# Notice of Preliminary Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** February 19, 1999
- **Citation:** 64 FR 8291

## Text

DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-846]

Notice of Preliminary Determination of Sales at Less Than Fair
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

EFFECTIVE DATE: February 19, 1999.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan, John Totaro, LaVonne
Jackson or Keir Whitson, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
4243, (202) 482-1374, (202) 482-0961, and (202) 482-1394, respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (``the Act''), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Act by the Uruguay Round Agreements Act (``URAA''). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to the regulations at 19 CFR part 351 (1998).

Preliminary Determination

We preliminarily determine that Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products (``hot-rolled steel'') from Japan is being, or
is likely to be, sold in the United States at less than fair value
(``LTFV''), as provided in section 733 of the Act. The estimated
margins of sales at LTFV are shown in the ``Suspension of Liquidation''
section of this notice.

Case History

On October 15, 1998, the Department initiated antidumping duty
investigations of imports of hot-rolled steel from Brazil, Japan, and
the Russian Federation. See Initiation of Antidumping Duty
Investigations: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel
Products from Brazil, Japan, and the Russian Federation, 63 FR 56607
(October 22, 1998) (Initiation). Since the initiation of this
investigation the following events have occurred:
The Department set aside a period for all interested parties to
raise issues regarding product coverage. Throughout the month of
November, the Department received numerous filings from respondents and
other interested parties proposing amendments to the scope of these
investigations. On January 6, 1999 and January 27, 1999, petitioners
(Bethlehem Steel Corporation, U.S. Steel Group, a unit of USX
Corporation, Ispat Inland Steel, LTV Steel Company, Inc., National
Steel Corporation, California Steel Industries, Gallatin Steel Company,
Geneva Steel, Gulf States Steel, Inc., IPSCO Steel Inc., Steel
Dynamics, Weirton Steel Corporation, the Independent Steelworkers
Union, and the United Steelworkers of America) filed letters agreeing
to amend the scope of these investigations to exclude those products
for which Itochu International, Inc., Nippon Steel Corp., and others
had requested exclusion (see Scope Memorandum to Joseph A. Spetrini,
February 12, 1999).
On October 22, 1998, the Department requested comments from
petitioners and respondents regarding the criteria to be used for model
matching purposes. On October 22 and 27, 1998, petitioners and
respondents (Companhia Siderurgica Nacional, Companhia Siderurgica
Paulista, Usinas Siderurgicas de Minas Gerais, Nippon Steel
Corporation, NKK Corporation, Kawasaki Steel, Sumitomo Metal
Industries, Ltd., and Kobe Steel Ltd.) submitted comments on our
proposed model-matching criteria.

[[Page 8292]]

On November 16, 1998, the United States International Trade
Commission (``ITC'') notified the Department of its affirmative
preliminary finding of threat of material injury in this case.
Additionally, on November 25, 1998, the ITC published its preliminary
determination that there is a reasonable indication that an industry in
the United States is threatened with material injury by reason of
imports of the subject merchandise from Japan (63 FR 65221). On October
19, 1998, the Department issued section A of an antidumping
questionnaire to Nippon Steel Corporation (``NSC''), NKK Corporation
(``NKK''), Kawasaki Steel Corporation (``KSC''), Sumitomo Metal
Industries (``Sumitomo''), Kobe Steel, Ltd. (``Kobe''), and Nisshin
Steel Co. Ltd. (``Nisshin''). On October 30, 1998, the Department
issued a memorandum which identified the respondents whose sales the
Department would examine for purposes of this investigation. (See
Respondent Selection section, below.) As a result of this decision, on
October 30, 1998, the Department issued sections B-E of an antidumping
questionnaire to NSC, NKK, and KSC (the chosen ``respondents''); the
remaining three companies were excused from responding to the section A
questionnaires the Department had sent them. Nevertheless, on November
12, 1998, Nisshin submitted a letter stating that it had not exported
subject merchandise to the United States during the period of
investigation (``POI'').
On November 16, 1998, we received section A questionnaire responses
from NSC, NKK, and KSC. Petitioners filed comments on NSC's, NKK's, and
KSC's section A questionnaire responses on November 30, 1998 and
December 1, 1998. We issued supplemental questionnaires for section A
to NSC, NKK, and KSC on December 4, 1998. On December 11, 1998, we
issued a letter to respondents informing them that the Department would
consider these supplemental questions for section A to have been issued
on January 4, 1999, in order to adhere to the schedule provided to all
interested parties at the time of initiation. On December 21, 1998, we
received responses to sections B, C, and D of the questionnaire from
NSC, NKK, and KSC. Petitioners filed comments on NSC's, NKK's, and
KSC's section B-D questionnaire responses on December 28, 1998. We
issued supplemental questionnaires for sections B, C and D to NSC, NKK,
and KSC on January 4, 1999, and received responses to these
questionnaires on January 25, 1999.
In addition, on November 10, 1998, KSC requested to be excused from
responding to section E (``Further Manufacturing'') of the Department's
questionnaire due to certain problems associated with obtaining the
requisite information. After a review of the material placed on the
record, the Department instructed KSC on January 4, 1999, to respond to
section E of the Department's questionnaire. However, on January 25,
1999, instead of responding to section E of the Department's
questionnaire, KSC argued that it was still unable to obtain the
requested information and reiterated its request to be excused from
providing the further manufactured sales in the United States. With
regard to NSC and NKK, although both companies were sent section E of
the questionnaire, both companies responded by stating that they did
not perform any further manufacturing operations on imports of subject
merchandise.
In the petition filed on September 30, 1998, petitioners alleged
that there is a reasonable basis to believe or suspect that critical
circumstances exist with respect to imports of hot-rolled steel from
Brazil, Japan, and the Russian Federation. On November 23, 1998, in the
investigations of Japan and the Russian Federation, the Department
issued its preliminary critical circumstances determination (63 FR
65750 November 30, 1998). In these determinations, the Department
preliminarily determined that there is a reasonable basis to believe or
suspect that critical circumstances exist with respect to imports of
hot-rolled steel from Japan and the Russian Federation.

