11 June 1997 Source: http://www.access.gpo.gov/su_docs/aces/aces140.html See related orders: http://jya.com/ita-ukraine.txt ----------------------------------------------------------------------- [Federal Register: June 11, 1997 (Volume 62, Number 112)] [Notices] [Page 31963-31967] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr11jn97-158] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [A-794-804] Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination; Certain Cut-to-Length Carbon Steel Plate from South Africa AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice of preliminary determination of sales at less than fair value and postponement of final determination. ----------------------------------------------------------------------- EFFECTIVE DATE: June 11, 1997. FOR FURTHER INFORMATION CONTACT: Charles Rast, or Robin Gray, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 482-5811, or (202) 482-0196, respectively. The Applicable Statute and Regulations Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Rounds Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are in reference to the regulations, codified at 19 CFR part 353, as they existed on April 1, 1996. Preliminary Determination We determine preliminarily that certain cut-to-length carbon steel plate from South Africa is being, or is likely to be, sold in the United States at less than fair value (LTFV), as provided in section 733 of the Act. The estimated margins are shown in the ``Suspension of Liquidation'' section of this notice. Case History Since the initiation of this investigation (61 FR 64051, December 3, 1996), the following events have occurred: On December 19, 1996, the United States International Trade Commission (ITC) issued an affirmative preliminary determination in this case (see ITC Investigations Nos. 731-TA-753-756). The ITC found that there is a reasonable indication that an industry in the United States is threatened with material injury by reason of imports from South Africa of certain cut-to-length carbon steel plate. On December 20, 1996, the Department issued its antidumping questionnaires to the following companies identified by petitioners as possible exporters of the subject merchandise: Iscor Limited (Iscor) and Highveld Steel and Vanadium Corporation Limited (Highveld). The questionnaire is divided into four sections. Section A requests general information concerning a company's corporate structure and business practices, the merchandise under investigation that it sells, and the sales of the merchandise in all of its markets. Sections B and C request home market sales listings and U.S. sales listings, respectively. Section D requests information on the cost of production (COP) of the foreign like product and constructed value (CV) of the subject merchandise. The Department conducted questionnaire presentations at Iscor on January 21-22, 1997, and at Highveld on January 23-24, 1997. In February 1997, Iscor and Highveld submitted responses to sections A, B, and C of the questionnaire. We issued supplemental questionnaires to the respondents in March 1997, and received supplemental questionnaire responses from both companies in April 1997. On February 12, 1997, Highveld requested that the Department use actual unadjusted daily exchange rates when performing currency conversions because of depreciation of the South African rand relative to the U.S. dollar during the POI. Petitioners objected to Highveld's request on February 24, 1997, arguing that Highveld failed to demonstrate that proper grounds exist for the Department to consider the fluctuation in the rand during the POI. On March 5, 1997, Highveld responded to petitioners' rebuttal. (See currency conversion section below.) On March 28, 1997, we postponed the preliminary determination until not later than May 14, 1997 (62 FR 14887), because we determined this investigation to be extraordinarily complicated within the meaning of section 733(c)(1)(B) of the Act. On March 31, 1997, petitioners alleged that both Highveld and Iscor had made sales in the home market at prices that were below the cost of production (COP), pursuant to section 773(b) of the Act. On April 9, 1997, the Department requested that petitioners provide additional information regarding their allegation on Iscor. The petitioners supplied the requested supplemental information on April 11, 1997. After analyzing petitioners' allegations, the Department determined that there were reasonable grounds to believe or suspect that Highveld and Iscor had made home market sales at prices below the cost of production. On May 1, 1997, the Department initiated a COP investigation of Highveld. On May 7, 1997, the Department initiated a COP investigation of Iscor. (See memorandum from Linda Ludwig to Richard O. Weible dated May 1, 1997, and May 7, 1997, respectively, on file in the Central Records Unit, Room B-099 of the Department of Commerce.) As a result of the Department's initiation of cost of production investigations, the Department requested, on May 1, 1997 and May 7, 1997, respectively, that Highveld and Iscor answer Section D of the original questionnaire. The Department extended Highveld's and Iscor's time to respond to Section D of the questionnaire to May 30, 1997 and June 4, 1997, respectively. Accordingly, we are not able to include a COP analysis in our preliminary determination. We will analyze the respondents' COP and CV data for our final determination. On April 15, 1997, petitioners submitted a request that the scope of their petitions be amended to include three items--plate in coil; plate made to carbon plate specifications regardless of alloy content; and plate