[Federal Register Volume 63, Number 43 (Thursday, March 5, 1998)]
[Notices]
[Pages 10854-10860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5604]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-843]
Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Stainless Steel Wire Rod
From Japan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: March 5, 1998.
FOR FURTHER INFORMATION CONTACT: David Genovese, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone:
(202) 482-0498.
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 of Commerce's (the
Department's) regulations are references to 19 CFR part 351 (62 FR
27296 (May 19, 1997)).
Preliminary Determination
We preliminarily determine that stainless steel wire rod (SSWR)
from Japan 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 Duty 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:
During August and September 1997, the Department obtained
information from the U.S. Embassy in Tokyo and the Embassy of Japan in
Washington, D.C., identifying potential producers and/or exporters of
the subject merchandise to the United States. Based on this
information, in September 1997, the Department issued antidumping
questionnaires to the following ten companies: Aichi Steel Works Ltd.
(Aichi), Daido Steel Co. Ltd. (Daido), Hitachi Metals Ltd. (Hitachi),
Kobe Steel Ltd. (Kobe), Nippon Steel Corporation (Nippon), Pacific
Metals Co. Ltd. (Pacific), Sanyo Special Steel Co. Ltd. (Sanyo),
Sumitomo Electric Industries Ltd. (SEI), Sumitomo Metal Industries Ltd.
(SMI), and Toa Steel Co. Ltd. (Toa).
On September 15, 1997, the United States International Trade
Commission (ITC) issued an affirmative preliminary injury determination
in this case (see ITC Investigation Nos. 731-TA-769-775).
In October and November 1997, the Department received questionnaire
responses from all ten companies. Five of the companies (Nippon, Daido,
Hitachi, Sanyo, and SEI) reported that they had made sales of subject
merchandise to the United States during the period of investigation
(POI) and five (Aichi, Kobe, Pacific, SMI, and Toa) reported that they
had not made sales of subject merchandise to the United States during
the POI. Because Daido, Hitachi, Nippon, Sanyo, and SEI made sales of
subject merchandise to the United States during the POI, they were
selected as mandatory respondents. See Memorandum To Louis Apple From
the Team, regarding respondents' selection, dated October 22, 1997. Of
these companies, Nippon, Daido, and Hitachi provided complete responses
to the Department's questionnaire; Sanyo provided a response to
questions 1, 2, 5 and 6, of Section A, and SEI provided a response only
to question 1 of Section A, but did not respond to the remaining
portion of Section A or Sections B and C of the Department's
questionnaire. In its partial response to the Department's
questionnaire, Sanyo requested to be excluded from the group of
companies investigated in this antidumping investigation, due to its
insubstantial exports of SSWR during the POI. The petitioners did not
support Sanyo's request (see Memorandum to the File from Jim Maeder,
dated December 4, 1997) and, thus, we were unable to grant Sanyo's
request, pursuant to 19 CFR 351.204(c)(1). On December 5, 1997, we
informed Sanyo that we considered it to be a mandatory respondent in
this investigation and that it was required to provide a complete
response to the remaining portion of our questionnaire. Sanyo never
responded to that request. With regard to SEI, when it failed to
respond to the remainder of the questionnaire, we informed it again on
October 8, 1997, that it was a mandatory respondent and was required to
respond to our questionnaire and we extended the deadline for its
response. SEI never responded to that request.
Because Sanyo and SEI failed to respond fully to our questionnaire,
we have assigned to these companies a margin based on the facts
available. (See the ``Facts Available'' section below for further
discussion.)
In its October 10, 1997, submission, Nippon stated that it was
affiliated with a number of SSWR producers. On October 22, 1997, based
on this information, the Department determined that Nippon was required
to provide a single response which included the information on all of
its affiliates. On October 28, 1997, Nippon requested that the
Department reconsider its position. On November 20, 1997, we informed
Nippon that, because we do not believe that it has a significant
potential to manipulate the pricing or production decisions of its
affiliates, Nippon would not be required to submit a single response
that includes the information
[[Page 10855]]
of its affiliates. We also informed Nippon that, should we find
evidence of significant potential for price manipulation during
verification, we may use facts available for purposes of the final
determination. For further discussion of this issue, see Memorandum
From the Team to Louis Apple, dated November 20, 1997.
