Notice of Preliminary Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From the Russian Federation

DEPARTMENT OF COMMERCE

International Trade Administration

[A-821-809]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From the

Russian Federation

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 25, 1999.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski (Severstal), Carrie

Blozy (MMK), Lesley Stagliano (Novolipetsk), or Rick Johnson, Import

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

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

20230; telephone: (202) 482-3208, (202) 482-0165, (202) 482-0190, and

(202) 482-3818, 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 the Russian

Federation 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). 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. 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 Corporation, and others had requested exclusion. See Memorandum

to Joseph A. Spetrini, from Richard Weible, Edward Yang, and Roland

MacDonald; Re: Antidumping and Countervailing Duty Investigations of

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

Japan, and the Russian Federation: Scope Amendments, dated February 12,

1999.

On October 19, 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.) in the Japanese and Brazilian

investigations submitted comments on proposed model matching criteria.

On November 16, 1998, the United States International Trade

Commission (``the ITC'') notified the Department of its November 13,

1998 affirmative preliminary finding of threat of material injury with

respect to subject imports from the Russian Federation. 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 being threatened with material injury by reason of imports of

the subject merchandise from the Russian Federation (63 FR 65221).

On October 19, 1998, the Department issued Section A of its

antidumping questionnaire to JSC Severstal (``Severstal''), Novolipetsk

Iron & Steel Corporation (``Novolipetsk''), Magnitogorsk Iron & Steel

Works (``MMK''), Amursteel, Novosibprokat Joint-Stock Co., Chusovskoy

Iron & Steel Works, Gorkovsky Metallurgichesky Zavod, Kuznetskiy Met

Kombinat, Lysva Metallurgical Plant, Nosta, Shchelkovsky Sheet Rolling

Mill, Taganrog, Tulachermet, Volgograd Steel Works (Red October),

Zapsib Met Kombinat, and Mechel. On October 30, 1998, the Department

issued Sections C and D of its antidumping questionnaire to the above-

named companies.

On November 16, 1998, we received the section A questionnaire

responses from Severstal, Novolipetsk, and MMK. Petitioners filed

comments on all three of the respondents section A questionnaire

responses on November 30, 1998 and December 1, 1998. We issued

supplemental questionnaires for section A to Severstal, Novolipetsk,

and MMK 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. On December 21, 1998, we received responses to sections C and D

of the questionnaire from Severstal, Novolipetsk, and MMK. Petitioners

filed comments on Severstal's, Novolipetsk's, and MMK's section C and D

questionnaire responses on December 28, 1998. We issued supplemental

questionnaires for sections C and D to Severstal, Novolipetsk, and MMK

on January 4, 1999, and received responses to these questionnaires on

January 25, 1999, as well as to our supplemental section A

questionnaires. On February 2, 1999, we issued an additional

supplemental questionnaire to Severstal, and received the company's

response on February 5, 1999.

On February 9, 1999, MMK submitted additional narrative explanation

and worksheets describing its calculation of the factors of production.

Because of the late date of this submission, the Department has not had

time to fully analyze the information provided by MMK. Therefore, the

Department has not considered this submission for its preliminary

determination. However, the Department will consider MMK's February 9,

1999 submission for its final determination.

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 decisions (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 for

[[Page 9313]]

imports of hot-rolled steel from Japan and the Russian Federation.

The Department notes that it has requested company specific export

information from Severstal, Novolipetsk, and MMK. 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.

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:

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

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% 0.20-0.40% 0.20% Max

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

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:

[[Page 9314]]

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

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 period of investigation (POI) is January 1, 1998 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. When 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 reasonably be examined.

After consideration of the complexities expected to arise in this

proceeding and the resources available to the Department, we determined

that it was not practicable to examine all known producers/exporters of

subject merchandise. Instead, we found that, given our resources, we

would be able to investigate the three Russian producers/exporters with

the greatest export volume. Based on the responses to section A from

Severstal, Novolipetsk, and MMK, these companies accounted for

substantially all known exports of the subject merchandise during the

POI. For a more detailed discussion of respondent selection in this

investigation, see Memorandum to Joseph A. Spetrini, from the Russia

Team; Re: Selection of Respondents (``Respondent Selection Memo''),

dated November 19, 1998.

