Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Stainless Steel Sheet and Strip in Coils From Japan

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-845]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Stainless Steel Sheet

and Strip in Coils From Japan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Letitia Kress, Cindy Sonmez or Karla

Whalen, Import Administration,

[[Page 109]]

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-6412, (202) 482-3362 or (202) 482-1391,

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the 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 (``URAA''). In addition,

unless otherwise indicated, all citations to the Department of Commerce

(``Department'') regulations are to the regulations at 19 CFR Part 351,

62 FR 27296 (May 19, 1997).

Preliminary Determination

We preliminarily determine that Stainless Steel Sheet and Strip in

Coils (``SSS&S'') from Japan is being, or is likely to be, sold in the

United States at less than fair value (``LTFV''), as provided in

section 733 of the Act. The estimated margins of sales at LTFV are

shown in the ``Suspension of Liquidation'' section of this notice. For

Nippon Steel Corporation (``NSC''), the Department used the sales data

submitted on December 2, 1998 and the cost of production and

constructed value data submitted on November 19, 1998. For Kawasaki

Steel Corporation (``Kawasaki'') the Department used the response

submitted on November 30, 1998.

Case History

On July 13, 1998, the Department initiated antidumping duty

investigations of imports of stainless steel sheet and strip in coils

from France, Germany, Italy, Japan, Mexico, South Korea, Taiwan and the

United Kingdom (see Initiation of Antidumping Investigations: Stainless

Steel Sheet and Strip in Coils From France, Germany, Italy, Japan,

Mexico, South Korea, Taiwan and the United Kingdom, 63 FR 37521 (July

13, 1998)). Since the initiation of this investigation the following

events have occurred.

The Department set aside a period for all interested parties to

raise issues regarding product coverage in a letter to interested

parties on July 21, 1998. On July 27, 1998, Allegheny Ludlum

Corporation, Armco, Inc.,1 J&L Specialty Steel,

Inc.,2 Washington Steel Division of Bethlehem Steel

Corporation (formerly Lukens, Inc.), the United Steelworkers of

America, AFL-CIO/CLC, the Butler Armco Independent Union 3

and the Zanesville Armco Independent Organization, Inc. 4

(``petitioners'') submitted comments to the Department stating that

they generally agree with the Department's product characteristics and

model match criteria. However, petitioners noted that the reporting of

products' actual alloy content, within certain ranges, must be

incorporated from the outset into the product characteristics that

comprise the product matching hierarchy that create the control numbers

(``CONNUMs'').

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\1\ Armco, Inc. is not petitioner in the Mexico case.

\2\ J&L Specialty Steel, Inc, is not a petitioner in the France

case.

\3\ Butler Armco Independent Union is not a petitioner in the

Mexico case.

\4\ Zanesville Armco Independent Organization, Inc. is not a

petitioner in the Mexico case.

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On July 17, 1998, NSC submitted comments claiming that petitioners

do not manufacture suspension foil and thus do not have standing to

file a petition against this product. Also on July 17, 1998, NSC

submitted a statement regarding petitioners agreement to exclude

suspension foil from the scope of the investigation. Also on July 20,

1998, Hutchinson Technology submitted comments regarding the definition

of suspension foil. On July 20, 1998, Hitachi Metals America, Ltd.

submitted comments concerning razor blade steel, flapper valve steel,

and surgical/medical categories of stainless steel sheet and strip and

that all of its products are outside of the scope of the investigation.

On July 27, 1998, respondent NSC submitted comments stating that

the criteria should be reordered and clarified and that the

``additional information'' concerning chemical content is burdensome

and unnecessary. On July 29, 1998, Hitachi Metals America, Ltd.

submitted comments regarding an exclusion for flapper valve steel. On

July 27, 1998, respondent Kawasaki Steel Corporation stated that it

agrees with NSC's July 27, 1998 comments. On July 29, 1998 petitioners

submitted a letter regarding the scope.

On July 24, 1998, the International Trade Commission (``ITC'')

notified the Department of its affirmative preliminary determination in

this case.

On August 3, 1998, the Department issued antidumping duty

questionnaires to Kawasaki, NSC, and Hitachi Metals America,

Ltd.5 On August 4, 1998, the Department issued antidumping

duty questionnaires to Nisshin Steel Co., Ltd. (``Nisshin''), Nippon

Yakin Kogyo (``Nippon Yakin''), Nippon Metal Industries (``Nippon

Metal''), and Sumitomo Metal Industries (``Sumitomo''). On September

21, 1998, the Department selected NSC, Kawasaki, Nippon Metal, Nippon

Yakin, and Nisshin (collectively ``respondents'') as mandatory

respondents. See Decision Memorandum from Division Directors, Office

VII, to Joseph Spetrini, regarding Selection of Respondents, September

21, 1998.

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\5\ Counsel for Hitachi Metals America, Ltd. forwarded the

questionnaire to Hitachi Metals, Ltd. in Japan.

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On August 28, October 19 and 27, and November 2, 1998, in letters

to the Department, NSC requested that it not be required to report

downstream sales in Japan because relevant resales: (1) Involve sales

to affiliated resellers which are at arm's length; (2) are all at a

different level of trade from United States sales; (3) for the most

part are not likely to match U.S. sales; and (4) would entail undue

burden. On September 8 and November 25, 1998, petitioners rebutted

NSC's requested exemption from reporting certain home market sales.

