[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61787-61794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30396]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-821-808]


Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Cut-to-Length Carbon Steel Plate from the Russian Federation

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

EFFECTIVE DATE: November 19, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan at (202) 482-1324 or 
Eugenia Chu at (202) 482-3964, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230.
    Applicable Statute: Unless otherwise indicated, all citations to 
the statute are references to the provisions effective January 1, 1995, 
the effective date of the amendments made to the Tariff Act of 1930 
(the Act) by the Uruguay Round Agreements Act (URAA). In addition, 
unless otherwise indicated, all citations to the Department's 
regulations are to 19 C.F.R. part 353 (1997).
    Final Determination: We determine that certain cut-to-length steel 
plate (CTL plate) 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 735 of the Act.

Case History

    Since the preliminary determination in this investigation 
(Preliminary Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate From the Russian Federation, 62 FR 
31967 (June 11, 1997)), the following events have occurred:
    In June 1997, we verified the Severstal's questionnaire responses. 
On July 23, 1997, the Department issued its report on verification 
findings. Petitioners and Respondent, Severstal, submitted case briefs 
on July 31, 1997, and rebuttal briefs on August 5, 1997. A public 
hearing was not requested nor held.
    On August 8, 1997, the Department provided interested parties the 
opportunity to submit additional publicly-available information (PAI) 
from surrogate countries to value certain factors of production. The 
Department received responses on August 15, 1997, and comments on 
August 22, 1997.

Scope of Investigation

    The products covered by this investigation are hot-rolled iron and 
non-alloy steel universal mill plates (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 rectangular shape, 
neither clad, plated nor coated with metal, whether or not painted, 
varnished, or coated with plastics or other nonmetallic substances; and 
certain iron and non-alloy steel flat-rolled products not in coils, of 
rectangular shape, hot-rolled, neither clad, plated, nor coated with 
metal, whether or not painted, varnished, or coated with plastics or 
other nonmetallic substances, 4.75 mm or more in thickness and of a 
width which exceeds 150 mm and measures at least twice the thickness. 
Included as subject merchandise in this petition are flat-rolled 
products of nonrectangular cross-section where such cross-section is 
achieved subsequent to the rolling process (i.e., products which have 
been ``worked after rolling'')--for example, products which have been 
bevelled or rounded at the edges. This merchandise is currently 
classified in the Harmonized Tariff Schedule of the United States (HTS) 
under item numbers 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000. Excluded from 
the subject merchandise within the scope of the petition is grade X-70 
plate. Although the HTS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
investigation is dispositive. See memorandum on Scope of Investigations 
on Carbon Steel Plate, from Joseph Spetrini to Robert S. LaRussa 
(October 24, 1997).

Period of Investigation (POI)

    The POI is April 1, 1996 through September 30, 1996.

Separate Rates

    Severstal has requested a separate, company-specific rate. The 
claimed ownership structure of Severstal during the POI is that of a 
publicly owned joint stock company, where the state owned 20% of the 
shares.
    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 FR 20588 (May 6, 1991) (Sparklers) and 
amplified in 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). Under the separate rates criteria, the 
Department assigns separate rates in nonmarket economy cases only if a 
respondent can demonstrate the absence of both de jure and de facto 
governmental control over export activities.

1. Absence of De Jure Control

    An individual company may be considered for a separate rate 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. Severstal has placed on the 
administrative record a number of documents demonstrating absence of de 
jure control. These documents include laws, regulations, and provisions 
enacted by the government of the Russian Federation, describing the 
deregulation of Russian enterprises as well as the deregulation of the 
Russian export trade (except for a list of products that may be subject 
to government export constraints which Severstal claims, and the 
Department verified, do not include subject merchandise). Specifically, 
Severstal provided English translations of the laws and regulations 
governing their enterprises. These laws and regulations authorized 
Severstal to make its own operational and managerial decisions during 
the POI. See Separate Rates Memorandum, dated June 3, 1997.

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

[[Page 61788]]

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.
    Severstal asserted, and we verified, the following: (1) it 
establishes its own EPs; (2) it negotiates contracts without guidance 
from any governmental entities or organizations; (3) it selects its own 
management; and (4) it retains the proceeds of its export sales, uses 
profits according to its business needs, and has the authority to sell 
its assets and to obtain loans. In addition, Severstal's questionnaire 
responses indicate that company-specific pricing during the POI does 
not suggest coordination among exporters. During verification 
proceedings, Department officials viewed such evidence as sales 
documents, company correspondence, and bank statements. This 
information supports a finding that, during the POI, there was a de 
facto absence of governmental control of export functions. In addition, 
we determined that Severstal had autonomy from the government in making 
decisions regarding the selection of management during the POI. 
Therefore, we have concluded that Severstal is entitled to a separate 
rate. See Separate Rates Memorandum, dated June 3, 1997.

