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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-427-814]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Stainless Steel Sheet

and Strip in Coils From France

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Doug Campau or Robert Bolling, Import

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

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

20230; telephone: (202) 482-3964 or (202) 482-3434, 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,

(May 19, 1997).

Preliminary Determination

We preliminarily determine that Stainless Steel Sheet and Strip in

Coils (``SSSS'') from France 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. The

Department used the data submitted December 1, 1998 in its analysis.

Case History

On July 13, 1998, the Department initiated antidumping duty

[[Page 131]]

investigations of imports of stainless steel sheet and strip in coils

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

United Kingdom (Notice of 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. 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 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).

Additionally, on July 27, 1998, respondent Usinor submitted comments

stating that the order and categories of some of the elements should be

modified to ensure that the Department's model matching criteria

appropriately identify identical and like products, consistent with the

statute. Further, on July 28, 1998, respondent submitted additional

comments on its product specification information regarding certain

products (i.e., Durphynox 17 and Gilphy 36). On December 3, 1998,

petitioners submitted additional comments, pertaining to all of the

pending SSSS investigations, detailing for the Department the

appropriate basis for product comparison when matching sales of non-

identical merchandise. On December 4, 1998, petitioners submitted

additional comments, specific to the French SSSS case, on the

additional finish information provided by Usinor. On December 7, 1998,

Usinor submitted comments arguing that the Department should disregard

concerns articulated by petitioners in their letters of December 4th

and 7th, 1998. However, Usinor misinterprets the purpose of the early

deadline for commenting on model matching. The purpose of that deadline

is not to cut off comment on all model match related issues, but rather

to let parties know the date by which they must respond in order to

ensure that their comments are considered in formulating initial

questionnaires. In this way the Department tries to avoid situations in

which parties point out relevant matching criteria too late for the

Department to gather necessary data. Petitioners' December comments do

not propose gathering new types of information, but rather suggest

other ways to arrange the criteria already reported. Depending on the

content, such general comments are subject to the deadlines of new

factual information, or for legal arguments. 19 CFR 351.301 and

351.309, respectively.

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\1\ Armco, Inc. is not a 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 24, 1998, the United States International Trade Commission

(``ITC'') notified the Department of its affirmative preliminary injury

determination in this case. Additionally, on August 5, 1998, the ITC

published its preliminary determination that there is a reasonable

indication that an industry in the United States is being materially

injured or is threatened with material injury by reason of imports of

the subject merchandise from France (63 FR 29250).

On August 3, 1998, the Department issued an antidumping duty

questionnaire to Usinor and Imphy, S.A. On September 9, 1998, the

Department received Usinor's response to Section A of the

questionnaire. In this response, Usinor stated that it made sales in

the home market through its Ugine division, and through Bernier SNC

(Bernier) and Ugine-Service SAS (Ugine-Service), and in the U.S. market

through its affiliate Uginox. Additionally, on September 29, 1998, the

Department received Usinor's responses to Sections B, C, D, and E of

the questionnaire. On September 29 and October 14, 1998, petitioners

filed comments on Usinor's questionnaire responses. On October 20,

1998, we issued a supplemental questionnaire to Usinor for Sections A,

B, C, D, and E. On November 12 and December 1, 1998, we received

Usinor's responses to the Department's supplemental questionnaire. On

December 2, 1998, petitioners filed comments to the upcoming

preliminary determination with respect to Usinor's sales and

confirmation dates.

