[Federal Register Volume 62, Number 122 (Wednesday, June 25, 1997)]
[Notices]
[Pages 34213-34216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16683]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-428-811; A-412-810; C-428-812; C-412-811]


Initiation of Anticircumvention Inquiry on Antidumping and 
Countervailing Duty Orders on Hot-Rolled Lead and Bismuth Carbon Steel 
Products From the United Kingdom and Germany

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

ACTION: Notice of initiation of anticircumvention inquiry.

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SUMMARY: On the basis of an application filed with the Department of 
Commerce (the Department) on April 14, 1997 and amended on May 14, 
1997, we are initiating an anticircumvention inquiry to determine 
whether imports of lead and bismuth carbon steel billets from Germany 
and the United Kingdom are circumventing the antidumping and 
countervailing duty orders on hot-rolled lead and bismuth carbon steel 
products from Germany and the United Kingdom (See Antidumping Orders; 
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from Brazil, 
France, Germany and the United Kingdom 58 FR 15334 (March 22, 1993) and 
Countervailing Duty Orders; Certain Hot-Rolled Lead and Bismuth Carbon 
Steel Products from Germany and the United Kingdom 58 FR 15325, 15327 
(March 22, 1993)).

EFFECTIVE DATES: June 25, 1997.

FOR FURTHER INFORMATION CONTACT: Anne D'Alauro, Russell Morris, or 
Maria MacKay, Office of CVD/AD Enforcement VI, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 
Washington, D.C. 20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On April 14, 1997, the Department received an application (amended 
on May 14, 1997) from Inland Steel Bar Company and USS/Kobe Steel 
Company (the applicants), requesting that the Department conduct an 
anticircumvention inquiry pursuant to section 781(a) of the Tariff Act 
of 1930, as amended (the Act), with respect to the antidumping and 
countervailing duty orders on certain hot-rolled lead and bismuth 
carbon steel products from the United Kingdom and Germany. The 
applicants allege that the principal German (Saarstahl A.G. and Thyssen 
Stahl A.G.) and British (British Steel PLC) producers of hot rolled 
leaded bar and rod are circumventing the respective orders by shipping 
bloom-cast leaded-steel billets (leaded-steel billets) to the United 
States, where they are easily and inexpensively converted into the hot-
rolled carbon steel products covered by the orders.
    The Department received written comments opposing the request to 
initiate the inquiry from Thyssen Stahl A.G. (Thyssen) on May 12, 1997, 
from Saarstahl A.G. (Saarstahl) on May 16, 1997, from British Steel PLC 
(British Steel) on May 23, 1997, and from the European Community (EC) 
on May 27, 1997. Written comments in opposition to the initiation of 
the inquiry were also received from four U.S. producers of subject 
merchandise: Bar Technologies on May 19, 1997, Sheffield Steel 
Corporation on June 2, 1997, Birmingham Steel Corporation on June 3, 
1997 and Nucor Steel on June 5, 1997.

Initiation of Anticircumvention Proceeding

    In accordance with section 781(a) of the Act, the Department may 
find circumvention of an order when the following four conditions are 
met:
    (1) The merchandise sold in the United States is of the same class 
or kind as the merchandise that is subject to the order,
    (2) Such merchandise is completed or assembled in the United States 
from parts or components produced in the foreign country to which the 
order applies,
    (3) The process of assembly or completion in the United States is 
minor or insignificant, and
    (4) The value of the parts or components produced in the foreign 
country with respect to which the order applies, is a significant 
portion of the total value of the merchandise sold in the United 
States.
    In order to determine whether a circumvention inquiry is warranted, 
we evaluated the information submitted by the applicants using each of 
the criteria listed above. We have concluded that the information 
submitted is sufficient to warrant the initiation of an 
anticircumvention inquiry. Each criterion is separately addressed 
below.

(1) Is the Merchandise Sold in the United States of the Same Class or 
Kind as the Merchandise That Is Subject to the Order?

    The merchandise covered by the orders is described as ``hot-rolled 
bars and rods of nonalloy or other alloy steel, whether or not 
descaled, containing by weight 0.03 percent or more of lead or 0.05 
percent or more of bismuth, in coils or cut lengths, and in numerous 
shapes and sizes.'' The leaded-steel billets being imported into the 
United States are alleged to contain 0.03 percent or more of lead or 
0.05 percent or more of bismuth and, thus, meet the chemical 
requirements specified for the merchandise subject to the antidumping 
and countervailing duty orders. The applicants claim that the imported 
leaded-steel billets are then converted, in the United States, into the 
identical products that are covered by the orders.