The Russia-Wide Rate

    U.S. import statistics indicate that the total quantity and value 
of U.S. imports of certain carbon steel plate from the Russian 
Federation is greater than the total quantity and value of steel plate 
reported by all Russian companies that submitted responses. Given this 
discrepancy, we conclude that not all exporters of Russian carbon steel 
plate responded to our questionnaire. Accordingly, we are applying a 
single antidumping deposit rate--the Russia-wide rate--to all exporters 
in the Russian Federation (other than Severstal), based on our 
presumption that those respondents who failed to respond constitute a 
single enterprise and are under common control by the Russian 
Federation government. See, e.g., Final Determination of Sales at Less 
Than Fair Value: Bicycles from the People's Republic of China, 61 FR 
19026 (April 30, 1996).
    This Russia-wide antidumping rate is based on adverse facts 
available. Section 776(a)(2) of the Act provides that ``if an 
interested party or any other person (A) withholds information that has 
been requested by the administering authority; (B) fails to provide 
such information by the deadlines for the submission of the information 
or in the form and manner requested, subject to subsections (c)(1) and 
(e) of section 782; (C) significantly impedes a proceeding under this 
title; or (D) provides such information but the information cannot be 
verified as provided in section 782(i), the administering authority * * 
* shall, subject to section 782(d), use the facts otherwise available 
in reaching the applicable determination under this title.''
    In addition, section 776(b) of the Act provides that, if the 
Department finds that an interested party ``has failed to cooperate by 
not acting to the best of its ability to comply with a request for 
information,'' the Department may use information that is adverse to 
the interests of that party as the facts otherwise available. The 
statute also provides that such an adverse inference may be based on 
secondary information, including the information drawn from the 
petition.
    As discussed above, all Russian exporters that do not qualify for a 
separate rate are treated as a single enterprise. Because some 
exporters of the single enterprise failed to respond to the 
Department's requests for information, that single enterprise is 
considered to be uncooperative. In such situations, the Department 
generally selects as total facts available either the higher of the 
average of the margin from the petition or the highest rate calculated 
for a respondent in the proceeding. See, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Persulfates From the 
People's Republic of China, 96 FR 27222 (May 19, 1997). In the present 
case, the average margin in the petition is higher than the one 
calculated rate. Accordingly, the Department has based the Russia-wide 
rate on information in the petition. In this case, the average petition 
rate is 185.00 percent.
    Section 776(c) of the Act provides that where the Department relies 
on ``secondary information,'' the Department shall, to the extent 
practicable, corroborate that information from independent sources 
reasonable at the Department's disposal. The Statement of 
Administrative Action (SAA), accompanying the URAA (H. Doc. 316, Vol. 
1, 103d Cong., 2d Sess. 870 (1996)), clarifies that the petition is 
``secondary information'' and that ``corroborate'' means to determine 
that the information used has probative value. See SAA at 870.
    In accordance with section 776(c) of the Act, we corroborated the 
margins in the petition to the extent practicable. The information 
contained in the petition shows that petitioners calculated export 
price based on two methods: (1) the import values declared to the U.S. 
Customs Service; and (2) an average export price derived from actual 
U.S. selling prices known to petitioners. We compared the starting 
prices used by petitioner less the importer mark-ups against prices 
derived from U.S. import statistics and found that the two sets of 
prices were consistent. We also compared the movement charges used in 
the petition with the surrogate values used by the Department in its 
margin calculations and found them to be consistent.
    The information in the petition with respect to the normal value 
(NV) is based on factors of production used by the petitioner in the 
production of steel plate. Petitioner submitted usage amounts for 
materials, labor and energy, adjusted for known differences in 
production efficiencies. To account for differences between the 
production processes of petitioners and potential respondents, 
Petitioner submitted three cost models in the petition: (1) Basic 
Oxygen Furnace (BOF) Cost Model; (2) Open-Hearth Furnace Cost Model; 
and (3) Weighted Average Normal Value of the BOF and Open-Hearth 
methods.
    The margins in the petition, which ranged from 139.97 to 230.38 
percent, were obtained by Petitioners by comparing the normal values to 
the export price developed from customs values and to export prices 
developed from actual U.S. price quotes. For each method, petitioners 
submitted estimated dumping margins for the BOF method, the open-hearth 
method and a weighted-average of the two. See Corroboration Memorandum, 
dated June 3, 1997.

Fair Value Comparisons

    To determine whether the sale of certain carbon steel plate from 
the Russian Federation sold to the United States by the Russian 
exporters receiving separate rates were made at less than fair value, 
we compared the EP to the NV, as specified in the ``Export Price'' and 
``Normal Value'' sections of this notice.

Export Price

    For Severstal, we calculated EP in accordance with section 772(a) 
of the Act, because the subject merchandise was sold directly to the 
first unaffiliated purchaser in the United States prior to importation 
and constructed export price (CEP) methodology was not otherwise 
indicated. In accordance with section 777A(d)(1)(A)(i) of the Act, we 
compared POI-wide weighted-average EPs to the factors of production.

[[Page 61789]]

    We corrected Severstal's data for errors and minor omissions found 
at verification and submitted to the Department. We calculated EP in 
accordance with our preliminary calculations, except that we: (1) 
corrected for the errors found at verification as submitted by 
Severstal on July 18, 1997, and (2) corrected input freight factors for 
limestone and ferroalloy purchases based on findings from verification, 
see Comments below.

Normal Value

    Section 773(c) of the Act requires the Department to value the 
factors of production, to the extent possible, in one or more market 
economy countries that are at a level of economic development 
comparable to that of the non-market economy country and that are 
significant producers of comparable merchandise.
    In our preliminary determination, we selected Brazil as our 
surrogate country. Brazil is an appropriate country for the reasons set 
forth in our preliminary determination. See the January 27, 1997 
memorandum from the Office of Policy discussing our selection of 
surrogate countries for Russia (Policy Memo). Since we find no 
compelling reason to change this selection, we have continued to base 
FMV on the values of the factors of production as valued in Brazil.

