Preliminary Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products From Japan

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-847]

Preliminary Determination of Sales at Less Than Fair Value:

Certain Cut-to-Length Carbon-Quality Steel Plate Products From Japan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 29, 1999.

FOR FURTHER INFORMATION CONTACT: Mark Manning or Wendy J. Frankel,

Office 4, Group II, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-

3936 or (202) 482-5849, respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (``the Act'') by

the Uruguay Round Agreements Act (``URAA''). In addition, unless

otherwise indicated, all references are made to the Department's

regulations at 19 CFR Part 351 (1998).

Preliminary Determination

We preliminarily determine that certain cut-to-length carbon-

quality steel

[[Page 41219]]

plate products (``CTL plate'') from Japan are being, or are 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: Certain Cut-To-Length Carbon-Quality Steel

Plate from Czech Republic, France, India, Italy, Japan, Republic of

Korea, and Former Yugoslav Republic of Macedonia (64 FR 12959, March

16, 1999)) (``Initiation Notice''), the following events have occurred:

In their petition, the petitioners 1 identified Kawasaki

Steel Corporation (``Kawasaki''), Kobe Steel, Ltd. (``Kobe''), Nippon

Steel Corporation (``Nippon''), NKK Corporation (``NKK''), and Sumitomo

Metal Industries, Ltd. (``Sumitomo'') as possible exporters of CTL

plate from Japan. Though we requested on March 12, 1999, data on all

producers and exporters of the subject merchandise during the period of

investigation (``POI'') from the U.S. embassy in Tokyo, the U.S.

embassy was unable to provide us with any additional information on

producers or exporters of the subject merchandise to the United States.

Based on information contained in the petition, the Department issued

antidumping questionnaires to Kawasaki, Kobe, Nippon, NKK, and Sumitomo

on March 17, 1999. 2

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\1\ The petitioners are Bethlehem Steel Corporation, Gulf States

Steel, Inc., IPSCO Steel Inc., Tuscaloosa Steel Corporation, the

United Steelworkers of America, and the U.S. Steel Group (a unit of

USX Corporation).

\2\ Section A of the questionnaire requested 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 requested home market sales listings and U.S. sales

listings. Section D of the questionnaire requested 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 requested information regarding the cost of

further manufacture or assembly performed in the United States.

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In April 1999, the United States International Trade Commission

(``ITC'') issued an affirmative preliminary injury determination in

this case (see ITC Investigation No. 731-TA-815-822). Also, the

Department received a response to all applicable sections of the

questionnaire from Kawasaki and responses to question 1.a.1. of Section

A from Kobe, NKK, and Sumitomo. On April 12, 1999, Nippon submitted a

letter stating that it would not be responding to the Department's

antidumping questionnaire. On April 26, 1999, Sumitomo submitted a

letter to the Department stating that it would not be providing any

further questionnaire responses with respect to this antidumping

investigation. Kobe and NKK did not respond further to the Department's

requests for information.

On April 26, 1999, the Department published its preliminary

determination of critical circumstances for certain cut-to-length

carbon-quality steel plate from Japan. In that determination, we

preliminarily found that there is a reasonable basis to believe or

suspect that critical circumstances exist for imports of CTL plate from

Japan. See Preliminary Determination of Critical Circumstances: Certain

Cut-To-Length Carbon-Quality Steel Plate From Japan (April 26, 1999),

64 FR 2025.

On April 26, 1999, Kawasaki requested that it be allowed to exclude

certain home market sales made during the period of investigation

(``POI''), of merchandise produced at Kawasaki's universal mill at

Mizushima and its hot-strip mill at Chiba, from its home market sales

listing. Kawasaki further requested that it be excused from reporting

the costs associated with producing this same merchandise.

Kawasaki stated that these sales constitute an insignificant amount

of its total home market sales, that subject merchandise produced at

these two mills was not sold in the United States, and that no

merchandise identical to that produced at these mills was sold in the

United States. Kawasaki stated that it would be very difficult and

burdensome to report the costs associated with the production of

subject merchandise at these facilities, especially in light of the

fact that the relevant sales represent such an insignificant portion of

sales during the POI. On May 14, 1999, the Department denied Kawasaki's

request with respect to the sales of subject merchandise produced at

the universal mill at Mizushima and the hot-strip mill at Chiba, and

instructed Kawasaki to include these sales in its home market sales

listing. However, on June 15, 1999, the Department granted Kawasaki's

request not to report costs of producing merchandise associated with

these two facilities. In granting this request, the Department notified

Kawasaki that the Department reserves the right to request additional

information concerning these costs and that in the event that we find

that there is a need to use the cost data, we may rely on the facts

available, as required by section 776 of the Act, including, if

appropriate, adverse inferences.

