[Federal Register Volume 63, Number 43 (Thursday, March 5, 1998)]
[Notices]
[Pages 10825-10831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5597]



[[Page 10825]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-829]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Stainless Steel Wire Rod 
From Korea

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

EFFECTIVE DATE: March 5, 1998.

FOR FURTHER INFORMATION CONTACT: Cameron Werker at (202) 482-3874 or 
Frank Thomson at (202) 482-5254, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230.

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 (May 19, 1997).

Preliminary Determination

    We preliminarily determine that stainless steel wire rod (SSWR) 
from Korea 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

    Since the initiation of this investigation (Notice of Initiation of 
Antidumping Investigations: Stainless Steel Wire Rod from Germany, 
Italy, Japan, Korea, Spain, Sweden, and Taiwan, 62 FR 45224 (August 26, 
1997)), the following events have occurred:
    On August 21, 1997, the Department issued a cable to the U.S. 
Embassy in Korea requesting information identifying potential Korean 
producers and/or exporters of the subject merchandise to the United 
States. We did not receive a response from the U.S. Embassy in Korea. 
However, on September 9, 1997, we received a letter of appearance on 
behalf of two producers/exporters of SSWR: Changwon Specialty Steel 
Co., Ltd. (Changwon), and Dongbang Special Steel Co., Ltd. (Dongbang). 
Based on this letter of appearance and information contained in the 
petition, on September 19, 1997, the Department issued antidumping 
questionnaires to the following companies: Dongbang, Changwon, Pohang 
Iron and Steel Co., Ltd. (POSCO), and Sammi Steel Co., Ltd. (Sammi).
    Also in September 1997, the United States International Trade 
Commission (ITC) issued an affirmative preliminary injury determination 
in this case (see ITC Investigation No. 731-TA-772).
    On October 7, 1997, POSCO submitted a letter to the Department 
stating that it had no shipments or sales of the subject merchandise to 
the United States during the period of investigation (POI). Following 
this submission, we requested that the U.S. Customs Service (Customs) 
confirm POSCO's statement. On December 10, 1997, we received 
confirmation from Customs that it had no records indicating POSCO had 
shipments to the United States during the POI.
    On October 10, 1997, the petitioners in this case (i.e., AL Tech 
Specialty Steel Corp., Carpenter Technology Corp., Republic Engineered 
Steels, Talley Metals Technology, Inc., and United Steelworkers of 
America) requested that the Department revise its questionnaire to 
obtain information on the actual nickel, chromium, and molybdenum 
content for each sale of the SSWR made during the POI. The Department, 
upon consideration of the comments from all parties on this matter, 
issued a memorandum on December 18, 1997, indicating its decision to 
make no changes in the model matching criteria specified in the 
September 19, 1997, questionnaire (see Memorandum from Team to Holly 
Kuga, Office Director, dated December 18, 1997).
    Also, in October 1997, the Department received responses to Section 
A of the questionnaire from Dongbang and Changwon (hereinafter ``the 
respondents''). The respondents submitted responses to sections B and C 
of the questionnaire in November 1997. Sammi failed to respond to the 
Department's request for information (see the ``Facts Available'' 
section of this notice, below).
    In November 1997, the petitioners submitted a timely allegation 
pursuant to section 773(b) of the Act that Dongbang and Changwon had 
made sales in the home market below the cost of production (COP). Based 
on our analysis of this allegation, in December 1997 we initiated a COP 
investigation with respect to these respondents and informed the 
companies that they were required to complete Section D of the 
questionnaire.
    On December 11, 1997, pursuant to section 733(c)(1)(A) of the Act, 
the petitioners made a timely request to postpone the preliminary 
determination. We granted this request and, on December 16, 1997, we 
postponed the preliminary determination until no later than February 
25, 1998 (62 FR 66849, December 22, 1997).
    We issued supplemental sections A, B, and C questionnaires to 
Changwon and Dongbang in December 1997 and received responses to these 
questionnaires in January 1998. We also received a response to Section 
D of the questionnaire from the respondents in January 1998. We issued 
a supplemental questionnaire to POSCO in December 1997 and requested 
that it complete section B of the questionnaire. We received POSCO's 
response to this questionnaire in January 1998. We issued supplemental 
section D questionnaires to Changwon and Dongbang on February 11, 1998. 
Complete responses to these questionnaires are not due until March 4, 
1998 and, therefore, could not be considered in this preliminary 
determination.
    The petitioners submitted comments on February 6, 1998, February 
11, 1998, and February 12, 1998, regarding issues they considered 
relevant to the preliminary determination. On February 17 and 18, 1998, 
Dongbang and Changwon, respectively, submitted responses to the 
petitioners' comments.

