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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-475-824]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Stainless Steel Sheet and Strip in Coils From Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Lesley Stagliano or Rick Johnson,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230; telephone: (202) 482-0190 or (202) 482-3818,

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's

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 (``SSSS'') from Italy 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.

Case History

On June 30, 1998, the Department initiated antidumping duty

investigations of imports of SSSS from France, Germany, Italy, Japan,

Mexico, South Korea, Taiwan, and the United Kingdom. See Initiation of

Antidumping Duty Investigations: Stainless Steel Sheet and Strip in

Coils From France, Germany, Italy, Japan, Mexico, South Korea, Taiwan,

and the United Kingdom (``Initiation'') 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. On July 29, 1998, petitioners,

Allegheny Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc.,

Washington Steel Division of Bethlehem Steel Corporation (formerly

Lukens, Inc.), the United Steelworkers of America, AFL-CIO/CLC, the

Butler Armco Independent Union, and the Zanesville Armco Independent

Organization, Inc., filed comments proposing clarifications to the

scope of these investigations. Also, from July through October, 1998,

the Department received numerous responses from respondents aimed at

clarifying the scope of the investigations. See Memorandum to Joseph A.

Spetrini, Re: Scope Issues, dated December 14, 1998.

On July 7, 1998, the Department requested information from the U.S.

Embassy in Italy to identify producers/exporters of the subject

merchandise. On July 21, 1998, the Department requested comments from

petitioners and other interested parties regarding the criteria to be

used for model matching purposes. On July 27, 1998, petitioners

submitted comments on our proposed model matching criteria.

Also on July 24, 1998, the United States International Trade

Commission (ITC) notified the Department of its affirmative preliminary

injury determination in this case. On August 3, 1998, the Department

issued an antidumping questionnaire to Acciai Speciali Terni SpA

(``AST'') and Arinox SrL (``Arinox''). On September 21, 1998, the

Department selected AST as a respondent in this investigation. See

``Selection of Respondents,'' below.

AST submitted its response to section A of the questionnaire on

September 8, 1998, and AST's responses to sections B through D followed

on September 28, 1998. Petitioners filed comments on AST's Section A

through D responses on October 9, October 13, and October 16, 1998. We

issued supplemental questionnaires for Sections A, B, and C to AST on

October 23, 1998, and for Section D on November 13, 1998. AST responded

to our supplemental questionnaires for Sections A, B, and C on November

6, and November 12, 1998, and to our supplemental questionnaires for

Section D on December 2, 1998.

On October 6, 1998, petitioners made a timely request for a thirty-

day postponement of the preliminary determination pursuant to section

733(c)(1)(A) of the Act. The Department determined that these

concurrent investigations are extraordinarily complicated and warranted

the thirty-day postponement requested by petitioners. On October 23,

1998, we postponed the preliminary determination until no later than

December 17, 1998. See Stainless Steel Sheet and Strip in Coils From

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

United Kingdom; Notice of Postponement of Preliminary Determinations in

Antidumping Duty Investigations, 63 FR 56909 (October 23, 1998). On

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

to believe or suspect that critical circumstances exist with respect to

imports of SSSS from Italy. The critical circumstances analysis for the

preliminary determination is discussed in the ``Critical

Circumstances'' section of the notice below.

[[Page 117]]

On December 2, 1998, petitioners submitted comments for use in this

preliminary determination. Petitioners also submitted comments on

December 3, 1998, regarding the product concordance for use in this

preliminary determination.

Postponement of Final Determination and Extension of Provisional

Measures

Pursuant to section 735(a)(2) of the Act, on December 15, 1998, AST

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. AST also included 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) AST accounts for a significant proportion of exports of the subject

merchandise, and (3) no compelling reasons for denial exist, we are

granting the respondent's request 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.

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 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 such

as ``Arnokrome III.'' 1

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\1\ ``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

[[Page 118]]

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.'' 2

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\2\ ``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.'' 3

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\3\ ``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).4 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''. 5

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\4\ This list of uses is illustrative and provided for

descriptive purposes only.

\5\ ``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.

