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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-836]

Preliminary Determination of Sales at Less Than Fair Value:

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

Republic of Korea

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 29, 1999.

FOR FURTHER INFORMATION CONTACT: Frank Thomson or Howard Smith, Group

II, Office 4, Import Administration, International Trade

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

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

4793, or (202) 482-5193, 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 plate products (``CTL plate'') from the Republic of Korea

(``Korea'') are being, or are likely to be, sold in the United

[[Page 41225]]

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, Korea, 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 Daekyung

Corporation (``Daekyung''), Dongkuk Steel Mill Co., Ltd (``Dongkuk''),

Korea Iron & Steel (``KISCO''), and Pohang Iron & Steel Co., Ltd

(``POSCO'') as possible exporters of CTL plate from Korea. 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 Seoul. Based on information contained in the petition and

received from the Embassy, the Department issued antidumping

questionnaires to Daekyung, Dongkuk, KISCO, and POSCO 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, 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).

On April 27, 1999, POSCO and Dongkuk submitted responses to section

A of the questionnaire. On May 5, 1999, Daekyung submitted a letter to

the Department stating that it did not export the subject merchandise

to the United States during the POI, with a request that it be excluded

from further participation in the investigation. We subsequently

informed Daekyung that these facts are subject to verification. POSCO

and Dongkuk submitted responses to sections B and C on May 11, 1999,

and responses to section D on May 14, 1999.

Petitioners filed comments on POSCO's section A through D responses

on May 20, 1999, and May 28, 1999, and on Dongkuk's section A response

on May 20, 1999 and on Dongkuk's sections B through D on May 27, 1999.

On May 28, 1999, we issued supplemental questionnaires for sections

A, B, and C to POSCO and Dongkuk, and for section D to POSCO and

Dongkuk on June 8, and 3, 1999 respectively. POSCO responded to our May

28, 1999, supplemental questionnaire on June 22, 1999; Dongkuk

responded to our May 28, 1999, supplemental questionnaire on June

22,1999 and on June 29 for the Section D supplemental questionnaire.

Petitioners commented on POSCO's and Dongkuk's supplemental

questionnaire on June 30, 1999. On July 2, 1999 we issued an additional

supplemental questionnaire to POSCO.

In letters dated June 2, 8, and 14, 1999, Dongkuk requested that it

be excused from reporting sales for its affiliate Korean Iron & Steel

Co. Ltd. (``KISCO''). Dongkuk stated that KISCO had ceased production

of subject merchandise early in the POI and had only an insignificant

quantity of home market sales, and no U.S. sales of subject

merchandise. Dongkuk argued that the Department should not collapse

Dongkuk and KISCO. On June 4, 1999 petitioners argued that the

Department should collapse Dongkuk and KISCO and require that its sales

and costs be reported. On June 24, 1999, for the reasons outlined in

its letters, we granted Dongkuk's request to be excused from reporting

KISCO's sales and cost.

On June 11, 1999 we instructed POSCO to report downstream sales

through five of its affiliated resellers. POSCO, in its Section A

response and in subsequent submissions dated May 17, and June 1, 1999,

had requested to be excused from reporting any sales through affiliated

resellers. After reviewing certain supplemental information provided by

POSCO, we selected the five resellers identified in the June 11, 1999

letter, and requested POSCO to provide a questionnaire response for

these affiliated resellers. See Affiliated Reseller Sales section

below.

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

[[Page 41226]]

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 below, 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 comments regarding

Usinor's and the Korean respondents' comments regarding model matching.

In addition, on May 17, 1999, ILVA S.p.A. (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 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.

Period of Investigation

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

Fair Value Comparisons

To determine whether sales of CTL plate from Korea 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 POSCO and Dongkuk covered by the description in

the ``Scope of Investigation'' section, above, and sold in Korea 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 there were no sales of

identical merchandise in the home market made in the ordinary course of

trade, 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 respondents 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

[[Page 41227]]

selling, general and administrative (``SG&A'') expenses and profit.

With respect to U.S. sales and EP transactions, the LOT is 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

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

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

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

the export transaction, we make an LOT adjustment under section

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

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

for determining whether the differences in the levels between NV and

CEP sales affects price comparability, we adjust NV under section

773(A)(7)(B) of the Act (the CEP offset provision). See 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).

