Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-810]

Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From

the United Kingdom; Final Results of Antidumping Duty Administrative

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review; certain hot-rolled lead and bismuth carbon steel products from

the United Kingdom.

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

SUMMARY: On December 9, 1997, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on certain hot-rolled lead and

bismuth steel products from the United Kingdom. The review covers two

manufacturers/exporters, British Steel Engineering Steels Limited

(BSES) and Glynwed Metal Processing Limited (Glynwed), and the period

March 1, 1996 through February 28, 1997.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received, we

have changed the results from those presented in the preliminary

results of review.

EFFECTIVE DATE: April 16, 1998.

FOR FURTHER INFORMATION CONTACT: Gideon Katz or Maureen Flannery,

Import Administration, International Trade Administration, U.S.

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

Washington, D.C. 20230; telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

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. In addition, unless otherwise indicated,

all citations to the Department's regulations are to the regulations as

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

Background

On December 9, 1997, the Department published in the Federal

Register (62 FR 64803) the preliminary results of its administrative

review of the antidumping duty order on certain hot-rolled lead and

bismuth steel products from the United Kingdom (58 FR 15324, March 22,

1993). On January 13, 1998, petitioner, Inland Steel Bar Company,

submitted comments on the Department's preliminary results. On January

20, 1998, BSES submitted rebuttal comments. We held a hearing on

January 22, 1998. The Department has now completed the review in

accordance with section 751 of the Act.

Scope of the Review

The products covered by this review are hot-rolled bars and rods of

nonalloy or other alloy steel, whether or not descaled, containing by

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

in coils or cut lengths, and in numerous shapes and sizes. Excluded

from the scope of this review are other alloy steels (as defined by the

Harmonized Tariff Schedule of the United States (HTSUS) Chapter 72,

note 1(f)), except steels classified as other alloy steels by reason of

containing by weight 0.4 percent or more of lead, or 0.1 percent of

more of bismuth, tellurium, or selenium. Also excluded are semi-

finished steels and flat-rolled products. Most of the products covered

in this review are provided for under subheadings 7213.20.00.00 and

7214.30.00.00 of the HTSUS. Small quantities of these products may also

enter the United States under the following HTSUS subheadings:

7213.31.30.00, 60.00; 7213.39.00.30, 00.60, 00.90; 7214.40.00.10,

00.30, 00.50; 7214.50.00.10, 00.30, 00.50; 7214.60.10, 00.30, 00.50;

and 7228.30.80.00. HTSUS subheadings are provided for convenience and

Customs purposes. The written description of the scope of this order

remains dispositive.

This review covers two manufacturers/exporters of certain hot-

rolled lead and bismuth steel products, BSES and Glynwed, and the

period March 1, 1996 through February 28, 1997.

Analysis of the Comments

We gave interested parties an opportunity to comment on the

preliminary results of review. We received comments from the

petitioner, Inland Steel Bar Company, and rebuttal comments from BSES.

Comment 1: Petitioner alleges that the Department erred in applying

the arm's-length test after incorporating BSES's model matching

concordance into the margin calculation program. Citing the September

26, 1997 ``Antidumping Duty Investigation on Steel Wire Rod from

[[Page 18880]]

Canada Analysis Memorandum for Preliminary Results of Sidbec-Dosco

(Ispat) Inc. (SDI) and Walker Wire,'' petitioner asserts that the

Department should follow standard practice and apply the arm's-length

test prior to incorporating the model matching concordance for BSES.

Petitioner further asserts that applying the arm's-length test

prior to incorporating the model matching concordance is consistent

with the intent of the Statement of Administrative Action (SAA).

Petitioner concludes that non-arms's-length sales cannot be used in the

concordance because the SAA, in reference to the starting point for

calculating normal value, states that the Department will ``ignore

sales to affiliated parties which cannot be demonstrated to be at arm's

length prices for purposes of calculating normal value.'' See Uruguay

Round Agreements Act, Statement of Administrative Action, H.R. Doc. No.

316, Vol. 1, 103d Cong., 2d Sess. 827 (1994).