Scope of Investigation

For purposes of this investigation, the products covered are
certain hot-rolled flat-rolled carbon-quality steel products of a
rectangular shape, of a width of 0.5 inch or greater, neither clad,
plated, nor coated with metal and whether or not painted, varnished, or
coated with plastics or other non-metallic substances, in coils
(whether or not in successively superimposed layers) regardless of
thickness, and in straight lengths, of a thickness less than 4.75 mm
and of a width measuring at least 10 times the thickness. Universal
mill plate (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 thickness of not less than 4 mm, not in coils and without
patterns in relief) of a thickness not less than 4.0 mm is not included
within the scope of these investigations.
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 the substrate for 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. The substrate for
motor lamination steels contains micro-alloying levels of elements such
as silicon and aluminum.
Steel products to be included in the scope of this investigation,
regardless of HTSUS definitions, are products in which: (1) iron
predominates, by weight, over each 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
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
0.012 percent of boron, 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 of zirconium.

All products that meet the physical and chemical description
provided above are within the scope of this investigation unless
otherwise excluded. The following products, by way of example, are
outside and/or specifically excluded from the scope of this
investigation:
Alloy hot-rolled steel products in which at least one of
the chemical elements exceeds those listed above (including e.g., ASTM
specifications A543, A387, A514, A517, and A506).
SAE/AISI grades of series 2300 and higher.
Ball bearing steels, as defined in the HTSUS.
Tool steels, as defined in the HTSUS.
Silico-manganese (as defined in the HTSUS) or silicon
electrical steel with a silicon level exceeding 1.50 percent.
ASTM specifications A710 and A736.
USS Abrasion-resistant steels (USS AR 400, USS AR 500).
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:

[[Page 8293]]

----------------------------------------------------------------------------------------------------------------
C Mn P S Si Cr Cu Ni
----------------------------------------------------------------------------------------------------------------
0.10-0.14%.................... 0.90% Max 0.025% Max 0.005% Max 0.30--0.50 0.50-0.70% 0.20--0.4 0.20% Max
% 0%
----------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches;
Yield Strength = 50,000 ksi minimum; Tensile Strength = 70,000-
88,000 psi.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:

----------------------------------------------------------------------------------------------------------------
C Mn P S Si Cr Cu Ni
----------------------------------------------------------------------------------------------------------------
0.10-0.16%.................... 0.70-0.90% 0.025% Max 0.006% Max 0.30--0.50 0.50-0.70% 0.25% Max 0.20% Max
%
Mo............................ .......... .......... .......... .......... .......... ......... .........
0.21% Max..................... .......... .......... .......... .......... .......... ......... .........
----------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi
Aim.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:

----------------------------------------------------------------------------------------------------------------
C Mn P S Si Cr Cu Ni
----------------------------------------------------------------------------------------------------------------
0.10-0.14%.................... 1.30-1.80% 0.025% Max 0.005% Max 0.30-0.50% 0.50-0.70% 0.20-0.40 0.20% Max
%
V(wt.)........................ Cb .......... .......... .......... .......... ......... .........
0.10 Max...................... 0.08% Max .......... .......... .......... .......... ......... .........
----------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi
Aim.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:

----------------------------------------------------------------------------------------------------------------
C Mn P S Si Cr Cu Ni
----------------------------------------------------------------------------------------------------------------
0.15% Max..................... 1.40% Max 0.025% Max 0.010% Max 0.50% Max 1.00% Max 0.50% Max 0.20% Max
Nb............................ Ca Al
0.005% Min.................... Treated 0.01-0.07%
----------------------------------------------------------------------------------------------------------------

Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield
Strength = 70,000 psi minimum for thicknesses 0.148 inches
and 65,000 psi minimum for thicknesses > 0.148 inches; Tensile Strength
= 80,000 psi minimum.
Hot-rolled dual phase steel, phase-hardened, primarily
with a ferritic-martensitic microstructure, contains 0.9 percent up to
and including 1.5 percent silicon by weight, further characterized by
either (i) tensile strength between 540 N/mm2 and 640 N/
mm2 and an elongation percentage 26 percent for
thicknesses of 2 mm and above, or (ii) a tensile strength between 590
N/mm2 and 690 N/mm2 and an elongation percentage
25 percent for thicknesses of 2mm and above.
Hot-rolled bearing quality steel, SAE grade 1050, in
coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A,
with excellent surface quality and chemistry restrictions as follows:
0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and
0.20 percent maximum residuals including 0.15 percent maximum chromium.
The merchandise subject to these investigations is classified in
the Harmonized Tariff Schedule of the United States (``HTSUS'') at
subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00,
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60,
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60,
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30,
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90,
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00,
7208.90.00.00, 7210.70.30.00, 7210.90.90.00, 7211.14.00.30,
7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00,
7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60,
7211.19.75.90, 7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain
hot-rolled flat-rolled carbon-quality steel covered by this
investigation, including: vacuum degassed, fully stabilized; high
strength low alloy; and the substrate for motor lamination steel may
also enter under the following tariff numbers: 7225.11.00.00,
7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00,
7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60,
7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00,
7226.91.80.00, and 7226.99.00.00. Although the HTSUS subheadings are
provided for convenience and Customs purposes, the written description
of the merchandise under investigation is dispositive.

Period of Investigation

The POI is July 1, 1997 through June 30, 1998.

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,

[[Page 8294]]

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 reasonably be examined.
After consideration of the complexities expected to arise in this
proceeding (with respect to each respondent) 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. Instead, we found that, given our resources, we
would be able to investigate the Japanese producers/exporters with the
greatest export volume, as identified above. These companies accounted
for more than 90 percent of all known exports of the subject
merchandise during the POI. For a more detailed discussion of
respondent selection in this investigation, see Respondent Selection
Memorandum, dated October 30, 1998.

Date of Sale

For its home market and U.S. sales, NSC reported the date of
shipment, NKK reported the date of shipment for home market sales, and
date of invoice for U.S. sales, and KSC reported the date of invoice as
the date of sale for both U.S. and home market sales. NSC, NKK, and KSC
all stated that the invoice/shipment date best reflects the date on
which the material terms of sale are established and that price and/or
quantity can and do change between order confirmation date and invoice/
shipment date. Petitioners, however, have alleged that the sales
documentation provided by respondents indicates that the order
confirmation date appears to be the date when the material terms of
sale are set for a majority of these respondents' sales of hot-rolled
steel. Given the relevance of petitioners' comments and the nature of
marketing these types of made-to-order products, we determined that
petitioners' claims have some merit. Consequently, on December 4, 1998,
and January 4, 1999, the Department requested respondents to provide
additional information concerning the nature and frequency of price and
quantity changes occurring between the date of order confirmation and
date of invoice. We also asked respondents to report the order
confirmation date for all home market and U.S. sales and to ensure that
the entire universe of sales with order or invoice dates within the POI
were properly reported. On December 21, 1998 and January 25, 1999, NKK
reiterated that invoice/shipment date is the most appropriate date of
sale and requested that it not have to report sales based on order
confirmation date. NSC and KSC provided the requested data in
accordance with the Department's instructions.
The Department is preliminarily using the dates of sales reported
by each respondent (date of shipment for NSC, invoice/shipment date for
NKK, and invoice date for KSC). We intend to fully examine this issue
at verification, and we will incorporate our findings, as appropriate,
in our analysis for the final determination. If we determine that order
confirmation is the most appropriate date of sale, we may resort to
facts available for the final determination to the extent that this
information has not been reported by the respondents. Due to the
complexity of this issue, we invite all interested parties to submit
comments on this issue in accordance with the schedule set forth in
this notice.