On August 31, 1998, in a letter to the Department, respondent

Usinor requested that it not be required to report downstream sales in

France by Bernier or Ugine-Service, or sales in the United States by

Edgcomb Metals, Inc. (Edgcomb). Usinor requested that it not be

required to report downstream sales in France because Bernier's and

Ugine-Service's relevant resales: (1) represent approximately five

percent of sales in France during the POI; (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 a disproportionately

large effort to report. Additionally, Usinor also requested that it not

be required to report sales in the United States by Edgcomb, an

affiliated processor/reseller. Usinor stated that the majority of

Ugine's sales of SSSS in the United States are made by Uginox, a

wholly-owned subsidiary of Usinor, and that during the POI, Uginox sold

a small quantity of SSSS to Edgcomb. Also, Usinor argues that while

Edgcomb is affiliated with Usinor, since January 1, 1998, Usinor only

indirectly owns 28.5% of its shares through its control of Sollac,

which is wholly owned by Usinor.5 Usinor asserts that

Edgcomb should not be regarded as affiliated with Uginox because Uginox

and Edgcomb are not under common control, and neither Uginox nor

Edgcomb controls the other. On September 11, 1998, in a letter to the

Department, petitioners contested Usinor's request for exemption from

reporting certain home market and U.S. sales. In the home market,

petitioners argue that Usinor misapplied the Department's five percent

test 6 by calculating the percentage of sales made by

affiliated buyers to their unaffiliated customers rather than

calculating the percentage of sales made by Usinor to all of its

affiliated customers. On October 19, 1998, we determined that Bernier

and Ugine-Service were required to report their home market downstream

sales, and that Edgcomb was required to report its U.S. downstream

sales. See Decision Memorandum from Roland MacDonald, Office Director,

Office VII to Joseph A. Spetrini, Deputy Assistant Secretary, Group

III, dated October 19, 1998. See also, Affiliation Memorandum from Case

Analysts to Roland MacDonald, dated December 14, 1998.

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\5\ Prior to January 1, 1998, Unisor indirectly owned 49% of

Edgcomb through its wholly-owned subsidiary Sollac.

\6\ The Department's practice of not requiring the reporting of

downstream sales for purposes of determining normal value if the

firm in question does not have sales of the foreign like product

over five percent to its affiliated customers.

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

the petitioners made a timely request to

[[Page 132]]

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 15, 1998, we postponed the

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

Notice of Postponement of Preliminary Antidumping Duty Investigations

of Stainless Steel Sheet and Strip in Coils: from France, Germany,

Italy, Japan, Mexico, South Korea, Taiwan and the United Kingdom, 63 FR

56909 (October 23, 1998).

Finally, Imphy S.A. reported that it did not produce or sell

subject merchandise. See Memorandum from Robert James, to Joseph A.

Spetrini, Deputy Assistant Secretary through Roland MacDonald, Office

Director, Office VII, Richard Weible, Office Director, Office VIII,

Edward Yang, Office Director, Office IX, Group III, dated December 14,

1998.

Scope of 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.'' 7

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\7\ ``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

[[Page 133]]

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.'' 8

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\8\ ``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.'' 9

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\9\ ``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).10 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''.11

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\10\ This list of uses is illustrative and provided for

descriptive purposes only.

\11\ ``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 25, 1998,

Usinor 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, and 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) Usinor 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.

Product Comparisons

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

products produced by Usinor covered by the description in the Scope of

Investigation section, above, and sold in France during the POI, 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 sales of the

foreign like product (listed in order of preference): grade, hot/cold

rolled, gauge, finish, metallic coating, non-metallic coating, width,

tempered/tensile strength, and edge trim. The Department's

questionnaire authorized respondents to make distinctions (sub-codes)

within some of these characteristics, but not within others. For

certain product characteristics (i.e., finish and coating) Usinor

reported additional sub-codes which were specifically permitted by the

Department's questionnaire. However, Usinor also reported additional

sub-codes in its hot/cold rolled, and tempered product characteristic

categories. These are characteristics for which the Department's

questionnaire did not explicitly permit sub-codes. Nevertheless, for

this preliminary determination, the Department has included the

additional codes that Usinor reported in the aforementioned categories

in the Department's product matching methodology. See Analysis Memo

from Doug Campau to The File, dated December 17, 1998. We will further

review Usinor's distinctions within characteristics to determine their

appropriateness for the final determination. 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 the August 3, 1998, reporting instructions.

