Hot-Rolled Lead and Bismuth Carbon Steel Products From Germany and the United Kingdom; Negative Preliminary Determinations of Circumvention of Antidumping and Countervailing Duty Orders

DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-810; C-412-811; A-428-811; C-428-812]

Hot-Rolled Lead and Bismuth Carbon Steel Products From Germany

and the United Kingdom; Negative Preliminary Determinations of

Circumvention of Antidumping and Countervailing Duty Orders

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of negative preliminary determinations of circumvention

of antidumping and countervailing duty orders.

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

SUMMARY: On April 14, 1997, the Department of Commerce received an

application requesting circumvention inquiries of the antidumping and

countervailing duty orders on hot-rolled lead and bismuth carbon steel

products from Germany and the United Kingdom. The application alleged

that the principal German and British producers of hot-rolled lead and

bismuth carbon steel products are circumventing the respective orders

by shipping leaded steel billets to the United States, where they are

easily and inexpensively converted into the hot-rolled lead and bismuth

carbon steel products covered by the orders. Pursuant to the

application, the Department of Commerce initiated anticircumvention

inquiries on June 25, 1997.

We preliminarily determine that imports into the United States of

leaded steel billets that were exported from Germany and the United

Kingdom do not constitute circumvention of the antidumping and

countervailing duty orders on hot-rolled lead and bismuth carbon steel

products from Germany and the United Kingdom, within the meaning of

section 781(a) of the Tariff Act of 1930, as amended. Interested

parties are invited to comment on these preliminary determinations.

EFFECTIVE DATE: May 1, 1998.

FOR FURTHER INFORMATION CONTACT: Anne D'Alauro, Russell Morris, or

Richard Herring, Office of CVD/AD Enforcement VI, Import

Administration, International Trade Administration, U.S. Department of

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

20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended, by

the Uruguay Round Agreements Act (URAA), effective January 1, 1995 (the

Act). In addition, unless otherwise indicated, all references to the

Department's regulations are to 19 CFR Parts 353 and 355 (1997).

Background

On March 22, 1993, the Department of Commerce (the Department)

published in the Federal Register the antidumping duty orders (58 FR

15334) and countervailing duty orders (58 FR 15325, 15327) on hot-

rolled lead and bismuth carbon steel products (hot-rolled lead bar)

from Germany and the United Kingdom. On April 14, 1997, the Department

received an application (amended on May 14, 1997) filed by Inland Steel

Bar Company and USS/KOBE Steel Company (the petitioners), requesting

that the Department conduct anticircumvention inquiries of the

antidumping and countervailing duty orders on hot-rolled lead bar from

Germany and the United Kingdom pursuant to section 781(a) of the Tariff

Act. The petitioners alleged that the principal German (Saarstahl A.G.

i.K. and Thyssen Stahl A.G.) and British (British Steel plc) producers

of hot-rolled lead bar are circumventing the respective orders by

shipping leaded-steel billets (lead billets) to the United States,

where they are easily and inexpensively converted into the hot-rolled

lead bar products covered by the orders.

The Department received written comments opposing the request to

initiate the inquiries from Thyssen on May 12, 1997, from Saarstahl

A.G. i.K. on May 16, 1997, from British Steel plc on May 23, 1997, and

from the European Community (EC) on May 27, 1997. We also received

written comments in opposition to the initiation of the inquiries from

Bar Technologies, Inc. (Bar Tech) on May 19, 1997, Sheffield Steel

Corporation on June 2, 1997, Birmingham Steel Corporation on June 3,

1997, and Nucor Steel Corporation on June 5, 1997.

Pursuant to the petitioners' application and in accordance with 19

CFR 353.29(e) and 355.29(e), the Department initiated circumvention

inquiries of the antidumping and countervailing duty orders on hot-

rolled lead bar from Germany and the United Kingdom (62 FR 34213; June

25, 1997).

We sent initial questionnaires to the foreign respondents on June

25, 1997, and received responses on July 21, 1997. On September 10,

1997, the Department again issued questionnaires to all foreign

respondents. Also on this date, the Department issued questionnaires to

those U.S. steel companies which were identified in the foreign

respondents' July 21, 1997 questionnaire responses as lead billet

customers. The U.S. steel companies which responded to the Department's

questionnaires on October 29, 1997 and November 3, 1997, purchased

virtually all of the foreign respondents' exports of lead billets to

the United States in 1995 and 1996, and rolled them into hot-rolled

lead bar (hereafter referred to as U.S. re-rollers). The Department

issued supplemental questionnaires to both the U.S. re-rollers and

foreign respondents.

In conducting the inquiries, we requested and received detailed

information on a range of topics, such as processing, pricing

information, and conversion costs. We also collected data on patterns

of trade, sourcing patterns, and other trend data for the period

January 1, 1991, through June 30, 1997.

