Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from the Russian Federation

DEPARTMENT OF COMMERCE

International Trade Administration

[A-821-808]

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

Certain Cut-to-Length Carbon Steel Plate from the Russian Federation

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 19, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan at (202) 482-1324 or

Eugenia Chu at (202) 482-3964, Import Administration, International

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

Constitution Avenue, N.W., Washington, D.C. 20230.

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 Round Agreements Act (URAA). In addition,

unless otherwise indicated, all citations to the Department's

regulations are to 19 C.F.R. part 353 (1997).

Final Determination: We determine that certain cut-to-length steel

plate (CTL plate) from the Russian Federation is being, or is likely to

be, sold in the United States at less than fair value (LTFV), as

provided in section 735 of the Act.

Case History

Since the preliminary determination in this investigation

(Preliminary Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Carbon Steel Plate From the Russian Federation, 62 FR

31967 (June 11, 1997)), the following events have occurred:

In June 1997, we verified the Severstal's questionnaire responses.

On July 23, 1997, the Department issued its report on verification

findings. Petitioners and Respondent, Severstal, submitted case briefs

on July 31, 1997, and rebuttal briefs on August 5, 1997. A public

hearing was not requested nor held.

On August 8, 1997, the Department provided interested parties the

opportunity to submit additional publicly-available information (PAI)

from surrogate countries to value certain factors of production. The

Department received responses on August 15, 1997, and comments on

August 22, 1997.

Scope of 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. Excluded from

the subject merchandise within the scope of the petition is grade X-70

plate. Although the HTS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

investigation is dispositive. See memorandum on Scope of Investigations

on Carbon Steel Plate, from Joseph Spetrini to Robert S. LaRussa

(October 24, 1997).

Period of Investigation (POI)

The POI is April 1, 1996 through September 30, 1996.

Separate Rates

Severstal has requested a separate, company-specific rate. The

claimed ownership structure of Severstal during the POI is that of a

publicly owned joint stock company, where the state owned 20% of the

shares.

To establish whether a firm is sufficiently independent from

government control to be entitled to a separate rate, the Department

analyzes each exporting entity under a test arising out of 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 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). Under the separate rates criteria, the

Department assigns separate rates in nonmarket economy cases only if a

respondent can demonstrate the absence of both de jure and de facto

governmental control over export activities.

1. Absence of De Jure Control

An individual company may be considered for a separate rate if it

meets the following de jure criteria: (1) an absence of restrictive

stipulations associated with an individual exporter's business and

export licenses; (2) any legislative enactments decentralizing control

of companies; and (3) any other formal measures by the government

decentralizing control of companies. Severstal has placed on the

administrative record a number of documents demonstrating absence of de

jure control. These documents include laws, regulations, and provisions

enacted by the government of the Russian Federation, describing the

deregulation of Russian enterprises as well as the deregulation of the

Russian export trade (except for a list of products that may be subject

to government export constraints which Severstal claims, and the

Department verified, do not include subject merchandise). Specifically,

Severstal provided English translations of the laws and regulations

governing their enterprises. These laws and regulations authorized

Severstal to make its own operational and managerial decisions during

the POI. See Separate Rates Memorandum, dated June 3, 1997.

2. Absence of 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 (``EP'') are set by

or 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

[[Page 61788]]

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 losses.

Severstal asserted, and we verified, the following: (1) it

establishes its own EPs; (2) it negotiates contracts without guidance

from any governmental entities or organizations; (3) it selects its own

management; and (4) it retains the proceeds of its export sales, uses

profits according to its business needs, and has the authority to sell

its assets and to obtain loans. In addition, Severstal's questionnaire

responses indicate that company-specific pricing during the POI does

not suggest coordination among exporters. During verification

proceedings, Department officials viewed such evidence as sales

documents, company correspondence, and bank statements. This

information supports a finding that, during the POI, there was a de

facto absence of governmental control of export functions. In addition,

we determined that Severstal had autonomy from the government in making

decisions regarding the selection of management during the POI.

Therefore, we have concluded that Severstal is entitled to a separate

rate. See Separate Rates Memorandum, dated June 3, 1997.

The Russia-Wide Rate

U.S. import statistics indicate that the total quantity and value

of U.S. imports of certain carbon steel plate from the Russian

Federation is greater than the total quantity and value of steel plate

reported by all Russian companies that submitted responses. Given this

discrepancy, we conclude that not all exporters of Russian carbon steel

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

single antidumping deposit rate--the Russia-wide rate--to all exporters

in the Russian Federation (other than Severstal), based on our

presumption that those respondents who failed to respond constitute a

single enterprise and are under common control by the Russian

Federation 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).

This Russia-wide antidumping rate is based on adverse 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 the information drawn from the

petition.

