[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40336-40351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19019]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-412-810; C-412-811--A-428-811; C-428-812]
Hot-Rolled Lead and Bismuth Carbon Steel Products from Germany
and the United Kingdom; Negative Final Determinations of Circumvention
of Antidumping and Countervailing Duty Orders
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Negative Final Determinations of Circumvention of
Antidumping and Countervailing Duty Orders.
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SUMMARY: On May 1, 1998, the Department of Commerce published
preliminary negative determinations of circumvention of the antidumping
and countervailing duty orders on hot-rolled lead and bismuth carbon
steel products from Germany and the United Kingdom.
We provided interested parties an opportunity to comment on the
preliminary negative determinations. After our analysis of the case and
rebuttal briefs, we have determined that imports into the United States
of leaded steel billets that were exported from Germany and the United
Kingdom do not constitute circumvention of the antidumping and
countervailing duty
[[Page 40337]]
orders on hot-rolled lead and bismuth carbon steel products from
Germany and the United Kingdom, within the meaning of section 781(a) of
the Tariff Act of 1930, as amended.
EFFECTIVE DATE: July 26, 1999.
FOR FURTHER INFORMATION CONTACT: Russell Morris or Richard Herring,
Office of AD/CVD Enforcement, Office VI, Group II, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC
20230; telephone (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930 (the Act), as
amended, by the Uruguay Round Agreements Act (URAA), effective January
1, 1995. In addition, unless otherwise indicated, all references to the
Department's regulations are to 19 C.F.R. Parts 353 and 355 (1997).
Background
On March 22, 1993, the Department of Commerce (the Department)
published in the Federal Register the antidumping duty (AD) orders (58
FR 15334) and countervailing duty (CVD) orders (58 FR 15325, 15327) on
hot-rolled lead and bismuth carbon steel products (hot-rolled lead bar)
from Germany and the United Kingdom. On April 14, 1997, the Department
received an application (amended on May 14, 1997) filed by Inland Steel
Bar Company and USS/KOBE Steel Company (the petitioners) requesting
that the Department conduct anticircumvention inquiries of the AD and
CVD orders on lead bar from Germany and the United Kingdom pursuant to
section 781(a) of the Act. The petitioners alleged that the principal
German (Saarstahl A.G. i.K. and Thyssen Stahl A.G.) and British
(British Steel plc) producers of lead bar are circumventing their
respective orders by shipping leaded-steel billets (lead billets) to
the United States, where they are easily and inexpensively converted
into the lead bar products covered by the orders.
Pursuant to the petitioners' application and in accordance with 19
C.F.R. 353.29(e) and 355.29(e), the Department initiated circumvention
inquiries of the AD and CVD orders on hot-rolled lead bar from Germany
and the United Kingdom (62 FR 34213; June 25, 1997).
In conducting the inquiries, we requested and received detailed
information on a range of topics, such as processing, pricing, and
conversion costs. We also collected data on patterns of trade, sourcing
patterns, and other trend data for the period January 1, 1991 through
June 30, 1997, for the United Kingdom proceeding and January 1, 1988
through June 30, 1997, for the German proceeding.
The preliminary determination in this investigation was issued on
April 23, 1998. See Hot-Rolled Lead and Bismuth Carbon Steel Products
from Germany and the United Kingdom; Negative Preliminary
Determinations of Circumvention of Antidumping and Countervailing Duty
Orders, 63 FR 24156 (May 1, 1998) (Preliminary Determination).
In May 1998, we verified the responses of two of the re-rollers,
American Steel & Wire and Republic Engineered Steels. We followed
standard verification procedures, including meeting with company
officials, and examination of relevant accounting records and original
source documents. Our verification results are outlined in detail in
the verification reports, which are on file in public version form in
the Central Records Unit, Room B-099, of the Commerce Department.
In May 1998, the petitioners requested that the Department hold a
public hearing on these circumvention inquiries. Based upon their
request a hearing was held on July 29, 1998. Case and rebuttal briefs
were filed by the interested parties prior to the hearing. Comments
raised by the interested parties in their respective case and rebuttal
briefs are addressed in the ``Analysis of Comments Received'' section
of this notice.
Scope of AD and CVD Orders
Imports covered by these orders include hot-rolled bars and rod of
non-alloy or other alloy steel, whether or not descaled, containing by
weight 0.03 percent of lead or 0.05 percent of bismuth, in coils or cut
lengths, and in numerous shapes and sizes. The order excludes ``other
alloy steels,'' as defined by Chapter 72, note 1(f) of the Harmonized
Tariff Schedule of the United States (HTSUS), ``except steels
classified as other alloy steel by reason of containing by weight 0.4
percent or more of lead or 0.1 percent or more of bismuth, tellurium or
selenium.'' Most of the products covered are provided for under
subheadings 7213.20.00.00 and 7214.30.00.00 of the HTSUS. Small
quantities of these products may also enter the United States under the
following HTSUS subheadings: 7213.31.30.00, 60.00; 7213.39.00.30,
00.60, 00.90; 7214.40.00.10, 00.30, 00.50; 7214.50.00.10, 00.30, 00.50;
7214.60.00.10, 00.30, 00.50; and 7228.30.80.00. Although the HTSUS
subheadings are provided for convenience and for customs purposes, the
written description of the scope of the order remains dispositive.
Scope of the Circumvention Inquiries
The products subject to these circumvention inquiries are carbon or
alloy steel billets containing 0.03 percent or more of lead or 0.05
percent or more of bismuth (the only accepted metallurgical equivalent
to lead), and other alloy steel billets by reason of containing by
weight 0.4 percent or more of lead or 0.1 percent or more of bismuth,
tellurium or selenium, that meet the chemical requirements for the
merchandise subject to the orders.
Facts Available
Section 776(a)(2) of the Act requires the Department to use facts
available if ``an interested party or any other person * * * withholds
information that has been requested by the administering authority * *
* under this title.'' The facts on the record show that Bar Tech did
not comply with the Department's requests for information required to
calculate the value of the processing performed in the United States.
In our initial questionnaire dated September 10, 1997, the Department
requested information regarding the total amount of lead billet
consumed in the production of one unit of lead bar (lead billet
consumption rate). Bar Tech responded to our questionnaire on October
29, 1997, but did not provide its lead billet consumption rate.
The Department's supplemental questionnaires dated November 18,
1997 and January 7, 1998, again requested that Bar Tech report its lead
billet consumption rate. Bar Tech, however, did not provide its lead
billet consumption rate to the Department.
Section 776(b) of the Act permits the administering authority to
use an inference that is adverse to the interests of an interested
party if that party has ``failed to cooperate by not acting to the best
of its ability to comply with a request for information.'' Such an
adverse inference may include reliance on information derived from (1)
the petition, (2) a final determination in the investigation under this
title, (3) any previous review under section 751 or determination under
section 753 regarding the country under consideration, or (4) any other
information placed on the record. Because Bar Tech did not comply with
the Department's requests to provide its
[[Page 40338]]
lead billet consumption rate, we find that Bar Tech failed to cooperate
by not acting to the best of its ability to comply with the
Department's information requests. Therefore, we are using adverse
inferences in accordance with section 776(b) of the Act. In making an
adverse inference for Bar Tech's lead billet consumption rate, the
Department has used the highest average lead billet consumption rate
submitted by another U.S. re-roller participating in these inquiries.
Corroboration of this data is not necessary because this information is
not considered secondary information. See Statement of Administrative
Action (SAA) accompanying the URAA, H.Doc. 103-316, Vol. 1, at 870
(1994).
Nature of the Circumvention Inquiry
Section 781(a)(1) of the Act provides that the Department, after
taking into account any advice provided by the United States
International Trade Commission (ITC) under section 781(e), may include
the imported merchandise under review within the scope of an order if
the following criteria have been met:
A. The merchandise sold in the United States is of the same class
or kind as any other merchandise that is the subject of--
(i) an antidumping duty order issued under section 736,
(ii) a finding issued under the Antidumping Act, 1921, or
(iii) a countervailing duty order issued under section 706 or
section 303;
B. Such merchandise sold in the United States is completed or
assembled in the United States from parts or components produced in the
foreign country with respect to which such order or finding applies;
C. The process of assembly or completion in the United States is
minor or insignificant; and
D. The value of the parts or components [produced in the foreign
country with respect to which the order applies], is a significant
portion of the total value of the merchandise.
If one of the four elements does not apply, there can be no finding
of circumvention. However, even if all four of these criteria are met,
the Act requires that the Department also consider additional factors.
Section 781(a)(3) of the Act directs the Department to consider, in
determining whether to include parts or components produced in a
foreign country within the scope of an AD and CVD order, such factors
as: (A) the pattern of trade, including sourcing patterns; (B) whether
the manufacturer or exporter of the parts or components is affiliated
with the person who assembles or completes the merchandise sold in the
United States from the parts or components produced in the foreign
country; and (C) whether imports into the United States of the parts or
components produced in such foreign country have increased after the
initiation of the investigation which resulted in the issuance of such
order or finding.
U.S. Re-Rollers
We requested information from U.S. re-rollers with respect to these
circumvention inquiries. Information was submitted by the following
five U.S. re-rollers: (1) American Steel & Wire (AS&W), a wholly-owned
subsidiary of Birmingham Steel Corporation; (2) Bar Tech; (3) Nucor
Steel Corporation (Nucor); (4) Republic Engineered Steels (Republic);
and (5) Sheffield Steel Corporation (Sheffield). Based upon our
analysis of the information submitted by the foreign respondents and
the U.S. re-rollers, we have determined that no affiliation exists
between the U.S. re-rollers and the foreign respondents, as defined in
section 771(33) of the Act. A determination with respect to sections
781(a)(1) and (2) of the Act is based solely on the processing of lead
billets into hot-rolled lead bar by these unaffiliated U.S. re-rollers.
The rolling facilities owned by each of the U.S. re-rollers, except Bar
Tech, were in operation before the initiation of the respective AD and
CVD investigations of hot-rolled lead bar from Germany and the United
Kingdom. Bar Tech was established after the issuance of the AD and CVD
orders when Bar Tech purchased Bethlehem Steel's Bar, Rod & Wire (BRW)
facilities in Lackawanna, New York in 1994. Bethlehem Steel, a former
roller of lead billet into hot-rolled lead bar, was one of the original
petitioners in the lead bar investigations.
Much of the information provided by the U.S. re-rollers is
proprietary. Therefore, in most instances, the information used in our
analysis below has been ranged, and our discussion of this information
has been generalized in order to maintain the proprietary treatment of
submitted information. In addition, for most of the U.S. re-rollers,
the source of their imported lead billet supply is also proprietary.
Therefore, the analysis below refers to imports from both Germany and
the United Kingdom.
Statutory Analysis
(1) Whether the Class or Kind of Merchandise Is Sold in the United
States
AS&W, Bar Tech, Republic, and Sheffield sell hot-rolled lead bar in
the United States. Nucor processes lead billets into hot-rolled lead
bar, which the company further processes into cold-finished products.
(2) Whether Merchandise Sold in the United States is Completed or
Assembled in the United States from Foreign Parts or Components
All of the U.S. re-rollers purchase lead billets from one or more
of the foreign respondents subject to the AD and CVD orders. They each
use the lead billets to produce hot-rolled lead bar in the United
States.