Date of Sale

For its U.S. sales, Severstal and Novolipetsk reported the date of

order specification as the date of sale. MMK has argued that the

Department should use the date of shipment as the date of sale.

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

of sale that date which best reflects the date on which the exporter or

producer establishes the material terms of sale. Severstal has stated

that the material terms of sale, namely price, quantity and product

characteristics, are set on the order specification date, and,

therefore it is the most appropriate date to use as date of sale.

Novolipetsk reported that the order specification date is the first

time that the material terms of the sale are recorded, making this date

the appropriate date of sale. However, Novolipetsk stated that it does

not date its order specifications. Novolipetsk reported that, to the

best of its knowledge, order specifications are not signed more than 30

days prior to commencing delivery. Therefore, the company claimed to

have reported as sales within the POI all specification orders with

delivery dates between January and July 1998 (one month beyond the POI)

to ensure that the entire universe of sales with order specification

dates within the POI was properly reported. In its supplemental

questionnaire response, Novolipetsk further stated that the company

reported the date on which the order was accepted, as evidenced by the

date stamp on the document. For a further discussion of this issue, see

Memorandum to the File from Lesley Stagliano, Case Analyst; Re:

Analysis for Novolipetsk Iron & Steel Corporation (Novolipetsk), dated

February 22, 1999.

In its section A questionnaire response, MMK stated that it

considered date of shipment to be the date of sale. However, MMK also

stated that the date of the order specification would most likely be

considered by the Department to be the most appropriate date of sale,

because the terms of sale are set in the order specification. See MMK's

section A questionnaire response at 13. Nevertheless, in MMK's

subsequent

[[Page 9315]]

questionnaire responses, MMK maintained that the Department should

treat the date of shipment as the date of sale because this is the date

that MMK recognizes as the date of sale in its accounting system and

because the terms of sale are subject to change until the shipment

date. See, e.g., supplemental section A questionnaire response at SA-1.

MMK identified sales for which the order specifications were amended

after the order was signed and reported the date of the order amendment

as the date of sale. Based on the sample order specification and the

order amendments provided by MMK, it appears that the terms of sale are

set in the order specification or, if applicable, in the order

amendment. We note that there is no evidence on the record which

indicates that, when no order amendment was provided, the terms of sale

for the merchandise shipped differed from the terms of sale set in the

order specification. Therefore, for the preliminary determination, the

Department is using the date of the order specification or order

amendment, if applicable, as the date of sale.

The Department is preliminarily using the date of sale for U.S.

sales as reported by respondents Severstal and Novolipetsk. For MMK, we

have preliminarily decided to use the order specification date as the

date of sale for U.S. sales. We intend to fully examine this issue at

verification, and we will incorporate our findings, as appropriate, in

our analysis for the final determination. 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.

Nonmarket Economy Country Status

The Department has treated the Russian Federation as a nonmarket

economy (``NME'') country in all past antidumping investigations and

administrative reviews (see, e.g., Titanium Sponge from the Russian

Federation: Final Results of Antidumping Administrative Review, 64 FR

1599 (January 11, 1999); Notice of Final Determination of Sales at Less

Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from the

Russian Federation, 62 FR 61787 (November 19, 1997); Notice of Final

Determination of Sale at Less Than Fair Value: Pure Magnesium and Alloy

Magnesium from the Russian Federation, 60 FR 16440 (March 30, 1995);

Notice of Preliminary Determination of Sales at Less Than Fair Value

and Postponement of the Final Determination: Ferrovanadium and Nitridid

Vanadium from the Russian Federation, 60 FR 438 (January 4, 1995)). A

designation as an NME remains in effect until it is revoked by the

Department (see section 771(18)(C) of the Act). Therefore, for this

preliminary determination, the Department is continuing to treat the

Russian Federation as an NME.

