03-21058. Notice of Preliminary Results of Antidumping Duty Administrative Review: Steel Concrete Reinforcing Bars from Latvia

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

August 15, 2003..

FOR FURTHER INFORMATION CONTACT:

Jim Kemp or Daniel O'Brien, at [phone] or [phone], respectively; AD/CVD Enforcement Office 5, Group II, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street & Constitution Avenue, NW, Washington, DC 20230.

Summary:

The Department of Commerce is conducting an administrative review of the antidumping duty order on steel concrete reinforcing bar (rebar) from Latvia. We preliminarily determine that sales of subject merchandise by Joint Stock Company Liepajas Metalurgs (Liepajas Metalurgs) have been made below normal value (NV). If these preliminary results are adopted in our final results, we will instruct the U.S. Bureau of Customs and Border Protection (BCBP) ^[1] to assess antidumping duties on appropriate entries based on the difference between the export price (EP) and the NV.

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

SUPPLEMENTARY INFORMATION:

Background

On September 7, 2001, the Department issued an antidumping duty order on rebar from Latvia. See Antidumping Duty Orders: Steel Concrete Reinforcing Bars From Belarus, Indonesia, Latvia, Moldova, People's Republic of China, Poland, Republic of Korea and Ukraine, 66 FR 46777 (September 7, 2001). On September 3, 2002, the Department issued a notice of opportunity to request the first administrative review of this order. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 67 FR 56267 (September 3, 2002).On September 3, 2003, in accordance with 19 CFR 351.213(b), Liepajas Metalurgs requested an administrative review. On October 24, 2002, the Department published the notice of initiation of this antidumping duty administrative review, covering the period January 30, 2001, through August 31, 2002 (the POR). See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 67 FR 65336 (October 24, 2002).

On October 25, 2002, the Department issued its antidumping questionnaire to Liepajas Metalurgs, specifying that the responses to Section A and Sections B-D would be due on November 15, and December 2, 2003, respectively.^[2] We received timely responses to Sections A-C of the initial antidumping questionnaire and associated supplemental questionnaires. Based on a timely allegation filed by the petitioners³ on January 6, 2003, we initiated a cost of production (COP) investigation of Liepajas Metalurgs. The company submitted timely responses to Section D of the antidumping questionnaire, as well as to supplemental questionnaires.

Scope of the Order

For purposes of this review, the product covered by this order is all steel concrete reinforcing bars sold in straight lengths, currently classifiable in the Harmonized Tariff Schedule of the United States (HTSUS) under item number 7214.20.00 or any other tariff item number. Specifically excluded are plain rounds (i.e., non-deformed or smooth bars) and rebar that has been further processed through bending or coating. HTSUS subheadings are provided for convenience and customs purposes. The written description of the scope of this proceeding is dispositive.

Verification

As provided in section 782(i)(3) of the Tariff Act of 1930, as amended (the Act), we verified information provided by Liepajas Metalurgs. We used standard verification procedures, including on-site inspection of Liepajas Metalurgs' facilities and examination of relevant sales and financial records. See Memorandum from Daniel O'Brien and Jim Kemp, International Trade Compliance Analysts, to Gary Taverman, Director, Office 5, Re: Verification of the Sales and Cost Responses of Joint Stock Company Liepaja Metalurgs in the First Administrative Review of Steel Concrete Reinforcing Bars from Latvia, dated July 30, 2003 (the Verification Report).

Facts Available

When responding to the questionnaire, Liepajas Metalurgs did not report all of the product characteristics for certain home market sales made by its affiliated reseller, Armaturas Servisa Centrs (ASC). Additionally, Liepajas Metalurgs did not report certain sales of merchandise that Liepajas Metalurgs produced but which was commingled at ASC's warehouse with incoming rebar produced by other companies and sold by ASC. Finally, we found that Liepajas Metalurgs' calculation of home market freight expense was unreliable for rebar shipments from the plant to the warehouse and shipments from Liepajas Metalurgs' Riga sales office (RSO) to the customer. We examined these issues closely at verification and found that Liepajas Metalurgs, in the normal course of business, did not maintain the necessary records to report the data as requested by the Department.