Selection of Respondents

Section 777A(c)(1) of the Act directs the Department to calculate

individual dumping margins for each known exporter and producer of the

subject merchandise. However, section 777A(c)(2) of the Act gives the

Department discretion, when faced with a large number of exporters/

producers, to limit its examination to a reasonable number of such

companies if it is not practicable to examine all companies. Where it

is not practicable to examine all known producers/exporters of subject

merchandise, this provision permits the Department to investigate

either: (1) a sample of exporters, producers, or types of products that

is statistically valid based on the information available at the time

of selection; or (2) exporters and producers accounting for the largest

volume of the subject merchandise that can reasonably be examined.

After consideration of the complexities expected to arise in this

proceeding and the resources available to the Department, we determined

that it was not practicable in this investigation to examine all known

producers/exporters of subject merchandise. Instead, we found that,

given our resources, we would be able to investigate the Italian

producers/exporters with the greatest export volume, as identified

above. Since AST accounted for more than 70 percent of all known

exports of the subject merchandise from Italy during the POI, we

selected it as the sole respondent. See Memorandum from Program

Managers to Joseph A. Spetrini Re: Selection of Respondents, September

21, 1998.

Affiliation

AST has claimed that it is not affiliated with Thyssen AG or any of

Thyssen AG's affiliates. However, a review of the evidence demonstrates

that AST is affiliated with Thyssen AG. Pursuant to section 771(33)(E)

of the Act, the Department will determine that companies are affiliated

where a company directly or indirectly owns, controls, or holds power

to vote, five percent or more of the outstanding voting stock or shares

of any organization. Here, evidence establishes that AST is 75 percent

owned by a joint venture company, KTS. KTS, in turn, is 40 percent

owned by Thyssen Stahl AG, itself a wholly-owned subsidiary of Thyssen

AG. Consequently, Thyssen AG has a 33.75 percent equity holding in AST

and, therefore, because this is greater than five percent, Thyssen AG

is affiliated with AST within the meaning of section 771(33)(E). See

Memorandum: Affiliation of AST and Thyssen AG, and AST and A Thyssen

Affiliate (company A), dated December 17, 1998.

AST also claimed that because it was not affiliated with Thyssen AG

or any of Thyssen AG's affiliates, AST was not affiliated with a

particular U.S. customer, company A. AST stated that company A was

wholly-owned by Thyssen Inc., N.A. and other evidence establishes that

Thyssen Inc., is in turn a wholly-owned subsidiary of Thyssen AG.

Because the Department is precluded under the statute from using sales

to affiliates in determining CEP or EP, we examined whether AST was

affiliated to company A. See Section 772 (a) and (b) of the Act.

Section 771(33)(F) provides the Department with the authority to find

parties affiliated where two or more persons are directly or indirectly

controlled by or under common control with any other person. Therefore,

if evidence demonstrates that Thyssen AG controls both company A and

AST, then AST and company A are affiliated within the meaning of

section 771(33)(F). Based on the evidence, we have preliminarily found

that Thyssen AG has the ability to control AST and company A, and

therefore, we find that AST and company A are affiliated.

In codifying a new definition of affiliated persons, the

legislative history make clear that one of the Department's goals was

to broaden its ability to analyze commercial relationships for the

purposes of a dumping analysis and

[[Page 119]]

consistent with economic reality. New section 771(33)(F) defines

affiliation to include additional control relationships. The

legislative history also makes clear that the statute does not require

majority ownership for a finding of control, but rather encompasses

both legal and operational control. See SAA at 838. A minority

ownership interest, examined within the context of the totality of the

circumstances, is a factor that we will consider in determining if one

party is operationally in control of another. See Certain Cut-To-Length

Carbon Steel Plate From Brazil, 62 FR 18486, 18490 (April 15, 1998).

Additionally, evidence of actual control is not required. See 19 C.F.R.

351.102(b).

