Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Stainless Steel Wire Rod From Sweden

DEPARTMENT OF COMMERCE

International Trade Administration

[A-401-806]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Stainless Steel Wire Rod

From Sweden

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: March 5, 1998.

FOR FURTHER INFORMATION CONTACT: Sunkyu Kim or Brian Smith, Import

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

Commerce, 14th Street and Constitution Avenue, NW, Washington, DC

20230; telephone: (202) 482-2613 or (202) 482-1766, 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 wire rod (``SSWR'')

from Sweden 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

Since the initiation of this investigation (Notice of Initiation of

Antidumping Investigations: Stainless Steel Wire Rod from Germany,

Italy, Japan, Korea, Spain, Sweden, and Taiwan (62 FR 45224, August 26,

1997)), the following events have occurred:

In August 1997, the Department obtained information from the U.S.

Embassy in Sweden identifying Fagersta Stainless AB (``Fagersta'') as

the only potential producer and/or exporter of the subject merchandise

to the United States. Based on this information, the Department issued

the antidumping questionnaire to Fagersta in September 1997. Section A

of the questionnaire requests general information concerning the

company's corporate structure and business practices, the merchandise

under investigation that it sells, and the sales of that merchandise in

all markets. Sections B and C of the questionnaire request home market

sales listings and U.S. sales listings. Section D of the questionnaire

requests information regarding the cost of production of the foreign

like product and the constructed value of the merchandise under

investigation. Section E of the questionnaire requests information

regarding the cost of further manufacture or assembly performed in the

United States.

Also in September 1997, the United States International Trade

Commission (``ITC'') issued an affirmative preliminary injury

determination in this case (see ITC Investigation No. 731-TA-770).

In October 1997, the Department received a response to Section A of

the

[[Page 10842]]

questionnaire from Fagersta. On October 14, 1997, Fagersta requested

that the Department modify the reporting period for a U.S. affiliate.

The Department granted this request on October 16, 1997. Fagersta

(hereinafter ``the respondent'') submitted its response to sections B,

C, and E of the questionnaire in November 1997.

On October 10, 1997, the petitioners in this case (i.e., AL Tech

Specialty Steel Corp., Carpenter Technology Corp., Republic Engineered

Steels, Talley Metals Technology, Incl, and United Steelworkers of

America) requested that the Department revise its questionnaire to

obtain information on the actual nickel, chromium, and molybdenum

content for each sale of the SSWR made during the period of

investigation. On October 17, 1997, the respondent requested that the

Department deny the petitioners' request. The Department, upon

consideration of the comments from all parties on this matter, issued a

memorandum on December 18, 1997, indicating its decision to make no

changes in the model-matching criteria specified in the September 19,

1997, questionnaire (see Memorandum from Team to Holly Kuga, Office

Director, dated December 18, 1997).

On October 20, 1997, Fagersta requested that it be allowed to

exclude from its sales listing U.S. sales of certain wire products

further manufactured from subject merchandise. On November 6, 1997, the

Department denied this request and required Fagersta to report these

sales of further-manufactured products in its response. On November 7,

1997, Fagersta requested that it be allowed to exclude certain other

sales made in the United States. Fagersta stated that these sales

constitute an insignificant amount of its total U.S. sales made during

the period of investigation and that they are unrepresentative of

Fagersta's normal sales. We granted Fagersta's request on November 12,

1997.

On November 25, 1997, the petitioners submitted a timely allegation

pursuant to section 773(b) of the Act that Fagersta had made sales in

the home market at less than the cost of production (``COP''). Our

analysis of the allegation indicated that there were reasonable grounds

to believe or suspect that Fagersta sold SSWR in the home market at

prices at less than the COP. Accordingly, we initiated a COP

investigation with respect to Fagersta pursuant to section 773(b) of

the Act (see Memorandum from Team to Louis Apple, Office Director,

dated December 16, 1997).

On December 11, 1997, pursuant to section 733(c)(1)(A) of the Act,

the petitioners made a timely request to postpone the preliminary

determination. We granted this request and, on December 16, 1997, we

postponed the preliminary determination until no later than February

25, 1998 (62 FR 66849, December 22, 1997).

