Cold-Rolled Carbon Steel Flat Products From the Netherlands: Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-421-804]

Cold-Rolled Carbon Steel Flat Products From the Netherlands:

Preliminary Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

[[Page 47228]]

ACTION: Notice of preliminary results of antidumping duty

administrative review.

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

SUMMARY: In response to requests from the petitioners and respondent,

the Department of Commerce (the Department) is conducting an

administrative review of the antidumping duty order on cold-rolled

carbon steel flat products from the Netherlands. The review covers one

manufacturer/exporter of the subject merchandise to the United States

and the period August 1, 1996 through July 31, 1997.

We have preliminarily determined that respondent has made sales

below normal value during the period of review. If these preliminary

results are adopted in our final results of review, we will instruct

the U.S. Customs Service to assess antidumping duties on all

appropriate entries.

Interested parties are invited to comment on these preliminary

results. Parties who submit argument in this proceeding are requested

to submit with the argument (1) a statement of the issue and (2) a

brief summary of the argument (no longer than five pages, including

footnotes).

EFFECTIVE DATE: September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Helen M. Kramer or Linda Ludwig,

Import Administration, International Trade Administration, U.S.

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

Washington, D.C. 20230; telephone (202) 482-0405 or 482-3833,

respectively.

APPLICABLE STATUTE: Unless otherwise indicated, all citations to the

Trade and Tariff Act of 1930, as amended (the Act) are references to

the provisions effective January 1, 1995, the effective date of the

amendments made to the Act by the Uruguay Round Agreements Act of 1994

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

Department's regulations are to 19 CFR Part 351 (1998).

SUPPLEMENTARY INFORMATION:

Background

The Department of Commerce published an antidumping duty order on

cold-rolled carbon steel flat products from the Netherlands on August

19, 1993 (58 FR 44172). The Department published a notice of

``Opportunity To Request Administrative Review'' of the antidumping

duty order for the 1996/1997 review period on August 4, 1997 (62 FR

41925). On August 29, 1997, both the respondent, Hoogovens Staal BV,

and petitioners (Bethlehem Steel Corporation, U.S. Steel Company (a

Unit of USX Corporation), Inland Steel Industries, Inc., Geneva Steel,

Gulf States Steel Inc. of Alabama, Sharon Steel Corporation, and Lukens

Steel Company) filed requests for review. We published a notice of

initiation of the review on September 25, 1997 (62 FR 50292).

Due to the complexity of issues involved in this case, the

Department extended the time limit for completion of the preliminary

results until August 31, 1998, in accordance with section 751(a)(3)(A)

of the Act (19 U.S.C. 1675 (a)(3)(A)). The deadline for the final

results of this review will continue to be 120 days after the date of

publication of this notice. The Department is conducting this review in

accordance with section 751 of the Act.

Scope of the Review

The products covered by this review include cold-rolled (cold-

reduced) carbon steel flat-rolled products, of rectangular shape,

neither clad, plated nor coated with metal, whether or not painted,

varnished or coated with plastics or other nonmetallic substances, in

coils (whether or not in successively superimposed layers) and of a

width of 0.5 inch or greater, or in straight lengths which, if of a

thickness less than 4.75 millimeters, are of a width of 0.5 inch or

greater and which measures at least 10 times the thickness or if of a

thickness of 4.75 millimeters or more are of a width which exceeds 150

millimeters and measures at least twice the thickness, as currently

classifiable in the Harmonized Tariff Schedule (HTS) under item numbers

7209.15.0000, 7209.16.0030, 7209.16.0060, 7209.16.0090, 7209.17.0030,

7209.17.0060, 7209.17.0090, 7209.18.1530, 7209.18.1560, 7209.18.2550,

7209.18.6000, 7209.25.0000, 7209.26.0000, 7209.27.0000, 7209.28.0000,

7209.90.0000, 7210.70.3000, 7210.90.9000, 7211.23.1500, 7211.23.2000,

7211.23.3000, 7211.23.4500, 7211.23.6030, 7211.23.6060, 7211.23.6085,

7211.29.2030, 7211.29.2090, 7211.29.4500, 7211.29.6030, 7211.29.6080,

7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7215.50.0015,

7215.50.0060, 7215.50.0090, 7215.90.5000, 7217.10.1000, 7217.10.2000,

7217.10.3000, 7217.10.7000, 7217.90.1000, 7217.90.5030, 7217.90.5060,

and 7217.90.5090. Included in this review 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

