E6-14912. Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

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

SUMMARY:

In response to timely requests, the U.S. Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on certain corrosion-resistant carbon steel flat products (CORE) from Canada for the period of review (POR) August 1, 2004 through July 31, 2005. The review covers two respondents, Dofasco Inc. and Sorevco and Company, Ltd. (collectively Dofasco), and Stelco Inc. (Stelco).

The Department preliminarily determines that Dofasco and Stelco made sales to the United States at less than normal value (NV). If these preliminary results are adopted in the final results of this administrative review, we will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on entries of Dofasco and Stelco's merchandise during the period of review. The preliminary results are listed below in the section titled “Preliminary Results of Review.”

EFFECTIVE DATE:

September 11, 2006

FOR FURTHER INFORMATION CONTACT:

Joshua Reitze or Douglas Kirby, AD/CVD Operations, Office 6, Import Administration, International Trade Administration, U.S. Department of Commerce, 14^th & Constitution Avenue, NW, Washington, DC 20230; telephone: [phone] and 202-482-3782, respectively.

SUPPLEMENTARY INFORMATION:

Background

The Department published the antidumping duty order on CORE from Canada on August 19, 1993. See Antidumping Duty Orders: Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada , 58 FR 44162 (August 19, 1993), as amended by Amended Final Determinations of Sales at Less Than Fair Value and Antidumping Orders: Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-To-Length Carbon Steel Plate From Canada, 60 FR 49582 (September 26, 1995) (Amended Final and Order). On August 1, 2005, the Department published in the Federal Register a notice of “Opportunity to Request Administrative Review” of the antidumping duty order on CORE from Canada. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 70 FR 44085 (August 1, 2005). On August 31, 2005, the Department received a properly filed, timely request for an administrative review of Dofasco and Stelco from the United States Steel Corporation (USSC) (a petitioner in the original investigation), as well as from Dofasco, a producer/exporter of CORE from Canada. On September 28, 2005, the Department initiated a review of Dofasco and Stelco. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 70 FR 56631 (September 28, 2005). On December 20, 2005, Dofasco withdrew its request for an administrative review for the current period of review; however, since petitioner had requested a review of Dofasco and Stelco, the Department is not rescinding the administrative review.

On October 26, 2005, the Department issued sections A through E of the questionnaire to Dofasco.¹ Dofasco submitted its section A response on December 22, 2005, and submitted its sections B through D response on January 17, 2006. The Department issued a section A through C supplemental questionnaire on April 28, 2006. On May 17, 2006, the Department issued its section D supplemental questionnaire. Dofasco submitted its sections A through C supplemental questionnaire response on May 25, 2006, and Dofasco submitted its section D supplemental response on June 14, 2006. On July 21, 2006, the Department issued a second supplemental questionnaire to Dofasco. On August 3, 2006, Dofasco submitted its response to the Department's second supplemental questionnaire.

On October 26, 2005, the Department issued sections A through E of the questionnaire to Stelco. Stelco submitted its section A questionnaire response on December 5, 2005, and its sections B through D response on December 20, 2005. On April 27, 2006, the Department issued its sections A through C supplemental questionnaire to Stelco. On May 18, 2006, the Department issued a section D supplemental questionnaire to Stelco. On May 11, 2006, Stelco submitted its response to the Department's sections A through C supplemental questionnaire. On June 1, 2006, Stelco submitted its response to the Department's section D supplemental questionnaire. On July 21, 2006, the Department issued a second supplemental questionnaire to Stelco. On July 28, 2006, Stelco submitted its response to the Department's second supplemental questionnaire.

On April 4, 2006, the Department extended the deadline for the preliminary results of this antidumping duty administrative review from May 3, 2006 to August 31, 2006. See Corrosion-Resistant Carbon Steel Flat Products from Canada: Notice of Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 71 FR 16761 (April 4, 2006).

Scope Of The Order

The product covered by the order is certain corrosion-resistant steel, and includes flat-rolled carbon steel products, of rectangular shape, either clad, plated, or coated with corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or not corrugated or painted, varnished or coated with plastics or other nonmetallic substances in addition to the metallic coating, in coils (whether or not in successively superimposed layers) and of a width of 0.5 inch or greater, or in straight lengths which, if of a thickness less than 4.75 millimeters, are of a width of 0.5 inch or greater and which measures at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the U.S. Harmonized Tariff Schedule (HTSUS) under item numbers 7210.30.0030, 7210.30.0060, 7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, and 7217.90.5090. Although the HTSUS subheadings are provided for convenience and customs' purposes, the Department's written description of the merchandise under the order is dispositive.