We received Fagersta's response to Section D of the questionnaire

in January 1998. We issued supplemental questionnaires for Sections A,

B, C and E to Fagersta in January 1998 and received responses to these

questionnaires along with a revised U.S. sales listing in February

1998. Fagersta also submitted additional clarifications to its

responses in February 1998.

Postponement of Final Determination and Extension of Provisional

Measures

Pursuant to section 735(a)(2) of the Act, on February 9, 1998,

Fagersta requested that, in the event of an affirmative preliminary

determination in this investigation, the Department postpone its final

determination until not later than 135 days after the date of the

publication of an affirmative preliminary determination in the Federal

Register. On February 12, 1998, Fagersta amended its request to include

a request to extend the provisional measures to not more than six

months. In accordance with 19 CFR 351.210(b), because (1) our

preliminary determination is affirmative, (2) Fagersta 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 Investigation

For purposes of this investigation, SSWR comprises products that

are hot-rolled or hot-rolled annealed and/or pickled and/or descaled

rounds, squares, octagons, hexagons or other shapes, in coils, that may

also be coated with a lubricant containing copper, lime or oxalate.

SSWR is made of alloy steels containing, by weight, 1.2 percent or less

of carbon and 10.5 percent or more of chromium, with or without other

elements. These products are manufactured only by hot-rolling or hot-

rolling, annealing, and/or pickling and/or descaling, are normally sold

in coiled form, and are of solid cross-section. The majority of SSWR

sold in the United States is round in cross-sectional shape, annealed

and pickled, and later cold-finished into stainless steel wire or

small-diameter bar.

The most common size for such products is 5.5 millimeters or 0.217

inches in diameter, which represents the smallest size that normally is

produced on a rolling mill and is the size that most wire-drawing

machines are set up to draw. The range of SSWR sizes normally sold in

the United States is between 0.20 inches and 1.312 inches diameter. Two

stainless steel grades, SF20T and K-M35FL, are excluded from the scope

of the investigation. The chemical makeup for the excluded grades is as

follows:

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

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

SF20T

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

Carbon............................ 0.05 max............. Chromium............. 19.00/21.00.

Manganese......................... 2.00 max............. Molybdenum........... 1.50/2.50.

Phosphorous....................... 0.05 max............. Lead................. added (0.10/0.30).

Sulfur............................ 0.15 max............. Tellurium............ added (0.03 min).

Silicon........................... 1.00 max

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

K-M35FL

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

Carbon............................ 0.015 max............ Nickel............... 0.30 max.

Silicon........................... 0.70/1.00............ Chromium............. 12.50/14.00.

Manganese......................... 0.40 max............. Lead................. 0.10/0.30.

Phosphorous....................... 0.04 max............. Aluminum............. 0.20/0.35.

Sulfur............................ 0.03 max

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

[[Page 10843]]

The products under investigation are currently classifiable under

subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and

7221.00.0075 of the Harmonized Tariff Schedule of the United States

(``HTSUS''). Although the HTSUS subheadings are provided for

convenience and customs purposes, the written description of the scope

of this investigation is dispositive.

Period of Investigation

The period of investigation (``POI'') is July 1, 1996, through June

30, 1997.

Fair Value Comparisons

To determine whether sales of SSWR from Sweden 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.'' This issue was

not raised by any party in this proceeding. However, 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. Therefore, in this

proceeding, when making comparisons in accordance with section 771(16)

of the Act, we considered all products sold in the home market as

described in the ``Scope of Investigation'' section of this notice,

above, that were in the ordinary course of trade for purposes of

determining appropriate product comparisons to U.S. sales. Where there

were no sales of identical merchandise in the home market made in the

ordinary course of trade to compare to U.S. sales, we compared U.S.

sales to sales of the most similar foreign like product made in the

ordinary course of trade, based on the characteristics listed in

Sections B and C of our antidumping questionnaire. We have implemented

the Court's decision in this case, to the extent that the data on the

record permitted.

In instances where the respondent has reported a non-AISI grade (or

an internal grade code) for a product that falls within a single AISI

category, we have used the actual AISI grade rather than the non-AISI

grades reported by respondents for purposes of our analysis. However,

in instances where the chemical content ranges of reported non-AISI (or

an internal grade code) grades are outside the parameters of an AISI

grade, we have preliminarily used the grade code reported by the

respondent for analysis purposes. We intend to examine this issue

further for the final determination.

