01-14801. Notice of Preliminary Results of Antidumping Duty Administrative Review: Stainless Steel Wire Rod from Taiwan

AGENCY:

Import Administration, International Trade Administration, U.S. Department of Commerce.

SUMMARY:

In response to a request by a producer/exporter of the subject merchandise, the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on stainless steel wire rod (SSWR) from Taiwan. This review covers one producer/exporter of the subject merchandise. The period of review (POR) is September 1, 1999, through August 31, 2000.

We preliminarily determine that sales have been made below normal value (NV). If these preliminary results are adopted in our final results, we will instruct the U.S. Customs Service to assess antidumping duties based on the difference between the export price (EP) and the NV.

Interested parties are invited to comment on the preliminary results. Parties who submit arguments are requested to submit with each argument: (1) A statement of the issue and (2) a brief summary of the argument. Further, we would appreciate parties submitting written comments to provide the Department with an additional copy of the public version of any such comments on diskette.

EFFECTIVE DATE:

June 12, 2001.

FOR FURTHER INFORMATION CONTACT:

Alexander Amdur or Karine Gziryan, at [phone] or [phone], respectively; AD/CVD Enforcement Office IV, Group II, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are to 19 CFR part 351 (April 2000).

Case History

On September 15, 1998, the Department issued an antidumping duty order on SSWR from Taiwan. See Notice of Amendment of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Stainless Steel Wire Rod From Taiwan, 63 FR 49332 (September 15, 1998) (Amended Final Determination and Order). On September 20, 2000, we published in the Federal Register the notice of opportunity to request an administrative review of this order. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 65 FR 56868 (September 20, 2000).

On September 26, 2000, Walsin Lihwa Corporation (Walsin) requested that the Department conduct an administrative review for the period from September 1, 1999, through August 31, 2000.

On October 30, 2000, we published the notice of initiation of this antidumping duty administrative review, covering the period September 1, 1999, through August 31, 2000. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, Requests for Revocation in Part and Deferral of Administrative Review, 65 FR 64662 (October 30, 2000).

On October 20, 2000, we issued an antidumping questionnaire to Walsin. The Department received Walsin's response in December 2000. We issued supplemental questionnaires to Walsin in January, March, April and May 2001, and received responses from Walsin in February, March, April and May 2001. In its March 30, 2001 supplemental questionnaire response, Walsin requested that it not be required to report an insignificant amount of sales made in Taiwan by its Shape, Pipe and Special Products Business Unit during the POR. On April 17, 2001, we granted this request.

Scope of the Review

For purposes of this review, 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 in diameter.

Two stainless steel grades are excluded from the scope of the review. SF20T and K-M35FL are excluded. The chemical makeup for the excluded grades is as follows:

SF20T

Carbon 0.05 max

Manganese 2.00 max

Phosphorous 0.05 max

Sulfur 0.15 max

Silicon 1.00 max

Chromium 19.00/21.00

Molybdenum 1.50/2.50

Lead-added (0.10/0.30)

Tellurium-added (0.03 min)

K-M35FL

Carbon 0.015 max

Silicon 0.70/1.00

Manganese 0.40 max

Phosphorous 0.04 max

Sulfur 0.03 max

Nickel 0.30 max

Chromium 12.50/14.00

Lead 0.10/0.30

Aluminum 0.20/0.35

The products subject to this review 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 review is dispositive.

Successorship

Walsin, in July 1998, purchased the operating assets, including the SSWR operations, of its affiliate, Walsin Cartech Specialty Steel Corporation (Walsin CarTech), one of the respondents in the original investigation of this proceeding. Prior to this purchase, Walsin did not produce the subject merchandise. Walsin integrated Walsin CarTech's former SSWR operations into its own corporate structure. These operations, which are now known as Walsin's Yenshui plant, are part of Walsin's stainless steel business unit. Walsin CarTech itself, as of March 2000, no longer exists as a corporate entity.