Included in the order are corrosion-resistant flat-rolled products of non-rectangular cross-section where such 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. Excluded from the order are flat-rolled steel products either plated or coated with tin, lead, chromium, chromium oxides, both tin and lead (“terne plate”), or both chromium and chromium oxides (“tin-free steel”), whether or not painted, varnished or coated with plastics or other nonmetallic substances in addition to the metallic coating. Also excluded from the order are clad products in straight lengths of 0.1875 inch or more in composite thickness and of a width which exceeds 150 millimeters and measures at least twice the thickness. Also excluded from the order are certain clad stainless flat-rolled products, which are three-layered corrosion-resistant carbon steel flat-rolled products less than 4.75 millimeters in composite thickness that consist of a carbon steel flat-rolled product clad on both sides with stainless steel in a 20%%-60%%-20%% ratio.

Analysis

Affiliation and Collapsing

For these preliminary results, we have collapsed Dofasco, Sorevco, and Do Sol Galva Ltd. (DSG) and treated them as a single respondent, as we have done in prior segments of the proceeding. See Final Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel Plate From Canada, 58 FR 37099, 37107 (July 9, 1993), for our analysis regarding collapsing Dofasco and Sorevco. There have been no changes to the pertinent facts such as, for example, ownership structure, that warrant reconsideration of our decisions to collapse these companies. As noted on page A-9 of Dofasco's Section A questionnaire response dated December 22, 2005, Sorevco still operates as a 50-50 joint venture between Dofasco and Ispat Sidbec.

DSG is a galvanizing line operated as a limited partnership between Dofasco and Arcelor. As in the prior review; 1) DSG remains a partnership between Dofasco (80 percent ownership interest), and the European steel producer Arcelor (20 percent ownership interest); 2) Dofasco continues to operate DSG, which is located at the Dofasco Hamilton plant, and to treat this line as its number five galvanizing line; and 3) all of the DSG production workers are still employed by Dofasco. See pages A-6 and A-9 of Dofasco's Section A questionnaire response dated December 22, 2005. For all intents and purposes, DSG is effectively another production line run on Dofasco's property. See Certain Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Preliminary Results of Antidumping Duty Administrative Review, 69 FR 55138, 55139 (September 13, 2004) (Preliminary Results of 10^th Review) (unchanged in Certain Corrosion-Resistant Carbon Steel Flat Products From Canada: Final Results of Antidumping Duty Administrative Review, 70 FR 13458 (March 21, 2005) (Final Results of 10^th Review)), for our analysis regarding collapsing DSG.

Consistent with past segments of this proceeding, in these preliminary results, we have not collapsed Dofasco and its toll producer DJ Galvanizing Ltd. Partnership (DJG) (formerly DNN Galvanizing Ltd. Partnership (DNN)). See e.g , Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Preliminary Results of Antidumping Duty Administrative Review, 70 FR 53621, 53622 (September 9, 2005) (Preliminary Results of 11^th Review), unchanged in the Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Final Results of Antidumping Duty Administrative Review, 71 FR 13582 (March 16, 2006) (Final Results of 11^th Review). There have been no material changes in the business relationship between Dofasco and DJG during this POR to warrant reconsideration of this finding. Therefore, for CORE that is processed by DJG before it is exported to the United States, we will, for assessment and cash deposit purposes, instruct CBP to: 1) apply Dofasco's rate on merchandise supplied by Dofasco, Sorevco, or DSG; 2) apply the company-specific rate on merchandise supplied by other previously reviewed companies; and 3) apply the “all others” rate for merchandise supplied by companies which have not been reviewed in the past.

Product Comparisons

In accordance with section 771(16)(A) of the Act, we considered all products produced by respondents that are covered by the description in the “Scope of the Order” section, above, and that were sold in the home market during the POR, to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. In accordance with sections 771(16)(B) and (C) of the Act, where there were no sales of identical merchandise in the home market to compare to U.S. sales, we compared U.S. sales to the most similar foreign like product on the basis of the characteristics listed in Appendix V of the Department's October 26, 2005 antidumping questionnaire.

Date of Sale

Based on our analysis of the questionnaire responses, we are using the same dates of sale that we have used in the past proceedings. See, e.g., Final Results of 11^th Review. Neither Dofasco nor Stelco reported any changes in their sales processes that would warrant changing their reported dates of sale.

For a complete discussion of our date of sale analysis for Dofasco and Stelco, see Memorandum from Douglas Kirby (AD/CVD Financial Analyst) through Thomas Gilgunn (Program Manager) to the File; Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Analysis of Dofasco Inc. (Dofasco) and Sorevco for the Preliminary Results, (August 31, 2006) (Dofasco Preliminary Analysis Memorandum), and Memorandum to the File, from Joshua Reitze through Thomas Gilgunn (Program Manager) re: Analysis of Stelco for the Preliminary Results, dated August 31, 2006 (Stelco Preliminary Analysis Memorandum), on file in the Central Record Unit, room B-099 of the main Department of Commerce building (CRU).