(2) Is the Merchandise Completed or Assembled in the United States From 
Parts or Components Produced in the Foreign Country to Which the Order 
Applies?

    The hot-rolled bars and rods allegedly are being completed in the 
United States from leaded-steel billets produced in the

[[Page 34214]]

United Kingdom and Germany--countries which are subject to the 
antidumping and countervailing duty orders on hot-rolled lead and 
bismuth carbon steel products (lead bar).

(3) Is the Process of Assembly or Completion Minor or Insignificant?

    When considering whether the process of assembly or completion is 
minor or insignificant, section 781(a)(2) of the Act instructs the 
Department to take into account: (1) The level of investment and 
research and development in the United States; (2) the nature of the 
production process in the United States; (3) the extent of production 
facilities in the United States; and (4) whether the value of the 
processing performed in the United States represents a small proportion 
of the value of the merchandise sold in the United States. These 
criteria are individually addressed below.

Investment

    The applicants state that the production of leaded-steel billet 
requires dedicated facilities and equipment. Thyssen, British Steel, 
and Saarstahl, according to the applicants, have made this substantial 
investment in their home countries. In contrast, rolling mills, which 
roll the leaded-steel billet into bar and rod, are alleged to require 
less capital investment and to be used to process other types of steel. 
Thus, the applicants conclude, the concentration of investment in semi-
finished steel (i.e., billets) production facilities in the home 
countries, relative to the rolling process performed in the United 
States, indicates that the level of investment in the United States is 
comparatively minor.

Research and Development (R&D)

    Applicants also state that R&D costs are concentrated in the melt 
shop facility where leaded-steel billets are produced. As these 
facilities are located in the home countries, it follows that their 
associated R&D costs are incurred in the home countries. The level of 
R&D costs related to the U.S. rolling facilities is alleged to be minor 
in comparison.

Nature of the Production Process in the United States

    The applicants describe the production process of lead bar as 
consisting of two stages. In the first stage, all raw material inputs 
(such as iron ore, limestone, coal, flux, and scrap) are heated in a 
furnace to become molten steel. The molten steel is then cast into 
semi-finished products, in this case either blooms or billets. The 
billets are cooled, before undergoing further shaping and finishing 
processes.
    The second stage consists of the conversion of the leaded-steel 
billets into bar or rod in rolling mills. In this stage, billets are 
reheated and then loaded into a series of roughing, intermediate, and 
finishing stands or rolls. The information provided does not indicate 
that additional raw materials are added in this stage of the process; 
the chemical and physical characteristics of the steel have already 
been imparted in the production of the billet. Rolling merely converts 
the billet into a wide range of steel products of different shapes, for 
instance of round, hexagonal, square, rectangular, or flat cross 
section.

Extent of Production Facilities in the United States

    The applicants claim to be the only U.S. steel makers which have 
made the capital investment necessary to produce both leaded-steel 
billets and lead bar. On this basis they conclude that the first stage 
in the production process of the subject merchandise, the billet 
production, occurs primarily abroad. The second stage of production, 
the re-rolling process, occurs instead primarily in the United States. 
The applicants note that many U.S. mills are capable of rolling 
purchased leaded-steel billets; however, those mills have not invested 
in melting and casting facilities.

Value of Rolling in the U.S. Compared to Value of Merchandise Sold in 
the U.S.

    The applicants provided six different calculations of the value of 
the rolling operation performed in the United States. These 
calculations were based on supporting cost data and price quotations 
for both leaded-steel billets and finished bar and rod. Based upon 
these calculations, the applicants conclude that the rolling process 
represents an insignificant portion of the total value of the finished 
bar and rod sold in the United States.

(4) Is the Value of the Parts or Components Produced in the Foreign 
Country to Which the Antidumping and the Countervailing Duty Orders 
Apply, a Significant Portion of the Total Value of the Merchandise Sold 
in the United States?