On November 25, 1997, the petitioners submitted a timely allegation
pursuant to section 773(b) of the Act that Daido and Nippon had made
sales in the home market below the cost of production (COP). Based on
our analysis of these allegations, we initiated a COP investigation
with respect to Daido and Nippon and informed these companies that they
needed to complete Section D of our 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. On December 16, 1997, we granted this request and
postponed the preliminary determination until no later than February
25, 1998. See 62 FR 66849 (December 22, 1997).
In December 1997, we issued to Daido supplemental sales
questionnaires and received responses in January 1998. In December
1997, we issued to Hitachi supplemental sales questionnaires and
received responses in the same month. In January 1998, we received
responses from Daido and Nippon to section D of the Department's
questionnaire. In addition, in January 1998, we issued a supplemental
cost questionnaire to Hitachi and received Hitachi's response in the
same month.
In February 1998, we issued additional supplemental sales
questionnaires to Daido, Hitachi, and Nippon, and supplemental cost
questionnaires to Daido and Nippon. Also in February 1998, Nippon
submitted revised home market and U.S. sales listings, which identified
prime and non-prime merchandise and corrected the inventory carrying
cost calculation. This information, except for Nippon's recalculation
of the inventory carrying cost adjustment which was a minor correction,
was received too late to be considered for purposes of this preliminary
determination. We will consider it, however, for purposes of the final
determination.
Postponement of Final Determination and Extension of Provisional
Measures
On February 13, 1998, the respondents 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. The respondents also
requested that the Department extend provisional measures pursuant to
section 733(d) of the Act from four months to not more than six months.
In accordance with 19 CFR 351.210(e), because: (1) Our preliminary
determination is affirmative; (2) the respondents account for a
significant proportion of exports of the subject merchandise; (3) no
compelling reasons for denial exist; and (4) respondents have requested
an extension of provisional measures, we are granting this request and
are postponing the final determination until no later than 135 days
after the publication of this notice in the Federal Register.
Suspension of liquidation will be extended accordingly.
Facts Available
As noted above, Sanyo only provided a response to questions 1, 2,
5, and 6 of Section A of the Department's questionnaire and SEI only
provided a response to question 1 of Section A of the Department's
questionnaire. They failed to respond to the remainder of the
questionnaire. Section 776(a)(2) of the Act provides that, if an
interested party: (A) Withholds information that has been requested by
the Department; (B) fails to provide such information in a timely
manner or in the form or manner requested; (C) significantly impedes a
proceeding under the antidumping statute; or (D) provides such
information but the information cannot be verified, the Department
shall, subject to subsections 782(c)(1) and (e), use facts otherwise
available in reaching the applicable determination. Because Sanyo and
SEI failed to respond to the Department's questionnaire and because
that failure is not overcome by the application of subsections (c)(1)
and (e) of section 782, we must use facts otherwise available to
calculate the dumping margins for these companies.
Section 776(b) of the Act provides that adverse inferences may be
used against a party that has failed to cooperate by not acting to the
best of its ability to comply with the Department's requests for
information. See also Statement of Administrative Action accompanying
the URAA, H.R. Rep. No. 316, 103d Cong., 2d Sess. 870 (1994) (SAA).
Sanyo's and SEI's decision not to reply to the Department's antidumping
questionnaire demonstrates that they have failed to act to the best of
their ability to comply with a request for information under section
776 of the Act. Thus, the Department has determined that, in selecting
among the facts otherwise available, an adverse inference is warranted.
In accordance with our standard practice, as adverse facts
available, we are assigning to Sanyo and SEI the higher of: (1) The
highest margin stated in the notice of initiation; or (2) the highest
margin calculated for any respondent in this investigation. In this
case, this margin is 31.38 percent, which is the highest margin
calculated for a respondent in this investigation.
