Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil

Federal RegisterNov 10, 1999

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DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-830]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products

From Brazil

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 10, 1999.

FOR FURTHER INFORMATION CONTACT: Phyllis Hall (Companhia Siderurgica

Nacional or CSN), Mark Ludwikowski or Martin Odenyo (Usinas

Siderurgicas de Minas Gerais and Companhia Siderurgica Paulista or

USIMINAS/COSIPA), Nancy Decker, or Robert M. James, Import

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

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

20230; telephone: (202) 482-1398, (202) 482-2704, (202) 482-5254, (202)

482-0196 and (202) 482-5222, respectively.

The Applicable Statute

Unless otherwise indicated, all citations to 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 Department of Commerce (Department)

regulations refer to the regulations codified at 19 CFR Part 351 (April

1999).

Preliminary Determination

We preliminarily determine that cold-rolled flat-rolled carbon-

quality steel products (cold-rolled steel products) from Brazil are

being sold, 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.

[[Page 61250]]

Case History

The Department initiated this investigation on June 21, 1999. See

Initiation of Antidumping Duty Investigations: Certain Cold-Rolled

Flat-Rolled Carbon-Quality Steel Products from Argentina, Brazil, the

People's Republic of China, Indonesia, Japan, the Russian Federation,

Slovakia, South Africa, Taiwan, Thailand, Turkey, and Venezuela, 64 FR

34194 (June 25, 1999) (Initiation Notice). Since the initiation of the

investigations, the following events have occurred:

The Department set aside a period for all interested parties to

raise issues regarding product coverage. From July through October

1999, the Department received responses from a number of parties

including importers, respondents, consumers, and petitioners, aimed at

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

Spetrini, dated November 1, 1999 (Scope Memorandum) for a list of all

persons submitting comments and a discussion of all scope comments.

There are several scope exclusion requests for products which are

currently covered by the scope of this investigation that are still

under consideration by the Department. These items are considered to be

within the scope for this preliminary determination; however, these

requests will be reconsidered for the final determination. See Scope

Memorandum.

On June 21, 1999, the Department invited interested parties to

submit comments regarding the criteria to be used for model matching

purposes. On June 28 1999, petitioners (Bethlehem Steel Corporation,

Gulf States Steel, Inc., Ispat Inland Steel, LTV Steel Company, Inc.,

National Steel Corporation, Steel Dynamics, Inc., U.S. Steel Group, a

unit of USX Corporation, Weirton Steel Corporation, the Independent

Steel Workers Union, and the United Steelworkers of America) and

respondents (CSN, USIMINAS, and COSIPA) submitted comments on our

proposed model matching criteria.

On June 22, 1999, the Department issued Section A antidumping

questionnaires to Cia Acos Especiais Itabira, Mangels Industria e

Comercio Ltda., Armco do Brazil S.A., CSN, USIMINAS, and COSIPA. On

July 9, 1999, the Department issued Sections B-E of the antidumping

questionnaires to CSN, USIMINAS, and COSIPA.

On July 1, 1999, Brasmetal Waelzholz, S.A. submitted a letter

identifying itself as a producer/exporter of the subject merchandise

and asked to be considered as a respondent in this investigation. On

July 9, 1999 the Department decided to limit the examination of

producers/exporters of subject merchandise, and not to investigate

voluntary respondents unless mandatory respondents should fail to

cooperate in the investigation. The Department selected CSN, USIMINAS,

and COSIPA as mandatory respondents. Consequently, Brasmetal was not

selected as a mandatory respondent in this investigation. See

Memorandum to Joseph A. Spetrini, dated July 9, 1999.

On July 19, 1999, the United States International Trade Commission

(ITC) notified the Department that it preliminarily determined that

there is a reasonable indication that an industry in the United States

is materially injured by the reason of imports of the subject

merchandise from Brazil.

On July 20, 1999, the Department received the Section A

questionnaire responses from CSN, USIMINAS, and COSIPA. Petitioners

filed comments on CSN's, USIMINAS' and COSIPA's Section A questionnaire

responses on August 3, 1999. The Department issued supplemental

questionnaires for Section A to CSN, USIMINAS, and COSIPA on August 24,

1999.

On August 30 and September 7, 1999, the Department received

responses to Sections B, C, and D of the questionnaire from CSN,

USIMINAS, and COSIPA. On October 12, 1999, the Department issued a

decision memorandum collapsing USIMINAS and COSIPA for purposes of this

investigation pursuant to section 351.401(f) of the Department's

regulations. See Affiliated Respondents section below. Petitioners

filed comments on CSN's and USIMINAS/COSIPA's Section B-D questionnaire

responses on September 7 and September 8, 1999. The Department issued

supplemental questionnaires for Sections B, C, and D to CSN and

USIMINAS/COSIPA on September 10, 1999. The Department received

responses to the Section A supplemental questionnaires on September 14,

1999, and responses to the Sections B-D supplemental questionnaires on

October 4, 1999.

On July 12 and July 26, 1999, USIMINAS and COSIPA requested that

they not be required to report home market sales of non-rectangular

shapes of steel, otherwise known as non-rectangular blanks, and that

they not be required to report home market sales through three

affiliated resellers. On August 27, 1999, the Department excused

USIMINAS and COSIPA from reporting home market sales of non-rectangular

blanks, subject to verification. However, the Department will examine

at verification whether non-rectangular blanks are sufficiently similar

to U.S. sales to warrant model match comparisons. We also determined

that the respondents should report home market sales by the affiliated

resellers. See Memorandum to Joseph A. Spetrini, dated August 27, 1999.

Period of Investigation

The period of the investigation (POI) is April 1, 1998, through

March 31, 1999. This period corresponds to each respondent's four most

recent fiscal quarters prior to the month of the filing of the petition

(i.e., June 1999).

Scope of Investigation

For purposes of this investigation, the products covered are

certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel

products, neither clad, plated, nor coated with metal, but whether or

not annealed, painted, varnished, or coated with plastics or other non-

metallic substances, both in coils, 0.5 inch wide or wider, (whether or

not in successively superimposed layers and/or otherwise coiled, such

as spirally oscillated coils), and also in straight lengths, which, if

less than 4.75 mm in thickness having a width that is 0.5 inch or

greater and that measures at least 10 times the thickness; or, if of a

thickness of 4.75 mm or more, having a width exceeding 150 mm and

measuring at least twice the thickness. The products described above

may be rectangular, square, circular or other shape and include

products of either rectangular or non-rectangular cross-section where

such 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.

Specifically included in this scope are vacuum degassed, fully

stabilized (commonly referred to as interstitial-free (``IF'')) steels,

high strength low alloy (``HSLA'') steels, and motor lamination steels.

IF steels are recognized as low carbon steels with micro-alloying

levels of elements such as titanium and/or niobium added to stabilize

carbon and nitrogen elements. HSLA steels are recognized as steels with

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

titanium, vanadium, and molybdenum. Motor lamination steels contain

micro-alloying levels of elements such as silicon and aluminum.