Scope of Antidumping and Countervailing Duty Orders

Imports covered by these orders include hot-rolled bars and rod of

non-alloy or other alloy steel, whether or not

[[Page 24157]]

descaled, containing by weight 0.03 percent of lead or 0.05 percent of

bismuth, in coils or cut lengths, and in numerous shapes and sizes. The

order excludes ``other alloy steels,'' as defined by Chapter 72, note

1(f) of the Harmonized Tariff Schedule of the United States (HTSUS),

``except steels classified as other alloy steel by reason of containing

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

bismuth, tellurium or selenium.'' Most of the products covered 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; 7214.60.00.10, 00.30, 00.50; and

7228.30.80.00. Although the HTSUS subheadings are provided for

convenience and for customs purposes, the written description of the

scope of the order remains dispositive.

Scope of the Circumvention Inquiries

The products subject to these circumvention inquiries are carbon or

alloy steel billets containing 0.03 percent or more of lead or 0.05

percent or more of bismuth (the only accepted metallurgical equivalent

to lead), and other alloy steel billets by reason of containing by

weight 0.4 percent or more of lead or 0.1 percent or more of bismuth,

tellurium or selenium, that meet the chemical requirements for the

merchandise subject to the orders.

Facts Available

Section 776(a)(2) of the Act requires the Department to use facts

available if ``an interested party or any other person * * * withholds

information that has been requested by the administering authority * *

* under this title.'' The facts on the record show that Bar Tech did

not comply with the Department's requests for information required to

calculate the value of the processing performed in the United States.

In our initial questionnaire dated September 10, 1997, the Department

requested information regarding the total amount of lead billet

consumed in the production of one unit of hot-rolled lead bar (lead

billet consumption rate). Bar Tech responded to our questionnaire on

October 29, 1997, but did not provide its lead billet consumption rate.

The Department's supplemental questionnaires dated November 18,

1997 and January 7, 1998, again requested that Bar Tech report its lead

billet consumption rate. Bar Tech, however, did not provide its lead

billet consumption rate to the Department.

Section 776(b) of the Act permits the administrative authority to

use an inference that is adverse to the interests of an interested

party if that party has ``failed to cooperate by not acting to the best

of its ability to comply with a request for information.'' Such an

adverse inference may include reliance on information derived from (1)

the petition, (2) a final determination in the investigation under this

title, (3) any previous review under section 751 or determination under

section 753 regarding the country under consideration, or (4) any other

information placed on the record. Because Bar Tech did not comply with

the Department's request to provide its lead billet consumption rate,

we find that Bar Tech failed to cooperate by not acting to the best of

its ability to comply with the Department's request. Therefore, we are

using adverse inferences in accordance with section 776(b) of the Act.

The adverse inference for Bar Tech's lead billet consumption rate is

the use of the highest average lead billet consumption rate submitted

by another U.S. re-roller participating in these inquiries.

Nature of the Circumvention Inquiry

Section 781(a)(1) of the Act provides that the Department, after

taking into account any advice provided by the United States

International Trade Commission (ITC) under section 781(e), may include

the imported merchandise under review within the scope of an order if

the following criteria have been met:

A. The merchandise sold in the United States is of the same class

or kind as any other merchandise that is the subject of--

(i) An antidumping duty order issued under section 736,

(ii) A finding issued under the Antidumping Act, 1921, or

(iii) A countervailing duty order issued under section 706 or

section 303;

B. Such merchandise sold in the United States is completed or

assembled in the United States from parts or components produced in the

foreign country with respect to which such order or finding applies;

C. The process of assembly or completion in the United States is

minor or insignificant; and

D. The value of the parts or components [produced in the foreign

country with respect to which the order applies], is a significant

portion of the total value of the merchandise.

If one of the four elements does not apply, there can be no finding

of circumvention. However, even if all four of these criteria are met,

the Act requires that the Department also consider additional factors.

Section 781(a)(3) of the Act directs the Department to consider, in

determining whether to include parts or components produced in a

foreign country within the scope of a countervailing and antidumping

duty order, such factors as: (A) the pattern of trade, including

sourcing patterns; (B) whether the manufacturer or exporter of the

parts or components is affiliated with the person who assembles or

completes the merchandise sold in the United States from the parts or

components produced in the foreign country; and (C) whether imports

into the United States of the parts or components produced in such

foreign country have increased after the initiation of the

investigation which resulted in the issuance of such order or finding.

U.S. Re-rollers

We requested information from U.S. re-rollers with respect to these

circumvention inquiries. Information was submitted by the following

U.S. re-rollers: American Steel & Wire (AS&W), a wholly-owned

subsidiary of Birmingham Steel Corporation; Bar Tech; Nucor Steel

Corporation (Nucor); Republic Engineered Steels (Republic); and

Sheffield Steel Corporation (Sheffield). Based upon our analysis of the

information submitted by the foreign respondents and the U.S. re-

rollers, we have determined that no affiliation exists between the U.S.

re-rollers and the foreign respondents, as defined in section 771(33)

of the Act. A determination with respect to section 781(a)(1) and (2)

of the Act, is based solely on the processing of lead billets into hot-

rolled lead bar by these unaffiliated U.S. re-rollers.