Section 776(b) states that an adverse inference may include
reliance on information derived from the petition or any other
information placed on the record. See also SAA at 829-831. 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. To corroborate secondary information, the Department will, to
the extent practicable, examine the reliability and relevance of the
information to be used. In an investigation, if the Department chooses
as facts available a calculated dumping margin of another respondent,
it is not necessary to question the reliability of that calculated
margin. With respect to relevance, however, the Department will
consider information reasonably at its disposal as to whether there are
circumstances that would render a margin not relevant. Where
circumstances indicate that the selected margin may not be appropriate,
the Department will attempt to find a more appropriate basis for facts
available (see, e.g., Fresh Cut Flowers from Mexico; Final Results of
Antidumping Duty Administrative Review, 61 FR 6812, 6814 (February 22,
1996) (where the Department disregarded the highest margin as adverse
best information available because the margin was based on another
company's uncharacteristic business expense resulting in an unusually
high margin)).
For both Sanyo and SEI, the rate specified above is reliable and
relevant because it is a calculated rate for another respondent in this
investigation and there is no information on the record that
demonstrates that the rate selected is not an appropriate total adverse
facts available rate. Thus, for Sanyo and SEI, the Department considers
the rate calculated for Daido, 31.38, to be appropriate adverse facts
available.
Scope of Investigation
For purposes of this investigation, SSWR comprises products that
are hot-
[[Page 10856]]
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.............
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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.
Fair Value Comparisons
To determine whether sales of SSWR from Japan to the United States
were made at less than fair value, we compared the Export Price (EP) or
Constructed Export Price (CEP) to the Normal Value (NV), as described
in the ``Export Price/Constructed Export Price'' and ``Normal Value''
sections of this notice, below. As discussed in the ``Export Price/
Constructed Export Price'' section of this notice, Daido and Nippon
made only EP sales to the United States and Hitachi made only CEP sales
to the United States. In accordance with section 777A(d)(1)(A)(i) of
the Act, we calculated weighted-average EPs and CEPs for comparison to
weighted-average NVs. For Hitachi, because its home market was not
viable and because it did not have sales to third countries, we made no
price-to-price comparisons. Instead, we based normal value on
constructed value (CV). See the ``Normal Value'' section of this
notice, below, for further discussion.
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 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.
In instances where a respondent has reported a non-AISI grade (or
an internal grade code) for a product that falls within a single AISI
category, we have used the actual AISI grade rather than the non-AISI
grades reported by respondents for purposes of our analysis. However,
in instances where the chemical content ranges of reported non-AISI (or
an internal grade code) grades are outside the parameters of an AISI
grade, we have preliminarily used the grade code reported by
respondents for analysis purposes. We intend to examine this issue
further for the final determination.
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 as the EP or CEP. The NV level of trade 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
[[Page 10857]]
selling, general and administrative expenses (SG&A) and profit. For EP,
the U.S. level of trade 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 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 level of trade, 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 level of trade of the export transaction, we make a
level-of-trade 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 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, 23761 (November 19, 1997).
Neither Daido nor Nippon claimed a level-of-trade adjustment.
Nevertheless, we evaluated whether such an adjustment was necessary by
examining Daido's and Nippon's distribution systems, including selling
functions, classes of customers, and selling expenses. We found that
there was no substantive difference in the selling functions performed
by Daido or Nippon at either of its claimed marketing stages in the
home market and in the U.S. market. For a detailed explanation of the
Department's level-of-trade analysis, see Memorandum from the Team to
James Maeder, dated February 25, 1998. Consequently, we determine that
only one level of trade exists with respect to sales made by Daido and
Nippon to all customers and, therefore, a level-of-trade adjustment
pursuant to section 773(a)(7)(A) of the Act is not warranted.
Hitachi reported that its home market was not viable because the
quantity of sales in the home market was less than five percent of the
quantity of U.S. sales. In addition, Hitachi reported that it did not
have sales to third countries. Consequently, we have not made a level-
of-trade adjustment or granted a CEP-offset adjustment to the CVs
reported by Hitachi. For a detailed explanation of the Department's
level-of-trade analysis, see Memorandum from the Team to James Maeder,
dated February 25, 1998.
U.S. Sample Sales
Hitachi has requested that the Department exclude from its analysis
all of Hitachi's U.S. sales that it claims are sales of samples. The
Department does not automatically exclude from its analysis of U.S.
sales any transaction to which a respondent applies the label
``sample.'' See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Romania, Singapore, Sweden and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 62 FR 54043, 54068 (Oct. 17,
1997). Pursuant to the recent Court of Appeals for the Federal Circuit
decision in NSK v. United States, 115 F.3d 965, 975 (1997), the
Department's policy is to exclude those sample transactions from the
antidumping calculations for which a respondent has established that
there is either no transfer of ownership or no consideration (i.e.,
payment). The Department makes its determinations regarding sample
sales by examining the relevant facts of each individual case, and the
burden of proof in demonstrating that (1) ownership of the merchandise
has not changed hands, or (2) the sample was returned to the respondent
or destroyed in the testing process rests with the respondent. See
Granular Polytetrafluoroethylene Resin from Japan, 58 FR 50343, 50345
(September 27, 1993).
