Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Grain-Oriented Electrical Steel From Italy

DEPARTMENT OF COMMERCE

[A-475-811]

Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Grain-Oriented Electrical Steel

From Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 9, 1994.

FOR FURTHER INFORMATION CONTACT: Jeffery B. Denning or Jennifer L.

Katt, Office of Antidumping Investigations, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue NW., Washington, DC 20230; telephone

(202) 482-4194 and 482-0498, respectively.

PRELIMINARY DETERMINATION: We preliminarily determine that grain-

oriented electrical steel (``GOES'') from Italy is being, or is likely

to be, sold in the United States at less than fair value, as provided

in section 733 of the Tariff Act of 1930, as amended (the ``Act''). The

estimated margins are shown in the ``Suspension of Liquidation''

section of this notice.

Case History

Since the initiation of this investigation on September 15, 1993,

(58 FR 49017, September 21, 1993), the following events have occurred:

On October 20, 1993, the United States International Trade

Commission (``ITC'') issued an affirmative preliminary injury

determination (see Investigation No. 701-TA-355, 58 FR 54168).

On November 4, 1993, the Department of Commerce (``Department'')

published a revision to the scope of this investigation (see 58 FR

58838, November 4, 1993). That scope revision is reflected below in the

``Scope of the Investigation'' section of this notice.

In November 1993, the Department issued its antidumping duty

questionnaire to ILVA S.p.A. and Acciai Speciali Terni (``Terni''), the

sole Italian producer of subject merchandise during the period of

investigation. After formal transmittal of the questionnaire, officials

from the Department traveled to Terni's production facilities in Italy

in order to outline the Department's antidumping procedures, answer

questions Terni might have concerning the proceeding and discuss any

difficulties Terni may encounter in meeting the Department's reporting

requirements.

In November and December, respectively, Terni submitted its

responses to Sections A and B through D of our questionnaire.

In December 1993, the Department issued a supplemental

questionnaire, and in January 1994, Terni submitted its response to

that supplement.

On January 26, 1994, Terni requested a postponement of the final

determination in this investigation.

Postponement of Final Determination

Pursuant to section 735(a)(2)(A) of the Act, on January 26, 1994,

Terni requested that, in the event of an affirmative preliminary

determination in this investigation, the Department postpone its final

determination until not more than 135 days after the date of

publication of the affirmative preliminary determinations. Pursuant to

19 CFR 353.20(b), if our preliminary determination is affirmative, and

the Department receives a request from producers or resellers who

account for a significant portion of the exports under investigation,

we will, absent compelling reasons to the contrary, grant the request.

Because no such compelling reasons exist, we are postponing the

final determination until the 135th day after the date of publication

of this notice in the Federal Register.

Scope of the Investigation

The product covered by this investigation is grain-oriented silicon

electrical steel, which is a flat-rolled alloy steel product containing

by weight at least 0.6 percent of silicon, not more than 0.08 percent

of carbon, not more than 1.0 percent of aluminum, and no other element

in an amount that would give the steel the characteristics of another

alloy steel, of a thickness of no more than 0.56 millimeters, in coils

of any width, or in straight lengths which are of a width measuring at

least 10 times the thickness, as currently classifiable in the

Harmonized Tariff Schedule of the United States (``HTS'') under item

numbers 7225.10.0030, 7226.10.1030, 7226.10.5015 and 7226.10.5065.

Although the HTS subheadings are provided for convenience and customs

purposes, our written description of the scope of this proceeding is

dispositive.

The HTS subheadings listed here reflect a revision from those

identified in our Notice of Initiation, and in our published Revision

of Scope of Investigations (58 FR 58838, November 4, 1993). This

revision is due to the fact that the Harmonized Tariff Schedule has

been amended so that there are now specific HTS subheadings for grain-

oriented silicon electrical steel. This revision of identified HTS

numbers pertains to this investigation, as well as the concurrent

antidumping investigation from Japan (A-588-831) and countervailing

duty investigation from Italy (C-475-812).

Period of Investigation

The period of investigation (``POI'') is March 1, 1993, through

August 31, 1993.

Such or Similar Comparisons

We have determined that the class or kind of merchandise subject to

this investigation constitutes a single such or similar category. In

making our fair value comparisons, in accordance with the Department's

standard methodology, we first compared identical merchandise, as

determined by the model-matching criteria contained in Appendix V of

the questionnaire (``Appendix V''), on file in Room B-099 of the main

building of the Department of Commerce (``Public File''). Since there

were sales of identical merchandise in the home market to compare to

U.S. sales, all of our price-to-price comparisons involved identical

merchandise.

Because Terni reported a single level of trade for both the home

and United States markets, in accordance with 19 CFR 353.58, all

comparisons were made at the same level of trade.

Fair Value Comparisons

To determine whether Terni's sales of GOES from Italy to the United

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

price (``USP'') to the foreign market value (``FMV''), as specified in

the ``United States Price'' and ``Foreign Market Value'' sections of

this notice.

