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

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** November 19, 1997
- **Citation:** 62 FR 61787

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-30396. Public record. Not legal advice.