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

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** February 25, 1999
- **Citation:** 64 FR 9312

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-4840. Public record. Not legal advice.