[Federal Register Volume 64, Number 145 (Thursday, July 29, 1999)]
[Notices]
[Pages 41224-41230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19305]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-836]
Preliminary Determination of Sales at Less Than Fair Value:
Certain Cut-to-Length Carbon-Quality Steel Plate Products From the
Republic of Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: July 29, 1999.
FOR FURTHER INFORMATION CONTACT: Frank Thomson or Howard Smith, Group
II, Office 4, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
4793, or (202) 482-5193, respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act (``URAA''). In addition, unless
otherwise indicated, all references are made to the Department's
regulations at 19 CFR Part 351 (1998).
Preliminary Determination
We preliminarily determine that certain cut-to-length carbon-
quality steel plate products (``CTL plate'') from the Republic of Korea
(``Korea'') are being, or are likely to be, sold in the United
[[Page 41225]]
States at less than fair value (``LTFV''), as provided in section 733
of the Act. The estimated margins of sales at LTFV are shown in the
``Suspension of Liquidation'' section of this notice.
Case History
Since the initiation of this investigation (Notice of Initiation of
Antidumping Investigations: Certain Cut-To-Length Carbon-Quality Steel
Plate from Czech Republic, France, India, Korea, Italy, Japan, Republic
of Korea, and Former Yugoslav Republic of Macedonia (64 FR 12959, March
16, 1999)) (``Initiation Notice''), the following events have occurred:
In their petition, the petitioners 1 identified Daekyung
Corporation (``Daekyung''), Dongkuk Steel Mill Co., Ltd (``Dongkuk''),
Korea Iron & Steel (``KISCO''), and Pohang Iron & Steel Co., Ltd
(``POSCO'') as possible exporters of CTL plate from Korea. We requested
on March 12, 1999, data on all producers and exporters of the subject
merchandise during the period of investigation (``POI'') from the U.S.
Embassy in Seoul. Based on information contained in the petition and
received from the Embassy, the Department issued antidumping
questionnaires to Daekyung, Dongkuk, KISCO, and POSCO on March 17,
1999.2
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\1\ The petitioners are Bethlehem Steel Corporation, Gulf States
Steel, Inc.,IPSCO Steel Inc., Tuscaloosa Steel Corporation, United
Steelworkers of America, and the U.S. Steel Group (a unit of USX
Corporation).
\2\ Section A of the questionnaire requested general information
concerning the company's corporate structure and business practices,
the merchandise under investigation that it sells, and the sales of
that merchandise in all markets. Sections B and C of the
questionnaire requested home market sales listings and U.S. sales
listings. Section D of the questionnaire requested information
regarding the cost of production of the foreign like product and the
constructed value of the merchandise under investigation. Section E
of the questionnaire requested information regarding the cost of
further manufacture or assembly performed in the United States.
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In April 1999, the United States International Trade Commission
(``ITC'') issued an affirmative preliminary injury determination in
this case (see ITC Investigation No. 731-TA-815-822).
On April 27, 1999, POSCO and Dongkuk submitted responses to section
A of the questionnaire. On May 5, 1999, Daekyung submitted a letter to
the Department stating that it did not export the subject merchandise
to the United States during the POI, with a request that it be excluded
from further participation in the investigation. We subsequently
informed Daekyung that these facts are subject to verification. POSCO
and Dongkuk submitted responses to sections B and C on May 11, 1999,
and responses to section D on May 14, 1999.
Petitioners filed comments on POSCO's section A through D responses
on May 20, 1999, and May 28, 1999, and on Dongkuk's section A response
on May 20, 1999 and on Dongkuk's sections B through D on May 27, 1999.
On May 28, 1999, we issued supplemental questionnaires for sections
A, B, and C to POSCO and Dongkuk, and for section D to POSCO and
Dongkuk on June 8, and 3, 1999 respectively. POSCO responded to our May
28, 1999, supplemental questionnaire on June 22, 1999; Dongkuk
responded to our May 28, 1999, supplemental questionnaire on June
22,1999 and on June 29 for the Section D supplemental questionnaire.