(3) Whether the Process of Assembly or Completion is Minor or
Insignificant
Section 781(a)(2) lists the factors the Department will consider in
determining whether the process of assembly or completion is minor or
insignificant. The SAA states that no single factor listed in section
781(a)(2) of the Act will be controlling. SAA at 893. The SAA also
states that the Department will evaluate each of the factors as they
exist in the United States depending on the particular circumvention
scenario. Id. Therefore, the importance of any one of the factors
listed under 781(a)(2) of the Act can vary from case to case depending
on the particular circumstances unique to each specific circumvention
inquiry. As discussed below, each of the factors set forth in section
781(a)(2) of the Act is examined below for the U.S. re-rollers.
(a) The Level of Investment in the United States
The rolling facilities owned by each of the U.S. re-rollers were in
operation before the initiation of the respective AD and CVD
investigations of hot-rolled lead bar from Germany and the United
Kingdom. Although Bar Tech did not exist before the initiation of the
investigations, the facility producing subject merchandise that is
operated by the company does pre-date the investigations. Each of the
U.S. re-rollers has made substantial capital investments in its
respective rolling mills.
AS&W entered the hot-rolled lead bar market in 1986, with its
purchase of rolling facilities from U.S. Steel. In 1993, Birmingham
Steel acquired AS&W and entered the specialty bar, rod, and wire
products business. In 1996, Birmingham Steel invested $132 million
[[Page 40339]]
in a new high-quality rolling mill at AS&W's Cleveland, Ohio facility,
enabling the company to produce larger-sized bar products and bars with
tighter size tolerances and more stringent mechanical properties. AS&W
primarily produces nonlead hot-rolled bars, and less than a quarter of
the mills' production utilizes lead billets. AS&W sells the hot-rolled
lead bar that it produces to unaffiliated customers.
Bar Tech came into existence in 1994, with the purchase of
Bethlehem Steel's BRW facilities for $19 million. From 1994 through
1997, Bar Tech made additional investments in the rolling facilities'
buildings, machinery, and equipment. In April 1996, Bar Tech acquired
Bliss & Laughlin (B&L), the largest cold-finishing company in the
United States. In September 1997, Bar Tech announced plans to invest
$30 million in its steelmaking facilities. Approximately half of the
investment is allocated for the production of lead and nonlead semi-
finished steels at its Johnstown meltshop. The majority of the
remaining investment is designated for equipment upgrades at its 13-
inch rolling mill in Lackawanna, New York to roll both lead and nonlead
billets.
Nucor's steel mill in Darlington, South Carolina became operational
as a new steel mill in 1969. Prior to 1991, Nucor added a high-speed
rolling line to its mill. The addition of such equipment allows for
automatic straightening, shearing, stacking, and bundling of bar, and
has significantly enhanced Nucor's ability to produce hot-rolled lead
and nonlead bar from lead and nonlead billets. Since 1991, Nucor has
made several investments for a variety of improvements.
In November 1989, Republic was created through an employee stock
ownership plan with the purchase of LTV's Bar Division. With the
purchased steelmaking facilities, Republic gained the ability to
produce lead and nonlead ingots, and hot-rolled and cold-finished bar
products. Republic currently produces lead billets via the ingot
process in a shared facility; however, the quantity it can produce is
restricted by environmental permit limits. During the 1990's, Republic
invested in the construction of a continuous casting facility which has
the capability to produce both lead and nonlead billets; however,
Republic currently only produces nonlead billets at the facility.
Sheffield was established in the early 1980's, with the purchase of
the Sand Springs, Oklahoma meltshop and rolling facility in 1981, and
the construction of the Kansas City, Missouri rolling facility in 1985.
In 1986, Sheffield purchased a 12-inch rolling mill facility in Joliet,
Illinois from Continental Steel for $3.5 million. This rolling mill was
originally installed around 1957. Since acquiring the Joliet mill in
1986, Sheffield has made additional investments of approximately $6
million in the facility, which is the company's only rolling mill which
produces hot-rolled lead bar. Sheffield entered the hot-rolled lead bar
market in 1992.
(b) The Level of Research and Development (R&D) in the United States
Four of the five re-rollers had little or no R&D related to the
production of hot-rolled lead bar. One U.S. re-roller reported that it
conducted some R&D with respect to the development of heating, rolling
and inspection practices used in the production of leaded steels. The
U.S. re-rollers reported that there have been few technological
breakthroughs affecting leaded steels since 1991. Because the rolling
of hot-rolled lead bar is a technically mature process, R&D is not a
significant factor in this industry.
(c) The Nature of the Production Process in the United States
The ITC states that the manufacturing process for the production of
hot-rolled lead bar consists of three different stages: (1) melting,
(2) casting, and (3) hot-rolling. See Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products From Brazil, France, and the United
Kingdom, Final Determinations of the Commission in Investigations Nos.
701-TA-314 thru 317, USITC Publication 2611 (March 1993). Lead billets
are created during the second stage; the U.S. re-rollers perform the
third and final stage in the manufacturing process of hot-rolled lead
bar.
Each of the U.S. re-rollers are fully operational hot-rolled lead
and nonlead bar producers, manufacturing bar in a like manner. The
nature of the process overall consists of a series of steps for the
purpose of sizing and shaping the lead billets to produce specific
sized and shaped hot-rolled bar on rolling equipment used to
manufacture either hot-rolled lead or nonlead bars. The rolling process
does not require equipment devoted exclusively to the production of
hot-rolled lead bar. Three of the five re-rollers also have cold-
finishing operations to further process the hot-rolled lead bar. In the
cold-finishing process, the bar undergoes surface treatments in the
form of polishing, turning, grinding, and straightening.
The process for producing hot-rolled lead bar from lead billets is
as follows. First, the lead billets are placed in a re-heat furnace and
heated to a temperature usually above 2200 degrees Fahrenheit. This
heating procedure increases the malleability of the steel, reducing
energy consumption and wear on the rolling mill. Once the lead billets
reach the necessary temperature, walking beams gradually discharge them
from the re-heat furnace onto the rolling lines. The lead billets are
then rolled on a series of rolling mills, including roughing,
intermediate, and finishing mills. Each rolling mill has a series of
stands which compress and shape the lead billets with each pass
through. As a lead billet passes through the stands, it becomes
elongated and its cross-section becomes smaller. This process
transforms a lead billet into a hot-rolled lead bar product having a
specific size and shape. Generally four to 15 percent of a lead
billet's weight is lost in the rolling process.
The hot-rolled lead bar is then placed on a hot bed and cooled to a
temperature of about 800 degrees Fahrenheit. Once cooled, the hot-
rolled lead bar undergoes straightening, non-destructive testing,
deburring, and saw cutting. The hot-rolled lead bar is either coiled or
cut into various lengths at the finishing shear. At this stage, some
re-rollers apply a surface treatment to clean and coat their products.
After being inspected for straightness, length, and defects, the hot-
rolled lead bars are weighed, packaged, and placed in the warehouse for
later shipment.
There are environmental issues and limitations in rolling lead
billets versus nonlead billets. Environmental controls, worker safety,
and health regulations are more stringent for lead than for nonlead
grades. For instance, additional ventilation of exhaust fumes is
necessary as lead and bismuth steel wastes are classified as hazardous
waste, necessitating their segregation and separate treatment from
other scrap. Specialized safety equipment and more rigorous operating
procedures must also be used in compliance with Occupational Safety and
Health Administration (OSHA) standards.
(d) The Extent of Production Facilities in the United States
In general, each of the U.S. re-rollers has production facilities
in various states throughout the United States, but the rolling of hot-
rolled lead bar mainly takes place in Illinois, Ohio, Utah, South
Carolina, and New York. As we have noted earlier, most of the U.S. re-
rollers were rolling lead billets into hot-rolled lead bar before the
initiation of the AD and CVD investigations of hot-rolled lead bar from
Germany and the United Kingdom.
[[Page 40340]]
In analyzing the extent of production facilities, we considered the
square footage of building space dedicated to rolling lead billet into
hot-rolled lead bar, the number of employees involved in rolling the
lead billets, and the capital equipment used in the production of hot-
rolled lead bar. Sheffield, for example, reported that its Joliet
rolling facility encompasses 334,305 square feet for the processing of
lead billet into hot-rolled lead bar.
With regard to the number and level of skilled employees involved
in rolling lead billets into hot-rolled lead bar, Sheffield, for
example, reported that in the production process of hot-rolled lead
bar, from the time the lead billets are received in the billet yard to
the time that hot-rolled lead bar is shipped to a customer, there are
25 skilled workers responsible for the rolling of a lead billet into
hot-rolled lead bar, and all of the other ancillary functions.
With respect to the capital equipment used in the processing of
lead billet into hot-rolled lead bar, the U.S. re-rollers have invested
a substantial amount of money not only in the construction of factory
buildings used in rolling operations for both lead and nonlead
products, but also in the purchase of sophisticated machinery required
to produce hot-rolled bar from lead and nonlead billets, and in the
maintenance required for such machinery.
(e) Whether the Value of the Processing Performed in the United States
Represents a Small Proportion of the Value of the Merchandise Sold in
the United States
We calculated the difference in value between the hot-rolled lead
bar sold in the United States and the value of the lead billets
purchased from the foreign respondents that were used in the production
of that merchandise. For AS&W, BarTech, Republic, and Sheffield, we
based our calculation of value added to the merchandise sold in the
United States on the difference between the delivered lead billet
import price and the ex-factory sales price of the hot-rolled lead bar.
This methodology was used because both transactions (lead billet
purchases and hot-rolled lead bar sales) were sales between
unaffiliated parties. To derive the value of processing performed by
each U.S. re-roller, we subtracted from the ex-factory sales price of
hot-rolled lead bar to unaffiliated customers the delivered price of
lead billets, after adjusting for a yield factor (to account for
additional lead billet consumed in the production of one unit of hot-
rolled lead bar).
In regard to Nucor, because the company uses all the hot-rolled
lead bar that it produces to further manufacture cold-finished
products, we applied a different value-added methodology. We based our
calculation of value-added on the comparison between the conversion fee
Nucor's rolling mill charged its affiliated cold-finisher and the
resulting total input cost of hot-rolled lead bar to the cold-finisher,
after adjusting both for a yield factor (to account for additional lead
billet consumed in the production of one unit of hot-rolled lead bar).
Some of the U.S. re-rollers purchased lead billets from all three
suppliers of lead billets subject to these inquiries, while others
purchased exclusively from one source. Some of the U.S. re-rollers,
however, were unable to identify the supplier of lead billets on a
transaction-specific basis with respect to the U.S. sales of the
processed hot-rolled lead bar. Therefore, for each U.S. re-roller, the
calculation of value-added is based upon a weighted-average price of
imported lead billet from the foreign respondent(s) from whom the U.S.
re-roller purchased its lead billets. Because the processing of the
imported lead billet into hot-rolled lead bar is virtually identical
regardless of the source of the imported lead billet, we consider this
weighted-average, non-supplier specific calculation of value-added to
be appropriate in those instances. However, where possible, we used the
supplier-specific information to calculate the value-added to each
supplier.