beveled or rounded at the edges. Excluded from this review is certain

shadow mask steel, i.e., aluminum-killed, cold-rolled steel coil that

is open-coil annealed, has a carbon content of less than 0.002 percent,

is of 0.003 to 0.012 inch in thickness, 15 to 30 inches in width, and

has an ultra flat, isotropic surface. These HTS item numbers are

provided for convenience and Customs purposes. The written description

remains dispositive.

Verification

As provided in section 782(i)(3) of the Act, we verified

information provided by Hoogovens at its headquarters in Beverwijk and

IJmuiden, the Netherlands, using standard verification procedures,

including inspection of the manufacturing facilities, examination of

relevant sales and financial records, and selection of original

documentation containing relevant information. We also verified

information provided by Hoogovens Steel USA, Inc. at its office in

Scarsdale, New York.

Export Price (EP)

In calculating the U.S. starting price, the Department considered

whether respondent's sales reported as export price (EP) sales are more

appropriately characterized as CEP sales, as argued by petitioners in

their letter to the Department dated July 10, 1998. Respondent offered

a rebuttal to petitioners' argument in a letter dated August 6, 1998.

In previous reviews the Department accepted the characterization of

these sales as reported. Certain Cold-Rolled Carbon Steel Flat Products

From the Netherlands; Final Results of Antidumping Duty Administrative

Review, 61 FR 48465 (September 13, 1996); 62 FR 18476 (April 15, 1997);

63 FR 13204 (March 18, 1998).

To ensure proper application of the statutory definitions of EP and

CEP, where a U.S. affiliate is involved in making a sale, we consider

the sale to be CEP unless the record demonstrates that the U.S.

affiliate's involvement in making the sale is incidental or ancillary.

Thus, whenever sales are made prior to importation through an

affiliated sales agent in the United States, the Department typically

determines whether to characterize the sales as EP sales based upon the

following criteria: (1) whether the merchandise was shipped directly to

the unaffiliated buyer, without being introduced into the affiliated

selling agent's inventory; (2) whether this

[[Page 47229]]

procedure is the customary sales channel between the parties; and (3)

whether the affiliated selling agent located in the United States acts

only as a processor of documentation and a communications link between

the foreign producer and the unaffiliated buyer. See, e.g., Notice of

Final Determination of Sales at Less Than Fair Value: Newspaper

Printing Presses From Germany, 61 FR 38175 (July 23, 1996); Certain

Corrosion Resistant Carbon Steel Flat Products From Korea: Final

Results of Antidumping Administrative Review, 61 FR 18547, 18551 (April

26, 1996); Certain Cut-To-Length Carbon Steel Plate From Germany: Final

Results of Antidumping Duty Administrative Review, 62 FR 18390 (April

15, 1997); Certain Cold-Rolled and Corrosion Resistant Carbon Steel

Flat Products From Korea: Final Results of Antidumping Duty

Administrative Reviews, 63 FR 13170, 13177 (March 18, 1998).

The Department found that the sales through Hoogovens Steel USA,

Inc. (HSUSA) satisfy these criteria. The subject merchandise is shipped

directly from Hoogovens' mill to customers in the United States. HSUSA

does not take title to the merchandise and does not maintain

inventories of subject merchandise. This procedure is the customary

sales channel between the parties, and the Department found no

exceptions to this rule. The analysis of the third criterion is more

complex. In this case the producer sells directly to the U.S. customer.

