Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products From Taiwan

Federal RegisterJan 7, 2000

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DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-834]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Certain Cold-Rolled

Flat-Rolled Carbon-Quality Steel Products From Taiwan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 7, 2000.

FOR FURTHER INFORMATION CONTACT: Abdelali Elouaradia or Keir Whitson at

(202) 482-0498 and (202) 482-1777, respectively; Import Administration,

Room 1870, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW, Washington, DC

20230.

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 Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to Department of Commerce (Department)

regulations refer to the regulations codified at 19 CFR part 351 (April

1999).

Preliminary Determination

We preliminarily determine that certain cold-rolled flat-rolled

carbon-quality steel products (cold-rolled steel products) from Taiwan

are being sold, or are 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 of sales at LTFV are shown in the Suspension of

Liquidation section of this notice.

Case History

This investigation was initiated on June 21, 1999. 1 See

Initiation of Antidumping Duty Investigations: Certain Cold-Rolled

Flat-Rolled Carbon-Quality Steel Products from Argentina, Brazil, the

People's Republic of China, Indonesia, Japan, the Russian Federation,

Slovakia, South Africa, Taiwan, Thailand, Turkey, and Venezuela, 64 FR

34194 (June 25, 1999) (Initiation Notice). Since the initiation of the

investigation, the following events have occurred.

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\1\ The petitioners in this investigation are Bethlehem Steel

Corporation, Gulf States Steel, the Independent Steelworkers Union,

Ispat Inland Steel, LTV Steel Company Inc., National Steel

Corporation (not a petitioner in the Japan case), Steel Dynamics,

U.S. Steel Group (a unit of USX Corporation), Weirton Steel

Corporation, and United Steelworkers of America.

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On June 22, 1999, the Department issued Section A antidumping

questionnaires to all known exporters of subject merchandise in Taiwan,

including all of those named in the original petition. 2

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\2\ 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. Section C requests a complete listing of U.S. sales.

Section D requests information on the cost of production (COP) of

the foreign like product and the constructed value (CV) of the

merchandise under investigation.

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On July 9, 1999, the Department selected China Steel Corporation

(CSC) as a mandatory respondent in this investigation and issued

Sections B, C, and D of the antidumping questionnaire to CSC. See

Respondent Selection Memo, July 9, 1999. In addition, on July 19, 1999,

we received a request from Taiwan Tokkin Co., Ltd. (Taiwan Tokkin) that

it be included as a voluntary respondent in this investigation.

Subsequently, on August 6, 1999, we accepted Taiwan Tokkin as a

voluntary respondent. However, we did not issue the questionnaire to

Taiwan Tokkin because on July 22, 1999, the company informed us that it

had already obtained copies of each section.

Responses to various sections of the Department's questionnaire

were received from Taiwan Tokkin and CSC between July and September

1999. We issued supplemental questionnaires where appropriate.

On July 16, 1999, the United States International Trade Commission

(the ITC) preliminarily determined that there is a reasonable

indication that imports of the products under investigation are

materially injuring the United States industry. See Certain Cold-Rolled

Steel Products From Argentina, Brazil, China, Indonesia, Japan, Russia,

Slovakia, South Africa, Taiwan, Thailand, Turkey, and Venezuela:

Determinations, 64 FR 41458 (July 30, 1999).

In their comments on Taiwan Tokkin's questionnaire responses,

petitioners raised the issue of whether the country of origin of Taiwan

Tokkin's exports to the United States was actually Japan. Subsequently,

Taiwan Tokkin submitted comments on this issue on September 27, 1999.

Additional comments were submitted by petitioners and Taiwan Tokkin on

October 15, 1999, and, October 21, 1999, respectively. See Taiwan

Tokkin--Country of Origin, below.

On November 5, 1999, the Department postponed the preliminary

determination in this case for 30 days in accordance with section

733(c) of the Act and 19 CFR 351.205(b)(2). See Notice of Postponement

of Preliminary Antidumping Duty Determinations: Certain Cold-Rolled

Flat-Rolled Carbon-Quality Steel Products from Indonesia, the People's

Republic of China, Taiwan and Turkey, 64 FR 61825 (November 15, 1999).