The value of processing performed in the United States ranges from
approximately 10 percent to 29 percent for the U.S. re-rollers. The
relative value of processing varies because of the lead billet prices
charged by the foreign respondents to the U.S. re-rollers, the U.S. re-
roller's yield factor for rolling one unit of lead billet into one unit
of hot-rolled lead bar, and the different prices charged by the U.S.
re-rollers to their customers due to size and shape of the hot-rolled
lead bar. Because the calculation of the value of processing is based
upon proprietary data, the value-added percentages presented above have
been ranged.
(4) Whether the Value of Imported Parts is a Significant Portion of
Value of Lead Bar
Under section 781(a)(1)(D) of the Act, the value of the imported
parts or components must be a significant portion of the total value of
the subject merchandise sold in the United States in order to find
circumvention. The imported lead billet is the sole material input into
the completed hot-rolled lead bar and a significant portion of the
value of the completed hot-rolled lead bar is for this material cost.
Other Factors To Consider
In making a determination whether to include parts or components
within an order, section 781(a)(3) of the Act instructs us to take into
account such factors as: the pattern of trade, including sourcing
patterns; whether affiliation exists between the exporter of the parts
and the person who assembles or completes the merchandise sold in the
United States; and whether imports into the United States of the parts
produced in the foreign country have increased after the initiation of
the investigation which resulted in the issuance of the order. Each of
these factors are examined below.
(1) Pattern of Trade And Sourcing
The first factor to consider under section 781(a)(3) is changes in
the pattern of trade, including changes in the sourcing patterns of the
lead billets. SAA at 894. Unlike our examination of the processing of
lead billets into hot-rolled lead bar in the United States, which was
essentially the same for all of the U.S. re-rollers, there are
differences in the pattern of trade among the U.S. re-rollers and the
three foreign respondents (British Steel, Thyssen, and Saarstahl).
Among the foreign respondents, British Steel and Thyssen are the two
largest lead billet exporters to the United States. In comparison,
Saarstahl is a small exporter of lead billets.
British Steel began selling lead billets to the United States in
1994. By 1996, the company's lead billet sales doubled. British Steel's
sales of hot-rolled lead bar peaked in 1992, declined in 1993 and 1994,
rebounded in 1995, and continued to trend upwards in 1996. In general,
sales of hot-rolled lead bar by British Steel have greatly exceeded its
sales of lead billets to the U.S. market (despite the AD and CVD
orders). British Steel's sales of hot-rolled lead bar in the U.S.
market have remained substantial since the imposition of the orders. In
fact, Sheffield reported that its primary competition for hot-rolled
lead bar shapes is imports from British Steel.
Thyssen has been selling lead billets to the United States since
1988, well before the Department initiated its hot-rolled lead bar
investigations in May 1992. Thyssen's lead billet shipments to the
United States increased steadily from 1991 to 1996, peaking in 1996,
while its hot-rolled lead bar sales to the U.S. market terminated in
1992. Thyssen has stated that lead billets, and not hot-rolled lead
bar, have always
[[Page 40341]]
been its primary U.S. market, and the pattern of trade for both
products indicates this to be accurate.
Saarstahl began selling lead billets to the United States in 1992,
the last year the steelmaker sold hot-rolled lead bar to U.S.
customers. Saarstahl's exports of lead billets to the United States
peaked in 1993, and since then have significantly decreased.
AS&W has been purchasing lead billets since its inception in 1986.
AS&W reported that since 1992, the company has sourced lead billets
from both foreign and domestic suppliers. A major change in the
company's sourcing was the termination of a billet supply agreement
(inclusive of lead and nonlead billets) with USS/KOBE. When Birmingham
Steel purchased AS&W in 1993, there was a lead billet supply agreement
in effect with USS/Lorain Works, which subsequently became USS/KOBE.
USS/KOBE terminated the supply agreement in 1996, citing a lack of lead
billet availability. With the termination of this supply agreement,
AS&W was no longer able to source lead billets domestically.
Bar Tech began purchasing lead billets in 1996. Bar Tech has not
sourced lead billets from domestic producers. Bar Tech never purchased
lead bar from the foreign respondents.
Nucor did not begin purchasing lead billets until 1992, when the
company began sourcing from foreign respondents. Purchases from the
foreign respondents have been generally declining. Nucor had previously
purchased hot-rolled lead bar from foreign sources.
Republic's predecessor began purchasing lead billets from foreign
sources in the mid-80's. Since becoming an independent company in 1989,
Republic has continued to source its lead billets from foreign sources
to supplement its own production. Republic has not purchased lead
billets from domestic producers. The company did purchase hot-rolled
lead bar from foreign sources in the early 1990's; however, since 1993,
Republic has sourced hot-rolled lead bar exclusively from domestic
suppliers.
Sheffield has sourced lead billets from both domestic and foreign
producers since it began purchasing lead billets in 1992. Throughout
much of 1993, Sheffield sourced lead billets from Inland; however, by
late 1993, Inland stopped its external sales of lead billets citing its
own internal lead billet consumption needs. In June 1995, Inland was
again in a position to supply lead billets. Sheffield placed orders
with Inland, but by the fourth quarter of 1995, Inland once again
stopped selling lead billets. Since 1996, Sheffield has sourced lead
billets from abroad.
(2) Affiliation
The second factor to consider under section 781(a)(3) of the Act is
whether the manufacturer or exporter of the lead billets is affiliated
with the entity that assembles or completes the merchandise sold in the
United States from the imported lead billets. In these circumvention
inquiries, the Department inquired whether affiliation existed between
the U.S. re-roller and the foreign respondents, pursuant to section
771(33) of the Act. Based upon our analysis of the information on the
record, including the questionnaire responses from both the U.S. re-
rollers and the foreign respondents, we find that no affiliation exists
between the parties. There is no common ownership, direct or indirect,
between the U.S. re-rollers and the foreign suppliers of lead billets,
or a joint venture between the companies. Further, there are no facts
(e.g., close supplier relationship) that suggest control of any of the
re-rollers by the foreign respondents. In sum, we have found no
evidence to indicate that the foreign respondents have attempted either
to purchase or to construct re-rolling facilities in the United States
which would allow them to import lead billet and process it into hot-
rolled lead bar for their own use.
(3) Whether Imports Have Increased
The third factor to consider under section 781(a)(3) is whether
imports of lead billets into the United States have increased after the
initiation of the hot-rolled lead bar investigations. Therefore, we
have analyzed the level of imports of lead billets from both Germany
and the United Kingdom since 1992, the year in which the AD and CVD
investigations of hot-rolled lead bar were initiated. While we find
that imports of lead billets have increased from all three foreign
respondents, there are reasons beyond the initiation of the AD and CVD
investigations to explain their rise.
According to some of the U.S. re-rollers, there has been a switch
from domestically produced lead billets to foreign-sourced lead billets
because Inland and USS/KOBE have not met the lead billet supply needs
of the U.S. market. In addition, there were two new entrants to the
hot-rolled lead bar market after the initiation of the hot-rolled lead
bar investigations that required supplies of lead billet. Sheffield
entered into the hot-rolled lead bar market after Bethlehem Steel
exited the market in 1992. Two years later, Bar Tech entered the hot-
rolled lead bar market after purchasing Bethlehem's rolling facilities.
Bethlehem Steel, one of the original petitioners in the hot-rolled lead
bar investigations, produced its own lead billets; however, neither
Sheffield nor Bar Tech currently have lead billet production and thus,
must source their lead billets from other outside sources.
Further, according to the ITC, in the United States almost all
semifinished steel such as blooms, billets, and slabs are used in
captive production of finished steel products. Steel processors, such
as the U.S. re-rollers, are an important outlet for excess semifinished
steel products manufactured by steel producers. In the relatively
limited semifinished steel market, the consumer is also likely to be
the supplier's competitor in sales of finished steel. See USITC
Publication 2758, Industry & Trade Summary Semifinished Steel (March
1994) 3, 5, and 11. Because the consumer of a billet is generally a
competitor of the supplier, the dynamics of supply operate differently
than for finished steel products. A steelmaker with excess melting
capacity may have incentive to refrain from selling semifinished steel,
such as billets.
It has also been difficult to measure the rise in imports of lead
billets from Germany and the United Kingdom against import trends from
other countries. This is because the primary HTS number under which
lead billets are imported is a basket category which includes other
imports of semifinished products of iron or nonalloy steel with a
chemical content of under 0.25 percent carbon. In its application,
Inland and USS/KOBE provided import data for this HTS category.
According to these data, imports of semifinished products of iron or
nonalloy steels from countries not subject to AD or CVD orders
increased after the initiation of the hot-rolled lead bar
investigations, and significantly in some cases.
Summary of Statutory Analysis
As discussed above, in order to make an affirmative determination
of circumvention, all the elements under sections 781(a)(1) of the Act
must be satisfied, taking into account the factors under section
781(a)(2). In addition, section 781(a)(3) of the Act instructs the
Department to consider, in determining whether to include parts or
components within the scope of an order, such factors as: pattern of
trade, affiliation, and whether imports into the United States of such
parts or components increased after the initiation of the investigation
which resulted in the issuance of the order. When the criteria
[[Page 40342]]
of section 781(a)(1), taking into account the factors under section
781(a)(2), are applied to the individual facts, our analysis of whether
circumvention is occurring is inconclusive. However, when the evidence
to be considered under section 781(a)(3) of the Act, is incorporated
into our analysis, we find that all of the evidence, taken as a whole,
does not lead us to find a basis for including lead billets within the
scope of the AD and CVD orders on hot-rolled lead bar from Germany and
the United Kingdom.
Pursuant to sections 781(a)(1) and (2), we find that the processing
of lead billets into hot-rolled lead bar is essentially identical for
all of the U.S. re-rollers involved in these inquiries. A detailed
description of the re-rolling process is provided above. Though the
U.S. re-rollers perform only one of the three processes needed to
produce hot-rolled lead bar, they do perform the final process of
converting the semifinished steel product into a functional finished
steel good. Also, because the production process of converting lead
billets into hot-rolled lead bar is a technically mature process, we
did not find significant R&D expenditures by the U.S. re-rollers.
The process of rolling lead billet into hot-rolled lead bar
requires significant capital investment in rolling machinery and
equipment, and compliance with a variety of OSHA and environmental
regulations. Capital equipment and machinery used by the U.S. re-
rollers, once purchased, installed, and operational, represent
significant fixed plant and equipment which cannot be easily
disassembled and transported to another location. Investment in re-
rolling facilities requires a long-term investment of capital, long-
term corporate planning, and a long-term business commitment by the
U.S. re-roller.
Pursuant to section 781(a)(3), in reaching our determination, we
took into consideration the factors of pattern of trade, sourcing,
affiliation, and import trends. The facts concerning pattern of trade,
sourcing, affiliation, and import trends do not indicate that there is
circumvention of the hot-rolled lead bar orders. Even if we were to
conclude that the value of processing performed by the U.S. re-rollers
in the United States is relatively small, when we examined sections
781(a)(1) and (2) in conjunction with the factors under section
781(a)(3), the facts, taken as a whole, do not lead us to find that
circumvention of the hot-rolled lead bar orders is occurring.