In this case, Hitachi reported that it received payment (i.e.,
consideration) for its U.S. sales of the SSWR proprietary grade. Thus,
it appears that the ownership of the merchandise has changed hands.
Further, Hitachi has neither claimed, nor provided evidence, that the
alleged samples were either returned to it or destroyed by the customer
during testing. Accordingly, consistent with our practice and the
Court's decision in NSK, we have included these sample sales in our
margin calculations.
Services Performed by Affiliated Parties
Daido, Hitachi, and Nippon reported that affiliated companies
provided various services for home market and U.S. sales. Hitachi
reported that an affiliated party in the home market provided brokerage
and handling and packing services. Daido reported that affiliated
parties performed transportation, warehousing and packing services for
home market and U.S. sales. Nippon reported that affiliated parties
provided transportation services for home market and U.S. sales. In
their questionnaire responses, Daido, Hitachi, and Nippon reported the
amounts charged to them by their affiliated service providers rather
than the actual costs incurred by these providers, claiming that the
prices charged for the services were at arm's length. The petitioners
contend that the respondents should be required to demonstrate that the
services provided by their affiliates were offered at arm's-length
prices. Alternatively, in the absence of such a demonstration,
petitioners assert that the respondents must show that the costs of the
affiliated service providers were fully absorbed.
It is the Department's practice to accept the payment made by a
respondent for a service as the basis for reported adjustments, as long
as it can be demonstrated that it was performed at arm's-length prices.
If this cannot be demonstrated, we require the respondent to provide
the affiliate's cost of performing the service. See, e.g., Certain
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From
Korea: Final Results of Antidumping Duty Administrative Reviews, 62 FR
18404, 18427 (April 15, 1997), and Final Determination of Sales at Less
Than Fair Value; Certain Internal Combustion, Industrial Forklift
Trucks from Japan, 53 FR 12552 (April 15, 1988). In February 1998, we
issued supplemental questionnaires to the respondents, asking them to
either demonstrate that the services provided by their affiliated
companies were at arm's-length prices or provide the cost incurred by
the affiliated companies for providing these services. Because we will
not receive this information in time for purposes of the preliminary
determination, we will use the amounts charged for these services by
the affiliated companies as reported by respondents. However, the
supplemental information provided by respondents will be subject to
verification and taken into consideration for purposes of the final
determination.
Export Price/Constructed Export Price
For Daido and Nippon, 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 CEP methodology was not otherwise indicated.
For Hitachi, since sales to the first unaffiliated purchaser took
place after importation into the United States, we
[[Page 10858]]
used CEP methodology, in accordance with section 772(b) of the Act.
We made company-specific adjustments as follows:
A. Daido
We calculated EP based on packed, FOB port-of-export prices, to
unaffiliated purchasers in the United States. We made deductions to the
starting price, where appropriate, for foreign inland freight and
foreign inland insurance expense, pre-sale warehousing expense, and
foreign brokerage and handling fees, pursuant to section 772(c)(2)(A)
of the Act.
B. Hitachi
We calculated CEP based on packed, ex-factory prices to
unaffiliated purchasers in the United States. We made deductions from
the starting price, where appropriate, for foreign inland freight and
foreign inland insurance expense, foreign brokerage and handling,
international freight, U.S. Customs merchandise processing fees, U.S.
brokerage and handling fees, and U.S. inland freight and U.S. inland
insurance expense, pursuant to section 772(c)(2)(A) of the Act.
