Preliminary Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From The People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-849]

Preliminary Determination of Sales at Less Than Fair Value:

Certain Cut-to-Length Carbon Steel Plate From The People's Republic of

China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary determination of sales at less than fair

value.

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EFFECTIVE DATE: June 11, 1997.

FOR FURTHER INFORMATION CONTACT: Elizabeth Patience, Stephen Jacques,

or Jean Kemp, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-

3793.

The Applicable Statute

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 to the

current regulations, codified at 19 CFR part 353 (April 1, 1996).

Preliminary Determination

We determine preliminarily that certain cut-to-length carbon steel

plate from the People's Republic of China (``PRC'') 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 November 27, 1997, we sent a survey to the Chinese Ministry of

Foreign Trade and Economic Cooperation (``MOFTEC'') and the China

Chamber of Commerce of Metals, Minerals & Chemicals Importers &

Exporters (``CCCMC'') to determine the identity of producers and

exporters of subject merchandise, but we received no response.

On December 19, 1996, the United States International Trade

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

determination in this case (see ITC Investigations Nos. 731TA-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 the PRC of steel plate. We issued an antidumping

questionnaire to the Chinese Ministry of Foreign Trade and Economic

Cooperation (``MOFTEC'') with a list of 20 possible producers of

subject merchandise and requested MOFTEC to forward it to all

producers/exporters of subject merchandise on December 20, 1996. We

also sent courtesy copies to the 20 producers on that date. These

producers were identified in Iron and Steel Works of the World, 11th

edition, 1994.

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 B does not normally apply in antidumping

proceedings involving the PRC). Section D requests information on the

factors of production of the subject merchandise.

On January 10, 1997, Geneva Steel Company and Gulf States Steel

Company, (petitioners) amended their petition to allege that critical

circumstances existed with respect to subject merchandise.

On January 24, 1997 the following submitted their section A

response: China Metallurgical Import & Export Liaoning Company

(Liaoning), an exporter of subject merchandise; Wuyang Iron and Steel

Company (Wuyang), which produced the merchandise sold by Liaoning;

Anshan Iron and Steel Complex (AISCO), a producer of subject

merchandise; Angang International Trade Corporation (Anshan

International), a wholly-owned AISCO subsidiary in China with its own

business license to import and export merchandise, and Sincerely Asia,

Limited (SAL) a partially-owned Hong Kong affiliate of AISCO involved

in sales of subject merchandise to the United States, (collectively,

Anshan); Baoshan Iron & Steel Corporation (Bao), a producer of subject

merchandise; Bao Steel International Trade Corporation (Bao Steel ITC),

a wholly-owned subsidiary of Bao responsible for selling Bao material

domestically and abroad; and Bao Steel Metals Trading Corporation (B.

M. International), a partially-owned U.S. subsidiary involved in U.S.

sales, (collectively

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Baoshan); Wuhan Iron & Steel Company (Wuhan) a producer of subject

merchandise; International Economic and Trading Corporation (IETC), a

wholly-owned subsidiary responsible for exporting WISCO merchandise;

Cheerwu Trader Ltd. (Cheerwu) a partially-owned Hong Kong affiliate of

Wuhan involved in sales of subject merchandise to the United States

(collectively, WISCO); Shanghai Pudong Iron and Steel Company (Shanghai

Pudong) a producer and exporter of subject merchandise. See the

Collapsing section of this memorandum, below. We consider Anshan,

Baoshan, Liaoning, WISCO and Shanghai Pudong to be sellers of the

subject merchandise during the POI.

In a letter entering notice of its appearance, Liaoning stated that

it purchased and sold subject merchandise from an unaffiliated

producer, Wuyang Iron and Steel Company (``Wuyang''). We therefore

requested that Wuyang also respond to the Department's questionnaires.

Wuyang complied with the Department's request.

On February 12 and February 14, 1997, the five exporters submitted

their section C responses. On February 19 and February 20, 1997,

Anshan, Baoshan, Wuyang, Shanghai Pudong, and WISCO producer/supplier

factories submitted section D questionnaire responses.

On March 11, 1997, we issued a supplemental questionnaire to

Liaoning and Wuyang. On March 12, 1997 we issued supplemental

questionnaires to Anshan, Shanghai Pudong, and WISCO. On March 13,

1997, we issued a supplemental questionnaire to Baoshan.

We received a supplemental questionnaire response from Liaoning and

Wuyang on April 9, 1997. We received supplemental questionnaire

responses from Anshan, Baoshan , Shanghai Pudong and WISCO on April 14,

1997. Anshan provided corrections to minor errors in its responses on

April 21, 1997, Baoshan submitted corrections on April 24, 1997 and

Shanghai Pudong submitted corrections in their April 29, 1997

submission.