Throughout the United States, the U.S. re-rollers have extensive
capital-intensive rolling facilities staffed by skilled workers. As
previously discussed, the U.S. re-rollers are not affiliated with the
foreign respondents and their rolling facilities were in existence and
operational before the initiation of the hot-rolled lead bar
investigations. Indeed, the petition for the hot-rolled lead bar
investigations was filed on behalf of two of the five U.S. re-rollers,
AS&W and Republic. In addition, a third U.S. re-roller, Bar Tech,
purchased its rolling facilities from Bethlehem Steel, one of the two
original petitioners in the hot-rolled lead bar investigations.
Based upon the information on the record, most of the U.S. re-
rollers' investment in rolling facilities in the United States was made
before the initiation of the AD and CVD investigations of hot-rolled
lead bar from Germany and the United Kingdom. In addition, some of the
U.S. re-rollers made large investments in their rolling mills after
1992, the year in which the investigations on hot-rolled lead bar
began. Thus, before and after 1992, U.S. re-rollers made large
investments of capital and resources into their rolling facilities.
These facts demonstrate that there were substantial production
facilities for converting lead billets into hot-rolled lead bar before
the initiation of the hot-rolled lead bar investigations.
Further, as discussed above, British Steel remains a large exporter
of hot-rolled lead bar to the United States and its bar market in the
United States is still much larger than its U.S. lead billet market.
Thyssen was primarily a lead billet exporter to the United States
before 1992, the year the hot-rolled lead bar investigations were
initiated. That did not change after the initiation of the hot-rolled
lead bar investigations. Saarstahl, which exports a relatively small
volume of lead billets to the United States, is not a major player in
the U.S. lead billet market.
With respect to the U.S. re-rollers, changes in their respective
sourcing patterns after 1992 appear to be due to changes in the U.S.
market, independent of the hot-rolled lead bar investigations. U.S. re-
rollers were purchasing lead billets and rolling them into hot-rolled
lead bar before 1992. For example, Republic began purchasing lead
billets in the mid-80's from foreign sources. New hot-rolled lead bar
entrants came into the market after the departure of Bethlehem, causing
an increase in the demand for lead billets. While Bethlehem was able to
produce its own lead billets, the two new entrants, Bar Tech and
Sheffield, have to purchase their lead billets from independent
sources. In addition, there were also shifts from domestic to foreign
billet suppliers because the domestic companies producing lead billets
were only able to meet their own internal consumption needs. As
discussed above, since 1996, both AS&W and Sheffield have been forced
to source lead billets from foreign suppliers as a result of the
termination of their supply arrangements with USS/KOBE and Inland,
respectively.
Our analysis demonstrates that the increase in the importation of
lead billets by the U.S. re-rollers in order to produce hot-rolled lead
bar was due to many factors above and beyond the imposition of the bar
orders. As noted above, a number of the U.S. re-rollers were producing
hot-rolled lead bar from foreign lead billet suppliers prior to the
orders and continued to produce hot-rolled lead bar after the orders.
In addition, these unaffiliated U.S. re-rollers invested a substantial
amount in their rolling facilities both before and after the AD and CVD
orders to roll both lead and nonlead billets into hot-rolled bar.
The facts of these inquiries also show that the foreign respondents
did not change their product lines in the United States as a result of
the initiation of the hot-rolled lead bar investigations. As noted,
Thyssen's primary market in the United States has been lead billets
since the mid-80's. British Steel, which commenced selling lead billets
in 1994, continues to export a significant amount of hot-rolled lead
bar to the United States.
Based upon this analysis under section 781(a) of the Act, we
determine that circumvention of the AD and CVD orders on hot-rolled
lead bar is not occurring by reason of imports of lead billets from
Germany and the United Kingdom.
Analysis of Comments Received
We invited interested parties to comment on the preliminary
negative determinations of circumvention of hot-rolled lead and bismuth
carbon steel products from Germany and the United Kingdom. We received
case and rebuttal briefs from the foreign respondents, British Steel,
Saarstahl, Thyssen; two of the U.S. re-rollers, Republic and Sheffield;
and the petitioners, USS/KOBE and Inland Steel Bar Company. All
comments and rebuttal arguments properly raised by the parties in their
briefs to the proceeding are discussed below.
[[Page 40343]]
Comment 1: The Statute Does Not Instruct the Department To Evaluate Why
Imports Into the United States Have Increased
The petitioners argue that pursuant to section 781(a)(3)(C) of the
Act, the Department will consider whether ``the parts or components
produced in such foreign country have increased after the initiation of
the investigation which resulted in the issuance of such order or
finding.'' The petitioners argue that the statute instructs the
Department to consider whether an increase of the lead billets have
occurred after the initiation of the original investigation without
evaluating possible reasons for such an increase before or during the
investigation period and up to the order date.
The petitioners assert that the data on the record clearly
demonstrates that the level of imported lead billets into the U.S.
market from Germany and the United Kingdom has increased dramatically
since the investigations of hot-rolled lead bar in 1992, while imports
of bars and rods subject to the orders have markedly declined.
The petitioners argue that the Department's reasons for the sharp
increase of lead billets, as stated in the preliminary determinations,
including general sourcing patterns in the U.S. semifinished steel
market, import trends from other countries, and the re-rollers ``short
supply'' argument, do not hold up to the facts. Moreover, the
petitioners argue that none of the U.S. re-rollers or foreign
respondents has alleged that there is a shortage of lead billets in the
United States. The petitioners argue that none of the alternate
rationales provided by the Department disproves the fact that the
imports of lead billets from the United Kingdom and Germany increased
since the investigation and subsequent orders placed on hot-rolled lead
bars in 1992 and 1993, respectively.
The foreign respondents argue that the pattern of trade
demonstrates that the foreign respondents were selling lead billets to
the United States before the imposition of the AD and CVD orders on
hot-rolled lead bar. In addition, the U.S. re-rollers participating in
these inquiries were in existence before the imposition of the hot-
rolled lead bar orders. Further, the U.S. re-rollers that were in
existence before the AD and CVD orders on hot-rolled lead and bismuth
carbon steel products had been purchasing lead billets prior to the AD
and CVD orders.
Collectively, the foreign respondents argue that the individual
patterns of trade for British Steel, Thyssen, and Saarstahl are vastly
different, and do not demonstrate on their part or the U.S. re-rollers'
part that circumvention of the orders is occurring. For example,
British Steel argues that its shipments of hot-rolled lead bar to the
United States have and continue to exceed its shipments of lead
billets. Thyssen argues that it was never a significant exporter of
hot-rolled lead bars to the United States. Rather, Thyssen states that
it sells significantly greater quantities of lead billets to unrelated
companies throughout the world, including the United States, than hot-
rolled lead bars. Additionally, Thyssen notes that prior to the certain
hot-rolled lead and bismuth carbon steel products from Brazil, France,
Germany and the United Kingdom investigations, it sold lead billets to
the United States in significantly greater quantities than its sales of
hot-rolled lead bar. Saarstahl argues that its sales of lead billets to
the United States have significantly declined since peaking in 1993.
Both the foreign respondents and U.S. re-rollers argue that,
because four of the five U.S. re-rollers participating in these
proceedings either do not currently produce lead billets themselves, or
can not produce sufficient quantities of lead billets to meet their
requirements, a reliable source of lead billet supply is necessary. The
U.S. re-rollers, as well as the foreign respondents, stress that the
reason for the increase in lead billet imports from Germany and the
United Kingdom is due to the fact that the domestic lead billet
industry (i.e., petitioners) is either ``unwilling'' or ``unable'' to
provide a consistent and reliable supply of lead billets to the U.S.
re-rollers respective facilities. AS&W, Republic, and Sheffield have
made repeated assertions that Inland and USS/KOBE do not have the
capacity to meet their demands or the demands of the domestic lead
billet merchant market and, therefore, were compelled to source lead
billets from the foreign respondents because both Inland and USS/KOBE
refused to sell lead billets on a consistent basis. British Steel notes
that AS&W approached British Steel as a possible supply source of lead
billets only after USS/KOBE terminated a supply agreement with AS&W in
1996.
Department's Position: Although the pattern of trade is not a
determining factor, but rather one of several factors which the
Department considers in evaluating whether circumvention is occurring,
the Department did consider this to be an important factor in its
analysis as to whether circumvention of the AD and CVD orders are
occurring.
The petitioners have argued that in evaluating the pattern of
trade, it is sufficient merely to look at the trends of the data
without further examination of the facts surrounding those trends. For
example, petitioners contend that we have disregarded the statute by
going behind the import statistics to consider what they characterize
as ``short supply'' issues. We disagree with petitioners''
interpretation of the statute. The petitioners' argument that the
Department only examine whether imports have increased would convert
this criterion into a mechanical approach which we believe is much less
meaningful than an examination of all the relevant circumstances,
including the causes behind the import trends. The ``pattern of trade''
is more than just bare import statistics alone.
Therefore, in order to determine whether circumvention of an order
has occurred, we are directed by the SAA to examine the individual
facts on a case-by-case basis for each circumvention inquiry. For
example, if imports of lead billet increased after the order by 10
percent, while the increase in imports of hot-rolled lead bar was 100
percent after the imposition of the order, the petitioners'
interpretation of the statute would require that the Department ignore
contributing factors and explanations for an increase in the level of
importations when deciding whether or not circumvention of an order has
occurred. To adopt this interpretation of the statute would render the
individual facts of a circumvention inquiry meaningless. In other
words, the petitioners' suggestion that the Department must only
consider quantitative changes pursuant to section 781(a)(3)(C) of the
Act without consideration of the facts of the circumvention inquiry and
the underlying causes that may have contributed to such changes is
inappropriate for evaluation of this criterion.
In analyzing the level of imports of lead billets from both Germany
and the United Kingdom, respectively, we found that imports of lead
billets have increased from all three foreign respondents. However, the
respective increases appear to be the result of causes other than the
initiation of the hot-rolled lead bar investigations and the subsequent
orders.
In evaluating the criterion provided by section 781(a)(3)(C), the
Department relied, in part, upon the fact that since the mid-1980s
Thyssen's primary product market in the United States has been lead
billets, not hot-rolled lead bar. With respect to British Steel, the
Department found that the pattern of trade did not suggest
circumvention because British Steel remains a large exporter of hot-
rolled lead bar to the
[[Page 40344]]
United States and its hot-rolled lead bar market in the United States
is still much larger than its lead billet market. Further, the
reduction or elimination of domestic supply by Inland and/or USS/KOBE's
inability to provide a consistent supply of lead billets to the U.S.
merchant lead billet market is a contributing cause to the reported
increase in imported lead billets into the United States. Thus, even
though the petitioners contend that there is now ``available'' domestic
capacity to meet the U.S. lead billet merchant market demand, the
record clearly demonstrates that the petitioners' capacity is not
necessarily available to U.S. re-rollers as evidenced by the re-
rollers' inability to secure a consistent supply from domestic sources.
Indeed, Inland has stated publicly that it does not sell lead billets
to the U.S. lead billet merchant market. See February 17, 1998 Ex Parte
Memorandum from the Team, through Barbara E. Tillman, to the File.