We issued supplemental questionnaires for Sections A, B, C and D to

Kawasaki in May 1999 and received responses to these questionnaires

along with revised home market and U.S. sales listings in June 1999. In

June 1999, Kawasaki submitted clarifications to its responses and the

petitioners submitted comments for the Department's consideration in

the preliminary determination. In July 1999, Kawasaki submitted

additional clarifications to its responses. Also, the petitioners

submitted further comments for the Department's consideration in the

preliminary determination.

Facts Available

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

or any other person--(A) withholds information that has been requested

by the administering authority; (B) fails to provide such information

by the deadlines for the submission of the information or in the form

and manner requested, subject to subsections (c)(1) and (e) of section

782; (C) significantly impedes a proceeding under this title; or (D)

provides such information but the information cannot be verified as

provided in section 782(i), the administering authority * * * shall,

subject to section 782(d), use the facts otherwise available in

reaching the applicable determination under this title.''

Moreover, section 776(b) of the Act provides that adverse

inferences may be used when a party has failed to cooperate by not

acting to the best of its abilities to comply with a request for

information. Kobe, Nippon, NKK, and Sumitomo all declined to respond to

the Department's antidumping questionnaire. Because these respondents

have withheld requested information, we must use facts available, in

accordance with section 776(a) of the Act. We have also determined that

these respondents have not cooperated to the best of their abilities.

Therefore, pursuant to 776(b) of the Act, we used an adverse inference

in selecting a margin from the facts available. As facts available, the

Department has applied a margin rate of 59.12 percent, the highest

alleged margin in the petition.

Section 776(c) of the Act provides that where the Department

selects from among the facts otherwise available and relies on

``secondary information,'' such as the petition, the Department shall,

to the extent practicable, corroborate that information from

independent sources reasonably at the Department's disposal. The

Statement of Administrative Action

[[Page 41220]]

accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994)

(hereinafter, the ``SAA'') states that ``corroborate'' means to

determine that the information used has probative value. See SAA at

870.

In this proceeding, we considered the petition information the most

appropriate record information to use to establish the dumping margins

for these uncooperative respondents. In accordance with section 776(c)

of the Act, we sought to corroborate the data contained in the

petition. We reviewed the adequacy and accuracy of the information in

the petition during our pre-initiation analysis of the petition, to the

extent appropriate information was available for this purpose (e.g.,

import statistics and foreign market research reports). See Initiation

Notice.

For purposes of the preliminary determination, we attempted to

corroborate the information in the petition. We reexamined the export

price and CV data which formed the basis for the highest margin in the

petition in light of information obtained during the investigation and,

to the extent practicable, found that it has probative value (see the

July 19, 1999, memorandum to the file regarding Corroboration of the

Petition Data, on file in the Central Records Unit (CRU) of the Main

Commerce Department building).

Scope of Investigation

The products covered by the scope of this investigation are certain

hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-

rolled products rolled on four faces or in a closed box pass, of a

width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or

actual thickness of not less than 4 mm, which are cut-to-length (not in

coils) and without patterns in relief), of iron or non-alloy-quality

steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual

thickness of 4.75 mm or more and of a width which exceeds 150 mm and

measures at least twice the thickness, and which are cut-to-length (not

in coils). Steel products to be included in this scope are of

rectangular, square, circular or other shape and of rectangular or non-

rectangular cross-section where such non-rectangular cross-section is

achieved subsequent to the rolling process (i.e., products which have

been ``worked after rolling'')--for example, products which have been

beveled or rounded at the edges. Steel products that meet the noted

physical characteristics that are painted, varnished or coated with

plastic or other non-metallic substances are included within this

scope. Also, specifically included in this scope are high strength, low

alloy (HSLA) steels. HSLA steels are recognized as steels with micro-

alloying levels of elements such as chromium, copper, niobium,

titanium, vanadium, and molybdenum. Steel products to be included in

this scope, regardless of Harmonized Tariff Schedule of the United

States (HTSUS) definitions, are products in which: (1) Iron

predominates, by weight, over each of the other contained elements, (2)