On May 2, 1997, we issued supplemental questionnaires requesting

additional information regarding each respondent's labor consumption

factors. Additionally, we requested information about Shanghai Pudong's

affiliation with Shanghai No. 1 a non-exporting producer of subject

merchandise which Shanghai Pudong had earlier indicated shared a common

trustee, Shanghai Metallurgical Holding (Group) Co. (``Shanghai

Metallurgical''). Wuyang submitted its response on May 9, 1997. The

other respondents submitted their labor information on May 16, 1997. At

their request, we granted Shanghai Pudong an extension, until May 23,

1997, to submit affiliation information.

On January 30, 1997, we requested publicly-available information

for valuing the factors of production and for surrogate country

selection. Petitioners had already provided comments on surrogate

values to be used in this investigation in their petition of November

5, 1996. Respondents provided their comments on this matter on March 4,

1997. Petitioners provided further surrogate values and rebuttal to

respondent's comments on April 10, 1997. On April 11, 1997, respondents

objected this filing. Respondent stated that petitioners sought to

insert new information on the record in an untimely fashion. We granted

respondents an opportunity to submit comments on petitioners' April 10,

1997 filing. We received no response.

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)(i) of the Act.

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 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.

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 April 1, 1996, through

September 30, 1996.

Non-Market-Economy Country Status

The Department has treated the PRC as a nonmarket-economy country

(NME) in all past antidumping investigations and administrative

reviews. See, e.g., Final Determination of Sales at Less Than Fair

Value: Silicon Carbide from the People's Republic of China, 59 FR 22585

(May 2, 1994) (Silicon Carbide); and Final Determination of Sales at

Less Than Fair Value: Furfuryl Alcohol from the People's Republic of

China, 60 FR

[[Page 31974]]

22545 (May 8, 1995) (Furfuryl Alcohol). Neither respondents nor

petitioners have challenged such treatment. Therefore, in accordance

with section 771(18)(C) of the Act, we will continue to treat the PRC

as an NME in this investigation.

Surrogate Country

When investigating imports from an NME, section 773(c)(1) of the

Act directs the Department in most circumstances to base normal value

(NV) on the NME producers' factors of production, valued in a surrogate

market-economy country or countries considered to be appropriate by the

Department. In accordance with section 773(c)(4), the Department, in

valuing the factors of production, shall utilize, to the extent

possible, the prices or costs of factors of production in one or more

market-economy countries that are comparable in terms of economic

development to the NME country and are significant producers of

comparable merchandise. The sources of the surrogate factor values are

discussed under the NV section below.

The Department has determined that India, Pakistan, Sri Lanka,

Egypt and Indonesia are countries comparable to the PRC in terms of

economic development. See Memorandum from David Mueller to Edward Yang,

dated January 29, 1997.

Customarily, we select an appropriate surrogate based on the

availability and reliability of data from these countries. For PRC

cases, the primary surrogate has usually been India if it is a

significant producer of comparable merchandise. However, the Department

has determined that Indonesia also is a significant producer of

comparable merchandise.

We used India as the primary surrogate country and accordingly, we

have calculated NV using Indian prices to value the PRC producers'

factors of production, when available and appropriate. We have obtained

and relied upon publicly-available information wherever possible. Where

Indian surrogate values were not available or where we considered these

values to be aberrational, we have used Indonesian import prices as

surrogate values. For one factor, slag, we were unable to locate an

appropriate surrogate value from any of the comparable countries

identified above. Therefore, we selected a U.S. slag value as the most

appropriate surrogate. See Concurrence Memoranda.

Non-Responsive Exporters

Consistent with Department practice, we presumed that those

respondents who failed to respond constitute a single enterprise, and

are under common control by the PRC government. See Final Determination

of Sales at Less Than Fair Value: Bicycles from the People's Republic

of China, 61 FR 19026 (April 30, 1996) (Bicycles). We applied a single

antidumping deposit rate--the China-wide rate--to these exporters and

all other exporters in the PRC who did not respond to our

questionnaire.

Separate Rates

All of the respondents have requested separate, company-specific

rates. In their questionnaire responses, respondents state that they

are independent legal entities. Of the five respondents, Anshan,

Baoshan, Liaoning and WISCO have reported that they are collectively-

owned enterprises, registered as being ``owned by all the people'',

Shanghai Pudong and Shanghai No. 1 are owned by Shanghai Metallurgical.

Shanghai Metallurgical is also owned by ``all the people.'' Shanghai

Pudong stated that it does not have any corporate relationship with any

level of the PRC Government. As stated Silicon Carbide and Furfuryl

Alcohol, ownership of a company by all the people does not require the

application of a single rate. Accordingly, each of these respondents is

eligible for consideration for a separate rate.