sold to nominal plate thicknesses whose actual thickness is slightly less than the thickness of plate but within specified thickness tolerances. With respect to plate in coil, petitioners maintain that this product has essentially the same physical characteristics and end uses as cut-to-length plate. Petitioners further [[Page 31964]] claim that a post-initiation shift has occurred in the pattern of trade from cut-to-length plate to plate in coil form, and that such a development indicates that any eventual order on cut-to-length plate will be susceptible to circumvention. Petitioners submitted additional information on May 9, 1997. Respondents submitted extensive rebuttal comments on April 25, 1997, and May 30, 1997. Because of the very recent submission of arguments on these complex and technical subjects, we were unable to fully analyze all of the relevant information on the record prior to this preliminary determination. In order to fully examine petitioners' claims, we intend to carefully examine all evidence and argument on the record regarding this matter and issue a decision as soon as possible. On April 30, 1997 (62 FR 23433) we further postponed the preliminary determination until not later than June 3, 1997. On May 12, 1997, petitioners provided comments on deficiencies in Iscor's response to the Department's questionnaire, including Iscor's failure to provide several expense items on a transaction specific basis. The Department has reviewed the allocation methodology reported by Iscor for these items and has decided that for purposes of the preliminary determination we will allow the reported expense and cost data. However, at verification the Department will analyze the reported allocation methodology and examine Iscor's statement that it is unable to provide expense and cost data on a transaction specific basis. Postponement of Final Determination and Extension of Provisional Measures Pursuant to section 735(a)(2)(A) of the Act, on May 14, 1997, Highveld and Iscor requested that in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination. Our preliminary determination is affirmative, and Highveld and Iscor account for a significant proportion of exports of the subject merchandise. In addition, we are not aware of the existence of any compelling reasons for denying this request. As a result we are granting the postponement request, in accordance with section 735(a)(2)(A) of the Act. Therefore, the final determination will be due not later than 135 days after the publication of this preliminary determination. (See memorandum from Joseph A. Spetrini to Robert S. LaRussa dated May 28, 1997.) Suspension of liquidation will be extended accordingly. See Preliminary Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled from Japan, 61 FR 8029 (March 1, 1996). Scope of the Investigation The products covered by this investigation are hot-rolled iron and non-alloy steel 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 thickness of not less than 4 mm, not in coils and without patterns in relief), of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances; and certain iron and non-alloy steel flat-rolled products not in coils, of rectangular shape, hot-rolled, neither clad, plated, nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances, 4.75 mm or more in thickness and of a width which exceeds 150 mm and measures at least twice the thickness. Included as subject merchandise in this petition are flat-rolled products of nonrectangular 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 bevelled or rounded at the edges. This merchandise is currently classified in the Harmonized Tariff Schedule of the United States (HTS) under item numbers 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. Although the HTS subheadings are provided for convenience and customs purposes, our written description of the scope of this investigation is dispositive. Period of Investigation The period of investigation (POI) is October 1, 1995, through September 30, 1996. The period of this investigation comprises each exporter's four most recent fiscal quarters prior to the filing of the petition. Fair Value Comparisons To determine whether sales of the subject merchandise by respondents to the United States were made at less than fair value, we compared the Export Price (EP) or Constructed Export Price (CEP), where appropriate, to the Normal Value (NV), as described in the ``Export Price'' and ``Normal Value'' sections of this notice. In accordance with section 777A(d)(1)(A)(i) of the Act, we compared the weighted average EPs or CEPs to weighted-average NVs during the POI. In determining averaging groups for comparison purposes, we considered the appropriateness of such factors as physical characteristics and level of trade. (i) Physical Characteristics In accordance with section 771(16) of the Act, we considered all products covered by the description in the ``Scope of Investigation'' section of this notice, produced in South Africa by the respondents and sold in the home market during the POI, to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. 