With regard to sales of merchandise commingled with different manufacturers' products, we found that ASC developed a system to identify the producer based on the customer, grade and size of the rebar, and location of the merchandise in inventory. However, ASC could not provide documentation to support its segregation of rebar and acknowledged that even by this method, the company was unable to identify the manufacturer for every sale. Concerning sales of merchandise with incomplete matching characteristics, we found that ASC only recorded all of the product characteristics (i.e. type of steel, yield strength, and size) of its merchandise when a customer ordered a specific grade of rebar. Therefore, ASC was unable to the report yield strength, and sometimes size, for sales where no such request was made by its customers. Finally, for the freight calculations in question, Liepajas Metalurgs could not properly document the type of merchandise shipped (i.e. rebar or other products) and the quantity relating to the freight invoices. For a further discussion of these issues, see the Verification Report.

Section 776(a)(2) of the Act provides that, if an interested party or any other person (A) withholds information that has been requested by the administering authority; (B) fails to provide such information by the deadlines for the submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782 of the Act; (C) significantly impedes a proceeding under this title; or (D) provides such information but the information cannot be verified as provided in section 782(i) of the Act, the Department shall, subject to section 782(d) of the Act, use the facts otherwise available in reaching the applicable determination under this title.

In applying facts otherwise available, section 776(b) of the Act provides that the Department may use an inference adverse to the interests of a party that has failed to cooperate by not acting to the best of its ability to comply with the Department's requests for information. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value and Final Negative Critical Circumstances: Carbon and Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55794-96 (August 30, 2002). Adverse inferences are appropriate “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 103-316, (1994) (SAA) at 870. Furthermore, “{a}ffirmative evidence of bad faith on the part of a respondent is not required before the Department may make an adverse inference.” See Antidumping Countervailing Duties: Final Rule, 62 FR 27296, 27340 (May 19, 1997).

In this case, we have found that an adverse inference is not appropriate for Liepajas Metalurgs because the company acted to the best of its ability to report the data requested by the Department. In its December 16, 2002, Section B response, Liepajas Metalurgs explained that ASC had some sales for which it did not track the necessary product information. Thereafter, the company answered all the Department's supplemental questions on this issue. At verification, we confirmed the information contained in Liepajas Metalurgs' responses regarding the sales with incomplete product information. Likewise, Liepajas Metalurgs attempted to the best of its ability to identify the manufacturer of all of ASC's sales. The company developed a method to accomplish this task, but, as we found at verification, due to ASC's manner of conducting business, it had no means to document its segregation of rebar by producer. ASC opened in May 2002 and was only in business and had sales for approximately four months during the POR. During this time frame, ASC was still in the process of developing a record keeping system and establishing routine procedures for the sales process. At verification, we confirmed that ASC conducted business and tracked sales in a manner that did not provide for the proper reporting of all the information requested by the Department, in spite of ASC's best efforts to do so.

Therefore, we preliminarily determine that Liepajas Metalurgs (and its affiliate, ASC) acted to the best of their ability and no adverse inference is warranted. Moreover, we expect that in future reviews ASC will have had sufficient time to establish its record keeping procedures in full awareness of the Department's reporting requirements. Thus, the Department will expect the company to properly report the source and matching characteristics for all of its home market sales and failure to do so may result in an adverse inference in the application of facts available.

Instead of an adverse inference, we have applied neutral facts available in response to Liepajas Metalurgs' inability to provide all the requested information. For purposes of the margin calculation, we were able to find an identical match at the same level of trade for the vast majority of Liepajas Metalurgs' U.S. sales (ASC's sales are at a distinct (more advanced) level of trade than Liepajas Metalurgs' direct home market and EP sales). See the Level of Trade Adjustment section below. Since we do not have all the information pertaining to ASC's sales, we cannot determine whether we may have found “most similar” matches among ASC's sales, if the company had correctly reported all of the information. Therefore, rather than attempting to match to similar home market sales, we applied neutral facts available pursuant to section 776(a)(2)(D) of the Act and compared the U.S. sales with no identical match to constructed value (CV), as described in the Calculation of Normal Value Based on Constructed Value section of this notice.