Petitioner also asserts that for Glynwed, the other respondent in

this review, the Department generated a product concordance after

completing the arm's-length test. Petitioner states that the Department

may use different methodologies for different respondents only if it

(1) offers a reasonable and rational explanation for doing so, and (2)

demonstrates that the practice is in accordance with the applicable

statute. Petitioner asserts that the Department offered no reasonable

and rational explanation for using a different methodology for BSES.

Petitioner also claims that BSES's allegedly improper model

matching concordance has a substantial impact on the Department's

analysis. Petitioner claims that it generated a model matching

concordance according to the Department's standard methodology, and

claims that it produced a vastly different model match concordance.

Petitioner claims that the Department's standard concordance

methodology is consistent with the statutory preference for computing

dumping margins on price-to-price comparisons rather than constructed

value. Petitioner also claims that the Department has the authority to

revise the concordance, as it did with Glynwed for the preliminary

results.

BSES argues that the Department should continue to perform the

arm's-length test after incorporating the model matching concordance

supplied by BSES. BSES argues that the Department has the discretion to

decide the timing of the concordance and that, while the Department's

practice has been mixed with respect to whether to perform the arm's-

length test before or after applying the model matching concordance, in

this proceeding the Department's practice has been consistent; the

Department has always performed the arm's-length test after

incorporating the model matching concordance provided by BSES. BSES

maintains that the Department made a determination that this

methodology works and should maintain that determination unless there

are good reasons to change.

BSES suggests that petitioner is objecting to the Department's

established model matching concordance methodology for the first time

in this review because, in the circumstances of this fourth review,

constructed value actually yields a lower margin for BSES than price-

to-price matching. BSES agrees that the methodology has an impact, but

asserts that the correct methodology should not be chosen based on

which alternative results in the higher dumping margin. BSES further

asserts that it is not appropriate for the Department to change

methodology now because BSES has not had an opportunity to develop a

factual record, discuss at verification, or defend the point because

the concordance methodology was not an issue raised or challenged by

the Department. BSES also claims that the products petitioner proposes

to match are so dissimilar that normal value (NV) would be based on

constructed value anyway or on very strange matches. If, however, the

arm's length test is run after the creation of the concordance, there

are better matches made.

Department's Position: We agree with petitioner. Although in prior

segments of this proceeding we have run the arm's-length test after the

creation of the concordance, the United States Court of Appeals for the

Federal Circuit has since ruled that [T]he initial consideration for

Commerce is whether, under section 1677b(a)(1), the sales are ``in the

usual commercial quantities and in the ordinary course of trade.'' 19

U.S.C. 1677b(a)(1). If the sales are not in the ordinary course of

trade, then Commerce should exclude that specific class of merchandise

* * * because a determination of the antidumping duty cannot be made.''

CEMEX, S.A. v. United States, slip op. 97-1151 at 15 (Fed. Cir. 1998).

It is clear from this ruling that sales made outside the ordinary

course of trade, which include those sales failing the arm's-length and

cost tests, must not be considered in the antidumping margin

calculation. We have therefore treated the arm's-length and cost tests

the same way and have run both tests prior to creating the product

concordance.

We are making this change to the preliminary results regardless of

whether the dumping margins would be affected positively or negatively.

The methodology has not been chosen based on which alternative results

in a higher margin, but rather on the court's decision.

BSES's claim that it did not have an opportunity to defend its

concordance methodology is erroneous, because it had just such an

opportunity in its rebuttal to petitioner's comments. Furthermore,

except for the elimination of sales that failed the arm's-length and

costs tests, as described above, our concordance methodology is

identical to that used by respondent.

Comment 2: Petitioner asserts that the Department should redefine

BSES's CONNUMs (control numbers assigned by respondent to identify each

unique product by its physical characteristics), aggregating the

CONNUMs to correspond to residual codes in BSES's cost accounting

system. Petitioner points out that, for the preliminary results, the

Department used CONNUMs which BSES segregated to the residual level,

stating that ``residuals are an essential part of the product.'' See

Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the

United Kingdom; Preliminary Results of Antidumping Administrative

Review, 62 FR 64803 (December 9, 1997) (Preliminary Results).