Factors of Production

    We calculated NV based on factors of production cited in the 
preliminary determination, making adjustments for specific verification 
findings. See Final Determination Calculation Memorandum, dated October 
24, 1997. To calculate NV, we multiplied the verified amounts for the 
factors of production by the appropriate surrogate value for the 
different inputs. We have used the same surrogate sources as in the 
preliminary determination with the exception of overhead, SG&A, and 
profit. For the final determination we based the percentages for 
overhead, SG&A and profit on the detailed public version of Companhia 
Siderurgica de Tubarao's (CST) and Usinas Siderurgicas de Minas Gerais' 
(Usiminas) financial statements that were placed on the record of this 
investigation by Severstal. See Comment 3, below.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by Severstal for use in our final determination. 
We used standard verification procedures, including examination of 
relevant accounting and production records and original source 
documents provided by Severstal.
    Comment 1: Input Freight Factors for Limestone and Ferroalloy 
Purchases.
    Petitioners claim that Severstal falsely reported no transportation 
costs incurred in connection with its purchases of limestone and 
ferroalloys for use as raw material inputs. Petitioners state that at 
verification the Department determined that one of Severstal's two 
limestone suppliers is located near Severstal's Cherepovets facility, 
and the other is located a fair distance away. Additionally, 
Petitioners assert that Severstal has numerous suppliers of ferroalloys 
located at varying distances from Severstal's facility. Petitioners 
argue that the failure to report these facts was not an ``inadvertent'' 
error and the information does not constitute a ``minor'' correction. 
Therefore, Petitioners argue that the Department should treat 
Severstal's withholding of this information as a failure to provide 
requested information in a timely fashion and an impediment to this 
proceeding. Petitioners rely on Titanium Sponge from the Russian 
Federation; Notice of Final Results of Antidumping Duty Administrative 
Review, 61 FR 58525 (Nov. 15, 1996) (Titanium Sponge from Russia) to 
argue that the Department may not accept this new information at 
verification, stating that ``the Department accepts new information at 
verification only when (1) the need for that information was not 
evident previously, (2) the information makes minor corrections to 
information already on the record, or (3) the information corroborates, 
supports, or clarifies information already on the record.'' 
Furthermore, Petitioners argue that, because Severstal did not act to 
the best of its ability in responding to the Department's requests, the 
Department should apply adverse facts available by calculating freight 
for both limestone and ferroalloys as originating from the most distant 
suppliers of each input.
    Severstal argues that the use of ``facts available'' is not 
appropriate in this situation as Severstal, who has never before been 
involved in a U.S. antidumping proceeding and has never before faced 
data-gathering demands of such intensity, submitted a massive amount of 
data, the overwhelming bulk of which was verified. Severstal argues 
that in the limited amount of time to prepare its responses it focused 
on the major inputs. Furthermore, Severstal asserts, because one of the 
major sources of limestone is located in the immediate vicinity of 
Severstal's steel mill, it is not surprising that it overlooked the 
more distant source in preparing its response. Additionally, Severstal 
argues that it is the Department's standard to accept such corrected 
data.

Department Position

    We agree with Petitioner that the Department must resort to facts 
available to calculate freight for ferroalloys. Section 776(b) of the 
Act provides that adverse inferences may be used if a party has failed 
to cooperate by not acting to the best of its ability to comply with 
requests for information. Severstal reported no transportation costs 
for its purchase of ferroalloys despite the fact that none of the 
suppliers of ferroalloys are located in the vicinity of Severstal's 
steel mill. Therefore, for the final determination, we have used the 
greatest reported distance to calculate freight for ferroalloys as 
adverse facts available.
    However, based on the fact that a major source of limestone is 
located in the immediate vicinity of Severstal's steel mill, we agree 
with Severstal that the other source was a mere oversight and 
constitutes an inadvertent error. Therefore, we did not use the 
greatest distance to calculate freight for limestone. Instead, we have 
used, as adverse facts available, a simple average of the two verified 
distances to calculate transportation costs incurred with Severstal's 
purchase of limestone.
    The submission of these corrections is not the same as the 
submission of data, rejected by the Department in Titanium Sponge from 
Russia, where a party claimed a by-product deduction at verification. 
Severstal's information, contrary to Petitioners' assertions, 
constitutes a minor correction to the information placed on the record 
by Severstal and it has a negligible impact on the weighted-average 
margin calculation. Therefore, we have accepted this information. 
However, as stated above, we have used facts available to calculate 
freight for both limestone and ferroalloys in the final determination 
because Severstal failed to provide the requested information in timely 
fashion.
    Comment 2: Non-Metallic Waste at the BOF and Recycled Materials at 
the Open Hearth Furnace.
    Petitioners argue that the information first submitted at 
verification that allegedly corrects ``minor errors'' in Severstal's 
reported non-metallic waste offset at the basic oxygen furnace (BOF) 
and recycled materials offset for the open hearth furnaces should be 
rejected because it does not correct clerical or minor errors in 
Severstal's original submission and it is untimely, unclear, and 
incorrect. In addition, Petitioners argue that Severstal's corrected

[[Page 61790]]

information changes the reported volume of recycled materials at the 
open hearth.
    Severstal does not insist that the offset for non-metallic waste at 
the BOF be adopted because Severstal has come to the conclusion that it 
erred in including this information in its correction letter provided 
to the verifiers. Severstal has since determined that the non-metallic 
waste amounts reported in its BOF ledger are not included as offsets by 
the company when calculating its cost of production of products for 
which that shop is utilized. However, Severstal argues that the 
Department should make the requested correction for the offset for 
recycled materials at the open hearth furnace. Severstal explains that 
it simply made an error when manually preparing the database for 
submission, which it corrected in its June 16, 1997 letter of 
verification corrections. Severstal argues that it is the Department's 
well-established practice to accept the correction of such errors, 
especially in a case where the overwhelming volume of submitted data 
was verified as accurate.

