Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Steel Wire Rod From Canada

[Federal Register Volume 62, Number 190 (Wednesday, October 1, 1997)]

[Notices]

[Pages 51572-51577]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 97-26040]

[[Page 51571]]

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Part IX

Department of Commerce

_______________________________________________________________________

International Trade Administration

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Notice of Preliminary Determination of Sales at Less Than Fair Value

and Postponement of Final Determination: Steel Wire Rod From Canada;

Steel Wire Rod From Germany; Steel Wire Rod From Trinidad and Tobago;

Steel Wire Rod From Venezuela; Notices

Federal Register / Vol. 62, No. 190 / Wednesday, October 1, 1997 /

Notices

[[Page 51572]]

DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-826]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Steel Wire Rod From

Canada

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Lisette Lach (202/482-6412); Cindy

Sonmez (202/482-0961); or Dorothy Woster (202/482-3362) for Stelco,

Inc. and Sidbec-Dosco (Ispat), Inc.; Alexander Braier (202/482-3818);

Abdelali Elouaradia (202/482-2243); or Sharon Harris (202/482-0190) for

Ivaco, Inc. Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act), are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreements Act (``URAA''). In addition, unless

otherwise indicated, all citations to the Department's regulations are

references to the provisions codified at 19 CFR Part 353 (April 1997).

Although the Department's new regulations, codified at 19 CFR 351 (62

FR 27296, May 19, 1997), do not govern this investigation, citations to

those regulations are provided, where appropriate, as a statement of

current departmental practice.

Preliminary Determination

We preliminarily determine that steel wire rod (``SWR'') from

Canada 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 on March 18, 1997 (see

Notice of Initiation of Antidumping Duty Investigations: Steel Wire Rod

from Canada, Germany, Trinidad and Tobago, and Venezuela, 62 FR 13854

(March 24, 1997), (``Notice of Initiation''), the following events have

occurred:

On April 14, 1997, the United States International Trade Commission

(``ITC'') notified the Department of Commerce (``the Department'') of

its affirmative preliminary injury determination in this case.

On April 21, 1997, the Department issued the antidumping duty

questionnaire to counsel for the following producers/exporters of SWR:

Stelco, Inc. (``Stelco''); Sidbec-Dosco (Ispat) Inc. (``SDI''); and

Ivaco, Inc. (``Ivaco'') (collectively ``respondents''). 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 the constructed value

(``CV'') of the subject merchandise. Section E requests information on

further manufactured merchandise.

During April and May 1997, the Department received interested party

comments regarding modifications to the product characteristic

reporting requirements. On May 22, 1997, the Department issued revised

product characteristic reporting instructions.

Respondents submitted their questionnaire responses in May and June

1997. The Department issued supplemental requests for information in

June, July, August, and September 1997, and received the supplemental

responses to these requests in July, August and September 1997.

Petitioners in this investigation (Connecticut Steel Group, Co-Steel

Raritan, GS Industries, Inc., Keystone Steel & Wire Co., North Star

Steel Texas, Inc., and Northwestern Steel & Wire Co.) filed comments on

respondents' questionnaire responses in June, July, August, and

September 1997.

On July 3, 1997, petitioners made a timely request that the

Department postpone the preliminary determination in this investigation

and the companion investigations of SWR from Canada, Trinidad and

Tobago, and Venezuela to September 24, 1997. We did so on July 14,

1997, in accordance with section 733(c)(1) of the Act (see Notice of

Postponement of Preliminary Antidumping Duty Determinations: Steel Wire

Rod from Canada, Germany, Trinidad and Tobago, and Venezuela, 62 FR

38257 (July 17, 1997)).

On July 18, 1997, the Department granted requests received from all

three respondents to exclude certain categories of ``outlier'' sales

that represented an insignificant portion of each company's home market

and U.S. sales (see Memoranda from Roland L. MacDonald to Joseph A.

Spetrini, dated July 18, 1997).