Petitioner contends that not all residual or other chemical differences

are sufficiently different to constitute separate products for the

Department's purposes, citing to Notice of Preliminary Determination of

Sales at Less Than Fair Value and Postponement of Final Determination:

Steel Wire Rod from Canada, 62 FR 51572, 51572 (October 1, 1997) (Steel

Wire Rod). Petitioner claims that BSES's reported CONNUMs, defined to

the residual level, over-segregate the merchandise and that this

produces fewer valid price-to-price comparisons and distorts the margin

due to overtechnical product differences.

Petitioner contends that BSES's residual levels can only be

relevant to the extent that BSES actually tracks these residual costs

in its own cost accounting system, and, to the extent it does not, it

has improperly subdivided products that should be considered identical.

Petitioner states that at verification, the Department found that BSES

failed to report product-specific costs, as requested by the Department

in the questionnaire. Petitioner claims that the Department has

rejected the proposition that identical products must be identical for

all purposes. Petitioner concludes that any merchandise with

[[Page 18881]]

the same production cost is sufficiently identical to be considered

identical for model matching comparison purposes, even though customers

request different residual levels and even if all products in a CONNUM

are not fully interchangeable commercially. Petitioner states that in a

separate case the Department has created residual baskets despite the

fact that customers order by residual levels. See the Department's

April 21, 1997 questionnaire for the Sales at Less Than Fair Value

Investigation of Steel Wire Rod from Trinidad and Tobago, page B-9.

Furthermore, petitioner claims that BSES obscured its cost reporting

methodology to hide the fact that it was using aggregate costs for

reporting its CONNUMs. Petitioner concludes that the Department should

aggregate BSES's CONNUMs to correspond to BSES's cost accounting system

because 1) these cost codes define the limits at which products can be

considered different, and 2) they must serve as facts available, due to

what petitioner says is BSES's misreporting of its costs.

Petitioner also points out that in respondent's concordance, GRADE

(a code used to identify chemical composition and tolerance in the

desired chemical composition) and PRODCOD (the chemical composition

code used internally by the company to define the chemical makeup of

its products) are out of sequence in one instance, and that there is

one instance of an unexplained gap in GRADE.

BSES argues that its product codes, defined to the residual level,

designate the relevant physical characteristics and should thus be used

for model matching. BSES states that its product codes specify the

exact levels of various required chemical elements in the steel and

also the highest permissible levels of the undesirable residual

elements. BSES contends that these codes are used in the ordinary

course of trade and that the product code is an essential part of the

product's identity, from order to invoicing, as confirmed by the

Department at verification. See the January 7, 1998 Memorandum to the

File from Rebecca Trainor and Gideon Katz through Maureen Flannery and

Edward Yang: ``Report on the Sales and Cost Verification of British

Steel Engineering Steels (BSES) in the Fourth Administrative Review of

the Antidumping Duty Order on Certain Hot-Rolled Lead and Bismuth

Carbon Steel Products from the United Kingdom'' (Verification Report),

page 5.

BSES states that, in other segments of this proceeding, the

Department rejected petitioner's arguments to ignore any differences in

the chemical compositions of the two products, and match using a CONNUM

that ignores residuals, or trace elements. In support of its argument,

BSES cites Certain Hot-Rolled Lead and Bismuth Carbon Steel Products

from the United Kingdom; Final Determination of Sales at Less than Fair

Value (LTFV Investigation Final Determination), 58 FR 6207, 6209

(January 27, 1993) and Certain Hot-Rolled Lead and Bismuth Carbon Steel

Products from the United Kingdom; Final Results of Antidumping

Administrative Review (First Review Final Results), 60 FR 44009, 44011

(August 24, 1995). BSES states that the Department determined, in both

instances, that it is appropriate to perform the model match

concordance using CONNUMs defined to the residual level because ``the

product differences claimed by [BSES] due to residuals are commercially

significant and not incidental--they are designed into the product.''