Department Position

    We agree with Petitioners that the new information claiming an 
offset for non-metallic waste at BOF should be rejected since the non-
metallic waste amounts are not included as offsets by Severstal. 
Therefore, we did not make an adjustment in calculating normal value.
    Based on the results of verification, we agree with Severstal 
regarding the correction of the recycled materials at the open hearth. 
The revision corrects an error that arose from the manual extraction of 
data from the open hearth's records which we verified (see Verification 
Report, dated July 23, 1997). We have corrected for this error in the 
final determination.
    Comment 3: Factory Overhead, SG&A, and Profit.
    Petitioners claim that the Department's preliminary results did not 
include all factory overhead costs and that a dumping margin cannot 
accurately be calculated without the inclusion of non-depreciation 
overhead costs. Although Petitioners have not been able to find this 
information, they provided one integrated producer's financial 
statement (Pohang Iron & Steel Co., Ltd. (``POSCO'')) which provides a 
detailed list of the types of expenses incurred as manufacturing costs. 
Petitioners urge the Department to either use the percentages from 
POSCO's financial statement as facts available to approximate the 
proper amount of factory overhead costs, or use its resources to find 
this additional information.
    Severstal argues that the Department should reject Petitioners' 
proposal to use factory overhead values obtained from the financial 
reports of a steel company in Korea. Respondents contend that Korea is 
not an appropriate surrogate country for Russia, and it was never 
considered by the Department or the parties in this (or any other) 
investigation as a potential surrogate. Severstal cites Antifriction 
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from 
France, et al.; Final Results of Antidumping Duty Administrative 
Reviews, 57 FR 28360 (June 24, 1992) (Antifriction Bearings) where the 
Department refused to use a surrogate overhead rate from another 
country because it was not among the surrogate countries cited for that 
review. Additionally, Severstal claims that to stray from Brazil to 
Korea would violate the Department's preference for consistency in the 
calculation of factor values, which is referenced through its reliance 
on data in a single surrogate country if possible. See Final 
Determination of Sales at Less Than Fair Value: Certain Carbon Steel 
Butt-Weld Pipe Fittings from the People's Republic of China, 57 FR 
21058 (May 18, 1992) (Carbon Steel Butt-Weld Pipe Fittings). Severstal 
further argues that while only depreciation is identified in the 
financial reports of the Brazilian steel producers whose financial 
information the Department used in the Preliminary Results, the 
Department merely accepted Petitioners' own proposal in using this data 
as the basis for calculating the factory overhead ratio.
    Furthermore, Severstal argues that the Department incorrectly 
utilized the data from surrogate country steel producers' financial 
statements for periods outside the period of investigation (POI). 
Severstal argues that, consistent with the Department's prior practice, 
the Department should use financial data contemporaneous with the POI. 
Severstal cites several cases where the Department has noted its policy 
to use contemporaneous surrogate values.
    Severstal also provided the 1996 financial statements of the 
surrogate country companies and provided recalculated ratios. Severstal 
additionally alleges that the Department made two clerical errors in 
calculating the SG&A and profit ratios. Severstal states that, when 
calculating the SG&A factor, the Department incorrectly included profit 
sharing expenses. Severstal states that these expenses do not represent 
actual expenses incurred by the companies but, rather, reflect the 
value of profits shared with employees and management, dividend 
distributions to employees, and annual taxes on net income. 
Additionally, Severstal states that the Department made a mathematical 
error in calculating the average profit ratio. Severstal requests that, 
if the Department chose not to utilize the contemporaneous data, the 
Department should at least utilize the correct ratio of 25.56 percent 
as opposed to the 26.65 value utilized in the preliminary 
determination.

Department Position

    We agree with Petitioner that our preliminary results did not 
include all factory overhead costs; however, we disagree with 
Petitioner's suggestion to use the data from a Korean steel producer's 
financial statement to calculate a factory overhead ratio. It is the 
Department's preference to use a single surrogate country as the source 
of data in an NME investigation. See Carbon Steel Butt-Weld Pipe 
Fittings. Furthermore, it is the Department's practice to only use data 
of those countries listed as potential surrogates identified in the 
Policy Memo. See Antifriction Bearings. Korea was never identified as a 
potential surrogate for the Russian economy. Therefore, we have 
continued to use Brazilian data for the final determination.
    We agree with Severstal that the Department should use financial 
data contemporaneous with the POI. Based on the submitted information 
and the Department's own research, we agree with Severstal that the 
financial data from the 1996 income statements of the two Brazilian 
companies used in the preliminary determination, CST and Usiminas, are 
the most appropriate surrogate information available to calculate the 
percentages for overhead, SG&A, and profit for our final determination.
    In contrast to our preliminary determination, for this final 
determination, in order to ensure that all costs are properly accounted 
for, in accordance with our practice we revised the overhead ratio to 
include employee profit sharing. Despite the manner in which labor 
costs are packaged (i.e., either through straight salary, profit 
sharing, etc.), total labor costs remain the same to the employer. This 
includes all profit sharing expenses. See Porcelain-on-Steel Cookware 
from Mexico: Notice of Final Results of Antidumping Duty Administrative 
Review, 62 FR 25908 (May 12, 1997), where the Department determined 
that profit sharing expense relates to the compensation of direct 
labor. Labor is