We made additional deductions from the starting price, in
accordance with sections 772(d)(1) and (2) of the Act, for credit
expenses, indirect selling expenses, inventory carrying costs, U.S.
repacking expenses, and U.S. further-manufacturing costs. In
calculating U.S. further-manufacturing costs, we adjusted the further-
manufacturing general and administrative expense ratio to reflect the
company-wide general and administrative expenses of HMA. See Memorandum
from Taija Slaughter to Chris Marsh, dated February 25, 1998. Pursuant
to section 772(d)(3) of the Act, the price was further reduced by an
amount for profit to arrive at the CEP. In accordance with section
772(f)(2)(C)(ii) and 772(f)(2)(D) of the Act, the CEP profit rate was
calculated using the internal financial statements of Yasugi Works, the
division that produces the subject merchandise for sale in the home
market and for export to the United States and the company-level
financial statements of HMA. For further explanation, see Concurrence
Issues Memorandum from the Team to Louis Apple dated February 25, 1998.
C. Nippon
We calculated EP based on packed sales prices to unaffiliated
purchasers in the United States. We made deductions from the starting
price, where appropriate, for discounts. We also made deductions from
the starting price for foreign inland freight and foreign inland
insurance expense, foreign brokerage and handling fees, and
international freight, where appropriate, pursuant to section
772(c)(2)(A) of the Act.
Normal Value
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, we
compared each respondent's volume of home market sales of the foreign
like product to the volume of its U.S. sales of the subject
merchandise, in accordance with section 773(a)(1)(C) of the Act.
Because Daido's and Nippon's aggregate volume of each company's 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 for Daido and Nippon.
Because Hitachi's volume of home market sales of the foreign like
product was not greater than five percent of its aggregate volume of
U.S. sales of the subject merchandise, we determined that its home
market was not viable. In addition, Hitachi reported that it did not
have sales of subject merchandise to third countries. Accordingly, for
Hitachi, we have based NV on the CV of the subject merchandise sold in
the United States.
Because Nippon and Daido reported home market sales during the POI
to affiliated parties, as defined by section 771(33) of the Act, we
tested these sales to ensure that they were made at arm's-length
prices, in accordance with our practice. To conduct this test, we
compared the starting prices of sales to affiliated and unaffiliated
customers net of all direct selling expenses, movement charges,
discounts, and packing, where appropriate. Based on the results of our
test, we excluded sales from Nippon and Daido to their affiliated
parties when weighted-average prices to an affiliated party were on
average less than 99.5 percent of weighted-average prices to
unaffiliated parties. We also excluded sales to affiliated parties when
there were no sales to unaffiliated parties to serve as a benchmark by
which to determine whether the sales to affiliated parties were made at
arm's-length prices.
Based on the information contained in cost allegations submitted by
the petitioners, the Department found reasonable grounds to believe or
suspect that Daido and Nippon made sales in the home market at prices
below the cost of producing the subject merchandise, in accordance with
section 773(b)(1) of the Act. As a result, the Department initiated
investigations to determine whether Daido or Nippon made home market
sales during the POI at prices below their respective cost of
production (COP) during the POI, within the meaning of section 773(b)
of the Act. See Memorandum to Louis Apple from the Team, regarding the
Analysis of Petitioners' Allegation of Sales Below the Cost of
Production, dated December 10, 1997. Before making any fair value
comparisons, we conducted the COP analysis described below.
We calculated the COP based on the sum of each respondent's 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 adjusted the numerator used in Daido's
G&A expense ratio calculation to exclude certain income and expense
items, and we adjusted the denominator to use unconsolidated cost of
sales. See Memorandum to Chris Marsh from Taija Slaughter, regarding
the COP calculation, dated February 25, 1998.
We compared Daido's and Nippon's weighted-average COP figures to
home market sales of the foreign like product, as required under
section 773(b) of the Act, in order to determine whether these sales
had been made at prices below their respective COPs. On a product-
specific basis, we compared the COP to home market price, less any
applicable movement charges, discounts, direct selling expenses and
packing expenses.
In determining whether to disregard home market sales made at
prices below the COP, we examined whether such sales were made: (1) In
substantial quantities within an extended period of time; and (2) at
prices which permitted the recovery of all costs within a reasonable
period of time in the normal course of trade, pursuant to section
773(b)(1) of the Act.
Pursuant to section 773(b)(2)(C) of the Act, 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
[[Page 10859]]
section 773(b)(2)(D) of the Act. Therefore, we disregarded the below-
cost sales. Where all sales of a specific product were at prices below
the COP, we disregarded all sales of that product. For those U.S. sales
of SSWR for which there were no comparable home market sales in the
ordinary course of trade, we compared the EP or CEP to CV in accordance
with section 773(a)(4) of the Act.