BSES also argues that redefining the model matching concordance to

correspond to BSES's cost accounting system is not appropriate because

the cost accounting system groups product codes only for administrative

convenience since BSES does not individually track the costs of certain

similar products. BSES claims that the cost accounting groupings of

product codes do not suggest lack of product individuality within the

group, product substitutability, or equal product costs. BSES maintains

that it is the product code, not the cost grouping, that describes the

characteristics of steel needed to meet customer specifications. BSES

further contends that the Department bases its model matching

methodology on similarity of physical characteristics, not similarity

of costs.

BSES argues that petitioner's references to the Department's

treatment of residuals in the questionnaire and preliminary notice in

other cases cannot be considered relevant here because these cases

involve plain carbon wire rod, an entirely different product, and

producers that have absolutely nothing in common with BSES. BSES

further argues that BSES' products are highly sophisticated engineering

steels used in high-performance applications, in which slight

variations in chemical composition can result in greatly differing

performance. BSES claims that fine-tuned residuals levels may not be

vital in plain carbon wire rod, but they are absolutely vital in BSES'

engineering steels.

BSES further asserts that redefining the model matching concordance

would have no practical effect on the margin analysis. BSES claims that

if the Department implements petitioner's methodology, only three pairs

of product codes (out of many hundreds) would be affected, and that any

effect on the margin may be minuscule. Finally, BSES claims that it has

reported product costs just as instructed, and that this is not a facts

available situation. BSES contends that the Department should reject

petitioner's request because it is both unjustified and

inconsequential.

Department's Position: The Department disagrees with petitioner.

The creation of a product concordance inherently relies upon the

matching of significant physical characteristics, not on cost groupings

in a company's cost accounting system. As noted by respondent, the

Department stated in the LTFV Investigation Final Determination that

``in order for merchandise to be considered identical, all physical

characteristics * * * must be the same.'' 58 FR at 6207, 6209 (January

27, 1993).

Throughout each segment of this proceeding the Department has

determined that residual content is an essential physical

characteristic in the creation of the model match product concordance.

For example, we determined that ``[p]roduct differences due to

residuals are commercially significant and not incidental, as they are

designed into the product. Therefore, CONNUM is the appropriate

variable to be used for model matching.'' See First Review Final

Results, 60 FR at 44009, 44011 (August 24, 1995). Petitioner has not

placed on the record evidence that residual or other chemical

differences are not significant enough to create separate products for

model matching purposes. In this review, the Department once again

verified the importance of residuals. We found that residual levels are

critical to BSES and to its customers. See Sales Verification Report at

5. Thus, we are making no change in the use of residuals in model

matching.

We have corrected one instance in which the GRADEs assigned to

certain PRODCODs were not consistent with the overall sequence of such

assignments in the key to matching criteria. There is no evidence that

there were incorrect matches because of any gap in GRADE.

Comment 3: Petitioner asserts that the Department should increase

BSES's general and administrative expenses (G&A) to include the costs

of a mill closure incurred during the period of review (POR).

Petitioner states that BSES accrued these costs in the year it

announced the closure, later setting the 1997 costs off against this

earlier accrual. Petitioner contends that BSES

[[Page 18882]]

did not include these actual costs of closure in the reported amounts

for the POR G&A.

Petitioner claims that BSES's accounting technique artificially and

improperly eliminated the actual costs incurred by BSES during the POR.

Petitioner claims that BSES concedes as much in its supplemental

response by merely stating that the mill closure ``had no effect on the

FY 1997 profit and loss account.'' See BSES's October 17, 1997

Supplemental Response, pages 22-23. Petitioner maintains that the

Department should include these costs in BSES's G&A expenses because

BSES incurred actual costs associated with the mill closure during the

POR.

BSES argues that the Department should not increase G&A expenses to

include the mill closure costs because BSES reported these expenses in

its financial accounts for FY 1995 in accordance with British Generally

Accepted Accounting Principles and, therefore, they do not appear in

BSES's financial accounts for 1997, the year used as the basis of the

cost analysis in this review. BSES maintains that the Department's

practice is to include costs as they appear on a company's audited

financial statement, and cites to Final Determination of Sales at Less

Than Fair Value: Sweaters Wholly or in Chief Weight of Man-Made Fiber

from Taiwan, 55 FR 34585 (August 23, 1990). BSES claims that, because

the entire closure costs were accrued and reported in BSES's FY 1995

financial statements, these costs should have no impact on the 1997

costs used for analysis in this review. BSES further notes that the

Department verified the reported G&A expenses.