POSCO

POSCO reported that it sells at the same LOT in both markets. In

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

EP sales, we examined stages in the marketing process and selling

functions along the chains of distribution between POSCO and its home

market and U.S. customers. Based on our analysis of the chains of

distribution and selling functions performed for EP sales in the U.S.

market, we preliminarily determine that POSCO and its subsidiaries

POSCO Steel Sales and Service Co., Ltd. (``POSTEEL'') and POSAM (for EP

sales) provided a sufficiently similar degree of services on sales to

all channels of distribution, and that the sales made to the United

States constitute one LOT.

Based on a comparison of the selling activities performed in the

U.S. market to the selling activities in the home market, we

preliminarily determine that there is not a significant difference in

the selling functions performed in both markets. 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) of the Act is warranted. See

LOT Memo dated July 19, 1999. See also Affiliated Reseller Sales

section below.

Dongkuk

In the home market, Dongkuk reported one channel of distribution

involving sales to distributors and affiliated and unaffiliated end-

users. Dongkuk reported few selling activities for its home market

sales. We examined the selling functions and found no appreciable

difference between types of customers. Because there are no appreciable

differences between the selling functions on sales made to different

customers in the home market, sales to these customers represent a

similar stage of marketing. Therefore, we preliminarily conclude that

all Dongkuk's sales to end-users constitute one LOT in the home market.

For its EP and CEP sales in the U.S. market, Dongkuk reported four

sales channels: (1) Dongkuk's sales through Dongkuk Industries Co.,

Ltd. (``DKI''), Dongkuk's affiliated trading company in Korea, to

Dongkuk International, Inc. (DKA), Dongkuk's affiliate located in the

United States, to unaffiliated customers; (2) Dongkuk's sales through

DKI, to unaffiliated customers; (3) Dongkuk's sales to DKA, to an

unaffiliated customer; and (4) Dongkuk's sales to an unaffiliated

customer. We examined the selling functions performed for each of the

four U.S. sales channels. These selling functions included freight and

delivery arrangements, credit services, and post-sale warehousing. With

the exception of freight and delivery arrangements for sales in channel

1, selling functions performed in the four sales channels were

identical. Thus, sales to these customer categories represent a similar

stage of marketing. Therefore, we preliminarily determine that the

sales made to the United States constitute one LOT.

Further, because we preliminarily conclude that the U.S. LOT and

the home market LOT included similar selling functions, we conclude

that these sales are made at the same LOT. Therefore, a LOT adjustment

for Dongkuk is not appropriate.

Export Price and Constructed Export Price

The Department considers several factors in making its

determination concerning whether sales made prior to importation

through a U.S. affiliate to an unaffiliated customer in the United

States are EP sales. These factors are: (1) whether the merchandise was

shipped directly from the manufacturer to the unaffiliated U.S.

customer without being introduced into the physical inventory of the

affiliated selling agent; (2) whether this is the customary commercial

channels between the parties involved; and (3) whether the functions of

the U.S. sales affiliates are limited to those 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. sales affiliate are ancillary to the sale, we treat the

transactions as EP sales. Where the U.S. sales affiliate has a

significant role in the sales process, we treat the transactions as CEP

sales (e.g. See Certain Cut-to-Length Carbon Steel Plate from Germany:

Final Results of Antidumping Administrative Review, 62 FR 18389, 18391

(April 15, 1997); Mitsubishi Heavy Industries versus United States,

Slip Op. 98-82 at 6 (CIT, June 23, 1998)).

POSCO

POSCO reported four channels of distribution for U.S. sales. In

channel 1 POSCO sold the subject merchandise directly to the United

States. In channel 4 POSCO sold the subject merchandise directly to

unaffiliated Korean trading companies for resale of subject merchandise

to the United States. In channel 2, POSTEEL, which is POSCO's

affiliated trading company, sold to a U.S. customer with the assistance

of another affiliate, POA. In channel 3, POSTEEL sold to a U.S.

customer through its U.S. affiliate POSAM . We classified the sales

made through channel 2 as EP sales, since POA had no involvement in the

selling process.