We also found during our verification of Republic various
contractual agreements between Republic and its customers. These
contracts, also known as a ``frozen practice,'' identify the lead
billet supplier, specifications and functional requirements of the
input. Republic has entered into a number of ``frozen practice''
arrangements with its customers which require Republic to use specific
lead billet suppliers in the production of the multiple downstream
products which are purchased by the automobile industry in the United
States. In these cases, changes in sourcing lead billets without
written approval of the customer are subject to refusal. See
Verification of Republic Engineered Steel's Questionnaire Responses in
the Anticircumvention Inquiry of the Antidumping and Countervailing
Duty Orders on Hot-Rolled Lead and Bismuth Carbon Steel Products from
Germany and the United Kingdom, July 6, 1998 at 4.
Comment 2: The Department Should Compare the Investments in a Re-
rolling Mill to the Investments Required for an Integrated Steel
Facility
The petitioners argue that the Department failed to provide a
proper analysis pursuant to section 781(a)(2) of the Act as to whether
the process carried on in the United States is ``minor'' or
``insignificant.'' In particular, the petitioners argue that the
Department's analysis was deficient with respect to the level of
investment factor. The petitioners contend that the Department, in
reaching its preliminary determinations, merely summarized generic hot-
rolling investment information submitted by the U.S. re-rollers and
concluded that ``[i]nvestment in re-rolling facilities requires a long
term investment of capital'' and that all of the U.S. re-rollers have
made ``large investments of capital and resources into their rolling
facilities'' without providing a proper comparison of what constituted
a ``long term investment of capital'' and ``large investment of
capital.'' The petitioners argue that the Department in its final
determination must compare the level of investment required to produce
lead billets relative to the investment required to roll lead billet
into hot-rolled lead bar. The petitioners argue that using a
comparative analysis would demonstrate that the production of lead
billets requires ``substantial'' investment in specialized facilities,
including dedicated equipment, such as bloom casters, lead injection
equipment, and fume control technology, whereas the level of investment
dedicated and required to roll lead billets into hot-rolled lead bar at
the U.S. re-roller facilities would be deemed ``minor'' or
``insignificant.''
The petitioners argue that the investment data from the U.S. re-
rollers clearly establishes that the plant and equipment required for
the production of hot-rolled lead bar represents only a fraction of the
plant and equipment required for the production of lead billets.
According to the petitioners, the investment required to construct the
facilities and purchase capital machinery dedicated and required for
the production of lead billets vastly exceeds the level of investment
in the U.S. re-rollers' current facilities and equipment which merely
roll the lead and/or nonlead billets into hot-rolled bar.
The petitioners also note that in their application for these
circumvention inquiries, the petitioners compared the level of
investment necessary to roll lead billets into hot-roll lead bar with
that required to produce lead billets, and that this relative
comparison prompted the Department to initiate these inquiries because
the level of investment required to roll lead billets at the U.S. re-
roller facilities was ``minor'' in comparison to the production of lead
billets at the petitioners'' integrated facility.
Further, the petitioners contend that the Department, in reaching
its preliminary determination, failed to follow previous
anticircumvention inquiries where the Department conducted a
comparative analysis of the level of investment between an industry and
its individual segments. See Granular Polytetrafluoroethylene Resin
from Italy; Final Affirmative Determination of Circumvention of
Antidumping Duty Order, 63 FR 26100 (April 30, 1993)(PTFE), and Brass
Sheet and Strip from Canada; Final Affirmative Determination of
Circumvention of Antidumping Duty Order, 58 FR 33610 (June 18, 1993)
(Brass Sheet and Strip). In PTFE, the petitioners assert, the
Department made an affirmative finding of circumvention, in part,
because ``* * * in comparison to the investment required to establish
an integrated production facility for granular PTFE resin (finished
product), respondent's investment in the United States is relatively
minor'' (58 FR at 26103). Petitioners also cite to Brass Sheet and
Strip, where the Department found that failure to compare the re-
roller's operations to an integrated mill would not ``provide * * * an
accurate representation of the industry as a whole * * * nor a
meaningful evaluation of Great Lakes' operations in particular'' (58 FR
at 33613).
The U.S. re-rollers and foreign respondents disagree with the
petitioners' assertion that the level of investment is ``minor'' and
that a comparison of an integrated facility to a rolling facility is
warranted in these inquiries. The U.S. re-rollers and foreign
respondents argue that the record in these inquiries demonstrates that
the U.S. re-rollers' absolute level of their investment in their
respective bar mills is ``significant.'' Both the U.S. re-rollers and
foreign respondents argue that during the course of these inquiries,
documentation has been provided and verified confirming that the level
of investment required to modernize a bar mill facility or to construct
a new state of the art bar mill facility in the United States
demonstrated a substantial level of investment in absolute terms. These
multi-million dollar investments in the United States, the U.S. re-
rollers and foreign respondents argue, do not comport with the type of
``screwdriver'' operations intended to be captured by the statutory
anticircumvention provisions.
Both the U.S. re-rollers and foreign respondents argue that the
mining, smelting, casting and refining of steel is performed by
integrated producers, which is just one part of the entire U.S. steel
making industry, whereas the U.S. re-rollers are a distinct segment of
the steel making industry. Further, the foreign respondents point out
that the Department has previously rejected comparisons of a
petitioner's production activities with those of foreign respondents,
when separate segments of the industry exist. See, e.g., Portable
Electric Typewriters from Japan (Brother
[[Page 40345]]
Industries, Ltd. and Brother Industries (USA), Inc.); Negative Final
Determination of Circumvention of Antidumping Order 56 FR 58031
(November 15, 1991)(PETS). Similarly, the foreign respondents argue
that the rolling operation of lead billets into lead bar is not the
kind of secondary operation the Department found in Brass Sheet and
Strip, but rather, is a substantial operation involving large amounts
of investment necessary to perform its intended operation (i.e.,
rolling, testing, finishing, etc.).
Department's Position: In reaching our final determinations, the
Department evaluated the U.S. re-rollers' level of investment within
the context of the amount of investment required at a rolling mill for
the production of hot-rolled lead and nonlead bar. We believe that a
comparison of the U.S. re-rollers' level of investment with that of an
integrated steel making facility, as suggested by the petitioners, is
not called for in these inquiries. First, neither the statute and SAA,
nor the legislative history contains a requirement that the Department
make such a comparison.
Second, it is not necessary or appropriate in this case to
undertake such an analysis because the activities undertaken by the
U.S. re-rollers historically represent a pre-existing and distinct
segment of the leaded steel industry. The investment made by each U.S.
re-roller in its facilities, as the Department has verified, was
largely made prior to the orders. Although the actual amount of an
individual U.S. re-rollers' investment is business proprietary
information, the data from the U.S. re-rollers reveal that, prior to
the inquiries in these cases, they made long-term commitments to
produce hot-rolled bar from leaded and nonleaded billets and, to this
end, invested a substantial amount of money in plant and equipment.
Furthermore, according to the ITC, the manufacturing process for the
leaded steel industry involves mining, melting, casting, rolling,
testing, and finishing. The ITC notes that operations performed by
integrated mills include all of the above and, therefore, such
facilities require more investment in relation to the U.S. re-rollers
which undertake the end stage, characterized by rolling, testing and
finishing operations. Thus, a comparison of operations undertaken and
the investment needed by an integrated mill would not represent an
appropriate standard in this case and would fail to provide an accurate
representation of the U.S. re-rollers' level of investment. The
petitioners' assertion that the U.S. re-rollers' investment in rolling
mills is small compared to its integrated mills' investment in the
United States is irrelevant because, here, we are only concerned with
the investment required at a rolling mill, a separate, recognized
segment of the steelmaking industry as identified by the ITC.
Section 781 of the Act was not intended to deter commercial
investment in the United States or to thwart the legitimate business
interests of U.S. companies. SAA at 894. In this regard, the record in
this proceeding establishes that each U.S. re-roller has made
significant investment in the United States in plant, equipment, and
the training of employees related to the rolling of leaded billets, and
they did so largely prior to the antidumping investigations. In view of
the amount and type of investment by the U.S. re-rollers and the
existence of these operations prior to the investigations, we do not
agree that the level of investment in this case plainly supports a
finding that the processing in the United States is minor or
insignificant, whether or not the level of investment may be smaller
than the amount needed for a fully integrated steel mill, as
petitioners argue. Rather, when all of the facts of this case are
considered, we find that these investments represent significant
investments in the re-rolling segment of the U.S. industry.
Although the petitioners cite to previous circumvention decisions
where the Department did compare segments of an industry to its whole,
the Department has also found it unnecessary to make such comparisons
in other circumvention inquiries. See, e.g., Certain Internal-
Combustion, Industrial Forklift Trucks from Japan; Negative Final
Determination of Circumvention of Antidumping Duty Order, 55 FR 6028
(February 21, 1990) (Forklift Trucks). In Forklift Trucks, the
Department noted that the foreign respondents ``made substantial
investments in plant and equipment'' (55 FR at 6029), and that the
``level of production operations is too great to characterize these
operations as completion or assembly operations established for the
purpose of evading the antidumping duty order'' (see Certain Internal-
Combustion, Industrial Forklift Trucks from Japan; Preliminary
Determination of Circumvention of Antidumping Duty Order, 54 FR 50260,
50263 (December 5, 1989)). In Forklift Trucks the Department determined
that ``it is not necessary that respondent's investments be comparable
with those of (petitioners) * * * in order for the Department to decide
if respondent's facilities are more than mere completion or assembly
operations' (55 FR at 6029).
In addition, there are factual differences between these
circumvention inquiries of the lead bar orders and the two cases cited
by the petitioners. In PTFE, the inquiry involved whether the Italian
PTFE manufacturer set up and operated facilities in the United States
in order to circumvent the PTFE order. The facility was newly
established and performed only a portion of the manufacturing process
the company performed in Italy. Thus, in that case, a comparison of the
Italian manufacturer's operations in the United States with its
operations in Italy was relevant to the inquiry because the allegation
of circumvention in PTFE focused on whether the Italian respondent had
set up a related subsidiary in the United States in order to circumvent
the order. Given the nature of the allegation, it would have been
extremely difficult to determine whether the Italian company started
its U.S. processing in order to circumvent the order on PTFE without
comparing the nature of its processing facilities in the United States
with that company's operations in Italy. This fact pattern is not
present in these circumvention inquiries on lead bar. For one thing,
the U.S. rerollers are not related to the U.K. and German lead bar
producers. Moreover, the U.S. rerollers existed at the time that the
lead bar orders were issued.
In addition, the fact pattern in Brass Sheet and Strip does not
support the petitioners' argument that we should compare the
investments made by the U.S. re-rollers with the investments required
of an integrated steel manufacturer. In Brass Sheet and Strip, the
Department compared the processes performed by the importer's facility
with the operations normally performed by brass mills in the United
States, because the importer's operations were not part of a separate,
recognized segment of the brass sheet and strip industry. In Brass
Sheet and Strip, we found that the importer's small amount of cold-
breakdown rolling was insufficient for us to consider it a fabricator,
but also that its operations were not comparable to the brass re-
rollers because the re-rollers purchase brass sheet and strip and roll
it into a different brass sheet and strip product. The purchased
products already were within the scope of the order, as was the final
product. In contrast, the importer subject to the circumvention
inquiry, Great Lakes, purchased brass plate that had been processed to
the point of being one rolling step short of constituting sheet and
strip. Because Great Lakes
[[Page 40346]]
performed some processing of the plate, the operations it performed did
not represent the type of processing that had been performed by a
separate, recognized segment of the brass sheet and strip industry.