On September 9, 1998, the Department received responses to Section

A of the questionnaire from Kawasaki, NSC, and Sumitomo. On October 5

and 7, 1998, petitioners filed comments to the Section A responses for

Kawasaki and NSC, respectively. On September 29, 1998, the Department

received Kawasaki and NSC's responses to Sections B and C of the

questionnaire. On October 15, 1998, petitioners filed comments on

Kawasaki and NSC's Section B and C questionnaire responses. On October

20 and 21, 1998, the Department issued supplemental questionnaires on

Sections A, B, and C to NSC and Kawasaki, respectively.

On October 6, 1998, pursuant to section 733(c)(1)(A) of the Act,

the petitioners made a timely request to postpone the preliminary

determination for thirty days. The Department determined that this

investigation is extraordinarily complicated and that the additional

time is necessary for the Department to make its preliminary

determination. On October 16, 1998, we postponed the preliminary

determination until no later than December 17, 1998. See Stainless

Steel Sheet and Strip from Italy, France, Germany, Mexico, Japan, the

Republic of Korea, the United Kingdom and Taiwan; Notice of

Postponement of Preliminary Determinations for Antidumping Duty

Investigations, 63 FR 56909, (October 23, 1998).

On October 8 and 13, 1998, petitioners timely requested that the

Department initiate a cost investigation against Kawasaki and NSC,

respectively. Based on an adequate sales below cost of production

allegation, the Department initiated a cost of

[[Page 110]]

production investigation against Kawasaki and NSC on October 28, 1998.

See Memorandum from William Jones and Taija Slaugher to Roland

MacDonald regarding Allegations of Sales Below the Cost of Production

for Kawasaki Steel Corporation and Nippon Steel Corporation dated

October 28, 1998. On November 19, 1998, Kawasaki and NSC submitted

their Section D responses.

On October 28, 1998, NSC submitted a request that it not be

required to report sales based on order confirmation date as was

requested in the supplemental questionnaire that the Department issued

on October 20, 1998. On November 18, 1998, Kawasaki requested a waiver

from the Department's request to submit a new database using order

confirmation date.

On October 30, 1998, petitioners timely alleged that critical

circumstances exist with respect to imports of stainless steel sheet

and strip in coils from Japan. On November 19, 1998, Kawasaki submitted

shipment information in regards to this allegation. On December 4,

1998, NSC submitted shipment information in regards to this allegation.

On December 2, 1998, NSC submitted the order confirmation date for

the sales it previously reported in its Section B and C responses as

well as downstream sales. On December 3, 1998, petitioners submitted

comments on appropriate product comparisons. On December 7, 1998,

Kawasaki submitted its sales made to unaffiliated parties based on

order confirmation date. On December 4 and 8, 1998, petitioners

submitted comments regarding preliminary determination guidance for

Kawasaki and NSC, respectively. On December 11, 1998, NSC submitted a

rebuttal to petitioners' December 8, 1988 preliminary determination

comments. On December 11, 1998, NSC submitted additional order

confirmation reporting. On December 9, 1998, Kawasaki submitted a

rebuttal to petitioners' December 4th preliminary determination

comments.

Scope of the Investigation

For purposes of this investigation, the products covered are

certain stainless steel sheet and strip in coils. Stainless steel is an

alloy steel containing, by weight, 1.2 percent or less of carbon and

10.5 percent or more of chromium, with or without other elements. The

subject sheet and strip is a flat-rolled product in coils that is

greater than 9.5 mm in width and less than 4.75 mm in thickness, and

that is annealed or otherwise heat treated and pickled or otherwise

descaled. The subject sheet and strip may also be further processed

(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that

it maintains the specific dimensions of sheet and strip following such

processing.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70,

7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90,

7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35,

7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44,

7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35,

7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44,

7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30,

7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30,

7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25,

7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00,

7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80,

7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60,

7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15,

7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30,

7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and

7220.90.00.80. Although the HTS subheadings are provided for

convenience and Customs purposes, the Department's written description

of the merchandise under investigation is dispositive.

Excluded from the scope of this investigation are the following:

(1) Sheet and strip that is not annealed or otherwise heat treated and

pickled or otherwise descaled; (2) sheet and strip that is cut to

length; (3) plate (i.e., flat-rolled stainless steel products of a

thickness of 4.75 mm or more); (4) flat wire (i.e., cold-rolled

sections, with a prepared edge, rectangular in shape, of a width of not

more than 9.5 mm); and (5) razor blade steel. Razor blade steel is a

flat rolled product of stainless steel, not further worked than cold-

rolled (cold-reduced), in coils, of a width of not more than 23 mm and

a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5

percent chromium, and certified at the time of entry to be used in the

manufacture of razor blades. See Chapter 72 of the HTSUS, ``Additional

U.S. Note'' 1(d).

In response to comments by interested parties the Department has

determined that certain specialty stainless steel products are also

excluded from the scope of this investigation. These excluded products

are described below.