The affiliate does not issue invoices, conduct customer credit checks,

or finance sales, and rarely handles receipt of payment for Hoogovens'

sales. Rather, Hoogovens creates and maintains most of the

documentation for U.S. sales in the Netherlands. With respect to

negotiations and price setting, the record is less clear. On the one

hand, Hoogovens has stated that HSUSA negotiates prices with U.S.

customers, subject to Hoogovens' approval. On the other hand, HSUSA

does not have the authority to set prices or quantities. Under the

terms of the agency agreement between Hoogovens and HSUSA, HSUSA is

responsible for conducting market research, finding new customers, and

soliciting orders. However, the agency agreement provides that in

performance of these activities on behalf of Hoogovens, HSUSA has no

authority to conclude contracts on Hoogovens' behalf. HSUSA cannot

negotiate above the prices set by Hoogovens and its compensation does

not depend on the price, quantity or profitability of sales. The record

shows that Hoogovens is directly and continuously involved in

negotiations and other communications with unaffiliated customers, and

is solely responsible for providing technical service. See Verification

at Hoogovens Steel USA, Inc., July 15, 1998, page 3 and Verification

Exhibits 4 and 6. HSUSA serves as a communications link in relaying

price quotes and other information, as well as quality complaints,

between Hoogovens and customers. HSUSA regularly visits U.S. customers,

both alone and in the company of Hoogovens officials from the

Netherlands, and participates in meetings with U.S. customers that take

place in the Netherlands. Based upon the information on the record, the

Department preliminarily concludes that HSUSA's role is ancillary to

the sales made in the Netherlands.

We note that this is a very complex and difficult issue. While we

have preliminarily determined to treat the transactions through HSUSA

as EP sales, we note that certain record evidence could be argued to

support treating these transactions as CEP sales. The Department

invites parties to submit information and comment on this issue. Any

such information or argument should be included in parties' case and

rebuttal briefs. We intend to examine this issue carefully for the

final results of this review. Any information or arguments parties

provide will be fully analyzed in making this final decision. Parties

are encouraged to provide any relevant information and arguments on

this issue to ensure that the Department's final determination as to

whether Hoogovens' sales to unaffiliated customers should be treated as

EP or CEP is based on a complete and thorough record.

We calculated EP based on the delivered, duty-paid price to

unaffiliated customers in the United States. We made adjustments for

discounts and post-sale price adjustments. We made deductions, where

applicable, for foreign inland freight, ocean freight and marine

insurance, brokerage and handling, U.S. inland freight, post-sale

warehousing, and U.S. customs duties in accordance with section 772(c)

of the Act. For EP sales, we rejected the reported imputed credit

expenses based on the weighted average interest rate on short term

dollar-denominated loans taken out in the Netherlands. We recalculated

these U.S. credit expenses using the weighted average interest rate on

HSUSA's short term borrowings in the United States during the POR.

Constructed Export Price (CEP)

We based CEP on the delivered price to unaffiliated customers in

the United States. We made deductions for foreign inland freight, ocean

freight and marine insurance, brokerage and handling, U.S. inland

freight, and U.S. customs duties. In accordance with section 772(d)(1)

of the Act, we calculated the CEP by deducting selling expenses

associated with economic activities occurring in the United States,

including credit expenses, indirect selling expenses, and inventory

carrying costs. In accordance with section 772(d)(2) of the Act, for

sales made through the affiliated Rafferty-Brown companies, we also

deducted the cost of further manufacturing, including repacking

expenses. Finally, we made an adjustment for an amount of profit

allocated to these expenses in accordance with section 772(d)(3) of the

Act.

In the absence of cost of production (COP) data for certain home

market sales,1 we estimated COP for calculation of the CEP

profit allocation and the home market profit rate for CV as follows:

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

\1\ Hoogovens reported CV data, which provide the cost of

manufacturing the products sold in the United States. As the product

mix is very different in the home market, the CV data are not

representative of total costs.