We found that, for certain models of SSWR, more than 20 percent of
the respondent's home market sales within an extended period of time
were at prices less than 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) of the Act.
In accordance with section 773(e) of the Act, we calculated CV
based on the sum of each respondent's cost of materials, fabrication,
SG&A expenses, profit, and U.S. packing costs. As noted above, for
Daido we adjusted the numerator used in the G&A expense ratio
calculation to exclude certain income and expense items, and the
denominator to use unconsolidated cost of sales. For Daido and Nippon,
in accordance with section 773(e)(2)(A) of the Act, we based SG&A
expenses and profit on the amounts incurred and realized by each
respondent in connection with the production and sale of the foreign
like product in the ordinary course of trade, for consumption in the
foreign country.
For Hitachi, we based SG&A expenses and profit on the weighted-
average of the SG&A and profit data computed for those respondents with
home market sales of the foreign like product in the ordinary course of
trade, in accordance with section 773(e)(2)(B)(ii) of the Act because
Hitachi had no viable home or third-country market.
A. Daido
We based NV on packed, delivered prices to home market customers.
We made deductions for foreign inland freight and foreign inland
insurance expenses, and pre- and post-sale warehousing expenses, 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.
We added export packing costs incurred for U.S. export shipments of
SSWR, in accordance with section 773(a)(6) of the Act. We made no
adjustment for home market packing costs because Daido included these
expenses in the cost of manufacture and did not report them separately.
Where appropriate, we made an adjustment 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.
B. Hitachi
As noted above, for Hitachi, we based NV on CV because Hitachi's
home market was not viable and because Hitachi did not have sales of
subject merchandise to third countries. We did not make any adjustments
to the CV amounts reported by Hitachi. In addition, because Hitachi's
home market was not viable, we based SG&A and profit expenses on the
weighted-average SG&A and profit data computed for Daido's and Nippon's
home market sales of the foreign like product in the ordinary course of
trade, in accordance with section 773(e)(2)(B)(ii) of the Act.
C. Nippon
We based NV on packed, ex-factory or delivered prices to home
market customers. Where appropriate, we made deductions for discounts.
We also made deductions for foreign inland freight and foreign inland
insurance expense, 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 for differences in
credit and warranty expenses.
Because Nippon paid commissions on U.S. sales, in calculating NV we
offset these commissions using the weighted-average amount of indirect
selling expenses, including inventory carrying costs, incurred on the
home market sales of the comparison product, up to the amount of U.S.
commissions, in accordance with 19 CFR 351.410(e).
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.
Currency Conversion
For purposes of the preliminary determination, 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. See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate From South Africa, 62 FR 61971 (November 19, 1997).
The benchmark is defined as the rolling average of rates for the past
40 business days. When we determine that a fluctuation exists, 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 Japanese Yen did not undergo a sustained movement nor were
there currency fluctuations 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 the
Customs Service to suspend liquidation of all imports of subject
merchandise that are entered, or withdrawn from warehouse, for
consumption on or after the date of publication of this notice in the
Federal Register. We will instruct the Customs Service to require a
cash deposit or the posting of a bond equal to the weighted-average
amount by which the NV exceeds the export price, as indicated in the
chart below. These suspension-of-liquidation instructions will remain
in effect until further notice. The weighted-average dumping margins
are as follows:
[[Page 10860]]
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Daido Steel Co. Ltd......................................... 31.38
Nippon Steel Corporation.................................... 24.41
Hitachi Metals Ltd.......................................... 27.81
Sanyo Special Steel Co., Ltd................................ 31.38
Sumitomo Electric Industries, Ltd........................... 31.38
All Others.................................................. 26.69
------------------------------------------------------------------------
Pursuant to section 735(c)(5)(A) of the Act, the Department has
excluded any zero and de minimis margins, and any margins determined
entirely under section 776 of the Act, from the calculation of the
``All Others Rate.''
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 place to be determined, at the
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, D.C. 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within ten 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. 98-5604 Filed 3-4-98; 8:45 am]
BILLING CODE 3510-DS-P
