or manner requested, (3) significantly impedes a determination under
the antidumping statute, or (4) provides such information but the
information cannot be verified, the Department shall, subject to
subsections 782(c)(1) and (e) of the Act, use facts otherwise available
in reaching the applicable determination. Subsections (c)(1) and (e) do
not apply to situations where a party provides no responses whatsoever
to our correspondence. Therefore, these subsections do not apply with
respect to this company. Because Sammi failed to respond to our
questionnaire in a timely manner, we must use facts otherwise available
to calculate Sammi's dumping margin.
Section 776(b) of the Act provides that adverse inferences may be
used when a party has failed to cooperate by not acting to the best of
its ability to comply with requests for information. See also Statement
of Administrative Action accompanying the URAA, H.R. Rep. No. 316, 103d
Cong., 2d Sess. 870 (SAA). Sammi's failure to reply to the Department's
questionnaire or to provide a satisfactory explanation of its conduct
demonstrates it has failed to act to the best of its ability in this
investigation. Thus, the Department has determined that, in selecting
among the facts otherwise available for Sammi, an adverse inference is
warranted.
In accordance with our standard practice, we determine the margin
used as adverse facts available by selecting the higher of (1) the
highest margin stated in the notice of initiation, or (2) the highest
margin calculated for any respondent.
Section 776(c) of the Act provides that, when the Department relies
on secondary information (such as the petition) in using the facts
otherwise available, it must, to the extent practicable, corroborate
that information from independent sources that are reasonably at its
disposal. In this case, when analyzing the petition for purposes of the
initiation, the Department reviewed all of the data upon which the
petitioners relied in calculating the estimated dumping margins and
determined that the margins in the petition were appropriately
calculated and supported by adequate evidence in accordance
[[Page 10827]]
with the statutory requirements for initiation.
However, for purposes of corroboration with regard to facts
available, the Department re-examined the price information provided in
the petition in light of information developed during the
investigation. Sales by POSCO during the fourth quarter of 1996 were
the basis for the margins contained in the petition. We contacted the
U.S. Customs Service, seeking information to determine whether there
had been any entries during that period. According to Customs, their
records indicated that POSCO did not make any shipments during the
fourth quarter 1996. Therefore, we reviewed the general Import
Statistics for the USHTS categories corresponding to the scope of this
investigation during the fourth quarter 1996.
The U.S. gross prices provided in the petition are corroborated by
the average fourth quarter U.S. dollar import value per metric ton
obtained from the Import Statistics. Furthermore, we have corroborated
the home market gross prices contained in the petition with the fourth
quarter 1996 home market prices provided by POSCO in its home market
sales listing. Therefore, although the record indicates that POSCO made
no shipments to the United States during the POI, we have been able to
corroborate the price information contained in petition, in accordance
with Section 776(c) of the Act, using information from independent
sources that were reasonably at our disposal. As a result we have
assigned Sammi the highest rate contained in the petition, 28.44
percent, for purposes of the preliminary determination.
Affiliation Among the Respondents
One of the issues in this case is whether POSCO and its wholly
owned subsidiary Changwon are affiliated with Dongbang. Interested
parties made several submissions to the Department on this topic in
November and December 1997. The petitioners argue generally that POSCO
controls Dongbang through a variety of non-equity factors and is
thereby affiliated with Dongbang pursuant to section 771(33)(G) of the
Act. Petitioners also contend that Dongbang and Changwon are affiliated
by virtue of the fact that they are under POSCO's common control
pursuant to section 771(33)(F) of the Act. Based on this reasoning,
they conclude that these producers should be collapsed for purposes of
the Department's margin calculation primarily because they believe that
the production facilities are similar and that there is a significant
potential for manipulation of price or production. The respondents
disagree, asserting that the facts of record do not indicate that POSCO
and Dongbang and, thus, Dongbang and Changwon are affiliated;
therefore, the respondents maintain that the circumstances under which
the Department would consider collapsing the entities are not present
in this case. In order to analyze the issue and understand the
relationships between POSCO, Changwon, and Dongbang more fully, we
requested that all three entities respond to supplemental questions on
this topic. The parties responded to these questions on January 16,
1998.