Postponement of Final Determination and Extension of Provisional 
Measures

    On February 19, 1998, Changwon and Dongbang requested that, in the 
event of an affirmative preliminary determination in this 
investigation, the Department postpone its final determination until no 
later than 135 days after the publication of this notice in the Federal 
Register pursuant to section 735(a)(2)(A) of the Act. Changwon and 
Dongbang also requested that the Department extend the provisional 
measures of sections 733(d)(1) and (2) of the Act from a four-month 
period to not more than six months, in accordance with section 733(d) 
of the Act. In accordance with 19 CFR 351.210(b)(2), because (1) our 
preliminary determination is affirmative, (2) Changwon and Dongbang 
account for a significant proportion of exports of the subject 
merchandise, and (3) no compelling reasons for denial exist, we are 
granting the respondent's request and are postponing the final 
determination until

[[Page 10826]]

no later than 135 days after the publication of this notice in the 
Federal Register. Suspension of liquidation will be extended 
accordingly. See Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Open-End Spun Rayon 
Singles Yarn From Austria, 62 FR 14399, 14400 (March 26, 1997); see 
also Final Determination of Sales at Less Than Fair Value: Certain 
Pasta From Italy, 61 FR 30326 (June 14, 1996).

Scope of Investigation

    For purposes of this investigation, SSWR comprises products that 
are hot-rolled or hot-rolled annealed and/or pickled and/or descaled 
rounds, squares, octagons, hexagons or other shapes, in coils, that may 
also be coated with a lubricant containing copper, lime, or oxalate. 
SSWR is made of alloy steels containing, by weight, 1.2 percent or less 
of carbon and 10.5 percent or more of chromium, with or without other 
elements. These products are manufactured only by hot-rolling or hot-
rolling, annealing, and/or pickling and/or descaling, are normally sold 
in coiled form, and are of solid cross-section. The majority of SSWR 
sold in the United States is round in cross-sectional shape, annealed 
and pickled, and later cold-finished into stainless steel wire or 
small-diameter bar.
    The most common size for such products is 5.5 millimeters or 0.217 
inches in diameter, which represents the smallest size that normally is 
produced on a rolling mill and is the size that most wire-drawing 
machines are set up to draw. The range of SSWR sizes normally sold in 
the United States is between 0.20 inches and 1.312 inches diameter. Two 
stainless steel grades, SF20T and K-M35FL, are excluded from the scope 
of the investigation. The chemical makeup for the excluded grades is as 
follows:


----------------------------------------------------------------------------------------------------------------
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                      SF20T                                                     
----------------------------------------------------------------------------------------------------------------
Carbon...........................  0.05 max............  Chromium............  19.00/21.00                      
Manganese........................  2.00 max............  Molybdenum..........  1.50/2.50                        
Phosphorous......................  0.05 max............  Lead................  added (0.10/0.30)                
Sulfur...........................  0.15 max............  Tellurium...........  added (0.03 min)                 
Silicon..........................  1.00 max                                    .................................
----------------------------------------------------------------------------------------------------------------
                                                     K-M35FL                                                    
----------------------------------------------------------------------------------------------------------------
Carbon...........................  0.015 max...........  Nickel..............  0.30 max                         
Silicon..........................  0.70/1.00...........  Chromium............  12.50/14.00                      
Manganese........................  0.40 max............  Lead................  0.10/0.30                        
Phosphorous......................  0.04 max............  Aluminum............  0.20/0.35                        
Sulfur...........................  0.03 max                                                                     
----------------------------------------------------------------------------------------------------------------

    The products under investigation are currently classifiable under 
subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and 
7221.00.0075 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, the written description of the scope of this 
investigation is dispositive.

Period of Investigation

    The POI is July 1, 1996, through June 30, 1997.