We have also applied a neutral facts available adjustment to Liepajas Metalurgs' home market freight expense calculated on shipments from the plant to the warehouse. In its calculation, Liepajas Metalurgs combined the cost for train and truck shipments into one expense allocated over all sales through the RSO or ASC warehouse. At verification, we found that the component of the expense based on truck shipments was unreliable. We found that in spite of Liepajas Metalurgs' best effort to properly calculate the expense, the documentation available to Liepajas Metalurgs did not provide the necessary information to do so. See the Verification Report at 17. Therefore, we have applied neutral facts available pursuant to section 776(a)(2)(D) of the Act and relied on the portion of the expense based on train freight for all shipments to the RSO or ASC warehouses.

While we found similar deficiencies with the calculation of freight expense for shipments from the RSO to the customer, we concluded that the expense calculated by the RSO was reasonable when compared to other verified and properly reported freight expenses incurred by Liepajas Metalurgs to the same or similar destinations. Therefore, we made no adjustment to the freight expense for shipments from the RSO to the customer.

Fair Value Comparisons

We compared the EP to the NV, as described in the Export Price and Normal Value sections of this notice. We first attempted to compare contemporaneous sales of products sold in the United States and comparison markets that are identical with respect to the matching characteristics. Pursuant to section 771(16) of the Act, all products produced by the respondent that fit the definition of the scope of the order and were sold in the comparison market during the POR fall within the definition of the foreign like product. We have relied on three criteria to match U.S. sales of subject merchandise to comparison market sales of the foreign like product: type of steel, yield strength, and size. Where there were no sales of identical merchandise in the comparison market, we compared U.S. sales to sales of the next most similar foreign like product on the basis of the characteristics listed above.

Export Price

We calculated an EP for all of Liepajas Metalurgs' sales because the merchandise was sold directly by Liepajas Metalurgs to the first unaffiliated purchaser for delivery to the United States, and constructed export price (CEP) was not otherwise warranted based on the facts of record. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These included inland freight and domestic brokerage and handling expenses.

Normal Value

A. Selection of Comparison Markets

Section 773(a)(1) of the Act directs that NV be based on the price at which the foreign like product is sold in the home market, provided that the merchandise is sold in sufficient quantities (or value, if quantity is inappropriate), that the time of the sales reasonably corresponds

to the time of the sale used to determine EP, and that there is no particular market situation that prevents a proper comparison with the EP. The statute contemplates that quantities (or value) will normally be considered insufficient if they are less than five percent of the aggregate quantity (or value) of sales of the subject merchandise to the United States.

We found that Liepajas Metalurgs had a viable home market for rebar. As such, Liepajas Metalurgs submitted home market sales data for purposes of the calculation of NV.

In deriving NV, we made adjustments as detailed in the Calculation of Normal Value Based on Home Market Prices section below.

B. Cost of Production Analysis

Based on a timely allegation filed by the petitioners, we initiated a COP investigation of Liepajas Metalurgs to determine whether sales were made at prices below COP. See Memorandum From Daniel O'Brien, International Trade Compliance Analyst, to Gary Taverman, Director, Office 5, Re: Petitioners' Allegation of Sales Below the Cost of Production for Liepajas Metalurgs, dated January 29, 2003.

1. Calculation of Cost of Production

In accordance with section 773(b)(3) of the Act, we calculated the weighted-average COP, by model, based on the sum of materials, fabrication, and general and administrative (G&A) expenses. We relied on Liepajas Metalurgs' submitted COP except in the specific instances noted below, where the submitted costs were not appropriately quantified or valued. See Memorandum from Daniel O'Brien and Jim Kemp, International Trade Compliance Analysts, to Constance Handley, Program Manager, Re: Analysis Memorandum for Joint Stock Company Liepajas Metalurgs, dated August 4, 2003 (the Analysis Memorandum).

a. We revised the G&A and interest expense factor by removing packing expenses from the denominator of Liepajas Metalurgs' original calculation. Additionally, we removed net exchange rate gains and losses from G&A and included them in the calculation of the financial expense factor.

b. We recalculated ASC's reported expense for cutting rebar.

2. Test of Comparison Market Sales Prices

We compared the adjusted weighted-average COP for Liepajas Metalurgs to its home-market sales prices of the foreign like product, as required under section 773(b) of the Act, to determine whether these sales had been made at prices below the COP within an extended period of time (i.e., a period of one year) in substantial quantities and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time.