Petitioners commented on POSCO's and Dongkuk's supplemental
questionnaire on June 30, 1999. On July 2, 1999 we issued an additional
supplemental questionnaire to POSCO.
In letters dated June 2, 8, and 14, 1999, Dongkuk requested that it
be excused from reporting sales for its affiliate Korean Iron & Steel
Co. Ltd. (``KISCO''). Dongkuk stated that KISCO had ceased production
of subject merchandise early in the POI and had only an insignificant
quantity of home market sales, and no U.S. sales of subject
merchandise. Dongkuk argued that the Department should not collapse
Dongkuk and KISCO. On June 4, 1999 petitioners argued that the
Department should collapse Dongkuk and KISCO and require that its sales
and costs be reported. On June 24, 1999, for the reasons outlined in
its letters, we granted Dongkuk's request to be excused from reporting
KISCO's sales and cost.
On June 11, 1999 we instructed POSCO to report downstream sales
through five of its affiliated resellers. POSCO, in its Section A
response and in subsequent submissions dated May 17, and June 1, 1999,
had requested to be excused from reporting any sales through affiliated
resellers. After reviewing certain supplemental information provided by
POSCO, we selected the five resellers identified in the June 11, 1999
letter, and requested POSCO to provide a questionnaire response for
these affiliated resellers. See Affiliated Reseller Sales section
below.
Scope of Investigation
The products covered by the scope of this investigation are certain
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or
actual thickness of not less than 4 mm, which are cut-to-length (not in
coils) and without patterns in relief), of iron or non-alloy-quality
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual
thickness of 4.75 mm or more and of a width which exceeds 150 mm and
measures at least twice the thickness, and which are cut-to-length (not
in coils). Steel products to be included in this scope are of
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is
achieved subsequent to the rolling process (i.e., products which have
been ``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum. Steel products to be included in
this scope, regardless of Harmonized Tariff Schedule of the United
States (HTSUS) definitions, are products in which: (1) Iron
predominates, by weight, over each of the other contained elements, (2)
the carbon content is two percent or less, by weight, and (3) none of
the elements listed below is equal to or exceeds the quantity, by
weight, respectively indicated: 1.80 percent of manganese, or 1.50
percent of silicon, or 1.00 percent of copper, or 0.50 percent of
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent
zirconium. All products that meet the written physical description, and
in which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS
[[Page 41226]]
AR 500); (5) products made to ASTM A202, A225, A514 grade S, A517 grade
S, or their proprietary equivalents; (6) ball bearing steels; (7) tool
steels; and (8) silicon manganese steel or silicon electric steel.
The merchandise subject to these investigations is classified in
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.
Scope Comments
As stated in our notice of initiation, we set aside a period for
parties to raise issues regarding product coverage. In particular, we
sought comments on the specific levels of alloying elements set out in
the description below, the clarity of grades and specifications
excluded from the scope, and the physical and chemical description of
the product coverage.
On March 29, 1999, Usinor, a respondent in the French antidumping
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd.
and Pohang Iron and Steel Co., Ltd., respondents in the Korean
antidumping and countervailing duty investigations (collectively the
Korean respondents), filed comments regarding the scope of the
investigations on CTL plate and the Department's model matching
criteria. On April 14, 1999, the petitioners filed comments regarding
Usinor's and the Korean respondents' comments regarding model matching.
In addition, on May 17, 1999, ILVA S.p.A. (ILVA), a respondent in the
Italian antidumping and countervailing duty investigations, requested
guidance on whether certain products are within the scope of these
investigations.
Usinor requested that the Department modify the scope to exclude:
(1) Plate that is cut to non-rectangular shapes or that has a total
final weight of less than 200 kilograms; and (2) steel that is 4'' or
thicker and which is certified for use in high-pressure, nuclear or
other technical applications; and (3) floor plate (i.e., plate with
``patterns in relief'') made from hot-rolled coil. Further, Usinor
requested that the Department provide clarification of scope coverage
with respect to what it argues are over-inclusive HTSUS subheadings
included in the scope language.
The Department has not modified the scope of these investigations
because the current language reflects the product coverage requested by
the petitioners, and Usinor's products meet the product description.