To establish whether a firm is sufficiently independent to be

entitled to a separate rate, the Department analyzes each exporting

entity under the test established in the Final Determination of Sales

at Less Than Fair Value: Sparklers from the People's Republic of China,

56 FR 20588 (May 6, 1991) (Sparklers) and amplified in Silicon Carbide.

Under this test, the Department assigns separate rates in nonmarket-

economy cases only if an exporter can affirmatively demonstrate the

absence of both (1) de jure and (2) de facto governmental control over

export activities. See Silicon Carbide and Furfuryl Alcohol.

1. De Jure Control

The respondents have placed on the administrative record a number

of documents to demonstrate absence of de jure control. Respondents

submitted the ``Law of the PRC on Industrial Enterprises Owned By the

Whole People,'' adopted on April 13, 1988 (the Industrial Enterprises

Law). The Department has previously determined that the Civil Law does

not confer de jure independence on the branches of government-owned and

controlled enterprises. See Sigma Corp v. United States, 890 F. Supp.

1077, 1080 (CIT 1995). However, the Industrial Enterprises Law has been

analyzed by the Department in past cases and has been found to

sufficiently establish an absence of de jure control of companies

``owned by the whole people,'' such as those participating in this

case. (See Notice of Preliminary Determination of Sales at Less Than

Fair Value and Postponement of Final Determination: Certain Partial-

Extension Steel Drawer Slides with Rollers from the People's Republic

of China, 60 FR 14725, 14727 (June 5, 1995); Notice of Preliminary

Determination of Sales at Less Than Fair Value: Honey from the People's

Republic of China, 60 FR 14725, 14727 (March 20, 1995); and Furfuryl

Alcohol. The Industrial Enterprises Law provides that enterprises owned

by ``the whole people'' shall make their own management decisions, be

responsible for their own profits and losses, choose their own

suppliers, and purchase their own goods and materials. The Regulations

of the People's Republic of China for Controlling the Registration of

Enterprises as Legal Persons (Legal Persons Regulations), issued on

July 13, 1988 by the State Administration for Industry and Commerce of

the PRC, provide that, to qualify as legal persons, companies must have

the ``ability to bear civil liability independently'' and the right to

control and manage their business. These regulations also state that,

as an independent legal entity, a company is responsible for its own

profits and losses. See Notice of Final Determination of Sales at Less

Than Fair Value: Manganese Metal from the People's Republic of China,

60 FR 56046 (November 6, 1995).

In sum, in prior cases, the Department has analyzed the Chinese

laws and regulations on the record in this case, and found that they

establish an absence of de jure control. We have no new information in

these proceedings which would cause us to reconsider this

determination.

2. De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) Whether the export prices are set by or are

subject to the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of

[[Page 31975]]

losses. See, e.g., Silicon Carbide and Furfuryl Alcohol.

Respondents have asserted the following: (1) They establish their

own export prices independently of the government and without the

approval of a government authority; (2) they negotiate contracts,

without guidance from any governmental entities or organizations; (3)

they make their own personnel decisions including the selection of

management; and (4) they retain the proceeds of their export sales, use

profits according to their business needs, and have the authority to

obtain loans. In addition, respondents' questionnaire responses

indicate that company-specific pricing during the POI does not suggest

coordination among exporters. The subject merchandise appears on the

``List of Products Subject to Export Permit Administration at Different

Levels'' issued by the Ministry of Foreign Trade and Economic

Cooperation (``MOFTEC'') on November 9, 1995. Respondents stated that,

to the best of their knowledge, steel plate is included on the list

because it is considered an important raw material for the economic

development of China (e.g., for the use in the construction of basic

infrastructure), and the Chinese government wishes to have a mechanism

in place to ensure adequate domestic supply in the event of a shortage.

Despite inclusion of the subject merchandise on this list, we have

found no indication from the respondents' business licences that the

issuing authority imposes any type of restriction on respondents'

business (for a more complete explanation of this issue, see the

Concurrence Memorandum).

Consequently, we preliminarily determine that the five responding

exporters have met the criteria for the application of separate rates.

We will examine this matter further at verification.

For non-responsive exporters, we preliminarily determine, as facts

available, that they have not met the criteria for application of

separate rates.

Facts Available: China-Wide Rate

The petition filed on November 5, 1996 identified 28 steel

producers with the capacity to produce cut-to-length carbon steel plate

during the POI. We received adequate responses from the five

respondents identified above. We received certification of non-shipment

by seven companies from the China Chamber of Commerce for Metals and

Chemicals (CCCMC). Additionally, we received a letter from one

respondent factory indicating shipments through parties who have not

responded to the questionnaire. See Non-Responsive Exporters section

above. All other companies did not respond to our questionnaire.