Steel products included in the scope of this investigation,

regardless of definitions in the Harmonized Tariff Schedules of the

United States (``HTSUS''), are products in which: (1) iron

predominates, by weight, over each

[[Page 61251]]

of the other contained elements; (2) the carbon content is 2 percent or

less, by weight, and; (3) none of the elements listed below exceeds the

quantity, by weight, respectively indicated:

1.80 percent of manganese, or

2.25 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 (also called columbium), or

0.15 percent of vanadium, or

0.15 percent of zirconium.

All products that meet the written physical description, and in

which the chemistry quantities do not exceed any one of the noted

element levels listed above, are within the scope of this investigation

unless specifically excluded. The following products, by way of

example, are outside and/or specifically excluded from the scope of

this investigation:

SAE grades (formerly also called AISI grades) above 2300;

Ball bearing steels, as defined in the HTSUS;

Tool steels, as defined in the HTSUS;

Silico-manganese steel, as defined in the HTSUS;

Silicon-electrical steels, as defined in the HTSUS, that are

grain-oriented;

Silicon-electrical steels, as defined in the HTSUS, that are

not grain-oriented and that have a silicon level exceeding 2.25

percent;

All products (proprietary or otherwise) based on an alloy ASTM

specification (sample specifications: ASTM A506, A507);

Silicon-electrical steels, as defined in the HTSUS, that are

not grain-oriented and that have a silicon level less than 2.25

percent, and

(a) fully-processed, with a core loss of less than 0.14 watts/pound

per mil (.001 inches), or

(b) semi-processed, with core loss of less than 0.085 watts/pound

per mil (.001 inches);

Certain shadow mask steel, which is aluminum killed cold-

rolled steel coil that is open coil annealed, has an ultra-flat,

isotropic surface, and which meets the following characteristics:

Thickness: 0.001 to 0.010 inches

Width: 15 to 32 inches

Chemical Composition

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

Element................................................. C

Weight %................................................ Certain flapper valve steel, which is hardened and tempered,

surface polished, and which meets the following characteristics:

Thickness: 1.0 mm

Width: 152.4 mm

Chemical Composition

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

Element........................... C Si Mn P S

Weight %.......................... 0.90-1.05 0.15-0.35 0.30-0.50 0.03 0.006

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

Mechanical Properties

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

Tensile Strength............................. 162 Kgf/mm \2\

Hardness..................................... 475 Vickers

hardness number

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

Physical Properties

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

Flatness............................... 0.04

Oxide Inclusion................................. 0.05

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

Compressive Stress: 10 to 40 Kgf/mm \2\

Surface Roughness

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

Thickness (mm) Roughness (m)

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

t 0.209............................. Rz 0.5

0.209 0.310..................... Rz 0.6

0.310 0.440..................... Rz 0.7

0.440 0.560..................... Rz 0.8

[[Page 61252]]

0.560 1.0

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

Certain ultra thin gauge steel strip, which meets the

following characteristics:

Thickness: 0.100 mm +/-7%

Width: 100 to 600 mm

Chemical Composition

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

Element........................ C Mn P S Al Fe

Weight %....................... 0.07 0.2-0.5 0.05 0.05 0.07 Balance

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

Mechanical Properties

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

Hardness............................... Full Hard (Hv 180 minimum)

Total Elongation....................... 0.3 micron

Camber (in 2.0 m)...................... 0.5 mm

Edge Burr.............................. Certain silicon steel, which meets the following

characteristics:

Thickness: 0.024 inches +/-.0015 inches

Width: 33 to 45.5 inches

Chemical Composition

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

Element........................ C Mn P S Si Al

Min. Weight %.................. ................... .................. .................. .................. 0.65 ..................

Max. Weight %.................. 0.004 0.4 0.09 0.009 .................. 0.4

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

Mechanical Properties

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

Hardness............................... B 60-75 (AIM 65)

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

Physical Properties

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

Finish................................. Smooth (30-60 microinches)

Gamma Crown (in 5 inches).............. 0.0005 inches, start measuring

\1/4\ inch from slit edge

Flatness............................... 20 I-UNIT max.

Coating................................ C3A-.08A max. (A2 coating

acceptable)

Camber (in any 10 feet)................ \1/16\ inch

Coil Size I.D.......................... 20 inches

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

Magnetic Properties

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

Core Loss (1.5T/60 Hz) NAAS............ 3.8 Watts/Pound max.

Permeability (1.5T/60 Hz) NAAS......... 1700 gauss/oersted typical

1500 minimum

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

Certain aperture mask steel, which has an ultra-flat surface

flatness and which meets the following characteristics:

Thickness: 0.025 to 0.245 mm

[[Page 61253]]

Width: 381-1000 mm

Chemical Composition

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

Element.............................. C N Al

Weight %............................. Certain tin mill black plate, annealed and temper-rolled,

continuously cast, which meets the following characteristics:

Chemical Composition

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

Element........................ C Mn P S Si Al As Cu B N

Min. Weight %.................. 0.02 0.20 ............. ................... ............ 0.03 ............ ............ ............ 0.003

Max. Weight %.................. 0.06 0.40 0.02 0.023 (Aiming 0.018 0.03 0.08 (Aiming 0.05) 0.02 0.08 ............ 0.008 (Aiming

Max.) 0.005)

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

Non-metallic Inclusions: Examination with the S.E.M. shall not

reveal individual oxides > 1 micron (0.000039 inches) and inclusion

groups or clusters shall not exceed 5 microns (0.000197 inches) in

length.

Surface Treatment as follows:

The surface finish shall be free of defects (digs, scratches, pits,

gouges, slivers, etc.) and suitable for nickel plating.

Surface Finish

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

Roughness, RA Microinches (Micrometers)

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

Aim Min. Max.

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

Extra Bright.................. 5 (0.1) 0 (0) 7 (0.2)

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

Certain full hard tin mill black plate, continuously cast,

which meets the following characteristics:

Chemical Composition

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

Element........................ C Mn P S Si Al As Cu B N

Min. Weight %.................. 0.02 0.20 ............. ................... ............ 0.03 ............ ............ ............ 0.003

Max. Weight %.................. 0.06 0.40 0.02 0.023 (Aiming 0.018 0.03 0.08 (Aiming 0.05) 0.02 0.08 ............ 0.008 (Aiming

Max.) 0.005)

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

Non-metallic Inclusions: Examination with the S.E.M. shall not

reveal individual oxides > 1 micron (0.000039 inches) and inclusion

groups or clusters shall not exceed 5 microns (0.000197 inches) in

length.

Surface Treatment as follows

The surface finish shall be free of defects (digs, scratches, pits,

gouges, slivers, etc.) and suitable for nickel plating.