The rolling facilities owned by each of the U.S. re-rollers were in

operation before the initiation of the respective antidumping and

countervailing (AD and CVD) investigations of hot-rolled lead bar from

Germany and the United Kingdom. All of the U.S. re-rollers, except Bar

Tech, existed as re-rollers before the initiation of the

investigations. Bar Tech was established after the issuance of the AD

and CVD orders when Bar Tech purchased Bethlehem Steel's Bar, Rod &

Wire (BRW) facilities in Lackawanna, New York in 1994. Bethlehem Steel,

a former re-roller of hot-rolled lead bar, was one of the original

petitioners in the lead bar investigations.

Much of the information provided by the U.S. re-rollers is

proprietary. Therefore, in most instances, the

[[Page 24158]]

information used in our analysis below has been ranged, and our

discussion of this information has been generalized in order to

maintain the proprietary treatment of submitted information. In

addition, for most of the U.S. re-rollers, the source of their imported

lead billets is also proprietary. Therefore, the analysis below refers

to both imports from Germany and the United Kingdom.

Statutory Analysis

(1) Whether the Class or Kind of Merchandise Is Sold in the United

States

AS&W, Bar Tech, Republic, and Sheffield sell hot-rolled lead bar in

the United States. Nucor processes lead billets into hot-rolled lead

bar, which the company further processes into cold-finished products.

(2) Whether Merchandise Sold in the United States Is Completed or

Assembled in the United States From Foreign Parts or Components

All of the U.S. re-rollers purchase lead billets from one or more

of the foreign respondents subject to the AD and CVD orders. They each

use the lead billets to produce hot-rolled lead bar in the United

States.

(3) Whether the Process of Assembly or Completion Is Minor or

Insignificant

Section 781(a)(2) lists the factors the Department will consider in

determining whether the process of assembly or completion is minor or

insignificant. The Statement of Administrative Action (SAA), H. Doc.

No. 316, Vol. 1, 103d Cong., 2nd Sess. (1994), states that no single

factor listed in section 781(a)(2) of the Act will be controlling. SAA

at 893. The SAA also states that the Department will evaluate each of

the factors as they exist in the United States depending on the

particular circumvention scenario. Id. Therefore, the importance of any

one of the factors listed under 781(a)(2) of the Act can vary from case

to case depending on the particular circumstances unique to each

specific circumvention inquiry. Each of the factors set forth in

section 781(a)(2) of the Act is examined below for the U.S. re-rollers.

(a) The Level of Investment in the United States

The rolling facilities owned by each of the U.S. re-rollers were in

operation before the initiation of the respective AD and CVD

investigations of hot-rolled lead bar from Germany and the United

Kingdom. Although Bar Tech did not exist before the initiation of the

investigations, the facility producing subject merchandise that is

operated by the company does pre-date the investigations. Each of the

U.S. re-rollers has made substantial capital investments in its

respective rolling mills.

AS&W entered the hot-rolled lead bar market in 1986, with its

purchase of rolling facilities from U.S. Steel. In 1993, Birmingham

Steel acquired AS&W and entered the specialty bar, rod, and wire

products business. In 1996, Birmingham Steel invested $132 million in a

new high-quality rolling mill at AS&W's Cleveland, Ohio facility,

enabling the company to produce larger-sized bar products and bars with

tighter size tolerances and more stringent mechanical properties. AS&W

primarily produces non-lead hot-rolled bars, and less than a quarter of

the mill's production utilizes lead billets. AS&W sells the hot-rolled

lead bar that it produces to unaffiliated customers.

Bar Tech came into existence in 1994, with the purchase of

Bethlehem Steel's BRW facilities for $19 million. Between 1994 and

1997, Bar Tech made additional investments in the rolling facilities'

buildings, machinery, and equipment. In April 1996, Bar Tech acquired

Bliss & Laughlin (B&L), the largest cold-finishing company in the

United States. In September 1997, Bar Tech announced plans to invest

$30 million in its steelmaking facilities. Approximately half of the

investment is allocated for the production of lead and non-lead semi-

finished steels (billets) at its Johnstown meltshop. The majority of

the remaining investment is designated for equipment upgrades at its 13

inch rolling mill in Lackawanna, New York to roll both lead and non-

lead billets.

Nucor's steel mill in Darlington, South Carolina became operational

as a new steel mill in 1969. Prior to 1991, Nucor added a high-speed

rolling line to its mill. The addition of such equipment allows for

automatic straightening, shearing, stacking, and bundling of bar, and

has significantly enhanced Nucor's ability to produce hot-rolled lead

and non-lead bar from lead and non-lead billets. Since 1991, Nucor has

made several investments for a variety of improvements.