Further, U.S. import statistics indicate that the total quantity and

value of U.S. imports of cut-to-length carbon steel plate from the PRC

is greater that the total quantity and value of plate reported by all

PRC companies that submitted questionnaire responses. Given these

discrepancies, we conclude that not all exporters of PRC plate

responded to our questionnaire. Accordingly, we are applying a single

antidumping deposit rate--the China-wide rate--to all exporters in the

PRC (other than those receiving an individual rate), based on our

presumption that those respondents who failed to respond constitute a

single enterprise, and are under common control by the PRC government.

See, e.g., Final Determination of Sales at Less Than Fair Value:

Bicycles From the People's Republic of China, 61 FR 19026 (April 30,

1996) (Bicycles).

This China-wide antidumping rate is based on facts available.

Section 776(a)(2) 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;

(C) significantly impedes a proceeding under this title; or (D)

provides such information but the information cannot be verified as

provided in section 782(i), the administering authority * * * shall,

subject to section 782(d), use the facts otherwise available in

reaching the applicable determination under this title.''

In addition, section 776(b) of the Act provides that, if the

Department finds that an interested party ``has failed to cooperate by

not acting to the best of its ability to comply with a request for

information,'' the Department may use information that is adverse to

the interests of that party as the facts otherwise available. The

statute also provides that such an adverse inference may be based on

secondary information, including information drawn from the petition.

As discussed above, all PRC exporters that do not qualify for a

separate rate are treated as a single enterprise. Because some

exporters of the single enterprise failed to respond to the

Department's requests for information, that single enterprise is

considered to be uncooperative. Accordingly, consistent with section

776(b)(1) of the Act, we have applied, as total adverse facts

available, the highest margin calculated for a respondent in this

proceeding. Based on our comparison of the calculated margins for the

other respondents in this proceeding to the average margin in the

petition, we have concluded that the highest calculated margin is the

most appropriate record information on which to form the basis for

dumping calculations in this investigation. Accordingly, the Department

has based the China-wide rate on information from respondents. In this

case, the highest calculated margin is 172.20 percent.

Section 776(c) of the Act provides that where the Department relies

on ``secondary information,'' the Department shall, to the extent

practicable, corroborate that information from independent sources

reasonably at the Department's disposal. The Statement of

Administrative Action (SAA), accompanying the URAA clarifies that the

petition is ``secondary information.'' See SAA at 870. The SAA also

clarifies that ``corroborate'' means to determine that the information

used has probative value. Id. However, where corroboration is not

practicable, the Department may use uncorroborated information.

The information contained in the petition shows that petitioners

calculated export price based on two methods: (1) The import values

declared to the U.S. Customs Service; and (2) an average Chinese export

price derived from actual U.S. selling prices of Chinese exporters,

known to petitioners. Petitioners stated that in order to ensure a fair

value comparison, import and export values from the same HTS categories

as subject merchandise were used to calculate the export price and the

factor consumption rates were used as a basis for normal value. In

addition, petitioners only used those HTS categories for subject

products which included only subject merchandise. Petitioners made

adjustments for foreign inland freight to FAS values to derive ex

factory prices. They also submitted supporting documentation including

an affidavit referring to sources and how petitioners obtained

information concerning adjustments and that these adjustments

represented current actual charges or expenses associated with the

importation and sale of cut-to-length carbon steel plate into the U.S.

market.

The information in the petition with respect to the normal value

(NV) is based on factors of production used by the petitioners in the

production of steel plate. Petitioners submitted usage amounts for

materials, labor and energy, adjusted for known differences in

[[Page 31976]]

production efficiencies. Petitioners submitted three cost models in the

petition: (1) Basic Oxygen Furnace (BOF) Cost Model; (2) Open-Hearth

Furnace Cost Model; and (3) Weighted-Average Normal Value of the BOF

and Open-Hearth methods to account for differences between the

production processes of petitioners and potential respondents. We

determine that this information has probative value and that we have

corroborated, to the extent practicable, the data contained in the

petition. See Corroboration Memorandum.

Fair Value Comparisons

To determine whether sales of certain cut-to-length carbon steel

plate from the PRC 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 ``Normal

Value'' sections of this notice.

Export Price

We based USP on export price (EP) in accordance with section 772(a)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and because

constructed export price methodology was not otherwise indicated. In

accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-

wide weighted-average export prices (EPs) to the factors of production.

See Company specific Calculation Memoranda, June 3,1997.