Date of Sale

In the home market and U.S. market, Usinor has reported date of

sale as the invoice date. Based on information reported in Usinor's

questionnaire response, it appeared that the date of the order

confirmation may be the appropriate date of sale. On October 14, 1998,

petitioners requested that the Department inquire further into how

Usinor reported its date of sale. 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

20, 1998, the Department requested sales data bases reported on that

basis. On November 2, 1998, Usinor submitted a letter requesting that

the Department not require the submission of order confirmation date

data because the companies' record keeping systems were not equipped to

report order acknowledgments, in some cases because order

acknowledgments were not generated, and in some cases because they were

routinely purged from the involved databases. Furthermore, Usinor

reported that the essential terms of the companies' orders change

between the date of order acknowledgment and the invoice date for most,

but not all, of its U.S. and home market sales. On December 1, 1998,

Usinor provided the Department

[[Page 134]]

with a database containing sales by order confirmation date. On

December 2, 1998, petitioners submitted a letter stating that Usinor

misrepresented its date of sale data by reporting invoice date instead

of order date. Petitioners contend that Usinor's material terms of sale

do not change but for changes to sales tolerance levels.

Section 351.401(i) of the Department's regulations states that the

Department will normally use the date of invoice, as recorded in the

exporter's or producer's records kept in the ordinary course of

business, as the date of sale. The preamble to the Final Rules (the

``Preamble'') provides an explanation of this policy and examples of

when the Department may choose to base the date of sale on a date other

than the date of invoice. See 62 FR at 27348-49 (May 19, 1997). For the

reasons given in the November 2, 1998 letter discussed above, Usinor

has argued that invoice date should be considered the proper date of

sale. In accordance with 19 CFR 351.401(i), where appropriate, we based

date of sale on invoice dates recorded in the ordinary course of

business by the involved sellers and resellers of the subject

merchandise. However, we intend to fully verify information concerning

respondent's claims that invoice date is the appropriate date of sale.

Based on the outcome of our verification, we will determine whether it

is appropriate to continue to use the date of invoice as the date of

sale. We will consider, among other things, whether, in fact, there

were any changes to the material contract terms between the original

order confirmation and the date of invoice. See e.g., Notice of Final

Results of Antidumping Duty Administrative Review: Canned Pineapple

Fruit from Thailand, 63 FR 7392 at 7394-95 (February 13, 1988).

Fair Value Comparisons

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

were made at LTFV, we compared constructed export price (``CEP'') to

the Normal Value (``NV''), as described in the ``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 CEP sales for comparison to weighted-average NV sales

or CV sales.

Constructed Export Price

We calculated CEP in accordance with section 772(b) of the Act

because the first sales to an unaffiliated purchaser took place after

the subject merchandise was imported into the United States.

We based CEP on the packed ex-warehouse or delivered prices to

unaffiliated purchasers in the United States. Where appropriate, we

made deductions from the starting price for discounts, credit, warranty

expenses, and commissions. We also made deductions for the following

movement expenses, where appropriate, in accordance with section

772(c)(2)(A) of the Act: inland freight from plant to distribution

warehouse, inland freight from plant/warehouse to port of exportation,

international freight, marine insurance, U.S. inland freight from port

to warehouse, U.S. inland freight from warehouse to the unaffiliated

customer, U.S. inland insurance, U.S. warehouse expenses, and U.S.