Our preliminary analysis of the facts of record within the context
of the control indicia enumerated in section 351.102(b) of our
regulations does not suggest that POSCO controls Dongbang such that
Dongbang is affiliated with Changwon based on POSCO's common control of
both entities. Consequently, the issue of collapsing all three
producers into one entity for purposes of our preliminary margin
analysis is moot. However, we will examine this affiliation issue more
closely at verification, with respect to close supply factors in
particular, and revisit the issue if necessary for purposes of the
final determination. For further discussion, see the Decision
Memorandum from the Team to Richard Moreland regarding ``Whether Pohang
Iron and Steel Co., Ltd. (POSCO), and its subsidiary Changwon Specialty
Steel Co., Ltd. (Changwon), are affiliated with Dongbang Special Steel
Co., Ltd. (Dongbang). Whether to collapse the above-mentioned entities
for antidumping analysis purposes,'' dated February 25, 1998
(``Affiliation Decision Memorandum'').
Regarding POSCO and Changwon, given the nature of the affiliation
between these two companies (i.e., POSCO owns 100 percent of Changwon,
there is significant overlap in the production equipment and processes,
and there exists significant potential for price and cost
manipulation), we have collapsed POSCO and Changwon as affiliated
producers in accordance with Sec. 351.401(f) of our regulations and
have assigned to them a single dumping margin as indicated in the
``Suspension of Liquidation'' section of this notice. However, we have
not used POSCO's home market sales of non-finished SSWR (i.e., black
coil) for purposes of comparing them to Changwon's U.S. sales of
finished SSWR because the POSCO products have not been further
processed and, therefore, are not as comparable to the U.S. sales as
are Changwon's home market sales of finished SSWR products. For further
discussion, see Affiliation Decision Memorandum.
Fair Value Comparisons
To determine whether sales of SSWR from Korea to the United States
were made at less than fair value, we compared the Export Price (EP) to
the Normal Value (NV), as described in the ``Export Price'' and
``Normal Value'' sections of this notice, below. As discussed in the
``Export Price'' and ``Normal Value'' sections of this notice, neither
respondent made Constructed Export Price (CEP) sales to the United
States. In accordance with section 777A(d)(1)(A)(i) of the Act, we
calculated weighted-average EPs 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.'' This issue was
not raised by any party in this proceeding. However, 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. Therefore, in this
proceeding, when making comparisons in accordance with section 771(16)
of the Act, we considered all products sold in the home market as
described in the ``Scope of Investigation'' section of this notice,
above, that were in the ordinary course of trade for purposes of
determining appropriate product comparisons to U.S. sales. 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 sales of the most similar foreign like product made in the
ordinary course of trade, based on the characteristics listed
[[Page 10828]]
in Sections B and C of our antidumping questionnaire. We have
implemented the Court's decision in this case, to the extent that the
data on the record permitted.
With respect to the characteristics used to make product
comparisons, the Department's questionnaire instructed the respondents
to report the grades of the SSWR products they sold during the POI in
accordance with AISI standards. Changwon and Dongbang argued that it
was more accurate and efficient to report their home market and U.S.
sales based on internal grade codes because, among other factors, the
respondents' sales, production, and accounting systems are maintained
by its ``internal'' grade codes. Moreover, the respondents maintained
that their customers do not order by the AISI grade but, rather, by one
of the various international grades or ``internal'' grade codes.
Additionally, Dongbang asserted that there are price and cost
differences between each of the ``internal'' grade codes. Changwon
stated that its grade codes do not overlap precisely with the AISI
grades but instead overlap with multiple AISI grades. The petitioners
argued that the respondents should not make changes to the product
characteristics once the Department had established such
characteristics because it could (a) seriously jeopardize the accuracy
of the Department's SSWR investigations, (b) extraordinarily complicate
the investigations, and (c) permit substantial manipulation of model
matches.