Normal Value Comparisons

To determine whether sales of subject merchandise to the United States were made at less than NV, we compared the export price (EP) or the constructed export price (CEP) to NV, as described in the “U.S. Price,” and “Normal Value” sections of this notice in accordance with section 777A(d)(2) of the Act.

U.S. Price

In accordance with Section 772(a) of the Act, we used EP when the subject merchandise was first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States, and CEP was not otherwise warranted by the facts on the record. Also, as discussed below, we conclude that certain Dofasco sales are EP, and that all of Stelco's sales are EP.

In accordance with Section 772(b) of the Act, we used CEP when the subject merchandise was first sold (or agreed to be sold) in the United States before or after the date of importation 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.

Dofasco

Dofasco reported four channels of distribution to the United States. See Dofasco's December 22, 2005 section A questionnaire response at A-18 through A-19. We have classified Dofasco's Channel 1 (direct shipments) and 4 (direct shipments through commission agents) sales as EP sales. As in prior reviews, we find that Dofasco makes these sales directly to the unaffiliated customer in the United States without the involvement of any affiliated party in the United States (Channel 1) or makes the sale directly to an unaffiliated purchaser for exportation to the United States (Channel 4). Accordingly, we are treating Channel 1 and 4 sales as EP sales for Dofasco. See, e.g., Final Results of 11^th Review.

All of Dofasco's sales in the United States through its affiliate, Dofasco USA (DUSA), were reported as channel 2 (shipped directly to the U.S. customer) or channel 3 (shipped indirectly to the U.S. customer) sales. Dofasco reported its U.S. sales through DUSA to be CEP sales because they were made for the account of Dofasco by DUSA. See Dofasco's December 22, 2005 section A questionnaire response at A-18 through A-19. Therefore, consistent with our determination in prior reviews, we are classifying Dofasco's channels 2 and 3 sales as CEP sales. See Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Final Results of Antidumping Duty Administrative Review, 69 FR 2566 (January 16, 2004) (Final Results of 9^th Review) and accompanying Issues and Decision Memorandum at Comment 1, and Final Results of 10^th Review at Comment 5.

Stelco

We have classified all of Stelco's U.S. sales as EP sales. As in prior reviews, we find that Stelco makes these sales directly to the unaffiliated customer in the United States without the involvement of any affiliated party in the United States (Channel 1). See Preliminary Results of 11^th Review, unchanged in the Final Results of 11^th Review. Accordingly, we are treating these respective sales as EP sales for Stelco.

Calculation Of Export Price And Constructed Export Price

Dofasco's EP: The Department calculated Dofasco's starting price as its gross unit price to its unaffiliated U.S. customers, making adjustments where necessary for billing adjustments and early payment discounts pursuant to section 772(a) of the Act. Where applicable, the Department also made deductions for movement expenses (foreign inland freight, domestic brokerage, and international freight) pursuant to section 772(c) of the Act.

Dofasco's CEP: The Department calculated Dofasco's starting price as its gross unit price to its unaffiliated U.S. customers, making adjustments where necessary for billing adjustments and early payment discounts, pursuant to section 772(c)(1) of the Act. Where applicable, the Department made deductions for movement expenses (foreign inland freight, international freight, U.S. movement, U.S. customs duty and brokerage, and post-sale warehousing) in accordance with section 772(c)(2) of the Act and section 351.401(e) of the Department's regulations. In accordance with sections 772(d)(1) and (2) of the Act, we also deducted, where applicable, U.S. direct selling expenses, including warranty, credit expenses, U.S. commissions, and U.S. indirect selling expenses and U.S. inventory carrying costs incurred in the United States and Canada associated with economic activities in the United States. We also deducted CEP profit in accordance with section 772(d)(3) of the Act.

As in prior reviews, certain Dofasco sales have undergone minor further processing in the United States as a condition of sale. The Department has deducted the price charged to Dofasco by the unaffiliated contractor for this minor further processing from gross unit price to determine U.S. price, consistent with section 772(d)(2) of the Act. See Certain Corrosion Resistant Carbon Steel Flat Products From Canada: Preliminary Results of Antidumping Duty Administrative Review, 68 FR 53105, 53106 (September 9, 2003), unchanged in Final Results of 9^th Review, 69 FR 2566, and accompanying Issues and Decision Memorandum at Comment 4.