    As noted above, the applicants have presented six calculations of 
the value attributable to the rolling process. The applicants do not 
allege that any portion of the value added is attributable to third 
country processing. Therefore, the calculations suggest that, based on 
the value attributable to the processing in the United States, the 
value of the imported leaded-steel billets constitutes a significant 
portion of the total value of the merchandise sold in the United 
States.

Additional Factors

    In addition to the criteria discussed above, Sec. 781(a)(3) of the 
Act instructs the Department to consider other factors before 
determining whether to include the merchandise in question in an 
antidumping or countervailing duty order. These are: (1) The pattern of 
trade; (2) whether a relationship exists between the manufacturer or 
exporter and the U.S. assembler of the product; and (3) whether imports 
into the United States of the parts or components produced in the 
foreign country increased after the initiation of the investigation 
which resulted in the issuance of the order.

Pattern of Trade

    The applicants claim that the pattern of trade has shifted 
subsequent to the issuance of the antidumping and countervailing duty 
orders, from the export of lead bars and rods to the export of leaded-
steel billets, which are now being finished in the United States. The 
applicants argue that, by shifting exports to leaded-steel billets, 
these producers have found a way to continue to sell lead bar in the 
United States, without regard to the antidumping and countervailing 
duty orders.

Relationship Between the Manufacturer or Exporter and the U.S. 
Assembler

    Applicants have stated that the U.S. re-rollers are not related to 
the foreign producers.

Import Statistics

    The applicants have provided statistics on the basis of which they 
allege that imports of leaded-steel billets from Germany and the United 
Kingdom have increased since the investigations in 1992, while imports 
of bars and rods subject to the orders have markedly declined.
    Based on our review of the foregoing allegations and supporting 
information submitted in the application, we find that the application 
contains sufficient evidence to warrant an anticircumvention inquiry. 
Therefore, we are initiating an anticircumvention inquiry concerning 
the antidumping and countervailing duty orders on lead and bismuth 
carbon steel products from the United Kingdom and Germany, pursuant to 
section 781(a) of the Act. For a more detailed discussion of the 
Department's analysis, see Memorandum to the Principal Deputy

[[Page 34215]]

Assistant Secretary for Import Administration from the Team dated June 
18, 1997, concerning Initiation of Anticircumvention Inquiry of 
Antidumping and Countervailing Duty Orders on Certain Hot Rolled Lead 
and Bismuth Carbon Steel Products from the United Kingdom and Germany, 
public version, on file in the Central Record Unit, Room B-099, Main 
Commerce Building.
    The Department will not suspend liquidation at this time. However, 
the Department will instruct the U.S. Customs Service (Customs) to 
suspend liquidation in the event of an affirmative preliminary 
determination of circumvention.
    Several interested parties have challenged the initiation of this 
anticircumvention inquiry. As discussed below their arguments do not 
provide a legal basis for rejecting Inland's and USS/Kobe's application 
for an inquiry.

(1) Whether There is an Industry Support Requirement for a 
Circumvention Inquiry