Product Comparisons

In accordance with section 771(16) of the Act, all products
produced by the respondents covered by the description in the Scope of
Investigation section, above, and sold in Japan during the POI are
considered to be foreign like products for purposes of determining
appropriate product comparisons to U.S. sales. We have relied on eleven
characteristics to match U.S. sales of subject merchandise to
comparison market sales of the foreign like product: paint, quality,
carbon content, strength, thickness, width, coiled or non-coiled,
temper rolling, pickling, edge trim, and patterns. These
characteristics have been weighted by the Department where appropriate.
Where there were no sales of identical merchandise in the home market
to compare to U.S. sales, we compared U.S. sales to the next most
similar foreign like product on the basis of the characteristics listed
in the antidumping questionnaire and reporting instructions.

Fair Value Comparisons

To determine whether sales of hot-rolled steel from Japan to the
United States were made at less than fair value, we compared the export
price (``EP'') to the normal value (``NV''), as described in the
``Export Price'' section of this notice below, or the constructed
export price (``CEP'') to the NV, as described in the ``Constructed
Export Price'' section of this notice. 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. In accordance with section
772(a) and (c) of the Act, we calculated EP for all of NSC's sales, all
of NKK's sales, and the sales KSC reported as EP sales since the
subject merchandise was sold to the first unaffiliated purchaser in the
United States prior to importation, and CEP was not otherwise warranted
based on the facts on the record. In accordance, with section 772 (b),
(c) and (d) of the Act, we calculated CEP for all of KSC's reported CEP
sales as the merchandise was sold in the United States by or for the
account of the producer or by a seller affiliated with the producer or
exporter, before or after the date of importation.

Export Price

We based our calculation for certain sales on EP, in accordance
with section 772(a) 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. We calculated EP
based on packed prices charged to the first unaffiliated customer in
the United States.
For NSC, NKK, and KSC we made company-specific adjustments to the
EP 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 (including ocean freight), marine
insurance fees, and brokerage and handling expenses; discounts and
rebates, and billing adjustments. No other adjustments were claimed or
allowed.

Constructed Export Price

We calculated CEP for KSC, in accordance with section 772(b) of the
Act when the first sale to an unaffiliated purchaser was made in the
United States by a seller affiliated with the producer or exporter
after the subject merchandise was imported into the United States.
We based CEP on the packed ex-warehouse or delivered prices to
unaffiliated purchasers in the United States. Where appropriate, we
made deductions from the starting price for discounts, credit, and
commissions. We also made deductions for the following movement
expenses, where appropriate, in accordance with section 772(c)(2)(A) of
the Act: inland freight from plant/warehouse to port of exportation,
foreign brokerage expenses, international freight (including ocean
freight), marine insurance, U.S. inland freight from warehouse to the
unaffiliated customer, U.S. warehouse expenses, and U.S. Customs
duties. In accordance with section 772(d)(1) of the Act, we deducted
selling expenses

[[Page 8295]]

associated with economic activities occurring in the United States,
including direct selling expenses, inventory carrying costs, and other
U.S. indirect selling expenses. In accordance with section 773(d)(3) of
the Act, we also deducted an amount for profit. In accordance with
section 772(f) of the Act, we computed profit based on total revenues
realized on sales in both the U.S. and home markets, less all expenses
associated with those sales. We then allocated profit to expenses
incurred with respect to U.S. economic activity, based on the ratio of
total U.S. expenses to total expenses for both the U.S. and home
market.
Although KSC performs further manufacturing on imported
merchandise, KSC did not provide transaction-specific information on
these sales in the United States. KSC is affiliated with two further
manufacturers in the United States. With regard to further manufactured
sales by its affiliate VEST Inc. (``VEST''), KSC reported that it was
unable to retrieve the requested data due to difficulties with the
computer system and other complications. After a review of the
information on the record, the Department determined that further
manufactured sales through VEST account for less than five percent of
total U.S. sales. Therefore, for purposes of the preliminary results,
the Department is disregarding these sales and not utilizing these
transactions in its margin calculation.
With regard to KSC's further manufactured sales via its other
affiliated further manufacturer, California Steel Industries, Inc.
(``CSI''), KSC argued that, due to conflicts of interest, CSI was
unable and unwilling to provide transaction-specific further
manufacturing information. After a review of the information placed on
the record, the Department determined that these sales account for a
substantial portion of KSC's U.S. sales. Section 776(a)(2) of the Act
provides, that if an interested party: (A) withholds information that
has been requested by the Department; (B) fails to provide such
information in a timely manner or in the form or manner requested; (C)
significantly impedes a proceeding under the antidumping statute; or
(D) provides such information but the information cannot be verified,
as provided in section 782(i), the Department shall, subject to
subsection 782(d), use facts otherwise available in reaching the
applicable determination. Section 776(b) of the Act provides that
adverse inferences may be used where 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 Statement of Administrative
Action (SAA) accompanying the URAA, H.R. Rep. No. 316, 103d Cong., 2d
Sess. 870 (1994). In the instant case, the Department has preliminarily
determined that KSC's and CSI's failure to respond to section E of the
Department's questionnaire satisfies the requirements of section
776(a)(2)(A), (B), and (C), as well as section 776(b). Therefore, the
Department has based its margin on adverse facts available. As facts
available, we used the highest calculated margin for U.S. sales that
fell within the mainstream of KSC's transactions. In selecting the
adverse margin, the Department sought a margin that was indicative of
KSC's customary selling practices and was rationally related to the
transactions to which the adverse facts available were being applied.
The selected margin is also sufficiently adverse to effectuate the
statutory purpose of adverse facts available, which is to induce
respondents to provide the Department with complete information in a
timely manner. See Final Determination of Sales at Less Than Fair
Value: Stainless Steel Wire Rod from Italy, 63 FR 40422, 40428, (July
29, 1998).
Section 776(c) provides that, when the Department relies on
secondary information rather than on information obtained in the course
of an investigation or review, it shall to the extent practicable
corroborate that information from independent sources that are
reasonably at their disposal. Because the information used to establish
the facts available margins for KSC's further manufactured sales was
information KSC submitted in the course of the investigation, rather
than secondary information, no corroboration of this data is necessary.