Stelco's EP: The Department calculated Stelco's starting price as its gross unit price to its unaffiliated U.S. customers, taking into account, where necessary, billing adjustments and early payment discounts, pursuant to section 772(a) of the Act. Where applicable, the Department made deductions from the starting price for movement expenses (foreign inland freight, domestic brokerage, and international freight) pursuant to section 772(c) of the Act.

Normal Value

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 five percent or more of the aggregate volume of U.S. sales), we compared the volume of each respondent's home market sales of the foreign like product to the volume of U.S. sales of subject merchandise. See section 773(a)(1) of the Act. Based on this comparison, we determined for both Dofasco and Stelco that the quantity of sales in their home market exceeded five percent of their sales of CORE to the United States. See section 351.404(b) of the Department's regulations. Therefore, in accordance with section 773(a)(1)(B)(i) of the Act, we have based NV on the price at which the foreign like product was first sold for consumption in the home market, in the usual commercial quantities, in the ordinary course of trade, and, to the extent practicable, at the same level of trade (LOT) as the EP or CEP. See “ Level of Trade” section below.

Affiliated Party Transactions and Arm's-Length Test

We used sales to affiliated customers in the home market only where we determined such sales were made at arm's-length prices (i.e., at prices comparable to the prices at which the respondent sold identical merchandise to unaffiliated customers). See section 351.403(c) of the Department's regulations. To test whether the sales to affiliates were made at arm's-length prices, we compared the unit prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, discounts and rebates, and packing. See id. In accordance with the Department's practice, if the prices charged to an affiliated party were, on average, between 98 and 102 percent of the prices charged to unaffiliated parties for merchandise identical or most similar to that sold to the affiliated party, we consider the sales to be at arm's-length prices. See section 351.403(c) of the Department's regulations; Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186 (November 15, 2002). Where the affiliated party transactions did not pass the arm's-length test, all sales to that affiliated party have been excluded from the NV calculation. Because the aggregate volume of the sales to these affiliates is less than 5 percent of total home market sales, we did not request downstream sales. See section 351.403(d) of the Department's regulations.

Price to Price Comparisons

For those product comparisons for which there were HM sales of like product in the ordinary course of trade, we based NV on home market prices to affiliated (when made at prices determined to be arms-length) or unaffiliated parties, in accordance with section 773(a)(1)(A) and (B) of the Act. We made adjustments for differences in cost attributable to differences in physical characteristics of the merchandise, pursuant to section 773(a)(6)(C)(ii) of the Act, and for differences in direct selling expenses, in accordance with 773(a)(6)(C)(iii) of the Act and section 351.410 of the Department's regulations. We relied on our model match criteria in order to match U.S. sales of subject merchandise to comparison sales of the foreign like product based on the reported physical characteristics of the subject merchandise. Where there were no sales of identical merchandise in the home market to compare to U.S. sales, we compared U.S. sales to the next most similar foreign like product on the basis of the characteristics and reporting instructions listed in the Department's questionnaire. See section 771(16) of the Act.

Dofasco: When comparing Dofasco's Canadian sales to its EP sales, the Department calculated Dofasco's starting price as its gross unit price, taking into account, where necessary, billing adjustments and early payment discounts, pursuant to section 773(a)(1)(A) of the Act. In accordance with section 351.401(c) of the Department's regulations, we added other revenue (e.g., inland freight revenue), where applicable. Pursuant to section 773(a)(6)(B)(ii) of the Act, we made deductions for movement expenses (e.g., inland freight and warehousing), when appropriate. In accordance with sections 773(a)(6)(A) and (B) of the Act, we deducted home market packing and added U.S. packing costs. In accordance with section 773(a)(6)(C)(iii) of the Act and section 351.410(c-d) of the Department's regulations, we deducted home market direct selling expenses (e.g., credit, warranty, and royalty) and added U.S. direct selling expenses. Pursuant to section 351.410(e) of the Department's regulations, we offset any commissions paid on EP sales to the United States by deducting home market indirect selling expenses up to U.S. commissions. In comparing Dofasco's EP sales to Canadian sales made at a different LOT, where we found a pattern of price difference, we made an LOT adjustment to NV in accordance with section 773(a)(7)(A) of the Act. See “Level of Trade” below. We made further adjustments for differences in costs attributable to differences in physical characteristics of merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.