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

1. We estimated the home market fixed costs by calculating the

weighted average ratio of fixed costs to variable costs for U.S. sales

(using the reported VCOMU and TCOMU variables) and multiplying the

reported home market variable costs (VCOMH) by this ratio.

2. We obtained the total cost of manufacturing (COM) by adding the

reported total variable costs and the estimated fixed costs.

3. We obtained general and administrative expenses and interest

expenses from the constructed value (CV) data base and added them to

the total COM to obtain COP.

Normal Value (NV)

In order to determine whether sales of the foreign like product in

the home market are a viable basis for calculating NV, we compared the

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

of subject merchandise sold in the United States, in accordance with

section 773(a)(1)(C) of the Act. Hoogovens' aggregate volume of home

market sales of the foreign like product was greater than five percent

of its respective aggregate volume of U.S. sales of the subject

merchandise. Therefore, we have based NV on home market sales.

[[Page 47230]]

Hoogovens made sales to both affiliated and unaffiliated customers

in the home market during the period of review. We included sales to

affiliated customers when we determined those sales to be at arms

length (i.e., at weighted average prices that were 99.5 percent or more

of weighted average prices for identical products sold to unaffiliated

customers in the home market). When the weighted average price to an

affiliated customer was less than 99.5 percent of the weighted average

price to unaffiliated customers, or there were no sales of identical

merchandise to unaffiliated customers, we excluded sales to that

affiliated customer from our calculation of NV. See e.g., Rules and

Regulations, Antidumping Duties; Countervailing Duties 62 FR 27296,

27355 (May 19, 1997): ``The Department's current policy is to consider

transactions between affiliated parties as `arm's length' if the prices

to affiliated purchasers are on average at least 99.5 percent of the

prices charged to unaffiliated purchasers.''

Home market prices were based on the packed, ex-factory or

delivered prices to customers. We made deductions to NV for inland

freight, early payment discounts, rebates, credit expenses, and

packing. We made deductions or additions, as appropriate, for post-sale

price adjustments. Where CV was used as the basis of NV, we deducted

direct selling expenses (comprised of credit and warranty/technical

service expenses).

Level of Trade

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

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

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

LOT is that of the starting-price sales in the comparison market or,

when NV is based on CV, that of the sales from which we derive selling,

general and administrative expenses and profit. For EP, the U.S. LOT is

also the level of the starting-price sale, which is usually from

exporter to importer. In this case, the exporter sells directly to

unaffiliated customers. For CEP, it is the level of the constructed

sale from the exporter to the importer.

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

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

along the chain of distribution between the producer and the

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

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

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

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. We determine any effect on price comparability

by examining sales at different levels of trade in the home market (or

the third country market) used to calculate NV. Any price effect must

be manifested in a pattern of consistent price differences between home

market (or third-country) sales used for comparison and sales at the

equivalent LOT of the export transaction. To quantify the price

differences, we calculate the difference in the weighted average of the

net prices of the same models sold at different levels of trade in the

home market. Net prices are used because any difference will be due to

differences in LOT rather than other factors. We use the average

percentage difference between these weighted averages to adjust NV when

the LOT of NV is different from that of the export sale. If there is no

pattern of price differences, then the difference in LOT does not have

a price effect and no adjustment is necessary.

In the case of CEP sales, Section 773 (b)(7)(B) of the statute also

provides for an adjustment to NV if it is compared to U.S. sales at a

different LOT, provided the NV is more remote from the factory than the

CEP sales and we are unable to determine whether the difference in

levels of trade between CEP and NV affects the comparability of their

prices. This latter situation might occur when there is no home market

(or third-country) LOT equivalent to the U.S. sales level, or where

there is an equivalent home market (or third-country) level, but the

data are insufficient to support a conclusion on price effect. This

adjustment, the CEP offset, is the lower of the (1) indirect selling

expenses of the home market (or third-country) sale; or (2) indirect

selling expenses deducted from the starting price used to calculate

CEP. The CEP offset is not automatic each time we use CEP. The CEP

offset is made only when the LOT of the home market (or third country)

sale is more advanced than the LOT of the U.S. CEP sale and there is

not an appropriate basis for determining whether there is an effect on

price comparability.