With respect to Usinor's clarification request, we do not agree that
the scope language requires further elucidation with respect to product
coverage under the HTSUS. As indicated in the scope section of every
Department antidumping and countervailing duty proceeding, the HTSUS
subheadings are provided for convenience and Customs purposes only; the
written description of the merchandise under investigation or review is
dispositive.
The Korean respondents requested confirmation whether the maximum
alloy percentages listed in the scope language are definitive with
respect to covered HSLA steels.
At this time, no party has presented any evidence to suggest that
these maximum alloy percentages are inappropriate. Therefore, we have
not adjusted the scope language. As in all proceedings, questions as to
whether or not a specific product is covered by the scope and, hence,
must be reported, should be timely raised with Department officials.
ILVA requested guidance on whether certain merchandise produced
from billets is within the scope of the current CTL plate
investigations. According to ILVA, the billets are converted into wide
flats and bar products (a type of long product). ILVA notes that one of
the long products, when rolled, has a thickness range that falls within
the scope of these investigations. However, according to ILVA, the
greatest possible width of these long products would only slightly
overlap the narrowest category of width covered by the scope of the
investigations. Finally, ILVA states that these products have different
production processes and properties than merchandise covered by the
scope of the investigations and therefore are not covered by the scope
of the investigations.
As ILVA itself acknowledges, the particular products in question
appear to fall within the parameters of the scope and, therefore, we
are preliminarily treating them as covered merchandise.
Period of Investigation
The POI is January 1, 1998, through December 31, 1998.
Fair Value Comparisons
To determine whether sales of CTL plate from Korea to the United
States were made at less than fair value, we compared the export price
(``EP'') or constructed export price (``CEP'') to the Normal Value
(``NV''), as described in the ``Export Price and Constructed Export
Price'' and ``Normal Value'' sections of this notice, below. In
accordance with section 777A(d)(1)(A)(i) of the Act, we calculated
weighted-average EPs and CEPs for comparison to weighted-average NVs.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by POSCO and Dongkuk covered by the description in
the ``Scope of Investigation'' section, above, and sold in Korea during
the POI to be foreign like products for purposes of determining
appropriate product comparisons to U.S. sales. We compared U.S. sales
to sales made in the home market. Where there were no sales of
identical merchandise in the home market made in the ordinary course of
trade, we compared U.S. sales to sales of the most similar foreign like
product made in the ordinary course of trade. In making the product
comparisons, we matched foreign like products based on the physical
characteristics reported by the respondents in the following order of
importance (which are identified in Appendix V of the questionnaire):
painting, quality, grade specification, heat treatment, nominal
thickness, nominal width, patterns in relief, and descaling.
Because respondents had no sales of non-prime merchandise in the
United States during the POI, we did not use home market sales of non-
prime merchandise in our product comparisons (see, e.g., Final
Determination of Sales at Less Than Fair Value: Stainless Steel Wire
Rod from Sweden (63 FR 40449, 40450, July 29, 1998) (``SSWR'')).
Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade (``LOT'') as the EP or CEP transaction. The NV
LOT is that of the starting-price sales in the comparison market or,
when NV is based on constructed value (``CV''), that of the sales from
which we derive
[[Page 41227]]
selling, general and administrative (``SG&A'') expenses and profit.
With respect to U.S. sales and EP transactions, the LOT is the level of
the starting price sale, which is usually from the exporter to the
importer. For CEP, the LOT is the level of the constructed sale from
the exporter to the importer.
To determine whether NV sales are at a different LOT than EP or CEP
sales, we examine stages in the marketing process and selling functions
along the chain of distribution between the producer and the
unaffiliated customer. If the comparison market sales are at a
different LOT, and the difference affects price comparability, as
manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison-market sales at the LOT of
the export transaction, we make an LOT adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is
more remote from the factory than the CEP level and there is no basis
for determining whether the differences in the levels between NV and
CEP sales affects price comparability, we adjust NV under section
773(A)(7)(B) of the Act (the CEP offset provision). See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).