It is not the Department's normal practice to allow companies to
change the criteria to be used for model match purposes based on their
own internal product coding system once such criteria have been
established. Any such deviation leads to the possibility that the
margins calculated for each company under investigation could be based
on completely different product grouping criteria. In addition,
allowing companies to deviate from the criteria may permit manipulation
of model matches, not only for the investigation, but also in future
reviews, in the event this investigation results in an antidumping duty
order.
Furthermore, contrary to Dongbang's argument, there is no
compelling evidence on the record that the net prices and costs of
Dongbang's internal grade codes vary significantly from one another
within a given AISI category (see Concurrence Memorandum dated February
25, 1998 (Concurrence Memorandum)).
Therefore, in instances where a respondent has reported a non-AISI
grade (or an internal grade code) for a product that falls within the
chemical content range of an AISI category, we have attempted to use
the actual AISI grade rather than the non-AISI grades reported by the
respondent for purposes of our preliminary analysis. In instances where
the chemical content ranges of the reported non-AISI grade (or internal
grade code) are outside the parameters of an AISI grade, we have
preliminarily used the grade code reported by the respondents for
purposes of our analysis.
With respect to Changwon, even though we were able to identify AISI
grades for a number of non-AISI products using the methodology
described above, we were unable to consolidate the sales and cost
databases on the basis of this AISI grade reclassification, given the
lack of information on the record that would enable us to link the two
databases by AISI grade. Therefore, for purposes of the preliminary
determination, we used the ``internal'' grades reported by Changwon.
For further discussion of this issue, see the Concurrence
Memorandum. We intend to examine this issue further for the final
determination.
With respect to home market sales of non-prime merchandise made by
Dongbang during the POI, we excluded these sales from our preliminary
analysis based on the limited quantity of such sales in the home market
and the fact that no such sales were made to the United States during
the POI, in accordance with our past practice. See, e.g., Final
Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and
Certain Cut-to-Length Carbon Steel Plate from Korea, 58 FR 37176, 37180
(July 9, 1993).
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
exporter to importer. For CEP, it is the level of the constructed sale
from the exporter to the importer.
To determine whether NV sales are at a different level of trade
than EP or CEP, we examined 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 difference in the levels between NV and CEP
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 Cut-to-Length Carbon Steel
Plate from South Africa, 62 FR 61731 (November 19, 1997).
Changwon and Dongbang only made EP sales during the POI and neither
respondent claimed a LOT adjustment. Nevertheless, we evaluated whether
such an adjustment was necessary by examining each respondent's
distribution system, including selling functions, classes of customers,
and selling expenses. We found that the selling functions performed by
each respondent, which included sales administration, billing, and
warranties, where applicable, are sufficiently similar in the United
States and the home market to consider them as constituting the same
LOT in the two markets. Accordingly, all comparisons are at the same
LOT and an adjustment pursuant to section 773(a)(7)(A) of the Act is
not warranted.
Export Price
For both of the respondents, we used EP methodology, in accordance
with section 772(a) of the Act, because the subject merchandise was
sold directly to the first unaffiliated purchaser in the United States
prior to importation and because CEP methodology was not otherwise
indicated.
We made company-specific adjustments as follows:
A. Dongbang
We calculated EP based on packed, delivered prices to unaffiliated
purchasers in the United States. We increased the starting price by the
amount of duty drawback reported by Dongbang. We made deductions from
the starting price, where appropriate, for foreign inland freight,
foreign brokerage and handling, other transportation expenses (i.e.,
container tax, wharfage,
[[Page 10829]]
document fees, and CFS charges), and international freight pursuant to
section 772(c)(2)(A) of the Act.
B. Changwon
We calculated EP based on packed prices to unaffiliated purchasers
in the United States. We increased starting price by the amount of duty
drawback reported by Changwon.
We made deductions from the starting price, where appropriate, for
foreign inland freight, foreign brokerage and handling expenses, other
transportation expenses (i.e., ocean freight and terminal charge,
formal entry charge, ABI filing fee, and devanning cost), international
freight, marine insurance, U.S. Customs duties, and U.S. inland
freight, pursuant to section 772(c)(2)(A) of the Act.
Normal Value
After testing home market viability, whether sales to affiliates
were at arm's-length prices, and whether home market sales were at
below-cost prices, we calculated NV as noted in the ``Price-to-Price
Comparisons'' and ``Price-to-CV Comparisons'' sections of this notice.