In channel 3, the U.S. affiliate, POSAM, was involved in all the

sales made to unaffiliated U.S. customers. POSCO reported these sales

as EP transactions in its responses. However, because POSAM is involved

in the U.S. selling activities for these sales to some degree, we

examined whether these sales should be properly classified as EP or CEP

transactions.

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. Based on our review of the

selling activities of POSCO's U.S. affiliate, we preliminarily

determine that EP is appropriate for POSTEEL's sales to the United

States through POSAM. The customary commercial channel between POSCO

and its unaffiliated customers is that POSCO 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 the

U.S. affiliates' activities are limited to that of a ``processor of

sales-related

[[Page 41228]]

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. We

based EP on the relevant terms of delivery price to unaffiliated

purchasers in the United States. We made deductions to 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 charges, ocean freight, U.S. brokerage

and wharfage charges and U.S. Customs duty, where appropriate. Finally,

we added to the U.S. price an amount for duty drawback pursuant to

section 772 (c)(1) (B) of the Act.

Dongkuk

For U.S. sales channels two and four, which are defined in the

Level of Trade section above, we based our calculation on EP, in

accordance with section 772 (a) of the Act, because the subject

merchandise was sold by the producer or exporter to the first

unaffiliated purchaser in the United States prior to importation, and

CEP methodology was not otherwise indicated. For U.S. sales channels

one and three, which are defined in the Level of Trade section above,

we based our calculation on CEP, in accordance with section 772 (b) of

the Act, because the merchandise was sold by or for the account of the

producer or exporter of such merchandise or by a seller affiliated with

the producer or exporter, to a purchaser not affiliated with the

producer or exporter.

We have preliminarily determined that the affiliated purchaser in

the United States, Dongkuk International, Inc. (DKA), did more than

merely act as a ``processor of sales-related documentation and a

communication link with the unrelated U.S. buyer.'' (i.e., channels 1

and 3 sales) Where a U.S. affiliate is involved in making a sale, we

normally consider the sale to be CEP unless the record demonstrates

that the U.S. affiliate's involvement in making the sale is incidental

or ancillary. The record demonstrates that Dongkuk International,

Inc.'s role exceeds that of an incidental or ancillary role. See LOT/

CEP Memo July 19, 1999

We based EP on the price to unaffiliated purchasers in the United

States. We made deductions for movement expenses in accordance with

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

foreign inland freight, foreign wharfage and loading, foreign

brokerage, international freight, marine insurance, domestic inland

freight, and U.S. brokerage and wharfage. Additionally, we added to the

U.S. price an amount for duty drawback pursuant to section 772(c)(1)(B)

of the Act.

We calculated CEP, in accordance with subsections 772(b), (c), and

(d) 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 prices to unaffiliated purchasers in the United States. We made

deductions for discounts and rebates. Additionally we made deductions

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

Act; these included, where appropriate, foreign inland freight, foreign

wharfage and loading, foreign brokerage, international freight, marine

insurance, domestic inland freight, U.S. brokerage and wharfage, U.S.

duty and U.S. warehousing expenses. In accordance with section

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

with economic activities occurring in the United States, including

direct selling expenses (e.g., commissions, credit costs, bank charges,

and warranty expenses), and indirect selling expenses. For CEP sales,

we also made an adjustment for profit in accordance with section

772(d)(3) of the Act. Additionally, we added to the U.S. price an

amount for duty drawback pursuant to section 772(c)(1)(B) 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 each of 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 both respondents.

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

POSCO

POSCO reported sales to affiliated parties in the home market. For

sales to affiliated parties we applied the arm's-length test by

comparing them to sales of identical merchandise from POSCO to

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 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 prices of sales to affiliated

and unaffiliated customers net of all movement charges, direct selling

expenses and packing. We added to the starting price interest revenue

and duty drawback. 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 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.

Dongkuk

Dongkuk also reported sales to affiliated parties in the home

market. We applied the arm's-length test as described above.

Affiliated Reseller Sales

POSCO asked to be excused from reporting downstream sales through

its numerous affiliated service centers. While we denied POSCO's

request, we limited the number of service centers that POSCO would have

to report. POSCO submitted its narrative questionnaire response on July

8, and its electronic database, along with certain supplemental

information, on July 12,

[[Page 41229]]

1999. However, there are a number of problems associated with these

data that made it difficult to reflect these reseller sales in our

preliminary margin calculations. Most important is the fact that two of

these resellers sell subject merchandise which they purchase from both

POSCO and other unaffiliated suppliers. According to POSCO, these

resellers cannot distinguish the producer of the subject merchandise.