In November 1989, Republic was created through an employee stock

ownership plan with the purchase of LTV's Bar Division. With the

purchased steelmaking facilities, Republic gained the ability to

produce lead and non-lead ingots, and hot-rolled and cold-finished bar

products. Republic currently produces lead billets via the ingot

process in a shared facility; however, the quantity it can produce is

restricted by environmental permit limits. During the 1990's, Republic

invested in the construction of a continuous casting facility which has

the capability to produce both lead and non-lead billets; however,

Republic currently only produces non-lead billets at the facility.

Sheffield was established in the early 1980's, with the purchase of

the Sand Springs, Oklahoma meltshop and rolling facility in 1981, and

the construction of the Kansas City, Missouri rolling facility in 1985.

In 1986, Sheffield purchased a 12 inch rolling mill facility in Joliet,

Illinois from Continental Steel for $3.5 million. This rolling mill was

originally installed around 1957. Since acquiring the Joliet mill in

1986, Sheffield has made additional investments of approximately $6

million in the facility, which is the company's only rolling mill which

produces hot-rolled lead bar. Sheffield entered the hot-rolled lead bar

market in 1992.

(b) The Level of Research and Development (R&D) in the United States

Four of the five re-rollers reported that they had little or no R&D

related to the production of hot-rolled lead bar. One U.S. re-roller

reported that it conducted some R&D with respect to the development of

heating, rolling and inspection practices used in the production of

leaded steels. The U.S. re-rollers reported that there have been few

technological breakthroughs affecting leaded steels since 1991. Because

the rolling of hot-rolled lead bar is a technically mature process, R&D

into the process of rolling bar is not a significant factor in this

industry.

(c) The Nature of the Production Process in the United States

The International Trade Commission (ITC) states that the

manufacturing process for the production of hot-rolled lead bar

consists of three different stages: (1) melting, (2) casting, and (3)

hot-rolling. See Certain Hot-Rolled Lead and Bismuth Carbon Steel

Products From Brazil, France, and the United Kingdom, Determinations of

the Commission in Investigations Nos. 701-TA-314 thru 317, USITC

Publication 2611 (March 1993). Lead billets are created during the

second stage; the U.S. re-rollers perform the third and final stage in

the manufacturing process of hot-rolled lead bar.

Each of the U.S. re-rollers are fully operational hot-rolled lead

and non-lead bar producers, manufacturing bar in a like manner. The

nature of the process overall consists of a series of sizing and

shaping of the lead billets to produce specific sized and shaped hot-

rolled bar on rolling equipment used to manufacture either hot-rolled

lead or

[[Page 24159]]

non-lead bars. The rolling process does not require equipment dedicated

exclusively to the production of hot-rolled lead bar. Three of the five

re-rollers also have cold-finishing operations to further process the

hot-rolled lead bar. In the cold-finishing process, the bar undergoes

surface treatments in the form of polishing, turning, grinding, and

straightening.

The process for producing hot-rolled lead bar from lead billets is

as follows. First, the lead billets are placed in a re-heat furnace and

heated to a temperature usually above 2200 degrees Fahrenheit. This

heating procedure increases the malleability of the steel, reducing

energy consumption and wear on the rolling mill. Once the lead billets

reach the necessary temperature, walking beams gradually discharge them

from the re-heat furnace onto the rolling lines. The lead billets are

then rolled on a series of rolling mills, including roughing,

intermediate, and finishing mills. Each rolling mill has a series of

stands which compress and shape the lead billets with each pass

through. As a lead billet passes through the stands, it becomes

elongated and its cross-section becomes smaller. This process

transforms a lead billet into a hot-rolled lead bar product having a

specific size and shape. Generally four to 15 percent of a lead

billet's weight is lost in the rolling process.

The hot-rolled lead bar is then placed on a hot bed and cooled to a

temperature of about 800 degrees Fahrenheit. Once cooled, the hot-

rolled lead bar undergoes straightening, non-destructive testing,

deburring, and saw cutting. The hot-rolled lead bar is either coiled or

cut into various lengths at the finishing shear. At this stage, some

re-rollers apply a surface treatment to clean and coat their products.

After being inspected for straightness, length, and defects, the hot-

rolled lead bars are weighed, packaged, and placed in the warehouse for

later shipment

There are environmental issues and limitations in rolling lead

billets versus non-lead billets. Environmental controls, worker safety,

and health regulations are more stringent for lead than for non-lead

grades. For instance, additional ventilation of exhaust fumes is

necessary as lead and bismuth steel wastes are classified as hazardous

waste, necessitating their segregation and separate treatment from

other scrap. Specialized safety equipment and more rigorous operating

procedures must also be used in compliance with Occupational Safety and

Health Administration (OSHA) standards.