As discussed above, all Russian 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. In such situations, the Department

generally selects as total facts available either the higher of the

average of the margin from the petition or the highest rate calculated

for a respondent in the proceeding. See, e.g., Notice of Final

Determination of Sales at Less Than Fair Value: Persulfates From the

People's Republic of China, 96 FR 27222 (May 19, 1997). In the present

case, the average margin in the petition is higher than the one

calculated rate. Accordingly, the Department has based the Russia-wide

rate on information in the petition. In this case, the average petition

rate is 185.00 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

reasonable at the Department's disposal. The Statement of

Administrative Action (SAA), accompanying the URAA (H. Doc. 316, Vol.

1, 103d Cong., 2d Sess. 870 (1996)), clarifies that the petition is

``secondary information'' and that ``corroborate'' means to determine

that the information used has probative value. See SAA at 870.

In accordance with section 776(c) of the Act, we corroborated the

margins in the petition to the extent practicable. 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 export price derived from actual

U.S. selling prices known to petitioners. We compared the starting

prices used by petitioner less the importer mark-ups against prices

derived from U.S. import statistics and found that the two sets of

prices were consistent. We also compared the movement charges used in

the petition with the surrogate values used by the Department in its

margin calculations and found them to be consistent.

The information in the petition with respect to the normal value

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

production of steel plate. Petitioner submitted usage amounts for

materials, labor and energy, adjusted for known differences in

production efficiencies. To account for differences between the

production processes of petitioners and potential respondents,

Petitioner 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.

The margins in the petition, which ranged from 139.97 to 230.38

percent, were obtained by Petitioners by comparing the normal values to

the export price developed from customs values and to export prices

developed from actual U.S. price quotes. For each method, petitioners

submitted estimated dumping margins for the BOF method, the open-hearth

method and a weighted-average of the two. See Corroboration Memorandum,

dated June 3, 1997.

Fair Value Comparisons

To determine whether the sale of certain carbon steel plate from

the Russian Federation sold to the United States by the Russian

exporters receiving separate rates were made at less than fair value,

we compared the EP to the NV, as specified in the ``Export Price'' and

``Normal Value'' sections of this notice.

Export Price

For Severstal, we calculated EP in accordance with section 772(a)

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

first unaffiliated purchaser in the United States prior to importation

and constructed export price (CEP) methodology was not otherwise

indicated. In accordance with section 777A(d)(1)(A)(i) of the Act, we

compared POI-wide weighted-average EPs to the factors of production.

[[Page 61789]]

We corrected Severstal's data for errors and minor omissions found

at verification and submitted to the Department. We calculated EP in

accordance with our preliminary calculations, except that we: (1)

corrected for the errors found at verification as submitted by

Severstal on July 18, 1997, and (2) corrected input freight factors for

limestone and ferroalloy purchases based on findings from verification,

see Comments below.

Normal Value

Section 773(c) of the Act requires the Department to value the

factors of production, to the extent possible, in one or more market

economy countries that are at a level of economic development

comparable to that of the non-market economy country and that are

significant producers of comparable merchandise.

In our preliminary determination, we selected Brazil as our

surrogate country. Brazil is an appropriate country for the reasons set

forth in our preliminary determination. See the January 27, 1997

memorandum from the Office of Policy discussing our selection of

surrogate countries for Russia (Policy Memo). Since we find no

compelling reason to change this selection, we have continued to base

FMV on the values of the factors of production as valued in Brazil.

Factors of Production

We calculated NV based on factors of production cited in the

preliminary determination, making adjustments for specific verification

findings. See Final Determination Calculation Memorandum, dated October

24, 1997. To calculate NV, we multiplied the verified amounts for the

factors of production by the appropriate surrogate value for the

different inputs. We have used the same surrogate sources as in the

preliminary determination with the exception of overhead, SG&A, and

profit. For the final determination we based the percentages for

overhead, SG&A and profit on the detailed public version of Companhia

Siderurgica de Tubarao's (CST) and Usinas Siderurgicas de Minas Gerais'

(Usiminas) financial statements that were placed on the record of this

investigation by Severstal. See Comment 3, below.

Verification

As provided in section 782(i) of the Act, we verified the

information submitted by Severstal for use in our final determination.

We used standard verification procedures, including examination of

relevant accounting and production records and original source

documents provided by Severstal.

Comment 1: Input Freight Factors for Limestone and Ferroalloy

Purchases.