Postponement of Final Determination and Extension of Provisional

Measures

On September 15, 1997, Ivaco requested that, pursuant to section

735(a)(2)(A) of the Act, in the event of an affirmative preliminary

determination in this investigation, the Department postpone its final

determination, until not later than 135 days after the date of

publication of the affirmative preliminary in the Federal Register. In

accordance with section 735 (a)(2)(A) of the Act and 19 CFR 353.2(b),

inasmuch as our preliminary determination is affirmative, Ivaco

accounts for a significant proportion of exports of the subject

merchandise, and we have not identified any compelling reasons for

denying this request, we are granting Ivaco's request and postponing

the final determination. Suspension of liquidation will be extended

accordingly. See Final Determination of Sales at Less Than Fair Value:

Certain Pasta From Italy, 61 FR 30326 (June 14, 1996).

Scope of Investigation

The products covered by this investigation are certain hot-rolled

carbon steel and alloy steel products, in coils, of approximately round

cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75 inch),

inclusive, in solid cross-sectional diameter. Specifically excluded are

steel products possessing the above noted physical characteristics and

meeting the Harmonized Tariff Schedule of the United States (``HTSUS'')

definitions for (a) stainless steel, (b) tool steel, (c) high nickel

steel, (d) ball bearing steel, (e) free machining steel that contains

by weight 0.03 percent or more of lead, 0.05 percent or more of

bismuth, 0.08 percent or more of sulfur, more than 0.4 percent of

phosphorus, more than 0.05 percent of selenium, and/or more than 0.01

percent of tellurium, or (f) concrete reinforcing bars and rods.

The following products are also excluded from the scope of this

investigation:

Coiled products 5.50 mm or less in true diameter with an average

partial decarburization per coil of no more than 70 microns in depth,

no inclusions greater than 20 microns, containing by weight the

following: carbon greater than or equal to 0.68 percent; aluminum less

than or equal to 0.005 percent; phosphorous plus sulfur less than or

equal to 0.040 percent; maximum

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combined copper, nickel and chromium content of 0.13 percent; and

nitrogen less than or equal to 0.006 percent. This product is commonly

referred to as ``Tire Cord Wire Rod.''

Coiled products 7.9 to 18 mm in diameter, with a partial

decarburization of 75 microns or less in depth and seams no more than

75 microns in depth, containing 0.48 to 0.73 percent carbon by weight.

This product is commonly referred to as ``Valve Spring Quality Wire

Rod.''

The products under investigation are currently classifiable under

subheadings 7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030,

7213.99.0090, 7227.20.0000, and 7227.90.6050 of the HTSUS. Although the

HTSUS subheadings are provided for convenience and customs purposes,

our written description of the scope of this investigation is

dispositive.

North American Wire Products Corporation (``NAW''), an importer of

the subject merchandise from Germany, has requested that the Department

exclude SWR used to manufacture pipe wrapping wire from the scope of

the antidumping and countervailing duty investigations. Petitioners

have not agreed to this scope exclusion. For purposes of the

preliminary determination, we have not excluded SWR for manufacturing

pipe wrapping wire from the scope.

On June 2, 1997, Ivaco requested that the Department exclude from

its antidumping analysis U.S. and home market sales of processed rod

(subject merchandise) produced from non-Canadian sourced ``green'' rod

which falls within the physical description of merchandise subject to

the proceeding. We examined the nature of the processing, which

consisted of heat treating and cleaning/coating, to determine whether

the green rod was substantially transformed so as to qualify as

Canadian-origin merchandise within the scope of this investigation.

Under the Department's ``substantial transformation'' practice, the

nature of the processing must result in an article different in

character and use to render the merchandise a product of the country in

which it was processed. See Notice of Final Determination of Sales at

Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings From

India, 60 FR 10545, 10546 (Feb. 27, 1995); Notice of Final

Determination of Sales at Less Than Fair Value: Certain Cold-Rolled

Carbon Steel Flat Products From Argentina (Appendix 1), 58 FR 37062,

37066 (July 9, 1993).