Because, in essence, company A is wholly-owned by Thyssen AG,

Thyssen AG has both legal and operational control over company A. With

regard to AST, Thyssen AG has a substantial minority equity interest in

AST of 33.75 percent. Under the prior statutory provision, parties were

deemed ``related'' if any person or persons owned or controlled 20

percent or more of the voting power or control in both entities. See

Queen's Flowers de Colombia v. United States, 981 Fed. Supp. 617 (CIT

1997); section 771(13) of the Act. As Congress intended the Department

to analyze a broader range of relationships under section 771(33) of

the Act, a minority equity interest of over 20 percent presumably would

represent control pursuant to section 771(33)(F) of the Act.

However, for our preliminary determination we also examined the

shareholder agreement forming KTS and other evidence which leads us to

conclude that, coupled with its 33.75 percent interest in AST, Thyssen

AG has the ability to control AST. Because most of this evidence is

proprietary in nature, we are not able to discuss this evidence

publicly. See Memorandum: Affiliation of AST and Thyssen AG, and AST

and A Thyssen Affiliate (Company A). In summary, we can say that this

evidence indicates that Thyssen AG retained the ability to control the

production and pricing decisions of AST through the joint venture

company KTS. Because both company A and AST are controlled by Thyssen

AG within the meaning of section 771(33)(F), we have preliminarily

found that AST and company A are affiliated. We therefore have

requested company A to provide all of its downstream sales of subject

merchandise made during the POI. On December 11, 1998, the Department

received this downstream U.S. sales information. However, due to the

timing of the receipt of this information, we were not able to review

these transactions for the preliminary determination.

Additionally, on December 11, 1998, AST reported that it could not

compel two additional resellers in the U.S. market, to which it claims

to have only an indirect minority interest, to report their downstream

sales information. Based on the fact that such sales constitute an

insignificant portion of total U.S. sales (exclusion of which from the

margin calculation, therefore, is non-distortive), for the purposes of

the preliminary determination, we have calculated a margin which does

not account for these sales.

Fair Value Comparisons

To determine whether sales of SSSS from Italy to the United States

were made at less than fair value, we compared the export price (EP) or

constructed export price (CEP) to the normal value (NV), as described

in the ``export price and constructed export price'' and ``normal

value'' sections of this notice, below. In accordance with section

777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs and

CEPs for comparison to weighted-average NVs.

On January 8, 1998, the Court of Appeals for the Federal Circuit

issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.).

In that case, based on the pre-URAA version of the Act, the Court

discussed the appropriateness of using constructed value (CV) as the

basis for foreign market value when the Department finds home market

sales to be outside the ``ordinary course of trade.'' The URAA amended

the definition of sales outside the ``ordinary course of trade'' to

include sales below cost. See Section 771(15) of the Act. Consequently,

the Department has reconsidered its practice in accordance with this

court decision and has determined that it would be inappropriate to

resort directly to CV, in lieu of foreign market sales, as the basis

for NV if the Department finds foreign market sales of merchandise

identical or most similar to that sold in the United States to be

outside the ``ordinary course of trade.'' Instead, the Department will

use sales of similar merchandise, if such sales exist. The Department

will use CV as the basis for NV only when there are no above-cost sales

that are otherwise suitable for comparison.

Transactions Investigated

For its home market sales, and U.S. sales which AST claimed were

CEP, AST reported the date of invoice as the date of sale, stating that

the invoice date represented the date when the essential terms of sale,

i.e., price and quantity, are definitively set, and that up to the

invoice date, these terms were subject to change. For sales AST claimed

were EP (``back-to-back'') sales, AST reported the date of shipment

from Italy as the date of sale because this is when final price and

quantity terms are determined. However, petitioners alleged that the

sales documentation provided by AST does not appear to support AST's

claims that price and quantity may change at any time between the order

acceptance date (confirmation date) and the shipment date. Given the

relevance of petitioners comments and the nature of marketing these

types of made-to-order products, petitioners claims have some merit.

Consequently, on October 23, 1998, the Department requested that AST

provide additional information concerning the nature and frequency of

price and quantity changes occurring between the date of order and date

of invoice for sales in both markets. In addition, we requested that

AST report all sales during the POI for which AST had issued an order

acceptance, in addition to those sales invoiced during the POI. AST

reported this information in its November 12, 1998 submission.