Surface Finish

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

Roughness, RA Microinches (Micrometers)

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

Aim Min. Max.

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

Stone Finish.................. 16 (0.4) 8 (0.2) 24 (0.6)

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

Certain ``blued steel'' coil (also know as ``steamed blue

steel'' or ``blue oxide'') with a thickness and size of 0.38 mm x 940

mm x coil, and with a bright finish;

Certain cold-rolled steel sheet, which meets the following

characteristics:

Thickness (nominal): 0.019 inches

Width: 35 to 60 inches

Chemical Composition

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

Element............................. C O B

Max. Weight %....................... 0.004 ....................... .......................

Min. Weight %....................... ........................ 0.010 0.012

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

Certain band saw steel, which meets the following

characteristics:

Thickness: 1.31 mm

Width: 80 mm

Chemical Composition

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

Element.......................... C Si Mn P S Cr Ni

Weight %......................... 1.2 to 1.3 0.15 to 0.35 0.20 to 0.35 0.03 0.007 0.3 to 0.5 0.25

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

[[Page 61254]]

Other properties:

Carbide: fully spheroidized having > 80% of carbides, which are

0.003 mm and uniformly dispersed

Surface finish: bright finish free from pits, scratches, rust,

cracks, or seams

Smooth edges

Edge camber (in each 300 mm of length): 7 mm arc height

Cross bow (per inch of width): 0.015 mm max.

The merchandise subject to this investigation is typically

classified in the HTSUS at subheadings: 7209.15.0000, 7209.16.0030,

7209.16.0060, 7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090,

7209.18.1530, 7209.18.1560, 7209.18.2550, 7209.18.6000. 7209.25.0000,

7209.26.0000, 7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000,

7210.90.9000, 7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500,

7211.23.6030, 7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090,

7211.29.4500, 7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000,

7212.40.5000, 7212.50.0000, 7225.19.0000, 7225.50.6000, 7225.50.7000,

7225.50.8010, 7225.50.8085, 7225.99.0090, 7226.19.1000, 7226.19.9000,

7226.92.5000, 7226.92.7050, 7226.92.8050, and 7226.99.0000.

Although the HTSUS subheadings are provided for convenience and

U.S. Customs Service (``U.S. Customs'') purposes, the written

description of the merchandise under investigation is dispositive.

Selection of Respondents

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

individual dumping margins for each known exporter and producer of the

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

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

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

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

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

merchandise, this provision permits the Department to investigate

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

is statistically valid based on the information available at the time

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

volume of the subject merchandise that can be reasonably examined.

After consideration of the complexities expected to arise in these

proceedings and the resources available to the Department, we

determined that it was not practicable in this investigation to examine

all known producers/exporters of subject merchandise. We selected CSN,

USIMINAS, and COSIPA as mandatory respondents because these are the

three largest producers and they account for the vast majority of U.S.

imports. Further, we determined not to investigate voluntary

respondents, including Brasmetal Waelzholz, unless mandatory

respondents fail to cooperate. See Memorandum to Joseph A. Spetrini on

respondent selection dated July 9, 1999.

Product Comparisons

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

produced by respondents covered by the description in the Scope of

Investigation section above and sold in Brazil during the POI are

considered to be foreign like products for purposes of determining

appropriate product comparisons to U.S. sales. Where there were no

sales of identical merchandise in the home market to compare to U.S.

sales, the Department compared U.S. sales to the next most similar

foreign like product on the basis of the characteristics listed in the

antidumping questionnaire and reporting instructions.

Affiliated Respondents

Under section 771(33)(E) of the Act, if one party owns, directly or

indirectly, five percent or more of the other, they shall be considered

to be affiliated. Since USIMINAS owns 49.79% of COSIPA, the Department

determined that USIMINAS and COSIPA are affiliated. See Memorandum to

Joseph A. Spetrini, dated October 12, 1999.

Furthermore, it is the Department's practice to collapse affiliated

producers for purposes of calculating a margin when the affiliated

producers have production facilities for similar or identical products

that would not require substantial retooling in order to restructure

manufacturing priorities and when the facts demonstrate that there is

significant potential for manipulation of pricing or production. In

accordance with section 351.401(f) of the Department's regulations, the

Department concluded that both companies are fully integrated producers

currently offering a similar range of products, including cold-rolled

steel products, and that their facilities would not require substantial

retooling to restructure manufacturing priorities. Furthermore, in

light of USIMINAS' high level of ownership of COSIPA, common directors,

and the fact that COSIPA is consolidated on USIMINAS' financial

statements, there is a significant possibility of price or production

manipulation between the two companies. For these reasons, the

Department collapsed USIMINAS and COSIPA into one entity for the

purpose of this investigation. See Id.

While it also appears that there may be links between the collapsed

entity, USIMINAS/COSIPA, and CSN, there is insufficient information on

the record at this time to consider all three companies to be

affiliated or to collapse CSN with USIMINAS/COSIPA. Therefore, we

preliminarily do not find CSN to be affiliated with USIMINAS/COSIPA,

and we preliminarily are not collapsing CSN with USIMINAS/COSIPA.

The Department notes that affiliation and collapsing are very

complex and difficult issues. Therefore, the Department invites parties

to submit information and comment on these issues to ensure that our

decision is based on a complete and thorough record. The Department

intends to examine these issues carefully for the final determination

of this investigation. Any new information that parties wish to provide

the Department must be submitted no later than November 8, 1999. All

information or arguments parties provide will be fully analyzed in

making our final determination.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine normal value (NV) based on sales in the

comparison market at the same level of trade (LOT) as the export price

(EP) or constructed export price (CEP) transaction. The NV LOT is that

of the starting price of 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

[[Page 61255]]

sale, which is usually from exporter to importer. For CEP, it is the

level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or

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

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

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

the export transaction, we make a LOT adjustment under section

773(a)(7)(A) of the Act. 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).

CSN

In the home market CSN made sales to service centers/distributors

and end-users. The company claims two levels of trade with respect to

these sales: (1) CSN ``direct'' sales to unaffiliated end-user

customers; and, (2) sales through Industrial Nacional de Acos Laminados

S.A. (INAL) (an affiliated service center/distributor) and sales

further processed under a tolling arrangement with an unaffiliated

company (toller), before going to unaffiliated customers. CSN reported

``no channels of distribution'' in the home market in its original

August 30, 1999, Section B questionnaire response because it claims no

distinction in the channels of distribution. CSN did, however, report a

code identifying the type of sale (i.e., CSN direct sales, INAL sales,

etc.). In the U.S. market CSN reported sales to two types of customers:

trading companies and distributors. CSN reported ``no channels of

distribution'' in the U.S. market since it claims that they have no

impact on pricing.

Although somewhat unclear, it appears that CSN is actually claiming

that in the home market it has two channels of distribution involving

different marketing stages (direct sales and affiliated distributor

sales). In the United States CSN appears to be claiming only a single

level of trade.