With respect to home market sales of non-prime merchandise made by

Fagersta during the POI, we excluded these sales from our preliminary

analysis based on the limited quantity of such sales in the home market

and the fact that no such sales were made to the United States during

the POI, in accordance with our past practice (see, e.g., Final

Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled

Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat

Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and

Certain Cut-to-Length Carbon Steel Plate from Korea (58 FR 37176,

37180, July 9, 1993)).

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 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 level of trade

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

functions along the chain of distribution between the producer and the

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

different LOT and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

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

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the difference in the levels between NV and CEP

affects price comparability, we adjust NV under section 773(a)(7)(B) of

the Act (the CEP-offset provision). See Notice of Final Determination

of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel

Plate from South Africa, 62 FR 61731 (November 19, 1997).

Fagersta reported one customer category (i.e., ``wire drawers'')

and one channel of distribution (i.e., direct sales from mill to end

users) for its home market sales. In its response, Fagersta claims that

its sales to the unaffiliated customers are at a different LOT than its

sales to the affiliated customers because Fagersta provides

significantly different selling services to its affiliated customers

than what it provides to its unaffiliated customers. Specifically,

Fagersta identified the following selling services it provides to its

unaffiliated customers: (1) General promotion and marketing services;

(2) freight and delivery; (3) post-sale warranty services; and (4) pre-

sale technical services. For sales to its affiliated customers,

Fagersta listed the following services: (1) Priority production and

delivery or just-in-time processing; (2) high level of technical

cooperation; (3) network data exchange; (4) prices set annually; (5)

warranty service; (6) billet rebates; and (7) freight and delivery.

Fagersta claims that, because it offers significantly different

services to its affiliated customers, in comparison to its services to

unaffiliated customers, Fagersta charges its affiliated customers

higher prices. Therefore, Fagersta claimed an LOT adjustment on this

basis.

In determining whether separate levels of trade actually existed in

the home market, we examined whether Fagersta's sales involved

different marketing stages (or their equivalent) based on the channel

of distribution, customer categories and selling functions. As noted

above, Fagersta's sales to its unaffiliated and affiliated

[[Page 10844]]

customers were made through the same channel of distribution and to the

same category of customer. With respect to selling activities, we note

that, in some instances, the activities Fagersta characterized as

selling functions (e.g., billet rebates and annual price setting) are

not distinct selling functions which we consider to be relevant to our

LOT analysis. Furthermore, based on our analysis, we note that, while

there are some differences in selling activities between Fagersta's

sales to affiliated customers and unaffiliated customers (e.g., just-

in-time processing services), we do not find that such differences are

sufficient to establish a difference in marketing stage (or its

equivalent). As discussed in the Department's regulations, substantial

differences in selling activities are a necessary, but not sufficient,

condition for determining that there is a difference in the stage of

marketing. See 19 CFR 351.412. See also Notice of Final Results:

Antidumping Duty Administrative Review of Antifriction Bearings from

France et al., 62 FR 2081, 2105 (January 15, 1997). Based on this

analysis, we find that Fagersta's home market sales comprise a single

level of trade.

Fagersta reported both EP and CEP sales in the U.S. market. For EP

sales, Fagersta reported one channel of distribution (i.e., direct

sales from the mill to unaffiliated end users). In analyzing Fagersta's

selling activities for its EP sales, we noted that the sales involved

basically the same selling functions associated with the home market

level of trade described above. Therefore, based upon this information,

we have determined that the level of trade for all EP sales is the same

as that in the home market.

The CEP sales were based on sales made by Fagersta to Sandvik Steel

Company (``SSUS''), one of Fagersta's U.S. affiliates, which then sold

the merchandise to unaffiliated purchasers in the United States. Based

on our analysis, we find that the selling functions performed at the

CEP level are essentially the same as those performed in the home

market. Specifically, after making deductions pursuant to section

772(d) of the Act, we determined that there were three selling

activities performed by Fagersta associated with its sales to SSUS: (1)

Freight and delivery; (2) post-sale warranty services; and (3) pre-sale

technical services, which are the same functions we found in the home

market. Therefore, we determine that Fagersta's CEP sales and its home

market sales are made at the same level of trade. Accordingly, because

we find the U.S. sales and home market sales to be at the same level of

trade, no level-of-trade adjustment under section 773(a)(7)(A) of the

Act is warranted.