Normally, the Department has a preference of using invoice date as

the date of sale. However, the Department may use a date other than

invoice date if a different date better reflects the date on which the

material terms of the sale were set. Final Determination of Sales at

Less Than Fair Value: Polyvinyl Alcohol from Taiwan, 61 FR 14067 (March

29, 1996); 19 C.F.R. 351.401(i). For AST's home market sales, AST

submitted information that indicates that date of invoice is the

appropriate date of sale. See Analysis Memo for AST at page 2.

Therefore, we have preliminarily determined that the date of invoice is

the appropriate indicator of the actual date of sale for all home

market sales, because price and quantity are subject to negotiation

until that time. For the U.S. sales that are EP (direct) sales, we have

preliminarily determined that the shipment date is the appropriate

indicator of the actual date of sale because price and quantity are

subject to negotiation until the date of shipment, a date preceding the

invoice date. For the U.S. sales that are CEP sales, we used the

invoice date as the date of sale, because either the material terms of

sale had not been fixed prior to invoice or the sale did not occur

prior to importation.

Product Comparisons

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

products produced by the respondent covered by

[[Page 120]]

the description in the ``Scope of the Investigation'' section, above,

and sold in the home market during the POI, to be foreign like products

for purposes of determining appropriate product comparisons to U.S.

sales. 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

and reporting instructions listed in the Department's questionnaire.

In its supplemental response dated November 12, 1998, AST defined

``side cuts'' as the 1\1/4\ inch trimmings that result from slitting

mill-edge coils with a width of 50\1/2\ inches. AST stated that side

cuts are second quality merchandise because ``the mill edges often

containing surface defects (like edge laminations) and variable

width.'' For ``pup coils'', AST stated that during inspection, it

sometimes is determined that the ends of the coil require cropping due

to defects (such as cross breaks) that cannot be corrected. AST stated

that the resulting coils generated from cropping the ends are pup

coils. Although AST has claimed that pup coils and side cuts are non-

prime merchandise, because AST provided no evidence to support its

claim that side cuts and pup coils were damaged or defective, thus

making them non-prime, the Department has treated both side-cuts and

pup-coils as prime merchandise for the purposes of this preliminary

determination. Data regarding the quality of side-cuts and pup-coils

will be reviewed at verification.

Level of Trade

In accordance with section 773(a)(1)(B)(i) 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 comparison sales

in the home market or, when NV is based on constructed value (CV), that

of the sales from which we derive SG&A expenses and profit. For EP, the

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

the exporter to the 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

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

along the chain of distribution between the producer and the

unaffiliated customer in the comparison market. 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 a 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 differences in

the levels between NV and CEP sales affects price comparability, we

adjust NV under section 773(A)(7)(B) of the Act (the CEP offset

provision). See Certain Cut-to-Length Carbon Steel Plate from South

Africa, Notice of Final Determination of Sales at Less Than Fair Value,

62 FR 61731 (November 19, 1997).

In this investigation, AST did not request a level-of-trade (LOT)

adjustment. To ensure that no such adjustment was necessary, in

accordance with principles discussed above, we examined information

regarding the distribution systems in both the United States and

Italian markets, including the selling functions, classes of customers

and selling expenses for AST.

For its home market sales, Acciai Speciali Terni SpA (``AST'')

reported: (1) three customer categories--industrial end-users, white

goods manufacturers, and service centers/distributors; and (2) two

channels of distribution--direct factory sales (sales of prime

merchandise) and warehouse sales (the majority of which are sales of

non-prime merchandise). AST claimed two levels of trade in the home

market based solely on the quality of subject merchandise, i.e., prime

vs. non-prime.

In reviewing AST's LOT in the home market, we asked AST to identify

the specific differences and similarities in selling functions and/or

support services between all phases of marketing to customers in the

home market and the United States. As mentioned above, AST identified

two channels of distribution in the home market based entirely on

whether the sale to the customer was of prime or non-prime merchandise.