Postponement of Final Determination and Extension of Provisional

Measures

Section 735(a)(2) of the Act provides that a final determination

may be postponed until not later than 135 days after the date of the

publication of the preliminary determination if, in the event of an

affirmative preliminary determination, a request for such

[[Page 1096]]

postponement is made by exporters who account for a significant

proportion of exports of the subject merchandise or if, in the event of

a negative preliminary determination, a request for such postponement

is made by the petitioners. The Department's regulations, at 19 CFR

351.210(e)(2), require that requests by respondents for postponement of

a final determination be accompanied by a request for extension of

provisional measures from a four-month period to not more than six

months.

On October 25, 1999, CSC requested that, in the event of an

affirmative preliminary determination in this investigation, the

Department postpone its final determination until not later than 135

days after the date of the publication of an affirmative preliminary

determination in the Federal Register. CSC also included a request to

extend the provisional measures to not more than six months.

Accordingly, since we have made an affirmative preliminary

determination, we have postponed the final determination until not

later than 135 days after the date of the publication of the

preliminary determination.

Period of Investigation

The period of the investigation (POI) is April 1, 1998, through

March 31, 1999.

This period corresponds to each respondent's four most recent

fiscal quarters prior to the month of the filing of the petition (i.e.,

June 1999).

Scope of Investigation

For purposes of this investigation, the products covered are

certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel

products, neither clad, plated, nor coated with metal, but whether or

not annealed, painted, varnished, or coated with plastics or other non-

metallic substances, both in coils, 0.5 inch wide or wider (whether or

not in successively superimposed layers and/or otherwise coiled, such

as spirally oscillated coils), and also in straight lengths, which, if

less than 4.75 mm in thickness having a width that is 0.5 inch or

greater and that measures at least 10 times the thickness; or, if of a

thickness of 4.75 mm or more, having a width exceeding 150 mm and

measuring at least twice the thickness. The products described above

may be rectangular, square, circular or other shape and include

products of either rectangular or 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.

Specifically included in this scope are vacuum degassed, fully

stabilized (commonly referred to as interstitial-free (IF)) steels,

high strength low alloy (HSLA) steels, and motor lamination steels. IF

steels are recognized as low carbon steels with micro-alloying levels

of elements such as titanium and/or niobium added to stabilize carbon

and nitrogen elements. HSLA steels are recognized as steels with micro-

alloying levels of elements such as chromium, copper, niobium,

titanium, vanadium, and molybdenum. Motor lamination steels contain

micro-alloying levels of elements such as silicon and aluminum.

Steel products included in the scope of this investigation,

regardless of definitions in the Harmonized Tariff Schedules of the

United States (HTSUS), are products in which: (1) Iron predominates, by

weight, over each of the other contained elements; (2) the carbon

content is 2 percent or less, by weight, and; (3) none of the elements

listed below exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or

2.25 percent of silicon, or

1.00 percent of copper, or

0.50 percent of aluminum, or

1.25 percent of chromium, or

0.30 percent of cobalt, or

0.40 percent of lead, or

1.25 percent of nickel, or

0.30 percent of tungsten, or

0.10 percent of molybdenum, or

0.10 percent of niobium (also called columbium), or

0.15 percent of vanadium, or

0.15 percent of zirconium.

All products that meet the written physical description, and in

which the chemistry quantities do not exceed any one of the noted

element levels listed above, are within the scope of this investigation

unless specifically excluded. The following products, by way of

example, are outside and/or specifically excluded from the scope of

this investigation:

SAE grades (formerly also called AISI grades) above 2300;

Ball bearing steels, as defined in the HTSUS;

Tool steels, as defined in the HTSUS;

Silico-manganese steel, as defined in the HTSUS;

Silicon-electrical steels, as defined in the HTSUS, that are

grain-oriented; Silicon-electrical steels, as defined in the HTSUS,

that are not grain-oriented and that have a silicon level exceeding

2.25 percent;

All products (proprietary or otherwise) based on an alloy ASTM

specification (sample specifications: ASTM A506, A507);

Silicon-electrical steels, as defined in the HTSUS, that are

not grain-oriented and that have a silicon level less than 2.25

percent, and

a) fully-processed, with a core loss of less than 0.14 watts/pound

per mil (.001 inches), or

b) semi-processed, with core loss of less than 0.085 watts/pound per

mil (.001 inches);

Certain shadow mask steel, which is aluminum killed cold-

rolled steel coil that is open coil annealed, has an ultra-flat,

isotropic surface, and which meets the following characteristics:

Thickness: 0.001 to 0.010 inches

Width: 15 to 32 inches

Chemical Composition

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Element................................................ C

Weight %............................................... Certain flapper valve steel, which is hardened and tempered,

surface polished, and which meets the following characteristics:

Thickness: 1.0 mm

Width: 152.4 mm

Chemical Composition

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Element........................... C Si Mn P S

Weight %.......................... 0.90-1.05 0.15-0.35 0.30-0.50 0.03 0.006

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[[Page 1097]]

Mechanical Properties

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Tensile Strength....................... 162 Kgf/mm \2\

Hardness............................... 475 Vickers

hardness number

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Physical Properties

------------------------------------------------------------------------

Flatness...............................

