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

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