For sales of prime merchandise, AST sold to all three of the customers

mentioned above, and provided the same selling functions to each of the

customers. Specifically, AST provided freight and delivery, credit,

technical services, and warranties. For sales of mostly non-prime

merchandise sold from AST's warehouse, AST performed the same selling

functions (except for providing warranties) as for sales of its prime

merchandise, but AST also engaged in the additional selling activities

of advertising of its mostly non-prime merchandise and maintaining

inventory of this merchandise at AST's warehouse. Because the selling

activities engaged in by AST were identical for each customer when

selling prime merchandise and were identical for each customer when

selling mostly non-prime from inventory, and because the selling

activities for both groups of sales were very similar, we preliminarily

determine that there exists one level of trade for AST's home market

sales.

For its U.S. sales, AST reported that its affiliated importer, AST

USA, made sales to two customer categories--industrial end-users and

service centers and through three channels of distribution--direct

factory sales, warehouse sales, and consignment sales. AST claimed two

levels of trade in the U.S. market based solely on the quality of

subject merchandise: (1) non-prime; and (2) prime. We examined the

claimed selling functions performed by AST and its U.S. affiliate, AST

USA, for all U.S. sales. For sales made directly to the unaffiliated

U.S. customer (EP sales), AST performed the same selling functions; it

provided technical and warranty services, arranged for freight and

delivery, and extended credit. For sales made to AST USA (CEP sales) as

adjusted, AST engaged in identical selling activities, providing

technical and warranty services, freight and delivery and credit. In

making sales from warehousing and consignment sales, AST USA engaged in

the additional activities of advertising and maintaining inventory.

In order to determine whether NV was established at a different LOT

than CEP sales, we examined stages in the marketing process and selling

functions along the chains of distribution between AST and its home

market customers. We compared the selling functions performed for home

market sales with those performed with respect to the CEP transaction,

after deductions for economic activities occurring in the United

States, pursuant to section 772(d) of the Act, to determine if the home

market levels of trade constituted more advanced stages of distribution

than the CEP level of trade.

Based on our analysis of the chains of distribution and selling

functions performed for sales in the home market and CEP and EP sales

in the U.S. market, we preliminarily find that both are made at the

same stage in the marketing process and involve identical selling

functions. Therefore, we preliminarily determine that AST made sales in

the home market at the same level of trade as existed in the U.S.

market for both CEP sales and EP sales.

[[Page 121]]

Thus, an LOT adjustment in this case is not appropriate.

For matching purposes, we have matched AST's sale of prime

merchandise in the home market to sales of prime merchandise in the

U.S. market. We have also matched sales of non-prime merchandise in the

home market to sales of non-prime merchandise in the U.S. market.

Export Price And Constructed Export Price

Based on the Department's practice, we examine several criteria in

determining whether sales made prior to importation through a sales

agent to an unaffiliated U.S. customer are EP sales, including: (1)

whether the merchandise was shipped directly from the manufacturer to

the unaffiliated customer; (2) whether this was the customary

commercial channel between the parties involved; and (3) whether the

function of the U.S. selling agent was limited to that of a ``processor

of sales-related documentation'' and a ``communications link'' with the

unaffiliated U.S. buyer. Where all three criteria are met, indicating

that the activities of the U.S. selling agent are ancillary to the

sale, the Department has regarded the routine selling functions of the

exporter as merely having been relocated geographically from the

country of exportation to the United States where the sales agent

performs them, and has determined the sales to be EP sales. Where one

of more of these conditions are not met, indicating that the U.S. sales

agent is substantially involved in the U.S. sales process, the

Department has classified the sales in question as CEP sales. See

Viscose Rayon Staple Fibre From Finland: Final Results of Antidumping

Duty Administrative Review, 63 FR 32820, 32821 (June 16, 1998); Certain

Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from

Korea: Final Results of Antidumping Duty Administrative Review, 63 FR

13170, 13174 (March 18, 1998).