Surrogate Country

When the Department is investigating imports from an NME, section

773(c) of the Act provides for the Department to base normal value

(``NV'') on the NME producers'' factors of production, valued in a

surrogate market economy country or countries considered appropriate by

the Department. In accordance with section 773(c)(4), the Department,

in valuing the factors of production, shall utilize, to the extent

possible, the prices or costs of factors of production in one or more

market economy countries that are comparable in terms of economic

development to the NME country and are significant producers of

comparable merchandise. The sources of individual factor values are

discussed under the NV section below.

The Department has determined that Tunisia, Colombia, Poland,

Venezuela, South Africa, and Turkey are countries comparable to the

Russian Federation in terms of overall economic development. See

Memorandum to Rick Johnson, Program Manager, from Jeff May, Director,

Office of Policy; Re: Certain Hot-Rolled Flat-Rolled Carbon-Quality

Steel Products from the Russian Federation: Nonmarket Economy Status

and Surrogate Country Selection (``Policy Memorandum''), dated December

21, 1998. According to the available information on the record, we have

determined that Turkey is an appropriate surrogate because it is at a

comparable level of economic development and is a significant producer

of comparable merchandise. Furthermore, there is a wide array of

publicly available information for Turkey. Accordingly, we have

calculated NV using Turkish prices to value the Russian producers'

factors of production, when available and where appropriate. We have

obtained and relied upon public information wherever possible.

We note that, in this investigation, Severstal, Novolipetsk, and

MMK have argued that Poland is a more appropriate surrogate than

Turkey. See January 7 and January 15, 1999 Letters to the Department

from Novolipetsk and MMK, and January 7, 1999 Letter to the Department

from Severstal. The Department concurs with respondents that Poland

also meets the above-mentioned criteria of being comparable in terms of

economic development to the Russian Federation and is likewise a

significant producer of comparable merchandise.

However, as noted in the Policy Memorandum, in the event that more

than one country satisfies both statutory requirements, the Department

should narrow the field to a single country on the basis of data

availability and quality. See also Notice of Final Determination of

Sales at Less Than Fair value: Certain Cased Pencils from the People's

Republic of China, 59 FR 55625 (November 8, 1994). Based on the

information submitted by interested parties in response to the

Department's solicitation of surrogate values, as well as information

independently gathered by the Department for the purposes of this

preliminary determination, we find that the Turkish data is more

complete and, for most values, of either the same or superior quality

when compared with the Polish data.

In accordance with section 351.301(c)(3)(i) of the Department's

regulations, for a final determination in an antidumping investigation,

interested parties may submit publicly available information to value

factors of production within 40 days after the date of publication of

the preliminary determination. Therefore, in the event that interested

parties submit timely additional information, including information

pertaining to Polish surrogate values, the Department will re-examine

its selection of Turkey as the primary surrogate country for the

purposes of its final determination. For a further discussion of the

Department's selection of Turkey as the primary surrogate, see

Memorandum to the File, from Carrie Blozy, Case Analyst; Re: Selection

of a Surrogate Country, dated February 22, 1999.

Separate Rates

The Department presumes that a single dumping margin is appropriate

for all exporters in an NME country. See Final Determination of Sales

at Less Than Fair Value: Silicon Carbide from the People's Republic of

China, 59 FR 22585 (May 2, 1994) (``Silicon Carbide''). The Department

may, however, consider requests for a separate rate from individual

exporters. Severstal, Novolipetsk, and MMK have each requested a

separate, company-specific rate. To establish whether a firm is

sufficiently independent from government control to be entitled to a

separate rate, the Department analyzes each exporting entity under a

test arising out of the Final Determination of Sales at Less Than Fair

Value: Sparklers from the People's Republic of China, 56

[[Page 9316]]

FR 20588 (May 6, 1991) and amplified in Silicon Carbide. Under the

separate rates criteria, the Department assigns separate rates in NME

cases only if a respondent can demonstrate the absence of both de jure

and de facto government control over export activities. For a complete

analysis of separate rates, see Memorandum to Edward C. Yang from

Lesley Stagliano, Case Analyst; Re: Separate Rates for Exporters that

Submitted Questionnaire Responses (``Separate Rates Memo''), dated

February 22, 1999.