When comparing Dofasco's Canadian sales to its CEP sales, the Department calculated Dofasco's starting price as its gross unit price, taking into account, where necessary, billing adjustments and early payment discounts, pursuant to section 773(a)(1)(A) of the Act. In accordance with section 351.401(c) of the Department's regulations, we added other revenue (e.g., inland freight revenue), where applicable. Pursuant to section 773(a)(6)(B)(ii) of the Act, we made deductions for movement expenses (e.g., inland freight and warehousing), when appropriate. In accordance with sections 773(a)(6)(A) and (B) of the Act, we deducted home market packing and added U.S. packing costs. In accordance with section 773(a)(6)(C)(iii) of the Act and section 351.410(c-d) of the Department's regulations, we deducted home market direct selling expenses, including warranty and credit expenses. Since we were able to find a pattern of price difference in each instance where we compared Dofasco's CEP sales to Canadian sales made at a different LOT, we made an LOT adjustment to NV in accordance with section 773(a)(7)(A) of the Act. We made further adjustments for differences in costs attributable to differences in physical characteristics of merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.

Stelco: The Department calculated Stelco's starting price as its gross unit price, taking into account, where necessary, billing adjustments and early payment discounts, pursuant to section 773(a)(1)(A) of the Act. In accordance with section 351.401(c) of the Department's regulations, we added other revenue (e.g., inland freight revenue), where applicable. Pursuant to section 773(a)(6)(B)(ii) of the Act, we made deductions for movement expenses (e.g., inland freight and warehousing), when appropriate. In accordance with sections 773(a)(6)(A) and (B) of the Act, we deducted home market packing and added U.S. packing costs. In accordance with section 773(a)(6)(C)(iii) of the Act and section 351.410(c-d) of the Department's regulations, we deducted home market direct selling expenses (e.g., credit, warranty, technical services, and advertising) and added U.S. direct selling expenses. We made further adjustments for differences in costs attributable to differences in physical characteristics of merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.

Cost Of Production Analysis

The Department disregarded certain Dofasco and Stelco sales that failed the cost test in the most recently completed review. See Preliminary Results of 11^th Review and Final Results of 11^th Review. We, therefore, have reasonable grounds to believe or suspect, pursuant to section 773(b)(2)(A)(ii) of the Act, that sales of the foreign like product under consideration for the determination of NV in this review may have been made at prices below the cost of production (COP). Thus, pursuant to section 773(b)(1) of the Act, we examined whether Dofasco's and Stelco's sales in the home market were made at prices below the COP.

We compared sales of the foreign like product in the home market with model-specific COP figures in the POR. In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of the costs of materials and fabrication employed in producing the foreign like product, plus selling, general and administrative (SG&A) expenses, and financial expenses and packing. In our sales-below-cost analysis, we used home market sales and COP information provided by Dofasco and Stelco in their questionnaire responses. See Dofasco's January 17, 2006 section D Questionnaire Response; see also Stelco's December 19, 2005 section D Questionnaire Response.

We compared the weighted-average COPs 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 the COP. In determining whether to disregard home market sales made at prices below the COP, we examined whether such sales were made (1) within an extended period of time in substantial quantities, and (2) at prices which permitted the recovery of all costs within a reasonable period of time in the normal course of trade, in accordance with sections 773(b)(1)(A) and (B) of the Act.² On a product-specific basis, we compared the COP to home market prices, less any movement charges, discounts and rebates, and direct and indirect selling expenses. See Treatment of Adjustments and Selling Expenses in Calculating the Cost of Production (“COP”) and Constructed Value (“CV”) Import Policy Bulletin (March 25, 1994).

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of a respondent's sales of a given model were at prices less than the COP, we did not disregard any below-cost sales of that model because the below-cost sales were not made in substantial quantities within an extended period of time. Where 20 percent or more of a respondent's sales of a given model were at prices less than the COP, we disregarded the below-cost sales because they were made in substantial quantities within an extended period of time, in accordance with sections 773(b)(2)(B) and (C) of the Act. Because we compared prices to average costs in the POR, we also determined that the below-cost prices did not permit the recovery of costs within a reasonable period of time, in accordance with section 773(b)(1)(B) of the Act.

In certain instances, we found that more than 20 percent of Dofasco's and Stelcos' home market sales of a given model(s) during the POR were at prices below the COP, and, in addition, 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 therefore excluded the below cost sales and used the remaining sales, if any, as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

Constructed Value

In accordance with section 773(a)(4) of the Act, we used constructed value (CV) as the basis for NV when we could not determine NV because there were no above-cost contemporaneous sales of identical or similar merchandise in the comparison market. We calculated CV in accordance with section 773(e) of the Act, including the cost of materials and fabrication, SG&A expenses, and profit. In accordance with section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on the amounts incurred and realized by the respondent in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the home market. Where NV is based on CV, we determine the NV LOT based on the LOT of the sales from which we derive selling expenses, SG&A expenses, and profit for CV, where possible.