0.04%

Oxide Inclusion.........................................

0.05%

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Compressive Stress: 10 to 40 Kgf/mm \2\

Surface Roughness

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Roughness

Thickness (mm) (m)

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t0.209....................................... Rz0

0.2090.310................................. Rz0

0.3100.440................................. Rz0

0.4400.560................................. Rz0

0.5601

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Certain ultra thin gauge steel strip, which meets the

following characteristics:

Thickness: 0.100 mm +/-7%

Width: 100 to 600 mm

Chemical Composition

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Element........................ C Mn P S Al Fe

Weight %....................... 0.07 0.2-0.5 0.05 0.05 0.07 Balance

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Mechanical Properties

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Hardness............................... Full Hard (Hv 180 minimum)

Total Elongation....................... 0.3 micron

Camber (in 2.0 m)...................... 0.5 mm

Edge Burr.............................. Certain silicon steel, which meets the following

characteristics:

Thickness: 0.024 inches +/-.0015 inches

Width: 33 to 45.5 inches

Chemical Composition

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Element........................ C Mn P S Si Al

Min. Weight %.................. 0.65

Max. Weight %.................. 0.004 0.4 0.09 0.009 0.4

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Mechanical Properties

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Hardness............................... B 60-75 (AIM 65)

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[[Page 1098]]

Physical Properties

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Finish................................. Smooth (30-60 microinches)

Gamma Crown (in 5 inches).............. 0.0005 inches, start measuring

\1/4\ inch from slit edge

Flatness............................... 20 I-UNIT max.

Coating................................ C3A-.08A max. (A2 coating

acceptable)

Camber (in any 10 feet)................ \1/16\ inch

Coil Size I.D.......................... 20 inches

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Magnetic Properties

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Core Loss (1.5T/60 Hz) NAAS............ 3.8 Watts/Pound max.

Permeability (1.5T/60 Hz) NAAS......... 1700 gauss/oersted typical

1500 minimum

------------------------------------------------------------------------

Certain aperture mask steel, which has an ultra-flat surface

flatness and which meets the following characteristics:

Thickness: 0.025 to 0.245 mm

Width: 381-1000 mm

Chemical Composition

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Element............................. C N Al

Weight %............................ Certain tin mill black plate, annealed and temper-rolled,

continuously cast, which meets the following characteristics:

Chemical Composition

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Element...................... C Mn P S Si Al As Cu B N

Min. Weight %................ 0.02 0.20 0.03 0.003

Max. Weight %................ 0.06 0.40 0.02 0.023 0.03 0.08 0.02 0.08 0.008

(Aiming (Aiming (Aiming

0.018 0.05) 0.005)

Max.)

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Non-metallic Inclusions: Examination with the S.E.M. shall not

reveal individual oxides > 1 micron (0.000039 inches) and inclusion

groups or clusters shall not exceed 5 microns (0.000197 inches) in

length.

Surface Treatment as follows:

The surface finish shall be free of defects (digs, scratches, pits,

gouges, slivers, etc.) and suitable for nickel plating.

Surface Finish

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Roughness, RA Microinches (Micrometers)

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Aim Min. Max.

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Extra Bright........................ 5(0.1) 0(0) 7(0.2)

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Certain full hard tin mill black plate, continuously cast,

which meets the following characteristics:

Chemical Composition

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Element...................... C Mn P S Si Al As Cu B N

Min. Weight %................ 0.02 0.20 0.03 0.003

Max. Weight %................ 0.06 0.40 0.02 0.023 0.03 0.08 0.02 0.08 0.008

(Aiming (Aiming (Aiming

0.018 0.05) 0.005)

Max.)