In determining whether separate LOTs actually existed in the home

market, we first examined whether CSN's sales involved different

selling functions along the chain of distribution between CSN and its

unaffiliated customers. CSN stated that it sells some products

directly, and other products through INAL or as merchandise further

processed by an unaffiliated toller. CSN claims that INAL and the

toller perform additional services beyond those performed on direct

sales. Taking into account whether or not sales are made through

intermediate parties, it appears that CSN's direct sales may be at a

different stage of marketing than its other sales, because these sales

were sold directly from the mill to the unaffiliated customer, whereas

sales through the other channel involved an affiliated intermediary or

tolling by an unaffiliated party before going to an unaffiliated

customer. This would indicate that CSN has two home market LOTs.

However, in further analyzing CSN's home market levels of trade, we

reviewed available information on the record about the company's

selling functions pertaining to each of these channels of distribution.

In its initial response, dated July 20, 1999, CSN claimed that it

provided warranties, technical assistance, returns, and freight. From

the written description, we determine that warranties and returns cover

the same selling functions. In a supplemental response, CSN identified

six different selling functions: freight/delivery arrangement, further

processing into smaller lots, custom-made products, ``end-user

information'', inventory maintenance, and just-in-time delivery (see

page 24 of CSN's October 4, 1999, response to the Department's

supplemental for Section B). CSN has not provided narrative information

on ``end-user information.'' Therefore we are not considering this as a

selling function. In addition, further processing into smaller lots and

custom made products do not appear to be traditional selling functions

relevant to the Department's LOT analysis but, rather, are production

costs. Also, we decided to combine two selling functions, inventory

maintenance and just-in-time delivery (which together we refer to as

``warehousing''), because we found that they were not sufficiently

different to warrant being treated as unique selling functions.

Although these two responses are somewhat inconsistent, we conclude

that CSN performed four selling functions in its home market: freight,

warehousing, warranty, and technical assistance.

Next, we examined whether these selling functions are provided

consistently across both channels of distribution in the home market,

finding that warehousing is rarely performed on CSN direct sales while

it is performed to some extent on INAL/toller sales. The other selling

functions are provided equally across both channels of distribution.

In conclusion, while CSN claimed two different levels of trade

based on differences in selling functions in connection with each LOT,

we find that the actual differences in selling function are relatively

minor. Therefore, we preliminarily determine that only one LOT exists

for CSN in the home market.

In determining the LOT in the U.S. market, we examined the selling

functions performed by CSN for its U.S. sales which, as discussed

elsewhere, were all made on an EP basis. CSN reported the following

selling activities and services for direct sales in the home market, as

well as EP sales in the U.S. market: warranties, returns, and freight.

As noted above, we interpret warranties and returns to constitute the

same selling function. Thus, we conclude that CSN has two U.S. selling

functions: warranty and freight.

In analyzing the differences between stages of marketing (or their

equivalent) and selling functions along the chain of distribution

between CSN and its unaffiliated customers, we have concluded that all

of CSN's U.S. sales are at one stage of marketing because they are all

direct EP sales from CSN to unaffiliated importers in the United

States, involving the same reselling functions. CSN noted that it did

not claim different channels of distribution since they have no impact

on pricing. CSN sells to two types of customers in the U.S. market:

trading companies and distributors.

We next compared EP sales to home market sales to determine whether

they were made at the same LOT. To perform this analysis, we compared

the selling functions offered by CSN on its EP sales to the functions

performed on its home market sales. As noted, CSN has four home market

selling functions (warranty, freight, technical assistance, and

warehousing) and two U.S. selling functions (warranty and freight).

However, CSN reported that its home market warehousing to many

customers was only performed rarely or to a limited degree. We find

that limited warehousing and technical assistance do not constitute a

significant difference between the services provided to home market and

U.S. customers. The information on record indicates that, for both EP

and home market transactions, CSN performed similar selling functions.

Consequently, the Department preliminarily determines

[[Page 61256]]

that there is only one LOT in the home market and that it is at the

same level as the single LOT in the U.S. market. Therefore, no LOT

adjustment was necessary.

USIMINAS/COSIPA

In the home market USIMINAS/COSIPA made sales to end-users,

affiliated distributors, and unaffiliated distributors. USIMINAS/COSIPA

claims seven ``channels of distribution'' with respect to home market

sales: (1) mill to OEMs; (2) mill to affiliated distributor; (3) mill

to unaffiliated distributor; (4) affiliated distributor to affiliated

distributor; (5) affiliated distributor to OEM; (6) affiliated

distributor to non-affiliated distributor; and (7) affiliated

distributor to retailer.

USIMINAS/COSIPA claims that there is a significant difference

between prices charged to end-users and prices charged to distributors.

USIMINAS/COSIPA further claims that prices charged to distributors and

to end-users differ significantly from prices charged by affiliated

distributors to their downstream customers.

Although the record is somewhat unclear, we have analyzed USIMINAS/

COSIPA's arguments with respect to its home market LOT. The seven

``channels'' which USIMINAS/COSIPA identifies apparently are only

single steps in the channels of distribution to unaffiliated

purchasers. The actual channels appear to be the following: (1) mill to

OEM; (2) mill to unaffiliated distributor (or affiliated distributor at

arm's length prices); (3) mill through affiliated distributor to OEM;

(4) mill through affiliated distributor to unaffiliated distributor;

and (5) mill through affiliated distributor to retailer. In examining

these channels, there appear to be two potential home market LOT: (1)

direct sales from the mill to unaffiliated parties (``mill direct

sales''); and (2) sales through affiliated distributors to unaffiliated

parties (``downstream sales'').

In determining whether separate levels of trade actually existed in

the home market, the Department first examined available information on

the record about the company's selling functions for each channel of

distribution. USIMINAS/COSIPA indicated that the selling functions

performed by the affiliated distributors on downstream sales are much

more significant than those performed by USIMINAS/COSIPA itself in the

first three home market channels of distribution (i.e., mill direct

sales). The following are the selling functions provided for downstream

sales: inventory maintenance, after sales service/warranties (to a

small degree), special warehousing, technical advice (to a small

degree), freight and delivery arrangement (to a great degree), and

special processing (cutting to customer's desired length). USIMINAS and

COSIPA perform the following services on mill direct sales: after sales

service/warranties (to a small degree), technical advice (to a small

degree), and freight and delivery arrangement (to a small degree). Of

these selling functions, special processing does not appear to be a

traditional selling function relevant to the Department's LOT analysis

but, rather, is a production cost. In addition, we decided to combine

two selling functions, inventory maintenance and special warehousing

(which, together, we refer to as ``warehousing''), because we found

that they were not sufficiently different to warrant being treated as

unique selling functions. Based on this information, we determined that

the selling functions of the affiliates for downstream sales were

significantly different than those for mill direct sales, and

therefore, we have determined that downstream sales by affiliates were

made at a different LOT than other HM sales.