Export Price and Constructed Export Price

Fagersta reported as EP transactions its sales of subject

merchandise sold to unaffiliated U.S. customers prior to importation

through two affiliated companies in the United States (Avesta Sheffield

Inc. (``ASI'') and SSUS). Fagersta reported as CEP transactions its

sales of subject merchandise sold to SSUS for its own account. SSUS

then resold the subject merchandise to unaffiliated customers or

further manufactured the wire rod into wire products which are outside

the scope of this investigation.

With respect to sales made through ASI and SSUS prior to

importation, Fagersta claims that these sales are properly classified

as EP sales because ASI and SSUS act only as sales-document processors

and communication links to facilitate Fagersta's U.S. sales to

unaffiliated customers. Specifically, Fagersta states the following:

(1) neither ASI nor SSUS takes physical possession of the merchandise;

(2) the merchandise is shipped directly from Fagersta to the customer;

(3) neither ASI nor SSUS has independent authority to establish prices;

(4) the essential terms of sales are set and approved by Fagersta in

Sweden; and (5) all relevant sales activities are performed by Fagersta

in Sweden before exportation. Therefore, according to Fagersta, ASI and

SSUS are mere conduits of sales information for Fagersta's direct mill

sales to unaffiliated U.S. customers.

We examine several factors to determine whether sales made prior to

importation through an affiliated sales agent to an unaffiliated

customer in the United States are EP sales, such as (1) whether the

merchandise was shipped directly from the manufacturer to the

unaffiliated U.S. customer; (2) whether the sales follow customary

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

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

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

unrelated U.S. buyer. Where the factors indicate that the activities of

the U.S. affiliate are ancillary to the sale (e.g., arranging

transportation or customs clearance), we treat the transactions as EP

sales. Where the U.S. affiliate is substantially involved in the sales

process (e.g., negotiating prices), we treat the transactions as CEP

sales.

Based on our review of the selling activities of Fagersta's U.S.

affiliates, we preliminarily determine that EP is appropriate for

Fagersta's sales to the United States through ASI and SSUS. The

customary commercial channel between Fagersta and its unaffiliated

customers is that Fagersta ships the EP merchandise directly to the

unaffiliated U.S. customers without having the merchandise enter into

the inventory of the U.S. affiliates and that the U.S. affiliates'

activities are limited to that of a ``processor of sales-related

documentation'' and a ``communication link'' with the unaffiliated U.S.

buyers. Accordingly, for purposes of the preliminary determination, we

are treating the sales in question as EP transactions. We will examine

this issue further at verification.

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 price to unaffiliated purchasers in the United

States. We added to the starting price any alloy surcharges and, where

appropriate, made adjustments for price-billing errors and freight

revenue. We made deductions for early payment discounts and rebates,

where applicable. We also made deductions for movement expenses in

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

appropriate, ocean freight, marine insurance, U.S. brokerage and

handling, U.S. customs duties (including harbor maintenance fees and

merchandise processing fees), U.S. inland insurance, and U.S. inland

freight expenses (freight from port to warehouse and freight from

warehouse to the customer).

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. In addition, Fagersta

reported sales of wire and wire products (non-subject merchandise)

which were further manufactured from wire rod (subject merchandise) by

one of its affiliates in the United States. In deciding whether to base

CEP on the sales of subject merchandise that are further manufactured,

the Department determines whether the value added is likely to exceed

substantially the value of the subject merchandise in accordance with

section 772(e) of the Act. Section 772(e) of the Act provides

alternatives to backing out the value added after importation, when

doing so

[[Page 10845]]

would cause an undue burden on the Department. See Statement of

Administrative Action, H.R. Doc. No. 316, Vol. 1, 103d Cong., 2d. Sess.

(1994), 825-826. Normally, when the estimated value-added amount

exceeds 65% of the value of the merchandise sold to unaffiliated

purchasers, the CEP for such merchandise will be established by an

alternative methodology in accordance with section 772(e) of the Act.