United States Price

All of Terni's U.S. sales to the first unrelated purchaser took

place prior to importation into the United States. Therefore, in

accordance with section 772(b) of the Act, our calculation of USP was

based on the purchase price (``PP'') methodology.

We calculated Terni's PP sales based on packed and delivered prices

to unrelated customers in the United States. We made deductions, where

appropriate, for U.S. brokerage and handling, U.S. duty and customs

fees and freight expenses. We have also made adjustments for the value-

added tax paid on comparison sales in Italy. These adjustments are made

pursuant to Federal-Mogul Corp. and The Torrington Co. v. United

States, 834 F. Supp. 1391 (CIT, 1993). For discussion of this

adjustment see, Final Results of Administrative Review: Certain

Industrial Forklifts from Japan, (59 FR 1374, January 10, 1994) and

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

Steel Wire Rods from France, (58 FR 68865, December 29, 1993).

Foreign Market Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating

FMV, we compared the volume of home market sales of subject merchandise

to the volume of third country sales of subject merchandise, in

accordance with section 773(a)(1)(B) of the Act. As a result we

determined that the home market was viable, and therefore, we have

based FMV on home market sales.

We used the Department's related party test to determine whether

sales to related customers were made on an arm's length basis. See

Appendix II to Final Determination of Sales at Less Than Fair Value:

Certain Cold-Rolled Carbon Steel Flat Products from Argentina, (58 FR

37077, July 9, 1993), for a discussion of this test. We excluded from

our price-to-price comparisons any sales to related customers we

determined were not at arm's length. Additionally, after issuance of

the questionnaire, Terni stated in a submission that it sold only one

type of GOES in the United States (conventional permeability GOES), but

sold this as well as other types of GOES in its home market (high

permeability GOES and ``downgraded'' GOES). Terni claimed that during

the POI it had home market sales of identical merchandise, as

determined by the Department's model-matching criteria, for all

``models'' of GOES sold in the United States, and requested that it be

allowed to limit its reporting of home market sales on that basis. We

agreed to Terni's request. Consequently, Terni was required to provide

full reporting of all home market sales of conventional permeability

GOES, as well as the following information for all remaining home

market sales of subject merchandise:

(1) All the Appendix V product characteristics for each unique

product, as determined by that criteria, for all home market POI

sales of subject merchandise;

(2) The total POI volume and value of sales, broken down for

each month of the POI, for each unique home market product, as

determined by Appendix V and;

(3) Sample sales invoices and order confirmations for POI sales

of each unique product, as determined by Appendix V.

(See Memorandum from Team to Richard W. Moreland, dated December 10,

1993, in the Public File)

Cost of Production

Based on allegations contained in the petition, and in accordance

with section 773(b) of the Act, we initiated an investigation to

determine whether Terni's home market POI sales were made at prices

below its cost of production (``COP''), and over an extended period of

time.

A. Calculation of COP

We calculated COP based on the sum of Terni's cost of materials,

fabrication, general expenses and home market packing reported on its

sales database, in accordance with section 773(b) of the Act. We relied

on the submitted COP, except in the following instances where the costs

were not appropriately quantified or valued:

1. We disallowed G&A expenses reported on a divisional basis for

the POI. We were unable to determine ILVA S.p.A.'s annual G&A costs

based on the information submitted. As BIA, pursuant to section 776(c)

of the Act, we used the average 1992 SG&A percentage for the domestic

industry as reported in petitioner's cost allegation dated August 26,

1993. Since we could not breakout the selling expenses from this

percentage, we disregarded all submitted selling and G&A expenses, and

used the domestic average SG&A rate.

2. Terni's submitted financial expense was calculated based

exclusively on interest expense incurred on a divisional basis during

the period March 1 to August 31, 1993. The Department's policy is to

compute a company's interest expense percentage using its audited

consolidated annual financial statements for the year that most closely

represents the POI. As BIA, we recalculated interest expense based on

1992 ILVA Group consolidated financial statements.

(See Concurrence Memorandum, dated January 28, 1994, for discussion of

these adjustments)

B. Test of Home Market Sale Prices

After calculating COP, we tested whether, as required by section

773(b) of the Act, Terni's home market sales of subject merchandise

were made at prices below COP, in substantial quantities, and over an

extended period of time, according to the following methodology:

On a model-specific basis, (as determined by Appendix V) we

compared COP to reported prices, minus movement charges and rebates. If

over 90 percent of the sales of a model were at prices equal to or

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

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

``substantial quantities''. If between ten and 90 percent of the sales

of a given model were at prices equal to or greater than the COP, we

discarded only the below-cost sales, provided sales of that model were

also found to be made over an extended period of time. Where we found

that more than 90 percent of the sales of a model were at prices below

the COP and sold over an extended period of time, in accordance with

section 773(b) of the Act, we disregarded all sales of that model, and

calculated FMV based on constructed value (``CV'').