Walsin did not request that the Department make a successorship determination for purposes of applying the antidumping duty law, but the Department is now making such a successorship determination in order to apply the appropriate and necessary company-specific cash deposit rates. In determining whether Walsin is the successor to Walsin CarTech for purposes of applying the antidumping duty law, the Department examines a number of factors including, but not limited to, changes in: (1) Management, (2) production facilities, (3) suppliers, and (4) customer base. See, e.g., Brass Sheet and Strip from Canada; Final Results of Antidumping Duty Administrative Review, 57 FR 20460 (May 13, 1992) (Brass Sheet and Strip from Canada); Steel Wire Strand for Prestressed Concrete from Japan, Final Results of Changed Circumstances Antidumping Duty Administrative Review, 55 FR 28796 (July 13, 1990); and Industrial Phosphorous From Israel; Final Results of Antidumping Duty Changed Circumstances Review, 59 FR 6944 (February 14, 1994). While examining these factors alone will not necessarily provide a dispositive indication of succession, the Department will generally consider one company to have succeeded another if that company's operations are essentially inclusive of the predecessor's operations. See Brass Sheet and Strip from Canada. Thus, if the evidence demonstrates, with respect to the production and sale of the subject merchandise, that the new company is essentially the same business operation as the former company, the Department will assign the new company the cash deposit rate of its predecessor.

The evidence on the record, including Walsin's Yenshui plant's and Walsin CarTech's company brochures, customer lists, and lists of suppliers, including those listed in Walsin's section D response,^[1] demonstrates that with respect to the production and sale of the subject merchandise, Walsin is the successor to Walsin CarTech. Specifically, the evidence shows that Walsin has the same SSWR production facilities, and most of the same customers, suppliers, and management, as Walsin CarTech had. Moreover, Walsin's SSWR operations are essentially the same as Walsin CarTech's former operations, except that the SSWR operations are now an integrated corporate unit of Walsin, while previously, the operations were organized as a separate, affiliated corporate entity, Walsin CarTech, of which Walsin owned 93.9% of the equity.

Therefore, since Walsin's SSWR operations are essentially inclusive of Walsin CarTech's former SSWR operations, we preliminarily determine that Walsin is the successor to Walsin CarTech for purposes of this proceeding, and for the application of the antidumping law.

Fair Value Comparisons

We compared EP to NV, as described in the Export Price and Normal Value sections of this notice. We first attempted to compare contemporaneous U.S. and comparison markets sales of products that are identical with respect to the following characteristics: grade, diameter, further processing and coating. Where we were unable to compare sales of identical merchandise, we compared U.S. sales to comparison market sales of the most similar merchandise based on the above characteristics, which are listed in order of importance for matching purposes. Since we were able to find appropriate comparison market sales of comparable merchandise for all of the merchandise sold in the United States, we made no comparisons to constructed value.

Export Price

For the price to the United States, we used EP as defined in section 772(a) of the Act because the merchandise was sold, prior to importation, by Walsin to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States, and constructed export price (CEP) methodology was not otherwise warranted based on the facts on the record.

We calculated EP based on the packed, CIF prices charged to unaffiliated customers in the United States or to unaffiliated customers for exportation to the United States. In accordance with section 772(c)(2)(A) of the Act, we made deductions from the starting price for foreign movement expenses (including brokerage and handling, harbor maintenance charges, and inland freight), international freight, and marine insurance.

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 subsection 4, Calculation of NV, below.

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., whether 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 Walsin's volume of home market sales of the foreign like product to the volume of its U.S. sales of subject merchandise, in accordance with section 773(a)(1) of the Act. Because Walsin's aggregate volume of home market sales of the foreign like product is greater than five percent of its aggregate volume of U.S. sales of subject merchandise, we determined that the home market is viable for Walsin.

2. Affiliated-Party Transactions and Arm's-Length Test

We included arm's-length sales to an affiliated home market customer in our analysis because we considered them to be made in the ordinary course of trade. See section 773(a)(1)(B)(i) of the Act and 19 CFR 351.102. To test whether sales to the affiliated customer in the home market were made at arm's-length prices, we compared, on a model-specific and quality-specific (i.e., prime and non-prime quality) basis, prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, and packing. Since, for the tested models of subject merchandise, prices to the affiliated party were on average 99.5 percent or more of the prices to 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).