1. Absence of De Jure Control

An individual company may be considered for separates rates if it

meets the following de jure criteria: (1) an absence of restrictive

stipulations associated with an individual exporter's business and

export licenses; (2) any legislative enactments decentralizing control

of companies; and (3) any other formal measures by the government

decentralizing control of companies.

The respondents have placed on the administrative record a number

of documents to demonstrate absence of de jure control. These documents

include laws, regulations, and provisions enacted by the central

government of the Russian Federation, describing the deregulation of

Russian enterprise as well as the deregulation of the Russian export

trade, except for a list of products that may be subject to central

government export constraints. Respondents claim that the subject

merchandise is not on this list. This information supports a

preliminary finding that there is an absence of de jure government

control. See Separate Rates Memo.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) whether the export prices (``EP'') are set by

or subject to the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses. All three respondents have reported that they are

publicly-owned companies. In no case is there aggregate government

ownership greater than 25 percent.

Severstal has asserted that the company establishes its prices in

negotiation with its customers, and that these prices are not subject

to review or guidance from any government organization. Furthermore,

Severstal's management has the authority to negotiate and sign

contracts, also without review or guidance from outside organizations.

Severstal stated that it can retain all export earnings, and that there

are no restrictions on the use of the company's export revenues or

utilization of profits. Severstal further reports that its management

is appointed by the company's shareholders, and that the government has

no role in, and is not advised of, the selection of its management.

Novolipetsk stated that it either negotiates directly with

customers or contracts with agents in determining price. The company

has reported that its prices are not subject to review by, or guidance

from, any government nor does the government have any involvement in

decisions involving the allocation of export profits. Novolipetsk

stated that only its Board of Directors makes decisions as to how

profits will be used. Novolipetsk's shareholders elect the Board of

Directors and the company's Director General at the annual

shareholder's meeting. Novolipetsk reports that the company's sales

director is authorized to contractually bind the company, and that no

organization outside the company reviews or approves any aspect of the

company's sales transactions.

MMK stated that it also negotiates prices directly with its

customers. These negotiations are conducted by the export department.

MMK reports that no outside authority or organization reviews or

approves pricing or any other aspect of the company's sales

transactions. Additionally, MMK reported that the allocation of MMK's

profits is determined by the General Shareholder's Meeting (with

respect to the payment of dividends) and MMK's management. MMK stated

that the members of the Board of Directors are elected to the Board by

the shareholders of MMK and the Chairman is elected by the Board of

Directors.

In addition, the respondents' questionnaire responses indicate that

company-specific pricing during the POI does not suggest coordination

among exporters. This information supports a preliminary finding that

there is an absence of de facto governmental control of the export

functions of these companies. Consequently, we preliminarily determine

that Severstal, Novolipetsk, and MMK meet the criteria for application

of separate rates. For a further discussion of this issue, see Separate

Rates Memo.

Fair Value Comparisons

To determine whether hot-rolled steel products from the Russian

Federation sold to the United States by the Russian producers/exporters

receiving separate rates 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.

Export Price

For Severstal, we preliminarily calculated EP in accordance with

section 772(a) of the Act, because the subject merchandise was sold to

the first unaffiliated purchaser in the United States prior to

importation and constructed export price (``CEP'') methodology was not

otherwise indicated. We will examine the EP/CEP designation further at

verification. In accordance with section 777A(d)(1)(A)(i) of the Act,

we compared POI-wide weighted-average EPs to the NV based on factors of

production.

We calculated EP based on either packed FOB prices or FCA prices to

unaffiliated trading companies. When appropriate, for FOB sales, we

made deductions from the starting price for brokerage and handling.