Normal Value

After testing home market viability and whether home market sales
were at below-cost prices, we calculated NV as noted in the ``Price-to-
Price Comparisons'' and ``Price-to-CV Comparison'' sections of this
notice.
A. 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 each 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 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.
B. Arm's Length Test
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 discounts, rebates, billing
adjustments, 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 and used those sales in determining NV. 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 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.
C. Downstream Sales
Pursuant to section 351.403 of the Department's regulations, the
Department does not normally require the reporting of downstream sales
if total sales of the foreign like product by a firm to all affiliated
customers account for five percent or less of the firm's total sales of
the foreign like product. In general, the Department does not believe
it necessary or appropriate to require the reporting of downstream
sales in all instances. Questions concerning the reporting of
downstream sales are complicated, and the resolution of such questions
depends on a number of considerations, including

[[Page 8296]]

the nature of the merchandise sold to and by the affiliate, the volume
of sales to the affiliate, the levels of trade involved, and whether
sales to affiliates were made at arm's length. In addition, the
Department normally will not require the respondent to report the
affiliate's downstream sales unless the sales to the affiliate fail the
arm's length test. The Department believes that imposing the burden of
reporting small numbers of downstream sales often is not warranted, and
that the accuracy of determinations generally is not compromised by the
absence of such sales.
In the instant case, NSC and KSC requested that they be excused
from reporting a small percentage of home market downstream sales due
to overwhelming burdens in obtaining the information and the fact that
these downstream sales will not constitute appropriate matches for
their U.S. sales of subject merchandise. After examining the data
placed on the record, the Department has preliminarily determined that
there are sufficient matches of sales in the home market and that the
downstream sales in question account for less than three percent of
each firm's total home market sales of subject merchandise. For
purposes of this preliminary determination, the Department is
disregarding this small percentage of downstream sales. The Department
intends to thoroughly examine this issue at verification and will
incorporate our findings, as appropriate in our analysis for the final
determination. If we determine that these downstream sales were
appropriate matches to U.S. sales, or where the data is readily
available, we may resort to facts available for the final determination
to the extent that this information has not been reported by the
respondents.
D. 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 each of the 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 (63 FR 56607, October 22, 1998).
We conducted the COP analysis described below.
1. Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated COP
for hot-rolled steel 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 expenses,
and packing costs. We 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.

NSC

We excluded from NSC's COP and CV data the reconciliation
adjustment related to differences between the control number
(``CONNUM'') specific cost and NSC's costs in its normal books and
records.

NKK

We recalculated NKK's G&A expense rate based on NKK's company-wide
G&A. Additionally we included the loss on outage for a blast furnace
accident in G&A expense and the mill movement expenses in the base used
for the G&A rate calculation. We disallowed NKK's adjustment for
alleged double counting of certain cost of manufacturing items.
Finally, we recalculated interest expense using the recalculated total
cost of manufacturing for each CONNUM.

KSC

We recalculated Kawasaki's general and administrative (``G&A'')
expense rate by including losses on disposal of fixed assets, special
retirement expenses, and past service portion of pension cost.
2. Test of Home Market Prices
We compared the weighted-average COP by CONNUM 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, 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. We compared the COP to home market
prices, less any applicable movement charges and direct and indirect
selling expenses.
3. Results of the COP Test
Pursuant to section 773(b)(2)(C)(i) 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, because we compared
prices to weighted-average COPs for the POI, we also determined that
such sales were not made at prices which would permit recovery of all
costs within a reasonable period of time, in accordance with section
773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost
sales. Where all sales of a specific product were at prices below the
COP, we disregarded all sales of that product.