AST has classified certain sales transactions which are further-

processed in the United States as EP sales. However, we preliminarily

determine that such sales are CEP sales. Evidence establishes that AST

USA contracts with unaffiliated processors to provide substantial

value-added services for these sales. This necessarily entails

significant expenses which are added to the price originally negotiated

between the unaffiliated customer and AST. Under such circumstances,

the characterization of a further-manufactured sale as an export price

sale would ignore these substantial expenses related to the sale of

subject merchandise. Clearly, AST USA's role with regard to these sales

is more than an ancillary one. Moreover, the Department has always

analyzed further manufacturing in the context of CEP, pursuant to

section 772(d) of the Act. See Notice of Final Determination of Sales

At Less Than Fair Value: Large Printing Presses and Components Thereof,

Whether Assembled or Unassembled, From Germany, 61 FR 38166, 38174

(July 23, 1996).

For the remaining sales which AST has classified as EP sales, our

examination leads us to preliminarily conclude that these are EP sales.

AST ships the subject merchandise directly to the unaffiliated U.S.

customer and we have no evidence to indicate this is other than a

customary commercial channel of trade between the parties.

Additionally, the facts demonstrate that it is AST which sets the terms

of the sale in Italy prior to importation. AST USA merely provides a

communication link and processes sales-related documentation by

transmitting the U.S. customer's request to AST and receiving AST's

response either confirming or not confirming the order.

Finally, AST classified sales of subject merchandise sold by AST

USA after importation and for the account of AST USA as CEP sales.

These were referred to by AST as warehouse or consignment sales.

We calculated EP, in accordance with section 772(a) of the Act, for

those sales where the merchandise was sold to the first unaffiliated

purchaser in the United States prior to importation and CEP methodology

was not otherwise warranted, based on the facts of record. We based EP

on the packed, delivered tax and duty unpaid price to unaffiliated

purchasers in the United States. We made adjustments to starting price

for billing adjustments, alloy surcharges, and skid charges, and for

movement expenses in accordance with section 772(c)(2)(A) of the Act;

these included, where appropriate, freight equalization charges,

foreign inland freight, foreign brokerage and handling, international

freight and foreign inland insurance.

We calculated CEP, in accordance with subsections 772(b) of the

Act, for those sales to the first unaffiliated purchaser that took

place after importation into the United States, or otherwise warranted

the application of CEP, as discussed above. We based CEP on the packed,

delivered, duty paid or delivered prices to unaffiliated purchasers in

the United States. We made adjustments to the starting price for price-

billing errors, where applicable. In addition, we made adjustments to

the starting price by adding alloy surcharges, and skid charges where

appropriate. We also made deductions for movement expenses in

accordance with section 772(c)(2)(A) of the Act; these included, where

appropriate, freight equalization charges, foreign inland freight,

marine insurance, U.S. customs duties, U.S. inland freight, foreign

brokerage and handling, international freight, foreign inland

insurance, and U.S. warehousing expenses. In accordance with section

772(d)(1) of the Act, we deducted those selling expenses associated

with economic activities occurring in the United States, including

direct selling expenses (credit costs, warranty expenses and technical

selling expenses), inventory carrying costs, and indirect selling

expenses. With regard to indirect selling expenses, we have included

the expense associated with AST's two U.S. shipments that were damaged

in transit, before reaching the United States. We calculated the

expense as the difference between the original value of the merchandise

(as represented by the amount of the insurance claim) less the

insurance revenue received for these two shipments, and the less value

of the subsequent sale of this material as secondary merchandise. For

CEP sales, we also made an adjustment for profit in accordance with

section 772(d)(3) of the Act.

Affiliated-Party Transactions and Arm's-Length Test

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

length prices 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 Final Determination of Sales at Less Than Fair

Value: Certain Cold-Rolled

[[Page 122]]

Carbon Steel Flat Products from Argentina (``Certain Cold-Rolled Carbon

Steel Flat Products from Argentina'') (58 FR 37062, 37077 (July 9,

1993); See, Notice of Preliminary Determination of Sales at Less Than

Fair Value and Postponement of Final Determination: Emulsion Styrene-

Butadiene Rubber from Brazil, 63 Fed. Reg. 59509 (Nov. 8, 1998), citing

to Certain Cold-Rolled Carbon Steel Flat Products from Argentina. Where

the exclusion of such sales eliminated all sales of the most

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

similar model.