Facts Available

    On September 19, 1997, we sent a questionnaire to Sammi, a Korean 
SSWR producer/exporter which allegedly underwent bankruptcy in 1997. 
Sammi never responded to our original questionnaire nor at any time 
filed an extension request. On October 24, 1997, we received a faxed 
confirmation from the commercial courier that the questionnaire was 
delivered to and signed for by personnel at Sammi. Therefore, on 
October 31, 1997, the Department sent a letter to Sammi alerting it to 
the fact that it had missed its deadlines for responding to the 
Department's information request, and that the Department would have to 
use adverse facts available as required under the antidumping statute 
in making its determinations. We have received no correspondence from 
Sammi to date.
    Section 776(a)(2) of the Act provides that, if an interested party 
(1) Withholds information that has been requested by the Department, 
(2) fails to provide such information in a timely manner or in the form 
or manner requested, (3) significantly impedes a determination under 
the antidumping statute, or (4) provides such information but the 
information cannot be verified, the Department shall, subject to 
subsections 782(c)(1) and (e) of the Act, use facts otherwise available 
in reaching the applicable determination. Subsections (c)(1) and (e) do 
not apply to situations where a party provides no responses whatsoever 
to our correspondence. Therefore, these subsections do not apply with 
respect to this company. Because Sammi failed to respond to our 
questionnaire in a timely manner, we must use facts otherwise available 
to calculate Sammi's dumping margin.
    Section 776(b) of the Act provides that adverse inferences may be 
used when a party has failed to cooperate by not acting to the best of 
its ability to comply with requests for information. See also Statement 
of Administrative Action accompanying the URAA, H.R. Rep. No. 316, 103d 
Cong., 2d Sess. 870 (SAA). Sammi's failure to reply to the Department's 
questionnaire or to provide a satisfactory explanation of its conduct 
demonstrates it has failed to act to the best of its ability in this 
investigation. Thus, the Department has determined that, in selecting 
among the facts otherwise available for Sammi, an adverse inference is 
warranted.
    In accordance with our standard practice, we determine the margin 
used as adverse facts available by selecting the higher of (1) the 
highest margin stated in the notice of initiation, or (2) the highest 
margin calculated for any respondent.
    Section 776(c) of the Act provides that, when the Department relies 
on secondary information (such as the petition) in using the facts 
otherwise available, it must, to the extent practicable, corroborate 
that information from independent sources that are reasonably at its 
disposal. In this case, when analyzing the petition for purposes of the 
initiation, the Department reviewed all of the data upon which the 
petitioners relied in calculating the estimated dumping margins and 
determined that the margins in the petition were appropriately 
calculated and supported by adequate evidence in accordance

[[Page 10827]]

with the statutory requirements for initiation.
    However, for purposes of corroboration with regard to facts 
available, the Department re-examined the price information provided in 
the petition in light of information developed during the 
investigation. Sales by POSCO during the fourth quarter of 1996 were 
the basis for the margins contained in the petition. We contacted the 
U.S. Customs Service, seeking information to determine whether there 
had been any entries during that period. According to Customs, their 
records indicated that POSCO did not make any shipments during the 
fourth quarter 1996. Therefore, we reviewed the general Import 
Statistics for the USHTS categories corresponding to the scope of this 
investigation during the fourth quarter 1996.
    The U.S. gross prices provided in the petition are corroborated by 
the average fourth quarter U.S. dollar import value per metric ton 
obtained from the Import Statistics. Furthermore, we have corroborated 
the home market gross prices contained in the petition with the fourth 
quarter 1996 home market prices provided by POSCO in its home market 
sales listing. Therefore, although the record indicates that POSCO made 
no shipments to the United States during the POI, we have been able to 
corroborate the price information contained in petition, in accordance 
with Section 776(c) of the Act, using information from independent 
sources that were reasonably at our disposal. As a result we have 
assigned Sammi the highest rate contained in the petition, 28.44 
percent, for purposes of the preliminary determination.