These services were assigned a surrogate value based on public

information from Certain Circular Welded Carbon Steel Pipe and Tube

from Turkey. See Memorandum to Edward C. Yang; Re: Factor Valuation for

Severstal, MMK, and Novolipetsk (``Factor Valuation Memo''), dated

February 22, 1999. We also made adjustments for foreign inland freight,

which was valued using Polish transportation rates, since public

information on Turkish values was unavailable. Because the mode of

transportation reported by Severstal is proprietary, for a further

discussion, see Factor Valuation Memo (proprietary version).

For MMK, we preliminarily calculated EP in accordance with section

772(a) of the Act, because the subject merchandise was sold to the

first unaffiliated purchaser in the United States prior to importation

and CEP methodology was not otherwise indicated. We will examine the

EP/CEP designation further at verification. In accordance with section

777A(d)(1)(A)(i) of the Act, we compared POI-wide weighted-average EPs

to the NV based on factors of

[[Page 9317]]

production. We calculated EP based on packed prices to unaffiliated

trading companies.

For Novolipetsk, we preliminarily calculated EP in accordance with

section 772(a) of the Act, because the subject merchandise was sold to

the first unaffiliated purchaser in the United States prior to

importation and CEP methodology was not otherwise indicated. We will

examine the EP/CEP designation further at verification. In accordance

with section 777A(d)(1)(A)(i) of the Act, we compared POI-wide

weighted-average EPs to the factors of production.

For Novolipetsk, we calculated EP based on either packed FOB prices

to the port of loading in the Russian territory or FCA rail prices to

unaffiliated trading companies. With regard to FOB sales, we made

deductions from the starting price, when appropriate, for brokerage and

handling. We assigned a surrogate value based on public information

from Certain Circular Welded Carbon Steel Pipe and Tube from Turkey.

See Factor Valuation Memo.

Normal Value

Section 773(c)(1) of the Act provides that the Department shall

determine the NV using a factors-of-production methodology if: (1) the

merchandise is exported from an NME country; and (2) the information

does not permit the calculation of NV using home-market prices, third-

country prices, or constructed value under section 773(a) of the Act.

Factors of production include: (1) hours of labor required; (2)

quantities of raw materials employed; (3) amounts of energy and other

utilities consumed; and (4) representative capital costs, including

depreciation. We calculated NV based on factors of production reported

by Severstal, Novolipetsk and MMK, with the following exceptions:

Severstal's ``charge by-products,'' packing bands, packing fasteners

and cleaning gas; Novolipetsk's by-products; and MMK's fluxing agents

and quantities purchased of raw materials (used in freight

calculation). For further discussions of these exceptions, see Factor

Valuation Memo, Memorandum to the File, from Lyn A. Baranowski, Case

Analyst; Re: Margin Calculation for the Preliminary Determination for

JSC Severstal (Severstal), dated February 22, 1999 and Memorandum to

the File, from Carrie Blozy, Case Analyst; Re: Analysis for

Magnitogorsk Iron and Steel Works (``MMK'') (``Analysis Memo: MMK''),

dated February 22, 1999. We valued all the input factors using publicly

available published information as discussed in the ``Surrogate

Country'' and ``Factor Valuations'' sections of this notice.

Factor Valuations

The selection of the surrogate values was based on the quality and

contemporaneity of the data. When possible, we valued material inputs

on the basis of tax-exclusive domestic prices in the surrogate country.

When we were not able to rely on domestic prices, we used import prices

to value factors. As appropriate, we adjusted import prices to make

them delivered prices. For those values not contemporaneous with the

POI, we adjusted for inflation using producer or wholesale price

indices, as appropriate, published in the International Monetary Fund's

International Financial Statistics.

To value coal, iron ore concentrate, iron ore pellets, sinter,

aluminum, dolomite, ferro-alloys, recycled materials, lime and scrap,

we used public information published by the United Nations Trade

Commodity Statistics for 1997 (``UNTCS''). Neither Novolipetsk nor

Severstal provided information on the record regarding iron content for

iron ore pellets. For the preliminary determination, we have valued

iron ore pellets based on the 1997 UNTCS Turkish value for HTS 260112,

which represents iron ore pellets with a low iron content. We have

based our valuation on evidence from The Making, Shaping and Treating

of Steel that indicates low iron content iron ore pellets are used in

blast furnaces. See Factor Valuation Memo, Attachment 6. We intend to

fully review actual iron ore content at verification.