POSCO
POSCO reported that it sells at the same LOT in both markets. In
order to determine whether NV was established at a different LOT than
EP sales, we examined stages in the marketing process and selling
functions along the chains of distribution between POSCO and its home
market and U.S. customers. Based on our analysis of the chains of
distribution and selling functions performed for EP sales in the U.S.
market, we preliminarily determine that POSCO and its subsidiaries
POSCO Steel Sales and Service Co., Ltd. (``POSTEEL'') and POSAM (for EP
sales) provided a sufficiently similar degree of services on sales to
all channels of distribution, and that the sales made to the United
States constitute one LOT.
Based on a comparison of the selling activities performed in the
U.S. market to the selling activities in the home market, we
preliminarily determine that there is not a significant difference in
the selling functions performed in both markets. Accordingly, because
we find the U.S. sales and home market sales to be at the same LOT, no
LOT adjustment under section 773(a)(7)(A) of the Act is warranted. See
LOT Memo dated July 19, 1999. See also Affiliated Reseller Sales
section below.
Dongkuk
In the home market, Dongkuk reported one channel of distribution
involving sales to distributors and affiliated and unaffiliated end-
users. Dongkuk reported few selling activities for its home market
sales. We examined the selling functions and found no appreciable
difference between types of customers. Because there are no appreciable
differences between the selling functions on sales made to different
customers in the home market, sales to these customers represent a
similar stage of marketing. Therefore, we preliminarily conclude that
all Dongkuk's sales to end-users constitute one LOT in the home market.
For its EP and CEP sales in the U.S. market, Dongkuk reported four
sales channels: (1) Dongkuk's sales through Dongkuk Industries Co.,
Ltd. (``DKI''), Dongkuk's affiliated trading company in Korea, to
Dongkuk International, Inc. (DKA), Dongkuk's affiliate located in the
United States, to unaffiliated customers; (2) Dongkuk's sales through
DKI, to unaffiliated customers; (3) Dongkuk's sales to DKA, to an
unaffiliated customer; and (4) Dongkuk's sales to an unaffiliated
customer. We examined the selling functions performed for each of the
four U.S. sales channels. These selling functions included freight and
delivery arrangements, credit services, and post-sale warehousing. With
the exception of freight and delivery arrangements for sales in channel
1, selling functions performed in the four sales channels were
identical. Thus, sales to these customer categories represent a similar
stage of marketing. Therefore, we preliminarily determine that the
sales made to the United States constitute one LOT.
Further, because we preliminarily conclude that the U.S. LOT and
the home market LOT included similar selling functions, we conclude
that these sales are made at the same LOT. Therefore, a LOT adjustment
for Dongkuk is not appropriate.
Export Price and Constructed Export Price
The Department considers several factors in making its
determination concerning whether sales made prior to importation
through a U.S. affiliate to an unaffiliated customer in the United
States are EP sales. These factors are: (1) whether the merchandise was
shipped directly from the manufacturer to the unaffiliated U.S.
customer without being introduced into the physical inventory of the
affiliated selling agent; (2) whether this is the customary commercial
channels between the parties involved; and (3) whether the functions of
the U.S. sales affiliates are limited to those of a ``processor of
sales-related documentation'' and a ``communication link'' with the
unrelated U.S. buyer. Where the factors indicate that the activities of
the U.S. sales affiliate are ancillary to the sale, we treat the
transactions as EP sales. Where the U.S. sales affiliate has a
significant role in the sales process, we treat the transactions as CEP
sales (e.g. See Certain Cut-to-Length Carbon Steel Plate from Germany:
Final Results of Antidumping Administrative Review, 62 FR 18389, 18391
(April 15, 1997); Mitsubishi Heavy Industries versus United States,
Slip Op. 98-82 at 6 (CIT, June 23, 1998)).
POSCO
POSCO reported four channels of distribution for U.S. sales. In
channel 1 POSCO sold the subject merchandise directly to the United
States. In channel 4 POSCO sold the subject merchandise directly to
unaffiliated Korean trading companies for resale of subject merchandise
to the United States. In channel 2, POSTEEL, which is POSCO's
affiliated trading company, sold to a U.S. customer with the assistance
of another affiliate, POA. In channel 3, POSTEEL sold to a U.S.
customer through its U.S. affiliate POSAM . We classified the sales
made through channel 2 as EP sales, since POA had no involvement in the
selling process.