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Non-metallic Inclusions: Examination with the S.E.M. shall not

reveal individual oxides > 1 micron (0.000039 inches) and inclusion

groups or clusters shall not exceed 5 microns (0.000197 inches) in

length.

Surface Treatment as follows:

The surface finish shall be free of defects (digs, scratches, pits,

gouges, slivers, etc.) and suitable for nickel plating.

[[Page 1099]]

Surface Finish

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Roughness, RA Microinches (Micrometers)

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Aim Min. Max.

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Stone Finish........................ 16(0.4) 8(0.2) 24(0.6)

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Certain ``blued steel'' coil (also know as ``steamed blue

steel'' or ``blue oxide'') with a thickness and size of 0.38 mm x 940

mm x coil, and with a bright finish;

Certain cold-rolled steel sheet, which meets the following

characteristics:

Thickness (nominal): 0.019 inches

Width: 35 to 60 inches

Chemical Composition

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Element............................. C O B

Max. Weight %....................... 0.004

Min. Weight %....................... 0.01 00.012

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Certain band saw steel, which meets the following

characteristics:

Thickness: 1.31 mm

Width: 80 mm

Chemical Composition

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Element........................ C Si Mn P S Cr Ni

Weight %....................... 1.2 to 1.3 0.15 to 0.35 0.20 to 0.35 0.03 0.007 0.3 to 0.5 0.25

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Other properties:

Carbide: fully spheroidized having >80% of carbides, which are

0.003 mm and uniformly dispersed

Surface finish: bright finish free from pits, scratches, rust,

cracks, or seams

Smooth edges

Edge camber (in each 300 mm of length): 7 mm arc height

Cross bow (per inch of width): 0.015 mm max.

The merchandise subject to this investigation is typically

classified in the HTSUS at subheadings: 7209.15.0000, 7209.16.0030,

7209.16.0060, 7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090,

7209.18.1530, 7209.18.1560, 7209.18.2550, 7209.18.6000. 7209.25.0000,

7209.26.0000, 7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000,

7210.90.9000, 7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500,

7211.23.6030, 7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090,

7211.29.4500, 7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000,

7212.40.5000, 7212.50.0000, 7225.19.0000, 7225.50.6000, 7225.50.7000,

7225.50.8010, 7225.50.8085, 7225.99.0090, 7226.19.1000, 7226.19.9000,

7226.92.5000, 7226.92.7050, 7226.92.8050, and 7226.99.0000.

Although the HTSUS subheadings are provided for convenience and

U.S. Customs Service (U.S. Customs) purposes, the written description

of the merchandise under investigation is dispositive.

The Department set aside a period for all interested parties to

raise issues regarding product coverage. From July through October

1999, the Department received responses from a number of parties

including importers, respondents, consumers, and petitioners, aimed at

clarifying the scope of the investigation. See Memorandum to Joseph A.

Spetrini (Scope Memorandum), November 1, 1999, for a list of all

persons submitting comments and a discussion of all scope comments.

There are several scope exclusion requests for products which are

currently covered by the scope of this investigation that are still

under consideration by the Department. These items are considered to be

within the scope for this preliminary determination; however, these

requests will be reconsidered for the final determination. See Scope

Memorandum.

Facts Available

In its response to Section B of the Department's antidumping

questionnaire, CSC reported a code designated ``X'' for certain home

market sales observations in response to requested categories for yield

strength, standard thicknesses, and standard widths. The Department

issued a supplemental questionnaire requesting, in part, that CSC re-

code these observations in conformity with the categories provided in

the original questionnaire. CSC replied that it did not have the

necessary information in its records to comply with the Department's

questionnaire categories and that it had used the ``X'' code to

designate those areas where it did not have the necessary information.

In order to avoid introducing any distortions from product

misclassification in the fair value comparison of CSC's home market

sales to its U.S. sales, we have determined that we cannot use the

product characteristics with a code designated as ``X'' for certain

home market sales and, therefore, the use of facts otherwise available

is necessary in this situation, pursuant to section 776(a) of the Act.