Normal Value

After testing home market viability and whether home market sales

were at below-cost prices, we calculated NV as noted in the ``Price-to-

Price Comparisons'' and ``Price-to-CV Comparison'' sections of this

notice.

Home Market Viability

In order to determine whether there was 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 was equal to or greater than five percent of the aggregate

volume of U.S. sales) we compared AST's volume of home market sales of

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

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

Because AST'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

was viable. Therefore, we have based NV on home market sales in the

usual commercial quantities and in the ordinary course of trade.

Cost of Production Analysis

Based on the information contained in the timely cost allegation

filed by the petitioners on June 10, 1998, the Department found

reasonable grounds to believe or suspect that AST's sales of the

foreign like product were made at prices which represent less than the

cost of production, in accordance with section 773(b)(1) of the Act. As

a result, the Department initiated an investigation to determine

whether AST made home market sales during the POI at prices below their

respective cost of production (COP)s, within the meaning of section

773(b) of the Act. See Initiation. Before making any fair value

comparisons, we conducted the COP analysis described below.

Calculation of COP

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

based on the sum of AST's cost of materials and fabrication for the

foreign like product, plus an amount for home market general and

administrative expenses (SG&A), interest expenses, and packing costs.

We relied on the COP data submitted by AST in its Section D cost

questionnaire response, except in the following instances where we

determined the reported costs were improperly valued: (1) We

recalculated AST's G&A rate using fiscal year data as reported on its

1997 audited financial statement; (2) we recalculated AST's financial

expense rate by excluding its financial income offset because it failed

to support that it was generated from short-term sources. In addition,

we recalculated the cost of sales denominator to include certain non-

operating income and expense items.

B. Test of Home Market Prices

We compared the weighted-average COP figures for AST to home market

sales prices of the foreign like product, as required under section

773(b) of the Act, in order to determine whether sales had been made at

prices below their COPs. In determining whether to disregard home

market sales made at prices less than the COP, we examined whether (1)

within an extended period of time, such sales were made 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. On a

product-specific basis, we compared COP to home market prices, less any

applicable movement charges, billing adjustments, alloy surcharges,

skid charges, rebates, and direct and indirect selling expenses.

C. Results of the COP Test

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

percent of a 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 such sales to have been made in ``substantial

quantities'', pursuant to section 773(b)(2)(c)(i), and within an

extended period of time, in accordance with section 773(b)(2)(B) of the

Act. In such cases, because we compared prices to weighted-average COPs

for the POI, we also determined that such sales were not made at prices

which would permit recovery of all costs within a reasonable period of

time, pursuant to section 773(b)(2)(D) of the Act. Therefore, we

disregarded the below-cost sales. Where all sales of a specific product

were at prices below the COP, we disregarded all sales of that product.

For those U.S. sales of SSSS for which there were no comparable home

market sales in the ordinary course of trade, we compared the CEP to CV

in accordance with section 773(a)(4) of the Act.

D. Calculation of Constructed Value

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

based on the sum of AST's cost of materials, fabrication, selling,

general, and administrative expenses (SG&A), interest expenses, profit,

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

based SG&A and profit on the amounts incurred and realized by AST in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in Italy. For CV, we made

the same adjustments described in the COP section above.

Price-to-Price Comparisons

We performed price-to-price comparisons where there were sales of

comparable merchandise in the home market that did not fail the cost

test.

For AST's home market sales of products that were above COP, we

calculated NV based on FOB or delivered prices to unaffiliated

customers or prices to affiliated customers that we determined to be at

arm's-length prices. We made adjustments for price billing errors,

discounts and rebates where appropriate. We made deductions, where

appropriate, for foreign inland freight, warehousing, and foreign

inland insurance expenses pursuant to section 773(a)(6)(B) of the Act.

In addition, we made adjustments for differences in cost attributable

to differences in physical characteristics of the merchandise, as well

as for differences in circumstances of sale (COS) in accordance with

section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS

adjustments, where appropriate, for imputed credit, warranty expenses,

and technical expenses. Finally, we deducted home market packing costs

and added U.S. packing costs in accordance with section 773(a)(6)(A)

and (B) of the Act.