3. Cost of Production (COP) Analysis

In the investigation of SSWR from Taiwan, the most recently completed segment of this proceeding, the Department disregarded Walsin CarTech's sales that were found to have failed the cost test. Accordingly, the Department, pursuant to section 773(b) of the Act, initiated a COP investigation of Walsin (the successor of Walsin CarTech) for purposes of this administrative review. We conducted the COP analysis as described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated the weighted-average COP, by model, based on the sum of materials and fabrication costs, general and administrative (G&A) expenses, and packing costs. We relied on the submitted costs except in the specific instances noted below, where the submitted costs were not appropriately quantified or valued.

We recalculated Walsin's G&A expenses to account for the company's total 1999 non-operating loss on idle assets valuation and obsolescence, and non-operating gain from the sale and disposal of fixed assets. We made this adjustment because these items relate to the general manufacturing activities of the company as a whole. We also adjusted Walsin's G&A expenses to reflect foreign exchange gains and losses related to accounts payable. We excluded from the G&A calculation certain non-operating expense and income items, such as other financial income and expense, rent income and expense, and commission and royalty income, because these items do not relate to the general manufacturing activities of the company.

We recalculated Walsin's interest expense factor using the company's total 1999 consolidated interest expense, foreign exchange gains and losses from notes and interest payable, and short-term interest income (used as an offset). Walsin had excluded an allocated portion of the interest expense related to investment income from its calculation of the interest expense factor. Walsin contends that, since the Department does not allow investment income as an offset to interest expense, it would be distortive, and contrary to the “matching principle” in generally accepted accounting principles (GAAP), to include the interest expense related to the same investment income in its interest expense. However, it is the Department's practice to derive net financing costs based on the borrowing experience of the entire consolidated company, including investment arms of the consolidated company. See Final Determination of Sales at Less Than Fair Value: New Minivans From Japan, 57 FR 21937, 21945 (May 26, 1992). Furthermore, the Department does not reduce the COP by income from long-term investments because we do not consider such income to be related to a company's manufacturing operations. See Final Determination of Sales at Less than Fair Value: Pasta from Italy, 61 FR 30326, 30359 (June 14, 1996).

We also adjusted Walsin's cost of goods sold (COGS) used in the calculation of the G&A and interest expense ratios by the amount of the applicable scrap revenue offset. We made this adjustment in order to make the COGS consistent with the COM (which includes this offset) to which the G&A and interest expense ratios are applied.

B. Test of Comparison Market Sales Prices

As required under section 773(b) of the Act, we compared the adjusted weighted-average COP to the comparison market sales of the foreign like product, in order 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. On a product-specific basis, we compared the revised COP to the comparison market prices, less any applicable movement charges, billing adjustments, and other direct and indirect selling expenses.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of Walsin's sales of a given product were made at prices below the COP, we did not disregard any below-cost sales of that product because the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of Walsin's sales of a given product were made at prices below the COP, we determined that such sales were made in substantial quantities within an extended period of time (i.e., a period of one year). Further, because we compared prices to POI-average costs, we determined that the below-cost prices would not permit recovery of all costs within a reasonable time period, and thus, we disregarded the below-cost sales in accordance with sections 773(b)(1) and (2) of the Act.

We found that for certain products, Walsin made home market sales at prices below the COP within an extended period of time in substantial quantities. Further, we found that these sales prices did not permit the recovery of costs within a reasonable period of time. We therefore excluded these sales from our analysis in accordance with section 773(b)(1) of the Act.

4. Calculation of NV

We determined price-based NVs for Walsin as follows: We calculated NV based on packed, delivered prices to all home market customers. We made deductions from the starting price for foreign inland freight and billing adjustments, 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 (COS) adjustments to the starting price, where appropriate, for differences in credit, royalty, and warranty expenses.

We deducted home market packing costs from, and added U.S. packing costs to, the starting price, in accordance with section 773(a)(6) of the Act. Where appropriate, we made adjustments to NV to account for differences in the physical characteristics of the merchandise sold in the U.S. and comparison market, in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.