In order to determine whether sales were made over an extended

period of time, we performed the following analysis on a model-specific

basis: (1) if a respondent sold a product in only one month of the POI

and there were sales in that month below the COP, or (2) if a

respondent sold a product during two months or more of the POI and

there were sales below the COP during two or more of those months, then

below-cost sales were considered to have been made over an extended

period of time. Otherwise the below-cost sales were not considered as

having been made over an extended period of time.

C. Results of COP Test

We found that for certain models of GOES more than 90 percent of

home market sales were at below-COP prices and were made over an

extended period of time. Since Terni provided no indication that these

sales were at prices that would permit recovery of all costs within a

reasonable period of time and in the normal course of trade, we based

FMV on CV for all U.S. sales left without an identical match to home

market sales as a result of our application of the COP test.

D. Calculation of CV

We calculated CV based on the sum of Terni's cost of materials,

fabrication, general expenses and U.S. packing costs as reported in the

U.S. sales database. We made the adjustments described above for COP.

In accordance with section 773(e)(1)(B)(i) and (ii) of the Act we

included: (1) the greater of Terni's reported general expenses,

adjusted as detailed above, or the statutory minimum of ten percent of

the cost of manufacture (``COM'') and; (2) for profit, we used the

statutory minimum, eight percent of COM and general expenses (because

actual profit on home market sales was less than eight percent).

Price-to-Price Comparisons

For those products for which there were an adequate number of sales

at prices above the COP, we based FMV on home market prices. We

calculated FMV based on delivered prices, inclusive of packing and VAT

to customers in the home market. Based upon application of our related

party test, we made comparisons only to home market sales to unrelated

parties. Since all comparisons of U.S. and home market sales involved

identical merchandise, we made no adjustments, pursuant to 19 CFR

353.57, for physical differences in merchandise. We deducted credit and

warranty expenses. In addition we made deductions, where appropriate,

for rebates and inland freight. We subtracted home market packing and

added U.S. packing costs. Pursuant to section 773(a)(4)(B) of the Act

and 19 CFR 353.56(a)(2), we made circumstance-of-sale-adjustments for

imputed credit and, where appropriate, certain U.S. warehousing

expenses. We recalculated credit for those sales that had missing

payment and or shipment dates. For sales with unreported shipment and

payment dates, we used a weighted-average credit days for our imputed

credit calculations. For sales with only unreported payment dates, we

used the date of the preliminary determination as the paydate (see

Concurrence Memorandum).

We included in FMV the amount of the VAT collected in the home

market (19 percent). We also calculated the amount of tax that was due

solely to the inclusion of price deductions in the original tax base

(i.e., 19 percent of the sum of any adjustments, expenses and charges

that were deducted from the tax base). We deducted this amount from the

FMV after all other additions and deductions had been made. By making

this additional tax adjustment, we avoid a distortion that would cause

the creation of a dumping margin even when pre-tax dumping is zero (see

Concurrence Memorandum).

Price to CV Comparisons

Where we compared Terni's U.S. prices to CV, we deducted from FMV

the weighted-average home market direct selling expenses and added the

U.S. model specific direct selling expenses.

Currency Conversion

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.

Verification

As provided in section 776(b) of the Act, we will verify

information that we determine is acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, we are directing

the Customs Service to suspend liquidation of all entries of GOES from

Italy that are entered, or withdrawn from warehouse, for consumption on

or after the date of publication of this notice in the Federal

Register. The Customs Service shall require a cash deposit or posting

of a bond equal to the estimated preliminary dumping margins, as shown

below. This suspension of liquidation will remain in effect until

further notice. The estimated preliminary less than fair value dumping

margins are as follows:

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

Weighted-

average

Producer/manufacturer/exporter margin

percentage

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

ILVA S.p.A. and Acciai Speciali Terni....................... 5.62

All others.................................................. 5.62

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

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 whether these imports are materially injuring,

or threaten material injury to, the U.S. industry before the later of

120 days after the date of this preliminary determination or 45 days

after our final determination.

Public Comment

Interested parties who wish to request a hearing must submit a

written request to the Assistant Secretary for Import Administration,

U.S. Department of Commerce, room B-099, 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, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary no later than May 6, 1994, and rebuttal briefs no later than

May 12, 1994. A hearing, if requested, will be held on May 17, 1994, at

1 pm at the U.S. Department of Commerce in room 1815. Parties should

confirm by telephone the time, date, and place of the hearing 48 hours

prior to the scheduled time. In accordance with 19 CFR 353.38(b), oral

presentations will be limited to issues raised in the briefs.

We will make our final determination not later than 135 days after

publication of this determination in the Federal Register.

This determination is published pursuant to section 733(f) of the

Act and 19 CFR 353.15(a)(4).

Dated: February 2, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-2998 Filed 2-8-94; 8:45 am]

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