Flapper valve steel is defined as stainless steel strip in coils

containing, by weight, between 0.37 and 0.43 percent carbon, between

1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent

manganese. This steel also contains, by weight, phosphorus of 0.025

percent or less, silicon of between 0.20 and 0.50 percent, and sulfur

of 0.020 percent or less. The product is manufactured by means of

vacuum arc remelting, with inclusion controls for sulphide of no more

than 0.04 percent and for oxide of no more than 0.05 percent. Flapper

valve steel has a tensile strength of between 210 and 300 ksi, yield

strength of between 170 and 270 ksi, plus or minus 8 ksi, and a

hardness (Hv) of between 460 and 590. Flapper valve steel is most

commonly used to produce specialty flapper valves in compressors.

Also excluded is a product referred to as suspension foil, a

specialty steel product used in the manufacture of suspension

assemblies for computer disk drives. Suspension foil is described as

302/304 grade or 202 grade stainless steel of a thickness between 14

and 127 microns, with a thickness tolerance of plus-or-minus 2.01

microns, and surface glossiness of 200 to 700 percent Gs. Suspension

foil must be supplied in coil widths of not more than 407 mm, and with

a mass of 225 kg or less. Roll marks may only be visible on one side,

with no scratches of measurable depth. The material must exhibit

residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm

over 685 mm length.

Certain stainless steel foil for automotive catalytic converters is

also excluded from the scope of this investigation. This stainless

steel strip in coils is a specialty foil with a thickness of between 20

and 110 microns used to produce a metallic substrate with a honeycomb

structure for use in automotive catalytic converters. The steel

contains, by weight, carbon of no more than 0.030 percent, silicon of

no more than 1.0 percent, manganese of no more than 1.0 percent,

chromium of between 19 and 22 percent, aluminum of no less than 5.0

percent, phosphorus of no more than 0.045 percent, sulfur of no more

than 0.03 percent, lanthanum of between 0.002 and 0.05 percent, and

total rare earth elements of more than 0.06 percent, with the balance

iron.

Permanent magnet iron-chromium-cobalt alloy stainless strip is also

excluded from the scope of this investigation. This ductile stainless

steel

[[Page 111]]

strip contains, by weight, 26 to 30 percent chromium, and 7 to 10

percent cobalt, with the remainder of iron, in widths 228.6 mm or less,

and a thickness between 0.127 and 1.270 mm. It exhibits magnetic

remanence between 9,000 and 12,000 gauss, and a coercivity of between

50 and 300 oersteds. This product is most commonly used in electronic

sensors and is currently available under proprietary trade names

``Arnokrome.'' 6

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\6\ ``Arnokrome III'' is a trademark of the Arnold Engineering

Company.

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Certain electrical resistance alloy steel is also excluded from the

scope of this investigation. This product is defined as a non-magnetic

stainless steel manufactured to American Society of Testing and

Materials (``ASTM'') specification B344 and containing, by weight, 36

percent nickel, 18 percent chromium, and 46 percent iron, and is most

notable for its resistance to high temperature corrosion. It has a

melting point of 1390 degrees Celsius and displays a creep rupture

limit of 4 kilograms per square millimeter at 1000 degrees Celsius.

This steel is most commonly used in the production of heating ribbons

for circuit breakers and industrial furnaces, and in rheostats for

railway locomotives. The product is currently available under

proprietary trade names such as ``Gilphy 36.''7

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\7\ ``Gilphy 36'' is a trademark of Imphy, S.A.

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Certain martensitic precipitation-hardenable stainless steel is

also excluded from the scope of this investigation. This high-strength,

ductile stainless steel product is designated under the Unified

Numbering System (``UNS'') as S45500-grade steel, and contains, by

weight, 11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon,

manganese, silicon and molybdenum each comprise, by weight, 0.05

percent or less, with phosphorus and sulfur each comprising, by weight,

0.03 percent or less. This steel has copper, niobium, and titanium

added to achieve aging, and will exhibit yield strengths as high as

1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after

aging, with elongation percentages of 3 percent or less in 50 mm. It is

generally provided in thicknesses between 0.635 and 0.787 mm, and in

widths of 25.4 mm. This product is most commonly used in the

manufacture of television tubes and is currently available under

proprietary trade names such as ``Durphynox 17.''8

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\8\ ``Durphynox 17'' is a trademark of Imphy, S.A.

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Finally, three specialty stainless steels typically used in certain

industrial blades and surgical and medical instruments are also

excluded from the scope of this investigation. These include stainless

steel strip in coils used in the production of textile cutting tools

(e.g., carpet knives).9 This steel is similar to ASTM grade

440F, but containing, by weight, 0.5 to 0.7 percent of molybdenum. The

steel also contains, by weight, carbon of between 1.0 and 1.1 percent,

sulfur of 0.020 percent or less, and includes between 0.20 and 0.30

percent copper and between 0.20 and 0.50 percent cobalt. This steel is

sold under proprietary names such as ``GIN4 Mo.'' The second excluded

stainless steel strip in coils is similar to AISI 420-J2 and contains,

by weight, carbon of between 0.62 and 0.70 percent, silicon of between

0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent,

phosphorus of no more than 0.025 percent and sulfur of no more than

0.020 percent. This steel has a carbide density on average of 100

carbide particles per square micron. An example of this product is

``GIN5'' steel. The third specialty steel has a chemical composition

similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent,

molybdenum of between 1.15 and 1.35 percent, but lower manganese of

between 0.20 and 0.80 percent, phosphorus of no more than 0.025

percent, silicon of between 0.20 and 0.50 percent, and sulfur of no

more than 0.020 percent. This product is supplied with a hardness of

more than Hv 500 guaranteed after customer processing, and is supplied

as, for example, ``GIN6''.10

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\9\ This list of uses is illustrative and provided for

descriptive purposes only.