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 the Department's antidumping questionnaire. In making the product comparisons, we relied on the following criteria (listed in order of preference): paint, quality, specification and/or grade, heat treatments, standard thickness, standard width, whether or not checkered, and descaling. It is our practice where sales were made in the home market on a different weight basis from the U.S. market (theoretical versus actual weight), to convert all quantities to the same weight basis, using the conversion factors supplied by the respondents, before making our fair-value comparisons. (See Final Determination of Sales at Less Than Fair Value: Cut-to-Length Carbon Steel Plate from Finland, 58 FR 37122 (July 9, 1993) and Final Determination of Sales at Less Than Fair Value: Certain Welded Stainless Steel Pipes from Taiwan, 57 FR 53705 (November 12, 1992.)) For Iscor, we noted inexplicable discrepancies between the data reported in the quantity and the converted quantity fields. Therefore, for the preliminary results the converted quantities provided by Iscor were disregarded. Consequently, we conducted our analysis based on data reported in the quantity field, which contains weights based on either actual or theoretical weight. We are requesting additional information from Iscor to clarify the conversion weights. We will look at this issue more closely at verification and invite parties to comment on it. [[Page 31965]] (ii) Level of trade To the extent practicable, we determine normal value for sales at the same level of trade as the U.S. sales (either EP or CEP). When there are no sales at the same level of trade we compare U.S. sales to home market (or, if appropriate third country) sales at a different level of trade. For both EP and CEP, the relevant transaction for level of trade is the sale from the exporter to the importer. While the starting price for CEP is that of a subsequent resale to an unaffiliated buyer, the construction of the EP results in a price that would have been charged if the importer had not been affiliated. The CEP is the price obtained after removing from the first resale to an independent U.S. customer profit and expenses deducted under section 772(d) of the Act. These expenses represent activities undertaken by, or on behalf of, the affiliated importer. The deduction of expenses under section 772(d) will normally yield a different level of trade for the CEP than for the later resale which is used for the starting price. Movement charges, and duties and taxes deducted under section 772(c) of the Act do not represent activities of the affiliated importer and are not removed as they do not affect the level of trade. The NV level of trade is that of the starting price of sales in the home market. When NV is based on constructed value, the level of trade is that of the sales from which we derive SG&A and profit. To determine whether home market sales are at a different level of trade than U.S. sales, we examine whether the home market sales are at different stages in the marketing process than the U.S. sales. The marketing process in both markets begins with goods being sold by the producer and extends to the sale to the final user. The final user could be an individual consumer or an industrial user, but the marketing process for all goods starts with a producer and ends with a user. The chain of distribution between the two may have many or few links, and somewhere in this process the respondent's sales occur. In the United States this is generally to an importer, whether independent or affiliated. We review and compare the distribution systems in the home market and U.S. export markets, including selling functions, class of customer, and the extent and level of selling expenses for alleged level of trade. Customer categories such as distributor, original equipment manufacturer (OEM), or wholesaler are useful as they are commonly used to describe levels of trade by respondents, but without substantiation, are insufficient to establish that a claimed level of trade is valid. An analysis of selling functions substantiates or invalidates claimed customer classifications based on levels of trade. If the claimed levels are different, so should be the selling functions performed in selling to those levels. Conversely, if levels of trade are nominally the same, so should be the selling functions performed. Different levels of trade necessarily involve differences in selling functions, but differences in selling functions, even substantial ones, are not alone sufficient to establish a difference in the level of trade. A difference in level of trade is characterized by purchasers at different places in the chain of distribution and sellers performing qualitatively or quantitatively different functions in selling to them. When we compare home market sales at a different level of trade than U.S. sales, we make a level-of-trade adjustment if the difference in level of trade affects price comparability. Any effect on price comparability is determined by examining sales at different levels of trade in a single market, the home market. Any price effect must be manifested in a pattern of consistent price differences between home market sales used for comparison and sales at the equivalent level of trade of the export transaction. We calculate the difference in the average of the net prices of the same models sold at different levels of trade. Net prices are used because any difference will be due to differences in level of trade rather than other factors. The average difference in net prices is used to adjust the NV when it is different from the level of trade of the export sale. If there is a pattern of no price differences, then the difference in level of trade does not have a price effect, and no adjustment is necessary. In terms of granting a CEP offset, the statute also provides an adjustment to NV if it is compared to U.S. sales at a different level of trade, provided the NV level is more remote from the factory, and we are unable to determine whether there is or is not a price effect of different levels of trade in the home market. This latter situation can occur where there is no home market