Prior to Great Lakes, there were no ``re-rollers'' that processed
plate. Great Lakes' operations, which were established after the order
was issued, included an operation normally performed by brass mills and
not by re-rollers. Thus, in Brass Sheet and Strip, we compared the U.S.
importer's processing to that of the brass mill, where the type of
processing Great Lakes performed normally took place in that industry.
Again, the facts which caused us to compare Great Lakes' rolling
facilities to integrated facilities in Brass Sheet and Strip are not
present in the hot-rolled lead bar circumvention inquiries. This case
does not involve a new and different type of processor. The U.S. lead
bar industry is comprised of both integrated producers and re-rollers.
This composition of the U.S. lead bar industry existed before the
initiation of the original AD and CVD investigations of lead bar from
Germany and the United Kingdom. Because re-rollers are a separate,
recognized part of the U.S. lead bar industry, there is no need to
compare their investments and facilities to another segment of the U.S.
steel industry.
Comment 3: The Department Should Compare the Extent and Nature of Re-
rolling Operations to Those of an Integrated Steel Facility
The petitioners argue that using a comparative analysis between the
nature and extent of a U.S. re-roller's processing and that of an
integrated facility would demonstrate that the quality, inherent
characteristics and machinability of the final product are imparted at
the steps taken in the casting stage of an integrated producer and that
the rolling of lead billets into hot-rolled lead bar is merely a
shaping and sizing process which does not add to the value because the
fundamental chemical properties are imparted in the production of the
semifinished leaded steel. The petitioners contend that the production
of the semifinished lead billet is substantial in terms of equipment
required (i.e., specialized facilities, including dedicated equipment,
such as bloom casters, lead injection equipment, and fume control
technology) and that the conversion of the semifinished steel into hot-
rolled bar is ``minor.''
Further, the petitioners argue that the Department has failed to
follow previous anticircumvention precedent where the Department made a
comparison of a segment of an industry to the entire industry as a
whole. The petitioners argue that, in Brass Sheet and Strip, the
Department evaluated a similar industry via a relative comparison, and
that this comparison rendered an affirmative determination of
circumvention. In Brass Sheet and Strip, the Department considered that
the nature of the production process indicated that U.S. value added
was ``small'' because melting and casting operations performed in
integrated brass mills were the ``primary operations for production of
brass sheet and strip; whereas rolling operations add only the last
fraction of value.'' The petitioners contend that the U.S. re-rollers,
in the instant proceeding, perform the last of three stages in the
manufacturing process for hot-rolled leaded bar and that this process
is similar to the finishing processes of brass plate in Brass Sheet and
Strip, where the rolling of brass plate into brass sheet entailed only
one process for turning a semifinished product into a single finished
product.
Similarly, the petitioners assert that in PTFE the Department
compared the respondent's integrated facility in Italy with its
affiliated U.S. production facility. The petitioners point out that in
PTFE the Department concluded that the ``post-treatment processes are
not complex relative to the processes required to produce PTFE wet raw
polymer, and do not fundamentally alter the nature of the product'' (58
FR at 26102). The petitioners argue that as in the instant proceedings,
the inherent characteristics of the lead billet are imparted at the
melting stage, not the rolling stage and that the rolling stage should
be considered similar to post treatment.
The foreign respondents refute the petitioners' allegations that
the nature and extent of processing lead billets into hot-rolled lead
bar is ``minor.'' In particular, Thyssen points out that Inland argued
to the ITC in the original lead bar investigations, that:
[t]he rolling practice of injected steels is also unique and with it
come additional production costs * * * must be heated up to an hour
longer than SBQ (special bar quality) carbon steels to achieve the
proper rolling temperature; therefore adding extra heating cost * *
* [t]here is substantially more time involved in producing a lead or
bismuth product and therefore it becomes a more costly process.
(See Thyssen's July 21, 1997 submission.) Further, the foreign
respondents and U.S. re-rollers contend that the Department has the
discretion to engage in a comparative analysis, and that the use of a
comparative analysis would be nonsensical in the steel industry
context, because the integrated facility produces a full range of
products with a different cost structure, different production volumes
and various product mixes than that of a rolling mill. The foreign
respondents argue that under the petitioners' hypothesis, any
production process that takes place after the casting of the
semifinished steel may be characterized as ``minor or insignificant''
by comparison, even though the further processing is very significant
in absolute terms. The U.S. re-rollers contend that an examination of
their descriptions of the production process reveal that the processing
of lead billet into hot-rolled lead bar that they perform in the United
States is substantial. According to the U.S. re-rollers, the operations
performed at their respective U.S. facilities require sophisticated and
complex machinery in order to adhere to strict environmental and
process quality controls.
The foreign respondents also refute the petitioners' assertions
that the machinery at the melting and casting stages at an integrated
facility is dedicated solely to the production of lead billets. The
foreign respondents argue that neither an integrated facility's nor the
U.S. re-rollers' equipment is used solely for the production of either
leaded and nonleaded steel products, but rather a product mix involving
chemistries for both leaded and nonleaded products. The foreign
respondents argue that the smelting and casting equipment at the
integrated facility (i.e., furnace and tundish) can be used to produce
both leaded and nonleaded steel products.
Both the foreign respondents and U.S. re-rollers argue that, given
the nature of the U.S. re-rollers operations, the fact that they do not
add any materials to the imported lead billet is irrelevant because
there is virtually no market for lead billet other than re-roller
facilities. The U.S. re-rollers state that they must substantially
transform the lead billet into a hot-rolled lead bar in order to
produce a saleable product. Foreign respondents stress that a lead
billet is a semifinished product that is used by the U.S. re-rollers to
produce other semifinished products (e.g., hot-rolled lead bar) and
finished products, (i.e., cold-finished lead bar).
Department's Position: The petitioners' main argument that the
Department should compare a re-rolling facility to an integrated steel
facility in determining whether the re-rolling operations in the United
States are ``minor'' or ``insignificant'' and their citations to Brass
Sheet and Strip and
[[Page 40347]]
PTFE have been addressed in the ``Department's Position'' to ``Comment
2.'' The issue present in these circumvention inquiries is not whether
the production of steel is more complex than the re-rolling and
completion of a semifinished steel product but whether the rolling of
lead billets into hot-rolled lead bar is a ``minor'' or
``insignificant'' process being used to circumvent the AD and CVD
orders on hot-rolled lead bar from Germany and the United Kingdom. For
the reasons stated earlier in our response to ``Comment 2,'' we did not
compare the operations of the U.S. re-rollers to the production of
steel by integrated steel producers.
In our analysis of the process used by the U.S. re-rollers'
operations, the Department thoroughly considered many factors,
including the square footage of building space dedicated to hot-
rolling, the number of employees involved in hot-rolling, and the
capital equipment used in the production of hot-rolled lead bar, as
well as the ITC's description of the re-rolling process carried on by
the U.S. industry. On the basis of this analysis, the Department
concluded in the preliminary determinations that throughout the United
States, the U.S. re-rollers have extensive capital-intensive rolling
facilities staffed by skilled workers which are used to transform lead
billet into hot-rolled lead bar.
In making our final determinations, we again reviewed the records
in these inquiries. During verification, the Department toured AS&W's
rolling facilities and Republic's meltshop and rolling facilities. We
reviewed the production processes and facilities with respect to the
manufacture of lead billets and the subsequent rolling of the lead
billet into hot-rolled lead bar. While touring Republic's meltshop, we
verified that Republic employs workers responsible for teeming,
controlling, and inoculating the molten steel with lead wire. See
Republic's Verification Report at 7. In addition, during our tour of
AS&W's bar mill facility, company officials stated that while AS&W
``does not have machinery dedicated exclusively for the purpose of
rolling leaded steel products, the bar mill was designed specifically
to roll high quality lead and alloy products.'' Further, AS&W provided
documentation which showed that in comparison to its rod mill, its bar
mill rolls at very high tolerances, and as such, normally will roll
lead billets as opposed to nonlead billets into hot-rolled products.
See AS&W Verification Report at 6. Both plant tours demonstrated that
the production processes at the U.S. re-roller facilities require
stringent quality control, strict adherence to OSHA and environmental
regulations, and special training for employees.
Thus, we disagree with the petitioners that the production of hot-
rolled lead bar from lead billets is similar to the process examined in
Brass Sheet and Strip. Based on our analysis of the re-rollers
production process, we found the transformation of lead billet into
lead bar to be a more substantial undertaking than the process used in
Brass Sheet and Strip. For example, Great Lakes did not perform hot-
breakdown rolling, but merely a small amount of cold-breakdown rolling;
whereas, the re-rollers in these inquiries perform hot-breakdown
rolling before the lead billet can be transformed into a lead bar.
Next, the Department found in Brass Sheet and Strip that the rerolling
operations that Great Lakes performed, which included all of the
processes that rerollers perform, with one additional step, namely that
of cold-breakdown rolling, ``add only the last fraction of value''
because Great Lakes'' fabrication process turned a semifinished product
(brass plate), a product which was merely one rolling step short of
constituting a single finished product (brass sheet and strip). In
contrast, the production of lead bar from lead billets is a more
involved multi-process operation as we found on verification and as
described in the ITC's report. See Statutory Analysis Section of this
notice for a discussion of the production processes.
In Forklift Trucks, the Department examined all of the facts and
circumstances surrounding the respondent's domestic assembly operations
and noted that all foreign respondents ``made substantial investments
in plant and equipment,'' and that the ``level of production operations
is too great to characterize these operations as completion or assembly
operations established for the purpose of evading the antidumping
order.'' Specifically, the Department discussed the manner in which it
analyzed the processing operations performed in the following manner:
We examined the nature of foreign respondents' U.S. production
facilities in order to determine whether such facilities were
similar to the examples of circumvention cited in the legislative
history. Since a major goal of the circumvention provision is to
prevent evasion of an antidumping duty order through ``slight
changes'' in the method of production or shipment * * * examination
of foreign respondents' U.S. production processes is an important
part of our analysis.
55 FR at 6030. Forklift Trucks is instructive for these final
determinations because the record in these proceedings demonstrates
that the operations which the U.S. re-rollers undertake in order to
produce hot-rolled lead bar from lead billets do not involve evasion of
the orders through ``slight changes.''
Comment 4: Valued-Added Calculated for U.S. Re-Rolling Process is
``Minor''
The petitioners contend that a comparison of the ranged value-added
data in these inquiries to that found in Brass Sheet and Strip should
have led the Department to conclude that the amount of value added by
the U.S. re-rollers in rolling lead billet into hot-rolled lead bar is
``minor'' or ``insignificant.'' In support of their argument, the
petitioners provided the Department with a weighted-average calculation
of the value-added by the re-rollers which indicated that the value
added in the instant inquiries is ``similar in amount'' to the value-
added calculated in Brass Sheet and Strip. Given this similarity, the
petitioners argue that the weight-averaged value-added calculation is
within the range that the Department previously determined to be
``small'' under the pre-URAA statute.