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 arm's
length and/or cost test. We made comparisons on an actual weight to
actual weight basis. We made adjustments, where appropriate, for
physical differences in the merchandise in accordance with section
773(a)(6)(C) of the Act. In accordance with section 773(a)(6)(A) and
(B), we deducted home market packing costs and added U.S. packing
costs.

NSC

We calculated NV based on prices to affiliated customers that
passed the arm's length test and sales to unaffiliated home market
customers. We made adjustments for physical differences in the
merchandise, where necessary in accordance with 773(a)(6)(C)(ii) of the
Act. We made deductions for quantity and sales promotion discounts,
rebates and movement expenses. We found after reviewing the information
placed on the record that NSC's reported home market freight expenses
(INLFTCH) are inclusive of both affiliated and unaffiliated freight
costs. The Department requested NSC to provide analyses demonstrating
that expenses for freight services provided by affiliated suppliers
were based on a market rate. However, NSC did not provide these
comparisons. In addition, the Department was unable to determine which
freight expenses were paid to affiliated or unaffiliated companies.
Therefore, the Department, for this

[[Page 8297]]

preliminary determination has disallowed this adjustment in the home
market. In addition, we made circumstance-of-sale (``COS'') adjustments
for differences in credit and warranty expenses, where appropriate in
accordance with 773(a)(6)(C)(iii) of the Act. In our NV calculations,
we did not use a certain portion of NSC's reported downstream sales
because the sales by NSC to its affiliated reseller passed the arm's
length test (see Arm's Length Test section, above).

NKK

We calculated NV based on prices to affiliated customers that
passed the arm's length test and sales to unaffiliated home market
customers. We made adjustments for physical differences in the
merchandise, where necessary. We made deductions for quantity and sales
promotion discounts, rebates, billing adjustments, direct selling, and
movement expenses. In addition, we made COS adjustments for differences
in credit and warranty expenses, where appropriate in accordance with
section 773(a)(6)(C)(iii). In our NV calculations, we did not use a
certain portion of NKK's reported downstream sales because the sales by
NKK to its affiliated reseller passed the arm's length test (see Arm's
Length Test section, above).

KSC

We calculated NV based on prices to affiliated customers that
passed the arm's length test and on sales to unaffiliated home market
customers. We made adjustments for physical differences in the
merchandise, where necessary. We made deductions for quantity and sales
promotion discounts, rebates and movement expenses, direct selling
expenses, and processing fees. In addition, we made COS adjustments for
differences in credit and warranty expenses, where appropriate in
accordance with section 776(a)(6)(C)(iii). In our NV calculations, we
did not use a certain portion of KSC's reported downstream sales
because the sales by KSC to its affiliated reseller passed the arm's
length test (see Arm's Length Test section, above).

Level of Trade

In accordance with section 773(a)(1)(B)(i) 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 CV, that of the sales from
which we derive SG&A and profit. For EP, the LOT is also the level of
the starting price sale, which is usually from the exporter to the
importer. For CEP, it is the level of the constructed export sale from
the exporter to the affiliated 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 a LOT adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is
more remote from the factory than the CEP level and there is no basis
for determining whether the 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).
In this investigation, no respondent requested a LOT adjustment;
however, KSC requested a CEP offset. To determine whether a LOT
adjustment was necessary, in accordance with principles discussed
above, we examined information regarding the distribution systems in
both the United States and Japanese markets, including the selling
functions, classes of customer and selling expenses for each
respondent. Results of the LOT analysis for each respondent are
summarized below. For a complete discussion and the results of the LOT
analysis, please see the Department's memorandum on Level of Trade,
dated February 12, 1999.

NSC

In the home market, NSC sold to unaffiliated and affiliated trading
companies and to end-users. In the U.S. market, NSC sold only to
trading companies and reported all sales on an EP basis. Based on our
analysis we find that NSC performed essentially the same level of
selling functions for all three groups of sales.
NSC claims that there is no difference in the selling functions
between the home market and U.S. channels of distribution. When
comparing NSC's U.S. sales to its home market sales, we found that NSC
performed essentially the same level of selling functions in both the
United States and home market. Based on our examination of the
information on the record, we agree with NSC that it sold merchandise
at the same LOT in the home market and the U.S. market. Therefore, we
have not made a LOT adjustment because all price comparisons are at the
same LOT and an adjustment pursuant to section 773(a)(7)(A) of the Act
is not appropriate.