1. 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 greater than five percent of the aggregate volume of
U.S. sales), we compared the respondents' volume of home market sales
of the foreign like product to the volume of U.S. sales of the subject
merchandise, in accordance with section 773(a)(1)(C) of the Act.
Because the respondents' 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 market was viable for the respondents.
2. Affiliated-Party Transactions and Arm's-Length Test
We excluded sales to affiliated customers in the home market not
made at arm's-length prices by Dongbang 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, starting prices of sales to
affiliated and unaffiliated customers net of all movement charges,
direct selling expenses, and packing, but inclusive of duty drawback,
freight revenue and interest revenue, where applicable. 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) and 62 FR at 27355 (preamble to the
Department's regulations). In instances where no customer price ratio
could be constructed for an affiliated customer because identical
merchandise was not sold to unaffiliated customers, we were unable to
determine that these sales were made at arm's-length prices and,
therefore, excluded them from our LTFV analysis. See Final
Determination of Sales at Less Than Fair Value: Certain Cold-Rolled
Carbon Steel Flat Products from Argentina, 58 FR 37062, 37077 (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 home market model.
3. Cost-of-Production Analysis
Based on the cost allegation submitted by the petitioners, the
Department found reasonable grounds to believe or suspect that Dongbang
and Changwon 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 Dongbang and/or Changwon made home market sales
during the POI at prices below their respective COPs within the meaning
of section 773(b) of the Act. See Memorandum from the Team to Holly
Kuga, dated December 24, 1997. Before making any fair value
comparisons, we conducted the COP analysis described below.
a. Calculation of COP
We calculated the COP based on the sum of each respondents' cost of
materials and fabrication for the foreign like product, plus amounts
for home market SG&A expenses and packing costs in accordance with
section 773(b)(3) of the Act. We made company-specific adjustments to
the reported COP as follows:
1. Changwon: We adjusted Changwon's reported general and
administrative (G&A) expenses by excluding miscellaneous income and
including foreign currency exchange losses and the amortization of
foundation and business starting expenses. In addition, we adjusted
Changwon's financing expense calculation to include foreign currency
exchange losses and to correct the amount of interest income used as an
offset. See Memorandum to Irene Darzenta from Howard Smith, dated
February 25, 1998.
2. Dongbang: We adjusted Dongbang's G&A expenses by excluding
miscellaneous income and bad debt expense and by including foreign
currency exchange losses. In addition, because Dongbang did not report
interest expense in accordance with our preferred methodology, we
recalculated the reported interest expense rate accordingly. See
Memorandum to Irene Darzenta from Howard Smith, dated February 25,
1998.
b. Test of Home Market Prices
We used each respondent's submitted POI weighted-average COPs, as
adjusted (see above). We compared the weighted-average COP figures to
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 below the COP, we examined whether (1) within an
extended period of time, such sales were made in substantial
quantities, and (2) whether such sales were made at prices which
permitted the recovery of all costs within a reasonable period of time
in the normal course of trade. On a product-specific basis, we compared
the COP (net of selling expenses and packing) to the home market
prices, inclusive of duty drawback, less any applicable movement
charges, direct and indirect selling expenses, and packing.
c. Results of the COP Test
Pursuant to 773(b)(2)(C), where less than 20 percent of the
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 the 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 section
773(b)(2)(B) of the Act. In such cases, 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.
We found that, for certain models of SSWR, more than 20 percent of
Dongbang's and Changwon's home market sales within an extended period
[[Page 10830]]
of time were at prices less than the COP. Further, the prices did not
provide for the recovery of costs within a reasonable period of time.
We therefore disregarded the below-cost sales and used the remaining
above-cost sales as the basis for determining NV, in accordance with
section 773(b)(1). For those U.S. sales of SSWR for which there were no
comparable home market sales in the ordinary course of trade, we
compared EPs to CV in accordance with section 773(a)(4) of the Act.
d. Calculation of CV
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of the respondent's cost of materials, fabrication,
G&A, U.S. packing costs, direct and indirect selling expenses, interest
expenses, and profit. As noted above, we adjusted Changwon's COP by
recalculating G&A and financing expenses. We also adjusted Dongbang's
G&A and financing expense.