While USIMINAS/COSIPA mill direct sales to end-users (whether or

not further processed) and mill direct sales to unaffiliated

distributors involve different channels of distribution, these sales do

not involve significant differences in selling functions. Therefore, we

do not consider these channels to represent different levels of trade.

Thus, we preliminarily determine that downstream sales and mill direct

sales represent two different home market LOTs.

In the U.S. market USIMINAS/COSIPA claim that all sales were made

at one level of trade, through one channel of distribution. USIMINAS/

COSIPA state that all U.S. sales were made to unaffiliated trading

companies. USIMINAS/COSIPA state that these sales are made at the same

level of trade as USIMINAS/COSIPA's mill direct home market sales to

unaffiliated distributors. However, as noted above, the Department

finds the selling functions of all home market mill direct sales

(whether to unaffiliated distributors or to OEMs) to be quite similar

to each other, thus constituting a single LOT. The Department

additionally finds the selling functions for mill direct sales to be

similar to U.S. sales. The only selling functions associated with U.S.

sales are after sales service/warranties and freight and delivery

arrangements, which are also provided to home market mill direct

customers. The only other selling function offered for home market mill

direct sales is a limited amount of technical advice. Both home market

mill direct sales and U.S. sales involve sales to large customers,

including service centers/distributors that resell steel. (U.S. sales

are only made to resellers.) Therefore, based on our analysis of

selling functions, the Department finds U.S. sales to be at the same

LOT as home market mill direct sales. Therefore, U.S. sales were only

compared to home market mill direct sales, and no LOT adjustment was

necessary.

Fair Value Comparisons

To determine whether sales of cold-rolled steel products from

Brazil were made at less than fair value, we compared the EP to the NV,

as described in the 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 for comparison to weighted-average

NVs.

Transactions Investigated

As stated in 19 CFR 351.401(i), the Department will use invoice

date as the date of sale unless another date reflects the date on which

the exporter or producer establishes the material terms of sale. Both

CSN and USIMINAS/COSIPA reported the date of the nota fiscal (i.e., the

date the product leaves the factory) as the date of sale.

CSN maintains that it uses the date of the nota fiscal for home

market sales in its accounting records because this is the date on

which material terms of sale are finalized. Moreover, CSN notes that it

adds estimated freight and insurance expenses to each invoice, which

are not confirmed in writing until the date of the nota fiscal. For its

U.S. sales, CSN reported the date of the nota fiscal to be consistent

with the Final Determination of Sales at Less than Fair Value: Certain

Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 FR

38756 (July 19, 1999) (Hot Rolled Steel). CSN notes, however, that it

disagrees with the determination in Hot Rolled Steel that the

appropriate date of sale for CSN's U.S. sales is the ex-factory

shipment date (i.e., nota fiscal date). CSN argues that the date of

commercial invoice (i.e., the invoice issued on the date of shipment

from the port) should be the date of sale.

USIMINAS and COSIPA maintain that for their home market sales, the

nota fiscal is the date on which the material terms of sale are first

finalized. The nota fiscal is also used by both companies' accounting

systems to register home market sales. For their U.S. sales,

[[Page 61257]]

USIMINAS and COSIPA both reported the date of the nota fiscal to be

consistent with Hot Rolled Steel. USIMINAS notes, however, that it

disagrees with the use of this date as there can be changes in

quantities or prices to the ultimate customer after the nota fiscal

date and that the commercial invoice date (i.e., the invoice issued on

the date of shipment from the port) should be the date of sale.

USIMINAS claims that the commercial invoice is the date to which all

U.S. sales are tied in its accounting system. COSIPA indicated that the

nota fiscal and the commercial invoice for U.S. sales are issued on the

same date.

For this preliminary determination, we are using the dates reported

by respondents as the date of sale. Thus, for both home market and U.S.

sales we are using the nota fiscal date as the date of sale. We intend

to fully examine date of sale during verification and will incorporate

our findings, as appropriate, in our analysis for the final

determination.

Export Price

We based our calculations on EP, in accordance with section 772 of

the Act, because the subject merchandise was sold by the producer or

exporter directly to the first unaffiliated purchaser in the United

States prior to importation. Furthermore, we calculated EP based on

packed prices charged to the first unaffiliated customers in the United

States. We made company-specific adjustments as follows:

CSN

We made deductions from the starting price, where appropriate, for

the following movement expenses, in accordance with section

772(c)(2)(A) of the Act: discounts, foreign inland freight,

international freight, and foreign brokerage and handling expenses.

In addition, for sales for which payment has not been received, we

recalculated credit expenses using the due date of the respondent's

supplemental submission (October 1, 1999), rather than the date of the

first response (August 30, 1999). Because it is CSN's stated practice

to charge late payment fees, we imputed home market interest revenue

for sales on which payment has not yet been received. For U.S. sales,

we have reclassified as discounts, certain payments to a customer of

CSN, which CSN had reported as commissions. A discount is a reduction

in price to a customer, while a commission is a form of payment for

services. Therefore, the issue is whether there was one transaction

between CSN and the ultimate customer in which the trading company

acted as a sales agent for a commission, or whether there were two

transactions, one in which the trading company bought from CSN and

received a discount on the price for that initial sale and subsequently

resold the merchandise to the ultimate purchaser. See Certain Cold-

Rolled Carbon Steel Flat Products from Germany; Final Results of

Antidumping Duty Review, 60 FR 65264, 65277-8 (December 19, 1995);

Certain Carbon Steel Products from Austria; Final Determination of

Sales at LTFV, 50 FR 33365 (August 19, 1985). We preliminarily

determined that the latter situation exists in the present case.

USIMINAS/COSIPA

The Department made deductions from the starting price, where

appropriate, for the following movement expenses, in accordance with

section 772(c)(2)(A) of the Act: foreign inland freight, international

freight, and foreign brokerage and handling expenses.

Normal Value

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 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. Since

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 all respondents. Therefore, we have

based NV on home market sales in the usual commercial quantities and in

the ordinary course of trade.

Arm's Length Test

CSN

CSN sold merchandise to an affiliated reseller (INAL). CSN reported

sales by INAL to unaffiliated companies, and CSN did not sell to any

other affiliated companies. Therefore, we did not need to perform the

arm's length test.

USIMINAS/COSIPA

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. 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 unaffiliated parties, we

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

length. See 19 CFR 351.403(c). In instances where no price ratio could

be constructed for an affiliated customer because identical merchandise

was not sold to unaffiliated customers, we were unable to determine

that these sales were made at arm's length prices, and therefore,

excluded them from our LTFV analysis. See, e.g., Notice of 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 product.