Petitioners claim that Severstal falsely reported no transportation

costs incurred in connection with its purchases of limestone and

ferroalloys for use as raw material inputs. Petitioners state that at

verification the Department determined that one of Severstal's two

limestone suppliers is located near Severstal's Cherepovets facility,

and the other is located a fair distance away. Additionally,

Petitioners assert that Severstal has numerous suppliers of ferroalloys

located at varying distances from Severstal's facility. Petitioners

argue that the failure to report these facts was not an ``inadvertent''

error and the information does not constitute a ``minor'' correction.

Therefore, Petitioners argue that the Department should treat

Severstal's withholding of this information as a failure to provide

requested information in a timely fashion and an impediment to this

proceeding. Petitioners rely on Titanium Sponge from the Russian

Federation; Notice of Final Results of Antidumping Duty Administrative

Review, 61 FR 58525 (Nov. 15, 1996) (Titanium Sponge from Russia) to

argue that the Department may not accept this new information at

verification, stating that ``the Department accepts new information at

verification only when (1) the need for that information was not

evident previously, (2) the information makes minor corrections to

information already on the record, or (3) the information corroborates,

supports, or clarifies information already on the record.''

Furthermore, Petitioners argue that, because Severstal did not act to

the best of its ability in responding to the Department's requests, the

Department should apply adverse facts available by calculating freight

for both limestone and ferroalloys as originating from the most distant

suppliers of each input.

Severstal argues that the use of ``facts available'' is not

appropriate in this situation as Severstal, who has never before been

involved in a U.S. antidumping proceeding and has never before faced

data-gathering demands of such intensity, submitted a massive amount of

data, the overwhelming bulk of which was verified. Severstal argues

that in the limited amount of time to prepare its responses it focused

on the major inputs. Furthermore, Severstal asserts, because one of the

major sources of limestone is located in the immediate vicinity of

Severstal's steel mill, it is not surprising that it overlooked the

more distant source in preparing its response. Additionally, Severstal

argues that it is the Department's standard to accept such corrected

data.

Department Position

We agree with Petitioner that the Department must resort to facts

available to calculate freight for ferroalloys. Section 776(b) of the

Act provides that adverse inferences may be used if a party has failed

to cooperate by not acting to the best of its ability to comply with

requests for information. Severstal reported no transportation costs

for its purchase of ferroalloys despite the fact that none of the

suppliers of ferroalloys are located in the vicinity of Severstal's

steel mill. Therefore, for the final determination, we have used the

greatest reported distance to calculate freight for ferroalloys as

adverse facts available.

However, based on the fact that a major source of limestone is

located in the immediate vicinity of Severstal's steel mill, we agree

with Severstal that the other source was a mere oversight and

constitutes an inadvertent error. Therefore, we did not use the

greatest distance to calculate freight for limestone. Instead, we have

used, as adverse facts available, a simple average of the two verified

distances to calculate transportation costs incurred with Severstal's

purchase of limestone.

The submission of these corrections is not the same as the

submission of data, rejected by the Department in Titanium Sponge from

Russia, where a party claimed a by-product deduction at verification.

Severstal's information, contrary to Petitioners' assertions,

constitutes a minor correction to the information placed on the record

by Severstal and it has a negligible impact on the weighted-average

margin calculation. Therefore, we have accepted this information.

However, as stated above, we have used facts available to calculate

freight for both limestone and ferroalloys in the final determination

because Severstal failed to provide the requested information in timely

fashion.

Comment 2: Non-Metallic Waste at the BOF and Recycled Materials at

the Open Hearth Furnace.

Petitioners argue that the information first submitted at

verification that allegedly corrects ``minor errors'' in Severstal's

reported non-metallic waste offset at the basic oxygen furnace (BOF)

and recycled materials offset for the open hearth furnaces should be

rejected because it does not correct clerical or minor errors in

Severstal's original submission and it is untimely, unclear, and

incorrect. In addition, Petitioners argue that Severstal's corrected

[[Page 61790]]

information changes the reported volume of recycled materials at the

open hearth.

Severstal does not insist that the offset for non-metallic waste at

the BOF be adopted because Severstal has come to the conclusion that it

erred in including this information in its correction letter provided

to the verifiers. Severstal has since determined that the non-metallic

waste amounts reported in its BOF ledger are not included as offsets by

the company when calculating its cost of production of products for

which that shop is utilized. However, Severstal argues that the

Department should make the requested correction for the offset for

recycled materials at the open hearth furnace. Severstal explains that

it simply made an error when manually preparing the database for

submission, which it corrected in its June 16, 1997 letter of

verification corrections. Severstal argues that it is the Department's

well-established practice to accept the correction of such errors,

especially in a case where the overwhelming volume of submitted data

was verified as accurate.

Department Position

We agree with Petitioners that the new information claiming an

offset for non-metallic waste at BOF should be rejected since the non-

metallic waste amounts are not included as offsets by Severstal.

Therefore, we did not make an adjustment in calculating normal value.