\10\ ``GIN4 Mo'', ``GIN5'' and ``GIN6'' are the proprietary

grades of Hitachi Metals America, Ltd.

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Period of Investigation

The Period of Investigation (``POI'') is April 1, 1997 through

March 31, 1998.

Postponement of Final Determination and Extension of Provisional

Measures

Pursuant to section 735(a)(2) of the Act, on November 19 and 25,

1998, Kawasaki and NSC respectively, requested that, in the event of an

affirmative preliminary determination in this investigation, the

Department postpone its final determination until not later than 135

days after the date of the publication of an affirmative preliminary

determination in the Federal Register. On December 15, 1998, NSC and

Kawasaki amended their requests to include a request to extend the

provisional measures to not more than six months. In accordance with 19

CFR 351.210(b), because (1) our preliminary determination is

affirmative, (2) NSC and Kawasaki account for a significant proportion

of exports of the subject merchandise, and (3) no compelling reasons

for denial exist, we are granting the respondents' requests and are

postponing the final determination until no later than 135 days after

the publication of this notice in the Federal Register. Suspension of

liquidation will be extended accordingly.

Preliminary Determination of Critical Circumstances

On October 30, 1998, petitioners alleged that there is a reasonable

basis to believe or suspect that critical circumstances exist with

respect to the subject merchandise. Petitioners based their allegation

on a comparison of import data from April-June and July-September,

1998, arguing comparison of these periods due to a one-month shipping

time lag. In accordance with 19 CFR 351.206(c)(2), since this

allegation was filed earlier than the deadline for the Department's

preliminary determination, we must issue our preliminary critical

circumstances determinations not later than the preliminary

determination. See Policy Bulletin 98/4 regarding Timing of Issuance of

Critical Circumstances Determinations, 63 FR 55364, (October 15, 1998).

Section 733(e)(1) of the Act provides that if a petitioner alleges

critical circumstances, the Department will determine whether there is

a reasonable basis to believe or suspect that: (A)(i) there is a

history of dumping and material injury by reason of dumped imports in

the United States or elsewhere of the subject merchandise; or (ii) the

person by whom, or for whose account, the merchandise was imported knew

or should have known that the exporter was selling the subject

merchandise at less than fair value and that there was likely to be

material injury by reason of such sales; and (B) there have been

massive imports of the subject merchandise over a relatively short

period.

The statute and the Statement of Administrative Action (``SAA'')

which accompanies the Uruguay Round Agreements Act are silent as to how

we are to make a finding that there was knowledge that there was likely

to be material injury. Therefore, Congress has left the method of

implementing this provision to the Department's discretion.

In determining whether there is a reasonable basis to believe or

suspect that an importer knew or should have known that the exporter

was selling the product at less than fair value, the Department

normally considers margins

[[Page 112]]

of 15 percent or more sufficient to impute knowledge of dumping for

constructed export price (``CEP'') sales, and margins of 25 percent or

more for export price (``EP'') sales. See, e.g., Preliminary Critical

Circumstances Determination: Honey from the People's Republic of China,

60 FR 29824 (June 6, 1995). Since the company specific margin for EP

sales in our preliminary determination for stainless steel sheet and

strip in coils are greater than 25 percent for Kawasaki, we have

imputed importer knowledge of dumping for Kawasaki. Since the company

specific margins for EP sales in our preliminary determination for

stainless steel sheet and strip in coils are less than 25 percent for

NSC, we have not imputed knowledge of dumping based on this margin.

There is no evidence on the record regarding history of dumping by NSC.

Therefore, NSC does not meet the first prong of the analysis.

In determining whether there is a reasonable basis to believe or

suspect that an importer knew or should have known that there was

likely to be material injury by reason of dumped imports, the

Department normally will look to the preliminary injury determination

of the ITC. If, as in this case, the ITC finds a reasonable indication

of present material injury to the relevant U.S. industry, the

Department will determine that a reasonable basis exists to impute

importer knowledge that there was likely to be material injury by

reason of dumped imports during the critical circumstance period--the

90-day period beginning with the initiation of the investigation. See

19 CFR 351.206. Therefore, the Department finds it is reasonable to

impute importer knowledge of injury by reason of dumped imports in this

case.

Since Kawasaki has met the first prong of the critical

circumstances allegation, we must examine whether or not it had massive

imports. To determine whether imports were massive over a relatively

short time period, the Department typically compares the import volume

of the subject merchandise for the three months immediately preceding

and following the filing of the petition. See 19 CFR 351.206(i).