Affiliation Among the Respondents

    One of the issues in this case is whether POSCO and its wholly 
owned subsidiary Changwon are affiliated with Dongbang. Interested 
parties made several submissions to the Department on this topic in 
November and December 1997. The petitioners argue generally that POSCO 
controls Dongbang through a variety of non-equity factors and is 
thereby affiliated with Dongbang pursuant to section 771(33)(G) of the 
Act. Petitioners also contend that Dongbang and Changwon are affiliated 
by virtue of the fact that they are under POSCO's common control 
pursuant to section 771(33)(F) of the Act. Based on this reasoning, 
they conclude that these producers should be collapsed for purposes of 
the Department's margin calculation primarily because they believe that 
the production facilities are similar and that there is a significant 
potential for manipulation of price or production. The respondents 
disagree, asserting that the facts of record do not indicate that POSCO 
and Dongbang and, thus, Dongbang and Changwon are affiliated; 
therefore, the respondents maintain that the circumstances under which 
the Department would consider collapsing the entities are not present 
in this case. In order to analyze the issue and understand the 
relationships between POSCO, Changwon, and Dongbang more fully, we 
requested that all three entities respond to supplemental questions on 
this topic. The parties responded to these questions on January 16, 
1998.
    Our preliminary analysis of the facts of record within the context 
of the control indicia enumerated in section 351.102(b) of our 
regulations does not suggest that POSCO controls Dongbang such that 
Dongbang is affiliated with Changwon based on POSCO's common control of 
both entities. Consequently, the issue of collapsing all three 
producers into one entity for purposes of our preliminary margin 
analysis is moot. However, we will examine this affiliation issue more 
closely at verification, with respect to close supply factors in 
particular, and revisit the issue if necessary for purposes of the 
final determination. For further discussion, see the Decision 
Memorandum from the Team to Richard Moreland regarding ``Whether Pohang 
Iron and Steel Co., Ltd. (POSCO), and its subsidiary Changwon Specialty 
Steel Co., Ltd. (Changwon), are affiliated with Dongbang Special Steel 
Co., Ltd. (Dongbang). Whether to collapse the above-mentioned entities 
for antidumping analysis purposes,'' dated February 25, 1998 
(``Affiliation Decision Memorandum'').
    Regarding POSCO and Changwon, given the nature of the affiliation 
between these two companies (i.e., POSCO owns 100 percent of Changwon, 
there is significant overlap in the production equipment and processes, 
and there exists significant potential for price and cost 
manipulation), we have collapsed POSCO and Changwon as affiliated 
producers in accordance with Sec. 351.401(f) of our regulations and 
have assigned to them a single dumping margin as indicated in the 
``Suspension of Liquidation'' section of this notice. However, we have 
not used POSCO's home market sales of non-finished SSWR (i.e., black 
coil) for purposes of comparing them to Changwon's U.S. sales of 
finished SSWR because the POSCO products have not been further 
processed and, therefore, are not as comparable to the U.S. sales as 
are Changwon's home market sales of finished SSWR products. For further 
discussion, see Affiliation Decision Memorandum.

Fair Value Comparisons

    To determine whether sales of SSWR from Korea to the United States 
were made at less than fair value, we compared the Export Price (EP) to 
the Normal Value (NV), as described in the ``Export Price'' and 
``Normal Value'' sections of this notice, below. As discussed in the 
``Export Price'' and ``Normal Value'' sections of this notice, neither 
respondent made Constructed Export Price (CEP) sales to the United 
States. In accordance with section 777A(d)(1)(A)(i) of the Act, we 
calculated weighted-average EPs for comparison to weighted-average NVs.
    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.). 
In that case, based on the pre-URAA version of the Act, the Court 
discussed the appropriateness of using constructed value (CV) as the 
basis for foreign market value when the Department finds home market 
sales to be outside the ``ordinary course of trade.'' This issue was 
not raised by any party in this proceeding. However, the URAA amended 
the definition of sales outside the ``ordinary course of trade'' to 
include sales below cost. See Section 771(15) of the Act. Consequently, 
the Department has reconsidered its practice in accordance with this 
court decision and has determined that it would be inappropriate to 
resort directly to CV, in lieu of foreign market sales, as the basis 
for NV if the Department finds foreign market sales of merchandise 
identical or most similar to that sold in the United States to be 
outside the ``ordinary course of trade.'' Instead, the Department will 
use sales of similar merchandise, if such sales exist. The Department 
will use CV as the basis for NV only when there are no above-cost sales 
that are otherwise suitable for comparison. Therefore, in this 
proceeding, when making comparisons in accordance with section 771(16) 
of the Act, we considered all products sold in the home market as 
described in the ``Scope of Investigation'' section of this notice, 
above, that were in the ordinary course of trade for purposes of 
determining appropriate product comparisons to U.S. sales. Where there 
were no sales of identical merchandise in the home market made in the 
ordinary course of trade to compare to U.S. sales, we compared U.S. 
sales to sales of the most similar foreign like product made in the 
ordinary course of trade, based on the characteristics listed