For those exporters that responded to the Department's

questionnaire, we calculated EP based on prices to unaffiliated

purchasers in the United States. We made deductions, where appropriate,

for foreign inland freight, ocean freight, marine insurance, and

foreign brokerage. See ``Factor Valuations'' section of this notice.

Normal Value

In accordance with section 773(c) of the Act, we calculated NV

based on the value of the factors of production reported by the

factories in the PRC which produced subject merchandise for the five

exporters. Where an input was sourced from a market economy and paid

for in market economy currency, we have used the actual price paid for

the input to calculate the factors-based NV in accordance with our

practice. See Lasko Metal Products v. United States (Lasko), 437 F. 3d

1442 (Fed. Cir. 1994). Otherwise, we used publicly available

information from India where possible. Where appropriate Indian values

were not available, we used publicly available information from

Indonesia.

Certain respondents purchase certain raw materials through

affiliated parties in Hong Kong. The Hong Kong parties also receive

payment, and transfer the funds to the PRC respondents, from U.S.

customers for the respondents' sales of plate. The amount of funds

transferred to the PRC respondents is reduced by the cost of any inputs

purchased on behalf of the PRC respondents. The Hong Kong affiliates

also reduce the payment by administrative costs it charges the PRC

respondents. In their responses, respondents provided sample contracts

for market economy purchases. They included contracts between the Hong

Kong affiliates and the original raw material suppliers as well as

contracts between the material suppliers and the PRC respondents. They

did not provide documentation of the transactions occurring between the

PRC respondents and the Hong Kong affiliates. We valued the relevant

inputs at the contract, market-economy, prices provided in the

responses for the preliminary determination. We will seek additional

clarification of these contracts and administrative costs at

verification.

Shanghai Pudong's questionnaire response indicates that, within the

meaning of section 771(33) of the Act, it may be affiliated with

Shanghai No. 1 based on the fact that Shanghai Metallurgical serves as

``trustee'' for both companies and thus may exercise control over the

two producers. Further, because both Shanghai Pudong and Shanghai No. 1

produce subject merchandise, the Department will consider whether these

two firms should be treated as a single entity (i.e., ``collapsed'').

In order for the Department to treat two or more producers as a single

entity, the Department relies on a test set forth in Nihon Cement v.

United States, 17 CIT 400, 425 (1993). Pursuant to that test, the

Department will only collapse the producers if each of these criteria

are met: (1) The producers must be affiliated, (2) the producers must

have production facilities for similar or identical products that would

not require substantial retooling in order to restructure manufacturing

priorities, and (3) there must be a significant potential for the

manipulation of price or production. Because we lacked sufficient

information to make the affiliation and collapsing decisions, we

requested additional information from Shanghai Pudong regarding both

its relationship with Shanghai No. 1 and Shanghai's No. 1's factors of

production. At Shanghai Pudong's request, we granted an extension on

the reporting of this information. Shanghai Pudong responded on May 23

advising that it does not control Shanghai No.1 and therefore could not

obtain its factors of production. Based on the data received prior to

the preliminary determination, including portions of the response

regarding Shanghai No. 1, we have determined that it is not clear from

the current record whether Shanghai Metallurgical controls Shanghai

Pudong and Shanghai No. 1. Therefore, we will not collapse Shanghai

Pudong and Shanghai No. 1 for the purposes of the preliminary

determination. We will continue to examine this issue and we will

verify the reported information of both Shanghai Pudong and Shanghai

No. 1, and consider the information with respect to both producers for

our final determination.

Four respondents identified a significant number of raw material

inputs. Certain of these inputs appeared to be variations or subsets of

larger inputs. We were unable to locate publicly available surrogate

values for these inputs for this preliminary determination. See each

responding firm's Calculation Memorandum. Based on the steel production

process, we combined the inputs into the larger subcategories for which

we have located a surrogate value in our preliminary determination. We

will continue to try to locate a surrogate value for these inputs for

our final determination.

Four respondents have identified a number of gases either produced

and reused in the production process or purchased from outside sources

for use in the production of subject merchandise. These respondents

have argued that all of these gases should be treated as overhead

items. Petitioners argue that these gases are direct inputs in the

steelmaking process and should not be considered as overhead items. In

previous cases in which the Department has used the same surrogate

value, power and fuel are specifically removed from the overhead

calculation so as to be treated as direct inputs. See Final Results of

Antidumping Duty Administrative Review: Sebacic Acid from the PRC, 62

FR 10530, March 7, 1997. We treated these gases as direct inputs as

they, in general, serve as power and fuel to the production process. We

offset the cost of production by the amount of any by-product

generated. This offset is based on our assumption that the by-products

either are re-used as an input to the production processes or has a

market for its uses. See Calculation Memoranda.