Pursuant to 19 CFR 351.206(h)(2), the Department will consider an

increase of 15 percent or more in the imports of the subject

merchandise over the relevant period to be massive. On November 19,

1998, Kawasaki submitted shipment information which shows that its

imports decreased during the comparison period (July-September, 1998)

from the level of the preceding three months. Therefore, we do not find

that critical circumstances exist for Kawasaki, since it did not have

massive imports, or for NSC, since it does not have a history of

dumping or a margin high enough to impute knowledge.

In addition, for companies which did not respond to the

Department's questionnaire, we are imputing knowledge based on the

facts available rate assigned, which is the highest petition rate.

Therefore, we determine, based on facts available, that there were

massive imports of stainless steel sheet and strip in coils by

companies that did not respond to the Department's questionnaire.

Therefore, we preliminarily determine that critical circumstances exist

with regard to these companies. Regarding all other exporters, because

we find that critical circumstances exist for three out of five

investigated companies, we also determine that critical circumstances

exist for all other exporters.

Product Comparisons

In accordance with section 771(16) of the Act, all products

produced by the respondents covered by the description in the Scope of

Investigation section above, and sold in Japan during the POI, are

considered to be foreign like products for purposes of determining

appropriate product comparisons to U.S. sales. We have relied on nine

characteristics to match U.S. sales of subject merchandise to

comparison market sales of the foreign like product (listed in order of

significance): grade; hot/cold rolled; gauge; finish; metallic coating;

non-metallic coating; width; temper/tensile strength; and, edge trim.

These characteristics have been weighted by the Department where

appropriate. Where there were no sales of identical merchandise in the

home market to compare to U.S. sales, we compared U.S. sales to the

next most similar foreign like product on the basis of the

characteristics listed in the antidumping duty questionnaire and

reporting instructions.

Date of Sale

For its home market and U.S. sales, NSC and Kawasaki reported the

date of invoice (shipment date) as the date of sale, in keeping with

the Department's stated preference for using the invoice date as the

date of sale. Both respondents stated that the invoice date best

reflects the date on which the material terms of sale are established

and that price and/or quantity can and do change between order date and

invoice date. However, petitioners have alleged that the sales

documentation indicates that the order date appears to be the date when

the material terms of sale are set for the majority of these

respondents' sales of SSSS. Given the relevance of petitioners'

comments and the nature of marketing these types of made-to-order

products, we determined that petitioners' claims have some merit.

Consequently, on October 20 and 21, 1998, the Department requested that

NSC and Kawasaki, respectively, provide additional information

concerning the nature and frequency of price and quantity changes

occurring between the date of order and date of invoice. We also asked

NSC and Kawasaki to report the order date for all home market and U.S.

sales, and to ensure that all sales with order or invoice dates within

the POI are reported. On October 28 and November 18, 1998, NSC and

Kawasaki reiterated that invoice date is the appropriate date of sale

and requested that they not have to report sales based on order

confirmation date. On December 21, 1998, NSC reported the order date

for sales reported in its section B and C responses. NSC supplemented

this filing on December 11, 1998 reporting sales with final order date

within the POI, and invoice dates within the POI. On December 7, 1998,

Kawasaki submitted its response to the Department's request for order

confirmation date reporting.

The Department is preliminarily using the invoice date as the date

of sale for both home market and U.S. sales. We intend to fully examine

this issue at verification, and we will incorporate our findings, as

appropriate, in our analysis for the final determination. If we

determine that the order confirmation date is the appropriate date of

sale, we may resort to facts available for the final determination to

the extent that this information has not been reported.

Fair Value Comparisons

To determine whether sales of SSS&S from Japan to the United States

were made at LTFV, we compared EP to the normal value (``NV''), as

described in the ``Export Price'' and ``Normal Value'' sections of this

notice, below. In accordance with section 772(a) and (c), we calculated

EP for all of Kawasaki and NSC's sales, since the subject merchandise

was sold to the first unaffiliated purchaser in the United States prior

to importation, and CEP was not otherwise warranted based on the facts

on the record.

Export Price

We calculated EP based on the packed delivered price to

unaffiliated purchasers in the United States. For Kawasaki, we made

deductions from the starting price (gross unit price), where

[[Page 113]]

appropriate, for foreign inland freight, insurance, rebates and

brokerage and handling, and we added duty drawback. For NSC, we made

deductions from the starting price (gross unit price), where

appropriate, for foreign inland freight, inland insurance, discounts

and rebates, credit, and warranty expenses.

Normal Value

After testing home market viability, as discussed below, we

calculated NV as noted in the ``Price-to-CV Comparisons'' and ``Price-

to-Price Comparisons'' sections of this notice.

1. Home Market Viability

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

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

is equal to or greater than five percent of the aggregate volume of

U.S. sales), we compared each respondent's volume of home market sales

of the foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(B) of the Act. Since

each respondent's aggregate volume of home market sales of the foreign

like product was greater than five percent of its aggregate volume of

U.S. sales of the subject merchandise, we determined that the home

market provides a viable basis for calculating NV. Therefore, we have

based NV on home market sales.

2. Cost of Production Analysis

Based on a cost allegation filed by the petitioners, the Department

found reasonable grounds to believe or suspect that sales by Kawasaki

and NSC in the home market were made at prices below the costs of

production (``COP''), pursuant to section 773(b)(1) of the Act. As a

result, the Department initiated an investigation to determine whether

Kawasaki or NSC made home market sales during the POI at prices below

their respective COPs, within the meaning of section 773(b) of the Act.