This makes it impossible to determine whether any given sale by these

resellers was produced by POSCO and should be included in our analysis.

In addition, petitioners have raised a number of issues regarding the

proper treatment of these sales and accompanying adjustments. However,

there is insufficient information on the record regarding these issues

to make a satisfactory determination concerning the use of these sales

in our antidumping analysis at this time. While we have not used these

sales for purposes of the preliminary determination, we intend to

address these issues in a supplemental questionnaire and determine

whether and in what way to use this information in the final

determination.

3. Cost of Production Analysis

In their petition, the petitioners submitted a countrywide

allegation pursuant to section 773(b)(1) of the Act that Korean

producers and exporters 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

each Korean exporter sold CTL plate in the home market at prices at

less than the COP. Accordingly, we initiated COP investigations with

respect to the two Korean exporters 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, 12965).

We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, for each

respondent we calculated COP based on the sum of the cost of materials

and fabrication for the foreign like product plus amounts for home

market selling, general and administrative expenses (``SG&A''),

interest expense, and packing costs. We relied on the COP data

submitted by POSCO and Dongkuk in their section D questionnaire

responses to calculate each company's weighted-average COPs for the

POI, except for the following instances where the information was

improperly quantified or valued: (1) We increased Dongkuk's reported

material cost for slabs purchased from affiliated suppliers to account

for an understatement of the affiliated supplier's costs reflected in

the transfer prices; (2) we increased Dongkuk's reported depreciation

expense as a result of our disallowance of the extension of the useful

lives for fixed assets; (3) we recalculated general and administrative

expenses to exclude certain items which were unrelated to general

operations; and (4) we recalculated interest expense to ensure

consistency between this basis for this expense and the basis for the

other reported costs. See Memo To Neal Halper, July 19, 1999. In

addition, we analyzed Dongkuk's treatment of certain start-up costs as

recorded in its accounting records in accordance with Korean GAAP. We

have allowed this treatment for purposes of the preliminary

determination as it appears to reasonably state Dongkuk's production

costs. However, we will continue to probe this issue at verification

and in the final determination.

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, rebates, 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 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.

For both Dongkuk and POSCO, we found that, for certain grades of

CTL plate, more than 20 percent of these firm's sales within an

extended period of time were at prices less than COP.

D. Calculation of CV

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

based on the sum of POSCO's and Dongkuk's cost of materials,

fabrication, SG&A, interest, U.S. packing costs and profit. We made

similar adjustments as those described above for COP. 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 prices to affiliated (where appropriate)

and unaffiliated customers. We made deductions, where appropriate, from

the starting price for inland freight, and also added duty drawbacks

and interest revenue. 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, warranties, and commissions. In the case of Dongkuk, we

recalculated it's credit expenses in the home market because of

inconsistencies in its sales response regarding this expense. See

Dongkuk Calculation Memo from Analyst to the File. Finally, we deducted

home market packing costs and added U.S. packing costs in accordance

with section 773(a)(6)(A) and (B) of the Act.

Price-to-CV Comparisons

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

if we were unable to find a home market match of the foreign like

product. We made adjustments to CV in accordance with section 773(a)(8)

of the Act. For comparisons to EP, we made COS adjustments by deducting

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

expenses.

[[Page 41230]]

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. See POSCO Calculation Memo from Analyst to

the File for an explanation of our treatment of currency conversion for

the POI in this case.

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. 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).)

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, except those entries produced by POSCO.

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. We will

adjust the deposit requirements to account for any export subsidies

found in the companion countervailing duty investigation. These

suspension-of-liquidation instructions will remain in effect until

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

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

Margin

Exported/manufacturer weighted-average percentage

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

Dongkuk Steel Mill Co. Ltd.............................. 6.15

Pohang Iron & Steel Co., Ltd............................ .05

All Others Rate......................................... 6.15

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

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 157 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 and 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 14, 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. 99-19305 Filed 7-28-99; 8:45 am]

BILLING CODE 3510-DS-P