[[Page 61791]]

captured in the cost of manufacturing which is part of the cost of 
sales. Thus, we have included profit sharing in overhead. However, if a 
company broke out profit sharing between employees and management, as 
CST has done, we included management profit sharing in the SG&A 
calculation and employee profit sharing in the overhead calculation. 
See Final Determination Calculation Memorandum, dated October 24, 1997.
    Consistent with prior Department practice, we have continued to 
include social contributions in SG&A for the final determination. See 
Final Determination Calculation Memorandum, dated October 24, 1997; see 
also Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determinations: Certain Hot-Rolled 
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat 
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and 
Certain Cut-to-Length Carbon Steel Plate From Brazil, 58 FR 7080 
(February 4, 1993).
    Comment 4: Energy.
    In our preliminary determination, we used a ``theoretical fuel'' 
ratio submitted by Severstal to derive values for various energy 
inputs. Petitioners allege that this approach is flawed for several 
reasons, particularly with respect to inputs of energy gases. First, 
Petitioners assert that the Department used numbers that represent the 
amount of energy or fuel theoretically necessary to create the energy 
instead of the energy generated (caloric output) by the particular type 
of fuel. Petitioners argue that the calculations should be based on 
caloric yield because the heat requirements of the steelmaking process 
demand a certain caloric yield regardless of the amount of energy that 
may have been used to create the fuel before it was purchased by the 
steel producer. Second, Petitioners argue that it is not clear what 
Respondents' reported figures represent because Severstal did not 
provide a citation or supporting documentation for its table. Third, 
Petitioners claim that the table used by the Department is flawed 
because the ratios representing the energy needed to create each fuel 
are the same as the ratios representing the energy yield of the 
resulting product. In other words, Petitioners conclude it appears as 
though every fuel listed has exactly the same energy efficiency.
    Severstal agrees that the Department may use the ``theoretical 
fuel'' ratios to derive the values for energy sources. Furthermore, 
Severstal claims that, because the ``theoretical fuel'' data in the 
first table to which Petitioners object was based on a scientific study 
and made available for the Department at verification, there is no 
reason to doubt its accuracy. However, Severstal does not object to the 
proposal to use the second table (showing the quantity of energy (in 
calories) generated by each type of fuel) to convert to an equivalent 
consumption value in terms of natural gas usage.

Department Position

    Based on our findings at verification, all gas input factors are 
reported in cubic meters needed to produce one ton of plate. Usage 
rates were adjusted to account for yields and waste. In obtaining 
surrogate value information, we were able to find values for natural 
gas in cubic meters based on Brazilian import statistics, but were 
unable to obtain surrogate values for other input energy sources on the 
same basis. Therefore, in order to ensure that the value of energy was 
consistent across all energy sources in calculating normal value, we 
chose to convert the other energy sources into natural gas equivalents.
    In response to Petitioners' argument that the Department should use 
the caloric output of fuels to determine the value of these fuels, we 
have used factor inputs as reported on a caloric output basis. We 
simply converted the surrogate value for natural gas into other gas 
equivalents using public conversion rates. Therefore, we have continued 
to use the methodology from our preliminary determination as this 
methodology is an accurate means of valuing energy usage.
    Comment 5: Reported Factor Usage Data.
    Petitioners allege that the production factor data submitted by 
Severstal are distorted in that they report the same factors of 
production for multiple CONNUMs. Petitioners claim that Severstal did 
not submit its factor usage data at the CONNUM-specific level of detail 
requested by the Department and that Severstal reported the same factor 
input values for multiple CONNUMs. Petitioners are primarily concerned 
with Severstal's failure to distinguish the different costs. 
Petitioners argue that the Department should adjust Severstal's 
submitted factor usage data to account for differences in production 
costs. Petitioners argue that in the past, the Department has adjusted 
information to correct for data which did not conform to the level of 
specificity required and cite Certain Cold-Rolled and Corrosion-
Resistant Carbon Steel Flat Products from Korea, 62 FR 18404 (April 15, 
1997) (Carbon Steel Flat Products from Korea) as an example where the 
Department adjusted the respondent's reported costs because its 
reporting method did not account for certain differences in physical 
characteristics. Petitioners argue that some products cost more to 
produce and that the Department should assign certain products the 
highest total calculated cost for any Severstal product.
    Severstal argues that it explained the calculations to the 
Department and the data was verified. Severstal asserts that it does 
not maintain its books in the normal course of business according to 
the product definitions established by the Department in creating 
CONNUMs, and that it submitted its factor data on the basis of the 
company books and records. Severstal claims that it reported its costs 
to the degree of specificity allowed by its records, and that in 
situations where a respondent reported its costs in as much detail as 
its normal accounting system would allow, the Department has repeatedly 
held that ``adjustment'' of the reported data would be inappropriate. 
Severstal further argues that Carbon Steel Flat Products from Korea 
does not support Petitioners' point. In that case, Severstal argues, 
the Department adjusted the respondents's cost data only where the 
respondent had weight-averaged cost data for all products that 
contained certain product characteristics. For costs associated with 
other physical characteristics, Severstal contends, the Department 
concluded that the respondent reported costs in as much detail as its 
accounting system allowed and that any costs associated with other 
physical characteristics were captured and allocated to all products. 
Severstal references several other cases to support this 
interpretation.
    Finally, Severstal argues that if the Department were to inflate 
the reported factors for one of the products sold, it must somehow 
compensate by reducing the factors for other subject merchandise 
because the total quantity of factors consumed in the production of the 
subject merchandise shipped to the United states is fixed and verified. 
Severstal alleges that any other response by the Department would not 
be an ``adjustment,'' but would rather constitute a punitive inflation 
of Severstal's reported factors.