Cost of Production (COP) Analysis

Based on the cost allegation submitted by petitioners in the

original petition, the Department found reasonable grounds to believe

or suspect that respondents had made sales in the home market at prices

below the cost of producing the merchandise, in accordance with section

773(b)(2)(A)(i) of the Act. As a result, the Department initiated an

investigation to determine whether respondents made home market sales

during the POI at prices below their respective COPs within the meaning

of section 773(b) of the Act. See Initiation Notice. The Department

conducted the COP analysis described below.

A. Calculation of COP

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

calculated COP for cold-rolled steel products based on the sum of the

cost of materials and fabrication for the foreign like product, plus

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

Department relied on the COP data submitted by each respondent in its

cost questionnaire response except, as discussed below, in specific

instances where the submitted costs were not appropriately quantified

or valued.

CSN

The Department relied on CSN's COP and CV data submitted on October

4, 1999, except in the following instances: (1) We revised its general

and

[[Page 61258]]

administrative (G&A) expense rate calculation to include non-operating

expenses and to exclude all monetary correction items except those

expenses related to accounts payable, and (2) we revised its financial

expense ratio to include monetary corrections for financing losses and

to exclude an offset for interest income from financial operations. See

Cost Calculation Memorandum, dated November 1, 1999.

USIMINAS/COSIPA

The Department relied on USIMINAS/COSIPA's COP and CV data

submitted on October 4, 1999, except in the following instances: (1) We

revised its submitted G&A expense ratio to exclude packing expenses

from the cost of goods sold used as the denominator in the calculation

of the ratio; (2) we revised its submitted financial expense ratio to

include expenses for export financing and foreign exchange losses

related to export financing and exclude an offset for foreign exchange

gains related to accounts receivable; and (3) for COSIPA we adjusted

the transfer price for iron ore obtained from an affiliated supplier in

accordance with the ``major input'' rule. See Cost Calculation

Memoranda, November 1, 1999.

B. Test of Home Market Prices

The Department compared the weighted-average COP for each

respondent, adjusted where appropriate (see above), to home market

sales prices 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, the Department 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, the Department compared the COP to home

market prices, less any applicable movement charges, taxes, billing

adjustment, and discounts and rebates.

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, the Department 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, the Department determined such sales to have been

made in ``substantial quantities,'' in accordance with 773(b)(2)(C)(i)

of the Act, within an extended period of time, in accordance with

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

compared prices to weighted-average COPs for the POI , the Department

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, the

Department disregarded the below-cost sales.

Price-to-Price Comparisons

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

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

test. We made adjustments, where appropriate, for physical differences

in the merchandise in accordance with section 773(a)(6)(C)(ii) of the

Act, as well as for differences in circumstances of sale (COS) in

accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410

of the Department's regulations. In accordance with section 773(a)(6)

of the Act, we deducted home market packing costs and added U.S.

packing costs.

Under section 777A(d)(1)(A) of the Act, we have broad authority to

use a number of methodologies in calculating the average prices used to

determine whether sales at less than fair value exist. More

specifically, under section 351.414(d)(3) of the Department's

regulations, the Department may use averaging periods shorter than the

POI when normal value, export price, or constructed export price varies

significantly over the POI. In this case, NV (in dollars) after January

12, 1999, varied significantly from NV earlier in the POI, due

primarily to a significant change in the underlying dollar value of the

real, evidenced by the precipitous and large drop that began in January

1999. As noted in the currency conversion section below, in late

January and early February 1999 the real lost over 40 percent of its

value. Consequently, it is appropriate to use two averaging periods to

avoid the possibility of a distortion in the dumping calculation. This

methodology is consistent with our policy adopted in Stainless Steel

Plate in Coils from Korea, 64 FR 15444, 15452 (March 31, 1999) and

Stainless Steel Sheet and Strip from Korea, 64 FR 30664, 30676 (June 8,

1999) (Stainless Sheet from Korea). Therefore, for all respondents, we

have used two averaging periods for this preliminary determination, the

beginning of the POI through January 12, 1999, and January 13, 1999,

through the end of the POI.

Brazilian Taxes

Consistent with past practice, we adjusted NV for the full amount

of IPI and ICMS taxes collected on the subject merchandise because

these are VAT taxes that have a basis for deduction according to

section 773(a)(6)(B)(iii) of the Act. We did not deduct the Brazilian

PIS and COFINS taxes as suggested by respondents in calculating NV.

Since these taxes are levied on total revenues, the taxes are not

imposed directly on the product or its components. Accordingly, there

is no basis to deduct them in the calculation of NV under section

773(a)(6)(B)(iii) of the Act. See Final Results of Antidumping Duty

Administrative Review: Certain Cut-To-Length Carbon Steel Plate from

Brazil, 63 FR 12744, 12746 (March 16, 1998); and Notice of Final

Determination of Sales at Less than Fair Value: Certain Hot-Rolled

Flat-Rolled Carbon Quality Steel from Brazil, 64 FR 38756, 38765 (July

19, 1999).

CSN

For CSN, we based NV on prices of home market sales that passed the

cost test. We made adjustments for billing adjustments and certain

taxes as discussed above. We made deductions, where appropriate, for

foreign inland freight (net of taxes) pursuant to section 773(a)(6)(B)

of the Act. We made COS adjustments for differences in credit, interest

revenue, warranty expenses, and bank charges, where appropriate. We

also made adjustments for home market inventory carrying costs and

other indirect selling expenses, where appropriate, to offset

differences between home market and U.S. commissions.

Under section 776(a) of the Act, if information is not available on

the record, the Department may use the facts available. Section 776(b)

of the Act provides that adverse inferences may be used in selecting

from among the facts available when an interested party has failed to

cooperate by not acting to the best of its ability to comply with the

Department's requests for information. See also, Statement of

Administrative Action (SAA) accompanying the URAA, H.R. Rep. No. 316,

103d Cong., 2d Sess. 870 (1994). We found that the reported amount of

CSN's U.S. commission payments did not match the amount of commissions

it described in its narrative response; CSN described its commissions

as a fixed percentage of the price, but the amount reported often

differed from that percentage. In our September 10, 1999 supplemental

questionnaire, we asked CSN to explain the commission calculations. In

its

[[Page 61259]]

October 4, 1999 supplemental, CSN allegedly corrected the commissions

in its database. However, analysis of the database submitted on October

4, 1999, reveals that the reported commissions still do not follow the

reported methodology. Consequently, we are unable to determine whether

the reported commission amounts are incorrect, or whether the

methodology as described is incorrect. Further, as this problem has

been pointed out to CSN, and CSN failed to correct the discrepancy, we

conclude that CSN has not cooperated to the best of its ability with

respect to this issue. Therefore, for purposes of this preliminary

determination, as adverse facts available, if the reported U.S.

commission is greater than the stated methodology, we are using the

reported U.S. commission amount. However, when the reported amount is

less than or equal to the stated methodology, we are adjusting the U.S.

commission to the stated methodology.