Section 776(a) 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;

provides such information but the information cannot be verified as

provided in section 782(i), the administering authority and the

Commission shall, subject to section 782(d), use the facts otherwise

available

[[Page 1100]]

in reaching the applicable determination under this title.'' The

statute requires that certain conditions be met before the Department

may resort to the facts otherwise available. Where the Department

determines that a response to a request for information does not comply

with the request, section 782(d) of the Act provides that the

Department will so inform the party submitting the response and will,

to the extent practicable, provide that party the opportunity to remedy

or explain the deficiency. If the party fails to remedy the deficiency

within the applicable time limits, the Department may, subject to

section 782(e), disregard all or part of the original and subsequent

responses, as appropriate. Briefly, section 782(e) provides that the

Department ``shall not decline to consider information that is

submitted by an interested party and is necessary to the determination

but does not meet all the applicable requirements established by the

administering authority'' if the information is timely, can be

verified, is not so incomplete that it cannot be used, and if the

interested party acted to the best of its ability in providing the

information. Where all of these conditions are met, and the Department

can use the information without undue difficulties, the statute

requires it to do so.

As noted above, we determined that we cannot rely on home market

sales for which certain product characteristics were designated as

``X.'' Therefore, in accordance with section 776(a) of the Act, we have

determined that use of facts available is appropriate. Since it is not

possible to determine the extent to which these sales might have served

as comparison merchandise for U.S. sales, we have assigned to any U.S.

sales that did not have identical matches the weighted-average margin

calculated for all identical matches.

Selection of Respondents

Section 777A(c)(1) of the Act directs the Department to calculate

individual dumping margins for each known exporter and producer of the

subject merchandise. However, section 777A(c)(2) of the Act gives the

Department discretion, when faced with a large number of exporters/

producers, to limit its examination to a reasonable number of such

companies if it is not practicable to examine all companies. Where it

is not practicable to examine all known producers/exporters of subject

merchandise, this provision permits the Department to investigate

either: (1) A sample of exporters, producers, or types of products that

is statistically valid based on the information available at the time

of selection, or (2) exporters and producers accounting for the largest

volume of the subject merchandise that can be reasonably examined.

After consideration of the complexities expected to arise in this

proceeding and the resources available to the Department, we determined

that it was not practicable in this investigation to examine a large

number of producers/exporters of subject merchandise. Instead, we found

that, given our resources, we would be able to investigate the

producer/exporter with the greatest export volume, as identified above.

Because CSC accounted for more than 50 percent of all known exports of

the subject merchandise from Taiwan during the POI, we selected CSC as

the sole respondent. Additionally, on August 6, 1999, we granted a

request from Taiwan Tokkin that it be included as a voluntary

respondent in this investigation.

Product Comparisons

In accordance with section 771(16) of the Act, all products

produced by the respondents covered by the description in the Scope of

Investigation section, above, and sold in Taiwan during the POI are

considered to be foreign like products for purposes of determining

appropriate product comparisons to U.S. sales. We have relied on 14

criteria to match U.S. sales of subject merchandise to comparison-

market sales of the foreign like product: hardening and tempering,

paint, carbon level, quality, yield strength, minimum thickness,

thickness tolerance, width, edge finish, form, temper rolling,

leveling, annealing, and surface finish. These characteristics have

been weighted by the Department where appropriate. 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 as listed above.

Fair Value Comparisons

To determine whether sales of cold-rolled steel products from

Taiwan were made in the United States at less than fair value, we

compared the export price (EP) 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 calculated

weighted-average EPs for comparison to weighted-average NVs.

Export Price

In accordance with section 772 of the Act, we calculated an EP for

each sale. Section 772(a) of the Act defines EP as the price at which

the subject merchandise is first sold before the date of importation by

the exporter or producer outside the United States to an unaffiliated

purchaser in the United States or to an unaffiliated purchaser for

exportation to the United States. Consistent with this definition, we

have found that CSC and Taiwan Tokkin made only EP sales during the

POI.

For CSC and Taiwan Tokkin, we calculated EP based on packed prices

charged to the first unaffiliated customer in the United States. We

based EP on ex-factory and FOB prices to unaffiliated customers in the

United States. We made deductions from the starting price, where

appropriate, for movement expenses including foreign brokerage, loading

and inland freight from the factory to the foreign port. Finally, for

Taiwan Tokkin, we increased the starting price by the amount of duty

drawback.

Taiwan Tokkin based its duty drawback calculation on a ratio of

kilograms of raw material required to produce one kilogram of finished

cold-rolled strip. We note that the ratio permitted under the drawback

scheme appears to be at odds with Taiwan Tokkin's own production

information. Accordingly, we will examine this issue closely at

verification to determine whether we should continue to include the

reported amount for duty drawback in our calculation of EP for the

final determination.