Department Position

    We agree with Severstal. The Department has in the past, as 
Petitioners correctly point out, adjusted information to correct for 
data which did not appropriately account for physical characteristics. 
However, even in cases where a company has been unable to provide 
information at the

[[Page 61792]]

level of detail requested by the Department, we still accepted the 
reported costs where we were satisfied that these costs nonetheless 
reasonably reflected the actual costs of producing the subject 
merchandise during the POI.
    For the same reasons outlined in Carbon Steel Flat Products from 
Korea and in Final Results of Antidumping Administrative Review: 
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate from Canada, 61 FR 13815 (March 28, 1996), 
we agree with Severstal that its reported costs were reasonable. In 
these cases, we concluded that the respondent's methodology was 
reasonable given the nature of its cost accounting system, its verified 
inability to determine specific costs, and the conservative method in 
which the costs were reported.
    In this case, Severstal has reported product-specific costs from 
its normal cost accounting system, which we verified reasonably reflect 
the actual usage of materials to produce the merchandise under 
investigation. Furthermore, given the nature of Severstal's cost 
accounting system, our verification findings confirmed Severstal's 
inability to determine specific costs. The instant situation is very 
different from that in Carbon Steel Flat Products from Korea where we 
determined that the respondent did not appropriately account for two 
characteristics where the respondent derived a general weighted-average 
cost and applied it to all merchandise that contained the two certain 
physical characteristics. This weight-averaged cost was contrary to the 
respondent's normal cost accounting system, resulted in a distortion of 
the cost of manufacturing, and differentiations were lost through 
averaging. For these reasons we calculated adjustment factors in that 
case. However, this clearly is not the case here.
    In regards to the other physical characteristics in Carbon Steel 
Flat Products from Korea, the Department found that costs were captured 
and allocated to all products because the respondent reported costs in 
as much detail as its normal accounting system provided, as Severstal 
has in this case. Furthermore, Severstal submitted its factor usage 
ratios as recorded in the company books and records. As stated above, 
based on our findings at verification, we have determined that 
Severstal's reported costs reflect the actual costs as recorded in its 
normal accounting system and reasonably reflect the cost of producing 
the merchandise. Therefore, we did not make any adjustments in this 
final determination.
    Comment 6: Indirect Materials and Energy in Factory Overhead.
    Petitioners argue that the Department should utilize the value of 
U.S. exports to Brazil for certain energy and indirect materials which 
were not valued for the preliminary determination. Petitioners provided 
the Department with publicly available information taken from U.S. 
Census statistics for exports to Brazil for 1996 and claim that in the 
absence of alternative data, the Department should use data on U.S. 
exports of certain indirect inputs to Brazil to determine the 
appropriate surrogate value.
    Severstal states that because these materials and types of energy 
are not directly related to the production of the merchandise under 
investigation, the Department properly treated these inputs as overhead 
expenses. Severstal cited several cases including Notice of Preliminary 
Determinations of Sales at Less Than Fair Value and Postponement of 
Final Determinations: Brake Drums and Brake Rotors From the People's 
Republic of China, 61 FR 53190 (Oct. 10, 1996) (Brake Drums and Rotors 
from the PRC); Sulfanilic Acid From the People's Republic of China; 
Final Results of Antidumping Duty Administrative Review, 61 FR 53711 
(Oct. 15, 1996) (Sulfanilic Acid from the PRC); and Porcelain-on-Steel 
Cooking Ware From the People's Republic of China; Preliminary Results 
of Antidumping Duty Administrative Review, 62 FR 4979 (Feb. 3, 1997) 
(Porcelain-on-Steel Cooking Ware from the PRC), as cases where the 
Department stated that its general policy is not to calculate surrogate 
values of indirect inputs separately, but instead is to include these 
inputs as part of the overhead expenses.