Ivaco's response indicates that Sivaco performed two processing

steps on its purchases of green SWR during the POI: cleaning/coating

and heat treatment. The cleaning/coating step first removes scale from

the SWR, while the coating aids in subsequent wire drawing and cold

drawing. The heat treatment modifies the SWR microstructure in order to

produce desired mechanical and metallurgical properties.

Neither of these two steps significantly change the physical or

chemical properties of the product, nor do they change the intended

uses. Further, the dimensional characteristics are similarly unchanged.

The types of processing Sivaco performed does not move the product out

of the scope or create a product of a new class or kind. Instead, this

processing would at most change the classification of a given rod

within individual model match characteristics. In sum, the nature of

these processing steps do not substantially transform the subject

merchandise. We note that our finding is consistent with the Customs'

practice of treating such processing as less than substantial

transformation. Therefore, we find that processed rod produced from

non-Canadian green SWR is outside the scope of this investigation.

Thus, these sales have been excluded from our analysis.

Period of Investigation

The period of investigation (``POI'') is January 1, 1996 through

December 31, 1996.

Product Comparisons

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

products produced by the respondents, covered by the description in the

Scope of Investigation section above, 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 next most similar foreign like

product on the basis of the characteristics listed in the antidumping

duty questionnaire and the May 22, 1997, reporting instructions.

For Stelco, the Department noted that, in the product

characteristic field deoxidation practice, silicon-killed titanium

grain refined steel had been classified under the category ``other''

rather than ``silicon-killed.'' However, the category ``silicon-

killed'' was intended to include all silicon-killed steels other than

silicon-killed vanadium or niobium grain refined steels. Silicon-killed

titanium grain refined steel is not included among these specific

exceptions; hence, the Department has reclassified all silicon-killed

titanium grain refined transactions as ``silicon-killed'' under

deoxidation practice.

On April 4, 1997, as the Department was in the process of preparing

its antidumping duty questionnaire, the Department requested comments

on the product characteristics to be included in the questionnaire. On

April 18, 1997, Ivaco requested the Department to establish a separate

class or kind of subject merchandise for cold heading quality (``CHQ'')

wire rod. On April 21, 1997, the Department issued the antidumping duty

questionnaire, which specified the physical characteristics to be used

in matching sales of subject merchandise. In response to comments made

by interested parties regarding the appropriate product

characteristics, on May 13, 1997, the Department requested comments

from all interested parties regarding modification to the product

characteristic reporting requirements. On May 22, 1997, the Department

issued the revised product characteristic reporting instructions, which

included the deoxidation variable. We preliminarily find that the

respondents' diversified analysis does not provide a sufficient basis

for finding a separate class or kind of merchandise for CHQ. However,

we have accounted for product differences in the revised product

characteristics.

Consistent with our practice, we compared prime merchandise sold in

the United States to prime merchandise sold in the home market, and

secondary merchandise to secondary merchandise. See e.g., Final Results

of Antidumping Duty Administrative Review: Cold-rolled Carbon Steel

Flat Products from the Netherlands, 61 FR 48465 (September 13, 1996).

Fair Value Comparisons

To determine whether sales of SWR by the Canadian respondents to

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

Export Price (``EP'') or Constructed Export Price (``CEP'') to the

Normal Value (``NV''), as described in the ``Export Price/Constructed

Export Price'' and ``Normal Value'' sections of this notice below. In

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

wide weighted-average EPs and CEPs to weighted-average NVs.

Level of Trade

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

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

the same level of trade (``LOT'') as the EP or CEP transaction. The NV

LOT is that of

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the starting-price sales in the comparison market or, when NV is based

on constructed value (``CV''), that of the sales from which we derive

selling, general and administrative (``SG&A'') expenses and profit. For

EP, the U.S. LOT is also the level of the starting-price sale, which is

usually from exporter to importer. For CEP, it is the level of the

constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or

CEP, we examine stages in the marketing process and selling functions

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison-market sales at the LOT of

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the difference in the levels between NV and CEP

affects price comparability, we adjust NV under section 773(a)(7)(B) of

the Act (the CEP offset provision). See Certain Welded Carbon Steel

Standard Pipes and Tubes From India: Preliminary Results of New Shipper

Antidumping Duty Administrative Review, 62 FR 23760, 23761 (May 1,

1997).