Foreign respondents argue that the value-added that the Department
calculated in its preliminary determinations is not ``small.'' They
argue that the Department can determine whether the value-added in a
circumvention inquiry is ``significant'' on a case-by-case basis.
Department's Position: The legislative history to section 781(a)
establishes that Congress intended the Department to make
determinations regarding circumvention on a case-by-case basis in
recognition that the facts of individual cases and the nature of
specific industries vary widely. In particular, Congress directed the
Department to focus more on the nature of the production process and
less on the difference in value between the subject merchandise and the
imported parts or components. (See S. Rep. No. 103-412, 81-82 (1994)).
Thus, we believe that any attempt to establish a numerical standard
would be contrary to the intentions of Congress.
The Department's determination that the U.S. value-added in Brass
Sheet and Strip was ``small'' is irrelevant to the present proceedings
because that decision concerns the unique nature and extent of
fabrication undertaken by a U.S. importer in an entirely different
industry with different production processes. In addition, that case
was decided before 1995, i.e., before the changes made in section 781
of the Act
[[Page 40348]]
by the URAA were effective. The URAA, which became effective on January
1, 1995, redirected the focus of an circumvention inquiry away from a
numerical calculation of value-added towards a more qualitative focus
on the nature of the production process. Under the URAA, which provides
the current statutory language for section 781 of the Act, the
numerical calculation of value-added is just one of five factors the
Department is to examine in our determination of whether the processing
undertaken in the United States is minor or insignificant.
We also note, in conclusion, that in Brass Sheet and Strip, which
is cited by the petitioners in support of their argument, the
Department explicitly stated in the ``Affirmative Final Determination
of Circumvention'' section of that final determination ``that our
analysis of the difference in value and resulting determination of
`small' in this case are not necessarily synonymous with such
determinations that the Department will formulate in future anti-
circumvention inquiries since Congress has directed us to make
determinations regarding the difference in value on a case-by-case
basis.''
Comment 5: The Department's Preliminary Determination of No
Circumvention Conflicts With Prior Case Precedent
The petitioners argue that the Department's preliminary
determinations are incompatible with its previous finding of
circumvention in Brass Sheet and Strip, which involved similar fact
patterns (i.e., value-added calculations, capital-intensive industries,
production processes, etc.).
In their case briefs, the petitioners provide the Department with a
calculated weighted-average amount of the value-added in the instant
inquiries and argue that this weighted-average amount is ``similar'' to
the value-added of 15% determined in Brass Sheet and Strip, where the
Department found circumvention. The petitioners also contend that in
Brass Sheet and Strip the Department determined that the re-rolling of
brass plate into brass sheet and strip neither adds additional
materials nor imparts essentially physical characteristics to the
rerolled brass plate but rather ``adds only the last fraction of
value'' by shaping and sizing the brass plate. The petitioners argue
that the Department in Brass Sheet and Strip considered that the nature
of the production process was indicative that the U.S. value-added was
``small,'' since melting and casting operations performed in integrated
brass mills were the ``primary operations for production of brass sheet
and strip; whereas re-rolling operations add only the last fraction of
value * * *'' (58 FR at 33614).
The foreign respondents argue that the brass sheet and strip
industry (i.e., producers and fabricators and its subgroup, secondary
mills) and the hot-rolled lead bar industry are vastly different. They
contend that in Brass Sheet and Strip, the brass plate was merely
``finished'' into brass sheet and strip. On the other hand, the U.S.
re-rollers and foreign respondents argue that the production of hot-
rolled lead bar from lead billets is much more involved than merely
``finishing'' the lead billet into hot-rolled bar. They assert that the
record clearly demonstrates that the production of lead billets into
hot-rolled lead bar involves more steps (i.e., hot-rolling, testing,
and finishing) than the mere conversion of brass sheet and strip from
brass plate (i.e., finishing). In addition, the foreign respondents and
U.S. re-rollers argue that the majority of hot-rolled lead bar sold in
the merchant market is still an intermediate good that must undergo
further processing (i.e., cold finishing, forming, and testing) before
it can be considered a finished good. On the other hand, foreign
respondents argue, brass sheet and/or strip are themselves finished
goods.
Department's Position: We agree with the foreign respondents and
U.S. re-rollers that the fact pattern of these inquiries is different
from Brass Sheet and Strip. As we have previously noted, the Department
must determine whether or not circumvention of an order has occurred
based upon the nature of the specific circumvention inquiry and the
facts surrounding that circumvention inquiry. Thus, the facts which are
present in the instant circumvention inquiries and the nature of the
circumvention allegations differ from the facts which were present in
Brass Sheet and Strip. A review of Brass Sheet and Strip and a review
of the allegations and the facts surrounding these lead bar
circumvention inquiries reveal that the petitioners' reliance on Brass
Sheet and Strip to support their argument that the Department has erred
in finding no circumvention of the lead bar orders is misplaced.
In order to determine whether the value added by Great Lakes, a
secondary mill, specifically a brass plate re-roller, in Brass Sheet
and Strip was ``small,'' the Department examined the operations of
Great Lakes' re-rolling of brass plate into brass sheet and strip. We
compared Great Lakes' operations to the operations performed by
fabricators in the U.S. brass sheet and strip industry, otherwise known
as brass mills, which perform fabrication processes such as casting,
melting and some re-rolling. Since Great Lakes re-rolled thicker brass
plate, while secondary mills normally re-roll the thinner gauge brass
sheet and strip, the Department determined that a comparison of the
Great Lakes' operations to the operations normally performed by a brass
mill was warranted, and upon examination, determined that the value
added by Great Lakes indicated that the processing performed was minor.
This decision was essentially based upon the fact that Great Lakes was
founded in 1990, more than three years after the issuance of the
antidumping order and the fact that, at the time of the original
investigation, brass plate re-rollers were not considered a separate
and recognized segment of the U.S. brass sheet and strip industry
because the established re-rollers began the re-rolling process with
brass sheet and strip, which itself was already within the scope of the
investigation and subsequent order. See the ``Department's Position''
to ``Comment 2'' in Brass Sheet and Strip. In other words, because
there was no brass plate re-roller industry segment with which to
compare Great Lakes' activities during the POI, the Department compared
Great Lakes' operations to that of a fabricator.
As we stated in Brass Sheet and Strip, the U.S. importer, Great
Lakes, imported brass plate, a product which was one rolling step short
of constituting sheet and strip prior to importation. In the brass
sheet and strip industry, the primary fabrication process is hot-
breakdown rolling, whereby brass ingots are heated, rolled, and coiled,
then further reduced through cold-breakdown rolling. The relatively
small amount of Great Lakes' cold-breakdown rolling was insufficient to
consider Great Lakes a fabricator; however, since Great Lakes re-rolled
brass plate, not the thinner brass sheet and strip re-rolled by the
recognized secondary brass sheet and strip mills, the Department
compared Great Lakes operations to the operations of brass fabricators
and concluded that the re-rolling of brass plate into brass sheet and
strip relative to a fabricator's processes was ``small.'' The
petitioners' arguments that we should compare the hot rolling process
in these inquiries to the process of an integrated steel facility
because such a comparison was conducted in Brass Sheet and Strip is
misplaced, because the rolling mills which subsequently roll lead
billets into hot-rolled lead bar predate the order and have always been
[[Page 40349]]
considered a distinct part of the industry. In contrast, brass plate
re-rollers were not considered a separate and recognized segment of the
brass sheet and strip industry but one created by a foreign exporter in
an attempt to evade the order on brass sheet and strip.
Since the date of the determination of circumvention in Brass Sheet
and Strip, there were also changes in the statute relating to the
determination of the amount of value added in the United States and the
place that this has in the Department's analysis. Whereas under the
statute applicable in Brass Sheet and Strip a determination of
circumvention required a finding that the value added to the imported
parts or components was ``small,'' under the current statute the amount
of value added is but one factor to be considered in determining
whether the processing or assembly in the United States is ``minor or
insignificant.'' Accordingly, whether or not the value added is a
``small proportion,'' we must consider other factors in determining
whether the processing is ``minor or insignificant.'' Thus, while case
precedent prior to the enactment of the URAA, which became effective
January 1, 1995, can provide useful guidance to the Department in post-
URAA circumvention inquiries, certain changes in the Act expanded the
factors to be considered by the Department in determining whether
circumvention of an order has occurred.
For example, in Brass Sheet and Strip, our circumvention
determination did not address level of investment. With the changes to
the Act under the URAA, the Department must consider the level of
investment by the U.S. re-rollers in determining whether the processing
in the United States is minor or insignificant. As stated earlier, some
of the U.S. re-rollers have invested over 100 million dollars in their
rolling facilities. These facts must be considered by the Department in
reaching determinations in these hot-rolled lead bar inquiries, while
these factors were not addressed in Brass Sheet and Strip.
In both these hot-rolled lead bar circumvention inquiries and in
Brass Sheet and Strip, the Department did examine patterns of trade to
determine whether there were increases in imports of the alleged
circumventing product. In Brass Sheet and Strip, the facilities of
Great Lakes, an affiliated importer, were introduced into production in
1990, more than three years after issuance of the antidumping duty
order, and imports of Canadian brass plate increased ten-fold from 1990
to 1991 (58 FR at 33610, 33615). This massive increase in imports of
brass plate following the establishment of this facility contrasts
markedly with the fact pattern in these hot-rolled lead bar inquiries,
where there was no dramatic increase in the importation of lead billets
connected with the establishment of an affiliated rolling mill in the
United States before and after the issuance of these orders (see the
``Department's Position'' to ``Comment 1,'' above). In these inquiries,
while there was some increase in imports of lead billets, the product
alleged to be circumventing the respective orders, after the initiation
of these investigations, the circumstances were quite different. In
particular, the U.S. re-rolling facilities existed prior these
investigations, the re-rollers that imported the lead billets are not
affiliated with any foreign producer or exporter of the lead billets,
and at least one of these re-rollers imported lead billets before the
initiation of the investigations. Thus, this pattern of trade in these
inquiries is different from the pattern of trade in Brass Sheet and
Strip.
In addition, the history and nature of the production process at
issue in Brass Sheet and Strip bears no relationship to the history and
nature of the processing performed by the U.S. re-rollers in these
inquiries. In Brass Sheet and Strip the type of processing performed by
the U.S. importer was not in existence at the time of the original AD
investigation. Indeed, the U.S. importer and brass finisher in Brass
Sheet and Strip was not established, and did not begin operations,
until more than three years after the issuance of the antidumping order
on brass sheet and strip. This contrasts with the facts in these lead
bar circumvention inquiries, where most of the U.S. re-rollers were in
existence, importing lead billets and processing them into lead bar,
before the AD and CVD petitions on lead bar were filed with the
Department.
In conclusion, the facts in Brass Sheet and Strip which caused the
Department to find circumvention in that inquiry are not present in the
circumvention inquiries on lead bar. Based on the facts present in
these inquiries and the current statute, we find that circumvention of
the lead bar orders is not occurring. Additional information with
respect to the petitioners' comment regarding the similar value-added
found in our preliminary determinations and the value-added determined
in Brass Sheet and Strip can be found in our position in ``Comment 4.''