the carbon content is two percent or less, by weight, and (3) none of

the elements listed below is equal to or exceeds the quantity, by

weight, respectively indicated: 1.80 percent of manganese, or 1.50

percent of silicon, or 1.00 percent of copper, or 0.50 percent of

aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or

0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of

tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or

0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent

zirconium. All products that meet the written physical description, and

in which the chemistry quantities do not equal or exceed any one of the

levels listed above, are within the scope of these investigations

unless otherwise specifically excluded. The following products are

specifically excluded from these investigations: (1) Products clad,

plated, or coated with metal, whether or not painted, varnished or

coated with plastic or other non-metallic substances; (2) SAE grades

(formerly AISI grades) of series 2300 and above; (3) products made to

ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-

resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to

ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary

equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon

manganese steel or silicon electric steel.

The merchandise subject to these investigations is classified in

the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,

7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,

7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,

7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,

7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,

7226.91.8000, 7226.99.0000.

Although the HTSUS subheadings are provided for convenience and

Customs purposes, the written description of the merchandise under

investigation is dispositive.

Scope Comments

As stated in our notice of initiation, we set aside a period for

parties to raise issues regarding product coverage. In particular, we

sought comments on the specific levels of alloying elements set out in

the description above, the clarity of grades and specifications

excluded from the scope, and the physical and chemical description of

the product coverage.

On March 29, 1999, Usinor, a respondent in the French antidumping

and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd.

and Pohang Iron and Steel Co., Ltd., respondents in the Korean

antidumping and countervailing duty investigations (collectively ``the

Korean respondents''), filed comments regarding the scope of the

investigations on CTL plate and the Department's model matching

criteria. On April 14, 1999, the petitioners filed rebuttal comments

regarding model matching. In addition, on May 17, 1999, ILVA SpA

(``ILVA''), a respondent in the Italian antidumping and countervailing

duty investigations, requested guidance on whether certain products are

within the scope of these investigations.

Usinor requested that the Department modify the scope to exclude:

(1) Plate that is cut to non-rectangular shapes or that has a total

final weight of less than 200 kilograms; and (2) steel that is 4'' or

thicker and which is certified for use in high-pressure, nuclear or

other technical applications; and (3) floor plate (i.e., plate with

``patterns in relief'') made from hot-rolled coil. Further, Usinor

requested that the Department provide clarification of scope coverage

with respect to what it argues are over-inclusive HTSUS subheadings

included in the scope language.

The Department has not modified the scope of these investigations

because the current language reflects the product coverage requested by

the petitioners, and Usinor's products meet the product description.

With respect to Usinor's clarification request, we do not agree that

the scope language requires further elucidation with respect to product

coverage under the HTSUS. As indicated in the scope section of every

Department antidumping and countervailing duty proceeding, the HTSUS

subheadings are provided for convenience and Customs purposes only; the

written description of the merchandise under investigation or review is

dispositive.

The Korean respondents requested confirmation whether the maximum

alloy percentages listed in the scope

[[Page 41221]]

language are definitive with respect to covered HSLA steels.

At this time, no party has presented any evidence to suggest that

these maximum alloy percentages are inappropriate. Therefore, we have

not adjusted the scope language. As in all proceedings, questions as to

whether or not a specific product is covered by the scope and, hence,

must be reported, should be timely raised with Department officials.

ILVA requested guidance on whether certain merchandise produced

from billets is within the scope of the current CTL plate

investigations. According to ILVA, the billets are converted into wide

flats and bar products (a type of long product). ILVA notes that one of

the long products, when rolled, has a thickness range that falls within

the scope of these investigations. However, according to ILVA, the

greatest possible width of these long products would only slightly

overlap the narrowest category of width covered by the scope of the

investigations. Finally, ILVA states that these products have different

production processes and properties than merchandise covered by the

scope of the investigations and therefore are not covered by the scope

of the investigations.

As ILVA itself acknowledges, the particular products in question

appear to fall within the parameters of the scope and, therefore, we

are preliminarily treating them as covered merchandise for purposes of

these investigations.

Period of Investigation

The POI is January 1, 1998, through December 31, 1998.