NKK

In the home market, NKK sold to unaffiliated and affiliated trading
companies and to end-users. NKK reported its sales to unaffiliated
trading companies and end-users as the same level of trade. NKK
performed essentially the same level of selling functions for all three
types of home market sales. Therefore, we find that there is one level
of trade in the home market. In the U.S. market, NKK sold only to
unaffiliated trading companies.
NKK claims that there are differences in the selling functions
between the home market and U.S. channels of distribution and therefore
its home market and U.S. sales should be considered made at different
levels of trade. When comparing NKK's U.S. sales to its home market
sales, we found that NKK provided different levels of selling functions
with respect to its U.S. and home market sales. For example, NKK
provided different levels of promotion, technical advice, warranty,
financing, delivery, and inventory and warehousing services in the U.S.
and in Japan. Based on our examination of the information on the
record, we preliminarily determine that NKK sold merchandise at one LOT
in the home market and a different LOT in the U.S. market. However,
after a review of the data on the record, we do not have information
which would allow us to examine pricing patterns between the relevant
levels of trade based on respondent's sales of subject merchandise in
the home market or other record information on which such an analysis
could be based. Therefore, we do not have an appropriate basis upon
which to determine a LOT adjustment. As a result, we have not made a
LOT adjustment. For a complete discussion of LOT, please see the
Department's memorandum on Level of Trade, dated February 12, 1999.

KSC

KSC stated that it sold subject merchandise through five channels
of trade during the period of investigation, three in the home market,
and two in the United States. KSC's U.S. sales were made to
unaffiliated trading companies and reported as EP sales, or through its

[[Page 8298]]

U.S. affiliate, Kawasho International, and reported as CEP sales. Its
three home market channels of trade involved sales to unaffiliated
trading companies; sales to unaffiliated end-users; and sales through
its affiliated reseller, Kawasho. For the last group of sales, the
Department conducted its LOT analysis based on Kawasho's sales to the
first unaffiliated customer.
The Department first examined whether any differences existed with
respect to the selling functions performed by KSC in making sales to
its three types of home market customers. The information on the record
indicates that there is a difference between the selling functions
performed in selling to end-users, directly or via affiliated trading
companies, as compared to the other home market channel of trade.
Therefore, using the information on the record, the Department
preliminarily determined that KSC sells at two levels of trade in the
home market.
Regarding KSC's U.S. EP sales, the Department found that evidence
existed to differentiate the selling functions between sales made to
unaffiliated trading companies for sales to the United States and sales
made at the two different levels of trade in the home market. Based
upon our analysis, we found a difference in the selling functions
performed on EP sales as compared to sales at each of the two distinct
levels of trade in the home market. Therefore, the Department
preliminarily determined that the information on the record justifies
treating KSC's EP sales as having been made at a different LOT from the
two home market levels of trade. However, we do not have information
which would allow us to determine whether there is a pattern of
consistent price differences between the relevant LOTs in the home
market. Therefore, we do not have an appropriate basis to determine a
LOT adjustment.
Regarding KSC's U.S. CEP sales, we examined the selling functions
performed by KSC in the home market in making sales to the two levels
of trade, and the selling functions performed by KSC in making sales to
its affiliate, Kawasho International, in the United States. For these
CEP sales we determined that fewer and different selling functions were
performed in making CEP sales to Kawasho International than in making
sales at any of the two home market LOTs. Therefore, information on the
record justifies treating CEP sales and the two groups of home market
sales as having been made at different levels of trade.
We next examined whether a LOT adjustment was appropriate when
KSC's CEP sales are compared to the home market levels of trade. The
Department makes this adjustment when it is demonstrated that a
difference in LOTs affects price comparability. However, where the
available data do not provide an appropriate basis upon which to
determine a LOT adjustment, and where the NV is established at a LOT
that is at a more advanced stage of distribution than the LOT of the
CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act
(the CEP offset provision). In the instant case, we were unable to
quantify the LOT adjustment in accordance with section 773(a)(7)(A) of
the Act, as we found that none of the LOTs in the home market matched
the LOT of the CEP transactions. Because of this, we were unable to
calculate a LOT adjustment. Instead, because we determined that all of
KSC's home market sales were made at levels of trade more advanced than
the LOT of KSC's U.S. sales, we granted a CEP offset and applied this
to comparisons between KSC's CEP sales and all HM sales.

Currency Conversion

We made currency conversions into U.S. dollars based on the
exchange rates in effect on the dates of the U.S. sales, as certified
by the Federal Reserve Bank, in accordance with section 773A(a) of the
Act.