    Several interested parties have argued that the Department must 
consider whether there is industry support for the anticircumvention 
inquiry before deciding whether to initiate. One party stated that the 
Department is required to ensure that the provisions of Article 11.4 of 
the Agreement on Subsidies and Countervailing Measures (SCM) on the 
standing of the domestic industry are adhered to. The parties contend 
that members of the U.S. industry who may have supported the imposition 
of antidumping and countervailing duties on lead bar may, in fact, 
oppose the imposition of such duties on leaded-steel billets. They cite 
a letter by a U.S. producer of lead bar opposing the initiation of an 
anticircumvention inquiry.
    There is no statutory requirement regarding industry support for 
purposes of initiating a circumvention inquiry. See 19 U.S.C. 1677j(a). 
The regulations provide that any interested party has standing to file 
an application to determine whether a particular product is within the 
scope of an order. 19 C.F.R. 353.29(b) (1996), 19 C.F.R. 355.29(b) 
(1996). The requirement regarding interested party status has been 
carried over into the new regulations. See Sec. 351.225(c). The statute 
and regulations define an interested party, in relevant part, as ``a 
manufacturer, producer, or wholesaler in the United States of a 
domestic like product.'' 19 U.S.C. 1677(9)(C). See also 19 C.F.R. 
353.2(k)(3) and 355.2(i)(3). In this instance, Inland meets the 
definition of ``a manufacturer'' of the domestic like product. Although 
USS/Kobe was not listed as one of the original petitioners, it was 
listed as a domestic producer of the subject merchandise. Therefore, as 
interested parties, Inland and USS/Kobe are entitled to request a 
circumvention inquiry.
    The statute requires a showing of industry support before an 
investigation may be initiated to determine whether an antidumping or 
countervailing duty order is warranted. 19 U.S.C. 1673a(c)(4) and 
1671a(c)(4). In contrast, a circumvention inquiry is focused on the 
enforcement of existing orders--i.e. it is designed to determine 
whether merchandise is properly within the scope of an order that has 
already been issued. See, e.g., Color Television Receivers From Korea; 
Initiation of Anticircumvention Inquiry on Antidumping Duty Order, 61 
FR 1339, 1342 (January 19, 1996) (Korean TV's Circumvention). 
Significantly, neither the statute nor prior Department practice 
requires that an interested party requesting a scope determination make 
such a showing of industry support. Id. The fact that the statute 
expressly requires a showing of industry support for initiating an 
investigation, but does not require such a showing for initiating an 
anticircumvention inquiry, is compelling evidence that no such 
requirement exists. Moreover, the lack of such a requirement is also 
indicated by the fact that the statute expressly prohibits 
reconsideration of the issue of industry support at any stage of the 
proceeding beyond initiation of the original investigation. 19 U.S.C. 
1673a(c)(4)(E) and 1671a(c)(4)(E).

(2) Whether Leaded-steel Billets, Specifically Excluded From the Lead 
Bar Orders, Can Now be Included in the Scope of the Same Orders Through 
a Circumvention Inquiry

    Several interested parties argue that the International Trade 
Commission (ITC) specifically determined that leaded-steel billets were 
excluded from its like product and domestic industry definitions, and, 
therefore, were not subject to its injury finding. Similarly, the 
Department expressly stated that ``semifinished steels'' were 
``excluded'' from the scope of the lead bar orders. These parties argue 
that, absent an injury finding on leaded-steel billets, the assessment 
of antidumping and countervailing duties would be contrary to U.S. 
antidumping and countervailing duty law and would contravene the 
international obligation of the United States under the World Trade 
Organization (WTO) Agreement. In addition, because the ITC found that 
leaded-steel billets constitute a different like product, one party 
argues that leaded-steel billets cannot be considered a ``part or 
component'' of bar.
    The Department faced a similar issue in Steel Wire Rope from 
Mexico; Affirmative Final Determination of Circumvention of Antidumping 
Duty Order, 60 FR 10831 (February 28, 1995). In that case, the 
Department included within the scope of the order a component that 
previously had been excluded. Specifically, the original Mexican wire 
rope order expressly excluded steel wire strand which is used to 
produce wire rope. Nevertheless, the Department made an affirmative 
finding that steel wire strand imported into the United States for use 
in the production of steel wire rope was circumventing the order 
pursuant to section 781(a)(2) of the Act. While this was an ``old'' law 
case, the current statutory provisions governing circumvention are the 
same regarding this issue.
    The same statutory analysis applies here as well. Simply put, the 
theory that parts expressly excluded from the scope of an antidumping 
or countervailing order can not be subject to an anticircumvention 
inquiry is contrary to, and would undermine, the core principles of the 
anticircumvention statute.
    The underlying rationale of the anticircumvention statute is that, 
where the criteria of section 781(a) are met, the parts and components 
subject to the finding of circumvention are, in all meaningful 
respects, being imported as the subject merchandise, not as parts or 
components per se. The processing in the United States is of such a 
minor or insignificant nature as to be irrelevant. In other words, an 
affirmative finding of circumvention treats the parts and components as 
constructively assembled into subject merchandise at the time of 
import. As the legislative history states:

    [T]he application of the U.S. finishing or assembly provision 
will not require new injury findings as to each part or component. 
The anti-circumvention provision is intended to cover efforts to 
circumvent an order by importing disassembled or unfinished 
merchandise for assembly in the United States. Hence, the ITC would 
generally advise as to whether the parts or components ``taken as a 
whole'' fall within the injury determination. If more than one part 
or component is proposed for inclusion, the ITC would * * * 
determine whether the imported parts or components can be 
constructively assembled so as to constitute a like product for 
purposes of the original order * * * . The ITC would advise as to 
whether the inclusion of the parts or

[[Page 34216]]

components, taken as a whole, would be inconsistent with its 
findings in the prior injury determination. H.R. Conf. Rep. No. 576, 
100th Cong., 2d Sess. 603 (1988) (emphasis added).