(d) The Extent of Production Facilities in the United States

In general, each of the U.S. re-rollers have production facilities

in various states throughout the United States, but the rolling of hot-

rolled lead bar mainly takes place in Illinois, Ohio, Utah, South

Carolina, and New York. As we have noted earlier, most of the U.S. re-

rollers were rolling lead billets into hot-rolled lead bar before the

initiation of the AD and CVD investigations of hot-rolled lead bar from

Germany and the United Kingdom.

In analyzing the extent of production facilities, we considered the

square footage of building space dedicated to rolling the semifinished

product (lead billet) into hot-rolled lead bar, the number of employees

involved in rolling the lead billets, and the capital equipment used in

the production of hot-rolled lead bar. Sheffield, for example, reported

that its Joliet rolling facility encompasses 334,305 square feet for

the processing of lead billet into hot-rolled lead bar.

With regard to the number and level of skilled employees involved

in rolling lead billets into hot-rolled lead bar, Sheffield, for

example, reported that in the production process of hot-rolled lead

bar, from the time the lead billets are received in the billet yard to

the time that hot-rolled lead bar is shipped to a customer, there are

25 skilled workers responsible for the rolling of a lead billet into

hot-rolled lead bar, and all of the other ancillary functions.

With respect to the capital equipment used in the processing of

lead billet into hot-rolled lead bar, the U.S. re-rollers have invested

a substantial amount of money not only in the construction of factory

buildings used in rolling operations for both lead and non-lead

products, but also in the purchase of sophisticated machinery required

to produce hot-rolled bar from lead and non-lead billets, and the

maintenance required for such machinery.

(e) Whether the Value of the Processing Performed in the United States

Represents a Small Proportion of the Value of the Merchandise Sold in

the United States

We calculated the difference in value between the hot-rolled lead

bar sold in the United States and the value of the lead billets

purchased from the foreign respondents that were used in the production

of that merchandise. For ASW, BarTech, Republic, and Sheffield, we

based our calculation of value-added to the merchandise sold in the

United States on the difference between the delivered lead billet

import price and the ex-factory sales price of the hot-rolled lead bar.

This methodology was used because both transactions (lead billet

purchases and hot-rolled lead bar sales) were sales between

unaffiliated parties. To derive the value of processing performed by

each U.S. re-roller, we subtracted from the ex-factory sales price of

hot-rolled lead bar to unaffiliated customers the delivered price of

lead billets, after adjusting for a yield factor (to account for

additional lead billet consumed in the production of one unit of hot-

rolled lead bar).

In regard to Nucor, because the company uses all the hot-rolled

lead bar that it produces to further manufacture cold-finished

products, we applied a different value-added methodology. We based our

calculation of value-added on the comparison between the conversion fee

Nucor's rolling mill charged its affiliated cold-finisher and the

resulting total input cost of hot-rolled lead bar to the cold-finisher,

after adjusting both for a yield factor (to account for additional lead

billet consumed in the production of one unit of hot-rolled lead bar).

Some of the U.S. re-rollers purchased lead billets from all three

suppliers of lead billets subject to these inquiries, while others

purchased exclusively from one source. Some of the U.S. re-rollers,

however, were unable to identify the supplier of lead billets on a

transaction-specific basis with respect to the U.S. sales of the

processed hot-rolled lead bar. Therefore, for each U.S. re-roller, the

calculation of value-added is based upon a weighted-average price of

imported lead billet from the foreign respondent(s) from whom the U.S.

re-roller purchased its lead billets. Because the processing of the

imported lead billet into hot-rolled lead bar is virtually identical

regardless of the source of the imported lead billet, we consider this

weighted-average, non-supplier specific calculation of value-added to

be appropriate in those instances. However, where possible, we used the

supplier-specific information to calculate the value-added to each

supplier.

The value of processing performed in the United States ranges from

approximately 10 percent to 29 percent for the U.S. re-rollers. The

value of processing varies because of the lead billet prices charged by

the foreign respondents to the U.S. re-rollers, the U.S. re-roller's

yield factor for rolling one unit of lead billet into one unit of hot-

rolled lead bar, and the different prices charged by the U.S. re-

rollers to their customers due to size and shape of the hot-rolled lead

bar. Because the calculation of the value of processing is based upon

proprietary data, the value-

[[Page 24160]]

added percentages presented above have been ranged

(4) Whether the Value of Imported Parts Is a Significant Portion of

Value of Lead Bar

Under section 781(a)(1)(D) of the Act, the value of the imported

parts or components must be a significant portion of the total value of

the subject merchandise sold in the United States in order to find

circumvention. The imported lead billet is the sole material input into

the completed hot-rolled lead bar and a significant portion of the

value of the completed hot-rolled lead bar is based upon this material

cost.

Other Factors To Consider

In making a determination whether to include parts or components

within an order, section 781(a)(3) of the Act instructs us to take into

account such factors as: the pattern of trade, including sourcing

patterns; whether affiliation exists between the exporter of the parts

and the person who assembles or completes the merchandise sold in the

United States; and whether imports into the United States of the parts

produced in the foreign country have increased after the initiation of

the investigation which resulted in the issuance of the order. Each of

these factors are examined below.