Customs duties. In accordance with section 772(d)(1) of the Act, we

deducted selling expenses associated with economic activities occurring

in the United States, including direct selling expenses, inventory

carrying costs, and other indirect selling expenses. We recalculated

credit expenses for those sales with missing payment dates because

payment has not yet been made. For sales with missing payment dates,

the Department set the date of payment as the projected preliminary

results date. For a further explanation, see Analysis Memo from Doug

Campau to The File, dated December 17, 1998. We also adjusted the

starting price for billing adjustments to the invoice price. For

products that were further manufactured after importation, we adjusted

for all costs of further manufacturing in the United States in

accordance with section 772(d)(2) of the Act. We deducted the profit

allocated to expenses deducted under section 772(d)(1) and (d)(2) in

accordance with sections 772(d)(3) and 772(f) of the Act. In accordance

with section 772(f) of the Act, we computed profit based on total

revenues realized on sales in both the U.S. and home markets, less all

expenses associated with those sales. We then allocated profit to

expenses incurred with respect to U.S. economic activity (including

further manufacturing costs), based on the ratio of total U.S. expenses

to total expenses for both the U.S. and home market. In our U.S. CEP

calculation, we included all downstream sales from Edgcomb and Hague

Steel Corp. (Hague) reported in respondent's December 1, 1998

submission.

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 accordance with section 773(a)(1)(C) of the Act, to determine

whether there was 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 greater than or

equal to five percent of the aggregate volume of U.S. sales), we

compared the respondent's volume of home market sales of the foreign

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

Because Usinor'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 for the subject merchandise, we determined that the home

market was viable. We therefore 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 Usinor in

its home market were made at prices below the costs of production

(COP), pursuant to section 773(b)(1). As a result, the Department has

initiated an investigation to determine whether the respondent made

home market sales during the POI at prices below their respective COPs,

within the meaning of section 773(b) of the Act.

A. Calculation of COP

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

weighted-average COP based on the sum of Usinor's cost of materials and

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

administrative expenses, interest expenses, and packing costs. We

relied on the COP data submitted by Usinor in its original and

supplemental cost questionnaire responses. For this preliminary

determination, we did not make any adjustments to Usinor's submitted

costs.

B. Test of Home Market Prices

We compared the weighted-average COP for Usinor 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

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trade, in accordance with section 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 billing adjustments, movement charges, discounts, and

direct and indirect selling expenses.

C. Results of the COP Test

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

percent of Usinor'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 Usinor'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. In such cases, because we use 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. Where all sales of a specific product

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

D. Calculation of CV

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

based on the sum of Usinor's cost of materials, fabrication, G&A, U.S.

packing costs, direct and indirect selling expenses, interest expenses

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

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

Usinor 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)(ii) of the Act. In

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

costs and added U.S. packing costs.

We calculated NV based on prices to unaffiliated home market

customers. Where appropriate, we deducted discounts, rebates, credit

expenses, warranty expenses, inland freight, inland insurance, and

warehousing expense. We also adjusted the starting price for billing

adjustments and freight revenue. We also made adjustments, where

applicable, for home market indirect selling expenses to offset U.S.

commissions in CEP comparisons.

We recalculated credit expenses for those sales with missing

payment dates. For sales with missing payment dates, the Department set

the date of payment to the projected preliminary results date. We also

recalculated indirect selling expenses incurred by Ugine, subtracting

indirect selling expenses not clearly attributable to the scope

merchandise. See Analysis Memo from Doug Campau to The File, dated

December 17, 1998. In our home market NV calculation, we included all

downstream sales from Bernier and Ugine-Service reported in

respondent's December 1, 1998 submission.

For reasons discussed below in the ``Level of Trade'' section, we

allowed a CEP offset for comparisons made at different levels of trade.

To calculate the CEP offset, we deducted the home market indirect

selling expenses from normal value for home market sales that were

compared to U.S. CEP sales. We limited the home market indirect selling

expense deduction by the amount of the indirect selling expenses

deducted in calculating the CEP as required under section 772(d)(1)(D)

of the Act.

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 the costs of materials

and fabrication employed in producing the subject merchandise, SG&A,

and 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

France. 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. We deducted from

CV the weighted-average home market direct selling expenses and allowed

a CEP offset adjustment (see ``Level of Trade'' section).