See 19 CFR 351.402(c)(2). In this case, we determine that section

772(e) of the Act does not apply because the value added in the United

States by the affiliated person is not likely to exceed substantially

the value of the subject merchandise. Therefore, for subject

merchandise further manufactured in the United States, we used the

starting price of the subject merchandise and deducted the costs of

further manufacturing to determine CEP for such merchandise, in

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

We based CEP on the packed FOB or delivered prices to unaffiliated

purchasers in the United States. We added to the starting price any

alloy surcharges and, where appropriate, made adjustments for price-

billing errors and freight revenue. We made deductions for early

payment discounts and rebates, where applicable. We also made

deductions for movement expenses in accordance with section

772(c)(2)(A) of the Act; these included, where appropriate, ocean

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

duties (including harbor maintenance fees and merchandise processing

fees), U.S. inland insurance, U.S. inland freight expenses (freight

from port to warehouse and freight from warehouse to the customer), and

post-sale 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 and warranty expenses), inventory carrying

costs, U.S. repacking expenses, and indirect selling expenses. We also

deducted an amount for further-manufacturing costs, where applicable,

in accordance with section 772(d)(2) of the Act and made an adjustment

for profit in accordance with section 772(d)(3) of the Act.

Normal Value

After testing (1) home market viability; (2) whether sales to

affiliates were at arm's-length prices and (3) whether home market

sales were at below-cost prices, we calculated NV as noted in the

``Price to Price Comparisons'' and ``Price to CV Comparisons'' sections

of this notice.

1. Home Market Viability

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

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

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

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

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

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

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

Because the respondent's aggregate volume of home market sales of the

foreign like product was greater than five percent of its aggregate

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

the home market was viable for the respondent.

2. Affiliated-Party Transactions and Arm's-Length Test

Fagersta, in its response, claimed that we should not include in

our analysis Fagersta's sales of wire rod to its affiliated customers

in the home market. According to Fagersta, due to the close

relationship between Fagersta and its affiliates based on their common

ownership and interdependence in the production of wire rod and wire

products, Fagersta's transactions with these affiliated companies

should be treated as internal transfers. Fagersta cited to the Certain

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

Korea: Final Results of the Antidumping Duty Administrative Reviews, 62

FR 18404 (April 15, 1997) (``Carbon Steel Flat Products From Korea'')

in support of its claim. This case upon which Fagersta relied is

inapposite. The issue in Carbon Steel Flat Products from Korea was

whether to ``collapse'' affiliated producers/exporters for margin-

calculation purposes. We do not use that type of analysis to determine

whether transactions between affiliated parties are an appropriate

basis for determining NV. The Department's standard practice with

respect to the use of home market sales to affiliated parties for NV is

to determine whether such sales are at arm's-length prices. Therefore,

in accordance with that practice, we performed an arm's-length test on

Fagersta's sales to affiliates as follows.

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

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

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

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

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

affiliated and unaffiliated customers net of all movement charges,

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

subject merchandise, prices to the affiliated party were on average

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

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

length. See 19 CFR 351.403(c) and 62 FR at 27355. 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

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

1993)). Where the exclusion of such sales eliminated all sales of the

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

most similar model.

3. Cost of Production Analysis

As stated in the ``Case History'' section of the notice, based on a

timely allegation filed by the petitioners, the Department initiated a

COP investigation of Fagersta to determine whether sales were made at

prices less than the COP.

We conducted the COP analysis described below.

A. Calculation of COP

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

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

the foreign like product, plus an amount for home market SG&A, interest

expenses, and packing costs. We used the information from Fagersta's

January 26, 1998, questionnaire response to calculate COP.

Fagersta purchased a major input (i.e., steel billets) for SSWR

from affiliated parties. In accordance with section 773(f)(3) of the

Act, we used the higher of the transfer price or cost of production to

value the billets in our analysis. No information on the market value

of billets was available. We excluded from billet costs the net foreign

exchange gain that had been charged to material acquisitions because

Fagersta did not describe in its response how it derived the amount of

the gain and how the gain was related to purchases of materials used to

produce the subject merchandise. See

[[Page 10846]]

Memorandum to Chris Marsh from Art Stein, dated February 25, 1998.