Comment 6: Most of the Merchandise Sold in the United States is a
Different Class or Kind From That Under the AD and CVD Orders
The foreign respondents argue that the vast majority of the
merchandise sold in the United States from the purchase of lead billets
is not the same class or kind of merchandise that is subject to the
leaded bar order. They state that the majority of the imported lead
billet further processed into hot rolled bar is subsequently cold
finished by the U.S. re-roller before it is sold to unaffiliated
customers or is sold to cold drawers. Thus, much of the merchandise
sold in the United States, i.e., cold finished leaded bar, is not the
same class or kind of merchandise subject to the orders. Foreign
respondents argue that in recognition of the fact that the
circumvention provision only applies to component materials used to
produce subject merchandise sold in the United States, the Department
has previously excluded from its circumvention findings component
materials used to produce nonsubject merchandise. The foreign
respondents argue that in Brass Sheet and Strip, the Department
excluded from its final affirmative determination brass plate used to
produce products sold as something other than brass sheet and strip.
Further, Republic has stated that if the Department issues an
affirmative final determination, at the very least, the Department
would need to adopt an importer/exporter certificate program so that
lead billets purchased by Republic for conversion to cold-finished bars
are excluded from the scope of the hot-rolled lead bar orders.
The petitioners argue that the foreign respondents' argument
ignores the fact that hot-rolled lead bar has been historically sold to
unaffiliated and affiliated cold finishers for further processing and
suggests that sales of merchandise for further manufacturing are not
``sales'' within the meaning of the statute. This would be inconsistent
with the Department's previous precedent in circumvention cases such as
Brass Sheet and Strip and PTFE. In both of those cases, the Department
found that products sold in the United States were of the same class or
kind as the merchandise subject to unfair trade orders even though the
items that were produced from parts or components were subject to
further processing before reaching the ultimate consumer.
Department's Position: Because the Department has determined that
imports of lead billets from Germany and the United Kingdom are not
circumventing the respective AD and CVD orders on
[[Page 40350]]
hot-rolled lead bar, we are addressing arguments concerning the
coverage of a circumvention finding.
Comment 7: Lead Billets Are Not Parts or Components
The foreign respondents argue that the anticircumvention statute
requires that the merchandise sold in the United States be completed or
assembled in the United States from parts or components from the
country subject to the orders. The foreign respondents assert that the
Department's preliminary determinations merely stated that all of the
U.S. re-rollers purchased lead billet from one or more of the foreign
respondents and that the re-rollers ``use the lead billet to produce
hot-rolled lead bar in the United States.'' They argue that the use of
a lead billet in the production of hot-rolled lead bar in the United
States does not establish a finding that the process of rolling lead
billets into hot-rolled lead bar constitutes ``completion.'' The
foreign respondents further argue that the petitioners recognized in
their methodological comments that lead billets are a complete product
upon importation when the petitioners described the hot-rolling of lead
billets into bars as a ``conversion'' process, rather than a process of
completion.
Further, the foreign respondents argue that broadening the scope of
an order beyond the like product examined in the ITC's injury
determination in the original AD and CVD investigations is inconsistent
with the anticircumvention statute. The foreign respondents assert that
lead billets and hot-rolled lead bar constitute separate and distinct
like products produced by separate and distinct domestic industries, as
determined by both the ITC and the Department in the initial
investigations. They also argue that because the petitioners in the
initial hot-rolled lead bar investigations made the strategic decision
to limit their petition to hot-rolled lead bar (rather than including
lead billets within its scope), the Department must now conclude, as a
matter of law, that circumvention does not exist.
The petitioners argue the anticircumvention statute does not
require a finding that the parts or components fall within the same
like product category as the finished product and certainly does not
require a separate finding that the products subject to an
anticircumvention inquiry must fall within the ITC's prior like product
and injury determinations. The petitioners also note that in previous
anticircumvention inquiries, Steel Wire Rope from Mexico and Brass
Sheet and Strip, the Department correctly included merchandise in the
scope of antidumping order that had previously been excluded from the
ITC's like product and injury determinations.
The petitioners note that the Department stated in its notice of
initiation of these inquiries that this investigation is analogous to
the anticircumvention inquiry in Steel Wire Rope from Mexico, where the
Department made an affirmative finding of circumvention and expanded
the scope of an order to include a component that the petitioners had
expressly excluded from the original investigation. Even though the
expressly excluded merchandise was not part of the ITC's like product
determination or injury determination, the petitioners argue in the
instant case that the Department should follow the plain meaning of the
statute (i.e., that the anticircumvention statute permitted expansion
of the scope beyond the original like product) and make an affirmative
finding. The petitioners note that in Brass Sheet and Strip the
Department included brass plate within the order on brass sheet and
strip even though the brass plate was not included within the scope of
the original investigation.
Department's Position: We disagree with the respondents' first
argument that a so-called ``completed'' product cannot be a ``part or
component'' of lead bar for purposes of section 781(a) of the Act.
Indeed, it is difficult to imagine that many ``parts and components''
used to produce or assemble subject merchandise could not be considered
``complete'' in and of themselves. For example, an engine is a
``completed'' product, but it can still be imported in the United
States and ``assembled'' into a forklift truck. Accordingly, the
engine, although a completed product, can still be a part or component
of another item. Thus, whether a part or component is or is not
characterized as ``completed'' is irrelevant to the circumvention
section of the statute. The question is whether that item becomes part
of the product sold in the United States that is of the same class or
kind of merchandise subject to an order.
Because the Department has determined that imports of lead billets
from Germany and the United Kingdom are not circumventing the
respective AD and CVD orders on hot-rolled lead bar, we are not
addressing the arguments concerning the ITC's injury determination.
Comment 8: Because There Is Minimal R&D in the Re-rolling Process, the
Re-rolling Process Must Be Minor or Insignificant
The petitioners contend that the Department's findings on the lack
of R&D in the U.S. re-rollers' facilities are consistent with the
petition, where the petitioners demonstrated that R&D expenditures are
typically concentrated in the relatively more complex melt shop
facility and that the Department's finding that ``R&D into the process
of rolling bar is not a significant factor in this industry''
demonstrates that foreign producers can easily shift from selling bars
and rod to selling billets, and, thus, circumvent the order. Therefore,
the petitioners argue that the Department's finding that little, if
any, R&D is evident at the rolling stage means that the production
process is ``minor'' or ``insignificant.''
The foreign respondents agree in part with the petitioners that the
amount of R&D expenditures related to the rolling of lead billets into
hot-rolled bar is minimal. However, they argue that, because the
production of leaded steels is technically a mature process, the
Department properly gave little weight to the level of R&D in the
United States in determining whether the conversion of leaded billet
into hot-rolled lead bar is ``minor'' or ``insignificant.'' Further,
the foreign respondents argue that the anticircumvention statute does
not require an analysis of R&D when the Department finds that it is not
a meaningful factor with respect to the industry and merchandise under
review.
Department's Position: We disagree with the petitioners that a lack
of R&D in the production of hot-rolled lead bar means that the foreign
respondents can readily shift from the sale of hot-rolled lead bars to
the sale of lead billets in circumvention of the orders. While R&D may
be a significant factor in some industries, it is not in others.
Further, the significance of its presence or absence depends on the
industry and product under investigation. For example, changes in
technology occur very rapidly in the electronics industry. This
requires significant amounts for R&D. Thus, R&D might be a significant
factor in a circumvention inquiry of that industry. In other
industries, such as this one R&D is not a significant factor because of
the maturity of the production process. However, a lack of R&D does not
necessarily mean that circumvention is more easily accomplished. Where
R&D is almost non-existent in the industry in general, whether that
industry is located in the
[[Page 40351]]
respondent's country or in the United States, the absence of such
expenditures does not automatically equate with ease of circumvention.
As we have explained above, the re-rolling of lead billet into lead bar
is not accomplished in temporary, transitory facilities. The lack of
R&D in this industry does not change that fact. Accordingly, the
Department gave little weight to R&D as an informative factor in its
determination as to whether the lead bar orders were being
circumvented.
Comment 9: The Department Placed Too Much Emphasis on the Fact that the
U.S. Re-rollers and Foreign Manufacturers are Unaffiliated
The petitioners argue that the Department has placed greater weight
on the fact that the respondents and the U.S. re-rollers are
unaffiliated than contemplated by the statute or previous circumvention
decisions. Specifically, the petitioners cite to the Department's
observation in the preliminary determination that ``these unaffiliated
re-rollers invested a substantial amount in their re-rolling facilities
both before and after the AD and CVD orders to roll both lead and
nonlead billets into hot-rolled bar.'' 63 FR at 24162. They also note
that affiliation is not necessary in order for the Department to make
an affirmative finding of circumvention.
The foreign respondents argue that while the absence of affiliation
does not mandate a negative determination, the arm's length nature of
the business relationships between the foreign respondents and the U.S.
re-rollers cannot be ignored in the Department's analysis.
Department's Position: The second factor the Department is required
to consider under section 781(a)(3) of the Act is whether the
manufacturer or exporter of the parts or components (in this instance,
the foreign respondents which produce and export the lead billets) is
affiliated with the persons which assemble or complete the merchandise
in the United States (here, the U.S. re-rollers). In its preliminary
determination, the Department set out the facts which lead it to find
that no affiliation of any kind existed between the foreign respondents
and the U.S. re-rollers.
Neither the statute, the SAA, nor the relevant legislative history
provide any guidance as to how the Department is to consider this
particular factor. Accordingly, the Department may reasonably determine
how to evaluate that factor on a case-by-case basis in light of the
pertinent facts particular to a specific circumvention inquiry. We
agree with the petitioners that, as a general proposition, affiliation
is not necessary for a finding of circumvention. However, a finding of
no affiliation cannot be dismissed as having no relevance to the
Department's determination, particularly when the statute mandates that
this factor be considered. Thus, we disagree with the petitioners that
we have elevated affiliation beyond that contemplated by the statute or
previous circumvention determinations. Indeed, in several prior
circumvention determinations, the Department has explicitly stated that
we consider circumvention to be more likely when the manufacturer/
exporter of the parts and components is related to the party completing
or assembling merchandise in the United States using the imported
components. See, e.g., PTFE and Brass Sheet and Strip.
In these circumvention inquiries, we found that the U.S. re-rollers
acted on behalf of their respective commercial interests, independently
of the foreign respondents' interests. The lack of any affiliation
between the foreign respondents and the U.S. re-rollers was a
contributing factor in the U.S. re-rollers' decisions on how best to
protect and advance their own economic interests given, in particular,
the sourcing problems for domestic leaded billet they encountered in
the market place. However, as we explained in the preliminary
determination and in this final determination, as well, affiliation is
only one of several factors the Department considered in reaching a
determination that circumvention does not exist.
Conclusion
Based on the analysis under section 781(a) of the Act, detailed
above, we determine that circumvention of the AD and CVD orders on hot-
rolled lead bar is not occurring by reason of imports of lead billets
from Germany and the United Kingdom.
These negative final circumvention determinations and notice are in
accordance with section 781(a) of the Act and 19 C.F.R. 353.29(e) and
19 C.F.R. 355.29(e).
Dated: July 20, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-19019 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P