[[Page 31977]]

Factor Valuations

The selection of the surrogate values was based on the quality and

contemporaneity of the data. Where possible, we attempted to value

material inputs on the basis of tax-exclusive domestic prices. Where we

were not able to rely on domestic prices, we used import prices to

value factors. We removed from the import data import prices from

countries which the Department has previously determined to be NMEs. As

appropriate, we adjusted input prices to make them delivered prices.

For those values not contemporaneous with the POI, we adjusted for

inflation using wholesale price indices (WPI), or, in the case of labor

rates, consumer price indices (CPI), published in the International

Monetary Fund's International Financial Statistics. For a complete

analysis of surrogate values, see each company's Factors Valuation

Memorandum, dated June 3, 1997.

For certain raw material surrogate values, we used values as

reported in the Monthly Statistics of Foreign Trade of India, Vol. II--

Imports, Directorate General of Commercial Intelligence & Statistics,

Ministry of Commerce, Government of India, Calcutta. The price

information from Monthly Statistics of Foreign Trade of India

represents cumulative values for the period of April 1995 through

January 1996. For each input value obtained from the above publication,

we used the average value per one kilogram for that input from market

economies. Import statistics from non-market economies were excluded in

the calculation of the average value. Since the data from this

publication is not contemporaneous with the POI, we adjusted material

values for inflation by using WPI rate for India. We then converted

each of the raw material inputs to U.S. dollars using an exchange rate

conversion factor.

For certain material inputs, we were unable to obtain specific

price information from India. Therefore, for these inputs, we resorted

to public information from Indonesia. The values for these inputs were

obtained from the publication Foreign Trade Statistics Bulletin

Imports, March 1996. The price information represents cumulative values

from January to March 1996. These inputs were adjusted for inflation.

Certain respondents reported the amount of slag, a by-product of

the plate production process, produced in the production of subject

merchandise and sold in China by some respondents. Normally, the

Department offsets the calculated cost of manufacturing by the value of

any by-products. The only surrogate value for slag from India or

Indonesia was aberrationally high when compared to an available U.S.

rate. Based on our knowledge of the steelmaking process, we know that

slag is a by-product with a relatively low value (compared to the price

of steel plate). We were able to locate an appropriate value for slag

from the U.S. Geological Survey, Mineral Commodities Summaries from

February 1997. We used the U.S. slag value for the preliminary

determination. We will continue to try to locate an appropriate

surrogate value from India, Indonesia, or another country at a

comparable level of development for our final determination.

We were unable to locate specific surrogate values for each of the

reported gases. Specifically, we were unable to locate surrogate values

for the gases generated in the production facilities (e.g., furnace

gas). We will continue to search for surrogate values for each of the

gases for the final determination. For our preliminary determination,

we applied surrogate gas values for gases for which we could find a

surrogate value and applied a natural gas surrogate value to the other

gases for which we could not locate a value.

For certain factors for which we could not locate import values, we

used values provided by petitioners which represent market values

reported in the 1995-96 Annual Report for Steel Authority of India

Limited (``SAIL''), a producer in India of cut-to-length carbon steel

plate. We adjusted these values for inflation.

For materials purchased from market economy country suppliers that

are paid for in a market economy currency and if the portion of the

input from the market economy was significant, we used the actual

purchase price paid during the POI as reported in the questionnaire

responses. This practice is consistent with the Department's new

regulations and with Lasko. In cases in which the same producer

reported several different market economy suppliers for the same input,

we used the average market economy price paid for that input.

For labor, we used the average labor cost per man-day worked for

the Basic Metal and Alloys Industries as reported in the Ministry of

Labour Government of India Annual Report 1994-1995. This source

included in its calculation of labor values ``a sum of various

components like wages and salaries; all types of bonus; money value of

benefits in kind; old age benefits; maternity benefits; social security

charges such as ESI compensation for injuries, family pension, lay-off/

retrenchment benefits, and other group benefits.'' We applied a single

labor rate for all levels of labor, i.e., skilled, unskilled, and

indirect labor. Accordingly, we adjusted for inflation from the time

period of the information (1990-1991) to the POI using the CPI, as

reported in the International Monetary Fund's International Financial

Statistics. The work day in India is an eight-hour day. See Coumarin

from PRC; Preliminary Determination of Sales at Less Than Fair Value,

59 FR 39727 (Aug. 4, 1994), citing to Country Reports: Human Rights

Practices for 1990; Coumarin from the PRC; Final Determination of Sales

at Less than Fair Value, 59 FR 66895 (Dec. 28, 1994) (Coumarin).