We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated COP

based on the sum of Kawasaki's and NSC's respective costs for materials

and fabrication for the foreign like product, plus amounts for selling,

general and administrative expenses, interest expenses, research and

development, and packing costs. We relied on the COP data submitted by

Kawasaki and NSC, except as discussed below, where Kawasaki submitted

costs were not sufficiently reported, quantified or valued.

1. Kawasaki did not report costs for some CONNUMs that were sold in

the home market. In these instances, we assigned the highest reported

costs to those CONNUMs.

2. Kawasaki reported no costs for secondary merchandise. Therefore,

we have assigned the highest reported costs to those products.

3. In any instances where Kawasaki reported more than one cost for

the same CONNUM, we calculated a single weighted-average cost for each

CONNUM using the reported production quantities.

4. We revised Kawasaki's general and administrative (``G&A'')

expenses to include losses related to the disposal of tangible fixed

assets and expenses related to retirement payments and pension costs

see Cost of Production and Constructed Value Calculation Adjustments

for the Preliminary Determination from William Jones and Taija

Slaughter to Neal Halper, dated December 17, 1998.

B. Test of Home Market Prices

We compared the weighted-average COP for each respondent, adjusted

where appropriate (see above), to home market sales of the foreign like

product, as required under section 773(b) of the Act, in order to

determine whether these sales had been made at prices below the COP. In

determining whether to disregard home market sales made at prices below

the COP, we examined whether such sales were made (1) within an

extended period of time in substantial quantities, and (2) at prices

which permitted the recovery of all costs within a reasonable period of

time in the normal course of trade, in accordance with sections

773(b)(1)(A) and (B) of the Act. On a product-specific basis, we

compared the COP to home market prices, less any applicable movement

charges, discounts and rebates, other selling expenses, and home market

packing.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of the respondent's sales of a given product were at prices

less than the COP, we did not disregard any below-cost sales of that

product because we determined that the below-cost sales were not made

in substantial quantities. Where 20 percent or more of a respondent's

sales of a given product during the POI were at prices less than the

COP, we determined that such sales have been made in substantial

quantities within an extended period of time, in accordance with

section 773(b)(2)(B) of the Act. Because we compared prices to POI

average costs, we also determined that such sales were not made at

prices which would permit recovery of all costs within a reasonable

period of time, in accordance with section 773(b)(2)(D) of the Act.

Therefore, we disregarded the below-cost sales.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of each respondent's cost of materials, fabrication,

G&A expenses, U.S. packing costs, direct and indirect selling expenses,

interest expenses, research and development expenses, and profit. We

made adjustments to Kawasaki's reported costs as indicated above in the

COP section. In accordance with section 773(e)(2)(A) of the Act, we

based selling, general, and administrative expenses and profit on the

amounts incurred and realized by each respondent in connection with the

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

of trade, for consumption in the foreign country. For selling expenses,

we used the actual weighted-average home market direct and indirect

selling expenses.

Price-to-Price Comparisons

For those product comparisons for which there were sales at prices

above the COP, we based NV on prices to home market customers. We made

adjustments, where appropriate, for physical differences in the

merchandise in accordance with section 773(a)(6)(C) of the Act. In

accordance with Section 773(a)(6), we deducted home market packing

costs and added U.S. packing costs.

Kawasaki

We based home market prices on the packed, delivered prices to

affiliated and unaffiliated purchasers in the home market. We made

adjustments, where applicable, in accordance with section 773(a)(6) of

the Act. Where applicable, we made adjustments for rebates and movement

expenses. To adjust for differences in circumstances of sale between

the home market and the United States, we reduced home market prices by

the amounts of direct selling expenses (i.e., warranty and credit

expenses) and added U.S. credit expenses. In order to adjust for

differences in packing between the two markets, we deducted HM packing

costs and added U.S. packing costs.

NSC

We calculated NV based on prices to unaffiliated home market

customers. We

[[Page 114]]

made deductions for direct selling expenses, discounts and rebates,

inland freight charges, insurance, warehousing, and packing expenses,

where appropriate. In accordance with section 773(a)(6), we deducted

home market packing costs and added U.S. packing costs. Lastly, in our

NV calculations, we did not use NSC's reported downstream sales because

the sales by NSC to its first affiliated reseller passed the arm's-

length test (see section on Arm's Length Test).

Price-to-CV Comparisons

In accordance with section 773(a)(4) of the Tariff Act, we based NV

on CV if we were unable to find a home market match of identical or

similar merchandise. We calculated CV based on each respondent's cost

of materials, fabrication, G&A expenses, U.S. packing, direct and

indirect expenses, interest expense, research and development expenses

employed in producing the subject merchandise as well as profit. In

accordance with section 773(a)(2)(A) of the Tariff Act, we based SG&A

expense 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 Japan.

For selling expenses, we used the weighted-average home market selling

expenses. Where appropriate, we made adjustments to CV in accordance

with section 773(a)(8) of the Tariff Act. For comparisons to EP, we

made COS adjustments by deducting home market direct selling expenses

and adding U.S. direct selling expenses.