Stelco

In this investigation, we calculated NV based on the same LOT.

Stelco did not claim a LOT adjustment. To examine whether such an

adjustment was necessary, we requested and examined Stelco's

distribution system, including classes of customers, selling functions,

and selling expenses. Stelco's home market sales are made through two

channels of distribution: (1) Direct sales from Stelco to unaffiliated

customers, and (2) direct sales by Stelwire, Stelco's wholly-owned

processor, to unaffiliated customers. Sales at both channels are made

to the same category of customer, (e.g., original equipment

manufacturers (OEMs)). We next reviewed where sales are made in the

chain of distribution. Sales by Stelco are made directly from the

factory, whereas sales by Stelwire are not--Stelwire first purchases

rod from Stelco, then resells the rod to unaffiliated customers. Sales

by a reseller represent an additional stage in the marketing process,

since the reseller is an intermediary between the factory and the

customer. Thus, sales by the two entities appear to be made at

different stages in the chain of distribution. However, we found no

evidence that the entities perform different selling activities (e.g.,

inventory services, technical services, credit extension, and warranty

services), or incur different selling expenses at these different

marketing stages. We therefore conclude that Stelco's home market sales

were made at one LOT.

Stelco reported EP sales in the U.S. market. We conducted an

identical analysis as described above and found that all sales were

made at the same stage in the chain of distribution, i.e., direct to

unaffiliated customers, with no distinction in selling functions

provided, or selling expenses incurred, among U.S. sales. On this basis

we conclude that Stelco's sales in the U.S. are made at one LOT.

Finally, we found no differences among the LOTs in the U.S. and home

market. Stelco provided the same or similar services with respect to

U.S. transactions and home market transactions. Overall, based on this

analysis, we conclude that there is no difference among the LOT in the

U.S. and home markets. As we are able to calculate NV based on the same

LOT as a U.S. sale, no LOT adjustment is warranted.

SDI

In this investigation, we calculated NV based on the same LOT. SDI

did not claim a LOT adjustment. To examine whether such an adjustment

was necessary, we requested and examined information on SDI's

distribution system, including classes of customers, selling functions,

and selling expenses. We noted that SDI had only one channel of

distribution (wire drawers and parts manufacturers) in the home market

and two channels of distribution in the U.S. market: EP sales (wire

drawers and parts manufacturers) and CEP sales (further manufactured

products). We also noted that SDI had two classes of customers (i.e.,

wire drawers and parts manufacturers) in the home market and U.S.

market. Furthermore, SDI's selling functions were the same for both

classes of customers in the home market and U.S. markets (for CEP

sales, we examined these functions after deducting U.S. selling

expenses and associated profit). Finally, we also noted that SDI

performed all selling functions or services during the POI, regardless

of channel of distribution, and the related expenses were reported to

the Department as indirect selling expenses. These functions and

services include (1) negotiating terms/developing/maintaining customer

base, (2) preparing merchandise for shipment, (3) maintaining records,

(4) collecting bills, (5) providing technical assistance and services

(provided to a greater degree to wire drawers rather than parts

manufacturers in both the United States and Canada), and (6) after-sale

service, and they are the same for the home market and U.S. market

(including EP and CEP sales). Therefore, it appears that all sales made

by SDI in both the home and U.S. markets were made at one LOT. As such,

no LOT adjustment is warranted for SDI.

Ivaco

We also examined the stages in the marketing process and selling

functions along the chain of distribution between Ivaco and its

customers. Based on this examination, we preliminarily determine that

Ivaco sold merchandise at two LOTs in the home market during the POI.