Based on the results of verification, we agree with Severstal

regarding the correction of the recycled materials at the open hearth.

The revision corrects an error that arose from the manual extraction of

data from the open hearth's records which we verified (see Verification

Report, dated July 23, 1997). We have corrected for this error in the

final determination.

Comment 3: Factory Overhead, SG&A, and Profit.

Petitioners claim that the Department's preliminary results did not

include all factory overhead costs and that a dumping margin cannot

accurately be calculated without the inclusion of non-depreciation

overhead costs. Although Petitioners have not been able to find this

information, they provided one integrated producer's financial

statement (Pohang Iron & Steel Co., Ltd. (``POSCO'')) which provides a

detailed list of the types of expenses incurred as manufacturing costs.

Petitioners urge the Department to either use the percentages from

POSCO's financial statement as facts available to approximate the

proper amount of factory overhead costs, or use its resources to find

this additional information.

Severstal argues that the Department should reject Petitioners'

proposal to use factory overhead values obtained from the financial

reports of a steel company in Korea. Respondents contend that Korea is

not an appropriate surrogate country for Russia, and it was never

considered by the Department or the parties in this (or any other)

investigation as a potential surrogate. Severstal cites Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from

France, et al.; Final Results of Antidumping Duty Administrative

Reviews, 57 FR 28360 (June 24, 1992) (Antifriction Bearings) where the

Department refused to use a surrogate overhead rate from another

country because it was not among the surrogate countries cited for that

review. Additionally, Severstal claims that to stray from Brazil to

Korea would violate the Department's preference for consistency in the

calculation of factor values, which is referenced through its reliance

on data in a single surrogate country if possible. See Final

Determination of Sales at Less Than Fair Value: Certain Carbon Steel

Butt-Weld Pipe Fittings from the People's Republic of China, 57 FR

21058 (May 18, 1992) (Carbon Steel Butt-Weld Pipe Fittings). Severstal

further argues that while only depreciation is identified in the

financial reports of the Brazilian steel producers whose financial

information the Department used in the Preliminary Results, the

Department merely accepted Petitioners' own proposal in using this data

as the basis for calculating the factory overhead ratio.

Furthermore, Severstal argues that the Department incorrectly

utilized the data from surrogate country steel producers' financial

statements for periods outside the period of investigation (POI).

Severstal argues that, consistent with the Department's prior practice,

the Department should use financial data contemporaneous with the POI.

Severstal cites several cases where the Department has noted its policy

to use contemporaneous surrogate values.

Severstal also provided the 1996 financial statements of the

surrogate country companies and provided recalculated ratios. Severstal

additionally alleges that the Department made two clerical errors in

calculating the SG&A and profit ratios. Severstal states that, when

calculating the SG&A factor, the Department incorrectly included profit

sharing expenses. Severstal states that these expenses do not represent

actual expenses incurred by the companies but, rather, reflect the

value of profits shared with employees and management, dividend

distributions to employees, and annual taxes on net income.

Additionally, Severstal states that the Department made a mathematical

error in calculating the average profit ratio. Severstal requests that,

if the Department chose not to utilize the contemporaneous data, the

Department should at least utilize the correct ratio of 25.56 percent

as opposed to the 26.65 value utilized in the preliminary

determination.

Department Position

We agree with Petitioner that our preliminary results did not

include all factory overhead costs; however, we disagree with

Petitioner's suggestion to use the data from a Korean steel producer's

financial statement to calculate a factory overhead ratio. It is the

Department's preference to use a single surrogate country as the source

of data in an NME investigation. See Carbon Steel Butt-Weld Pipe

Fittings. Furthermore, it is the Department's practice to only use data

of those countries listed as potential surrogates identified in the

Policy Memo. See Antifriction Bearings. Korea was never identified as a

potential surrogate for the Russian economy. Therefore, we have

continued to use Brazilian data for the final determination.

We agree with Severstal that the Department should use financial

data contemporaneous with the POI. Based on the submitted information

and the Department's own research, we agree with Severstal that the

financial data from the 1996 income statements of the two Brazilian

companies used in the preliminary determination, CST and Usiminas, are

the most appropriate surrogate information available to calculate the

percentages for overhead, SG&A, and profit for our final determination.

In contrast to our preliminary determination, for this final

determination, in order to ensure that all costs are properly accounted

for, in accordance with our practice we revised the overhead ratio to

include employee profit sharing. Despite the manner in which labor

costs are packaged (i.e., either through straight salary, profit

sharing, etc.), total labor costs remain the same to the employer. This

includes all profit sharing expenses. See Porcelain-on-Steel Cookware

from Mexico: Notice of Final Results of Antidumping Duty Administrative

Review, 62 FR 25908 (May 12, 1997), where the Department determined

that profit sharing expense relates to the compensation of direct

labor. Labor is

[[Page 61791]]

captured in the cost of manufacturing which is part of the cost of

sales. Thus, we have included profit sharing in overhead. However, if a

company broke out profit sharing between employees and management, as

CST has done, we included management profit sharing in the SG&A

calculation and employee profit sharing in the overhead calculation.