Fair Value Comparisons

To determine whether sales of CTL plate from Japan 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.

Product Comparisons

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

products produced by Kawasaki covered by the description in the ``Scope

of Investigation'' section, above, and sold in Japan during the POI to

be foreign like products for purposes of determining appropriate

product comparisons to U.S. sales. We compared U.S. sales to sales made

in the home market, where appropriate. 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.

In making the product comparisons, we matched foreign like products

based on the physical characteristics reported by the respondents in

the following order of importance (which are identified in Appendix V

of the questionnaire): painting, quality, grade specification, heat

treatment, nominal thickness, nominal width, patterns in relief, and

descaling.

Because Kawasaki had no sales of non-prime merchandise in the

United States during the POI, we did not use home market sales of non-

prime merchandise in our product comparisons (see, e.g., Final

Determination of Sales at Less Than Fair Value: Stainless Steel Wire

Rod from Sweden (63 FR 40449, 40450, July 29, 1998) (``SSWR'')).

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. With respect to U.S. price or EP transactions, the LOT is

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

exporter to the importer. For CEP, the LOT 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 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 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 difference in the levels between NV and CEP

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

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

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

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

Kawasaki reported two customer categories (i.e., trading companies

and original equipment manufacturers) and what it claimed were three

channels of distribution (i.e., sales to unaffiliated trading

companies, direct sales to original equipment manufacturers, and sales

to an affiliated trading company, Kawasho Corporation (``Kawasho

Japan'')) for its home market sales. Kawasaki reported EP and CEP sales

in the U.S. market. For EP sales, Kawasaki reported one customer

category and one channel of distribution (i.e., direct sales to

unaffiliated Japanese trading companies, for sale to the U.S. market).

Kawasaki claimed in its response that its EP sales were made at the

same LOT as home market sales to unaffiliated trading companies. For

this reason, Kawasaki has not asked for a LOT adjustment to NV for

comparison to its EP sales. For CEP sales, Kawasaki reported one

customer category and one channel of distribution (i.e., Kawasaki sales

through Kawasho International (``KI''), which is the U.S. affiliate of

Kawasho Japan, Kawasaki's affiliated trading company that sells in the

home market and, for U.S. sales purposes, to KI). Kawasaki stated that

there is no LOT in the home market that is comparable to the CEP LOT in

the United States. Kawasaki claims that when comparing the selling

activities of Kawasaki's affiliated trading company, Kawasho Japan, for

home market sales (channel three) and for CEP sales, Kawasho provides a

higher level of selling services in home market than for CEP sales.

Kawasaki asserts that because Kawasho performs greater selling

activities in the home market, Kawasho incurs higher selling expenses

for home market sales. In addition, Kawasaki argues that the home

market LOTs are more remote (further from production) than the CEP LOT.

Kawasaki stated that since there is no comparable LOT in the home

market, it could not demonstrate a pattern of consistent differences in

price due to sales at different LOTs in the home market and therefore

did not claim a LOT adjustment. Kawasaki has requested a CEP offset

instead.

In determining whether separate LOTs actually existed in the home

market and U.S. market, we examined whether Kawasaki's sales involved

different marketing stages (or their

[[Page 41222]]

equivalent) based on the channel of distribution, customer categories

and selling functions.

For sales in the home market we found that Kawasaki performed

essentially the same selling activities for each of the three channels

of distribution. These include: technical advice, warranty service,

advertising, marketing services, freight and delivery, warehousing,

inputting a specification control number, sales processing, rebate

administration, and demand forecasting. Based on our analysis of these

factors, we found that Kawasaki's home market sales comprise a single

LOT.

In analyzing Kawasaki's selling activities for its EP sales, we

noted that the sales involved basically the same selling functions

associated with the home market LOT described above. These selling

activities include technical advice, warranty service, advertising,

marketing services, inputting a specification control number, sales

processing, rebate administration, and demand forecasting. Therefore,

based upon this information, we have determined that the LOT for all EP

sales is the same as that in the home market.