One level of trade is for sales made by Ivaco's wire rod manufacturing

facility, Ivaco Rolling Mills (``IRM''); the second level of trade is

for sales made by Ivaco's wire rod processing and drawing facilities,

Sivaco Ontario and Sivaco Quebec. From our analysis of the marketing

process for these sales, we determined that sales by Sivaco Ontario and

Sivaco Quebec are at a more remote marketing stage than that for sales

by IRM. See Memorandum from Alexander Braier to Roland MacDonald, dated

September 24, 1997, which is on file in Import Administration's Central

Records Unit, Room B-099, U.S. Department of Commerce, 14th &

Constitution Avenue, N.W., Washington, D.C. We also found significant

distinctions between the selling activities and associated expenses

between these sales at each marketing stage. Based on these

differences, we concluded that two LOTs exist in the home market, an

IRM LOT and a Sivaco LOT.

Ivaco reported both EP and CEP sales in the U.S. market, claiming

that the same two LOTs exist in the U.S. as in the home market. We

examined the chains of distribution in the U.S., which were the same as

those reported for the home market. We also examined the selling

functions with respect to these sales (for CEP sales, we examined these

functions after deducting U.S. selling expenses and associated profit).

Based on this analysis, we concluded that there are two LOTs in the

U.S. market and that these LOTs are the same as those found in the home

market. Because the LOTs in the United States are identical to those in

the home market, the preceding analysis with respect to the home market

LOTs applies equally to the U.S. market. Therefore, the preceding

analysis

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applies to the U.S. market in total. See Memorandum from Alexander

Braier to Roland L. MacDonald, dated September 24, 1997.

To the extent possible, we have compared U.S. and home market sales

at the same LOT without making a LOT adjustment. When we were unable to

find sales of the foreign like product in the home market at the same

LOT as the U.S. sale, we examined whether a LOT adjustment was

appropriate. The Department makes this adjustment when it is

demonstrated that a difference in LOT effects price comparability. To

make this determination, we compared the weighted-average of Ivaco's NV

prices of sales made in the ordinary course of trade at the two LOTs

for models sold at both levels. Because the weighted-average prices

were higher at one of the LOTs for a preponderance of the models and

higher for a preponderance (by quantity) of total sales on the

quantities of each model sold, we considered this to demonstrate a

pattern of consistent price differences. See Antifriction Bearings

(Other Than Tapered Roller Bearings) and Parts Thereof From France, et

al.; Final Results of Antidumping Duty Administrative Reviews, 62 FR

2081, 2106 (January 15, 1997). Thus, we made an adjustment to NV for

the differences in LOT when appropriate. To calculate the LOT

adjustment, we applied the percentage differential between the

weighted-average home market starting price at one LOT and the

weighted-average home market starting price at the next LOT. Because we

were able to quantify the LOT adjustment, in accordance with section

773(a)(7)(B) of the Act, no CEP offset is applicable to relevant NV-CEP

comparisons. For a detailed discussion of Ivaco's LOT analysis, see

Memorandum from Alexander Braier to Roland MacDonald, dated September

24, 1997.

Export Price/Constructed Export Price

For Stelco, SDI, and Ivaco, we used the Department's EP

methodology, in accordance with section 772(a) of the Act, where the

subject merchandise was sold to the first unaffiliated purchaser in the

United States prior to importation because CEP methodology was not

otherwise warranted based on the facts on the record. For SDI and

Ivaco, we used the Department's CEP methodology, in accordance with

sections 772(b) of the Act, where the subject merchandise was sold to

unaffiliated purchasers after importation into the United States.

We made company-specific adjustments as follows:

1. Stelco

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated customer in

the United States. We made deductions from the starting price (gross

unit price), where appropriate, for rebates, pre-sale warehousing,

Canadian inland freight from plant to distribution warehouse, inland

freight from plant/warehouse to point of delivery in the United States,

U.S. brokerage and handling, and U.S. customs duties.