In channel 3, the U.S. affiliate, POSAM, was involved in all the
sales made to unaffiliated U.S. customers. POSCO reported these sales
as EP transactions in its responses. However, because POSAM is involved
in the U.S. selling activities for these sales to some degree, we
examined whether these sales should be properly classified as EP or CEP
transactions.
We examine several factors to determine whether sales made prior to
importation through an affiliated sales agent to an unaffiliated
customer in the United States are EP sales. Based on our review of the
selling activities of POSCO's U.S. affiliate, we preliminarily
determine that EP is appropriate for POSTEEL's sales to the United
States through POSAM. The customary commercial channel between POSCO
and its unaffiliated customers is that POSCO ships the EP merchandise
directly to the unaffiliated U.S. customers without having the
merchandise enter into the inventory of the U.S. affiliates, and the
U.S. affiliates' activities are limited to that of a ``processor of
sales-related
[[Page 41228]]
documentation'' and a ``communication link'' with the unaffiliated U.S.
buyers. Accordingly, for purposes of the preliminary determination, we
are treating the sales in question as EP transactions. We will examine
this issue further at verification.
We calculated EP in accordance with section 772(a) of the Act. We
based EP on the relevant terms of delivery price to unaffiliated
purchasers in the United States. We made deductions to the starting
price for movement expenses in accordance with section 772(c)(2)(A) of
the Act; these included, where appropriate, foreign inland freight,
foreign brokerage and handling charges, ocean freight, U.S. brokerage
and wharfage charges and U.S. Customs duty, where appropriate. Finally,
we added to the U.S. price an amount for duty drawback pursuant to
section 772 (c)(1) (B) of the Act.
Dongkuk
For U.S. sales channels two and four, which are defined in the
Level of Trade section above, we based our calculation on EP, in
accordance with section 772 (a) of the Act, because the subject
merchandise was sold by the producer or exporter to the first
unaffiliated purchaser in the United States prior to importation, and
CEP methodology was not otherwise indicated. For U.S. sales channels
one and three, which are defined in the Level of Trade section above,
we based our calculation on CEP, in accordance with section 772 (b) of
the Act, because the merchandise was sold by or for the account of the
producer or exporter of such merchandise or by a seller affiliated with
the producer or exporter, to a purchaser not affiliated with the
producer or exporter.
We have preliminarily determined that the affiliated purchaser in
the United States, Dongkuk International, Inc. (DKA), did more than
merely act as a ``processor of sales-related documentation and a
communication link with the unrelated U.S. buyer.'' (i.e., channels 1
and 3 sales) Where a U.S. affiliate is involved in making a sale, we
normally consider the sale to be CEP unless the record demonstrates
that the U.S. affiliate's involvement in making the sale is incidental
or ancillary. The record demonstrates that Dongkuk International,
Inc.'s role exceeds that of an incidental or ancillary role. See LOT/
CEP Memo July 19, 1999
We based EP on the price to unaffiliated purchasers in the United
States. We made deductions for movement expenses in accordance with
section 772(c)(2)(A) of the Act; these included, where appropriate,
foreign inland freight, foreign wharfage and loading, foreign
brokerage, international freight, marine insurance, domestic inland
freight, and U.S. brokerage and wharfage. Additionally, we added to the
U.S. price an amount for duty drawback pursuant to section 772(c)(1)(B)
of the Act.