Department Position

    We agree with Severstal that these inputs are not materials 
directly incorporated in the production of steel and thus are not part 
of materials consumed. Therefore, consistent with our preliminary 
determination, we have treated these inputs as part of factory overhead 
in the final determination.
    Comment 7: Critical Circumstances.
    Severstal alleges that the Department acted unlawfully in finding 
critical circumstances in the preliminary determination. They base 
their argument on the fact that the 1994 URAA added a new element to 
the critical circumstances analysis that the importer ``knew or should 
have known'' that ``there was likely to be material injury by reason 
of'' the LTFV sales of the subject merchandise. Severstal states that 
because the ITC preliminarily found only a threat of material injury 
rather than actual injury, the Department may not impute that the 
importers had knowledge that these sales would cause material injury to 
a U.S. domestic industry. Severstal alleges that the Department's 
preliminary decision is unlawful and contrary to its determination in 
Notice of Final Determination of Sales at Less Than Fair Value: Brake 
Drums and Brake Rotors from the People's Republic of China, 62 FR 9162 
(Feb. 28. 1997) (Brake Drums and Rotors) where the Department stated 
that ``when the ITC has preliminarily found no reasonable indication 
that a U.S. industry is experiencing present material injury by reason 
of the dumped subject merchandise, but only a threat of such injury, 
the Department has determined that it is not reasonable to conclude 
that an importer knew or should have known that its imports would cause 
material injury * * *.''
    Severstal further argues that the Department's reliance on the 
increase in the volume of imports and the magnitude of the margins is 
not only contrary to the Department's previous practice but also 
redundant because these factors are also reviewed when determining 
whether there has been massive imports during a short period of time 
and whether the importer had knowledge of LTFV sales. Therefore, 
Respondents asset, the Department has collapsed the first prong of its 
analysis of the issue with the second and third prongs of the analysis 
to incorrectly conclude that critical circumstances existed in the 
preliminary determination.
    Petitioners rebut Severstal's argument that the Department 
improperly found critical circumstances for the preliminary 
determination. Petitioners note that it is a well established practice 
for the Department to impute knowledge of material injury based on 
dumping margins of greater than 25 percent.
    Petitioners argue that the Department's negative finding in Brake 
Drums and Rotors from the PRC-Final does not preclude it from making an 
affirmative finding in the current case because (1) the SAA and the 
URAA are silent as to how the Department is to make a finding of 
importer knowledge of material injury and, (2) it is within the 
Department's discretion to select a reasonable and administrable 
approach. Petitioners also argue that an ITC threat determination does 
not mean that an importer of Russian CTL plate cannot have known that 
there was likely to be material injury by reason of dumped imports 
during the critical

[[Page 61793]]

circumstances period. Petitioners argue that the basis for an 
affirmative threat determination by the ITC is ``whether further dumped 
or subsidized imports are imminent and whether material injury by 
reason of imports would occur unless an order is issued or a suspension 
agreement is accepted'.

Department Position

    We agree with Petitioner and continue to find critical 
circumstances in the final determination.
    Section 735(a)(3) of the Act provides that if the final 
determination is affirmative, then that determination shall also 
contain a finding of whether: (A)(i) there is a history of dumping and 
material injury by reason of dumped imports in the United States or 
elsewhere of the subject merchandise, or (ii) the person by whom, or 
for whose account, the merchandise was imported knew or should have 
known that the exporter was selling the subject merchandise at less 
than its fair value and that there would be material injury by reason 
of such sales, and (B) there have been massive imports of the subject 
merchandise over a relatively short period.
    Because there is no history of dumping and material injury by 
reason of dumped imports for cut-to-length steel plate, we conducted 
our analysis under section 735(a)(3)(A)(ii) of the Act (importer 
knowledge of dumping and material injury).
1. Importer Knowledge of Dumping
    In determining whether an importer knew or should have known that 
the exporter was selling the plate at less than fair value, the 
Department normally considers margins of 15 percent or more sufficient 
to impute knowledge of dumping for constructed export price (CEP) 
sales, and margins of 25 percent or more for export price (EP) sales. 
See, e.g., Preliminary Critical Circumstances Determination: Honey from 
the People's Republic of China (PRC), 60 FR 29824 (June 6, 1995) 
(Honey). Since the company-specific margins for EP sales in our 
preliminary determination for CTL plate are greater than 25 percent for 
Severstal, we have imputed knowledge of dumping.
2. Massive Imports
    To determine whether imports were massive over a relatively short 
time period, the Department typically compares the import volume of the 
subject merchandise for the three months immediately preceding and 
following the initiation of the proceeding. See 19 C.F.R. 353.16(g). 
Pursuant to 19 C.F.R. 353.16(f)(2), the Department will consider an 
increase of 15 percent or more in the imports of the subject 
merchandise over the relevant period to be massive. As noted, because 
imports of the subject merchandise increased 145 percent during the 
relevant period, we have determined that imports have been massive.
3. Importer Knowledge of Material Injury
    The statute and the Statement of Administrative Action which 
accompanies the Uruguay Round Agreements Act (SAA) are silent as to how 
we are to make a finding that there was knowledge that there would be 
material injury. Therefore, Congress has left the method of 
implementing this provision to the Department's discretion.
    In determining whether an importer knew or should have known that 
there would be material injury by reason of dumped imports, we normally 
will look to the preliminary injury determination of the ITC. If the 
ITC finds a reasonable indication of present material injury to the 
relevant U.S. industry, we will determine that a reasonable basis 
exists to impute importer knowledge that there would be material injury 
by reason of dumped imports during the critical circumstances period--
the 90-day period beginning with the initiation of the investigation 
(see 19 C.F.R. 353.16(g)). If the ITC preliminarily finds threat of 
material injury, we would normally not find knowledge of injury. 
However, in this case, the magnitude of the margins and increase in 
imports are so great that we have concluded that the importer knew or 
should have known that these sales of subject merchandise to the U.S. 
would cause material injury.
    In this case, imports of Russian plate increased 145 percent in the 
three months following the initiation of the investigation when 
compared to the three months immediately preceding initiation, or 
almost ten times the level of increase needed to find ``massive 
imports'' during the same period (see below). Furthermore, we 
preliminarily determined that margins of 53.81 percent exist for 
Severstal. Based on the ITC's preliminary determination of threat of 
injury, the massive increase in imports noted above, and the high 
preliminary margins, we have determined that the importer knew or 
should have known that there would be material injury by means of sales 
of the subject merchandise at less than fair value.
    In response to Severstal's allegation, we did not collapse the 
first prong of our analysis with the second and third prongs. Importer 
knowledge of sales at less than fair value, importer knowledge of 
injury, and massive imports are the three separate criteria considered 
in determining whether critical circumstances exist. However, some of 
the factors we examine to determine whether each of these criteria are 
met may be relevant to more than one of the criteria. For example, the 
magnitude of the margins is relevant to the importer's knowledge of 
sales at less than fair value and the increase in import volumes is 
likewise relevant to the massive imports criterion. However, both of 
these factors are also relevant to the knowledge of injury criterion. 
If the margins and the increase in imports are very large, it is 
reasonable for us to assume that the importer knew that such an 
increase in imports at such low prices would injure the U.S. domestic 
industry.
    In response to Severstal's argument regarding Brake Drums and 
Rotors, the Department, in deciding the issue of importer knowledge of 
material injury in Brake Drums and Rotors was faced with very different 
facts and circumstances. In that case, the company specific margins 
were all under 15% for Rotors, except for one company with a margin of 
16.35%. Moreover, for that one company, the increase of its imports to 
the U.S. was under 15%. Thus, the circumstances in Brake Drums and 
Rotors, where the ITC finding of threat of injury was coupled with 
comparatively minimal company-specific margins and absence of massive 
imports, are very different from those in the present investigation.
    Thus, because we have determined in this case that the importer 
knew or should have known that Russian exporters were selling the 
subject merchandise at less than its fair value and that there would be 
material injury by reason of such sales, and because there have been 
massive imports of the subject merchandise over a relatively short time 
period, we have determined that critical circumstances exist for 
Severstal.
4. Unexamined Respondents/Russia-Wide Entity
    As stated above, in a nonmarket economy case, the Department 
presumes that those respondents who failed to respond to the 
Department's questionnaire constitute a single enterprise and are under 
common control by the Russian government. Therefore, for companies 
subject to the Russia-wide rate (i.e., companies which did not respond 
to the Department's questionnaire), as facts available, we are imputing 
knowledge based on the Russia-wide rate.