2. SDI

We calculated EP based on packed, delivered prices to the first

unaffiliated customer in the United States. We made deductions from the

starting price (gross unit price), where appropriate, for rebates,

Canadian inland freight from warehouse to port of exit, U.S. inland

freight from warehouse to unaffiliated customers, U.S. inland freight

from port to warehouse, U.S. brokerage and handling, and U.S. customs

duties.

We calculated CEP based on packed, delivered prices to the first

unaffiliated customer in the United States. We made the same deductions

from the starting price as described above. In accordance with sections

772(d)(1) and (2) of the Act, we also made deductions, where

appropriate, for direct selling expenses, including credit and warranty

expenses, indirect selling expenses, including Canadian and U.S.

inventory carrying costs, further manufacturing costs, and CEP profit,

in accordance with section 772(d)(3) of the Act.

3. Ivaco

We calculated EP based on packed, delivered prices to the first

unaffiliated customer in the United States. In some instances,

customers took delivery of the merchandise at the factory. We made

additions to the starting price (gross unit price), where appropriate,

for freight revenue (reimbursement for freight charges paid by Ivaco)

and debit-note price adjustments (adjustments made by Ivaco for billing

errors), and deductions, where appropriate, for discounts, rebates,

inland freight from IRM to Sivaco Ontario or Sivaco Quebec, inland from

IRM to Sivaco New York, inland freight from IRM to unaffiliated U.S.

customers, inland freight from IRM to unaffiliated U.S. processors,

inland freight from Sivaco Ontario to unaffiliated customers, inland

freight from Sivaco Ontario, Sivaco Quebec, or Sivaco New York to their

unaffiliated U.S. customers, U.S. customs duties, U.S. brokerage and

handling, and credit price adjustments.

We calculated CEP based on packed, delivered prices to the first

unaffiliated customer in the United States. In some instances,

customers took delivery of the merchandise at the factory. We made the

same adjustments to the starting price as described above. In

accordance with sections 772(d)(1) and (2) of the Act, we also made

deductions, where appropriate, for direct and indirect selling

expenses, commissions, further manufacturing costs, and CEP profit, in

accordance with 773(d)(3) of the Act.

Normal Value

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

the aggregate volume of home market sales of the foreign like product

is greater than five percent of the aggregate volume of U.S. sales), we

compared each respondent's volume of home market sales of the foreign

like product to the volume of U.S. sales of the subject merchandise, in

accordance with section 773(a)(1)(C) of the Act. Since each

respondent's aggregate volume of home market sales of the foreign like

product was greater than five percent of its aggregate volume of U.S.

sales for the subject merchandise, we determined that the home market

was viable for each respondent. Therefore, we have based NV on home

market sales.

We based NV on the price at which the foreign like product was

first sold for consumption in Canada, in the usual commercial

quantities, in the ordinary course of trade in accordance with section

773(a)(1)(B)(i) of the Act. To the extent practicable, we based NV on

sales at the same level of trade as the EP or CEP sales. If NV was

calculated at a different level of trade, when appropriate, we made an

adjustment in accordance with section 773(a)(7) of the Act. This

adjustment is discussed further in the Level of Trade section above.

Because Stelco, SDI, and Ivaco reported home market sales to

affiliated parties during the POI, we tested these sales to ensure that

the affiliated party sales were at ``arm's length.'' To conduct this

test, we compared the gross unit prices of sales to affiliated and

unaffiliated customers net of all movement charges, direct selling

expenses (credit and warranty expenses), rebates, and packing. Where

the price to the affiliated party was on average 99.5 percent or more

of the price to the unaffiliated party, we determined that the sale

made to the affiliated party was at arm's length. Based on the results

of this test, we

[[Page 51576]]

excluded from the calculation of each respondent's NV all sales made to

an affiliated party that failed the ``arm's length'' test.