Department's Position: The Department agrees with petitioner. We

are including the actual closure costs for this mill in BSES's G&A for

this POR. It is the Department's general practice to include accruals

which are recognized in the respondent's audited financial statements

in the COP/constructed value calculations. See Certain Cut-To-Length

Carbon Steel Plate from Germany: Final Results of Antidumping Duty

Administrative Review, 61 FR 13836 (March 28, 1996). However, the

Department has not in any prior review included the closure costs for

this mill. See the March 31, 1998 Memorandum to the file from Gideon

Katz: ``Phone conversation with BSES regarding mill closure costs.''

Since it is necessary to account for these costs, and since the actual

costs were incurred in the 1996-1997 period of review, we are including

these actual costs in BSES's G&A for this POR.

Comment 4: Petitioner asserts that the Department should reject

BSES's reported U.S. packing expenses because the Department found

these expenses to be inaccurate at verification. Petitioner further

asserts that the Department should set all U.S. packing costs to the

highest packing cost calculated for any U.S. sale, and then increase

all home market prices by this highest reported packing cost.

BSES argues that the Department should not make the changes to

packing costs that petitioner requested because the Department already

made a slight adjustment to packing costs in the preliminary results to

reflect small discrepancies found at verification. BSES claims that the

Department would have to make any packing adjustment to both the U.S.

and home market products because BSES packs all its products in the

exact same manner. BSES claims that there could thus be no impact on

the margin. BSES asserts that additional changes would be unnecessary

and improper.

Department's Position: The Department disagrees with petitioner.

The discrepancy in packing costs discovered at verification was minor

and the verifiers were easily able to derive the correct figures for

actual packing costs. Thus, it is appropriate to use corrected packing

costs for both markets, which we did in the preliminary results and are

continuing to do for these final results.

Final Results of Review

We determine that the following weighted-average dumping margins

exist:

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

Margin

Manufacturer/exporter Time period (percent)

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

British Steel Engineering Steels

Limited (BSES)(formerly United

Engineering Steels Limited).......... 03/01/96-02/28/97 18.18

Glynwed Metal Processing Limited

(Glynwed)............................ 03/01/96-02/28/97 7.69

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between export price and NV may vary from the percentages

stated above. Because there is a concurrent review of the

countervailing duty order on the subject merchandise, final assessments

for BSES and Glynwed will reflect the final results of the

countervailing duty administrative review in accordance with 19 CFR

353.41(d)(iv). The Department will issue appraisement instructions

directly to the Customs Service. For assessment purposes, we intend to

calculate importer-specific assessment rates.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of review for all

shipments of certain hot-rolled lead and bismuth carbon steel products

from the United Kingdom entered, or withdrawn from warehouse, for

consumption on or after the publication date, as provided for by

section 751(a)(2)(C) of the Act: (1) The cash deposit rate for the

reviewed companies will be the rate listed above; (2) for previously

reviewed or investigated companies not listed above, the cash deposit

rate will continue to be the company-specific rate published for the

most recent period; (3) if the exporter is not a firm covered in this

review, a prior review, or the original less-than-fair-value (LTFV)

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) for all other producers and/or exporters of

this merchandise, the cash deposit rate shall be 25.82 percent, the

``all others'' rate established in the LTFV investigation (58 FR 6207,

January 27, 1993). These deposit requirements shall remain in effect

until publication of the final results of the next administrative

review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and subsequent assessment

of double antidumping duties.

Notification of Interested Parties

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the

[[Page 18883]]

disposition of proprietary information disclosed under APO in

accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675 (a)(1) and

19 U.S.C. 1677f(i)(1)) and 19 CFR 353.22.

Dated: April 7, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-10038 Filed 4-15-98; 8:45 am]

BILLING CODE 3510-DS-P