We calculated CEP, in accordance with subsections 772(b), (c), and
(d) of the Act, for those sales to the first unaffiliated purchaser
that took place after importation into the United States. We based CEP
on the prices to unaffiliated purchasers in the United States. We made
deductions for discounts and rebates. Additionally we made deductions
for movement expenses in accordance with section 772(c)(2)(A) of the
Act; these included, where appropriate, foreign inland freight, foreign
wharfage and loading, foreign brokerage, international freight, marine
insurance, domestic inland freight, U.S. brokerage and wharfage, U.S.
duty and U.S. warehousing expenses. In accordance with section
772(d)(1) of the Act, we deducted those selling expenses associated
with economic activities occurring in the United States, including
direct selling expenses (e.g., commissions, credit costs, bank charges,
and warranty expenses), and indirect selling expenses. For CEP sales,
we also made an adjustment for profit in accordance with section
772(d)(3) of the Act. Additionally, we added to the U.S. price an
amount for duty drawback pursuant to section 772(c)(1)(B) of the Act.
Normal Value
After testing (1) home market viability, (2) whether sales to
affiliates were at arm's-length prices, and (3) whether home market
sales were at below-cost prices, we calculated NV as noted in the
``Price-to-Price Comparisons'' and ``Price-to-CV Comparisons'' sections
of this notice.
1. Home Market Viability
In order to determine whether there is a sufficient volume of sales
in the home market to serve as a viable basis for calculating NV (i.e.,
the aggregate volume of home market sales of the foreign like product
is equal to or greater than five percent of the aggregate volume of
U.S. sales), we compared the respondent's volume of home market sales
of the foreign like product to the volume of U.S. sales of the subject
merchandise, in accordance with section 773(a)(1)(C) of the Act.
Because each of the respondent's aggregate volume of home market sales
of the foreign like product was greater than five percent of its
aggregate volume of U.S. sales for the subject merchandise, we
determined that the home market was viable for both respondents.
2. Affiliated-Party Transactions and Arm's-Length Test
POSCO
POSCO reported sales to affiliated parties in the home market. For
sales to affiliated parties we applied the arm's-length test by
comparing them to sales of identical merchandise from POSCO to
unaffiliated home market customers. If these affiliated-party sales
satisfied the arm's-length test, we used them in our analysis. Sales to
affiliated customers in the home market not made at arm's-length prices
(if any) were excluded from our analysis because we considered them to
be outside the ordinary course of trade. See 19 CFR 351.102.
To test whether these sales were made at arm's-length prices, we
compared on a model-specific basis the prices of sales to affiliated
and unaffiliated customers net of all movement charges, direct selling
expenses and packing. We added to the starting price interest revenue
and duty drawback. Where, for the tested models of subject merchandise,
prices to the affiliated party were on average 99.5 percent or more of
the price to the unaffiliated parties, we determined that sales made to
the affiliated party were at arm's length. See 19 CFR 351.403(c) and 62
FR at 27355. In instances where no price ratio could be constructed for
an affiliated customer because identical merchandise was not sold to
unaffiliated customers, we were unable to determine that these sales
were made at arm's-length prices and, therefore, excluded them from our
LTFV analysis. See SSWR at 63 FR 40451. Where the exclusion of such
sales eliminated all sales of the most appropriate comparison product,
we made a comparison to the next most similar model.
Dongkuk
Dongkuk also reported sales to affiliated parties in the home
market. We applied the arm's-length test as described above.
Affiliated Reseller Sales
POSCO asked to be excused from reporting downstream sales through
its numerous affiliated service centers. While we denied POSCO's
request, we limited the number of service centers that POSCO would have
to report. POSCO submitted its narrative questionnaire response on July
8, and its electronic database, along with certain supplemental
information, on July 12,
[[Page 41229]]
1999. However, there are a number of problems associated with these
data that made it difficult to reflect these reseller sales in our
preliminary margin calculations. Most important is the fact that two of
these resellers sell subject merchandise which they purchase from both
POSCO and other unaffiliated suppliers. According to POSCO, these
resellers cannot distinguish the producer of the subject merchandise.
This makes it impossible to determine whether any given sale by these
resellers was produced by POSCO and should be included in our analysis.
In addition, petitioners have raised a number of issues regarding the
proper treatment of these sales and accompanying adjustments. However,
there is insufficient information on the record regarding these issues
to make a satisfactory determination concerning the use of these sales
in our antidumping analysis at this time. While we have not used these
sales for purposes of the preliminary determination, we intend to
address these issues in a supplemental questionnaire and determine
whether and in what way to use this information in the final
determination.