Arm's Length Test

Sales to affiliated customers in the home market not made at arm's

length prices (if any) were excluded from our analysis because we

considered them to be outside the ordinary course of trade. See 19 CFR

351.102. To test whether these sales were made at arm's length prices,

we compared on a model-specific basis the starting prices of sales to

affiliated and unaffiliated customers net of all movement charges,

direct selling expenses, and packing. Where, for the tested models of

subject merchandise, prices to the affiliated party were on average

99.5 percent or more of the price to the unaffiliated parties, we

determined that sales made to the affiliated party were at arm's

length. See 19 CFR 351.403 (c). In instances where no price ratio could

be constructed for an affiliated customer because identical merchandise

was not sold to unaffiliated customers, we were unable to determine

that these sales were made at arm's length prices and, therefore,

excluded them from our LTFV analysis. See Notice of Final Determination

of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat

Products from Argentina, 58 FR 37062, 37077 (July 9, 1993). Where the

exclusion of such sales eliminated all sales of the most appropriate

comparison product, we made a comparison to the next most similar

product.

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 constructed value (``CV''), that of the sales from

which we derive selling, general and administrative (``SG&A'') 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. 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. Finally,

for CEP sales, if the NV level is more remote from the factory than the

CEP level and there is no basis for determining whether the difference

in the levels between NV and CEP affects price comparability, we adjust

NV under section 773(a)(7)(B) of the Act (the CEP offset provision).

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

Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731

(November 19, 1997).

Kawasaki

In its questionnaire responses, Kawasaki stated that it sold

subject merchandise through a total of five channels of trade during

the period of investigation, four in the home market and one in the

United States. Kawasaki's U.S. sales were all made to unaffiliated

trading companies. Its four home market channels were sales from

Kawasaki to end users, sales from Kawasaki to unaffiliated trading

companies, sales from Kawasaki to affiliated trading companies and then

to affiliated customers (which used the subject merchandise to

manufacture products outside the scope of the proceeding), and finally,

sales from Kawasaki to affiliated trading companies and then to

unaffiliated customers. Thus, Kawasaki sold subject merchandise to two

types of customers: trading companies, whether affiliated or not, and

unaffiliated end users. These sales represent two different points in

the chain of distribution between the producer and the final end user,

as in one instance (sales to trading companies), the subject

merchandise passes through the intermediary parties, while in the other

case, sales are made without any intervening parties at all. As a

result, these sales to different points in the distribution chain could

represent different levels of trade in the home market.

The Department then examined whether any differences existed with

respect to the selling functions Kawasaki performed in making sales to

these two types of customers. Regardless of the type of customer, all

of Kawasaki's home market sales were manufactured to order and the

merchandise was shipped directly from the factory to the end user. The

packing processes were also identical for all sales, and the reported

selling expenses were comparable for all sales. There is no evidence on

the record to suggest that Kawasaki had formal policies for providing

special payment terms, such as discounts, to different types of

customers. Regarding the selling functions with respect to the sales to

end users, Kawasaki conducted price negotiations, communications with

the customers, payment collection activity, and warranty activity, in

addition to maintaining a long-term cooperative relationship designed

to assist the customers' utilization of Kawasaki's products. None of

these qualitatively different functions were performed regarding the

sales to trading companies. Based on the different points in the chain

of distribution and the differences in selling functions, the

Department has preliminarily determined that two levels of trade exist

for Kawasaki's sales in the home market.

Regarding U.S. sales, the Department found that no evidence existed

to differentiate the selling functions between sales made to trading

companies for sale to the United States and sales made to trading

companies for sale in the home market. Therefore, the Department

preliminarily considers sales made through trading companies,

[[Page 115]]

whether to the United States or the home market, to be at the same

level of trade.

The Department then checked to determine whether a pattern of

consistent price differences existed between these two levels of trade.

The Department found that no consistent significant pattern existed and

therefore did not adjust NV if U.S. sales were compared to home market

sales made at a different LOT.

NSC

In the home market NSC sold to unaffiliated and affiliated trading

companies and to end users. In the U.S. market, NSC sold only to

unaffiliated trading companies. NSC claims that there is no difference

in the selling expenses between channels. Although the sales in the

home market represent different points in the chain of distribution

between the producer and the final end-user which could represent

different levels of trade, NSC provided essentially the same level of

marketing assistance and selling functions to all three types of

customers. For its U.S. sales, NSC reported sales to unaffiliated

resellers as its only method of distribution.

When comparing NSC's sales at its EP LOT to its home market LOT, we

found that NSC provided essentially the same level of strategic or

economic planning, market research, engineering services, or post-sale

warehousing at both the EP or home market LOT. All packing expenses and

freight arrangements were similar (in the activities performed) in both

markets. NSC provided similar degrees of after-sales and technical

support at both the EP and home market LOT. Based upon our examination

of the information on the record, we agree with NSC that it had one

LOT.

We have not, therefore, made a LOT adjustment because all price

comparisons are at the same LOT and an adjustment pursuant to section

773(a)(7)(A) of the Tariff Act is not appropriate.