On a model-specific basis, we compared the revised COP to the home market prices, less any applicable movement charges, discounts, rebates, and direct and indirect selling expenses.

3. Results of the COP Test

We disregarded below-cost sales where (1) 20 percent or more of Liepajas Metalurgs' sales of a given product were made at prices below the COP and such sales were made within an extended period of time in substantial quantities in accordance with sections 773(b)(2)(B) and (C) of the Act, and (2) based on comparisons of price to weighted-average COPs for the POR, we determined that the below-cost sales of the product were at prices which would not permit recovery of all costs within a reasonable time period, in accordance with section 773(b)(2)(D) of the Act. We found that Liepajas Metalurgs made sales below cost and we disregarded such sales where appropriate.

C. Calculation of Normal Value Based on Comparison-Market Prices

We determined NV for Liepajas Metalurgs as follows. We made adjustments for any differences in packing and deducted home market movement expenses pursuant to sections 773(a)(6)(A) and 773(a)(6)(B)(ii) of the Act. In addition, we made adjustments for differences in circumstances of sale (COS) pursuant to section 773(a)(6)(C)(iii) of the Act. We made COS adjustments for Liepajas Metalurgs's EP transactions by deducting direct selling expenses incurred for home market sales (credit expenses) and adding U.S. direct selling expenses (credit expenses). We made the following additional adjustment to the calculation of normal value. See the Analysis Memorandum.

We recalculated Liepajas Metalurgs' and ASC's indirect selling expense calculation to incorporate certain expenses found at verification.

As reported in its December 16, 2002, Section B Questionnaire Response (Section B), Liepajas Metalurgs made sales of “non-commercial length” rebar during the POR. Liepajas Metalurgs considers the merchandise corresponding to these sales to be a “by-product from production of commercial length” rebar. See Section B at B-6. Accordingly, Liepajas Metalurgs sold the non-commercial length products at “salvage value” in the home market. Therefore, we have designated the non-commercial length rebar as non-prime in our calculation of Liepajas Metalurgs' antidumping duty margin. We confirmed at verification that Liepajas Metalurgs sold no such merchandise in the U.S. market.

In addition to these adjustments, we have made modifications to the calculation of normal value based on the facts otherwise available, as discussed in the Facts Available section of this notice.

D. Calculation of Normal Value Based on Constructed Value

For those comparisons with no identical matches, we compared EP to CV, as a neutral facts available adjustment, because of ASC's inability to report all of the sales data requested by the Department. See the Facts Available section above. Section 773(e) of the Act provides that CV shall be based on the sum of the cost of materials and fabrication for the foreign like product, plus amounts for selling, G&A expenses, profit, and U.S. packing.

We calculated CV based on the methodology described in the COP section, above. In accordance with section 773(e)(2)(A) of the Act, we used the actual amounts incurred and realized by Liepajas Metalurgs in connection with the production and sale of the foreign like product, in the ordinary course of trade, for consumption in the comparison market to calculate selling expenses and profit. For price-to-CV comparisons, we made adjustments to CV for COS differences, pursuant to section 773(a)(8) of the Act. Specifically, we made COS adjustments by deducting direct selling expenses incurred for home market sales (credit expenses) and adding U.S. direct selling expenses (credit expenses).

E. Level of Trade Adjustment

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade as the EP transaction. The NV level of trade is that of the starting-price sales in the comparison market. For EP sales, the U.S. level of trade is also the level of the starting-price sale, which is usually from exporter to importer.

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

In implementing these principles in this administrative review, we obtained information from Liepajas Metalurgs about the marketing stages involved in the reported U.S. and home market sales, including a description of the selling activities performed by the respondent for each channel of distribution. In identifying levels of trade for EP and home market sales we considered the selling functions reflected in the starting price before any adjustments.

In conducting our level-of-trade analysis for Liepajas Metalurgs, we examined the specific types of customers, the channels of distribution, and the selling practices of the respondent. Generally, if the reported levels of trade are the same, the functions and activities of the seller should be similar. Conversely, if a party reports levels of trade that are different for different categories of sales, the functions and activities may be dissimilar. We found the following.