Kawasaki failed to provide any factual support for its argument

that the LOT of its home market sales is more remote than the LOT of

its CEP sales. Our analysis indicates that the selling functions

performed at the CEP level are essentially the same as those performed

in the home market. Specifically, after having excluded selling

functions of its U.S. affiliate from our analysis, in accordance with

sections 772(d) and 773(a)(7)(A) of the Act, we determined that

Kawasaki and/or Kawasho Japan performed the following selling

activities for its CEP sales: technical advice, warranty service,

advertising, marketing services, freight and delivery, inputting a

specification control number, sales processing, and demand forecasting.

Therefore, based upon this analysis, we determine that Kawasaki's CEP

and home market sales are made at the same LOT.

Accordingly, because we find the U.S. sales and home market sales

to be at the same LOT, no LOT adjustment under section 773(a)(7)(A) and

no CEP offset pursuant to 773(a)(7)(B) of the Act are warranted.

Export Price and Constructed Export Price

Kawasaki reported as EP transactions sales of subject merchandise

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

multiple unaffiliated Japanese trading companies. Kawasaki reported as

CEP transactions sales of subject merchandise to an affiliated trading

company, Kawasho Japan, which resold the merchandise to KI (Kawasho

Japan's U.S. affiliate), which then resold the subject merchandise to

unaffiliated customers in the United States.

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 FOB stowed and trimmed or FAS price to unaffiliated

purchasers in the United States, as appropriate. We made deductions to

the starting price for 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, foreign

inland freight, foreign brokerage and handling charges, and foreign

insurance.

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

for those sales to the first unaffiliated purchaser that took place

after importation into the United States. We based CEP on the packed

ex-dock, duty paid, U.S. port prices to unaffiliated purchasers in the

United States. We made deductions from the starting price for movement

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

included, where appropriate, foreign inland freight, foreign brokerage

and handling, foreign insurance, ocean freight, marine insurance, and

U.S. customs duties. 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, technical service costs and advertising expenses) and

indirect selling expenses (including inventory carrying costs). We also

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'' section 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 Kawasaki'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 Kawasaki'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 Kawasaki.

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

Kawasaki is affiliated with two home market trading companies--

Kawasho Japan and a second trading company, which we will refer to as

company X. Kawasaki stated in its questionnaire responses that company

X, who purchases both Kawasaki-produced subject merchandise and subject

merchandise produced by other manufacturers, is unable to link its

sales of subject merchandise to unaffiliated home market customers with

its purchases of Kawasaki-produced subject merchandise. For this

reason, Kawasaki states that it is unable to report the downstream sale

from company X to the first unaffiliated home market customer.

Therefore, Kawasaki has reported only its sales to company X.

Kawasaki also stated that Kawasho sells subject merchandise to

several affiliated processors and resellers in the home market.

According to Kawasaki, these affiliated processors and resellers

purchase both Kawasaki-produced subject merchandise and subject

merchandise produced by other manufacturers. Kawasaki states that it

cannot report the downstream sales by these affiliates because these

companies do not link the original subject merchandise produced with

the product sold. For this reason, Kawasaki has reported only sales

from Kawasho to the affiliated processors and resellers.

Because Kawasaki is affiliated with company X and Kawasho's

affiliated processors and resellers, we applied the arm's-length test

to sales from Kawasaki to company X, and to sales made by Kawasho to

its affiliated processors and resellers, by comparing them to sales of

identical merchandise from Kawasaki to its unaffiliated home market

customers. If these affiliated party sales satisfied the arm's-length

test, we used them in our analysis. Sales to affiliated customers in

the home market which were not made at arm's-length prices were

excluded from our analysis because we considered them to be

[[Page 41223]]

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,

rebates, direct selling expenses, and home market packing. We added

interest revenue and billing adjustments to the gross unit price in the

amounts reported by Kawasaki. 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, Preamble--Department's Final

Antidumping Regulations (May 19, 1997). 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 SSWR at 63 FR

40451. 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

In their petition, the petitioners submitted an allegation pursuant

to section 773(b) of the Act that Kawasaki and the other named

respondents 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 Kawasaki had

sold CTL plate in the home market at prices at less than the COP.

Accordingly, we initiated a COP investigation with respect to each

respondent to determine whether sales were made at prices less than the

COP pursuant to section 773(b) of the Act (see Initiation Notice at 64

FR 12959, 12963).

We conducted the COP analysis described below.

A. Calculation of COP

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

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

the foreign like product, direct and indirect selling expenses, plus an

amount for home market SG&A, interest expenses, and packing costs.