Cost of Production Analysis

Pursuant to an allegation made by petitioners, we initiated a cost

of production investigation in our notice of initiation. See Notice of

Initiation, 62 FR 13854 (March 24, 1997). Before making any fair value

comparisons, we conducted the COP analysis described below.

a. Calculation of COP

We calculated the COP based on the sum of the respondent's cost of

materials and fabrication for the foreign like product, plus amounts

for home market general expenses and packing costs in accordance with

section 773(b)(3) of the Act. We adjusted the company's reported COP as

follows:

1. Stelco: We adjusted Stelco's reported COP to allocate ingot

teeming costs only to the products manufactured from billets produced

at the facility for which these costs were incurred. We recalculated

Stelco's general and administrative amounts to exclude off-sets to

research and development and capital tax expenses. See Memorandum to

Chris Marsh from Beverly Lyons, dated September 17, 1997.

2. Ivaco: We recalculated Ivaco's general and administrative

amounts based on the expenses incurred by IRM, Sivaco Ontario, and

Sivaco Quebec. We adjusted the cost of billets to account for Atlantic

Steel's selling, general and administrative costs. We recalculated

further manufacturing general and administrative amounts to reflect

Sivaco New York's expenses rather than IRM's expenses. See Memorandum

to Chris Marsh from Art Stein, dated September 18, 1997.

b. Test of Home Market Prices

We used each respondent's submitted POI weighted-average COPs, as

adjusted (see above). We compared the weighted-average COP figures to

home market sales of the foreign like product as required under section

773(b) of the Act. In determining whether to disregard home market

sales made at prices below the COP, we examined whether (1) within an

extended period of time, such sales were made in substantial

quantities, and (2) such sales were made at prices which permitted the

recovery of all costs within a reasonable period of time. On a product-

specific basis, we compared the COP to the home market prices, less any

applicable movement charges, rebates, discounts, packing, and direct

and indirect selling expenses.

c. Results of COP Test

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

respondent's sales of a given product were at prices less than the COP,

we did not disregard any below-cost sales of that product because we

determined that the below-cost sales were not made in ``substantial

quantities.'' Where 20 percent or more of the respondent's sales of a

given product during the POI were at prices less than the COP, we

determined such sales to have been made in ``substantial quantities''

within an extended period of time in accordance with section

773(b)(2)(B) of the Act. In such cases, we also determined that such

sales were not made at prices which would permit recovery of all costs

within a reasonable period of time, in accordance with section

773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost

sales. Where all sales of a specific product were at prices below the

COP, we disregarded all sales of that product, and calculated NV based

on CV, in accordance with section 773(a)(4) of the Act.

d. Calculation of CV

In accordance with section 773(e) of the Act, we calculated CV

based on the sum of the respondent's cost of materials, fabrication,

G&A, U.S. packing costs, direct and indirect selling expenses, interest

expenses, and profit. As noted above, we adjusted Stelco's COP for

ingot teeming costs and recalculated general and administrative expense

amounts. We also adjusted Ivaco's cost of billets, and general and

administrative expense amounts.

In accordance with section 773(e)(2)(A) of the Act, we based SG&A

and profit on the amounts incurred and realized by the respondent in

connection with the production and sale of the foreign like product in

the ordinary course of trade, for consumption in the foreign country.

For selling expenses, we used the actual monthly weighted-average home

market direct and indirect selling expenses.

e. Adjustments to Prices

1. Stelco: We calculated NV based on packed, delivered prices to

unaffiliated customers and prices to affiliated customers where the

sales were made at arm's length. We made deductions from the starting

price (gross unit price), where appropriate, for rebates, inland

freight from plant to distribution warehouse, inland freight from

plant/warehouse to customers, pre-sale warehouse expense, and packing,

in accordance with section 773(a)(6) of the Act. Pursuant to section

773(a)(6)(C)(iii) of the Act and 19 CFR 353.56(a)(2), we made

circumstance-of-sale adjustments, where appropriate, by deducting home

market direct selling expenses (i.e., warranty, credit and technical

service expenses) and adding U.S. direct selling expenses (i.e.,

warranty, credit and technical service expenses).