    In short, it is plain that Congress intended to allow 
anticircumvention inquiries into parts or components such as the 
leaded-steel billets at issue here. Of course, the anticircumvention 
provisions are crafted to ensure compliance with the injury 
requirements of the statute and the WTO agreements on antidumping and 
countervailing measures. Thus, a circumvention finding can apply to 
parts and components that meet the criteria of section 781(a).

(3) Whether There Are Threshold Standards That Must Be Met in 
Requesting a Circumvention Inquiry

    One interested party expresses a concern with respect to the 
sufficiency of the evidence presented in the application submitted to 
the Department and argues that, the application does not contain 
information on subsidization and injury of the leaded-steel billets. In 
their view, the Department should examine whether the leaded-steel 
billets benefit from the subsidy established in the original 
investigation on lead bar, before including this product in the scope 
of the lead bar orders.
    The regulatory provisions on circumvention, which fall within the 
section on scope rulings, do not set forth specific requirements for 
the information that must be included in an anticircumvention 
application as compared to a petition for an investigation. Cf. 19 
C.F.R. 353.12 and 355.12. The regulations simply state that 
applications for scope rulings, which include circumvention inquiries, 
must include:
    (1) A detailed description of the product, including technical 
characteristics and uses of the product, and its current U.S. Tariff 
Classification Number;
    (2) A statement of the interested party's position as to whether 
the product is within the scope of an antidumping order, including
    (i) A summary of the reasons for this conclusion,
    (ii) Citations to any applicable statutory authority, and
    (iii) Attachment of any factual support for this position, 
including applicable portions of the Secretary's or the Commission's 
investigation.
    19 C.F.R. 353.29(b). See also 19 C.F.R. 355.29(b). These 
requirements are essentially the same in the new regulations. See 
Sec. 351.225(c).
    The legislative history of the URAA provides some additional 
guidance on the standards for initiation of anticircumvention 
inquiries. The Senate Report states that ``the Committee expects 
Commerce to initiate circumvention inquiries in a timely manner and 
generally consistent with the standards for initiating antidumping or 
countervailing duty investigations.'' S. Rep. 103-412, 103rd Cong., 2d 
Sess. 83 (1994). The Department has interpreted that report language to 
mean that the general evidentiary requirements for initiating petitions 
(e.g., allege the elements necessary for relief, accompanied by 
information reasonably available to support those allegations) apply to 
anticircumvention requests. Korean TV's Circumvention, 61 FR 1342.
    Furthermore, as described above, should the Department determine 
that the criteria of section 781(a) are met, we would consider the 
parts and components, in all meaningful respects, to be the subject 
merchandise upon being imported. Therefore, the Department's original 
subsidization and injury determinations reached with respect to the 
subject merchandise will be equally valid for the parts and components 
being completed or assembled in the United States which have been 
determined to be included within the scope of the order. Pursuant to 
section 781(e) of the Act, the ITC will be notified prior to any 
proposed action that the Department may take which would result in a 
final affirmative finding of circumvention.

(4) Whether a Company Excluded From an Order Can Be Included in a 
Circumvention Inquiry

    Thyssen notes that it was excluded from the countervailing duty 
order on lead bar from Germany because it received a de minimis rate in 
the investigation. Accordingly, it argues that its exports of leaded-
steel billets cannot be found to be within the scope of the 
countervailing duty order on lead bar.
    While we agree with Thyssen with respect to the countervailing duty 
order, Thyssen remains covered by the antidumping duty order under the 
``all other'' category. As such, Thyssen will be included in our 
examination of the alleged circumvention of the antidumping duty order 
on lead bar from Germany.
    This notice is published in accordance with section 781(a) of the 
Act (19 U.S.C. 1677j(a)) and 19 CFR 353.29 and 19 CFR 355.29.

    Dated: June 18, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-16683 Filed 6-24-97; 8:45 am]
BILLING CODE 3510-DS-P