Kawasaki produced a small quantity of subject merchandise at its

universal mill at Mizushima and its hot-strip mill at Chiba. According

to Kawasaki, both of these mills primarily produce non-subject

merchandise. For this reason, Kawasaki claimed that it would be

burdensome to calculate actual production costs for the subject

merchandise originating at these mills. After examining this issue, we

granted Kawasaki's request not to report the actual costs from both

mills, but required Kawasaki to report the standard costs for subject

merchandise produced at these mills. We made the following adjustments

to respondents' reported costs:

1. For certain models of merchandise produced at both the hot-strip

mill at Mizushima and the hot-strip mill at Chiba, we calculated

CONNUM-specific weighted-average total costs of manufacture (TOTCOM)

using the quantities produced at the respective mills and the actual

TOTCOMs from the Mizushima hot-strip facility and the standard costs

from the hot-strip mill at Chiba.

2. For certain CONNUMs of merchandise produced only at the

universal mill at Mizushima, and for additional other models of

merchandise produced only at the hot-strip mill at Chiba, we used as

the TOTCOM the standard costs for each product, as reported by

Kawasaki.

3. The Department requested in the antidumping questionnaire that

Kawasaki provide CONNUM-specific variable cost of manufacturing

(``VCOMH'') data for home market sales. For certain home market sales,

Kawasaki failed to provide this information. Therefore, we applied the

CONNUM-specific variable cost of manufacturing data that Kawasaki

reported in its cost of production database as the VCOMH for these

sales in Kawasaki's home market sales database.

4. Kawasaki failed to provide cost information for a small number

of home market sales. Our analysis of these sales indicates that none

are of a specification that would be considered identical or similar to

any specification sold in the U.S. market during the POI. For this

reason, none of these sales are eligible to be matched to a U.S. sale.

Consequently, we have not included them in our analysis.

B. Test of Home Market Sales Prices

We compared the weighted-average COP figures 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 COP. 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 and rebates.

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, 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, in accordance with section 773(b)(2)(D) of

the Act. Therefore, we disregarded the below-cost sales.

We found that, for certain grades of CTL plate, more than 20

percent of Kawasaki'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) of the Act.

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, where appropriate. We added to the starting price

the amount Kawasaki reported for interest revenue and billing

adjustments. We made deductions, where appropriate, from the starting

price for rebates, inland freight, warehousing, and inland freight

insurance. We made adjustments for differences in the merchandise in

accordance with section 773(a)(6)(C)(ii) of the Act. In its

questionnaire responses, Kawasaki reported a certain fee it regularly

incurs as a rebate. We reclassified this fee as a direct expense

because the amount Kawasaki reported

[[Page 41224]]

under this category is for the fees Kawasaki paid to a service provider

rather than a rebate Kawasaki paid to its customers. We made

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

in circumstances of sale for imputed credit expenses, advertising,

warranty expenses, technical service expenses, and the above-referenced

fee. 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.

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 yen 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 April 1999, the Department made an early determination of

critical circumstances with respect to imports of subject merchandise

from Japan. See Preliminary Determination of Critical Circumstances:

Certain Cut-To-Length Carbon-Quality Steel Plate From Japan (April 26,

1999), 64 FR 2025. Thus, in accordance with section 733(e)(2) of the

Act, the Department will direct the U.S. Customs Service to suspend

liquidation of all entries of CTL plate from Japan, that are entered,

or withdrawn from warehouse, for consumption on or after 90 days prior

to the date of publication in the Federal Register of our preliminary

determination of sales at LTFV.

We will instruct the Customs Service to require a cash deposit or

the posting of a bond equal to the weighted-average amount by which the

NV exceeds the EP or 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

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

Kawasaki Steel Corporation.............................. 11.70

Kobe Steel, Ltd......................................... 59.12

Nippon Steel Corporation................................ 59.12

NKK Corporation......................................... 59.12

Sumitomo Metal Industries, Ltd.......................... 59.12

All Others.............................................. 11.70

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

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 in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than August 25, 1999, and rebuttal briefs no later than September

1, 1999. 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 September 13, 1999, 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 75 days after the date of this

preliminary determination.

This determination is issued and published pursuant to sections

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

Dated: July 19, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-19304 Filed 7-28-99; 8:45 am]

BILLING CODE 3510-DS-P