For limestone, coal tar, grease and kerosene, we used information

from 1996 UNTCS. For packing, Severstal reports that it uses a certain

material for bands. Therefore, we have used the 1996 UNTCS for valuing

bands, as well as fasteners (for which Severstal has not reported the

composition). For packing, MMK reports that it uses straps, wire rods

and cold-rolled sheets. For wire rods and sheets, we have used 1996

UNTCS for carbon wire rod and cold-rolled sheets. For packing straps,

we have based their value on the value of packing bands reported in

public information from the antidumping investigation, Stainless Steel

Plate in Coils from South Africa (see July 15, 1998 response of

Columbus Stainless Steel Company, page 48).

We note that certain inputs into the production of subject

merchandise have been reported by all three companies as being self-

produced. The Department instructed respondents, in the initial

questionnaire, that ``if you manufacture or produce one or more

products in a separate production process that is then used in a

subsequent process to manufacture the subject merchandise (e.g., if

your company produces), report separately the materials, labor, and

energy factors (Fields 2.0 through 6.n) consumed in each production

stage or process. If you have any questions regarding the reporting of

intermediate production factors, please contact the Official In Charge

immediately.'' See page D-3 of the original questionnaire.

Subsequently, in supplemental questionnaires to Severstal,

Novolipetsk, and MMK, the Department noted that each respondent had

reported that it produced certain inputs internally. We again indicated

that ``these and any other factors produced internally should be

included in your calculation of factors of production for subject

merchandise. As requested in the original questionnaire, you should

provide a complete narrative description of your calculations,

including supporting documentation and calculation worksheets.'' See,

e.g., Supplemental Questionnaire to JSC Severstal, page 10, dated

January 4, 1999. Nevertheless, we note that none of the three

respondents appear to have reported the factors of production for these

self-produced inputs in their supplemental responses of January 25,

1999 (see Novolipetsk's response to supplemental section D

questionnaire, pgs. 23-24; Severstal's response to supplemental section

D questionnaire, pg. 23; MMK's response to supplemental section D

questionnaire, pg. SD-6).

For this preliminary determination, the Department has used the

direct factors reported by respondents for these self-produced inputs.

However, should the Department find at verification that reporting the

factors used to produce these intermediate products would lead to

higher overall usage rates, we may apply facts available with adverse

inferences for the final determination.

MMK has not reported any direct usage rates for fluxing agents in

its factors of production database for hot-rolled steel. Therefore, we

have assigned, as facts available, usage rates for certain fluxing

agents, as reported in Exhibit D-2 of MMK's section D questionnaire

response, dated December 21, 1998. For a further discussion of this

issue, see Analysis Memo: MMK.

We have valued by-products in the production of hot-rolled steel

reported by these companies. We have valued non-solid by-products at

their natural gas equivalents. We have valued solid

[[Page 9318]]

by-products based on 1996 and 1997 UNTCS. However, we note that

Novolipetsk apparently aggregated the production of all of its by-

products into a single database field. As discussed in the Factor

Valuation Memo, we found Novolipetsk's by-product factors to be

aberrational. Moreover, Novolipetsk failed to support those factors

with requested calculation worksheets. For these reasons, we have

disregarded Novolipetsk's by-product factors for the preliminary

determination. As facts available for the preliminary determination,

the Department has allocated a theoretical output for Novolipetsk's by-

products based on outputs of the two largest components of the

aggregate by-products field reported by Novolipetsk. For a further

discussion of this issue, see Factor Valuation Memo (proprietary

version).