An affiliated reseller of CSN reported its downstream sales made in

the home market and the related COM. However, the reported COM has not

been segregated between variable and fixed costs. Consequently, using

the cost data as reported, we are unable to calculate an adjustment for

the physical differences in merchandise. Therefore, as facts available,

wherever CSN and the reseller sold identical products we replaced the

reseller's variable COM (VCOM) with CSN's VCOM. In those instances

where the reseller sold unique products we calculated a weighted-

average percentage of the variable cost to the total COM for CSN. Then,

we applied the result to the total COM reported by the affiliated

reseller to attain the reseller's VCOM. We used this calculated VCOM to

determine the adjustment to normal value related to the physical

differences in merchandise.

USIMINAS/COSIPA

For USIMINAS/COSIPA we based NV on prices of home market sales that

passed the cost test. We made deductions for billing adjustments,

discounts, taxes, and rebates. We made deductions, where appropriate,

for inland freight and inland insurance, pursuant to section

773(a)(6)(B) of the Act. We note that the deduction for inland freight

should be net of VAT taxes. However, while we have requested this

information, we did not receive it in time for this preliminary

determination. Consequently, we have estimated an amount for VAT paid

on inland freight and deducted the estimated VAT from the reported

amounts. We made COS adjustments for imputed credit expense, interest

revenue, and warranties.

For home market sales on which payment has not been received,

USIMINAS/COSIPA stated that they used October 1, 1999, as a surrogate

payment date. However, analysis of the database indicates that COSIPA

used the date of the first submission. Section 776(b) of the Act

provides that the Department may use the facts available when necessary

information is not on the record. Therefore, in accordance with section

776(a) we must use facts available as facts available, we recalculated

credit expenses for COSIPA for sales for which payment has not been

received using the due date of the respondents supplemental submission

(October 1, 1999), rather than the date of the first submission.

Because it is standard practice for the respondents to charge late

payment fees, we imputed home market interest revenue for COSIPA for

sales on which payment has not been received.

Also, we have recalculated home market credit expenses so that

credit expenses for all sales are based on prices net of taxes and

billing adjustments.

USIMINAS made home market sales based on both actual and

theoretical weight. U.S. sales were all made on actual weight. For

USIMINAS'' home market sales made based on theoretical weight, USIMINAS

did not provide a conversion factor to adjust the applicable weight,

prices, and adjustments for these sales to an actual weight basis, for

proper comparison to other home market sales and to U.S. sales. As

facts available, we have applied a theoretical to actual weight cold-

rolled steel conversion factor from the public file of Certain Cold-

Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea;

Fifth Administrative Review. A copy of this factor was submitted on the

record of the instant case by petitioners on October 8, 1999. For all

home market theoretical weight sales, we multiplied the reported

quantity by this factor and divided the reported prices and adjustments

by this factor. We will review this topic at verification, and for

purposes of the final determination, we will look at any information

that may make this conversion more accurate.

Affiliated resellers of USMINAS/COSIPA reported their downstream

sales made in the home market and the related COM. However, the

reported COM has not been segregated between variable and fixed costs.

Consequently, using the cost data as reported, we are unable to

calculate an adjustment for the physical differences in merchandise.

Therefore, as facts available, wherever USIMINAS/COSIPA and the

reseller sold identical products we replaced the resellers' VCOM with

USIMINAS/COSIPA's VCOM. In those instances where the resellers sold

unique products we calculated a weighted-average percentage of the

variable cost to the total COM for USIMINAS/COSIPA. Then we applied the

result to the total COM reported by the affiliated resellers to attain

the resellers variable COM. We used the revised VCOMs to determine the

adjustment to normal value related to the physical differences in

merchandise.

Currency Conversions

We made currency conversions in accordance with section 773A of the

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

exchange rate to convert foreign currencies into U.S. dollars unless

the daily rate involves a fluctuation. The Department considers a

``fluctuation'' to exist when the daily exchange rate differs from the

benchmark rate by 2.25 percent or more. 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 generally substitute the

benchmark rate for the daily rate, in accordance with established

practice. (An exception to this rule is described below.) 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 occurs 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.

Our preliminary analysis of dollar-real exchange rates show that

the real declined rapidly in early 1999, losing over 40 percent of its

value in January 1999, when the Brazilian government ended its exchange

rate restrictions. The decline was, in both speed and magnitude, many

times more severe than any change in the dollar-real exchange rate

during recent years, and it did not rebound significantly in a short

time. As such, we preliminarily determine that the decline in the real

during January 1999 was of such magnitude that the dollar-real exchange

rate cannot reasonably be viewed as having simply fluctuated at that

time, i.e., as having experienced only a

[[Page 61260]]

momentary drop in value relative to the normal benchmark. We

preliminarily find that there was a large, precipitous drop in the

value of the real in relation to the U.S. dollar in January 1999.

We recognize that, following a large and precipitous decline in the

value of a currency, a period may exist wherein it is unclear whether

further declines are a continuation of the large and precipitous

decline or merely fluctuations. Under the circumstances of this case,

such uncertainty may have existed following the large, precipitous drop

in January 1999. Thus, we devised a methodology for identifying the

point following a precipitous drop at which it is reasonable to presume

that rates were merely fluctuating. Beginning on January 13, 1999, we

used only actual daily rates until the daily rates were not more than

2.25 percent below the average of the 20 previous daily rates for five

consecutive days. At that point, we determined that the pattern of

daily rates no longer reasonably precluded the possibility that they

were merely ``fluctuating.'' (Using a 20-day average for this purpose

provides a reasonable indication that it is no longer necessary to

refrain from using the normal methodology, while avoiding the use of

daily rates exclusively for an excessive period of time.) Accordingly,

from the first of these five days, we resumed classifying daily rates

as ``fluctuating'' or ``normal'' in accordance with our standard

practice, except that we began with a 20-day benchmark and on each

succeeding day added a daily rate to the average until the normal 40-

day average was restored as the benchmark. See Notice of Final Results

of Antidumping Duty Administrative Review: Certain Welded Carbon Steel

Pipes and Tubes from Thailand, 64 FR 56759, 56763, October 21, 1999.

Applying this methodology in the instant case, we used daily rates

from January 13, 1999 through March 4, 1999. We then resumed the use of

our normal methodology through the end of the period of investigation

(March 31, 1999), starting with a benchmark based on the average of the

20 reported daily rates on March 5, 1999.

Critical Circumstances

On June 10, 1999, petitioners alleged that there is a reasonable

basis to believe or suspect that critical circumstances exist with

respect to imports of cold-rolled steel from Brazil. In accordance with

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

days prior to the preliminary determination, the Department must issue

its preliminary critical circumstances determination no later than the

preliminary determination.