[[Page 10828]]

in Sections B and C of our antidumping questionnaire. We have 
implemented the Court's decision in this case, to the extent that the 
data on the record permitted.
    With respect to the characteristics used to make product 
comparisons, the Department's questionnaire instructed the respondents 
to report the grades of the SSWR products they sold during the POI in 
accordance with AISI standards. Changwon and Dongbang argued that it 
was more accurate and efficient to report their home market and U.S. 
sales based on internal grade codes because, among other factors, the 
respondents' sales, production, and accounting systems are maintained 
by its ``internal'' grade codes. Moreover, the respondents maintained 
that their customers do not order by the AISI grade but, rather, by one 
of the various international grades or ``internal'' grade codes. 
Additionally, Dongbang asserted that there are price and cost 
differences between each of the ``internal'' grade codes. Changwon 
stated that its grade codes do not overlap precisely with the AISI 
grades but instead overlap with multiple AISI grades. The petitioners 
argued that the respondents should not make changes to the product 
characteristics once the Department had established such 
characteristics because it could (a) seriously jeopardize the accuracy 
of the Department's SSWR investigations, (b) extraordinarily complicate 
the investigations, and (c) permit substantial manipulation of model 
matches.
    It is not the Department's normal practice to allow companies to 
change the criteria to be used for model match purposes based on their 
own internal product coding system once such criteria have been 
established. Any such deviation leads to the possibility that the 
margins calculated for each company under investigation could be based 
on completely different product grouping criteria. In addition, 
allowing companies to deviate from the criteria may permit manipulation 
of model matches, not only for the investigation, but also in future 
reviews, in the event this investigation results in an antidumping duty 
order.
    Furthermore, contrary to Dongbang's argument, there is no 
compelling evidence on the record that the net prices and costs of 
Dongbang's internal grade codes vary significantly from one another 
within a given AISI category (see Concurrence Memorandum dated February 
25, 1998 (Concurrence Memorandum)).
    Therefore, in instances where a respondent has reported a non-AISI 
grade (or an internal grade code) for a product that falls within the 
chemical content range of an AISI category, we have attempted to use 
the actual AISI grade rather than the non-AISI grades reported by the 
respondent for purposes of our preliminary analysis. In instances where 
the chemical content ranges of the reported non-AISI grade (or internal 
grade code) are outside the parameters of an AISI grade, we have 
preliminarily used the grade code reported by the respondents for 
purposes of our analysis.
    With respect to Changwon, even though we were able to identify AISI 
grades for a number of non-AISI products using the methodology 
described above, we were unable to consolidate the sales and cost 
databases on the basis of this AISI grade reclassification, given the 
lack of information on the record that would enable us to link the two 
databases by AISI grade. Therefore, for purposes of the preliminary 
determination, we used the ``internal'' grades reported by Changwon.
    For further discussion of this issue, see the Concurrence 
Memorandum. We intend to examine this issue further for the final 
determination.
    With respect to home market sales of non-prime merchandise made by 
Dongbang during the POI, we excluded these sales from our preliminary 
analysis based on the limited quantity of such sales in the home market 
and the fact that no such sales were made to the United States during 
the POI, in accordance with our past practice. See, e.g., Final 
Determinations of Sales at Less Than Fair Value: 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 Korea, 58 FR 37176, 37180 
(July 9, 1993).