(1) Pattern of Trade and Sourcing

The first factor to consider under section 781(a)(3) is changes in

the pattern of trade, including changes in the sourcing patterns of the

lead billets. SAA at 894. Unlike our examination of the processing of

lead billets into hot-rolled lead bar in the United States, which was

essentially the same for all of the U.S. re-rollers, there are

differences in the pattern of trade among the U.S. re-rollers and the

three foreign respondents (British Steel, Thyssen, and Saarstahl).

Among the foreign respondents, British Steel and Thyssen are the two

largest lead billet exporters to the United States. In comparison,

Saarstahl is a small exporter of lead billets.

British Steel began selling lead billets to the United States in

1994. By 1996, the company's lead billet sales doubled. British Steel's

sales of hot-rolled lead bar peaked in 1992, declined in 1993 and 1994,

rebounded in 1995, and continued to trend upwards in 1996. In general,

sales of hot-rolled lead bar by British Steel have greatly exceeded its

sales of lead billets to the U.S. market (in spite of the AD and CVD

orders). British Steel's sales of hot-rolled lead bar in the U.S.

market have remained significant since the imposition of the orders. In

fact, Sheffield reported that its primary competition for hot-rolled

lead bar shapes is imports from British Steel.

Thyssen has been selling lead billets to the United States since

1988, well before the Department initiated its hot-rolled lead bar

investigations in May 1992. Thyssen's lead billet shipments to the

United States increased steadily from 1991 to 1996, peaking in 1996,

while its hot-rolled lead bar sales to the U.S. market terminated in

1992 . Thyssen has stated that lead billets, and not hot-rolled lead

bar, have always been its primary U.S. market, and the pattern of trade

for both products indicates this to be accurate.

Saarstahl began selling lead billets to the United States in 1992,

the last year the steelmaker sold hot-rolled lead bar to U.S.

customers. Saarstahl's exports of lead billets to the United States

peaked in 1993, and since then have significantly decreased.

AS&W has been purchasing lead billets since its inception in 1986.

AS&W reported that since 1992, the company has sourced lead billets

from both foreign and domestic suppliers. A major change in the

company's sourcing was the termination of a billet supply agreement

(inclusive of lead and non-lead billets) with USS/KOBE. When Birmingham

Steel purchased AS&W in 1993, there was a lead billet supply agreement

in effect with USS/Lorain Works, which subsequently became USS/KOBE.

USS/KOBE terminated the supply agreement in 1996, citing a lack of lead

billet availability. With the termination of this supply agreement,

AS&W was no longer able to source lead billets domestically.

Bar Tech began purchasing lead billets in 1996. Bar Tech has not

sourced lead billets from domestic producers. Bar Tech never purchased

lead bar from the foreign respondents.

Nucor did not begin purchasing lead billets until 1992, when the

company began sourcing from foreign respondents. Purchases from the

foreign respondents have been generally declining. Nucor had previously

purchased hot-rolled lead bar from foreign sources.

Republic's predecessor began purchasing lead billets from foreign

sources in the mid-80's. Since becoming an independent company in 1989,

Republic has continued to source its lead billets from foreign sources

to supplement its own production. Republic has never purchased lead

billets from domestic producers. The company did purchase hot-rolled

lead bar from foreign sources in the early 1990's; however, since 1993,

Republic has sourced hot-rolled lead bar exclusively from domestic

suppliers.

Sheffield has sourced lead billets from both domestic and foreign

producers since it began purchasing lead billets in 1992. Throughout

much of 1993, Sheffield sourced lead billets from Inland; however, by

late 1993, Inland stopped its external sales of lead billets citing its

own internal lead billet consumption needs. In June 1995, Inland was

again in a position to supply lead billets. Sheffield placed orders

with Inland, but by the fourth quarter of 1995, Inland once again

stopped selling lead billets. Since 1996, Sheffield has sourced lead

billets from abroad.

(2) Affiliation

The second factor to consider under section 781(a)(3) of the Act is

whether the manufacturer or exporter of the lead billets is affiliated

with the entity that assembles or completes the merchandise sold in the

United States from the imported lead billets. In these circumvention

inquiries, the Department inquired whether affiliation existed between

the U.S. re-roller and the foreign respondents, pursuant to section

771(33) of the Act. Based upon our analysis of the questionnaire

responses from both the U.S. re-rollers and the foreign respondents, we

find that no affiliation exists between the parties. There is neither

common ownership, direct or indirect, between the U.S. re-rollers and

the foreign suppliers of lead billets, nor a joint venture between the

companies. Further, there are no facts (e.g., close supplier

relationship) that suggest control of any of the re-rollers by the

foreign respondents. In sum, we have found no evidence to indicate that

the foreign respondents have attempted either to purchase or to

construct re-rolling facilities in the United States which would allow

them to import lead billet and process it into hot-rolled lead bar for

their own use.