Dofasco: We used CV as the basis for NV for sales in which there were no usable contemporaneous sales of the foreign like product in the comparison market, in accordance with section 773(a)(4) of the Act. We calculated CV in accordance with section 773(e) of the Act. We added reported materials, labor, and factory overhead costs to derive the cost of manufacture (COM), in accordance with section 773(e)(1) of the Act. We then added interest expenses, SG&A expenses, profit, and U.S. packing expenses to derive the CV (and added U.S. credit for comparison to EP), in accordance with sections 773(e)(2) and (3) of the Act. We calculated profit based on the total value of sales and total COP reported by Dofasco in its questionnaire response, in accordance with section 773(e)(2)(A) of the Act. Finally, we deducted comparison market credit expenses from CV (and added U.S. credit) to calculate the foreign unit price in dollars (FUPDOL), pursuant to section 773(e)(2)(B) of the Act. Since Dofasco did not report its selling expenses, G&A expenses, and profit that we used for CV on an LOT basis, we were unable to identify a CV LOT.

Level Of Trade

Section 773(a)(1)(B)(i) of the Act states that, to the extent practicable, the Department will calculate NV based on sales at the same LOT as the EP or CEP. Sales are made at different LOTs if they are made at different marketing stages (or their equivalent). See section 351.412(c)(2) of the Department's regulations. Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stages of marketing. Id.; see also Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa, 62 FR 61731, 61732 (November 19, 1997) (South African Plate Final). In order to determine whether the comparison sales were at different stages in the marketing process than the U.S. sales, we reviewed the distribution system in each market (i.e., the chain of distribution),^[3] including selling functions,⁴ class of customer (customer category), and the level of selling expenses for each type of sale.

Pursuant to section 773(a)(1)(B)(i) of the Act, in identifying levels of trade for EP and comparison market sales (i.e., NV based on either home market or third country prices), we consider the starting prices before any adjustments. In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determined NV based on sales made in the comparison market at the same LOT as the CEP sales. The NV LOT is based on the starting price of the sales in the comparison market. In Micron Technology, Inc. v. United States, 243 F.3d 1301, 1315 (Fed. Cir. 2001) (“Micron Technology”), the Court of Appeals for the Federal Circuit held that the statute unambiguously requires Commerce to remove the selling activities set forth in section 772(d) of the Act from the CEP starting price prior to performing its LOT analysis. As such, for CEP sales, the U.S. LOT is based on the starting price of the sales, as adjusted under section 772(d) of the Act. Consistent with Micron Technology, the Department will adjust the U.S. LOT of Dofasco's CEP sales, pursuant to section 772(d) of the Act, prior to performing the LOT analysis, as articulated by section 351.412 of the Department's regulations.

When the Department is unable to match U.S. sales to sales of the foreign like product in the comparison market at the same LOT as the EP or CEP, the Department may compare the U.S. sale to sales at a different LOT in the comparison market. In comparing EP or CEP sales to Canadian sales made at a different LOT, and where we found patterns of price differences, we made an LOT adjustment to NV in accordance with section 773(a)(7)(A) of the Act. Finally, for CEP sales only, if the NV LOT is more remote from the factory than the CEP LOT and we are unable to make a level of trade adjustment, the Department shall grant a CEP offset, as provided in section 773(a)(7)(B) of the Act. See South African Plate Final, 62 FR at 61732-33.

Dofasco LOT Analysis

We obtained information from Dofasco regarding the marketing stages involved in making the reported home market and U.S. sales, including a description of the selling activities performed by the respondents for each channel of distribution. See Dofasco's December 22, 2005 section A Questionnaire Response. In the current review, as in the previous review, Dofasco claimed that sales in both the home market and the U.S. market were made at different LOTs. See Dofasco's December 22, 2005 section A Questionnaire Response at A26 to 28. In the previous review, we concluded that Dofasco did sell at different LOTs. See Memorandum from Douglas Kirby (AD/CVD Case Analyst) through Sean Carey (Acting Program Manager) to the File; Certain Corrosion-Resistant Carbon Steel Flat Products from Canada: Analysis of Dofasco Inc. (Dofasco) and Sorevco for the Final Results, (March 16, 2006) (Dofasco Final Analysis Memorandum 11^th Review), on file in the CRU.

We examined the selling activities associated with sales reported by Dofasco to three distinct channels of distribution (automotive, construction, and service centers) in the home market. See Dofasco Preliminary Analysis Memorandum. We find that home market sales to the construction and service center customer categories were similar with respect to selling and marketing, technical service, freight services, and inventory. Therefore, we find that these customer categories constituted a distinct level of trade (LOTH2). We find that home market sales to automotive customer category differed significantly from LOTH2 sales with respect to sales process, freight services, and technical service, and therefore, constitute a distinct level of trade (LOTH1). Thus, based upon our analysis of the home market, we find that LOTH1 and LOTH2 constitute two different levels of trade in the home market.