Price-to-CV Comparisons

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

if we were unable to find a home market

[[Page 123]]

match of such or similar merchandise. Where appropriate, we made

adjustments to CV in accordance with section 773(a)(8) of the Act. For

comparisons to EP, we made COS adjustments by deducting the weighted

average home market selling expenses and adding U.S. direct selling

expenses. Where we compared CV to CEP, we deducted from CV the average

home market direct selling expenses.

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 773A(a) of the

Act.

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 imports of SSSS from Italy. In accordance with 19 CFR

351.206(c)(2)(i), since this allegation was filed at least 20 days

prior to the Department's preliminary determination, we must issue our

preliminary critical circumstances determination not later than the

preliminary determination.

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

critical circumstances, the Department will determine that critical

circumstances exist if 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 its 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.

To determine that there is a history of dumping of the subject

merchandise, the Department normally considers evidence of an existing

antidumping duty order on SSSS in the United States or elsewhere to be

sufficient. Petitioners did not provide any information indicating a

history of dumping of SSSS from Italy. Furthermore, we investigated the

existence of antidumping duty orders on SSSS from Italy in the United

States or elsewhere and found none. We were also unable to find other

information that would have indicated a history of dumping of SSSS from

Italy.

In determining whether an importer knew or should have known that

the exporter was selling subject merchandise at less than fair value

and thereby causing material injury, the Department normally considers

margins of 25 percent or greater for EP sales to impute knowledge of

dumping and of resultant material injury. In this investigation, we

have not calculated estimated dumping margins of 25 percent or greater.

With regard to CEP sales, the Department normally consider margins of

15 percent or greater sufficient to impute knowledge of dumping and

material injury. In this investigation, we have not calculated

estimated dumping margins of 15 percent or greater. Based on these

facts, we determine that the first criterion for ascertaining whether

critical circumstances exist is not satisfied. Therefore, we

preliminarily determine that there is no reasonable basis to believe or

suspect that critical circumstances exist with respect to exports of

SSSS from Italy by AST. We have not analyzed the shipment data for AST

to examine whether imports of SSSS have been massive over a relatively

short period. (see e.g., Notice of Preliminary Determination of Sales

at Less Than Fair Value and Postponement of Final Determination:

Collated Roofing Nails From Korea, 62 FR 25895, 25898 (May 12, 1997)).

Regarding all other exporters, because we do not find that critical

circumstances exist for AST, we determine that critical circumstances

do not exist for companies covered by the ``All Others'' rate. We will

make a final determination concerning critical circumstances when we

make our final determination in this investigation, if that final

determination is affirmative.

Verification

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

information relied upon in making our final determination.

The All Others Rate

Because the Department investigated one company (AST), we used

AST's margin in this investigation as the all-others rate. As a result,

the all-others rate is 6.25 percent.

Suspension of Liquidation

In accordance with section 733(d) 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. 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 export price, as indicated below.

These suspension-of-liquidation instructions will remain in effect

until further notice. The weighted-average dumping margins are as

follows:

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

Weighted-

Exporter/manufacturer average

margin

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

AST........................................................ 6.25%

All Others................................................. 6.25%

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

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 imports of stainless steel plate in coils are materially

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

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 the date of publication of this preliminary determination. A list

of authorities used and an executive summary of issues should accompany

any briefs submitted to the Department. This 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, any hearing will be held fifty-

seven days after publication of this notice at the U.S. Department of

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

20230, at a time and location to be determined. Parties should confirm

by telephone the date, time, and location 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 date of 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. At the hearing, each party may make an affirmative

presentation

[[Page 124]]

only on issues raised in that party's case brief, and may make rebuttal

presentations only on arguments included in that party's rebuttal

brief. See 19 CFR 351.310(c). We will issue our final determination in

this investigation no later than 135 days after the date of publication

in the Federal Register of the preliminary determination.

This determination is issued and published in accordance with

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

Dated: December 17, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-34464 Filed 12-31-98; 8:45 am]

BILLING CODE 3510-DS-P