For some of the energy inputs reported (natural gas, blast furnace

gas, coke oven gas, and electricity), we relied on public information

from ``Energy Prices and Taxes: 2nd quarter 1998,'' published by the

International Energy Agency, OECD. In addition to these inputs, MMK

reported coal as an energy input, while Novolipetsk reported grease as

an energy input. We valued coal and grease based on 1997 and 1996 UNTCS

Turkish values, respectively. Because we were unable to obtain publicly

available Turkish values, we used Polish transport information to value

transport for raw materials. Since the mode of transportation reported

by all respondents is proprietary, for a full discussion of this issue,

see Factor Valuation Memo (proprietary version).

For labor, we used the Russian regression-based wage rate at Import

Administration's homepage, Import Library, Expected Wages of Selected

NME Countries, revised on June 2, 1997. Because of the variability of

wage rates in countries with similar per capita gross domestic

products, section 351.408(c)(3) of the Department's regulations

requires the use of a regression-based wage rate. The source of this

wage rate data on the Import Administration's homepage is found in the

1996 Year Book of Labour Statistics, International Labour Office

(``ILO''), (Geneva: 1996), Chapter 5B: Wages in Manufacturing.

To value overhead, general expenses and profit, we used public

information reported in the 1997 financial statements of Eregli Demir

ve Celik Fabrikalari TAS (``Erdemir''), a Turkish steel producer. We

adjusted Erdemir's depreciation expenses for the effects of high

inflation, and we reduced its financial expenses for estimated short-

term interest income and excluded estimated long-term foreign exchange

losses. For a further discussion of this issue, see Attachment 10 of

the Factor Valuation Memo.

Verification

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

information relied upon in making our final determination.

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 subsections 782(d), use facts otherwise

available in reaching the applicable determination.

As discussed in the Factor Valuation Memo, and the ``Factor

Valuations'' section above, the Department had requested information

regarding by-products both in its initial and supplemental

questionnaires. Novolipetsk did not report the by-products as

instructed, and failed to adequately answer the Department's questions

regarding the calculation of the quantities of these by-products.

Having found the reported quantities of by-product to be aberrationally

high, the Department has instead utilized an applied theoretical output

for the two largest by-products. These output factors were based on

information published in a steel industry treatise, The Making, Shaping

and Treating of Steel.

As discussed in the ``Factor Valuations'' section above, and in

Analysis Memo: MMK, MMK failed to report direct usage rates for certain

fluxing agents in its database. As a result, we have assigned usage

rates based on information included in Exhibit D-2 of MMK's section D

questionnaire response, dated December 21, 1998.

Suspension of Liquidation

In accordance with section 733(d) and (e) 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 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 below. These suspension-of-liquidation

instructions will remain in effect until further notice. The weighted-

average dumping margins are as follows:

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

Weighted-

Exporter/manufacturer average margin

(percent)

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

JSC Severstal........................................... 70.66

Novolipetsk Iron & Steel Corp........................... 217.67

Magnitogorsk Iron & Steel Works......................... 149.54

All Others.............................................. 156.58

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

The All-Others Rate

The three companies selected by the Department have all

preliminarily qualified for a separate rate. Moreover, the information

on the record indicates that these three companies account for all

imports of subject merchandise during the period of investigation. See

Respondent Selection Memo. We have no evidence that there are any other

Russian exporters of subject merchandise that may be subject to common

government control. For this reason, we have not calculated a Russia-

wide rate in this investigation. We have calculated an all-others rate

in accordance with section 735(c)(5) of the Act. See Notice of Final

Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol From

the People's Republic of China, 61 FR 14057, 14059 (1996). This all-

others rate has been calculated based on the weighted-average of all

margins that are not zero, de minimis or based on facts available. The

all-others rate applies to all entries of subject merchandise except

for entries from exporters/factories that are identified individually

above.

International Trade Commission 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 from the Russian Federation are

materially injuring, or threatening 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

[[Page 9319]]

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 two days

before the scheduled date.

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 May 10,

1999.

This determination is issued and published in accordance with

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

Dated: February 22, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-4840 Filed 2-24-99; 8:45 am]

BILLING CODE 3510-DS-P