Arm's-Length Sales

Usinor reported that it made sales in the home market to affiliated

end users. Sales to affiliated customers in the home market not made at

arm's length were excluded from our analysis. To test whether these

sales were made at arm's length, we compared the starting prices of

sales to affiliated and unaffiliated customers net of all movement

charges, direct selling expenses, discounts and packing. Where prices

to the affiliated party were on average 99.5 percent or more of the

price to the unrelated party, we determined that sales made to the

related party were at arm's length. Where no affiliated customer ratio

could be calculated because identical merchandise was not sold to

unaffiliated customers, we were unable to determine that these sales

were made at arm's length and, therefore, excluded them from our

analysis. See 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 comparisons to the next most similar model.

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 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

[[Page 136]]

there is no basis for determining whether the difference in 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, 61732

(November 19, 1997).

In reviewing the selling functions reported by the respondents, we

examined all types of selling functions and activities reported in

respondent's questionnaire response on LOT. In analyzing whether

separate LOTs existed in this review, we found that no single selling

function was sufficient to warrant a separate LOT in the home market.

See Antidumping Duties; Countervailing Duties, Final Rule, 63 FR 65347

(November 25, 1998).)

We determined that Usinor sold merchandise at two LOTs in the home

market during the POI. One level of trade involved sales made through

two channels: 1. Sales by Usinor's Ugine division, directly to

unaffiliated service centers or end users (Channel 1), and 2. Sales

made by Usinor's Ugine division, with the assistance of Ugine-Service

in its capacity as sales agent, to unaffiliated service centers or end

users (Channel 2). The second level of trade involved sales from Ugine

to Usinor's affiliates, Ugine-Service and Bernier, together with

subsequent resales by those affiliates to unaffiliated end users

(Channel 3). From our analysis of the marketing process for these

sales, we determined that sales through Channel 3 were made at a more

remote marketing stage than that for sales through Channels 1 or 2. See

Memorandum from Doug Campau to Roland MacDonald, dated December 12,

1998, on file in Import Administration's Central Records Unit, Room B-

099, U.S. Department of Commerce, 14th & Constitution Avenue, NW.,

Washington, DC. We also found significant distinctions in selling

activities and associated expenses between the sales through channel 3

and those through channel 1 or 2. Based on these differences, we

concluded that two LOTs existed in the home market.

In order to determine whether separate LOTs actually existed

between the U.S. and home market, we reviewed the selling activities

associated with each channel of distribution. Usinor only reported CEP

sales in the U.S. market. Because all of Usinor's CEP sales in the U.S.

market were made through Uginox, there was only one level of trade. For

these CEP sales, we determined that fewer and different selling

functions were performed for CEP sales to Uginox than for sales at

either of the home market LOTs. In addition, we found that the home

market sales were at a more advanced stage of distribution (to end-

users) compared to the CEP sales (to the affiliated distributor).

We examined whether a LOT adjustment was appropriate. The

Department makes this adjustment when it is demonstrated that a

difference in LOTs affects price comparability. However, where the

available data do not provide an appropriate basis upon which to

determine a LOT adjustment, and where the NV is established at a LOT

that is at a more advanced stage of distribution than the LOT of the

CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act

(the CEP offset provision). We were unable to quantify the LOT

adjustment in accordance with section 773(a)(7)(A) of the Act, as we

found that neither of the LOTs in the home market matched the LOT of

the CEP transactions. Because of this, we did not calculate a LOT

adjustment. Instead, a CEP offset was applied to the NV-CEP

comparisons. See Memorandum from Doug Campau to Roland MacDonald, dated

December 12, 1998, on file in Import Administration's Central Records

Unit, Room B-099, U.S. Department of Commerce, 14th and Constitution

Avenue, N.W., Washington, D.C.

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 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) 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 CEP, 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-

Exporter/manufacturer average margin

(percentage)

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

Usinor.................................................. 11.73

All Others.............................................. 11.73

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

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.

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

in the Federal Register.

This determination is issued and published in accordance with

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

[[Page 137]]

Dated: December 17, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-34466 Filed 12-31-98; 8:45 am]

BILLING CODE 3510-DS-P