[[Page 61794]]

    As noted above, we have determined, based on facts available, that 
importers knew or should have known that there would be material injury 
to the U.S. cut-to-length steel plate industry based on the ITC's 
preliminary determination of a reasonable indication of present 
material injury. In the absence of shipment data for the Russia-wide 
entity, we have determined based on facts available and making the 
adverse inference permitted under section 776(b) of the Act, that 
because this entity did not provide an adequate response to our 
questionnaire, there were massive imports of subject merchandise. We 
further note that the record indicates a post-filing surge in U.S. cut-
to-length steel plate imports from Russia which is not accounted for by 
the cooperating respondent, Severstal. Finally, the Russia-wide margin 
of 185 percent exceeds the 25 percent threshold for imputing a 
knowledge of dumping to the importers of the merchandise. Therefore, 
for the Russia-wide entity, critical circumstances exist with respect 
to imports of subject merchandise.
    Therefore, we find that critical circumstances exist for cut-to-
length carbon steel plate sales by all Russian exporters.
Continuation of Suspension of Liquidation
    On October 24, 1997, the Department signed a suspension agreement 
with the Ministry of Foreign Economic Relations and Trade of the 
Russian Federation (the Agreement). Therefore, we will instruct Customs 
to terminate the suspension of liquidation of all entries of cut-to-
length carbon steel plate from the Russian Federation. Any cash 
deposits of entries of cut-to-length carbon steel plate from the 
Russian Federation shall be refunded and any bonds shall be released.
    On October 14, 1997, we received a request from Petitioners 
requesting that we continue the investigation. We received a separate 
request from the United Steelworkers of America, an interested party 
under section 771(9)(D) of the Act, on October 14, 1997. Pursuant to 
these requests, we have continued and completed the investigation in 
accordance with section 734(g) of the Act. We have found the following 
margins of dumping:

------------------------------------------------------------------------
                                                               Weight-  
                                                               average  
               Manufacturer/producer/exporter                   margin  
                                                              percentage
------------------------------------------------------------------------
Severstal..................................................        53.81
Russia-Wide Rate...........................................       185.00
------------------------------------------------------------------------

ITC Notification
    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine, within 45 days, whether these imports are 
causing material injury, or threat of material injury, to an industry 
in the United States. If the ITC's injury determination is negative, 
the Agreement will have no force or effect, and the investigation shall 
be terminated. See section 734(f)(3)(A) of the Act. If, on the other 
hand, the Commission's determination is affirmative, the Agreement 
shall remain in force but the Department shall not issue an antidumping 
duty order so long as (1) the Agreement remains in force, (2) the 
Agreement continues to meet the requirements of subsection (d) and (1) 
of the Act, and the parties to the Agreement carry out their 
obligations under the Agreement in accordance with its terms. See 
section 734(f)(3)(B) of the Act.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: October 24, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30396 Filed 11-18-97; 8:45 am]
BILLING CODE 3510-DS-P