(3) Whether Imports Have Increased

The third factor to consider under section 781(a)(3) is whether

imports of lead billets into the United States have increased after the

initiation of the hot-rolled lead bar investigations. Therefore, we

have analyzed the level of imports of lead billets from both Germany

and the United Kingdom since 1992, the year in which the AD and CVD

investigations of hot-rolled lead bar were initiated. While we find

that imports of lead billets have increased from all three foreign

respondents, the increase appears to be the result of causes other than

the initiation of the hot-rolled lead bar investigations.

[[Page 24161]]

According to some of the U.S. re-rollers, there has been a switch

from domestically produced lead billets to foreign-sourced imports

because Inland and USS/KOBE have not met the lead billet supply needs

of the U.S. market. In addition, there were two new entrants to the

hot-rolled lead bar market after the initiation of the hot-rolled lead

bar investigations that required supplies of lead billet. Sheffield

entered into the hot-rolled lead bar market after Bethlehem Steel

exited the market in 1992. Two years later, Bar Tech entered the hot-

rolled lead bar market after purchasing Bethlehem's rolling facilities.

Bethlehem Steel, one of the original petitioners in the hot-rolled lead

bar investigations, produced its own lead billets; however, neither

Sheffield nor Bar Tech currently have lead billet production and thus,

must source their lead billets from other outside sources.

Further, according to the ITC, in the United States almost all

semifinished steel such as blooms, billets, and slabs are used in

captive production of finished steel products. Steel processors, such

as the U.S. re-rollers, are an important outlet for excess semifinished

steel products manufactured by steel producers. In the relatively

limited semifinished steel market, the consumer is likely also to be

the supplier's competitor in sales of finished steel. See USITC

Publication 2758, Industry & Trade Summary Semifinished Steel (March

1994) at pages 3, 5, and 11. Because the consumer of a billet is

generally a competitor of the supplier, the dynamics of supply operate

differently than for finished steel products. A steelmaker with excess

melting capacity may have incentive to refrain from selling

semifinished steel, such as billets.

It has also been difficult to measure the rise in imports of lead

billets from Germany and the United Kingdom against import trends from

other countries. This is because the primary HTS number under which

lead billets are imported is a basket category which includes other

imports of semifinished products of iron or nonalloy steel with a

chemical content of under 0.25 percent carbon. In its application,

Inland and USS/KOBE provided import data for this HTS category.

According to these data, imports of semifinished products of iron or

nonalloy steels from countries not subject to antidumping or

countervailing duty orders increased after the initiation of the hot-

rolled lead bar investigations, and in some cases significantly.

Summary of Statutory Analysis

As discussed above, in order to make an affirmative determination

of circumvention, all the elements under sections 781(a)(1) and (2) of

the Act must be satisfied. In addition, section 781(a)(3) of the Act

instructs the Department to consider, in determining whether to include

parts or components within the scope of an order, such factors as:

pattern of trade, affiliation, and whether imports into the United

States of such parts or components increased after the initiation of

the investigation which resulted in the issuance of the order. When the

criteria of sections 781(a)(1) and (2) are applied to the individual

facts, our analysis of whether circumvention is occurring is

inconclusive. However, when the evidence to be considered under section

781(a)(3) of the Act is incorporated into our analysis, we find that

all of the evidence, taken as a whole, does not lead us to find a basis

for including lead billets within the scope of the AD and CVD orders on

hot-rolled lead bar from Germany and the United Kingdom.

Pursuant to sections 781(a)(1) and (2), we find that the processing

of lead billets into hot-rolled lead bar is essentially identical for

all of the U.S. re-rollers involved in these inquiries. A detailed

description of the re-rolling process is provided above. Though the

U.S. re-rollers perform only one of the three processes needed to

produce hot-rolled lead bar, they do perform the final process of

converting the semifinished steel product into a functional finished

steel good. Also, because the production process of converting lead

billets into hot-rolled lead bar is a technically mature process, we

did not expect to find significant R&D expenditures by the U.S. re-

rollers.

The process of rolling lead billet into hot-rolled lead bar

requires significant capital investment in rolling machinery and

equipment, and compliance with a variety of OSHA and environmental

regulations. Capital equipment and machinery used by the U.S. re-

rollers, once purchased, installed, and operational, represent

significant fixed plant and equipment which cannot be easily

disassembled and transported to another location. Investment in re-

rolling facilities requires a long-term investment of capital, long-

term corporate planning, and a long-term business commitment by the

U.S. re-roller.

Pursuant to section 781(a)(3), in reaching our determination, we

took into consideration the factors of pattern of trade, sourcing,

affiliation, and import trends. The facts concerning pattern of trade,

sourcing, affiliation, and import trends do not indicate that there is

circumvention of the hot-rolled lead bar orders. Even if we were to

conclude that the calculated value of processing performed by the U.S.

re-rollers in the United States is relatively small, when we examined

sections 781(a)(1) and (2) in conjunction with the factors under

section 781(a)(3), the facts, taken as a whole, do not lead us to find

that circumvention of the hot-rolled lead bar orders is occurring.