See Final Determination Calculation Memorandum, dated October 24, 1997.

Consistent with prior Department practice, we have continued to

include social contributions in SG&A for the final determination. See

Final Determination Calculation Memorandum, dated October 24, 1997; see

also Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determinations: Certain Hot-Rolled

Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat

Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and

Certain Cut-to-Length Carbon Steel Plate From Brazil, 58 FR 7080

(February 4, 1993).

Comment 4: Energy.

In our preliminary determination, we used a ``theoretical fuel''

ratio submitted by Severstal to derive values for various energy

inputs. Petitioners allege that this approach is flawed for several

reasons, particularly with respect to inputs of energy gases. First,

Petitioners assert that the Department used numbers that represent the

amount of energy or fuel theoretically necessary to create the energy

instead of the energy generated (caloric output) by the particular type

of fuel. Petitioners argue that the calculations should be based on

caloric yield because the heat requirements of the steelmaking process

demand a certain caloric yield regardless of the amount of energy that

may have been used to create the fuel before it was purchased by the

steel producer. Second, Petitioners argue that it is not clear what

Respondents' reported figures represent because Severstal did not

provide a citation or supporting documentation for its table. Third,

Petitioners claim that the table used by the Department is flawed

because the ratios representing the energy needed to create each fuel

are the same as the ratios representing the energy yield of the

resulting product. In other words, Petitioners conclude it appears as

though every fuel listed has exactly the same energy efficiency.

Severstal agrees that the Department may use the ``theoretical

fuel'' ratios to derive the values for energy sources. Furthermore,

Severstal claims that, because the ``theoretical fuel'' data in the

first table to which Petitioners object was based on a scientific study

and made available for the Department at verification, there is no

reason to doubt its accuracy. However, Severstal does not object to the

proposal to use the second table (showing the quantity of energy (in

calories) generated by each type of fuel) to convert to an equivalent

consumption value in terms of natural gas usage.

Department Position

Based on our findings at verification, all gas input factors are

reported in cubic meters needed to produce one ton of plate. Usage

rates were adjusted to account for yields and waste. In obtaining

surrogate value information, we were able to find values for natural

gas in cubic meters based on Brazilian import statistics, but were

unable to obtain surrogate values for other input energy sources on the

same basis. Therefore, in order to ensure that the value of energy was

consistent across all energy sources in calculating normal value, we

chose to convert the other energy sources into natural gas equivalents.

In response to Petitioners' argument that the Department should use

the caloric output of fuels to determine the value of these fuels, we

have used factor inputs as reported on a caloric output basis. We

simply converted the surrogate value for natural gas into other gas

equivalents using public conversion rates. Therefore, we have continued

to use the methodology from our preliminary determination as this

methodology is an accurate means of valuing energy usage.

Comment 5: Reported Factor Usage Data.

Petitioners allege that the production factor data submitted by

Severstal are distorted in that they report the same factors of

production for multiple CONNUMs. Petitioners claim that Severstal did

not submit its factor usage data at the CONNUM-specific level of detail

requested by the Department and that Severstal reported the same factor

input values for multiple CONNUMs. Petitioners are primarily concerned

with Severstal's failure to distinguish the different costs.

Petitioners argue that the Department should adjust Severstal's

submitted factor usage data to account for differences in production

costs. Petitioners argue that in the past, the Department has adjusted

information to correct for data which did not conform to the level of

specificity required and cite Certain Cold-Rolled and Corrosion-

Resistant Carbon Steel Flat Products from Korea, 62 FR 18404 (April 15,

1997) (Carbon Steel Flat Products from Korea) as an example where the

Department adjusted the respondent's reported costs because its

reporting method did not account for certain differences in physical

characteristics. Petitioners argue that some products cost more to

produce and that the Department should assign certain products the

highest total calculated cost for any Severstal product.

Severstal argues that it explained the calculations to the

Department and the data was verified. Severstal asserts that it does

not maintain its books in the normal course of business according to

the product definitions established by the Department in creating

CONNUMs, and that it submitted its factor data on the basis of the

company books and records. Severstal claims that it reported its costs

to the degree of specificity allowed by its records, and that in

situations where a respondent reported its costs in as much detail as

its normal accounting system would allow, the Department has repeatedly

held that ``adjustment'' of the reported data would be inappropriate.