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 Korea.
Price-to-Price Comparisons
1. Changwon
We based NV on packed prices to unaffiliated home market customers.
Pursuant to section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410(c),
we made circumstance-of-sale adjustments, where appropriate, for
differences in warranties, bank charges, and credit expenses offset by
interest revenue.
We deducted home market packing costs and added U.S. packing costs,
in accordance with section 773(a)(6) of the Act. Where appropriate, we
made adjustments to NV to account for differences in physical
characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii)
of the Act and 19 CFR 351.411.
2. Dongbang
We based NV on packed, delivered prices to home market unaffiliated
customers and prices to affiliated customers that we determined to be
at arm's length. We added freight revenue and duty drawback, where
applicable. We made deductions for foreign inland freight, where
appropriate, pursuant to section 773(a)(6)(B) of the Act. Pursuant to
section 773 (a)(6)(C)(iii) of the Act and 19 CFR 351.410(c), we made
circumstance-of-sale adjustments, where appropriate, for differences in
credit expenses, bank charges, interest revenue, and warranties.
We deducted home market packing costs and added U.S. packing costs,
in accordance with section 773(a)(6) of the Act. Where appropriate, we
made adjustments to NV to account for differences in physical
characteristics of the merchandise, in accordance with section
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.
Price-to-CV Comparisons
For price-to-CV comparisons, we made adjustments to CV in
accordance with section 773(a)(8) of the Act. Where CV was compared to
EP, we deducted from CV the weighted-average home market direct selling
expenses and added the weighted-average U.S. product-specific direct
selling expenses in accordance with section 773(a)(6)(C)(iii) of the
Act.
Currency Conversion
We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales as certified by
the Federal Reserve Bank.
Section 773A(a) directs the Department to use a daily exchange rate
in order to convert foreign currencies into U.S. dollars unless the
daily rate involves a fluctuation. It is the Department's practice to
find that a fluctuation exists when the daily exchange rate differs
from the benchmark rate by 2.25 percent. The benchmark is defined as
the moving average of rates for the past 40 business days. When we
determine a fluctuation to have existed, we substitute the benchmark
rate for the daily rate, in accordance with established practice.
Further, section 773A(b) directs the Department to allow a 60-day
adjustment period when a currency has undergone a sustained movement. A
sustained movement has occurred when the weekly average of actual daily
rates exceeds the weekly average of benchmark rates by more than five
percent for eight consecutive weeks. (For an explanation of this
method, see Policy Bulletin 96-1: Currency Conversions (61 FR 9434,
March 8, 1996)). Such an adjustment period is required only when a
foreign currency is appreciating against the U.S. dollar. The use of an
adjustment period was not warranted in this case because the Korean won
did not undergo a sustained movement during the POI.
Verification
As provided in section 782(i) of the Act, we will verify all
information determined to be acceptable for use in making our final
determination.
Suspension of Liquidation
In accordance with section 733(d) of the Act, we are directing
Customs 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 Customs to require a cash deposit or the posting of a
bond equal to the weighted-average amount by which the NV exceeds the
EP, 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
------------------------------------------------------------------------
Dongbang Special Steel Co., Ltd............................. 5.96
Changwon Specialty Steel Co., Ltd./Pohang Iron and Steel
Co., Ltd................................................... 6.09
Sammi Steel Co., Ltd........................................ 28.44
All Others.................................................. 5.97
------------------------------------------------------------------------
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether 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 May 22, 1998, and rebuttal briefs no later than May 29,
1998. A list of authorities used and an executive summary of issues
must 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 on June 2, 1998, time and room to be determined, at the
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
[[Page 10831]]
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. If
this investigation proceeds normally, we will make our final
determination by no later than 135 days after the publication of this
notice in the Federal Register.
This determination is published pursuant to section 777(i) of the
Act.
Dated: February 25, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-5597 Filed 3-4-98; 8:45 am]
BILLING CODE 3510-DS-P