Throughout the United States, the U.S. re-rollers have extensive

capital-intensive rolling facilities staffed by skilled workers. As

previously discussed, the U.S. re-rollers are not affiliated with the

foreign respondents and their rolling facilities were in existence and

operational before the initiation of the hot-rolled lead bar

investigations. Indeed, the petition for the hot-rolled lead bar

investigations was filed on behalf of two of the five U.S. re-rollers,

AS&W and Republic. In addition, a third U.S. re-roller, Bar Tech,

purchased its rolling facilities from Bethlehem Steel, one of the two

original petitioners in the hot-rolled lead bar investigations.

According to the responses from the U.S. re-rollers, most of their

investment in rolling facilities in the United States was made before

the initiation of the AD and CVD investigations of hot-rolled lead bar

from Germany and the United Kingdom. In addition, some of the U.S. re-

rollers made large investments in their rolling mills after 1992, the

year in which the investigations on hot-rolled lead bar began. Thus,

before and after 1992, U.S. re-rollers made large investments of

capital and resources into their rolling facilities. These facts

demonstrate that there were substantial production facilities for

converting lead billets into hot-rolled lead bar before the initiation

of the hot-rolled lead bar investigations.

Further, as discussed above, British Steel remains a large exporter

of hot-rolled lead bar to the United States and its bar market in the

United States is still much larger than its U.S. lead billet market.

Thyssen was primarily a lead billet exporter to the United States

before 1992, the year the lead bar investigations were initiated. That

did not change after the initiation of the hot-rolled lead bar

investigations. Saarstahl, which exports a relatively small volume of

lead billets to the United States, is not a major player in the U.S.

lead billet market.

With respect to the U.S. re-rollers, changes in their respective

sourcing patterns after 1992, appear to be due to changes in the U.S.

market, independent

[[Page 24162]]

of the hot-rolled lead bar investigations. U.S. re-rollers were

purchasing lead billets and rolling them into hot-rolled lead bar

before 1992. As noted above, Republic began purchasing lead billets in

the mid-80's from foreign sources. New hot-rolled lead bar entrants

came into the market after the departure of Bethlehem, causing an

increase in the demand for lead billets. While Bethlehem was able to

produce its own lead billets, the two new entrants, Bar Tech and

Sheffield, have to purchase their lead billets from independent

sources. In addition, there were also shifts from domestic to foreign

billet suppliers because the domestic companies producing lead billets

were only able to meet their own internal consumption needs. As

discussed above, since 1996, both AS&W and Sheffield have been forced

to source lead billets from foreign suppliers as a result of the

termination of their supply arrangements with USS/KOBE and Inland,

respectively.

Our analysis demonstrates that imposition of the hot-rolled lead

bar orders in 1993, was not the impetus for the importation of lead

billet by the U.S. re-rollers in order to produce hot-25 rolled lead

bar. As noted above, a number of the U.S. re-rollers were producing

hot-rolled lead bar prior to the orders and continued to produce hot-

rolled lead bar after the orders. In addition, these unaffiliated U.S.

re-rollers invested a substantial amount in their rolling facilities

both before and after the AD and CVD orders to roll both lead and non-

lead billets into hot-rolled bar.

The facts of these inquiries also show that the foreign respondents

did not change their product lines in the United States as a result of

the initiation of the hot-rolled lead bar investigations. As noted,

Thyssen's primary market in the United States has been lead billets

since the mid-80's. British Steel, which commenced selling lead billets

in 1994, continues to export a significant amount of hot-rolled lead

bar to the United States.

Based upon this analysis under section 781(a) of the Act, we

preliminarily find that circumvention of the AD and CVD orders on hot-

rolled lead bar is not occurring by reason of imports of lead billets

from Germany and the United Kingdom.

Public Comment

Interested parties may request disclosure of the calculations

performed for these determinations within five days of the date of

publication of this determination, and may request a hearing within 10

days of publication. Case briefs and/or written comments from

interested parties may be submitted no later than 30 days after the

date of publication of this notice. Rebuttal briefs and rebuttals to

comments, limited to issues raised in those briefs or comments, may be

filed no later than 37 days after the publication of this notice. Any

hearing, if requested, will be held 44 days after the publication of

this notice. The Department will publish the final determinations with

respect to these anti-circumvention inquiries, including the results of

its analysis of any written comments.

These negative preliminary circumvention determinations and notice

are in accordance with section 781(a) of the Tariff Act and 19 CFR

353.29(e) and 19 CFR 355.29(e).

Dated: April 23, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-11666 Filed 4-30-98; 8:45 am]

BILLING CODE 3510-DS-P