Because Stelco paid commissions on U.S. sales, in calculating NV

for the respondents, we deducted the lesser of either (1) the weighted-

average amount of commission paid on a U.S. sale for a particular

product, or (2) the weighted-average amount of indirect selling

expenses paid on the home market sales for a particular product. See

351.410(e), 62 FR 27414 (May 19, 1997).

For matches of similar merchandise, we made adjustments, where

appropriate, for physical differences in the merchandise in accordance

with section 773(a)(6)(C)(ii) of the Act.

2. SDI: We calculated NV based on packed, delivered prices to

unaffiliated customers and prices to affiliated customers where sales

were made at arm's length. We made deductions from the starting price

(gross unit price), where appropriate, for rebates, inland freight from

plant/warehouse to customer, packing, and warranty and credit expenses,

in accordance with section 773(a)(6) of the Act. Pursuant to section

773(a)(6)(C)(iii) of the Act and 19 CFR 353.56(a)(2), we made

circumstance-of-sale adjustments, where appropriate, by deducting home

market direct selling expenses (i.e., warranty and credit expenses) and

adding U.S. direct selling expenses (i.e., warranty and credit

expenses). For matches of similar merchandise, we made adjustments,

where appropriate, for physical differences in the merchandise in

accordance with section 773(a)(6)(C)(ii) of the Act.

3. Ivaco: We calculated NV based on packed, delivered prices to

unaffiliated customers and prices to affiliated customers where sales

were made at arm's length. We made deductions from the starting price

(gross unit price), where appropriate, for discounts, rebates, post-

sale price adjustments, foreign inland freight, warranty expense, and

the direct portion of technical service expenses, in accordance with

section 773(a)(6) of the Act. Pursuant to section 773(a)(6)(C)(iii) of

the Act and 19 CFR 353.56(a)(2), we made circumstance-of-sale

adjustments, where appropriate, for warranty and credit expenses. If NV

was calculated at a different level of trade than EP, we made an

adjustment in accordance with section 773(a)(7) of the Act, as

discussed in the Level of Trade section above.

[[Page 51577]]

If NV was calculated at a different level of trade than CEP, we

made an adjustment in accordance with section 773(a)(7) of the Act, as

discussed in the Level of Trade section above.

Because Ivaco paid commissions on U.S. sales, in calculating NV for

the respondent, we deducted the lesser of either (1) the weighted-

average amount of commission paid on a U.S. sale for a particular

product, or (2) the weighted-average amount of indirect selling

expenses paid on the home market sales for a particular product. See

351.410(e), 62 FR 27414 (May 19, 1997). For matches of similar

merchandise, we made adjustments, where appropriate, for physical

differences in the merchandise in accordance with section

773(a)(6)(C)(ii) of the Act.

Currency Conversions

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

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

effect on the dates of the U.S. sales as certified by the Federal

Reserve Bank.

Verification

As provided in section 782(i) of the Act, we will verify all

information determined to be acceptable for use 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 that are entered, or withdrawn from warehouse, for

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

Federal Register. We will instruct the 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-

Exporter/manufacturer average margin

percentage

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

Stelco, Inc............................................. 2.43

Sidbec-Dosco (Ispat), Inc............................... 11.76

Ivaco, Inc.............................................. 7.49

All Others Rate......................................... 7.79

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

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

threatening material injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least six copies must

be submitted to the Assistant Secretary for Import Administration no

later than December 16, 1997, and rebuttal briefs, no later than

December 30, 1997. A list of authorities used and an executive summary

of issues should accompany any briefs submitted to the Department. Such

summary should be limited to five pages total, including footnotes. In

accordance with section 774 of the Act, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs. Tentatively, the hearing

will be held on January 6, 1998, at the U.S. Department of Commerce,

14th Street and Constitution Avenue, N.W., Washington, D.C. 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. Oral presentations will be limited to issues raised in the

briefs. We will make our final determination not later than 135 days

after the publication of this notice in the Federal Register.

This determination is published pursuant to sections 733(f) and

777(i) of the Act.

Dated: September 24, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-26040 Filed 9-30-97; 8:45 am]

BILLING CODE 3510-DS-P