Section 733(e)(1) of the Act provides that the Department will

determine that critical circumstances exist if there is a reasonable

basis to believe or suspect that: (A)(i) there is a history of dumping

and material injury by reason of dumped imports in the United States or

elsewhere of the subject merchandise, or (ii) the person by whom, or

for whose account, the merchandise was imported knew or should have

known that the exporter was selling the subject merchandise at less

than its fair value and that there was likely to be material injury by

reason of such sales, and (B) there have been massive imports of the

subject merchandise over a relatively short period. Moreover, in

determining whether there is a reasonable basis to believe or suspect

that an importer knew or should have known that there was likely to be

material injury by reason of dumped imports, the Department may look to

the preliminary injury determination of the ITC.

History of Dumping or Importer Knowledge

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

merchandise, the Department normally considers evidence of an existing

antidumping duty order in the United States or elsewhere to be

sufficient. The Department found that Mexico has in force an

antidumping duty order on cold-rolled steel from Brazil, and therefore

determined that there is a history of dumping and material injury by

reason of dumped imports of the subject merchandise. Since we have

found a history of dumping causing material injury with respect to

Brazil, there is no need to examine importer knowledge.

Massive Imports

In determining whether there are ``massive imports'' over a

``relatively short time period,'' the Department ordinarily basis its

analysis on import data for at least three months preceding (the ``base

period'') and following (the ``comparison period'') the filing of the

petition. Pursuant to 19 CFR 351.206(h)(2), unless the imports in the

comparison period have increased by at least 15 percent during the base

period, we will not consider the imports to have been ``massive''. In

addition, the regulations allow for the adjustment of the base and

comparison periods where the availability of the data and the

commercial realities of the marketplace so dictate. Additionally, as

stated in the Department's regulations, at section 351.206(i), if the

Secretary finds that importers, exporters, or producers had reason to

believe, at some time prior to the beginning of the proceeding, that a

proceeding was likely, then the Secretary may consider a time period of

not less than three months from that earlier time.

In this case petitioners argue that importers, exporters or

producers of Brazilian cold-rolled steel had reason to believe that an

antidumping proceeding was likely before the filing of the petition.

The Department examined whether conditions in the industry and

published reports and statements provide a basis for inferring

knowledge that a proceeding was likely. We considered other sources of

information including press reports in late 1998 regarding rising

imports and the likelihood of antidumping action against imports of

cold-rolled steel. We find that such press reports, particularly in

October and November 1998, are sufficient to establish that by the

beginning of November 1998, importers, exporters, or producers knew or

should have known that a proceeding was likely concerning cold-rolled

products from Brazil. See Preliminary Analysis Memoranda, dated

November 1, 1999 (Preliminary Analysis Memoranda). Accordingly, we

examined the increase in import volumes from January--October 1998 as

compared to November 1998-August 1999, the maximum period for which we

had reliable data in this case, and found that company-specific export

shipment data shows an increase of more than 100 percent in exports

from USIMINAS/COSIPA and a decrease in exports from CSN. See

Preliminary Analysis Memoranda. Therefore, pursuant to section 733(e)

of the Act and section 351.206(h) of the Department's regulations, we

preliminarily determine that there have been massive imports of cold-

rolled steel from USIMINAS/COSIPA over a relatively short period of

time.

We have also analyzed the issue of critical circumstances for

companies in the ``all others'' category. Our conclusions regarding the

history of dumping with respect to any such companies are identical to

our conclusions on this issue for the individually examined

respondents. Similarly, we conclude, for the reasons stated above, that

such importers knew or should have known that a proceeding was likely

as of November 1999. With regard to the issue of massive imports, in

accordance with our current practice (See Notice of Final Determination

of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality

Steel Products from Japan, 64 FR 24329, 24335 (May 6, 1999)), we first

[[Page 61261]]

considered the import data of the mandatory respondents. In this case,

we found massive imports for one respondent, based on an increase in

imports of more than 100 percent, but not massive imports for the

other. We also considered whether U.S. customs data would permit the

Department to analyze imports of subject merchandise. However, that

data includes products not subject to this investigation. Therefore, it

is not appropriate to base our critical circumstances determination on

that data. (See Final Determination of Sales at Less Than Fair Value:

Stainless Steel Sheet and Strip in Coils From Germany, 64 FR 30710,

30728 (June 8, 1999)). Under these circumstances, while we normally do

not consider the relative volumes of imports from respondents, we

considered that the respondent with massive imports accounts for a

larger volume of imports than the respondent that did not have the

massive imports. Based on these facts, we find that there were massive

imports from the uninvestigated companies. Thus we preliminarily find

critical circumstances with respect to companies in the ``all others''

category.

Accordingly, we preliminary determine that critical circumstances

exist for USIMINAS/COSIPA and for companies in the ``all others

category'' but not for CSN.

Verification

In accordance with section 782(i) of the Act, we will verify all

information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(2) of the Act, we are directing

the U.S. Customs Service to suspend liquidation of all entries of cold-

rolled steel products from Brazil that are entered, or withdrawn from

warehouse, for consumption: (1) For CSN, on or after the date of

publication of this notice in the Federal Register; and (2) for

USIMINAS/COSIPA and all others, on or after the date 90 days prior to

the date of publication of this notice in the Federal Register. We will

instruct the U.S. 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, as indicated in the chart below. These instructions

suspending liquidation will remain in effect until further notice. The

weighted-average dumping margins are as follows:

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

Weighted-

Exporter manufacturer average margin

(in percent)

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

CSN..................................................... 51.24

USIMINAS/COSIPA......................................... 40.65

All Others.............................................. 42.97

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

International Trade Commission Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final antidumping determinations are

affirmative, the ITC will determine whether these imports are

materially injuring, or threatening material injury to, the U.S.

industry. The deadline for that ITC determination is the later of 120

days after the date of this preliminary determination or 45 days after

the date of our final determination.

Public Comment

Case briefs or other written comments may be submitted to the

Assistant Secretary for Import Administration no later than fifty days

after the date of publication of this notice, and rebuttal briefs,

limited to issues raised in case briefs, no later than fifty-five days

after the date of publication of this preliminary determination. A list

of authorities used and an executive summary of issues should accompany

any briefs submitted to the Department. This summary should be limited

to five pages total, including footnotes. In accordance with section

774 of the Act, we will hold a public hearing, if requested, to afford

interested parties an opportunity to comment on arguments raised in

case or rebuttal briefs. Tentatively, any hearing will be held fifty-

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

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

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

by telephone the date, time, and location of the hearing 48 hours

before the scheduled time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

1870, within 30 days of the date of publication of this notice.

Requests should contain: (1) the party's name, address, and telephone

number; (2) the number of participants; and (3) a list of the issues to

be discussed. At the hearing, each party may make an affirmative

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

make rebuttal presentations only on arguments included in that party's

rebuttal brief. See 19 CFR 351.310(c). We intend to make our final

determination no later than 75 days after the date of issuance of this

notice.

This determination is issued and published in accordance with

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

Dated: November 1, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-29460 Filed 11-9-99; 8:45 am]

BILLING CODE 3510-DS-P

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.