level of trade equivalent to the U.S. sales level, or where there is an equivalent home market level, but the data are insufficient to support a conclusion on price effect. The CEP offset is the lower of the two following: The indirect selling expenses on the home market sale; or The indirect selling expenses deducted from the starting price used to calculate CEP. The CEP offset is not automatic each time export price is constructed. It is only applicable when the level of trade of the affiliated importer is less advanced than the level of trade of the home market purchaser, and the available data do not provide an appropriate basis for determining whether there is an effect on price comparability. Iscor did not claim a difference in level of trade between its U.S. (EP) and home market sales. Its response indicates that there are significant differences between the selling functions it performs for sales to its unaffiliated U.S. customers, which are resellers, and either home market local merchants or end-users. Iscor's sales to U.S. customers appear to be at a different stage in the marketing process from either local merchants or end-users in the home market. However, we are unable to determine if this difference in level of trade affects price comparability, as all of Iscor's home market sales are at the same level of trade. For these preliminary results, we have treated all of Iscor's home market sales as being at a single level of trade and we have made no level of trade adjustment when matching its U.S. sales to these home market sales. We will look at this issue more closely at verification and invite parties to comment on it. Highveld claimed sales were made in the home market at two different levels of trade--large-scale service centers/distributors and smaller service centers/distributors. Highveld claims that the difference between these levels is that additional time is spent servicing the larger service centers and that they receive preferential treatment. Highveld claims that all of its U.S. sales were made at one level of trade. That is, Highveld's CEP sales, after making the applicable adjustments, are at the same level of trade as its EP sales. Based on our analysis of the selling functions performed by Highveld, we found that a single level of trade exists in each market. We found that with respect to the home market, large-scale service centers/distributors and smaller service centers/distributors are not at different stages in the marketing process. Also, there do not appear to be any significant differences in selling functions between these two groups of customers, although Highveld may provide certain functions to large-scale service centers/distributors at a higher intensity. We then compared selling functions in the U.S. market and in the home market. There appear to be several differences between the selling [[Page 31966]] functions performed for sales to U.S. and home market customers, notably with respect to just-in-time delivery, advertising, market research and product development, which are provided in the home market but not in the United States. However, we are unsure as to whether U.S. and home market sales--both of which include sales to large resellers-- are at different stages in the marketing process. Nor is there sufficient information on the record to determine the significance of the noted differences in selling functions. For these preliminary results we find, therefore, that sales in the home market and in the U.S. market are at the same level of trade and that no level of trade adjustment is warranted. As there is no difference in level of trade, Highveld does not qualify for a CEP offset. Therefore, we made no adjustment. We will look at this issue more closely at verification and invite parties to comment on it. (iii) Currency Conversion For purposes of the preliminary determination, we made currency conversions using the official daily exchange rate in effect on the date of the U.S. sale. These exchange rates were derived from actual daily exchange rates certified by the Federal Reserve Bank of New York. (See Change in Policy Regarding Currency Conversions, 61 FR 9434 (March 8, 1996.)) 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.'' In accordance with the Department's practice, we have determined that a fluctuation exists when the daily exchange rate differs from a benchmark by 2.25 percent. (See, 61 FR at 9435.) The benchmark is defined as the rolling average of rates for the past 40 business days. When we determine that a fluctuation exists, we substitute the benchmark 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. Such an adjustment period is required only when a foreign currency is appreciating against the U.S. dollar and was not applicable in this case. In this investigation, there were certain days of the POI for which we substituted the benchmark for the daily rate because the daily rate involved a fluctuation. We saw no reason in this case to deviate from established practice, since South Africa is not a high-inflation economy, and the decline in the rand was not so precipitous and large as to reasonably preclude the occurrence of fluctuations. Export Price We calculated the price of United States sales based on EP, in accordance with section 772(a) of the Act, when the subject merchandise was sold to unaffiliated purchasers in the United States prior to the date of importation. In certain instances, however, we determined that CEP as defined in section 772(b) of the Act, was a more appropriate basis for the price of the United States sales. These instances involved sales made by Highveld to its U.S. affiliate, Newco Steel Trading (NST), which negotiates prices and quantities with its U.S. customers, and sells the subject merchandise to the U.S. customers. Newco Steel Trading company operates as Highveld's exclusive distributor for sales of the subject merchandise in the United States, and as such, undertakes selling activities exceeding those of processing sales-related documentation. Specifically, NST negotiates prices for particular products with its customers on a case-by-case basis, pays Highveld for the product order based on a price agreement, and takes title to the merchandise which is physically transferred to U.S. customers by common carriers. For both respondents, we calculated EP based on packed prices to unaffiliated customers in the United States. Where appropriate, we made deductions from the starting price for foreign inland freight, international freight, foreign brokerage and handling, marine insurance, early payment discounts, pre-sale warehousing expenses, and U.S. Customs duties. We calculated CEP based on packed prices to unaffiliated customers in the United States. Where appropriate, we made deductions for the starting price for the foreign inland freight, foreign brokerage and handling, international freight, marine insurance, U.S. Customs duties, commissions, inventory carrying expenses, credit expenses, and indirect selling expenses. Finally, we made an adjustment for the amount of profit allocated to these expenses, in accordance with section 772(d)(3) of the Act. Normal Value Based on a comparison of the aggregate quantity of home-market and U.S. sales, we determined that the quantity of the foreign like product sold in the exporting country was sufficient to permit a proper comparison with the sales of the subject merchandise to the United States, pursuant to section 773(a) of the Act. Therefore, in accordance with section 773(a)(1)(B)(i) of the Act, we based NV on the price which the foreign like product was first sold for consumption in the home market, in the usual commercial quantities and in the ordinary course of trade. We excluded from our analysis a limited number of reported home market sales made by Iscor to a member country of the Southern African Customs Union, which we determined were not home market sales. Where appropriate, we deducted rebates, discounts, credit, inland freight, pre-sale warehousing, and packing. We also made adjustments, where appropriate, for home-market indirect selling expenses to offset U.S. commissions in EP and CEP comparisons. In comparisons to EP and CEP sales, we increased NV by U.S. packing costs in accordance with section 773(a)(6)(A) of the Act. We also made adjustments to NV for physical differences in merchandise (``diffmer''). The Department notes that it has certain questions regarding the diffmer adjustments calculated from Highveld's reported data. In particular, significantly different diffmer adjustments were calculated for pairs of U.S. and home market product codes, which apparently differed only by the same difference in specification. We will look further at this issue at verification and invite comments from interested parties. Verification As provided in section 782(i) of the Act, we will verify the information used 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, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. We will instruct Customs Service to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds EP or CEP, as indicated in the chart below. These suspension of liquidation instructions will remain in effect until further notice. The weighted-average dumping margins are as follows: [[Page 31967]] ------------------------------------------------------------------------ Weighted- average Manufacturer/producer/exporter margin percentage ------------------------------------------------------------------------ Highveld................................................... 15.77 Iscor...................................................... 31.45 All Other.................................................. 23.77 ------------------------------------------------------------------------ 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 120 days after the date of this preliminary determination or 45 days after our final determination whether these imports are materially injuring, or threatened with material injury, by reason of imports, or sales (or the likelihood of sales) for importation, of the subject merchandise. Public Comment In accordance with 19 CFR 353.38, case briefs in at least ten copies must be submitted to the Assistant Secretary for Import Administration no later than Friday, September 5, 1997, and rebuttal briefs, no later than Friday, September 12, 1997. A list of authorities used and a summary of arguments made in the briefs should accompany these briefs. Such summary should be limited to five pages total, including footnotes. We will hold a public hearing, if requested, to afford interested parties an opportunity to comment on arguments made in case or rebuttal briefs. At this time, the hearing is scheduled for Friday, September 19, 1997, time and place to be determined, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 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 ten 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. In accordance with 19 CFR 353.38(b) 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 135 days after the publication of this notice in the Federal Register. This determination is published pursuant to section 733(f) of the Act. Dated: June 3, 1997. Robert S. LaRussa, Acting Assistant Secretary for Import Administration. [FR Doc. 97-15292 Filed 6-10-97; 8:45 am] BILLING CODE 3510-DS-P