To examine LOT in this review, we requested detailed information

concerning the selling functions associated with sales to service

centers and to several categories of end-users in each of Hoogovens'

markets and interviewed sales, technical service and research managers.

The information gathered indicated that there are no significant

differences among the selling functions performed and services offered

to service centers and end-user customers in either the home or U.S.

markets. In both markets, the larger customers received more frequent

visits from sales personnel. In the home market, a higher level of

service was provided to automotive customers than to other end-users,

but the sales were at the same stage of marketing as all other home

market sales. Hoogovens stated it cannot differentiate among the

selling functions performed and services offered to different classes

of home market or export price customers. However, Hoogovens claimed it

has no home market sales at a LOT equivalent to the CEP LOT, alleging:

While the CEP sale has been adjusted to create, in effect, an

ex-factory level of trade, the starting price of the home market

sales reflects many selling activities not reflected in the adjusted

CEP price. These include indirect selling activities, indirect

warranty and technical service expenses, and inventory carrying

costs incurred on home market sales.

Section A response (October 6, 1997), p. 13.

We disagree with Hoogovens' claim that the prices used to determine

NV reflect many selling activities not reflected in CEP. In calculating

CEP, the Department deducted the imputed credit expenses incurred by

the Rafferty-Brown companies as direct selling expenses. In accordance

with section 772(d)(1), the Department deducted indirect selling

expenses (ISE), including imputed inventory carrying costs (ICC)

incurred in the United States by the Rafferty-Brown companies for sales

to the first unaffiliated buyers. The Department did not deduct ISE

incurred in the Netherlands (reported in computer data fields DINDIRSU

and DINVCARU), nor expenses of the U.S. sales office from the adjusted

CEP, on the grounds that these are expenses associated with the sale to

Hoogovens U.S. affiliates, rather than with the sales by the affiliates

to the first unaffiliated buyers. Thus, the CEP includes Hoogovens'

warranty and technical service expenses for U.S. sales, as well as ISE,

including the expenses of the sales offices in IJmuiden and New York

incurred in connection with the sales to the affiliated service

centers.

Hoogovens' starting price for home market sales includes direct

warranty and technical service expenses, ICC, the expenses of the sales

office in IJmuiden, and other indirect selling expenses incurred for

home market sales. Thus, for the purposes of the LOT analysis, there is

no distinguishable difference between the selling functions included

[[Page 47231]]

in the home market starting price and the selling functions included in

the CEP. On the basis of this analysis, the Department has determined

that there is no basis for Hoogovens' claim that home market sales are

at a different, more advanced LOT than the adjusted CEP sales. The

Department therefore has determined for these preliminary results that

Hoogovens' sales are made at one LOT in both markets.

We note that this is a very complex and difficult issue. While we

have preliminarily determined to treat all home market and U.S. sales

as at the same LOT, we note that this is a change from the prior review

period. The Department invites parties to submit information and

comment on this issue. Any such information or argument should be

included in parties' case and rebuttal briefs. We intend to examine

this issue carefully for the final results of this review. Any

information or arguments parties provide will be fully analyzed in

making this final decision. Parties are encouraged to provide any

relevant information and arguments on this issue to ensure that the

Department's final determination as to whether all of Hoogovens' home

market and U.S. sales are at the same LOT is based on a complete and

thorough record.