Therefore, we then divided the surrogate value by 8 hours to arrive at

an hourly wage rate. Petitioners have argued that the labor usage rates

reported by respondents are abnormally low for steel production. We

will carefully review the reported labor rates at verification and for

our final determination.

For overhead, profit and SG&A expenses, we used information

reported in the April 1995 Reserve Bank of India Bulletin. See

Statement 1--``Combined Income, Value of Production, Expenditure and

Appropriation Accounts, Industry Group-Wise, 1992-93.''

Respondents allocated a majority of the labor employed in their

facilities to overhead and selling and general administrative (SG&A)

tasks. Only a small percentage of the labor employed in respondents'

facilities has been reported as direct costs of production and

therefore included in our NV calculations. Conversely, the Indian

surrogate values for overhead and SG&A do not include a separate

allowance for labor. See Factor Valuation Memoranda. We therefore

increased the surrogate overhead value to include the significant labor

resources respondents allocated to overhead. See, Calculation

Memoranda.

We included certain indirect materials as part of ``overhead

expenses.'' In previous final determinations, the Department has

considered inputs which ``are not direct materials consumed in the

production process'' as part of factory overhead. See Brake Drums and

Brake Rotors From the PRC; Notice of Preliminary Determination, 61 FR,

53190, 63196 (Oct. 10, 1996); Brake Drums and Brake Rotors From the

PRC; Final Determination of Sales at Less than Fair Value, 62 FR 9154,

9160 (Feb. 24, 1997). The treatment of indirect materials as

``overhead'' is consistent with Compendium of Statements and Standards:

Accounting (India).

[[Page 31978]]

In calculating the cost of raw material inputs in NME cases, we

include an adjustment for the cost of transporting the input from the

supplier to the respondent. This adjustment is based on the distance

from the supplier to the producing factory and the mode of

transportation; see, e.g., Sulfanilic Acid from the People's Republic

of China; Final Results and Partial Recission of Antidumping Duty

Administrative Review, 61 Fed. Reg. 53702, 53705 (Comment 3) (October

15, 1996). We determine a value from the surrogate country based on

this distance and on mode of transportation used. While all respondents

provided distances for some of their inputs, only one of the

respondents provided distances and mode of transportation for all

material inputs. We requested this information for all inputs in our

original and supplemental questionnaires. For each respondent that did

not comply with our requests for this information, as to some inputs,

we applied, as facts available, the highest freight cost calculated for

any input of that respondent to those inputs for which we did not

receive the required freight information. This presumes that the

respondents chose not to provide information that would be adverse to

them.

For the preliminary determination, we were unable to find specific

surrogate values for a small number of inputs. Therefore, we excluded

them from our calculations for the preliminary determination. We will

continue to research price information for these inputs for the final

determination.

Critical Circumstances

On January 10, 1997, petitioners alleged that there is a reasonable

basis to believe or suspect that critical circumstances exist with

respect to subject merchandise. In accordance with 19 C.F.R.

353.16(b)(2)(i) (1996), since these allegations were filed earlier than

the deadline for the Department's preliminary determination, we must

issue our preliminary critical circumstances determinations not later

than the preliminary determination.

Section 733(e)(1) of the Act provides that the Department will

determine that there is a reasonable basis to believe or suspect that:

(A)(i) There is a history of dumping and material injury by reason of

dumped imports in the United States or elsewhere of the subject

merchandise, or (ii) the person by whom, or for whose account, the

merchandise was imported knew or should have known that the exporter

was selling the subject merchandise at less than its fair value and

that there was likely to be material injury by reason of such sales,

and (B) there have been massive imports of the subject merchandise over

a relatively short period.

The statute and the Statement of Administrative Action (SAA) which

accompanies the Uruguay Round Agreements Act are silent as to how we

are to make a finding that there was knowledge that there was likely to

be material injury. Therefore, Congress has left the method of

implementing this provision to the Department's discretion.

In determining whether there is a reasonable basis to believe or

suspect that an importer knew or should have known that the exporter

was selling the plate at less than fair value, the Department normally

considers margins of 15 percent or more sufficient to impute knowledge

of dumping for constructed export price (CEP) sales, and margins of 25

percent or more for export price (EP) sales. See, e.g., Preliminary

Critical Circumstances Determination: Honey from the People's Republic

of China (PRC), 60 FR 29824 (June 6, 1995) (Honey). Since the company

specific margins for EP sales in our preliminary determination for

carbon steel plate are greater than 25 percent for Anshan, Shanghai

Pudong and WISCO, we have imputed knowledge of dumping. We found that

Baoshan and Liaoning had margins below 25 percent. Because we found

margins to be below 25 percent, we do not impute importer knowledge of

dumping. Therefore for Baoshan and Liaoning, we find that critical

circumstances do not exist with respect to the subject merchandise.