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the EP or CEP transaction. The NV LOT 
is that of the starting-price sales in the comparison market or, when 
NV is based on CV, that of the sales from which we derive selling, 
general and administrative (SG&A) expenses and profit. For EP, the LOT 
is also the level of the starting-price sale, which is usually from 
exporter to importer. For CEP, it is the level of the constructed sale 
from the exporter to the importer.
    To determine whether NV sales are at a different level of trade 
than EP or CEP, we examined stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison-market sales at the LOT of 
the export transaction, we make an LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the difference in the levels between NV and CEP 
affects price comparability, we adjust NV under section 773(a)(7)(B) of 
the Act (the CEP offset provision). See Notice of Final Determination 
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel 
Plate from South Africa, 62 FR 61731 (November 19, 1997).
    Changwon and Dongbang only made EP sales during the POI and neither 
respondent claimed a LOT adjustment. Nevertheless, we evaluated whether 
such an adjustment was necessary by examining each respondent's 
distribution system, including selling functions, classes of customers, 
and selling expenses. We found that the selling functions performed by 
each respondent, which included sales administration, billing, and 
warranties, where applicable, are sufficiently similar in the United 
States and the home market to consider them as constituting the same 
LOT in the two markets. Accordingly, all comparisons are at the same 
LOT and an adjustment pursuant to section 773(a)(7)(A) of the Act is 
not warranted.

Export Price

    For both of the respondents, we used EP methodology, 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 because CEP methodology was not otherwise 
indicated.
    We made company-specific adjustments as follows:

A. Dongbang

    We calculated EP based on packed, delivered prices to unaffiliated 
purchasers in the United States. We increased the starting price by the 
amount of duty drawback reported by Dongbang. We made deductions from 
the starting price, where appropriate, for foreign inland freight, 
foreign brokerage and handling, other transportation expenses (i.e., 
container tax, wharfage,

[[Page 10829]]

document fees, and CFS charges), and international freight pursuant to 
section 772(c)(2)(A) of the Act.

B. Changwon

    We calculated EP based on packed prices to unaffiliated purchasers 
in the United States. We increased starting price by the amount of duty 
drawback reported by Changwon.
    We made deductions from the starting price, where appropriate, for 
foreign inland freight, foreign brokerage and handling expenses, other 
transportation expenses (i.e., ocean freight and terminal charge, 
formal entry charge, ABI filing fee, and devanning cost), international 
freight, marine insurance, U.S. Customs duties, and U.S. inland 
freight, pursuant to section 772(c)(2)(A) of the Act.

Normal Value

    After testing home market viability, whether sales to affiliates 
were at arm's-length prices, and whether home market sales were at 
below-cost prices, we calculated NV as noted in the ``Price-to-Price 
Comparisons'' and ``Price-to-CV Comparisons'' sections of this notice.

1. Home Market Viability

    In order to determine whether there is a sufficient volume of sales 
in the home market to serve as a viable basis for calculating NV (i.e., 
the aggregate volume of home market sales of the foreign like product 
is equal to or greater than five percent of the aggregate volume of 
U.S. sales), we compared the respondents' volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act. 
Because the respondents' aggregate volume of home market sales of the 
foreign like product was greater than five percent of its aggregate 
volume of U.S. sales for the subject merchandise, we determined that 
the home market was viable for the respondents.

2. Affiliated-Party Transactions and Arm's-Length Test

    We excluded sales to affiliated customers in the home market not 
made at arm's-length prices by Dongbang from our analysis because we 
considered them to be outside the ordinary course of trade. See 19 CFR 
351.102. To test whether these sales were made at arm's-length prices, 
we compared, on a model-specific basis, starting prices of sales to 
affiliated and unaffiliated customers net of all movement charges, 
direct selling expenses, and packing, but inclusive of duty drawback, 
freight revenue and interest revenue, where applicable. Where, for the 
tested models of subject merchandise, prices to the affiliated party 
were on average 99.5 percent or more of the price to the unaffiliated 
parties, we determined that sales made to the affiliated party were at 
arm's length. See 19 CFR 351.403(c) and 62 FR at 27355 (preamble to the 
Department's regulations). In instances where no customer price ratio 
could be constructed for an affiliated customer because identical 
merchandise was not sold to unaffiliated customers, we were unable to 
determine that these sales were made at arm's-length prices and, 
therefore, excluded them from our LTFV analysis. See Final 
Determination of Sales at Less Than Fair Value: Certain Cold-Rolled 
Carbon Steel Flat Products from Argentina, 58 FR 37062, 37077 (July 9, 
1993). Where the exclusion of such sales eliminated all sales of the 
most appropriate comparison product, we made a comparison to the next 
most similar home market model.