Severstal further argues that Carbon Steel Flat Products from Korea

does not support Petitioners' point. In that case, Severstal argues,

the Department adjusted the respondents's cost data only where the

respondent had weight-averaged cost data for all products that

contained certain product characteristics. For costs associated with

other physical characteristics, Severstal contends, the Department

concluded that the respondent reported costs in as much detail as its

accounting system allowed and that any costs associated with other

physical characteristics were captured and allocated to all products.

Severstal references several other cases to support this

interpretation.

Finally, Severstal argues that if the Department were to inflate

the reported factors for one of the products sold, it must somehow

compensate by reducing the factors for other subject merchandise

because the total quantity of factors consumed in the production of the

subject merchandise shipped to the United states is fixed and verified.

Severstal alleges that any other response by the Department would not

be an ``adjustment,'' but would rather constitute a punitive inflation

of Severstal's reported factors.

Department Position

We agree with Severstal. The Department has in the past, as

Petitioners correctly point out, adjusted information to correct for

data which did not appropriately account for physical characteristics.

However, even in cases where a company has been unable to provide

information at the

[[Page 61792]]

level of detail requested by the Department, we still accepted the

reported costs where we were satisfied that these costs nonetheless

reasonably reflected the actual costs of producing the subject

merchandise during the POI.

For the same reasons outlined in Carbon Steel Flat Products from

Korea and in Final Results of Antidumping Administrative Review:

Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-

to-Length Carbon Steel Plate from Canada, 61 FR 13815 (March 28, 1996),

we agree with Severstal that its reported costs were reasonable. In

these cases, we concluded that the respondent's methodology was

reasonable given the nature of its cost accounting system, its verified

inability to determine specific costs, and the conservative method in

which the costs were reported.

In this case, Severstal has reported product-specific costs from

its normal cost accounting system, which we verified reasonably reflect

the actual usage of materials to produce the merchandise under

investigation. Furthermore, given the nature of Severstal's cost

accounting system, our verification findings confirmed Severstal's

inability to determine specific costs. The instant situation is very

different from that in Carbon Steel Flat Products from Korea where we

determined that the respondent did not appropriately account for two

characteristics where the respondent derived a general weighted-average

cost and applied it to all merchandise that contained the two certain

physical characteristics. This weight-averaged cost was contrary to the

respondent's normal cost accounting system, resulted in a distortion of

the cost of manufacturing, and differentiations were lost through

averaging. For these reasons we calculated adjustment factors in that

case. However, this clearly is not the case here.

In regards to the other physical characteristics in Carbon Steel

Flat Products from Korea, the Department found that costs were captured

and allocated to all products because the respondent reported costs in

as much detail as its normal accounting system provided, as Severstal

has in this case. Furthermore, Severstal submitted its factor usage

ratios as recorded in the company books and records. As stated above,

based on our findings at verification, we have determined that

Severstal's reported costs reflect the actual costs as recorded in its

normal accounting system and reasonably reflect the cost of producing

the merchandise. Therefore, we did not make any adjustments in this

final determination.

Comment 6: Indirect Materials and Energy in Factory Overhead.

Petitioners argue that the Department should utilize the value of

U.S. exports to Brazil for certain energy and indirect materials which

were not valued for the preliminary determination. Petitioners provided

the Department with publicly available information taken from U.S.

Census statistics for exports to Brazil for 1996 and claim that in the

absence of alternative data, the Department should use data on U.S.

exports of certain indirect inputs to Brazil to determine the

appropriate surrogate value.

Severstal states that because these materials and types of energy

are not directly related to the production of the merchandise under

investigation, the Department properly treated these inputs as overhead

expenses. Severstal cited several cases including Notice of Preliminary

Determinations of Sales at Less Than Fair Value and Postponement of

Final Determinations: Brake Drums and Brake Rotors From the People's

Republic of China, 61 FR 53190 (Oct. 10, 1996) (Brake Drums and Rotors

from the PRC); Sulfanilic Acid From the People's Republic of China;

Final Results of Antidumping Duty Administrative Review, 61 FR 53711

(Oct. 15, 1996) (Sulfanilic Acid from the PRC); and Porcelain-on-Steel

Cooking Ware From the People's Republic of China; Preliminary Results

of Antidumping Duty Administrative Review, 62 FR 4979 (Feb. 3, 1997)

(Porcelain-on-Steel Cooking Ware from the PRC), as cases where the

Department stated that its general policy is not to calculate surrogate

values of indirect inputs separately, but instead is to include these

inputs as part of the overhead expenses.

Department Position

We agree with Severstal that these inputs are not materials

directly incorporated in the production of steel and thus are not part

of materials consumed. Therefore, consistent with our preliminary

determination, we have treated these inputs as part of factory overhead

in the final determination.