Liepajas Metalurgs reported three channels of distribution in the home market: 1) direct sales by Liepajas Metalurgs; 2) sales by Liepajas Metalurgs' RSO; and 3) sales by ASC. In the U.S. market, Liepajas Metalurgs reported one channel of distribution: direct sales by Liepajas Metalurgs. The company reported three customer categories in the home market: 1) traders; 2) end users; and 3) service centers. We found that the selling functions performed by Liepajas Metalurgs differed significantly for home market customers depending on the channel of distribution. The activities performed by ASC and the RSO were in greater number and more advanced than those provided by Liepajas Metalurgs on direct sales. ASC and RSO both provided selling functions such as customer negotiation, warehousing, sorting, repacking, and freight delivery, while Liepajas Metalurgs only negotiated with customers and arranged delivery of the product. Therefore, we have preliminarily determined that sales through ASC and RSO are at the same level of trade and Liepajas Metalurgs' direct sales are at a different level of trade in the home market.

Liepajas Metalurgs has reported one customer category in the U.S. market: traders. In comparing EP sales to the direct sales in the home market sales, we found that the selling functions performed by Liepajas Metalurgs for its direct customers and channels of distribution were very similar in the U.S. and Latvian markets. For U.S. sales, Liepajas Metalurgs conducts negotiations with the traders and arranges delivery to the port. Therefore, we concluded that the EP and home market direct sales were made at the same level of trade. Since Liepajas Metalurgs' direct home market and U.S. sales are at the same level of trade, and RSO's and ASC's home market sales are at a more advanced level of trade and a consistent pattern of price differences exist, we have preliminarily determined that a level of trade adjustment is warranted.

Currency Conversion

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

Preliminary Results of Review

As a result of this review, we preliminarily determine that the following weighted-average margin exists for the period January 30, 2001, through August 31, 2002:

Producer	Weighted-Average Margin (Percentage)
Joint Stock Company Liepajas Metalurgs	0.87

The Department will disclose calculations performed in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held 44 days after the date of publication, or the first working day thereafter. Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results. Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 37 days after the date of publication. Parties who submit arguments are requested to submit with the argument (1) a statement of the issue,

(2) a brief summary of the argument, and (3) a table of authorities. Further, the parties submitting written comments should provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of these preliminary results.

Assessment

Upon completion of this administrative review, pursuant to 19 CFR 351.212(b), the Department will calculate an assessment rate on all appropriate entries. We will calculate importer-specific duty assessment rates on the basis of the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of the examined sales for that importer. Since the delivery terms for all of Liepajas Metalurgs' U.S. sales were FOB Latvian seaport, we will calculate entered value using the gross unit price reported in the U.S. sales database. Where the assessment rate is above de minimis, we will instruct the BCBP to assess duties on all entries of subject merchandise by that importer.

Cash Deposit Requirements

The following deposit rates will be effective upon publication of the final results of this administrative review for all shipments of rebar from Latvia entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act: (1) the cash deposit rate listed above for Liepajas Metalurgs will be the rate established in the final results of this review, except if a rate is less than 0.5 percent, and therefore de minimis, the cash deposit will be zero; (2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the less-than-fair-value (LTFV) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous review conducted by the Department, the cash deposit rate will be 17.21 percent, the “All Others” rate established in the LTFV investigation. These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entities during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

This determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 4, 2003.

Joseph A. Spetrini,

Acting Assistant Secretary for Grant Aldonas, Under Secretary.

Footnotes

1.  Formerly the U.S. Customs Service.

2.  Section A of the questionnaire requests general information concerning a company's corporate structure and business practices, the merchandise under review that it sells, and the manner in which it sells that merchandise in all of its markets. Section B requests a complete listing of all home market sales, or, if the home market is not viable, of sales in the most appropriate third-country market (this section is not applicable to respondents in non-market economy cases). Section C requests a complete listing of U.S. sales. Section D requests information on the cost of production of the foreign like product and the constructed value of the merchandise under review. Section E requests information on further manufacturing.

3.  The petitioners in this case are the Rebar Trade Action Coalition (“RTAC”) and its individual members.