3. Cost-of-Production Analysis

    Based on the cost allegation submitted by the petitioners, the 
Department found reasonable grounds to believe or suspect that Dongbang 
and Changwon had made sales in the home market at prices below the cost 
of producing the merchandise, in accordance with section 773(b)(1) of 
the Act. As a result, the Department initiated an investigation to 
determine whether Dongbang and/or Changwon made home market sales 
during the POI at prices below their respective COPs within the meaning 
of section 773(b) of the Act. See Memorandum from the Team to Holly 
Kuga, dated December 24, 1997. Before making any fair value 
comparisons, we conducted the COP analysis described below.
a. Calculation of COP
    We calculated the COP based on the sum of each respondents' cost of 
materials and fabrication for the foreign like product, plus amounts 
for home market SG&A expenses and packing costs in accordance with 
section 773(b)(3) of the Act. We made company-specific adjustments to 
the reported COP as follows:
    1. Changwon: We adjusted Changwon's reported general and 
administrative (G&A) expenses by excluding miscellaneous income and 
including foreign currency exchange losses and the amortization of 
foundation and business starting expenses. In addition, we adjusted 
Changwon's financing expense calculation to include foreign currency 
exchange losses and to correct the amount of interest income used as an 
offset. See Memorandum to Irene Darzenta from Howard Smith, dated 
February 25, 1998.
    2. Dongbang: We adjusted Dongbang's G&A expenses by excluding 
miscellaneous income and bad debt expense and by including foreign 
currency exchange losses. In addition, because Dongbang did not report 
interest expense in accordance with our preferred methodology, we 
recalculated the reported interest expense rate accordingly. See 
Memorandum to Irene Darzenta from Howard Smith, dated February 25, 
1998.
b. Test of Home Market Prices
    We used each respondent's submitted POI weighted-average COPs, as 
adjusted (see above). We compared the weighted-average COP figures to 
home market sales of the foreign like product as required under section 
773(b) of the Act. In determining whether to disregard home market 
sales made at prices below the COP, we examined whether (1) within an 
extended period of time, such sales were made in substantial 
quantities, and (2) whether such sales were made at prices which 
permitted the recovery of all costs within a reasonable period of time 
in the normal course of trade. On a product-specific basis, we compared 
the COP (net of selling expenses and packing) to the home market 
prices, inclusive of duty drawback, less any applicable movement 
charges, direct and indirect selling expenses, and packing.
c. Results of the COP Test
    Pursuant to 773(b)(2)(C), where less than 20 percent of the 
respondent's sales of a given product were at prices less than the COP, 
we did not disregard any below-cost sales of that product because we 
determined that the below-cost sales were not made in ``substantial 
quantities.'' Where 20 percent or more of the respondent's sales of a 
given product during the POI were at prices less than the COP, we 
determined such sales to have been made in ``substantial quantities'' 
within an extended period of time in accordance with section 
773(b)(2)(B) of the Act. In such cases, we also determined that such 
sales were not made at prices which would permit recovery of all costs 
within a reasonable period of time, in accordance with section 
773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost 
sales. Where all sales of a specific product were at prices below the 
COP, we disregarded all sales of that product.
    We found that, for certain models of SSWR, more than 20 percent of 
Dongbang's and Changwon's home market sales within an extended period

[[Page 10830]]

of time were at prices less than the COP. Further, the prices did not 
provide for the recovery of costs within a reasonable period of time. 
We therefore disregarded the below-cost sales and used the remaining 
above-cost sales as the basis for determining NV, in accordance with 
section 773(b)(1). For those U.S. sales of SSWR for which there were no 
comparable home market sales in the ordinary course of trade, we 
compared EPs to CV in accordance with section 773(a)(4) of the Act.
d. Calculation of CV
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of the respondent's cost of materials, fabrication, 
G&A, U.S. packing costs, direct and indirect selling expenses, interest 
expenses, and profit. As noted above, we adjusted Changwon's COP by 
recalculating G&A and financing expenses. We also adjusted Dongbang's 
G&A and financing expense.
    In accordance with section 773(e)(2)(A) of the Act, we based SG&A 
and profit on the amounts incurred and realized by the respondents in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade for consumption in Korea.