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 transaction. The NV LOT is that of the starting-price sales in the comparison market. For EP sales, the U.S. LOT is also the level of the starting-price sales.

To determine whether NV sales are at a different LOT than EP transactions, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make a level-of-trade adjustment under section 773(a)(7)(A) of the Act.

In implementing these principles in this review, we obtained information from Walsin about the marketing stages for the reported U.S. and comparison market sales, including a description of the selling activities performed by Walsin for each channel of distribution. In identifying levels of trade for EP and comparison market sales, we considered the selling functions reflected in the starting price before any adjustments. See 19 CFR 351.412(c)(1)(i) and (iii). We expect that, if claimed levels of trade are the same, the selling functions and activities of the seller at each level should be similar. Conversely, if a party claims that levels of trade are different for different groups of sales, the selling functions and activities of the seller for each group should be dissimilar.

In this review, Walsin claimed that all of its sales involved identical selling functions, irrespective of the channel of distribution or market. We examined these selling functions, and found that sales activities were limited in nature and scope in both the comparison and U.S. markets, and consisted primarily of providing freight services. Therefore, we have preliminarily found that there is one LOT in the U.S. and comparison market, and thus, no level-of-trade adjustment is required for comparison of U.S. sales to comparison market sales. For further details, see Memorandum on Level of Trade Analysis dated June 4, 2001.

Currency Conversion

We made currency conversions into U.S. dollars in accordance with section 773A of the Act, based on exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the following weighted-average margin exists for the period September 1, 1999, through August 31, 2000:

Manufacter/exporter	Margin (percent)
Walsin Lihwa Corporation	4.75

We will disclose the calculations used in our analysis to parties to this proceeding within five days of the publication date of this notice. See 19 CFR 351.224(b). Any interested party may request a hearing within 30 days of the publication date of this notice. See 19 CFR 351.310(c). If requested, a hearing will be held 44 days after the date of publication of this notice, or the first workday thereafter. Interested parties may submit case briefs within 30 days of the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than 7 days after the deadline for filing case briefs. Interested parties are invited to comment on the preliminary results. Parties who submit arguments are requested to submit with each argument: (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Further, we would appreciate it if parties submitting written comments would provide the Department with an additional copy of the public version of any such comments on a diskette. The Department will publish the notice of the final results of this administrative review, which will include the results of its analysis of issues raised in any written comments or hearing, within 120 days from the publication date of this notice.

Assessment Rate

Pursuant to 19 CFR 351.212(b), the Department calculated an assessment rate for each importer of subject merchandise. Upon completion of this review, the Department will instruct the U.S. Customs Service to assess antidumping duties on appropriate entries. We have calculated each importers' duty assessment rate based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of examined sales. Where the assessment rate is above de minimis, we will assess the importer-specific rate uniformly on all entries made during the POR.

If the Department determines in the final results of this review that Walsin is the successor to Walsin CarTech for purposes of applying the antidumping duty law, we will further instruct the U.S. Customs Service to assign Walsin CarTech's antidumping company identification number to Walsin.

Cash Deposit Requirements

The following deposit rates will be effective upon publication of the final results of this administrative review for all shipments of SSWR from Taiwan entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act: (1) the cash deposit rate for Walsin Lihwa Corporation will be the rate 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 (except for Walsin CarTech^[2] ), the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the less than fair value (LTFV) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous review or the LTFV investigation conducted by the Department, the cash deposit rate will be 8.29 percent, the “All Others” rate established in the LTFV investigation.

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

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) 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 determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 4, 2001.

Faryar Shirzad,

Assistant Secretary for Import Administration.

Footnotes

1.  For information on Walsin CarTech, see Memorandum to the File dated June 4, 2001 regarding information on Walsin CarTech from the investigation state of this proceeding; and for information on Walsin, see Walsin's February 28, 2001 section A, B, C, and D responses.

2.  If we determine in the final results that Walsin is the successor to Walsin CarTech for purposes of applying the antidumping duty law, Walsin CarTech will no longer have its own company-specific cash deposit rate.