Facts Available

Section 776(a)(2) of the Act provides that, if an interested party:

(A) withholds information that has been requested by the Department;

(B) fails to provide such information in a timely manner or in the form

or manner requested; (C) significantly impedes a proceeding under the

antidumping statute; or (D) provides such information but the

information cannot be verified, as provided in section 782(i), the

Department shall, subject to subsections 782(d), use facts otherwise

available in reaching the applicable determination. Because Nisshin,

Nippon Yakin, and Nippon Metal failed to respond to the Department's

questionnaire, and because that failure is not overcome by the

application of section 782, we must use facts otherwise available to

calculate the dumping margins for each company.

Section 776(b) of the Act provides that adverse inferences may be

used against a party that has failed to cooperate by not acting to the

best of its ability to comply with the Department's requests for

information. See also Statement of Administrative Action accompanying

the URAA, H.R. Rep. No. 316, 103d Cong., 2d Sess. 870 (1994). The non-

responsive companies' decisions not to reply to the Department's

antidumping questionnaire demonstrates that they have failed to act to

the best of their ability to comply with a request for information

under section 776 of the Act. Thus, the Department has determined that,

in selecting among the facts otherwise available, an adverse inference

is warranted.

Consistent with Department practice, as adverse facts available,

the Department is assigning to Nisshin, Nippon Yakin, and Nippon Metal

the higher of: (1) the highest margin stated in the petition; or (2)

the highest margin calculated for any respondent in this investigation.

Section 776(b) states that an adverse inference may include

reliance on information derived from the petition or any other

information placed on the record. See also SAA at 829-831. Section

776(c) provides that, when the Department relies on secondary

information (e.g., the petition) as the facts otherwise available, it

must, to the extent practicable, corroborate that information from

independent sources that are reasonably at its disposal. We reviewed

the adequacy and accuracy of the information in the petition during our

pre-initiation analysis of the petition, to the extent appropriate

information was available for this purpose (e.g., import statistics,

call reports, and data from business contacts). In this case, the

highest margin alleged in the petition for any Japanese producer is

57.87 percent (see Import Administration AD Investigation Initiation

Checklist, dated June 30, 1998 for a discussion of the margin

calculations in the petition).

The Department was provided with no other useful information by the

respondents or other interested parties, and is aware of no other

independent sources of information, that would enable it to further

corroborate the remaining components of the margin calculation in the

petition.

Currency Conversion

We made currency conversions into U.S. dollars based on the

exchange rates in effect on the dates of the U.S. sales as certified by

the Federal Reserve Bank, in accordance with section 773(A) of the Act.

Verification

As provided in section 782(i) of the Act, we will verify all

information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(2) of the Act, we are directing

the Customs Service to suspend liquidation of all imports of subject

merchandise that are entered, or withdrawn from warehouse, for

consumption on or after the date of publication of this notice in the

Federal Register. For all companies except Kawasaki and NSC, we are

directing the Customs Service to suspend liquidation of all imports of

subject merchandise that are entered or withdrawn from warehouse, for

consumption on or after the date 90 days prior to the date of

publication of this notice in the Federal Register. See section

733(e)(2). We will instruct the Customs Service to require a cash

deposit or the posting of a bond equal to the weighted-average amount

by which the NV exceeds the EP, as indicated in the chart below. These

suspension of liquidation instructions will remain in effect until

further notice. The weighted-average dumping margins are as follows:

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

Weighted-

average

Exporter/manufacturer margin

percentage

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

Kawasaki Steel Corporation................................ 48.41

Nippon Steel Corporation.................................. 24.94

Nisshin Steel Co., Ltd.................................... 57.87

Nippon Yakin Kogyo........................................ 57.87

Nippon Metal Industries................................... 57.87

All Others................................................ 35.61

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

Pursuant to section 735(c)(5)(A) of the Act, the Department has

excluded any zero and de minimis margins and any margins determined

entirely under section 776 of the Act, from the calculation of the

``All Others Rate.''

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

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

the ITC will determine before the later of 120 days after the date of

this preliminary determination, or 45 days after our final

determination, whether these imports are materially injuring, or

threaten material injury to, the U.S. industry.

[[Page 116]]

Public Comment

Case briefs or other written comments may be submitted to the

Assistant Secretary for Import Administration no later than fifty days

after the date of publication of this notice, and rebuttal briefs,

limited to issues raised in case briefs, no later than fifty-five days

after publication of this notice. A list of authorities used and an

executive summary of issues should accompany any briefs submitted to

the Department. Such summary should be limited to five pages total,

including footnotes. In accordance with section 774 of the Act, we will

hold a public hearing, if requested, to afford interested parties an

opportunity to comment on arguments raised in case or rebuttal briefs.

Tentatively, the hearing will be held fifty-seven days after

publication of this notice, time and room to be determined, at the U.S.

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

Washington, D.C. 20230. Parties should confirm by telephone the time,

date, and place of the hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

1870, within 30 days of the publication of this notice. Requests should

contain: (1) The party's name, address, and telephone number; (2) the

number of participants; and (3) a list of the issues to be discussed.

Oral presentations will be limited to issues raised in the briefs. If

this investigation proceeds normally, we will make our final

determination no later than 135 days after publication of this notice.

This determination is issued and published in accordance with

sections 733(d) and 777(i)(1) of the Act.

Dated: December 17, 1998.

Richard Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-34463 Filed 12-31-98; 8:45 am]

BILLING CODE 3510-DS-P