In determining whether there is a reasonable basis to believe or

suspect that an importer knew or should have known that there was

likely to be material injury by reason of dumped imports, the

Department normally will look to the preliminary injury determination

of the ITC. If the ITC finds a reasonable indication of present

material injury to the relevant U.S. industry, the Department will

determine that a reasonable basis exists to impute importer knowledge

that there was likely to be material injury by reason of dumped imports

during the critical circumstances period--the 90-day period beginning

with the initiation of the investigation (see 19 C.F.R. 351.16(g). If,

as in this case, the ITC preliminarily finds threat of material injury

(See, Cut-to-Length Carbon Steel Plate from China, Russia, South

Africa, and Ukraine, U.S. International Trade Commission, December

1996), the Department will also consider the extent of the increase in

the volume of imports of the subject merchandise during the critical

circumstances period and the magnitude of the margins in determining

whether a reasonable basis exists to impute knowledge that material

injury was likely.

In this case, imports of Chinese plate increased 29 percent in the

three months following the initiation of the investigation when

compared to the three months preceding initiation, or nearly two times

the level of increase needed to find ``massive imports'' during the

same period (see below). Furthermore, we have preliminarily found

margins of 40.35 percent for Shanghai Pudong, 172.20 percent for Anshan

and 51.70 for WISCO.

Based on the ITC's preliminary determination of threat of injury,

the increase in imports noted above, and the high preliminary margins,

the Department determines that there is a reasonable basis to believe

or suspect that the importer knew or should have known that there was

likely to be material injury by means of sales of the subject

merchandise at less than fair value.

To determine whether imports were massive over a relatively short

time period, the Department typically compares the import volume of the

subject merchandise for the three months immediately preceding and

following the initiation of the proceeding. See 19 C.F.R. 353.16(g).

Pursuant to 19 C.F.R. 353.16(f)(2), the Department will consider an

increase of 15 percent or more in the imports of the subject

merchandise over the relevant period to be massive. As noted, imports

of the subject merchandise increased 29 percent during the relevant

period, and thus we determine that imports have been massive.

Thus, because we determine that there is a reasonable basis to

believe or suspect that the importer knew or should have known that

Anshan, Shanghai Pudong and WISCO were selling the subject merchandise

at less than its fair value and that there was likely to be material

injury by reason of such sales, and that there have been massive

imports of the subject merchandise over a relatively short time period,

we preliminarily determine that critical circumstances exist for

Anshan, Shanghai Pudong and WISCO.

For companies subject to the China-wide rate (i.e., companies which

did not respond to the Department's questionnaire), we are imputing

knowledge based on the China-wide rate, and determine, based on facts

available, that there were massive imports of certain cut-to-length

carbon steel plate by companies that did not

[[Page 31979]]

respond to the Department's questionnaire.

Therefore, we preliminarily determine that critical circumstances

exist with regard to these companies.

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 from Baoshan and Liaoning, entered, or withdrawn from

warehouse, for consumption on or after the date of publication of this

notice in the Federal Register. For Anshan, Shanghai Pudong, WISCO and

companies subject to the China-wide rate, we are directing Customs to

suspend liquidation of all imports of subject merchandise entered, or

withdrawn from warehouse, for consumption on or after the date 90 days

prior to 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 the export price, 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:

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

Weighted-

average

Manufacturer/exporter margin

(percent)

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

Anshan (AISCO/Anshan International/Sincerely Asia Ltd)..... 172.20

Baoshan (Bao/Bao Steel International Trade Corp/Bao Steel

Metals Trading Corp)...................................... 14.20

Liaoning................................................... 8.19

Shanghai Pudong............................................ 40.35

WISCO (Wuhan/International Economic and Trading Corp/

Cheerwu Trader Ltd)....................................... 51.70

China-wide Rate 1.......................................... 172.20

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

\1\ The China-wide rate applies to all entries of the subject

merchandise except for entries from exporters that are identified

individually above.

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 the domestic industry in the United States is materially

injured, 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 or other written

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

Secretary for Import Administration no later than 50 days after the

publication of this preliminary determination, and rebuttal briefs, no

later than five days after the filing of case briefs. 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

within 10 days of publication of this notice, to afford interested

parties an opportunity to comment on arguments raised in case or

rebuttal briefs. The hearing will be held at the U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230, time, date and room to be determined. 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 August 18,

1997.

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. 97-15294 Filed 6-10-97; 8:45 am]

BILLING CODE 3510-DS-P