Price-to-Price Comparisons

1. Changwon

    We based NV on packed prices to unaffiliated home market customers. 
Pursuant to section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410(c), 
we made circumstance-of-sale adjustments, where appropriate, for 
differences in warranties, bank charges, and credit expenses offset by 
interest revenue.
    We deducted home market packing costs and added U.S. packing costs, 
in accordance with section 773(a)(6) of the Act. Where appropriate, we 
made adjustments to NV to account for differences in physical 
characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii) 
of the Act and 19 CFR 351.411.

2. Dongbang

    We based NV on packed, delivered prices to home market unaffiliated 
customers and prices to affiliated customers that we determined to be 
at arm's length. We added freight revenue and duty drawback, where 
applicable. We made deductions for foreign inland freight, where 
appropriate, pursuant to section 773(a)(6)(B) of the Act. Pursuant to 
section 773 (a)(6)(C)(iii) of the Act and 19 CFR 351.410(c), we made 
circumstance-of-sale adjustments, where appropriate, for differences in 
credit expenses, bank charges, interest revenue, and warranties.
    We deducted home market packing costs and added U.S. packing costs, 
in accordance with section 773(a)(6) of the Act. Where appropriate, we 
made adjustments to NV to account for differences in physical 
characteristics of the merchandise, in accordance with section 
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.

Price-to-CV Comparisons

    For price-to-CV comparisons, we made adjustments to CV in 
accordance with section 773(a)(8) of the Act. Where CV was compared to 
EP, we deducted from CV the weighted-average home market direct selling 
expenses and added the weighted-average U.S. product-specific direct 
selling expenses in accordance with section 773(a)(6)(C)(iii) of the 
Act.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales as certified by 
the Federal Reserve Bank.
    Section 773A(a) directs the Department to use a daily exchange rate 
in order to convert foreign currencies into U.S. dollars unless the 
daily rate involves a fluctuation. It is the Department's practice to 
find that a fluctuation exists when the daily exchange rate differs 
from the benchmark rate by 2.25 percent. The benchmark is defined as 
the moving average of rates for the past 40 business days. When we 
determine a fluctuation to have existed, we substitute the benchmark 
rate for the daily rate, in accordance with established practice. 
Further, section 773A(b) directs the Department to allow a 60-day 
adjustment period when a currency has undergone a sustained movement. A 
sustained movement has occurred when the weekly average of actual daily 
rates exceeds the weekly average of benchmark rates by more than five 
percent for eight consecutive weeks. (For an explanation of this 
method, see Policy Bulletin 96-1: Currency Conversions (61 FR 9434, 
March 8, 1996)). Such an adjustment period is required only when a 
foreign currency is appreciating against the U.S. dollar. The use of an 
adjustment period was not warranted in this case because the Korean won 
did not undergo a sustained movement during the POI.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing 
Customs to suspend liquidation of all imports of subject merchandise 
that are entered, or withdrawn from warehouse, for consumption on or 
after the date of publication of this notice in the Federal Register. 
We will instruct Customs 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 in the chart below. These suspension of liquidation 
instructions will remain in effect until further notice. The weighted-
average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Dongbang Special Steel Co., Ltd.............................        5.96
Changwon Specialty Steel Co., Ltd./Pohang Iron and Steel                
 Co., Ltd...................................................        6.09
Sammi Steel Co., Ltd........................................       28.44
All Others..................................................        5.97
------------------------------------------------------------------------

ITC Notification

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

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than May 22, 1998, and rebuttal briefs no later than May 29, 
1998. A list of authorities used and an executive summary of issues 
must accompany any briefs submitted to the Department. Such 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, the hearing 
will be held on June 2, 1998, time and room to be determined, at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.

[[Page 10831]]

    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 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. 
Oral presentations will be limited to issues raised in the briefs. If 
this investigation proceeds normally, we will make our final 
determination by no later than 135 days after the publication of this 
notice in the Federal Register.
    This determination is published pursuant to section 777(i) of the 
Act.

    Dated: February 25, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-5597 Filed 3-4-98; 8:45 am]
BILLING CODE 3510-DS-P