Comment 7: Critical Circumstances.

Severstal alleges that the Department acted unlawfully in finding

critical circumstances in the preliminary determination. They base

their argument on the fact that the 1994 URAA added a new element to

the critical circumstances analysis that the importer ``knew or should

have known'' that ``there was likely to be material injury by reason

of'' the LTFV sales of the subject merchandise. Severstal states that

because the ITC preliminarily found only a threat of material injury

rather than actual injury, the Department may not impute that the

importers had knowledge that these sales would cause material injury to

a U.S. domestic industry. Severstal alleges that the Department's

preliminary decision is unlawful and contrary to its determination in

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

Drums and Brake Rotors from the People's Republic of China, 62 FR 9162

(Feb. 28. 1997) (Brake Drums and Rotors) where the Department stated

that ``when the ITC has preliminarily found no reasonable indication

that a U.S. industry is experiencing present material injury by reason

of the dumped subject merchandise, but only a threat of such injury,

the Department has determined that it is not reasonable to conclude

that an importer knew or should have known that its imports would cause

material injury * * *.''

Severstal further argues that the Department's reliance on the

increase in the volume of imports and the magnitude of the margins is

not only contrary to the Department's previous practice but also

redundant because these factors are also reviewed when determining

whether there has been massive imports during a short period of time

and whether the importer had knowledge of LTFV sales. Therefore,

Respondents asset, the Department has collapsed the first prong of its

analysis of the issue with the second and third prongs of the analysis

to incorrectly conclude that critical circumstances existed in the

preliminary determination.

Petitioners rebut Severstal's argument that the Department

improperly found critical circumstances for the preliminary

determination. Petitioners note that it is a well established practice

for the Department to impute knowledge of material injury based on

dumping margins of greater than 25 percent.

Petitioners argue that the Department's negative finding in Brake

Drums and Rotors from the PRC-Final does not preclude it from making an

affirmative finding in the current case because (1) the SAA and the

URAA are silent as to how the Department is to make a finding of

importer knowledge of material injury and, (2) it is within the

Department's discretion to select a reasonable and administrable

approach. Petitioners also argue that an ITC threat determination does

not mean that an importer of Russian CTL plate cannot have known that

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

during the critical

[[Page 61793]]

circumstances period. Petitioners argue that the basis for an

affirmative threat determination by the ITC is ``whether further dumped

or subsidized imports are imminent and whether material injury by

reason of imports would occur unless an order is issued or a suspension

agreement is accepted'.

Department Position

We agree with Petitioner and continue to find critical

circumstances in the final determination.

Section 735(a)(3) of the Act provides that if the final

determination is affirmative, then that determination shall also

contain a finding of whether: (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 would be material injury by reason

of such sales, and (B) there have been massive imports of the subject

merchandise over a relatively short period.

Because there is no history of dumping and material injury by

reason of dumped imports for cut-to-length steel plate, we conducted

our analysis under section 735(a)(3)(A)(ii) of the Act (importer

knowledge of dumping and material injury).

1. Importer Knowledge of Dumping

In determining whether 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 CTL plate are greater than 25 percent for

Severstal, we have imputed knowledge of dumping.

2. Massive Imports

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, because

imports of the subject merchandise increased 145 percent during the

relevant period, we have determined that imports have been massive.

3. Importer Knowledge of Material Injury

The statute and the Statement of Administrative Action which

accompanies the Uruguay Round Agreements Act (SAA) are silent as to how

we are to make a finding that there was knowledge that there would be

material injury. Therefore, Congress has left the method of

implementing this provision to the Department's discretion.

In determining whether an importer knew or should have known that

there would be material injury by reason of dumped imports, we 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, we will determine that a reasonable basis

exists to impute importer knowledge that there would 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. 353.16(g)). If the ITC preliminarily finds threat of

material injury, we would normally not find knowledge of injury.

However, in this case, the magnitude of the margins and increase in

imports are so great that we have concluded that the importer knew or

should have known that these sales of subject merchandise to the U.S.

would cause material injury.

In this case, imports of Russian plate increased 145 percent in the

three months following the initiation of the investigation when

compared to the three months immediately preceding initiation, or

almost ten times the level of increase needed to find ``massive

imports'' during the same period (see below). Furthermore, we

preliminarily determined that margins of 53.81 percent exist for

Severstal. Based on the ITC's preliminary determination of threat of

injury, the massive increase in imports noted above, and the high

preliminary margins, we have determined that the importer knew or

should have known that there would be material injury by means of sales

of the subject merchandise at less than fair value.