3. Cost of Production Analysis
In their petition, the petitioners submitted a countrywide
allegation pursuant to section 773(b)(1) of the Act that Korean
producers and exporters had made sales in the home market at less than
the cost of production (``COP''). Our analysis of the allegation
indicated that there were reasonable grounds to believe or suspect that
each Korean exporter sold CTL plate in the home market at prices at
less than the COP. Accordingly, we initiated COP investigations with
respect to the two Korean exporters to determine whether sales were
made at prices less than the COP pursuant to section 773(b) of the Act
(see Initiation Notice at 64 FR 12959, 12965).
We conducted the COP analysis described below.
A. Calculation of COP
In accordance with section 773(b)(3) of the Act, for each
respondent we calculated COP based on the sum of the cost of materials
and fabrication for the foreign like product plus amounts for home
market selling, general and administrative expenses (``SG&A''),
interest expense, and packing costs. We relied on the COP data
submitted by POSCO and Dongkuk in their section D questionnaire
responses to calculate each company's weighted-average COPs for the
POI, except for the following instances where the information was
improperly quantified or valued: (1) We increased Dongkuk's reported
material cost for slabs purchased from affiliated suppliers to account
for an understatement of the affiliated supplier's costs reflected in
the transfer prices; (2) we increased Dongkuk's reported depreciation
expense as a result of our disallowance of the extension of the useful
lives for fixed assets; (3) we recalculated general and administrative
expenses to exclude certain items which were unrelated to general
operations; and (4) we recalculated interest expense to ensure
consistency between this basis for this expense and the basis for the
other reported costs. See Memo To Neal Halper, July 19, 1999. In
addition, we analyzed Dongkuk's treatment of certain start-up costs as
recorded in its accounting records in accordance with Korean GAAP. We
have allowed this treatment for purposes of the preliminary
determination as it appears to reasonably state Dongkuk's production
costs. However, we will continue to probe this issue at verification
and in the final determination.
B. Test of Home Market Sales Prices
We compared the weighted-average COP figures to home market sales
of the foreign like product as required under section 773(b) of the
Act, in order to determine whether these sales had been made at prices
below COP. In determining whether to disregard home market sales made
at prices less than the COP, we examined whether (1) within an extended
period of time, such sales were made in substantial quantities, and (2)
such sales were made at prices which permitted the recovery of all
costs within a reasonable period of time. On a product-specific basis,
we compared the COP to the home market prices, less any applicable
movement charges, rebates, discounts, and direct and indirect selling
expenses.
C. Results of the COP Test
Pursuant to section 773(b)(2)(C) of the Act, where less than 20
percent of respondent's sales of a given product were at prices less
than the COP, we did not disregard any below-cost sales of that product
because we determined that the below-cost sales were not made in
``substantial quantities.'' Where 20 percent or more of a respondent's
sales of a given product during the POI were at prices less than the
COP, we determined such sales to have been made in ``substantial
quantities'' within an extended period of time in accordance with
section 773(b)(2)(B) of the Act. In such cases, we also determined that
such sales were not made at prices which would permit recovery of all
costs within a reasonable period of time, in accordance with section
773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost
sales.
For both Dongkuk and POSCO, we found that, for certain grades of
CTL plate, more than 20 percent of these firm's sales within an
extended period of time were at prices less than COP.
D. Calculation of CV
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of POSCO's and Dongkuk's cost of materials,
fabrication, SG&A, interest, U.S. packing costs and profit. We made
similar adjustments as those described above for COP. In accordance
with sections 773(e)(2)(A) of the Act, we based SG&A and profit on the
amounts incurred and realized by the respondent in connection with the
production and sale of the foreign like product in the ordinary course
of trade for consumption in the foreign country. For selling expenses,
we used the weighted-average home market selling expenses.