Taiwan Tokkin--Country of Origin

Taiwan Tokkin's reported U.S. sales were for merchandise that was

first imported into Taiwan from Japan as cold-rolled coil, processed by

Taiwan Tokkin, and then exported to the United States as cold-rolled

strip. As previously mentioned, petitioners raised the issue of whether

the country of origin of Taiwan Tokkin's exports to the United States

is actually Japan. In their comments on this issue, petitioners argued

that Taiwan Tokkin's production process does not substantially

transform the merchandise and, therefore, it retains Japanese country

of origin. In support of this contention, they put forth the following

arguments: (1) Taiwan Tokkin's imported and exported material are both

cold-rolled products and stay within the same class or kind of

merchandise; (2) under U.S. Customs regulations 19 CFR 120.20 dealing

with the country of origin, a change in HTSUS heading from 7209 to

7211, as

[[Page 1101]]

occurs in this case, does not change the country of origin; and (3)

Taiwan Tokkin's production process does not make any dramatic changes

to the product, and the substantial transformation of the merchandise

occurs in Japan where it was processed from slabs into hot bands and

then cold-rolled into coils.

Taiwan Tokkin contends that the imported merchandise is

substantially transformed in Taiwan and, therefore, acquires Taiwanese

country of origin. Taiwan Tokkin argues that (1) Taiwan Tokkin's

production process of slitting and repeated cold-rolling and annealing

significantly changes the physical characteristics of the imported

material and imparts a spring like-quality to the product, with higher

tensile strength and flexibility; (2) while the raw material has no

other use than for conversion into cold-rolled strip, the finished

product is used in the production of end-products such as tape

measures, springs and parts of electronic machinery; and (3) the value

added to the merchandise through its production process is significant.

We have preliminarily accepted Taiwan Tokkin's claim that its

merchandise sold to the United States is of Taiwanese origin. However,

we intend to continue our analysis of this issue based on our findings

at verification and comments submitted by the interested parties. We

invite interested parties in this proceeding to submit comments or

information concerning this issue, including arguments for the

appropriate treatment of Taiwan Tokkin's sales if the Department

determines that the country of origin of the merchandise in question is

Japan.

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) 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.

CSC and Taiwan Tokkin had viable home markets of cold-rolled steel

products, and they reported home market sales data for purposes of the

calculation of NV.

In deriving NV, we made adjustments as detailed in Calculation of

Normal Value Based on Home-Market Prices and Calculation of Normal

Value Based on Constructed Value, below.

B. Cost of Production Analysis

Based on allegations contained in the petition and in accordance

with section 773(b)(2)(A)(i) of the Act, we found reasonable grounds to

believe or suspect that sales of cold-rolled steel products made in

Taiwan were made at prices below the COP. See Initiation Notice, 64 FR

34194 (June 25, 1999). As a result, the Department conducted an

investigation to determine whether CSC and Taiwan Tokkin made home

market sales during the POI at prices below their respective COPs,

within the meaning of section 773(b) of the Act. We conducted the COP

analysis described below.

1. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated a

weighted-average COP based on the sum of CSC's and Taiwan Tokkin's

respective costs of materials and fabrication for the foreign like

product, plus amounts for general and administrative expenses (G&A),

selling expenses, commissions, packing expenses and interest expenses.

We relied on the COP data submitted by CSC and Taiwan Tokkin in their

respective supplemental cost questionnaire responses, except as noted

below, where the submitted costs were not appropriately quantified or

valued.

CSC

We adjusted CSC's reported scarp recovery values to account for the

overstatement of scrap credits resulting from the inclusion of

downgraded products. Secondly, we adjusted CSC's G&A and financial

expense rations. For the G&A expense ratio, we included certain

revenues and expenses that had been excluded from the reported amount.

In addition, we adjusted the cost of goods sold figure to be on the

same basis as the reported cost of manufacturing. For the financial

expense ratio, we adjusted the cost of goods sold figure to be on the

same basis as the reported cost of manufacturing.

Taiwan Tokkin. Taiwan Tokkin adjusted its reported conversion costs

by excluding costs associated with packing, freight, royalties, and

including costs associated with direct labor. Tokkin calculated this

adjustment as a percentage of conversion costs, but applied the

adjustment to the total cost of manufacturing. We revised Taiwan

Tokkin's cost adjustment percentage to one based on total cost of

manufacturing, so that the adjustment percentage matches the basis to

which it is applied.