Sales Comparisons

To determine whether sales of cold-rolled carbon steel flat

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

compared EP or CEP to NV, as described in the ``Export Price,''

``Constructed Export Price'' and ``Normal Value'' sections of this

notice. In accordance with section 777(A) of the Act, we calculated

monthly weighted-average prices for NV and compared these to individual

U.S. transactions. When there were no contemporaneous home market sales

of the foreign like product, we used CV as the basis for normal value,

in accordance with section 773(a)(4) of the Act. All the sales to which

CV was applied were CEP sales of secondary merchandise. We calculated

CV in accordance with section 773(e) of the Act and the methodology

enunciated in the Memorandum of April 19, 1995, entitled ``Treatment of

Non-Prime Merchandise for the First Administrative Review of Certain

Carbon Steel Flat Products.'' We included the cost of manufacture, and

selling, general and administrative expenses (SG&A). In accordance with

section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on

the amounts incurred and realized by the respondent in connection with

the production and sale of the foreign like product in the ordinary

course of trade for consumption in the home market. For selling

expenses, we used the weighted average home market selling expenses. We

calculated profit by subtracting the weighted average total cost of

production (estimated as described above) from the total weighted

average sales revenue. We adjusted CV for credit and warranty expenses.

Reimbursement

Section 351.402(f) of the antidumping regulations requires the

Department to deduct from EP or CEP the amount of any antidumping duty

that is reimbursed to the importer. Based on verified evidence on the

record in this review, including the revised agency agreement between

Hoogovens and Hoogovens Steel USA, Inc. (HSUSA) and the refund to

Hoogovens by HSUSA of a portion of the cash deposits advanced equal to

the Department's calculation of the antidumping duties to be assessed

in the third administrative review, the Department has preliminarily

determined that HSUSA is solely responsible for the payment of

antidumping duties. Further, evidence on the record in this review

shows that as a result of corporate restructuring, HSUSA has sufficient

assets to establish its ability to pay the antidumping duties to be

assessed. Therefore, for this period of review, we have determined that

Hoogovens has not reimbursed HSUSA for antidumping duties to be

assessed.

Preliminary Results of Review

We preliminarily determine that the following margin exists for the

period August 1, 1996 through July 31, 1997:

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

Margin

Company (percent)

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

Hoogovens Staal BV......................................... 0.95

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

Parties to this proceeding may request disclosure within five days

of publication of this notice and any interested party may request a

hearing within 30 days of publication. Any hearing, if requested, will

be held 44 days after the date of publication, or the first working day

thereafter. Interested parties may submit case briefs and/or written

comments no later than 30 days after the date of publication. Rebuttal

briefs and rebuttals to written comments, limited to issues raised in

such briefs or comments, may be filed no later than 37 days after the

date of publication. The Department will publish the final results of

this administrative review, which will include the results of its

analysis of issues raised in any such written comments or at a hearing,

within 120 days after the publication of this notice.

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. For assessment purposes,

the duty assessment rate will be a specific amount per metric ton. The

Department will issue appraisement instructions directly to Customs.

The final results of this review shall be the basis for the assessment

of antidumping duties on entries of merchandise covered by this review

and for future deposits of estimated duties.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review for

all shipments of cold-rolled carbon steel flat products from the

Netherlands entered, or withdrawn from warehouse, for consumption on or

after the publication date of the final results of this administrative

review, as provided by section 751(a)(1) of the Act: (1) the cash

deposit rate for the reviewed firm will be the rate established in the

final results of administrative review, except if the rate is less than

0.5 percent, and therefore, de minimis within the meaning of 19 CFR

351.106, in which case the cash deposit rate will be zero; (2) if the

exporter is not a firm covered in this review or the original

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

that established for the manufacturer of the merchandise in the final

results of this review; and (3) if neither the exporter nor the

manufacturer is a firm covered in this or any previous review or the

original fair value investigation, the cash deposit rate will be 19.32

percent.

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 351.402(f) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during these review periods. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 31, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-23930 Filed 9-3-98; 8:45 am]

BILLING CODE 3510-DS-P