In response to Severstal's allegation, we did not collapse the

first prong of our analysis with the second and third prongs. Importer

knowledge of sales at less than fair value, importer knowledge of

injury, and massive imports are the three separate criteria considered

in determining whether critical circumstances exist. However, some of

the factors we examine to determine whether each of these criteria are

met may be relevant to more than one of the criteria. For example, the

magnitude of the margins is relevant to the importer's knowledge of

sales at less than fair value and the increase in import volumes is

likewise relevant to the massive imports criterion. However, both of

these factors are also relevant to the knowledge of injury criterion.

If the margins and the increase in imports are very large, it is

reasonable for us to assume that the importer knew that such an

increase in imports at such low prices would injure the U.S. domestic

industry.

In response to Severstal's argument regarding Brake Drums and

Rotors, the Department, in deciding the issue of importer knowledge of

material injury in Brake Drums and Rotors was faced with very different

facts and circumstances. In that case, the company specific margins

were all under 15% for Rotors, except for one company with a margin of

16.35%. Moreover, for that one company, the increase of its imports to

the U.S. was under 15%. Thus, the circumstances in Brake Drums and

Rotors, where the ITC finding of threat of injury was coupled with

comparatively minimal company-specific margins and absence of massive

imports, are very different from those in the present investigation.

Thus, because we have determined in this case that the importer

knew or should have known that Russian exporters were selling the

subject merchandise at less than its fair value and that there would be

material injury by reason of such sales, and because there have been

massive imports of the subject merchandise over a relatively short time

period, we have determined that critical circumstances exist for

Severstal.

4. Unexamined Respondents/Russia-Wide Entity

As stated above, in a nonmarket economy case, the Department

presumes that those respondents who failed to respond to the

Department's questionnaire constitute a single enterprise and are under

common control by the Russian government. Therefore, for companies

subject to the Russia-wide rate (i.e., companies which did not respond

to the Department's questionnaire), as facts available, we are imputing

knowledge based on the Russia-wide rate.

[[Page 61794]]

As noted above, we have determined, based on facts available, that

importers knew or should have known that there would be material injury

to the U.S. cut-to-length steel plate industry based on the ITC's

preliminary determination of a reasonable indication of present

material injury. In the absence of shipment data for the Russia-wide

entity, we have determined based on facts available and making the

adverse inference permitted under section 776(b) of the Act, that

because this entity did not provide an adequate response to our

questionnaire, there were massive imports of subject merchandise. We

further note that the record indicates a post-filing surge in U.S. cut-

to-length steel plate imports from Russia which is not accounted for by

the cooperating respondent, Severstal. Finally, the Russia-wide margin

of 185 percent exceeds the 25 percent threshold for imputing a

knowledge of dumping to the importers of the merchandise. Therefore,

for the Russia-wide entity, critical circumstances exist with respect

to imports of subject merchandise.

Therefore, we find that critical circumstances exist for cut-to-

length carbon steel plate sales by all Russian exporters.

Continuation of Suspension of Liquidation

On October 24, 1997, the Department signed a suspension agreement

with the Ministry of Foreign Economic Relations and Trade of the

Russian Federation (the Agreement). Therefore, we will instruct Customs

to terminate the suspension of liquidation of all entries of cut-to-

length carbon steel plate from the Russian Federation. Any cash

deposits of entries of cut-to-length carbon steel plate from the

Russian Federation shall be refunded and any bonds shall be released.

On October 14, 1997, we received a request from Petitioners

requesting that we continue the investigation. We received a separate

request from the United Steelworkers of America, an interested party

under section 771(9)(D) of the Act, on October 14, 1997. Pursuant to

these requests, we have continued and completed the investigation in

accordance with section 734(g) of the Act. We have found the following

margins of dumping:

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

Weight-

average

Manufacturer/producer/exporter margin

percentage

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

Severstal.................................................. 53.81

Russia-Wide Rate........................................... 185.00

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

ITC of our determination. As our final determination is affirmative,

the ITC will determine, within 45 days, whether these imports are

causing material injury, or threat of material injury, to an industry

in the United States. If the ITC's injury determination is negative,

the Agreement will have no force or effect, and the investigation shall

be terminated. See section 734(f)(3)(A) of the Act. If, on the other

hand, the Commission's determination is affirmative, the Agreement

shall remain in force but the Department shall not issue an antidumping

duty order so long as (1) the Agreement remains in force, (2) the

Agreement continues to meet the requirements of subsection (d) and (1)

of the Act, and the parties to the Agreement carry out their

obligations under the Agreement in accordance with its terms. See

section 734(f)(3)(B) of the Act.

This determination is published pursuant to section 735(d) of the

Act.

Dated: October 24, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-30396 Filed 11-18-97; 8:45 am]

BILLING CODE 3510-DS-P