Dofasco reported EP sales through two channels of distribution: Channel 1 including sales to automotive, service centers, and construction, and Channel 4 sales to construction. See Dofasco's December 22, 2005 section A Questionnaire Response at A-19 and A-20. We examined the selling activities associated with sales to construction and service center categories through these channels and found them to be similar with respect to selling and marketing, technical service, freight, and inventory. Therefore, we find that these two channels of distribution to these customer categories constituted a distinct level of trade (LOTU2). We find that sales to the automotive customer category differed significantly from LOTU2 sales with respect to selling and marketing and technical service, but were similar with respect to freight and inventory. Since the sales and marketing and technical service functions comprise significant selling activities, we find that these factors are determinative in finding that sales to this automotive customer category constitute a separate level of trade (LOTU1). Thus, based upon our analysis of Dofasco's EP sales, we find that sales to automotive (LOTU1) and sales to construction/manufacturers and service centers (LOTU2) constitute two different levels of trade.

Dofasco reported two channels of distribution related to its CEP sales to automotive customers through Dofasco USA. Pursuant to Micron Technology, we excluded any sales activities undertaken by DUSA and only considered the selling activities provided by Dofasco in our LOT analysis. Dofasco reported that these two CEP channels of distribution had the same selling functions and thus constitute a single level of trade. We analyzed the selling functions in both CEP channels and found that Dofasco's CEP sales constituted a single level of trade (LOTU3).

We then compared the two EP levels of trade (LOTU1 and LOTU2) and one CEP level of trade (LOTU3) to the two home market LOTs. We found that LOTU2 differed considerably from LOTH1 with respect to selling and marketing, technical service and freight. However, LOTU2 was similar to LOTH2 with respect to selling and marketing, technical service, freight, and inventory. We also found that LOTU1 differed considerably from LOTH2 with respect to technical service. However, LOTU1 was similar to LOTH1 with respect to selling and marketing, technical service, freight, and inventory. We also found that LOTU3 differed considerably from LOTH2 with respect to technical service and freight. However, LOTU3 was similar to LOTH1 with respect to selling and marketing, technical service, freight, and inventory. Consequently, we are matching LOTU2 sales to sales at the same level of trade in the home market (LOTH2), and LOTU1 and LOTU3 sales to sales at the same level of trade in the home market (LOTH1). Where we could not match products at the same LOT, and there was a pattern of consistent price differences between different LOTs, we made an LOT adjustment. See section 773(a)(7)(A) of the Act; see also Dofasco Preliminary Analysis Memorandum.

Stelco LOT Analysis

Stelco stated in its response that it was not claiming an LOT adjustment. However, Stelco did provide information regarding its selling functions, which we analyzed. See Stelco's May 11, 2006 section A Questionnaire Response at A-6. In the home market, Stelco reported two channels of distribution (end-users and service centers).

We examined Stelco's chain of distribution and the selling activities in the home market. See Stelco Preliminary Analysis Memorandum, on file in the CRU. We found that Stelco's home market sales to end-users and service centers differed slightly with respect to freight services, but were similar for sales processes, inventory maintenance, and technical services. Therefore, we find that these customer categories constitute a single level of trade in the home market (LOTH1).

Stelco reported only EP sales through one channel of distribution to a single customer category in the United States, end-users. See Stelco's May 11, 2006 supplemental sections A, B, and C Questionnaire Response at A-5. Therefore, we have determined that Stelco has only a single LOT in the United States (LOTU2). Since there is only one Canadian LOT and that differs from the single U.S. LOT, we cannot quantify an LOT adjustment.

Currency Conversion

For purposes of the preliminary results, in accordance with section 773A of the Act, we made currency conversions based on the official exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank of New York.

Preliminary Results Of Review

As a result of this review, we preliminarily find that the following weighted-average dumping margins exist:

Manufacturer/Exporter	Margin
Dofasco Inc., Sorevco Inc., Do Sol Galva Ltd.	4.78 %%
Stelco Inc.	1.45 %%

Cash Deposit Requirements

If the preliminary results are adopted in the final results of review, the following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication of the final results of this administrative review, as provided in section 751(a)(1) of the Act: 1) the cash deposit rate for Dofasco, Sorevco, and DSG will be that established in the final results of this review for Dofasco (and entities collapsed with Dofasco); 2) the cash deposit rate for Stelco will be that established in the final results of this review; 3) for previously reviewed or investigated companies not covered in this review, the cash deposit rate will continue to be the company-specific rate published for the most recent period; 4) 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 subject merchandise; and 5) if neither the exporter nor the manufacturer is a firm covered in this or any previous proceeding conducted by the Department, the cash deposit rate will continue to be the “all others” rate established in the LTFV investigation, which is 18.71 percent. See Amended Final and Order. For shipments processed by DJG we will, 1) apply Dofasco's rate on merchandise supplied by Dofasco or DSG; 2) apply the company-specific rate on merchandise supplied by other previously reviewed companies; and, 3) apply the “all others” rate for merchandise supplied by companies which have not been reviewed in the past. These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Duty Assessment