B. Test of Home Market Sales Prices

We compared the weighted-average COP for Fagersta, adjusted where

appropriate, to home market sales of the foreign like product as

required under section 773(b) of the Act. 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) such sales were made at prices

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

time. On a product-specific basis, we compared the COP to the home

market prices, less any applicable movement charges, rebates,

discounts, and direct and indirect selling expenses.

C. Results of the COP Test

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

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''

within an extended period of time in accordance with section

773(b)(2)(B) of the Act. In such cases, 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.

We found that, for certain grades of SSWR, more than 20 percent of

Fagersta's home market sales within an extended period of time were at

prices less than COP. Further, the prices did not provide for the

recovery of costs within a reasonable period of time. We therefore

excluded these sales and used the remaining above-cost sales as the

basis for determining NV if such sales existed, in accordance with

section 773(b)(1). For those U.S. sales of SSWR for which there were no

comparable (above-cost) home market sales in the ordinary course of

trade, we compared export prices or constructed export prices to CV in

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

D. Calculation of CV

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

based on the sum of Fagersta's cost of materials, fabrication, SG&A,

interest, and U.S. packing costs. As noted above in the ``Calculation

of COP'' section of the notice, for CV we adjusted billet costs to

exclude the net foreign exchange gain that had been charged to

materials acquisitions. In accordance with sections 773(e)(2)(A) of the

Act, we based SG&A and profit on the amounts incurred and realized by

the respondent in connection with the production and sale of the

foreign like product in the ordinary course of trade for consumption in

the foreign country. For selling expenses, we used the weighted-average

home market selling expenses.

Price-to-Price Comparisons

We calculated NV based on delivered prices to unaffiliated

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

arm's-length prices. We made deductions, where appropriate, from the

starting price for discounts, rebates, inland freight, and ``billing

error'' rebates. We made adjustments for differences in the merchandise

in accordance with section 773(a)(6)(C)(ii) of the Act. In addition, we

made adjustments under section 773(a)(6)(C)(iii) of the Act for

differences in circumstances of sale for imputed credit expenses and

warranties. 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

For price-to-CV comparisons, we made adjustments to CV in

accordance with section 773(a)(8) of the Act. Where we compared CV to

EP, we deducted from CV the weighted-average home market direct selling

expenses and added the weighted-average U.S. product-specific direct

selling expenses in accordance with section 773(a)(6)(C)(iii) of the

Act. Where we compared CV to CEP, we deducted from CV the weighted-

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.

Section 773A(a) of the Act directs the Department to use a daily

exchange rate in order to convert foreign currencies into U.S. dollars

unless the daily rate involves a fluctuation. It is the Department's

practice to find that a fluctuation exists when the daily exchange rate

differs from the benchmark rate by 2.25 percent. The benchmark is

defined as the moving average of rates for the past 40 business days.

When we determine a fluctuation to have existed, we substitute the

benchmark rate for the daily rate, in accordance with established

practice. Further, section 773A(b) of the Act directs the Department to

allow a 60-day adjustment period when a currency has undergone a

sustained movement. A sustained movement has occurred when the weekly

average of actual daily rates exceeds the weekly average of benchmark

rates by more than five percent for eight consecutive weeks. (For an

explanation of this method, see Policy Bulletin 96-1: Currency

Conversions (61 FR 9434, March 8, 1996).) Such an adjustment period is

required only when a foreign currency is appreciating against the U.S.

dollar. The use of an adjustment period was not warranted in this case

because the Swedish Krona did not undergo a sustained movement.

Verification

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

information determined to be acceptable for use 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 export price, as indicated in the

chart below. These suspension-of-liquidation instructions will remain

in effect until further notice. The weighted-average dumping margins

are as follows:

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

Weighted-

average

Exporter/manufacturer margin

percentage

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

Fagersta Stainless AB..................................... 6.51

All Others................................................ 6.51

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

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

[[Page 10847]]

are materially injuring, or threaten material injury to, the U.S.

industry.

Public Comment

Case briefs or other written comments in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than June 1, 1998, and rebuttal briefs no later than June 8,

1998. 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 on June 12, 1998, time and room to be determined, at the

U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 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 by no later than 135 days after the publication of this

notice in the Federal Register.

This determination is published pursuant to section 777(i) of the

Act.

Dated: February 25, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-5600 Filed 3-4-98; 8:45 am]

BILLING CODE 3510-DS-P