Taiwan Tokkin did not submit revised conversion costs for one

control number (CONNUM) for merchandise produced prior to the POI but

sold during the POI. Therefore, we assigned to that CONNUM the reported

direct material costs and the conversion costs of a CONNUM with the

most similar product characteristics.

We adjusted Taiwan Tokkin's G&A and financial expense ratios by

excluding certain costs from the cost of goods sold used in the

denominator to ensure that the denominator is on the same basis as the

cost of manufacturing to which the ratios are being applied. We

adjusted Taiwan Tokkin's financial expense ratio to include certain

financial expenses that had been omitted from the submitted

calculation.

2. Test of Home-Market Sales Prices

We compared the weighted-average COP for Taiwan Tokkin and CSC,

adjusted where appropriate (see above), 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 within an extended period of time (i.e., a period of one year)

in substantial quantities 3 and whether such prices were

sufficient to permit the recovery of all costs within a reasonable

period of time.

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\3\ In accordance with section 773(b)(2)(C)(i) of the Act, we

determined that sales made below the COP were made in substantial

quantities if the volume of such sales represented 20 percent or

more of the volume of sales under consideration for the

determination of NV.

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On a model-specific basis, we compared the revised COP to the home

market prices, less any applicable movement charges, discounts and

rebates.

3. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of a respondent's sales of a given product were at prices less

than the COP, we did not disregard any below-cost sales of that product

because we determined that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a respondent's

sales of a given product during the POI were at prices less than the

COP, we determined such sales to have been made in ``substantial

quantities'' within an extended period of time in accordance with

section 773(b)(2)(B) of the Act. In such cases, because we compared

prices to POI average costs,

[[Page 1102]]

we also determined that such sales were not made at prices that would

permit recovery of all costs within a reasonable period of time, in

accordance with section 773(b)(2)(D) of the Act. We therefore

disregarded the below-cost sales and used the remaining sales as the

basis for determining NV, in accordance with section 773(b)(1) of the

Act. For those U.S. sales of cold-rolled steel products for which there

were no comparable home-market sales in the ordinary course of trade,

we compared EPs to CV in accordance with section 773(a)(4) of the Act.

See Calculation of Normal Value Based on Constructed Value, below.

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

We performed price-to-price comparisons where there were sales of

comparable merchandise in the home market that did not fail the cost

test.

For CSC and Taiwan Tokkin, we calculated NV based on delivered or

FOB prices and made deductions from the starting price, where

appropriate, for inland freight. In addition, we made circumstance-of-

sale (COS) adjustments for direct expenses, where appropriate, in

accordance with section 773(a)(6)(C)(iii) of the Act. These included

imputed credit expenses and warranty expenses. For CSC, we also

adjusted for discounts and rebates. In accordance with sections

773(a)(6)(A) and (B) of the Act, for both CSC and Taiwan Tokkin, we

deducted home market packing costs and added U.S. packing costs.

In addition, the Department notes that CSC, during the fourth

quarter of the POI, instituted a ``special incentive program'' for

certain customers in the home market. These sales were included for

purposes of calculating NV for the preliminary determination. At

verification, the Department will conduct a detailed examination of

this program in order to determine whether or not the Department should

continue to include these sales in its calculation of NV for the final

determination.

D. Calculation of Normal Value Based on Constructed Value

Section 773(a)(4) of the Act provides that, where NV cannot be

based on comparison-market sales, NV may be based on CV. Accordingly,

for those models of cold-rolled steel products for which we could not

determine the NV based on comparison-market sales, either because there

were no sales of a comparable product or all sales of the comparison

products failed the COP test, we based NV on CV.

Section 773(e)(1) of the Act provides that CV shall be based on the

sum of each respondent's cost of materials, fabrication, interest

expense, selling, general and administrative (SG&A) expenses and

profit. We made adjustments to each respondent's reported cost as

indicated above in the COP section. 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 each respondent in connection with the

production and sale of the foreign like product in the ordinary course

of trade, for consumption in the foreign country.

In addition, for each respondent we used U.S. packing costs as

described in the Export Price section of this notice, above.