Upon publication of the final results of this review, the Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. Pursuant to section 351.212(b)(1) of the Department's regulations, the Department calculates an assessment rate for each importer of the subject merchandise for each respondent. Stelco and Dofasco have reported entered values for all of their respective sales of subject merchandise to the United States during the POR. We have compared the entered values reported by Stelco and Dofasco with the entered values that they reported to CBP on their customs entries and preliminarily find that Stelco and Dofasco's reported entered values are reliable. See Stelco's Preliminary Analysis Memorandum and Dofascos's Preliminary Analysis Memorandum. Therefore, in accordance with section 351.212(b)(1) of the Department's regulations, we will calculate importer-specific ad valorem assessment rates on the basis of the ratio of the total amount of antidumping duties calculated for the examined sales and the total entered value of the examined sales. These rates will be assessed uniformly on all entries the respective importers made during the POR if these preliminary results are adopted in the final results of review. The Department will issue appropriate assessment instructions directly to CBP within 41 days of the final results of this review. See section 356.8(a) of the Department's regulations.

The Department clarified its “automatic assessment” regulation on May 6, 2003. See Antidumping and Countervailing Duty Proceedings: Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003) (Assessment Policy Notice). This clarification will apply to entries of subject merchandise during the period of review produced by companies included in these final results of reviews for which the reviewed companies did not know that the merchandise it sold to the intermediary (e.g., a reseller, trading company, or exporter) was destined for the United States. In such instances, we will instruct CBP to liquidate unreviewed entries at the all-others rate if there is no rate for the intermediary involved in the transaction. See Assessment Policy Notice for a full discussion of this clarification.

Public Comment

Pursuant to section 351.224(b) of the Department's regulations, the Department will disclose to any party to the proceeding the calculations performed in connection with these preliminary results, within five days after the date of publication of this notice. Pursuant to section 351.309(c)(ii) of the Department's regulations, interested parties may submit case briefs in response to these preliminary results no later than 30 days after the date of publication of this notice. Rebuttal briefs, limited to issues raised in case briefs, may be filed no later than 5 days after the time limit for filing case briefs in accordance with section 351.309(d)(1) of the Department's regulations. Parties who submit arguments in this proceeding 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 in accordance with section 351.309(d)(2) of the Department's regulations. Further, the Department requests that parties submitting briefs provide the Department with an additional copy of the public version of any such comments on a computer diskette. Case and rebuttal briefs must be served on interested parties in accordance with section 351.303(f) of the Department's regulations.

Any interested party may request a hearing within 30 days of publication of this notice in accordance with section 351.310(c) of the Department's regulations. Any hearing, if requested, will normally be held two days after the date for submission of rebuttal briefs in accordance with section 351.310(d)(1) of the Department's regulations. 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 written comments or at a hearing, within 120 days after the publication of this notice, unless extended. See section 751(a)(3)(A) of the Act; section 351.213(h) of the Department's regulations.

Notification To Importers

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

The preliminary results of this administrative review and this notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 31, 2006.

David M. Spooner,

Assistant Secretary for Import Administration.

Footnotes

1.  Section A of the questionnaire requests general information concerning a company's corporate structure and business practices, the merchandise under investigation 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 investigation. Section E requests information on further manufacturing.

2.  Section 773(b)(2)(ii)(B-C) of the Act defines extended period of time as a period that is normally 1 year, but not less than 6 months, and substantial quantities as sales made at prices below the cost of production that have been made in substantial quantities if (i) the volume of such sales represents 20 percent or more of the volume of sales under consideration for the determination of normal value, or (ii) the weighted average per unit price of the sales under consideration for the determination of normal value is less than the weighted average per unit cost of production for such sales.

3.  The marketing process in the United States and in the comparison markets begins with the producer and extends to the sale to the final user or consumer. The chain of distribution between the two may have many or few links, and the respondents' sales occur somewhere along this chain. In performing this evaluation, we considered the narrative responses of each respondent to properly determine where in the chain of distribution the sale occurs.

4.  Selling functions associated with a particular chain of distribution help us to evaluate the level(s) of trade in a particular market. For purposes of this preliminary determination, we have organized the common selling functions into four major categories: sales process and marketing support, technical service, freight and delivery, and inventory maintenance.