Price-to-Price Comparisons
We calculated NV based on prices to affiliated (where appropriate)
and unaffiliated customers. We made deductions, where appropriate, from
the starting price for inland freight, and also added duty drawbacks
and interest revenue. We made adjustments for differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. In
addition, we made adjustments under section 773(a)(6)(C)(iii) of the
Act for differences in circumstances of sale for imputed credit
expenses, warranties, and commissions. In the case of Dongkuk, we
recalculated it's credit expenses in the home market because of
inconsistencies in its sales response regarding this expense. See
Dongkuk Calculation Memo from Analyst to the File. Finally, we deducted
home market packing costs and added U.S. packing costs in accordance
with section 773(a)(6)(A) and (B) of the Act.
Price-to-CV Comparisons
In accordance with section 773(a)(4) of the Act, we based NV on CV
if we were unable to find a home market match of the foreign like
product. We made adjustments to CV in accordance with section 773(a)(8)
of the Act. For comparisons to EP, we made COS adjustments by deducting
home market direct selling expenses and adding U.S. direct selling
expenses.
[[Page 41230]]
Currency Conversion
We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales as certified by
the Federal Reserve Bank. See POSCO Calculation Memo from Analyst to
the File for an explanation of our treatment of currency conversion for
the POI in this case.
Section 773A(a) of the Act directs the Department to use a daily
exchange rate in order to convert foreign currencies into U.S. dollars
unless the daily rate involves a fluctuation. It is the Department's
practice to find that a fluctuation exists when the daily exchange rate
differs. When we determine a fluctuation to have existed, we substitute
the benchmark rate for the daily rate, in accordance with established
practice. Further, section 773A(b) of the Act directs the Department to
allow a 60-day adjustment period when a currency has undergone a
sustained movement. A sustained movement has occurred when the weekly
average of actual daily rates exceeds the weekly average of benchmark
rates by more than five percent for eight consecutive weeks. (For an
explanation of this method, see Policy Bulletin 96-1: Currency
Conversions (61 FR 9434, March 8, 1996).)
Verification
As provided in section 782(i) of the Act, we will verify all
information determined to be acceptable for use in making our final
determination.
Suspension of Liquidation
In accordance with section 733(d) of the Act, we are directing the
Customs Service to suspend liquidation of all imports of subject
merchandise that are entered, or withdrawn from warehouse, for
consumption on or after the date of publication of this notice in the
Federal Register, except those entries produced by POSCO.
We will instruct the Customs Service to require a cash deposit or
the posting of a bond equal to the weighted-average amount by which the
NV exceeds the EP or CEP, as indicated in the chart below. We will
adjust the deposit requirements to account for any export subsidies
found in the companion countervailing duty investigation. These
suspension-of-liquidation instructions will remain in effect until
further notice. The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Margin
Exported/manufacturer weighted-average percentage
------------------------------------------------------------------------
Dongkuk Steel Mill Co. Ltd.............................. 6.15
Pohang Iron & Steel Co., Ltd............................ .05
All Others Rate......................................... 6.15
------------------------------------------------------------------------
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 157 days after the date of
this preliminary determination or 45 days after our final determination
whether these imports are materially injuring, or threaten material
injury to, the U.S. industry.
Public Comment
Case briefs or other written comments and at least ten copies must
be submitted to the Assistant Secretary for Import Administration no
later than August 25, 1999, and rebuttal briefs no later than September
1, 1999. A list of authorities used and an executive summary of issues
should accompany any briefs submitted to the Department. Such summary
should be limited to five pages total, including footnotes. In
accordance with section 774 of the Act, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
arguments raised in case or rebuttal briefs. Tentatively, the hearing
will be held on September 14, 1999, time and room to be determined, at
the U.S. Department of Commerce, 14th Street and Constitution Avenue,
NW, Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the publication of this notice. Requests should
contain: (1) The party's name, address, and telephone number; (2) the
number of participants; and (3) a list of the issues to be discussed.
Oral presentations will be limited to issues raised in the briefs. If
this investigation proceeds normally, we will make our final
determination by no later than 75 days after the date of this
preliminary determination.
This determination is issued and published pursuant to sections
733(d) and 777(i)(1) of the Act.
Dated: July 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-19305 Filed 7-28-99; 8:45 am]
BILLING CODE 3510-DS-P