We made adjustments to CV for differences in COS in accordance with

section 773(a)(8) of the Act and 19 CFR 351.410. These involved the

deduction of direct selling expenses incurred on home market sales

from, and the addition of U.S. direct selling expenses to, CV.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade (LOT) as the EP transaction. The normal-value

LOT is that of the starting-price sales in the comparison market or,

when NV is based on CV, that of the sales from which we derive SG&A

expenses and profit. The U.S. LOT for EP sales 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 LOT than EP, we

examine stages in the marketing process and selling functions along the

chain of distribution between the producer and the unaffiliated

customer. If the comparison-market sales are at a different LOT and the

difference affects price comparability, as manifested in a pattern of

consistent price differences between the sales on which NV is based and

comparison-market sales at the LOT of the export transaction, we make a

level-of-trade adjustment under section 773(a)(7)(A) of the Act. See

Notice of Final Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731

(November 19, 1997).

In implementing these principles in this investigation, we obtained

information from each respondent about the marketing stages involved in

the reported U.S. and home market sales, including a description of the

selling activities performed by the respondents for each channel of

distribution. In identifying LOTs for EP and home market sales, we

considered the selling functions reflected in the starting price before

any adjustments.

With respect to each respondent's EP sales, in this investigation

we found a single LOT in the United States, and a single, identical LOT

in the home market. It was thus unnecessary to make any level-of-trade

adjustment for comparison of EP and home market prices. See Memorandum

to the File: Preliminary Determination Calculation Memorandum for

Taiwan Tokkin Co., Ltd., November 8, 1999, and Memorandum to the File:

Preliminary Determination Calculation Memorandum for China Steel

Corporation, November 8, 1999.

Currency Conversions

We made currency conversions into U.S. dollars in accordance with

section 773A(a) of the Act based on exchange rates in effect on the

dates of the U.S. sales, as certified by the Federal Reserve Bank.

Verification

In accordance with section 782(i) of the Act, we intend to verify

all information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing U.S.

Customs to suspend liquidation of all entries of cold-rolled steel

products from Taiwan, that are entered, or withdrawn from warehouse,

for consumption on or after the date of publication of this notice in

the Federal Register. We are also instructing U.S. Customs to require a

cash deposit or the posting of a bond equal to the weighted-average

amount by which the NV exceeds the EP, as indicated in the chart below.

These instructions suspending liquidation will remain in effect until

further notice.

The weighted-average dumping margins are provided below.

------------------------------------------------------------------------

Margin

Manufacturer/exporter (percent)

------------------------------------------------------------------------

CSC........................................................ 14.80

Taiwan Tokkin.............................................. 4.72

All Others................................................. 14.80 \4\

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\4\ In accordance with section 735(c)(5) of the Act and section

351.204(d)(3) of the Department's regulations, we excluded the

weighted-average dumping margin for Taiwan Tokkin, a voluntary

respondent in this investigation, from the calculation of the all-

others rate.

[[Page 1103]]

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final antidumping determination is

affirmative, the ITC will determine whether these imports are

materially injuring, or threaten material injury to, the U.S. industry.

The deadline for that ITC determination would be the later of 120 days

after the date of these preliminary determination or 45 days after the

date of our final determination.

Public Comment

Case briefs for this investigation must be submitted no later than

one week after the issuance of the verification reports. Rebuttal

briefs must be filed within five days after the deadline for submission

of case briefs. A list of authorities used, a table of contents, and an

executive summary of issues should accompany any briefs submitted to

the Department. Executive summaries should be limited to five pages

total, including footnotes.

Section 774 of the Act provides that the Department will hold a

hearing to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs, provided that such a

hearing is requested by any interested party. If a request for a

hearing is made in an investigation, the hearing will tentatively be

held two days after the deadline for submission of the rebuttal briefs,

at the U.S. Department of Commerce, 14th Street and Constitution

Avenue, NW, Washington, D.C. 20230. In the event that the Department

receives requests for hearings from parties to several cold-rolled

cases, the Department may schedule a single hearing to encompass all

those cases. 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 within 30 days of

the publication of this notice. Requests should specify the number of

participants and provide a list of the issues to be discussed. Oral

presentations will be limited to issues raised in the briefs.

If this investigation proceeds normally, we will make our final

determination no later than 135 days after the date of publication of

this notice in the Federal Register.

This determination is issued pursuant to sections 733(d) and

777(i)(1) of the Act.

Dated: December 28, 1999.

Holly A. Kuga,

Acting Assistant Secretary for Import Administration.

[FR Doc. 00-297 Filed 1-6-00; 8:45 am]

BILLING CODE 3510-DS-P

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.