Facts Available

Section 776(a)(2) of the Act provides, that if an interested party:
(A) withholds information that has been requested by the Department;
(B) fails to provide such information in a timely manner or in the form
or manner requested; (C) significantly impedes a proceeding under the
antidumping statute; or (D) provides such information but the
information cannot be verified, as provided in section 782(i), the
Department shall, subject to subsection 782(d), use facts otherwise
available in reaching the applicable determination.
Section 776(b) of the Act provides that adverse inferences may be
used 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). In the instant case, the Department determined that the failure
of KSC and its U.S. affiliate to respond to section E of the
Department's questionnaire satisfies the requirements of section
776(a)(2)(A), (B), and (C). Therefore, in accordance with the statutory
requirements, the Department applied adverse facts available. As
adverse facts available we used the highest calculated dumping margin
found for any individual product (i.e., CONNUM) as the dumping margin
for all sales via KSC's affiliated further manufacturer.
The Department also used facts available in determining the margins
for certain U.S. sales by NSC. NSC reported the majority of U.S. sales
on an actual weight basis. In addition, it reported all comparable
merchandise in the home market on an actual weight basis. However, it
reported a small quantity of U.S. sales on a theoretical weight basis.
Due to the fact that NSC did not provide conversion factors for these
U.S. sales upon the Department's request, we preliminarily assigned the
highest calculated margin by CONNUM as facts available for these
transactions. In addition, NSC did not provide full costs for certain
CONNUMs.
Section 776(b) of the Act provides that adverse inferences may be
used where 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). As facts available, we used the highest calculated margin for
U.S. sales that fell within the mainstream of NSC's and KSC's
transactions. In selecting the adverse margin, the Department sought a
margin that was indicative of NSC's and KSC's customary selling
practices and was rationally related to the transactions to which the
adverse facts available were being applied. The selected margin is also
sufficiently adverse to effectuate the statutory purpose of adverse
facts available, which is to induce respondents to provide the
Department with complete information in a timely manner. See Final
Determination of Sales at Less Than Fair Value: Stainless Steel Wire
Rod from Italy, 63 FR 40422, 40428, (July 29, 1998).
NKK reported all its U.S. and home market sales on an actual weight
basis, with the exception of less than one percent of home market
sales. Although the Department requested conversion factors for these
transactions, NKK refused to provide conversion factors for these
sales. Therefore, for purposes of the preliminary determination, we
used adverse facts available as the adjusted price for these
transactions used in calculating NV. As adverse facts available for
each CONNUM we assigned the highest calculated adjusted price for that
CONNUM to the relevant transactions within that CONNUM.

[[Page 8299]]

All Others Rate

Recognizing the impracticality of examining all producers and
exporters in all cases (see SAA at 873), section 735(c)(5)(A) of the
Act provides for the use of an ``all others'' rate, which is applied to
non-investigated firms. This section states that the all others rate
shall generally be an amount equal to the weighted average of the
weighted-average dumping margins established for exporters and
producers individually investigated, excluding any zero and de minimis
margins, and any margins based entirely upon the facts available.
Therefore, we have preliminarily assigned to all other exporters of
Japanese hot-rolled steel, an ``all others'' margin that is the
weighted average of the margins calculated for NSC, NKK and KSC.

Verification

As provided in section 782(i) of the Act, we will verify all
information relied upon in making our final determination.

Critical Circumstances

The Department notes that it will request company specific export
information from NSC, NKK, and KSC, for our final determination. We
invite interested parties to comment on the issue of critical
circumstances, and we will consider these comments and the company
specific data in making our final determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the
U.S. 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 which is 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 posting of a bond
equal to the weighted-average amount by which the NV exceeds the export
price, as indicated below. These suspension-of-liquidation instructions
will remain in effect until further notice. The weighted-average
dumping margins are as follows:

------------------------------------------------------------------------
Weighted-
average
Exporter/Manufacturer margin
(percent)
------------------------------------------------------------------------
Nippon Steel Corporation................................... 25.14
NKK Corporation............................................ 30.63
Kawasaki Steel Corporation................................. 67.59
All Others................................................. 35.06
------------------------------------------------------------------------

International Trade Commission (ITC) Notification

In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether imports of hot-rolled steel are materially injuring, or
threaten material injury to, the U.S. industry.

Public Comment

Case briefs or other written comments may be submitted to the
Assistant Secretary for Import Administration no later than fifty days
after the date of publication of this notice, and rebuttal briefs,
limited to issues raised in case briefs, no later than fifty-five days
after 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, N.W., Washington, D.C.
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). If this investigation proceeds
normally, we will make our final determination no later than April 28,
1999.
This determination is issued and published in accordance with
sections 733(d) and 777(i)(1) of the Act.

Dated: February 12, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-4196 Filed 2-18-99; 8:45 am]
BILLING CODE 3510-DS-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-4196. Public record. Not legal advice.